stagflation

…however, many Western countries experienced “stagflation,” or simultaneous high unemployment and inflation, a phenomenon that contradicted Keynes’s view. The result was a revival of classical liberalism, also known as “neoliberalism,” which became the cornerstone of economic policy in the United States under President Ronald Reagan (1981–89) and in the United…

…declining profit rate coincided with stagflation; a fiscal crisis developed; internationalization made state economic management less effective; clients began to reject standardized, bureaucratic treatment in the welfare state; and American economic dominance and political hegemony were threatened by European and East Asian expansion. These phenomena prompted a wide-ranging search for…

The “stagflation” of the 1970s (literally, a combination of economic stagnation and inflation), impossible in a simplified Keynesian framework, was seen by many as confirmation of Friedman’s hypothesis. In any event, it marked the end of the dominance of the Keynesian model in macroeconomics.