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1). The stagnation of the 1970s was caused largely by conflicts in the Middle-East, resulting in the decision of many OPEC nations to enact sanctions against the allies of Israel. The consequent rise in oil prices led to the stagnation of many large industries, caused by increased production costs. To maintain momentum and profits, the big corporations laid off many workers, and prices were raised, causing even greater inflation. As the overall wealth of the nation declined, the demand for such high prices commodities fell, and a rapid succession of mergers and acquisitions ensued, thus ensuring that stagflation would not end even if the supply of oil were restored.

Enter Reagan. In 1981, the former actor and Governor of California was elected to the presidency, amid high hopes that the economic policies proposed during his campaign would end stagflation. His proposed economic policy was characterized by four pillars: reduction in the growth of government spending, reduction of marginal tax rates, reduction of economic regulations, and greater control over the money supply. These strategies had their roots in neoclassical supply-side economic theory, founded by the father of modern economics, Adam Smith. The general idea behind this theory is that economic growth is best promoted by encouraging higher production, and thus decreasing living costs while raising the standard of living. The most common methods of encouraging higher production are decreases in income and capital gains tax rates, both of which were implemented by Reagan early in his presidency (Phillips 20). The cuts in tax rates would provide industry and their wealthy shareholders with more money, which would then be invested back into the corporations and allow fo...

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...Milton Friedman, whose ideas have supported or added to the supply-side theory. Arguments that Reaganomics disadvantage the poor and promote the wealthy are irrelevant and unfounded as well. The tax cuts for the rich, while making them wealthier, also expands industry, increases productivity, decreases unemployment, and increases the standard of living (Buchholz 102).

Moral and political ideology aside, Reaganomics was a success, and a working solution to the economic crises of the 70s. Though it did not exactly meet the level of success expected, and though it should never be used as a one-size-fits-all solution, Reaganomics is not the “voodoo economics” that many people deride it as. Through its implementation to a modicum of success in the past 28 years, it is, as Milton Friedman said, just another set of policies for use by the government when the need arises.