Events
1970s Stagflation
Also Known As Stagflation
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Stagflation is the combination of high inflation, slow economic growth, and elevated unemployment occurring at the same time, a combination that mainstream Keynesian economics of the 1960s had considered unlikely because it assumed a stable tradeoff between inflation and unemployment. The defining episode began after the Organization of the Petroleum Exporting Countries quadrupled oil prices in October 1973, and continued, in varying degrees across the industrialized economies, into the early 1980s. It challenged the leading macroeconomic theories of the day and produced three lasting, competing explanations that still shape how economists read the period.
Facts
Event Year1973 is used as the anchor year for the OPEC oil embargo that triggered the episode; the period of high inflation and slow growth it named continued through the early 1980s in varying degrees across industrialized economies. Event DateStagflation is a multi-year phenomenon with no single onset date. Dated here to the 1973 oil crisis, which the cited source itself ties the era''s broader recognition to (see this atlas''s own 1973 Oil Shock entity for the specific embargo date). Day and month are not stated in the cited source; dated to October 1973, when the OPEC oil embargo began. LocationUnited States and other industrialized economies 1 Cross-Tradition Connections
Associated With
1973 Oil Shock, Events The quadrupling of oil prices is widely credited as a proximate trigger of 1970s stagflation.
Associated With School
Why this is disputed. Austrian accounts attribute stagflation to the excessive money creation of the preceding years distorting investment and weakening real economic growth, reading simultaneous inflation and stagnation as a natural consequence of loose monetary policy rather than a shock that required an external oil crisis to explain it.
Why this is disputed. Keynesian accounts attribute 1970s stagflation primarily to cost push pressure from the 1973 oil embargo and other supply shocks, which raised prices even as they contracted aggregate supply and slowed growth.
Why this is disputed. Monetarist accounts, built on the expectations augmented Phillips curve associated with Milton Friedman and Edmund Phelps, attribute stagflation to workers and firms coming to expect sustained inflation after years of rapid monetary growth, which shifted the tradeoff between inflation and unemployment that earlier Keynesian models had assumed was stable.
Sources
1. Wikipedia
Wikimedia FoundationStagflation, lead sectionQuote, Stagflation, lead section
It gained broader recognition in the 1970s after a series of global economic shocks, such as the closure of the Suez Canal (1967-1975) and the 1973 oil crisis, which disrupted supply chains and led to rising prices and slowing growth.
1. Wikipedia
Wikimedia FoundationAssociated With School: Keynesian EconomicsView the Source 1. Wikipedia
Wikimedia FoundationAssociated With School: Monetarist EconomicsView the Source 1. Wikipedia
Milestones: Oil Embargo, 1973-1974
United States Department of State, Office of the HistorianAssociated With: 1973 Oil ShockView the Source Reader Challenges (0 open reader challenges)
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