Today, we turn our gaze to 1979, a year that profoundly shaped the remainder of the 20th century, cementing anxieties born in the 1970s and launching the geopolitical and economic narratives that would define the next decade.
Following 1978, a year where economic anxieties clashed with evolving social norms, 1979 saw these tensions reach a fever pitch. The ongoing struggles with inflation and a diminished sense of national confidence, which President Carter famously termed a “crisis of confidence,” would be severely tested by events that truly rocked the global stage and reverberated deeply within American society.
Geopolitical Seismic Shifts: Iran, Afghanistan, and the “New Cold War”
Undoubtedly, the most dramatic and far-reaching events of 1979 unfolded in the Middle East and Central Asia.
The long years of resentment against Shah Mohammad Reza Pahlavi’s dictatorship in Iran culminated in mass demonstrations toward the end of 1978. On September 8, 1978, hundreds of demonstrators were massacred by the Shah’s troops, yet President Jimmy Carter affirmed his support for the Shah the very next day via a telephone call. U.S. Embassy sources revealed in December 1978 that the embassy staff was bolstered by dozens of specialists, including CIA experts on Iran, to help the Shah’s faltering rule. However, in early 1979, as the crisis intensified, the former chief analyst on Iran for the CIA reportedly disclosed that he and his colleagues knew of the tortures of Iranian dissenters by Savak, the Iranian secret police established with CIA assistance, and that a senior CIA official was involved in instructing Savak officials on torture techniques.
Despite U.S. backing, the popular, massive revolution prevailed, and the Shah fled Iran on January 16, 1979, for what he called a brief vacation. His overthrow led to the installation of an Islamic republic under Ayatollah Ruholla Mussaui Khomeini in April. This event marked a major geopolitical defeat for America, as Iran had been its stronghold in the Middle East and a predictable source of oil, as well as a primary defense post against Soviet influence in the region.
The most potent symbol of this shift, and a profound blow to American pride, occurred on November 4, 1979, when a group of militant Iranian students stormed the U.S. embassy in Tehran and seized its employees, holding fifty-two embassy employees hostage. This act, sanctioned by Ayatollah Khomeini, was a direct response to America’s decades-long support for the Shah’s police state, and a fear that the U.S. might restore the Shah to power. The ensuing 444-day hostage crisis dominated foreign news in the United States, eliciting powerful nationalist feelings and contributing significantly to President Carter’s eventual defeat in the 1980 election. The Iranian hostage-takers explicitly invoked the ghost of Vietnam, whispering “Vietnam, Vietnam” to their captives and lining cells with images of crippled Vietnamese children, stating, “We’re paying you back for Vietnam”. This crisis fueled a growing sense of national victimhood in America, portraying an innocent nation as the target of inexplicable foreign assaults.
Concurrently, another major geopolitical shift occurred in Afghanistan. In 1978, communists staged a coup there, deposing the elected president, and the Soviet Union provided support to the faltering new regime. By early 1979, religious activists, inspired by Khomeini’s triumph in Iran, carried their defiant message across the border into Afghanistan, particularly to Herat, a city with strong ties to Iran. Despite this local religious revival, Kabul’s communists, advised by Soviets, pressed secular reforms, conscripted soldiers, seized lands, and mandated Marxist dogma. On December 24, 1979, the Soviet Union invaded Afghanistan, ostensibly to support the communist government. This move was predicted to be temporary by Soviet leader Leonid Brezhnev, who thought it would be “over in three to four weeks”. However, it ignited a protracted war, with resistance fighters known as the mujahidin receiving support from the Saudi government, eager to promote its Wahhabism, and the United States, which saw an opportunity to “sow shit in their backyard” by bankrolling the mujahidin. The U.S. began supporting this anti-Soviet movement in Afghanistan in 1979, giving little attention to the extreme anti-Western jihadists it was aiding, focusing only on their opposition to Soviet imperialism. Carter’s response included symbolic actions such as reinstituting the draft and calling for a boycott of the 1980 Moscow Olympics.
These events, particularly the Iranian Revolution and the Soviet invasion of Afghanistan, led to the perception of America’s influence ebbing throughout the 1970s and contributed to a “New Cold War”. In 1979, President Carter signed a presidential directive (PD-59) authorizing a counterforce targeting strategy aimed at Russia’s political/military nerve centers, further intensifying nuclear anxieties.
Beyond these major crises, 1979 also saw significant diplomatic shifts. Deng Xiaoping, having outmaneuvered Maoist hardliners, emerged as Mao’s de facto successor and paid an official visit to the United States in January 1979, ostensibly celebrating America’s formal recognition of the People’s Republic. This move completed the recognition of China that had stalled after Nixon’s resignation and Mao’s death, though Congress, upset by Carter’s methods, passed the Taiwan Relations Act of 1979 to maintain a relationship and security support for Taiwan. While in the U.S., Deng was permitted to attack Moscow, further endangering the Strategic Arms Limitation Talks (SALT) negotiations. Despite these tensions, Vance and the Soviet Union’s ambassador, Anatoly Dobrynin, persevered, and on June 19, 1979, Brezhnev and Carter signed the second SALT treaty in Vienna, limiting the manufacture and deployment of strategic missiles.
Economic Headwinds: Inflation and Monetary Policy Shifts
Economically, 1979 continued the struggles with inflation that had been raging since the late 1960s, intensifying under Carter’s watch. The Iranian revolution directly contributed to this, causing oil prices to skyrocket and leading to long lines at gas pumps, profoundly impacting Americans. The cost of oil imports rose dramatically from $8 billion in 1973 to $47 billion in 1977. By January 1979, the monthly rate of increase in consumer prices in the United States rose sharply, reaching 10.6% (at annual rates) from 5.3% in December 1978, with an annual realization of 13.0% compared to a forecast of 7.5%. Wage increases also rose, further embedding inflation into the economy. This economic distress was a primary factor in Carter’s eventual defeat in 1980.
The skyrocketing oil prices in 1979 resulted in one of the largest wealth transfers in history, from oil consumers in the West to oil producers, creating a “new culture of greed” that reverberated globally. In this environment, the Federal Reserve struggled to print money without fueling more inflation.
In response to the persistent economic challenges, President Carter’s administration and the Federal Reserve grappled with policy. By the turn of 1978–79, some within the administration, like Schultze and Blumenthal, perceived policy as “too expansive” and initiated a “leaked campaign in the press” to pressure Fed Chairman G. William Miller into tightening monetary policy. However, Miller had little prior experience with monetary policy, his appointment in April 1978 owing largely to his work in Carter’s presidential campaign and his friendship with Vice President Walter Mondale. Miller complained about leaks to the press from FOMC meetings, an issue that had arisen many times before and would return.
A significant shift in monetary policy came later in the year. In July 1979, Miller was replaced by Paul Volcker as Treasury Secretary, leaving a vacancy at the Federal Reserve. President Carter appointed Paul Volcker, a known anti-inflationist, as the new Chairman of the Federal Reserve. Volcker quickly took a more aggressive stance against inflation. On August 30, the FOMC voted to raise the upper end of the federal funds rate band to 11.5% due to high money growth. Volcker, in an October 1979 speech, explicitly warned against loans financing speculation and emphasized that inflation itself was the “greater threat to economic stability”. He also rejected the idea that inflation could be reduced by cooperative action by labor unions and businesses, stating that such programs could “lull us into thinking that they are a substitute for monetary and budgetary discipline”. By 1979, the Federal Reserve System aimed to gain more control of money growth.
The end of the 1970s also saw the burden of costly regulations become apparent, and deregulation began, indicating a shift from the Keynesian policies that had dominated American economic policy since the end of World War II.
Domestic Politics and Social Undercurrents
On the domestic political front, Carter’s presidency continued to be challenged. In September 1978, Hubert Harris of the Office of Management and Budget had reported to Hamilton Jordan about “suspicious meetings” of Edward Kennedy and his supporters in Boston, indicating early plans for a presidential challenge. Indeed, Kennedy decided to run during the summer of 1979, informing Carter in late September, but officially launched his candidacy on November 7, 1979, just three days after the U.S. embassy in Tehran was seized. This made Kennedy’s candidacy a vehicle for Democratic liberals “infuriated for years” by what they considered Carter’s “apostasy”.
Beyond the political establishment, social and cultural shifts continued. While sources provided focus more on the 1980s for specific social movements like the nuclear freeze or anti-apartheid movements, the ongoing “culture wars” and discussions around individual rights continued to be a backdrop for American society.
In sum, 1979 was a year that saw the United States grappling with profound challenges both at home and abroad. The Iranian Revolution and the Soviet invasion of Afghanistan dealt severe blows to American power and confidence, while persistent inflation demanded drastic shifts in economic policy. These events not only defined the remainder of Carter’s presidency but also profoundly influenced the political and economic landscape that Ronald Reagan would inherit, setting the stage for the ideological and geopolitical struggles of the 1980s. The truth, as always, lies in acknowledging the intricate, often painful, interplay of these forces.