
WTF Happened in 1971? - black6
https://wtfhappenedin1971.com/
======
baldeagle
Article points out one thing (moving away from the gold standard) that
happened in 1971, but ignores all other cultural and social changes. If you
believe the economy takes time to change, then you might as well blame the
voting rights act in 1965, or Loving vs Virginia in '67, or the proliferation
of terminals in mainframe computers in the early 70s. Very incomplete
analysis, and lots of graphs with questionable predicted values - given the
persuasive nature of the site.

~~~
dTal
A priori, one wouldn't expect those things to have such a dramatic and sudden
effect. If you start from the mysterious graphs of many different financial
metrics all going berserk at virtually the same instant - like someone
snapping their fingers - you start to ask yourself "what seismic shift
happened in the financial world at this point? What fundamental change was
made here?"

And if you ask this question in good faith, the answer bubbles right up.

~~~
orf
Removing the gold standard caused more people to get divorced?

~~~
_-david-_
If the removal of the gold standard caused economic issues as the OP is
suggesting then it could have been an indirect cause of divorce. Money is one
the largest causes of divorce after all.

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tyingq
Could also have been this: [http://history.house.gov/Historical-
Highlights/1951-2000/The...](http://history.house.gov/Historical-
Highlights/1951-2000/The-Legislative-Reorganization-Act-of-1970/)

Congressional votes became "transparent" in 1970. Such that a lobbyist buying
a vote could check and make sure they got the vote they bought.

~~~
jnellis
There is quite an in-depth analysis regarding this piece of legislation's
effect upon the nation. It's diabolically counter-intuitive why we really
don't want to know how our congressmen vote on legislation. Transparency in
voting is poison to democracy.

[https://www.youtube.com/results?search_query=cardboard+box+r...](https://www.youtube.com/results?search_query=cardboard+box+reform)

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8bitsrule
When looking at what happened (but not causation) one cultural change in the
1970s (in the US, at least) is that many more women began entering the
workforce (for multiple reasons). This created a big jump in two-earner
families, greatly enlarging the number of potential employees as well as the
middle-class. (Another impact, latchkey kids.)

Forbes summary: [https://www.forbes.com/sites/lisaquast/2011/02/14/causes-
and...](https://www.forbes.com/sites/lisaquast/2011/02/14/causes-and-
consequences-of-the-increasing-numbers-of-women-in-the-
workforce/#3820d1de728c)

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jmclnx
He seems to be using data to point to the gold standard, but in reality the
gold was eliminated by FDR in 1933, not Nixon in 1971. There is one shock
people love to ignore, cheap energy. In the early 70s energy prices skyrocked
due to well documented reasons. So, companies had to pay more for and maybe
discovered they could keep pay low once prices stabilized.

~~~
k26dr
A version of the gold standard with the dollar pegged to gold for
international trade partners was reintroduced in 1945 post WWII and that's
what's Nixon suspended. Just like a true gold standard, it put a check on how
much dollars the government could print

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NTDF9
Having independently come to this same conclusion, I am glad someone did the
compilation on a single page.

I'm not against the gold standard per se but I have come to believe that money
supply controlled by credit expansion is simply not efficient. It distorts who
gets the first bite at money in circulation. It also keeps everyone forever in
debt.

Humans are not supposed to be indebted forever. Money as credit has monetary
system backwards af.

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dTal
I'm glad someone made this website. I've been collecting some of these graphs
myself and felt it was pretty clear a conversation needed to be had.

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tcbawo
Nixon also reopened relations with China in 1972. I'm having a hard time
finding trade information from the 1970s (a quick search turned up:
[https://apjjf.org/2013/11/24/Dong-
Wang/3958/article.html](https://apjjf.org/2013/11/24/Dong-
Wang/3958/article.html)). You could argue that arbitraging cheap labor
overseas has been happening for 40+ years. On the other hand, you could also
argue that this has helped make the US richer than otherwise would have been
the case.

~~~
dTal
That definitely seems like something that would conceivably exacerbate the
inequality effects, in the USA at least. But it feels to me to be too gradual
a shift to explain the elbows in some of those curves - it's not as if Nixon
reopened relations with China, and then companies instantly started
outsourcing. Is it?

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js2
End of Bretton Woods happened. Also I was born. And it's all been downhill
economically for the middle class since then.

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kahnjw
Is "graph picture book" the new medium for conspiracy theory videos or
something?

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lucas_membrane
There was a tax cut that took effect as-of January, 1971. Actually, the
government sold it to the public as repeal of a 5% tax surcharge effective 30
June 1970, but they did not change form 1040 to identify which income and/or
deductions were in which half of the year, so it actually worked out to be a
2.5% reduction in tax rates as-of 1 January 1970, and a 2.5% reduction as of
January 1971. With these 2 pay raises from the government a year apart,
employers may have felt less pressure to raise wages.

In addition, note that the first year of very high birth rates during the baby
boom was 1952. The non-college bound high-school graduates would all be
entering the labor force in 1970 and 1971. As the draft lottery numbers were
drawn late in 1969, those who got the high numbers felt free to leave college
and enter the work force without fear of the draft, most often at the end of
the school year in June 1970, and thencefrom a large fraction of high school
graduates could make their decisions about whether or not to attend college
without any need for ways to avoid the draft.

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tabtab
What about computerization of white collar work as a factor? Minicomputers,
such as DEC, started spreading into medium-sized businesses and departments.
The wealthy got the benefits of such but it didn't trickle down to those laid
off or who had to go back to school after their job was automated away.
Offshoring of manufacturing to Asia also began increasing around that time.
Thus, it could be a combination of offshoring and automation.

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ncmncm
The Powell Memorandum, the declaration of war by the Republican Party against
the continued existence of a Middle Class. The war is going swimmingly (for
them), and they have persuaded their victims to vote for it all. Look up
"managed population".

It has nothing to do with fiat currency, and everything to do with deliberate
policy to concentrate wealth in fewer hands.

~~~
tom_mellior
> Look up "managed population".

Do you have concrete sites you would like us to see? If so, please link them.

This general trope of "just google a term I'm throwing out there" is a
hallmark of conspiracy theorists. Please don't be one of them.

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randomsearch
Anyone else see the 80s as the real turning point? Eyeballing the graphs ‘71
seems a stretch.

Friedman, Reagan, Thatcher, were surely much more impactful. In the UK,
Thatcher was the first PM to have a major impact on the country since the
1940s.

Regressive moves in taxation, privatisation, deregulation, etc are also more
appealing to me as an explanation for rocketing inequality etc.

~~~
dwd
I would consider it a continuation.

Thatcher's era saw the breaking of union influence and control over employment
in many industries. The few jobs that have seen year on year increases since
then were those that managed to retain strong union membership such as
teaching and nursing in Australia.

Deregulation, market liberalisation and financial globalisation were then
factors enabling the offshoring of manufacturing to lower labour cost
countries.

We've been talking for years now how technology and automation will be the
next job destroyers but I think the flood of cheap capital is having a bigger
effect. Even shareholders are getting left out due to share buyback schemes
that's leaving the means for wealth in fewer hands.

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tryitnow
Well, those are charts.

OK, I think the author is making some vague point about the collapse of the
Bretton Woods system leading to the surge in inequality.

On a superficial level that looks to be what happened. And indeed something
big happened that created an economic regime very different than the post-War
regime of rising GDP and rising wages.

What happened in the early 1970s?

I think that's the wrong question because it pinpoints the last 40 years as in
some way exceptional. I don't think they are. It's more interesting to ask
what happened in the immediate post war era to allow increasing shared
prosperity.

Well, the US won a major near apocalyptic war with its home territory
completely unscathed permitting the US to utterly dominate the capitalist
world order.

Maintaining that dominance required appeasing American workers who agitated
heavily before the war and could credibly threaten to shut down strategic
parts of the economy in the midst of a Cold War that could turn hot at any
moment. Furthermore, that same Cold War created a polarity between capital and
labor and forced the hands of the American elite to give way more concessions
to labor than they would otherwise.

So in the years following WWII, there was about two decades of relatively pro-
labor policies (or at least tolerance of labor). This allowed American workers
to share in the gains from productivity.

What happened in the late 1960s?

American power started to diminish as the rest of the capitalist world became
more competitive. The US could no longer just print dollars to fund its war
machine and a new social welfare state (Great Society).

International capital became more aggressive in pursuit of profits. Why invest
in American businesses when they could invest in lower wage, more efficient,
up and coming economies. That put more pressure on American wages and American
labor power.

With high levels of war spending and social spending without commensurate
increases in taxes inflation was an ever present threat. Another reason
capitalist became less interested in holding dollars.

The inflation threat was finally stomped out by the Volker Federal Reserve
policies that generated a crushing recession. This recession and the Reagan
administration's anti-labor policies crushed any hope that American labor
would have of regaining its share of productivity increases.

The massive Reagan tax cuts further precluded building a social welfare safety
net that could have helped workers weather economic calamities. Desperate
workers work for cheap and are more willing to give up gains from
productivity.

So, I don't think anything magical happened in 1971. Rather it was a
collection of events that spanned into the 1980s culminating in the early
1980s recessions that both ended inflation and severely weakened American
labor. On top of that right-wing policies further weakened the power of
workers, making it less likely that they could share in gains from
productivity increases.

~~~
dTal
>I don't think anything magical happened in 1971. Rather it was a collection
of events that spanned into the 1980s...

How can you look at those graphs and not see the unmistakable, virtually
overnight phase change? There are lines that run together until 1971 and then
diverge. There are lines that cross axes in 1971. There are lines than run
flat, and then begin a meteoric ascent in 1971.

The whole point of putting these graphs together is to show that something
sudden happened then.

~~~
pgrote
>The whole point of putting these graphs together is to show that something
sudden happened then.

Yes, it appears that way.

Not all the graphs show a total change in 1971, but around it. Perhaps what
happened was a multifactor process begun in the 60s and finished in the 80s?
Cultural as well as financial?

~~~
solotronics
It was a fundamental change to the most basic unit of economy we have (money).
This was the date the financial system separated from reality and became based
on... nothing!

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Zarathu
[https://en.wikipedia.org/wiki/Lewis_F._Powell_Jr.#Powell_Mem...](https://en.wikipedia.org/wiki/Lewis_F._Powell_Jr.#Powell_Memorandum)

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tom_mellior
I'm intrigued by the consumer price index graph. Does it mean that a 1910
dollar bought you about the same goods and services as a 1790 dollar?
Mindboggling.

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Ididntdothis
A lot of the charts should have an exponential y axis. Otherwise the climb
gets steeper and steeper.

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newen
Milton Friedman introduced the Shareholder Theory in 1970, where he argued
that a company has no responsibility to society and that its only
responsibility is to the shareholders. As good a source as any...

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amai
See also
[https://en.wikipedia.org/wiki/Nixon_shock](https://en.wikipedia.org/wiki/Nixon_shock)
.

