No water. No petrol. But no stagflation -- yet.
What's this? Queues at the petrol pumps. A drought across half the country. Strikers threatening to bring down the government. It could be the 1970s all over again!
The decade is often celebrated for the awfulness of its fashion: flared trousers, cheesecloth shirts and platform shoes -- and that was just the men. And it had the hottest and driest summer -- 1976 -- of the century. In some parts of the country, domestic water supplies were cut off and housewives queued to fill buckets at stand pipes in the street. There were still housewives in the 1970s.
But the decade also saw most of the developed world suffer its worst economic performance since the Second World War. It was marked by the phenomenon of stagflation, a pernicious cocktail of inflation, stagnant economic activity and high unemployment.
In the UK, inflation peaked at just under 25% in 1976, while the economy was shrinking. Strikes and other industrial action added to the malaise, culminating in the 'Winter of Discontent' in 1978-79, which ushered in the Thatcher revolution.
Oil shocks
Conventional wisdom has it that the root causes of stagflation were the oil shocks of 1973 and 1979. Both had their origins in the Middle East.
In 1973, Egypt and Syria launched a surprise attack against Israel (the Yom Kippur war) with the aim of regaining territory Israel had occupied since the 1967 Six Days War. President Nixon's decision to provide arms to Israel led to the Organisation of the Petroleum Exporting Countries (OPEC) imposing sanctions against the US and other Western nations. Oil prices rocketed.
The 1979 crisis followed the Iranian Revolution when the Shah was deposed by Ayatollah Khomeni and President Jimmy Carter imposed sanctions on Iran. It continued into the 1980s as the ensuing Iran-Iraq war disrupted production in the region.
Bretton Woods
But some economic historians see the problems originating closer to home. The cost of the Vietnam War and the first trade deficit of the 20th Century had US inflation running at nearly 6% by 1970. Nixon responded with wage and price controls, and by taking the dollar off the gold standard in 1971, effectively ending the Bretton Woods Accord.
That led to a massive devaluation of the dollar. OPEC sought to maintain the oil price in gold terms, and the price hikes of 1973 effectively achieved that.
Nixon is also blamed, by monetarist economists, with pressuring the Federal Reserve to keep interest rates too low for too long, fearing a recession in his re-election year. When wage and price controls were removed, double-digit inflation ensued.
UK
Wage and price controls were also Prime Minister Edward Heath's response to inflation at the start of the 1970s. That led to massive industrial unrest, with nine million working days lost to strikes during his tenure.
The miners' strikes of 1972-74 gave rise to the three-day (working) week as electricity supplies were rationed. The economy collapsed into recession in 1974 with output falling over 3% while inflation was running at around 15%, and Heath lost the general election to Harold Wilson.
In 1979 widespread strikes in the public sector did for the Labour government, then led by James Callaghan, with rubbish famously piled in the streets and coffins going unburied in Liverpool after a gravediggers' strike. Margaret Thatcher led the Conservatives to victory in the 1979 general election.
Phillips curve
The 1970s stagflation confounded the prevailing Keynesian economic theory that held high inflation and high unemployment to be mutually exclusive. In a relationship described as the 'Phillips curve', inflation was supposed to fall if unemployment rose, and vice versa. That led to the rise of monetarist economists, who placed much more emphasis on managing the money supply.
There is some consensus now that stagflation is caused either by a severe external shock on the supply side of the economy, such as the oil price hikes or by economic mismanagement.
Could it happen again? With the world wrestling with how to respond to Iran's potential nuclear capability, and the eurozone held together with a piece of string, there's a couple of good candidates for future external shocks.
Unprecedented low interest rates, massive debt overhang and a decade of austerity measures yet to bite, together these create enough novelty in the economic environment for policy makers to be able to get it wrong.
Too much is different from the 1970s to draw any direct comparisons. But too much is similar for us to be complacent. Those who envy the generation that grew up in the 1970s should be thankful things are different now -- and not just because of the flared trousers...
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