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'It all comes down to the oil crisis of 1973’ - Is this an adequate explanation of the global recession of the later-1970s and 1980s?

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Intern at South African Media & Gender Institute
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modern history

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  1. Introduction
  2. Inflation during 1970's and 1980's
  3. Keynesian economic theory
  4. Crisis due to inflation
  5. Conclusion

The historian Eric Hobsbawm's assertion that ?any historian who puts major change in the configuration of the world economy down to bad luck and avoidable accidents should think again' provides a useful theoretical objection to the contention that the economic crisis years of the late 1970s and early 1980s can be, at its core, wholly attributed to the OPEC oil crisis which occurred in 1973. However, the inadequacy of this approach is not wholly theoretical but empirical too. The effects of the oil crisis alone are insufficient to fully account for the recession as it becomes evident that it occurred in conjunction with the decline of the so called ?Golden Age' of the mixed economy, which was accompanied by unemployment, inflation and stagnated investment.

This essay thus does not need to challenge the entire significance of the oil crisis to prove that the world economic recession did not ?all come down to the oil crisis'. It will instead focus on three important weaknesses already apparent in the world economy prior to the 1972-1973 recession during which the crisis took place as well as during the subsequent failed periods of ?recovery'. A discussion of the problem of inflation caused by ?wage-price pressures' and profit recuperation as well as the Vietnam War spending of the United States, endemic high unemployment, and low investment, or rather, the over accumulation of capital which prevented significant recovery, will illustrate how ?the crisis was much deeper and had? origin (s)' other than the oil crisis and therefore ?that the petroleum crisis was just another consequence, and not the cause, of the general crisis' .

Subsidiary considerations such as the weakened stability of the US superpower will help to further provide a more nuanced explanation for the recession. First, however, the more ominous signs of a coming recession that were apparent before and just after 1973 - namely, inflation, unemployment and over-accumulation - will be addressed.

[...] At this point, it is clear that these three issues alone those being inflation, unemployment and over-accumulation point to serious problems in the world economy that were largely independent of the 1973 oil crisis. There are, of course, other factors to consider, which only strengthen the argument that the oil crisis was only one of the many causes for worldwide recession. For example, while Golden Age depended on the overwhelming political and economic dominance of the USA which acted as the stabilizer and guarantee of the world economy'[47], the early 1970s saw the global economic hegemony of the United States declining, bringing down with it gold-dollar based world monetary system'[48]. [...]

[...] (London 1980) pp GATT, ?Prospects for International Trade, Main Conclusions of GATT Study for 1978-79' (Geneva, 1979) in Frank, Andre Gunder, Crisis: In The World Economy (London 1980) pp Frank, Andre Gunder, Crisis: In The World Economy (London 1980) pp ibid. pp Frank, Andre Gunder, Crisis: In The World Economy (London 1980) pp ibid. pp ibid. pp Hobsbawm, E. Age of Extremes (London, 1994) pp.413 ibid. pp ibid. pp ibid. pp ibid. pp [...]

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