Although Nixon eluded prosecution, Watergate continued to weigh on voters’ minds. It netted big congressional gains for Democrats in the 1974 midterm elections, and Ford’s pardon damaged his chances in 1976. Former one-term Georgia governor Jimmy Carter, a nuclear physicist and peanut farmer who represented the rising generation of younger, racially liberal “New South” Democrats, captured the Democratic nomination. Carter did not identify with either his party’s liberal or conservative wing; his appeal was more personal and moral than political. He ran on no great political issues, letting his background as a hardworking, honest, southern Baptist navy man ingratiate him to voters around the country, especially in his native South, where support for Democrats had wavered in the wake of the civil rights movement. Carter’s wholesome image was painted in direct contrast to the memory of Nixon, and by association with the man who pardoned him. Carter sealed his party’s nomination in June and won a close victory in November.61
When Carter took the oath of office on January 20, 1977, however, he became president of a nation in the midst of economic turmoil. Oil shocks, inflation, stagnant growth, unemployment, and sinking wages weighed down the nation’s economy. Some of these problems were traceable to the end of World War II when American leaders erected a complex system of trade policies to help rebuild the shattered economies of Western Europe and Asia. After the war, American diplomats and politicians used trade relationships to win influence and allies around the globe. They saw the economic health of their allies, particularly West Germany and Japan, as a crucial bulwark against the expansion of communism. Americans encouraged these nations to develop vibrant export-oriented economies and tolerated restrictions on U.S. imports.
This came at great cost to the United States. As the American economy stalled, Japan and West Germany soared and became major forces in the global production for autos, steel, machine tools, and electrical products. By 1970, the United States began to run massive trade deficits. The value of American exports dropped and the prices of its imports skyrocketed. Coupled with the huge cost of the Vietnam War and the rise of oil-producing states in the Middle East, growing trade deficits sapped the United States’ dominant position in the global economy.
American leaders didn’t know how to respond. After a series of negotiations with leaders from France, Great Britain, West Germany, and Japan in 1970 and 1971, the Nixon administration allowed these rising industrial nations to continue flouting the principles of free trade. They maintained trade barriers that sheltered their domestic markets from foreign competition while at the same time exporting growing amounts of goods to the United States. By 1974, in response to U.S. complaints and their own domestic economic problems, many of these industrial nations overhauled their protectionist practices but developed even subtler methods (such as state subsidies for key industries) to nurture their economies.
The result was that Carter, like Ford before him, presided over a hitherto unimagined economic dilemma: the simultaneous onset of inflation and economic stagnation, a combination popularized as stagflation.”62 Neither Ford nor Carter had the means or ambition to protect American jobs and goods from foreign competition. As firms and financial institutions invested, sold goods, and manufactured in new rising economies like Mexico, Taiwan, Japan, Brazil, and elsewhere, American politicians allowed them to sell their often cheaper products in the United States.
As American officials institutionalized this new unfettered global trade, many American manufacturers perceived only one viable path to sustained profitability: moving overseas, often by establishing foreign subsidiaries or partnering with foreign firms. Investment capital, especially in manufacturing, fled the United States looking for overseas investments and hastened the decline in the productivity of American industry.
During the 1976 presidential campaign, Carter had touted the “misery index,” the simple addition of the unemployment rate to the inflation rate, as an indictment of Gerald Ford and Republican rule. But Carter failed to slow the unraveling of the American economy, and the stubborn and confounding rise of both unemployment and inflation damaged his presidency.
Just as Carter failed to offer or enact policies to stem the unraveling of the American economy, his idealistic vision of human rights–based foreign policy crumbled. He had not made human rights a central theme in his campaign, but in May 1977 he declared his wish to move away from a foreign policy in which “inordinate fear of communism” caused American leaders to “adopt the flawed and erroneous principles and tactics of our adversaries.” Carter proposed instead “a policy based on constant decency in its values and on optimism in our historical vision.”63
Carter’s human rights policy achieved real victories: the United States either reduced or eliminated aid to American-supported right-wing dictators guilty of extreme human rights abuses in places like South Korea, Argentina, and the Philippines. In September 1977, Carter negotiated the return to Panama of the Panama Canal, which cost him enormous political capital in the United States.64 A year later, in September 1978, Carter negotiated a peace treaty between Israeli prime minister Menachem Begin and Egyptian president Anwar Sadat. The Camp David Accords—named for the president’s rural Maryland retreat, where thirteen days of secret negotiations were held—represented the first time an Arab state had recognized Israel, and the first time Israel promised Palestine self-government. The accords had limits, for both Israel and the Palestinians, but they represented a major foreign policy coup for Carter.65
And yet Carter’s dreams of a human rights–based foreign policy crumbled before the Cold War and the realities of American politics. The United States continued to provide military and financial support for dictatorial regimes vital to American interests, such as the oil-rich state of Iran. When the President and First Lady Rosalynn Carter visited Tehran, Iran, in January 1978, the president praised the nation’s dictatorial ruler, Shah Reza Pahlavi, and remarked on the “respect and the admiration and love” Iranians had for their leader.66 When the shah was deposed in November 1979, revolutionaries stormed the American embassy in Tehran and took fifty-two Americans hostage. Americans not only experienced another oil crisis as Iran’s oil fields shut down, they watched America’s news programs, for 444 days, remind them of the hostages and America’s new global impotence. Carter couldn’t win their release. A failed rescue mission only ended in the deaths of eight American servicemen. Already beset with a punishing economy, Carter’s popularity plummeted.
Carter’s efforts to ease the Cold War by achieving a new nuclear arms control agreement disintegrated under domestic opposition from conservative Cold War hawks such as Ronald Reagan, who accused Carter of weakness. A month after the Soviets invaded Afghanistan in December 1979, a beleaguered Carter committed the United States to defending its “interests” in the Middle East against Soviet incursions, declaring that “an assault [would] be repelled by any means necessary, including military force.” The Carter Doctrine not only signaled Carter’s ambivalent commitment to de-escalation and human rights, it testified to his increasingly desperate presidency.67
The collapse of American manufacturing, the stubborn rise of inflation, the sudden impotence of American foreign policy, and a culture ever more divided: the sense of unraveling pervaded the nation. “I want to talk to you right now about a fundamental threat to American democracy,” Jimmy Carter said in a televised address on July 15, 1979. “The threat is nearly invisible in ordinary ways. It is a crisis of confidence. It is a crisis that strikes at the very heart and soul and spirit of our national will.”