able to continue their inroads into the American
market.
The biggest increases in employment were in
trade and services. Rapidly growing service sectors
included medical care, recreation and entertain-
ment, and education. Improved medical technology
and accessibility helped extend life expectancy and
raised the proportion of the population over age
sixty-five from 11.3 percent in 1980 to 12.4 percent
in 1989. Household entertainment resources were
rapidly transformed. Cable television began to sup-
plement the traditional broadcast networks (whose
number was augmented when FOX entered the
business in 1986). Ted Turner introduced the Cable
News Network (CNN) in 1980; it had 39 million sub-
scribers by 1985. MTV offered viewers a steady diet
of music videos, to the mingled delight and dismay
of the nation. Audio compact discs (CDs) came on
the market in the early 1980’s and grew to a $2 bil-
lion business by 1988, with a corresponding wane
in long-playing record sales. By 1988, two-thirds of
homes had a videocassette recorder (VCR).
The decade saw the emergence of the desktop
personal computer (PC). In 1980, most computers
were large mainframes with many satellite keyboards
and monitors. In 1981, there were about 2 million
PCs in use, most of them in business firms. By 1988,
the number had grown to 45 million, the majority in
households. Apple Computer had pioneered the PC
in the 1970’s, but a major step came when Interna-
tional Business Machines (IBM) permitted MS-DOS
software to be installed on new machines. Software
became a major industry in itself, with Microsoft as
the chief firm.
Deregulation The effort to stimulate competition
and innovation by deregulating sectors of the econ-
omy had begun under President Carter and was vig-
orously extended under President Reagan. In 1980,
Congress removed the ceilings on interest rates that
could be paid by banks and other deposit institu-
tions to investors. Rate ceilings had prevented de-
posit institutions from offering competitive interest
rates when market rates went so high in the later
1970’s. Savings institutions had experienced heavy
withdrawals, and many investors had shifted their
funds into the newly developed money-market mu-
tual funds.
Government regulation of pricing, entry of new
firms, and other operations had been traditional in
transportation and public utilities. Many of these
regulations were now reduced or removed. The Mo-
tor Carrier Act of June, 1980, gave firms in the truck-
ing industry freedom to determine their routes,
schedules, and rates. Similar deregulation of airlines
had begun in 1978. One effect was the creation of
People Express Airline, which began low-price, low-
frill service in 1980. The telecommunications sector
also experienced increased competition and flexi-
bility. One factor contributing to this increase was
the 1982 antitrust settlement that fragmented Amer-
ican Telephone and Telegraph (AT&T), creating
regional operating companies (the so-called Baby
Bells) and opening the way for competition in long-
distance telephone service by such firms as Sprint
and MCI.
In the short term, deregulation seemed to lead to
lower prices and greater access to competing suppli-
ers. However, it also created the appearance of dis-
orderly market conditions. Consumers confronted
problems getting accurate information about prod-
ucts and services from suppliers, who often made
confusing offers. At the same time that traditional,
economic forms of regulation were being disman-
tled, however, social regulatory programs were ex-
panding through such agencies as the Environ-
mental Protection Agency, the Equal Employment
Opportunity Commission, the Consumer Products
Safety Commission, and the Occupational Safety
and Health Administration.Monetarism and the End of Inflation With the sup-
port of President Reagan, Federal Reserve chief Paul
Volcker was able to slow down the rate at which the
money supply expanded. Many economists had be-
come adherents of monetarism, according to which
inflation would tend to move in proportion to the
rate of monetary growth. The monetarists also be-
lieved that interest rates would tend to move in pro-
portion to the expected rate of inflation. Both views
seemed to be validated in the 1980’s, as monetary
slowdown reduced both interest rates and the rate of
price increase (to between 4 and 5 percent annually
in 1987-1989). However, home mortgage rates were
still in the neighborhood of 10 percent in 1989. Re-
duction in the inflation rate was greatly aided by
the decline in world petroleum prices. Oil imports,
which cost the United States almost $80 billion an-
nually in 1980-1981, cost less than $40 billion annu-
ally in 1986-1988.160 Business and the economy in the United States The Eighties in America