Panic, Prosperity, and Progress: Five Centuries of History and the Markets

CHAPTER 17

The Reagan Revolution and Crash

Entering the 1980s, the United States could be forgiven for viewing its future with a healthy amount of skepticism. The past two decades had been wearisome for the nation, as it had gone through civil unrest, presidential assassination, surging inflation, a stagnant economy, an outdated “rust belt” industrial sector, the disaster of Vietnam, the first presidential resignation, and a persistent cold war.

The leadership of the United States in the form of Nixon, Ford, and Carter hardly inspired the public, either. The nation exited the 1970s with a sense of malaise, and although it was still a superpower, the United States and its population could plausibly accept the prospect that its best days were behind it.

In this environment, the country was ready for a new direction, and it found it in the form of Ronald Reagan. America wanted to be told that it could be a great nation again, and Reagan’s assurances that a smaller government, lower taxes, and a new respect for business and the good it could do resonated with the voting public. Jimmy Carter lost his bid for a second term in office, and Reagan began in early 1981 what would be an eight-year stint in the White House.

■ The Death of Inflation

If there was one aspect of the economy that characterized the 1970s, it was inflation. It had persisted for most of the decade, and as long as it was an economic reality, it would continue to choke off any meaningful growth in the nation’s business. ...