The Year 1982: Up Close - Essay Example

The Year 1982: Up Close Introduction It is regularly stated that two of the most important stages in life is when one is born, and the next is when they realize why they were born. 1982 marks the initial stage in my life; and in my defense, the second stage takes more time than the first. During childhood, only one issue really captured the attention of the entire nation; the Cold War. Everyone was sought of prepared for war; it would not be a surprise even if it was a nuclear one. This was further escalated by the fact that there were tensions in many other areas such as Germany and South Africa. People in other regions had their own issues apart from the Cold War, and this war was increasingly becoming “boring” (Collins 312). The issue of recession also started to gain momentum. It was difficult to remember most happenings in the 80s, but some really stood out that even a child at that age would notice. One of these occurrences was the collapse of the Berlin wall. The wall had long separated the city, and indeed the entire Germany in two. Its collapse, along with the fact that both sides played a role in bringing it down marked a very crucial stage in the world. The collapse was in 1989, the same year that the cold war ended. It may be seen as a stage where the world was tired of separation, and the realization that unity is a vital key to progress. Since that era, the world has seen developments that bring people together like the ending of apartheid in South Africa. This paper shows how time has changed over the past thirty one years and what it all means on a personal perspective. The Year 1982 This was a year that was a consequence of the deeds in the past, and an outset of those that would come after. Very significant events took place in the twelve months of this year. Even though some were in the spot light more than others, each had an impact in the way people live not only in the United States, but across the globe. As stated earlier, the issue of the Cold War was one of the most talked about issue of the year. However, others such the looming economic crisis was gaining more attention. The United States could not promptly declare that it would have economic hardships as this would display its weakness to the enemy (Collins 307). Although the Cold War was not violent, there were other wars going on across the globe that was quite different. Argentina and the United Kingdom were fighting over the Falkland Islands, while Israel was invading Lebanon. In the earlier years, both Argentina and the U.K. suffered damages by losing a ship and a submarine respectively. They also lost lives in the war and thousands of Palestine refugees in camps in Beirut were slain by the Lebanese Militia. Not everything that occurred in the year was detrimental, there were instances that were celebrated. For instance, the first CD player was sold in Japan. In sports, Italy won the world cup in Spain. In the field of medicine, doctors massive improvement by implanting the first permanent artificial heart. Commercial whaling is also banned in this year with the help of the International Whaling Commission. On a relatively surprising end, the largest cash robbery was reported in New York after just below ten million dollars is stolen from an armored car (Collins 308). The Recession The recession of early 1980s began in July of 1981 and ended in November the following year. Although it was considered that the developed nations had been experiencing some economic hardships since the 70s, the recession in the United States was clearly evident in this time frame of 1981-1982. The key reason stated for the destitution was that the Federal Reserve System has an ineffective contractionary monetary system in place to control inflation. This system had been put in place since the country was hurting from the 1973 Oil Crisis along with the energy crisis in 1879. These two events in the 70s had caused the Federal Reserve to seek a plan as they were causing massive inflation at a time of little growth. In an economy such as the United States, it was utterly irresponsible to use systems without the proper knowledge of the possible outcomes (Imbs 337). The recession caused some adverse impacts that were felt on an international scale since the U.S. was a big part of the global economy. Some of the most notable outcomes are discussed below, and some proposals put forth to solve them. Unemployment As with any other period with economic hardships, the employment figures in the U.S. in 1982 swelled rapidly. It stood at 5.1% at the start of 1974 and 9% in May 1975. The 70s were times of crisis such as the Oil Crisis followed by the Energy Crisis and hence the figures would occasionally shift (Barone 40). At the start of the recession in 1981, the unemployment percentage was 7.5%, but steadily rose through to the following year. It is appropriate to establish that some regions had higher percentages than others; for instance in September 1982, Michigan was leading with an alarming 14.5%, while Stamford has a dismal 3.4% unemployment. When the recession peaked around the end of 1982, the general unemployment figure stood at 10.8%, the highest figure since The Great Depression. This figure still stands as the highest unemployment figure in the U.S. since the 1930s, further solidifying the relevance of the event in 1982. At the peak of the recession, Michigan was still leading in the unemployment figures at 16.5%, while South Dakota was lowest at 5.6%. The following year showed an alarming figure of 20.1% in West Virginia. The same year, 1983, saw thirty states hit double digits for unemployment (Imbs 339). The issue of employment is one that is of great significance to any nation. Since the recession had already found its roots in the country, it may take some blame for the unemployment figures that ensued. However, the recession was eminent, and hence some more informed steps should have been taken to ensure that the figures did not reach the levels that they did. It is notable that the figures in some areas such as Stamford and South Dakota remained low even at the peak of the recession, it is an illustration that they took measures to ensure the employed remained like so. Areas such as West Virginia and Michigan can learn a lot from them. Inflation The figure for inflation in the U.S. was typically around 3.2% each year before the war. During the 1970s however, the oil crisis doubled the figure to 7.7%, and this figure reached 9.1% by 1975. This latest inflation level was the highest since 1945. The subsequent years had fluctuations up until 1979 where it reached an all high of 11.3%. 1980 experienced a brief recession which further surged the inflation rate to an astounding 13.5% (Barone 2009). A few industries that are key contributors to the economy were severely affected by the recession, some included automobile production, steel production, ad housing. The sectors that supplied these industries were consequently hard hit. The Federal Reserve was responsible of most of the unemployment by increasing the interest rates in order to lessen inflation. Hence, once inflation levels tumbled, the number of unemployed gradually fell in turn (Imbs 340). The issue of inflation is not as complicated as that of employment. Inflation can be manipulated by tweaking the interest rates. However, this is achieved at the expense of increasing the unemployment rate. In order to solve this issue of high inflation, the government ought to consider the impact on employment. The best course of action is to incorporate measures that support both employment opportunities and lessen the inflation levels such as developing the economy while checking the interest rates so as to control inflation. Banks Banks in any country form a very essential part of its economy. Hence, their functioning is imperative to the functioning of the economy in turn. However, if the case is quite different like that of the U.S. in 1982, the economy is in deep trouble. The recession came at a time when the banks did not have solid foundations to weather it. The recession came just after the banks had undergone a period of deregulation which allowed them to lend more, and loosed some of their practices. The immediate response from the banks was that they lent out more, and ventured into other areas just when the economy was about to face hardships (Iqbal 28). The year 1982 saw a record 42 banks fail as the recession supplemented by the elevated interest rates took their toll. Notably, the recession had a profound impact on the banking industry long after the economic hardships, and this is most evident when 50 more banks failed in 1983. This figure was higher than that reached during the great depression in 1940 (Iqbal 28). In many ways, the issue of banks was properly handled by the regulating body- the Federal Deposit Insurance Corporation (FDIC). After the bank failures begun in 1982, the institution spent just under one billion dollars to ensure that the trend ended. This was successful even though other banks did fail. One reason why the banks were failing in succession is because they were linked and hence the failure of one bank prompted the failure of others. When the Continental Illinois National Bank and Trust Company failed, members of the congress knew many more banks would consequently fail since this was one of the biggest banks in the country. They served as a financial package and kept the bank afloat this was a clever move. Savings and Loan Crisis The savings and loan industry was already realizing difficulties when recession came in and worsened the entire situation. There was a sharp drop in the income the industry made from a sensible figure to a big loss. In the year 1980, the S&L income was over $ 700 million, and in the following year the industry realized a loss $4.6 billion the following year. In just one year, the industry made a very sudden change of direction. Looses continued into the year 1982, with a tangible net worth of the complete industry almost at zero (Imbs 341). The industry was also not regulated in the proper way for the body entrusted to do so did not hold the adequate attributes that would control the wide array of new lending powers held by the financial institution in the S&L industry. This inability to deal with deliquesces that the industry held meant that poor financial practices were never corrected. The consequence of these was the advancement of deregulation and vigorous lending to forestall insolvency. Most acts seemed to work against the prosperity in the industry including the Economic Recovery Tax Act of 1981 which resulted in a boom in the construction of viable real estate (Jenkins 32). It may be stated that this crisis was a result of inadequate measures taken by regulating institutions along with the worsening congressional initiatives. Although there were difficulties due to the oil and energy crisis, supplemented by the recession, there were numerous opportunities of making the right choices in order to take back the industry to the level it belonged. However, it seems that all the initiatives taken worked to the contrary and only worsened the situation and capacity for the industry to recover. The supposedly regulatory bodies did not hold enough of the necessary jurisdiction to foster the growth needed (Imbs 345). Political Fallout After the recession had been feeling for about a year, President Ronald Reagan acknowledged that the nation was dealing with a “slight recession”. People consequently dubbed the economic hardship “the Reagan recession” due to the measures taken to weather the economic depression. The president lost a huge portion of his support due to budget cuts enacted in 1981, but took effect in 1982. It was deemed that Reagan would not win the reelection as people thought that he was insensitive to the needs of the people. There was increased deficit as a result of the recession; the president opted to increase corporate tax in 1982. Notably, the president refuted to cut on defense spending along with the income taxes (Keller 492). In 1982, the midterm Congressional elections were perceived by many as a referendum on Reagan with his economic policies. Indeed, they proved to act against these policies by giving the opposition 26 House seats which were at the time more than any other time apart from 1974, the Watergate Year (Keller 492). It is appropriate to note that the balance of power remained unchanged in the Senate. During an economic meltdown such as the one above, the reactions of the leaders have a profound impact on the ultimate outcome. It is comprehensible why President Reagan did not cut defense spending at the height of the cold war, but what can be considered as a failure is the lack of bringing the people in the country together. The decisions made by the president might have been in the best interest of the people, but bringing people to realize so is one of the most important roles of the president (Keller 495). Summary Time is one of the best teachers around, and one of the most just despots all at ones. It gives one the chance to view an issue from very different viewpoints that improves their comprehension of the world around them. This is applicable in many spheres of knowledge that is constantly growing, and hence reaching new heights. This knowledge is one of the essential components for reaching the next stage in life; realizing why one is alive. Reference Barone, Michael. "The Seventies Shift." The Wilson Quarterly 33.4 (2009): 40-45. Collins, Robert M. "The New Historiography of the 1980s." Transforming America: Politics and Culture during the Reagan Years 36.2 (2008): 305-314. Imbs, Jean. "The First Global Recession in Decades." IMF Economic Review 58.2 (2010): 327- 354. Iqbal, Azhar. "The Deeper the Recession, the Stronger the Recovery: Is It Really That Simple?" Business Economics 46.1 (2011): 24-32. Jenkins, Jamie. "The labor market in the 1980s, 1990s and 2008/09 recessions." Economic & Labor Market Review 4.8 (2010): 29-36. Keller, Jonathan W. "Explaining Rigidity and Pragmatism in Political Leaders: A General Theory and a Plausibility Test from the Reagan Presidency." Political Psychology 30.3 (2009): 480-498. Read More