America's Economic Status

The economy of the world throughout the past century has changed as a result of world leaders, war, and different economic theorists. One example of a country which has faced negative economic changes is Germany, which was left helpless after the first world war. When Germany lost, they had already suffered many economic blows due to the costs of fighting a war. The world's top leaders then demanded Germany pay reparations to the other countries they had fought against, which caused the economy to plummet further. It became so bad that eventually money was worthless. This hyperinflation caused Germans to start looking for a different way of governing, and they eventually came to believe in the methods of socialism. Socialism had already taken hold of Russia, with Lenin in the 1920's. Lenin believed in 'abolishing the chaos' of free-markets, and thought that it would benefit the economy if the government controlled certain markets.

America had a similar response to the Great Depression, where inflation was also a problem. President Roosevelt adopted the ideas of John Maynard Keynes, which managed to stay popular in America and Great Britain until the early 1970's. Keynes believed in government regulation, which enabled the government to set prices in certain fields, such as the airline industry. This regulation eventually created problems however; both America and Great Britain suffered from stagflation, which was characterized by high unemployment rates. When the government did not allow free-markets, small business also suffered, many going bankrupt. Inflation continued, even with the wage and price controls implemented by President Nixon between 1968-1974. With the Arab oil embargo in the 70's, gas prices skyrocketed, adding to the frustration of the American people with the economy.

Stagflation eventually ended with the election of two conservative leaders: Margaret Thacher as the Prime Minister of Great Britain, and President Reagan in America. The leaders refused to use Keynesian economics, instead turning to the ideas of Freidrich von Hayek. Hayek, who wrote the novel The Road to Serfdom and won the Nobel Prize, believed that the economy, if given time, would eventually take care of itself. Without control of wages, and with free-markets, everything in the economy would theoretically balance. Reagan incorporated Hayek's ideas, and used deregulation, modest tax rates, and moderate government spending to help change the economy. Thacher did the same, and also changed her country's failing economy.

The economy has always been one of the most crucial parts of a country's survival; the ideas of Keynes and Hayek were both useful in changing the economy, for better or for worse. Throughout the century, important world leaders have employed different economic ideas, resulting in either improvement or inflation and stagflation. Economics is a necessary field of study; without a thriving economy, a country will fail.