The U.S. participation in the global economy contributed to stagflation in the 1970s in a few ways. One major factor was the increase in global competition, particularly from countries like Japan and Germany, which led to a decline in American manufacturing jobs and a shift towards service-based industries. This, in turn, led to a decline in American productivity and a rise in inflation as prices for goods and services increased.
In addition, the U.S. was heavily dependent on foreign oil during this time, and the oil embargo of 1973 caused a significant increase in oil prices. This led to a rise in energy costs, which in turn increased the cost of goods and services, contributing further to inflation.
Furthermore, the U.S. was also dealing with the aftermath of the Vietnam War and increased government spending on social programs, which led to a rise in government debt and a decrease in the value of the U.S. dollar. This made imports more expensive, contributing to inflation and further exacerbating the economic stagnation.
Overall, the combination of increased global competition, rising energy costs, and government spending contributed to stagflation in the 1970s, and the U.S. had to implement new economic policies and strategies in order to overcome these challenges.