To what extent was the Cold War caused by post World War 2 economics?

To what extent was the Cold War caused by post World War 2 economics?

Quite a while ago I wrote an essay for college on the causes of the First Cold War (Seeing as in some schools of thought, the Cold War can be split into 2 distinct "conflicts" or stages) looking primarily at it from an economic standpoint.

In the end I summarised that the cold war was caused by a mixture of factors that included the relative delay in the western allies fighting on mainland Europe (Stalin push for D-Day to happen much earlier than it did), the massive difference in casualties (at it's worst it could have been as much as 15 Soviet deaths to every allied death), the fact that Europe's and Russia's economies were decimated by WW2 where as the US doubled it's GDP and profited off of the Lend Lease Programme, Stalins/Russia's Xenophobia and ideological differences.

So, my question to you is: To what extent was the Cold War caused by economic differences? or was the Cold War caused more by the the political strain between the US/UK and Russia over the events of WW2, particularly the rush for Berlin etc? or could it have been the US fear of Communism/Soviet fear of Capitalism?

As a side note, much of my research came from two books - "Inside the Kremlins Cold War" - Zubok and Pleshakov and "Russia, America and the Cold War" - McCauley.


The cold war started even before the end of WW2, in fact the distrust between the USSR and the western powers predates WW2 and can be traced back to the Russian civil war where the western powers favoured the whites rather than the eventually victorious reds.
They were allies of necessity, not love, and even in the 1920s and '30s there was an active undercover war going on between intelligence agencies of the USSR and the west, espionage and counter espionage, which eventually culminated in the 1950s in the false accusations against McCarthy when he exposed a large part of the historical Soviet spy network in the US government for what it was to the great discomfort of many in high office.
So no, economics did not cause the cold war. They no doubt played a part in some countries when deciding which side to favour (think some African dictator currying favour with both the US and USSR to see who would give him the most jet fighters and tanks to decide whether to allow one or the other basing rights).


To what extent was the Cold War caused by post World War 2 economics? - History

Students must understand the multi-faceted nature of the Cold War between the US and USSR

Footnotes is the bulletin of FPRI’s Marvin Wachman Center for Civic and International Literacy. Essays published here are designed in particular for teachers and students and are often drawn from the lectures at our nationally recognized Butcher History Institute for Teachers.

Deficiencies in Cold War Knowledge by U.S. Students

The Cold War (1947-1991) is not only an important topic in world and U.S. History, but it also offers an excellent opportunity for students to become more economically literate through understanding the consequences of the most extensive socialist experiments in history. A better understanding of the Cold War fosters insights into the incentive structures of socialism in its “democratic” forms as well as some understanding into its seemingly eternal appeal to large portions of the population. Students who systematically study this seminal event in world and American History must consider important ideological and moral questions that were foundational in the Cold War. What follows is a special segment on the Cold War that I have modified and implemented in my Secondary School History and Social Science Methods classes throughout the last several years. I recently presented this instructional segment to high school and undergraduate instructors at an international economic education conference and in a teacher institute.[1]

My interest in incorporating content about the Cold War into a social studies methods course began six years ago after hearing a provocative and powerful March 5, 2003 lecture by Alan Kors entitled “Is This Still the Age of Socialism?” It is archived in the Intercollegiate Studies Institute lecture series. Professor Kors discussed two topics that particularly interested me. First, Kors lamented the failure of the U.S. and other liberal democracies to intensely denounce communist governments at the end of the Cold War—in stark contrast to the historical and contemporary Western condemnation of Nazism. This relative silence on the part of liberal democracies regarding communist atrocities ignores the fact that totalitarian communist regimes killed many more people than Hitler’s Germany communist regimes killed roughly 100 million people compared to an estimated 25 million deaths caused by Nazis.[2] The second topic that caught my attention was Kors’ assertion that most contemporary high school and university students perceive the Cold War as primarily a nuclear arms race between the super powers rather than an event deeply rooted in profoundly contrasting views and beliefs about human action.

Every semester at the University of Tennessee at Chattanooga, I am the primary instructor for the secondary history education and social science methods courses. The majority of my students plan to become history teachers, and the 90% of students who aspire to be high school teachers must take 30 semester hours of history courses, which they usually complete before they enroll in my class. Intrigued by Kors’ second assertion, I began asking students in the class to define briefly the Cold War and added a short answer question on the Cold War to a history knowledge diagnostic assessment that I administer during the first class. Both the oral and written answers that I have received from students corroborate Kors’ assertion. A few students, usually aspiring middle school teachers who have taken a small number of history courses, are unfamiliar with the term “Cold War.” Approximately 90% of remaining students stress the nuclear arms race between the super powers and their allies. Economic systems, or contrasting ideas about ideology, morality, and human nature, are only occasionally included in student written definitions of the Cold War. In response, I developed this special segment on the Cold War.

My overarching goal for the special segment is to help students understand how the most grandiose experiments with socialism in world history impacted the lives of people in communist nations. What follows are brief descriptions of links, methods, and materials I employ in the Cold War special segment. The total amount of time in my class devoted to learning about the Cold War includes approximately five hours of in-class activities which comprise portions of four separate two and one half hour night classes (my class meets once a week, and several separate topics are addressed in each class meeting). Students study the Cold War as a part of the “Teaching Modern World History” portion of the course. There are many sources that can help students learn more about the Cold War, but in this class, I use three broad sources for which students are responsible for reading or viewing inside and outside the class in order to increase their contextual knowledge of economics, post-World War II events in Asia, and the beginning of the Cold War in Europe: Common Sense Economics, Modern Chinese History, and Winston Churchill (documentary).[3]

The introductory Cold War classroom activity is a distribution of the one page basic handout I created that appears below. I make brief remarks in class about most of the items on the handout and answer questions. The purpose of the handout is the provision of context about Communism and the Cold War for students this context helps them better understand the Kors lecture they view as homework and subsequently write a two-page paper on the video for the next class.

­­­­­­Handout—Modern World History: What Social Studies Teachers Should Know about Communism and the Cold War

Your next short paper is on the Alan Kors video lecture “Is This Still the Age of Socialism?”

You can skip the introduction if you so choose and begin the video at approximately 5 minutes. In order to provide context so that you can get the most out of the powerful lecture, please read what follows first:

  1. Karl Marx and Friedrich Engels developed the theory of Communism in the mid-19 th century while writing in the United Kingdom.[4]
  1. Socialism is an economic system that features public (government) ownership and production of goods and services. Communism is a form of socialism based upon the notion that economic and class relations exclusively determine the course of history. It is revolutionary in that its proponents argue they are working toward a classless society with minimal government where everyone works together and has enough to meet his or her needs. The official ideology of communism includes atheism although some communists are not atheists. Communists are also called Marxists. The terms are synonyms.
  1. Beginning in 1917, Russia was the first country ever to attempt to implement communism. The Soviet Union (USSR)—the name of the Russian Communist government—lasted from 1917 to 1991.
  1. Every communist government that has existed for any length of time abolished rival political parties, persecuted political opponents, and implemented, if powerful enough, a totalitarian government during the so-called “dictatorship of the proletariat” (worker) stage. In his lecture, Kors calls communism “consequential socialism.”
  1. Marxist governments that still exist in North Korea and Africa continue to feature a socialist economic system where there is no or very little private ownership.
  1. From 1947 until 1991, the U.S. and its allies and the USSR, its satellite European states, and its allies engaged in a worldwide struggle for dominance. Although some historians and observers argue that there was moral equivalence between the two sides, Alan Kors and other sources show that communist dictatorships were responsible for killing nearly 100 million of their own citizens. At least fifty million (conservative estimate) people died in Mao’s Communist China. During the Cold War, the U.S. and the West, despite being involved in proxy wars, committed no atrocities that came anywhere near the scale of what occurred in communist countries.
  1. The plight of Eastern Europe was particularly poignant. Most of these nations were forced by the USSR to become part of the Soviet Empire. During the Cold War, these countries were referred to as the Iron Curtain, a term Winston Churchill coined.
  1. Another term you will hear in the Kors lecture is “Gulag,” which is the Russian term for prison camp. Gulags still exist today in Communist North Korea.
  1. Aleksandr Solzhenitsyn’s One Day in the Life of Ivan Denisovich is a vivid account of life in a Gulag. The novel is short and widely used. There is a movie based on it. Two other famous anti-communist novels are George Orwell’s 1984 and Animal Farm.
  1. Communism and the Cold War are not only important in modern world history, but also important for civic and economic literacy. Because communism and even democratic socialism are so theoretically appealing, they always have adherents.

Understanding the Failure of Mao’s China

The second Cold War classroom activity that takes place on the same evening, focuses upon China’s 1958-1962 Great Leap Forward. Students watch a 22 minute Great Leap Forward excerpt from the segment entitled “The Mao Years” from the four part 2007 documentary China: A Century of Revolution. Part of perhaps the best documentary ever produced on 20 th century China, the segment on the Great Leap Forward features candid interviews in China with academics, peasants, workers, Mao’s former physician, and others who lived through these tumultuous years. Students have context for the documentary since Mao’s Great Leap Forward was included in the assigned reading and paper from the Modern Chinese History book referenced earlier. At this point in the course, students have also read Parts I and II of Common Sense Economics, so they understand the concept of secondary effects/unintended consequences and comprehend how attempted government management of an economy (especially in totalitarian communism) makes political rather than economic considerations dominant.

For readers who are unfamiliar with The Great Leap Forward (Mao’s Second 5 Year Plan), it was an attempt by Mao to utilize half a billion men, women, and children residing on large agricultural communes throughout China in order to both increase food production and enhance industrial output in electricity, coal, and, especially, steel. Mao believed that effort rather than expertise would result in achieving these two goals. Party cadres were fearful of not meeting agricultural and industrial quotas, so many local and midlevel party leaders exaggerated production figures and reported higher agricultural yields than actually achieved. Additionally, the steel produced in backyard furnaces throughout China was useless. The central government, which planned to feed urban Chinese with “surplus” agricultural produce, took food supplies from the countryside based upon the phony numbers reported by cadres and transported grain and rice to the cities leaving peasants without enough food. The massive unintended consequences of the Great Leap Forward were the primary reasons for the starvation of approximately 30 million Chinese peasants, the largest man-made famine in world history. Students, most of whom know nothing about this event, are visibly moved by the accounts in the documentary by survivors discussing how family members starved. Students also more easily grasp the potential for chaos that is possible when economic incentives are replaced with politicization.[5]

It is worth noting—and I do so at the conclusion of the Great Leap Forward segment—that during the 20 th century, at least four communist regimes in addition to China (USSR 1928-1932, Ethiopia 1970s-1980s, Cambodia 1975-1978, and North Korea 1990s) were responsible for perpetrating man-made famines.[6]

Barbarism and a “Helping Hand”: The Gulags and the Marshall Plan

In the following class, the focus shifts to the USSR and Europe. For approximately 20 minutes, we have a class discussion on the papers that students wrote on the Alan Kors lecture. Kors vividly describes how totalitarian socialist policies resulted in millions of deaths and makes a powerful argument that even many journalists, novelists, public intellectuals, and politicians in Europe and the U.S. who condemned Soviet Communism’s excesses never explicitly made connections between economic policies common to all socialist systems. These opinion-molders also, according to Kors, often downplayed the Cold War as a struggle between proponents of two economic systems. In the same class, I introduce Gulag: Soviet Prison Camps and Their Legacy, a 59 page unit for high school instructors and teachers developed by scholars at Harvard University’s National Resource Center for Russian, East European and Central Asian Studies. The unit, designed for three, one hour high school class periods (with homework assignments), is highly informative and includes maps, photographs, Gulag survivor accounts, and even polls about post-Communist Russians’ surprisingly mixed opinions about the Gulags and Joseph Stalin, the man who was responsible for their major expansion.

We spend approximately an hour (two 30 minute segments in two separate classes) having students work through Day 1 of the unit which includes a concise description and map of the locations of Gulags, a timeline, a biographical vignette of Stalin, descriptions of three campaigns against “Enemies of the People,” a description of the types of prisons that were created, a narrative on what categories of prisoners were sent to the Gulags, and the economic and social effects of the mass arrests on the spouses and children of incarcerated individuals. Students learn that simple envy on the part of a neighbor, especially in the Stalin years, could easily result in an individual being sent to a Gulag.

The Gulags were intended in part to incarcerate real and imagined political prisoners, but many of the large prison populations were used for major economic projects. In-class work with the unit includes a case study of the massive 1931-33 White Sea Canal project connecting two inland water ways that utilized 175,000 prisoners using primitive hand tools to construct the canal. At least 25,000 prisoners died during the construction of the canal, often because of insufficient food supplies, subzero temperatures, and inadequate housing. Instead of utilizing steel and cement to construct the 141 miles of waterways and the 19 locks, prisoners had to use sand, rocks, and wood. They completed construction on the canal in a short period of time, and government officials used its quick construction as a pro-Stalin propaganda tool party officials claimed that the camps and the labor rehabilitated the prisoners, and the canal would result in substantial economic gains for the USSR. However, the poorly built canal was too narrow and shallow. Barges could use it only rarely, and it was impossible for passenger ships or submarines to use. The last topic addressed on Day 1 of the unit is “Camps as Economic Failures.” I have students spend approximately 8 minutes reading this section of the unit in class and we then discuss the economics and politics of the gulag-forced labor system. Although there were exceptions, such as Siberian Gold Mining, prison labor did not make a substantial contribution to the economy. Upon Stalin’s death, the process of closing camps began because of their (then publicized) economic inefficiency.[7] A graphic from Day 1 of the Gulag curriculum guide is included in this article to illustrate the high quality of the Gulag unit.

The Marshall Plan is a topical focus for 30 minutes in one of my Cold War-related classes in conjunction with the Gulag material. Students read “The Marshall Plan for Rebuilding Western Europe” from Bill of Rights in Action (Constitutional Rights Foundation). Bill of Rights in Action (BORIA), justifiably highly respected among high school teachers, is a quarterly newsletter specifically designed for history and government classrooms. Each issue consists of 4-5 page articles on three separate topics. Treatment of content is accurate, objective, written on a high school reading level, and each reading is accompanied by discussion questions and often additional activities. Most BORIAs, including the one cited in the narrative, are archived and available at no charge.

I augment the newsletter through a 5-6 minute lecture based upon excerpts from primary source material included in David McCullough’s acclaimed 1992 biography Truman. Students learn about Europe’s post-war devastation along with George Kennan’s, Dean Acheson’s, and George Marshall’s realization by 1947 of Stalin’s unwillingness to negotiate regarding a divided Germany or regarding the Eastern European nations the USSR then controlled. The BORIA reading informs students of the Truman Administration’s determination to convince both political parties and the American public that a massive European economic reconstruction program could serve to check the further spread of communism in Europe and elsewhere. In April 1948, Congress passed the “Economic Cooperation Act of 1948,” known commonly as the Marshall Plan. From 1948-1951, it provided over $13 billion (USD) in aid to 14 Western European nations including the Federal Republic of Germany (West Germany). The language in the act indicated that the major objectives of the Marshall Plan were to ensure “individual liberty, free institutions, and sound economic conditions.”[8] Students discuss both the intended and unintended consequences of this historic American economic reconstruction initiative.

Excerpt from “Gulag: Soviet Prison Camps and Their Legacy,” pg. 1

Khmer Rouge Genocide

During the same class that includes the Marshall Plan, students spend 30 minutes on the most radical communist experiment in world history, the 1975-1979 Khmer Rouge Genocidal Regime in Cambodia. The Yale University Cambodian Genocide Program estimates that the Khmer Rouge, under the leadership of Pol Pot, killed about 1.7 million people, roughly 21% of the nation’s population. Upon the overthrow of the Khmer Republic in 1975, the Khmer Rouge (the unofficial name for the communist faction that gained power the government’s formal name was Democratic Kampuchea) in an attempt to create an unprecedented socialism, quickly depopulated Phnom Penh and other cities, abolished money, and classified the populations. The rural proletariat was generally protected. Anyone else who could not flee and was not a member of the Kampuchean Communist Party faced great peril. Former city dwellers, especially people who were not working class, ethnic minorities including Vietnamese (despite North Viet Nam’s communist ideology), and anyone who was defined as a dissident, were subject to execution, starvation, imprisonment, and torture. Thanks to the 2015 award-winning online 18 minute documentary My Cambodia, available for no cost, students can gain a vivid and accurate impression of this horror. The narrator, now a professor at the University of California: Berkeley, revisits the nation that she was fortunate enough to escape in the 1970s, and much of the footage is devoted to the most infamous of the Khmer Rouge Prisons and to the “Killing Fields” where mass executions occurred. My students quickly realize from the documentary that their residences and/or class level could quite easily mean death during the Khmer Rouge years.

Time does not permit an extensive treatment of this topic in a survey course, but in a few minutes during this segment, I explain that in its effort to fight hostile Vietnamese and Cambodians inside Cambodia during the Vietnam War, the U.S. inadvertently created a situation where much of the rural population supported the Khmer Rouge in the civil war that it eventually won.[9]

Literature and Government Tyranny: Friedrich Hayek and Aleksander Solzhenitsyn

Excerpts from internationally-famous economist Friedrich Hayek’s non-fiction classic, The Road to Serfdom and Aleksander Solzhenitsyn’s novel, In the First Circle, constitute the final activity in the Cold War segment. These two opponents of totalitarian communism articulate perhaps the most powerful moral cases against socialism, and in Solzhenitsyn’s case, particularly communism these cases resonate with students if they have the context that hopefully the prior activities provide.

Thirty minutes introducing and discussing excerpts from each author with students can help to illuminate the moral degradation that is always a potent possibility when government dominates or controls both the economy and society. Moral depravity is always possible in human action regardless of what ideological and economic systems dominate, but Hayek’s “Why the Worst Always Get on Top” illustrates how socialism is conducive to the ascent of evil tyrants:

First, the higher the education and intelligence of individuals become, the more their tastes and views are differentiated. If we wish to find a high degree of uniformity in outlook, we have to descend the regions of lower moral and intellectual standards where the more primitive instincts prevail. This does not mean that the majority of people have low moral standards it merely means that the largest group of people whose values are very similar are the people with low standards.

Second, since this group is not large enough to give sufficient weight to the leader’s endeavors, he will have to increase their numbers by converting more to the same simple creed. He must gain the support of the docile and gullible, who have no strong convictions of their own but are ready to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently. It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.

Third, to weld together a closely coherent body of supporters, the leader must appeal to a common human weakness. It seems to be easier for people to agree on a negative program–on the hatred of an enemy, on the envy of the better off–than on any positive task.[10]

Aleksandr Solzhenitsyn, who spent years in the Gulags, captures the “worst” in the novel In the First Circle. Students are first given brief context on Solzhenitsyn and a summary of the novel for the excerpt on Stalin that follows. A then-loyal communist and decorated war hero, Solzhenitsyn was arrested by Smersch, the Soviet Spy agency, and sentenced to eight years in a labor camp in February 1945. The evidence that incriminated him, according to the authorities, was his disrespect of Stalin. The evidence was a letter to a school friend in which Solzhenitsyn referred to Stalin as “the man with the mustache.”

After stays in several prisons and labor camps doing menial labor in grueling conditions, in July 1947, Solzhenitsyn, a university-trained mathematician, was moved to Special Prison No. 16. The special prison was a sharashka this category of prisons was meant especially for highly trained scientists who were forced to do advanced scientific research. Inmates had some privileges and better food. Solzhenitsyn’s assignment was to work on an electronic voice recognition project with applications for coding messages and identifying leaks. Because politics always trumped expertise in the prison, Solzhenitsyn was banished to a remote camp in Kazakhstan doing hard labor again because he criticized the scientific abilities of his non-prisoner Colonel who headed the project.[11]

In the First Circle is based upon Solzhenitsyn’s three years in Special Prison No. 16. In one chapter on Stalin, the dictator muses on his “four rules for greatness:”

It is rightly said that we reach maturity at forty. Only then do we finally understand how to live and behave. Only then did Stalin become aware of his greatest strength: the power of the unspoken verdict. Your mind is made up, but the person whose head depends on our decision must not learn it too soon. Time enough for that when his head rolls! Another strength was his habit of disbelieving what others said and attaching no importance to his own words. Say not what you mean to do (you may not know it until the moment comes) but what puts the other person at ease. A third rule for the strong man is never to forgive anyone who betrays you, and if your teeth are in someone’s throat never let go, though the sun rises in the west and portents appear in the heavens. A fourth rule for the strong man is not to rely on theory. Theory never helped anyone you can always produce some sort of theoretical justification after the event. What you must always keep in mind is what fellow traveler you need for the present and at which milestone you must part company.[12]

Stalin’s approach to human interactions epitomizes the personality type of the “worst,” and research on totalitarian socialist leaders consistently confirms Hayek’s assertion. It is not enough to simply criticize totalitarian socialism because of its manifest economic failures. The separation of moral and ideological concerns from critiques of socialism makes these critiques much less effective. Students deserve a more holistic approach that fosters understanding of the political, economic, and, perhaps most important, moral consequences of the Cold War and the ideology and economic systems of totalitarian socialist nations.

Lessons for Students

An organized introduction to the Cold War utilizing a variety of print and video sources offers profound, educational benefits for students.

A foundational lesson from learning about the Cold War is that ideologies have massive consequences. No systematic view of human history, society, and action “completely works” when assessed in light of historical events, but the historical evidence regarding Marxist governments is powerful and evidential. In totalitarian socialist systems, ordinary people are deprived of most freedoms and much more likely to be imprisoned or killed by their governments than is the case with citizens fortunate enough to live in liberal democracies—even if they reside in partially-free or authoritarian societies. A basic understanding of the Cold War is at one level a “wake up” call for many students who previously had no clue that a monumental clash of contrasting ideas about human nature and action constituted the foundation of a struggle that lasted well over three decades.

A second lesson is that communist and socialist economies do not work well because political incentives are much more likely to trump economic incentives in critical investment, resource allocation, and production decisions. The disasters caused by the “Great Leap Forward” and the attempt to use the Gulags to attain economic objectives in the Soviet Union are just two of many examples that compellingly prove the point the 1928-1932 famines that occurred because of the first USSR Five Year Plan, the 1970s-1980s famines in Ethiopia, and the North Korean famines of the 1990s resulted in the deaths of millions of people, primarily because of government-forced collectivization policies. Even less oppressive socialist governments intentionally or inadvertently impose incentive systems that do not foster the efficient and ample production of goods and services, spur innovation, create monetary and fiscal stability, or generate meaningful employment that increases human self-worth and stimulates individual energy and optimism to the extent that is the case in economies with large market sectors.

Finally, organized religions throughout the world have established ethical and moral structures that have been an integral part of human life. Marx spurned religion as reactionary, and communist governments, beginning with establishment of the USSR, have consistently and actively persecuted a variety of religions by oppressing, imprisoning, and killing millions of faithful adherents. The Victims of Communism Memorial Foundation, a Washington-based U.S. non-profit organization established by a 1992 bipartisan act of Congress and signed by President Bill Clinton, extensively documents much of the history of communist attacks upon organized religion.

Lucien Ellington thanks Nancy Asplund and Jeff Melnik for their assistance in the development of this manuscript and Thomas Shattuck and Ron Granieri at FPRI for their suggestions.

Notes

[1] An earlier version of this article was presented as a paper at the 41 st Meeting of The Association for Private Enterprise Education in Las Vegas, Nevada on April 4 th 2016.

[2] Stephane Courtois, Nicolas Werth, Jean-Louis Panne, Andrzej Paczkowsi, Karel Bartosek and Jean-Louis Margolin. The Black Book of Communism. (Cambridge: Harvard University Press, 1999): 4.

[3] James D. Gwartney, Richard L. Stroup, Dwight R. Lee, Tawni H. Ferrarini. Common Sense Economics (Revised), (New York: St. Martin’s Press, 2010) David Kenley. Modern Chinese History. (Ann Arbor: the Association for Asian Studies, 2012) and Winston Churchill presented by Martin Gilbert (New York: A&E Television Networks, 2003), DVD.

[4] Communism’s foundational text is Karl Marx and Friedrich Engels’ The Communist Manifesto (1848). Although readers can find primary source excerpts from the pronouncements of communist leaders and governments in the various recommended sources included in this article, specific regimes emphasized various aspects of Marxism depending upon historical circumstances, varying cultures, and domestic and international policy circumstances. Nevertheless, the ideological basis of communism was and continues to be The Communist Manifesto. Reading this work that was written as a political tract is the best way to gain a basic understanding of the communist theory. This short text is universally available in libraries and less than 50 pages depending upon the publisher. A PDF version is available online.

[5] Clayton D. Brown, “China’s Great Leap Forward,” Education About Asia 17, no. 3 (2012): 29-34. https://aas2.asian-studies.org/EAA/EAA-Archives/17/3/1073.pdf. This article, which I have sometimes used in the course I am describing and often utilized in teacher professional development programs, is in my opinion, the best published short introduction to the Great Leap Forward.

[6] Michael J. Seth, “North Korea’s 1990s Famine in Historical Perspective,” Education About Asia 16, no. 3 (2011): 24-28. https://aas2.asian-studies.org/EAA/EAA-Archives/16/3/1156.pdf.

[8] Constitutional Rights Foundation. “The Marshall Plan for Rebuilding Western Europe.” Bill of Rights in Action 20, no. 3. Summer 2004. https://www.crf-usa.org/bill-of-rights-in-action/bria-20-3-a-the-marshall-plan-for-rebuilding-western-europe.html (accessed 3 24, 2016): under “The Marshall Plan in Action,” para. 1.

[9] For an article by a Cambodian academic that includes a succinct context for the events before 1975 but focuses primarily on the Khmer Rouge in power see Sok Udom Deth’s “The Rise and Fall of Democratic Kampuchea” Education About Asia 14, no. 3 (2009): 26-30. https://aas2.asian-studies.org/EAA/EAA-Archives/14/3/849.pdf.

[10] Friedrich A. Hayek The Road to Serfdom (Abridged). (Washington, D.C.: The Heritage Foundation with permission of the University of Washington Press, 1972): 20.

[11] Michael T. Kaufman “Solzhenitsyn, Literary Giant Who Defied Soviets, Dies at 89,” The New York Times, (Aug. 2008). https://www.nytimes.com/2008/08/04/books/04solzhenitsyn.html?_r=2.

[12] Solzhenitsyn, Aleksandr I., In the First Circle, (New York: HarperCollins, 2009): 118.

Bibliography

China: A Century of Revolution. Directed by Lyman Will, Sue Williams, Kathryn, and Dun Tan Dietz. Performed by Ambrica Productions, WGBH (Television station: Boston, Mass.), Channel Four (Great Britain), WGBH Educational Foundation, and Zeitgeist Films. 1989-1997.

Constitutional Rights Foundation. “The Marshall Plan for Rebuilding Western Europe.” Bill of Rights in Action 20, no. 3. Summer 2004. https://www.crf-usa.org/bill-of-rights-in-action/bria-20-3-a-the-marshall-plan-for-rebuilding-western-europe.html (accessed 3 24, 2016).

Courtois Stephane, Nicolas Werth, Jean-Louis Panne, Andrzej Paczkowsi, Karel Bartosek, and Jean-Louis Margolin. The Black Book of Communism. Cambridge: Harvard University Press, 1999.

Hosford David, Pamela Kachurin, and Thomas Lamont. Gulag: Soviet Prison Camps and Their Legacy. Cambridge: National Park Service, National Resource Center for Russian, East European and Central American Studies, Harvard, 2005.

Hayek, Friedrich A. The Road to Serfdom (Abridged). Washington, D.C.: The Heritage Foundation with permission of the University of Washington Press, 1972.

Kenley, David. Modern Chinese History. Ann Arbor: the Association for Asian Studies, 2012.

Kaufman, Michael T. “Solzhenitsyn, Literary Giant Who Defied Soviets, Dies at 89,” The New York Times, Aug. 4th 2008. https://www.nytimes.com/2008/08/04/books/04solzhenitsyn.html?_r=2 (accessed March 24th, 2016).

McCullough, David. Truman. New York: Simon & Schuster Inc., 1992.

My Cambodia. Directed by Morimoto Risa. Produced by Sekiguchi Rylan. Performed by Stanford Program on International and Cross-Cultural Education. 2014.

Solzhenitsyn, Aleksandr I. In the First Circle. New York: HarperCollins, 2009.

Lucien Ellington is Senior Fellow at FPRI’s Wachman Center and UC Foundation Professor of Education at the University of Tennessee at Chattanooga. Ellington is also director of the University of Tennessee at Chattanooga Center for Reflective Citizenship (founded in 2011).


How did the Soviet Union take control of Eastern Europe?

The Soviet Union under dictator Josef Stalin had several overarching goals and fears in the waning days of the Second World War. Stalin kept in mind the devastation that Russia faced in successive crises including the First World War and Russian Civil War. Stalin had a particular distrust for the Western Allies due to intervention by these powers against the Reds in the Russian Civil War and for abandoning Czechoslovakia before the war began. These are among the factors that pushed Stalin into signing a non-aggression pact with Germany in 1941. Now facing betrayal by Hitler, massive destruction, and about 20 million military and civilian deaths, the Soviet Union was in a unique position. Soviet Red Army troops now occupied almost half of Europe and were the largest military force in the world. [1]

As Soviet troops displaced German ones Stalin promised free and fair elections across Eastern Europe. In some places, the exiled government returned and limited elections were held. However, many of these governments were forced into coalition governments with Communist-led Popular Fronts. Within several years these Popular Fronts seized power in every country occupied by Soviet troops and installed regimes loyal to Stalin.


The World Economy After the Cold War

Courtesy Reuters

Three global transformations are well under way as we enter the 1990s. First, the reforms in the Soviet Union and Eastern Europe, if successful, will end the Cold War and most East-West confrontation, and will allow substantial reductions in military arsenals. Second, the salience of security issues will decline sharply economics will move much closer to the top of the global agenda. The international position of individual countries will derive increasingly from their economic prowess rather than their military capability. The relative power of the United States-and, even more, of the Soviet Union-will fall Europe's-and, even more, Japan's-will rise. Third, the world economy will complete its evolution from the American-dominated regime of the first postwar generation to a state of U.S.-European-Japanese "tripolarity." An economically united Europe will be the world's largest market and largest trader. Japan is already the world's largest creditor and the leader in many key technologies. Its GNP will exceed three-quarters of America's by the year 2000 at the growth and exchange rates that now seem likely.

International relations will look very different by 2000 as a result of these transformations. The hierarchy of nations will shift considerably. The Big Three of economics will supplant the Big Two of nuclear competition as the powers that will shape much of the 21st century.

The United States is the only superpower in both military and economic terms. It alone will remain in the top rank as the nature of world affairs changes. Indeed America may soon be the only military superpower. Such status, however, will be of decreased utility as global military tensions are substantially reduced and international competition becomes largely economic.

Moreover the United States is in relative economic decline, caught in a scissors movement between increasing dependence on external economic forces and a shrinking capacity to influence those forces. The share of international trade in the American economy has tripled over the last four decades, and is about as great as in the economies of Japan or of the European Community as a group. The United States has become the world's largest debtor country and will continue to rely on capital inflows of over $100 billion per year to finance its external deficits for the foreseeable future.

By contrast the American share of world output has been halved during the postwar period. America's share of world trade is less than the EC's, and its exports are not much greater than West Germany's alone. The global role of the dollar has fallen steadily as the Deutsche mark and the yen become more widely used in international finance.

In the short to medium term, America's international economic position is likely to decline further. Economic growth is now much more rapid in Asia and Europe, and seems likely to continue there at four percent a year or so through most of the next decade, compared to an annual growth rate of between two and two-and-a-half percent in the United States. Productivity increases in Japan and many other Asian countries are considerably higher than in America. Europe is buoyed both by the onset of economic unification in the West (almost certain to go beyond "completion of the internal market" to an Economic and Monetary Union, or EMU) and by economic revival in Eastern Europe. By 2000, the Big Three economies will be more alike than different on most key counts: levels of GNP and external trade, and degree of dependence on international trade and financial flows.

A central question for the world of the 1990s and beyond is whether the new international framework will produce conflict over economic issues or a healthy combination of competition and cooperation. History suggests that there is considerable risk of conflict, which may even spill over from the economic sphere to create or intensify political rivalries. Such a pattern contributed to the breakdown of global order prior to 1914 and again in the interwar period. Now is the time to create a global framework to avoid such tensions in the future.

The world must adjust to this fundamental shift in economic relationships among its major countries as security arrangements change. Ironically, the end of the Cold War could sharply heighten the prospect of a trade war. Throughout the postwar period, the overriding security imperative blunted trans-Atlantic and trans-Pacific economic disputes. The United States and its allies, particularly West Germany, frequently made economic concessions to avoid jeopardizing their global security structures. Cold War politics in fact sheltered the economic recoveries of Europe and Japan, and America's support for them. The United States seldom employed its security leverage directly in pursuit of its economic goals indeed, security and economic issues remained largely compartmentalized in all of the industrial democracies.

Removal of the "security blanket" could erode this separation. Indeed the United States and others could be tempted to use security issues to seek economic advantage. Such a policy would make it considerably harder to maintain cooperation in both the economic and security dimensions. At the same time, since East-West confrontation has provided the rationale for much of America's international engagement throughout the postwar period, ending the Cold War may suggest to some Americans that the country should largely withdraw from such engagement, including in the economic domain.

In short there is an intimate interaction between the basic international political and economic transformations: removal of the security blanket increases the risk of economic conflict, which could erode security ties. The ultimate paradox of the twentieth century would be a realization of the Marxist prophecy of an inevitable clash among the capitalist nations just as the political conflict spurred by Marxist ideology is waning. The "end of history" might not be so dull after all.

This risk of economic conflict is already acute. Japanese politician Shintaro Ishihara has predicted that "the 21st century will be a century of economic warfare." Such conflict is most likely to surface between the United States and Japan.

Japan's position is clearly changing. Its global current-account surplus fell from $87 billion in 1987 to $57 billion in 1989, a figure representing less than two percent of its GNP. The growth of Japan's imports from the United States during the same period was six times greater than the growth of its exports to the United States. Manufactured goods now comprise more than half of total Japanese imports. Japan has displayed a willingness to continue financing a large portion of America's deficits, even when the dollar was falling steadily during 1985-87, and to contribute substantially to global funding needs elsewhere (Third World debtors, foreign aid recipients, even Eastern Europe). The image of an omnipotent "Japan, Inc." was eroded considerably in early 1990 by the sharp decline of Tokyo's stock market and the yen, and the apparent inability of the Japanese authorities to stop it.

Yet American frustration with Japan remains high. Japan's bilateral trade surplus with the United States remains large, and may soon start rising again because of the weakening of the yen over the past two years and slower Japanese growth. There remains much exasperation over the Japanese market's seeming impenetrability to many imports and most foreign direct investment. A major concern is Japan's concentrated pursuit of superiority in a wide range of strategic high-technology industries, including many in which the United States retains a substantial competitive advantage.

The debate has taken an ominous new direction in both countries. In America, many who consider themselves internationalists-including many mainstream economists-have come to agree that Japan is "different" and should be treated differently. The latest negotiating effort between the two countries, the Structural Impediments Initiative, addressed some of these differences, but it is unlikely to produce rapid results. If it does not, this will strengthen the view that a new strategy is required.

Attitudes are changing in Japan as well. Dismay bordering on disdain is coming to dominate Japanese reactions to America's continued failure to correct its budget and trade deficits, raise the national savings level, improve the education system and boost competitiveness at the company level. At the same time, the fragility of Japan's political system and a redirection of its policies to improve domestic living standards provide powerful pressures for turning inward. Hence Japan may not accept another round of "bashing" from America.

With respect to Europe, fears are widespread that a truly united continent will see itself as so self-sufficient, and be so preoccupied by regional developments, that it will have little interest in promoting global economic cooperation. Indeed the European Commission's own study of the unification of the European market predicts that imports from outside the community will decline in almost every sector as a result of the removal of remaining trade barriers.1 Blueprints for EMU suggested by the European Commission and by Bundesbank President Karl Otto Pöhl refer to the outside world in only the most cursory fashion.2 These concerns are heightened by the prospect of a broadening of Europe's economic union to embrace Eastern Europe, which will undoubtedly seek extensive preferential access to the West European market and thus further inhibit liberalization of the EC's global policy.

One motive for European unity is restoration of global leadership for the continent, to reclaim the limelight enjoyed by virtually all of its member countries during earlier periods of history. In a world dominated by economic issues, the quest for economic leadership could be a major driving force.

This drive could be healthy if, supported (or led) by convergent policies in the United States and Japan, it could propel Europe toward a cooperative leadership position in the global economic structure. But Europe could also swing in a confrontational direction, as it has with its current policies on agriculture and aircraft. The West German model of close ties between banks and industries, sometimes with government support, is an approach that could arouse foreign ire. France's historical mercantilism is clearly still alive, as demonstrated by its repeated efforts to hold Japanese competition at bay. The involvement of East European countries could add to dirigiste thinking in the EC. If market-oriented Great Britain were to opt out of the EC during this critical transition period, the risk of confrontation would be enhanced.

Finally, America's confidence in its international economic position has been shaken. Trade "hawks" have argued, with some success, that the reduction in the security imperative now opens the way for unilateral actions to promote U.S. trade interests. And it is true that the United States can now afford to be less solicitous of its allies-American leverage is enhanced, to an extent, by the declining need to place overriding priority on political cohesion and thus to mute its economic demands.

U.S.-Japanese economic tension has already intensified, and U.S.-European economic confrontation could erupt as well. Any significant downturn of the U.S. economy could trigger an outbreak of protectionism. Renewed growth in the external deficit could discredit the strategy, crafted in 1985-87 by then Secretary of the Treasury James Baker and the other finance ministers of the Group of Seven leading industrial nations, to respond to trade pressures primarily through currency changes and macroeconomic policy cooperation-particularly since such cooperation has already virtually disappeared. A new financial crisis or failure of the several ongoing trade negotiations, bilateral and multilateral, would intensify the tendency to "blame the foreigners."

How might such economic conflict evolve in the 1990s and beyond in a world dominated by nonmilitary concerns and three great economic powers? One possibility is the emergence of blocs, each centered on one of the Big Three. There are widespread perceptions that the world is already headed in this direction. An economic bloc already exists in Europe and will clearly broaden (to include more countries) and deepen (to encompass more functions) over the coming decade.

At the moment, however, the development of blocs in Asia or the Americas seems unlikely. Asian trade is split in three directions: within the region, with the western hemisphere, and with Europe and the Middle East. Most Asian countries thus focus primarily on expanding multilateralism and their global relationships. Annual income disparities within the region are huge, ranging from over $20,000 per capita in Japan, through South Korea and Taiwan at about one-fourth that level, to Southeast Asia at much less and China at a few hundred dollars hence meaningful economic integration is virtually impossible. Politically, no country in the region wants to enter a bloc led by Japan unless all other avenues are effectively closed.

Similar considerations pervade the Americas-except perhaps for Canada and Mexico, because they depend so heavily on trade with the United States. The rest of Latin America has diversified trade, a far different standard of living and a historical antipathy to entangling ties with the "Colossus of the North." Moreover, nearly every country in the hemisphere is a debtor and needs financial help from the rest of the world. Closer consultative arrangements among the Americas might be desirable, but an economically significant bloc is no more likely than in Asia, barring a substantial breakdown at the global level.

However, to head off eventual self-fulfillment of the prophecies that trading blocs will develop, it will be essential to reinvigorate global economic cooperation and its institutions. This is one key reason, encompassing both economics and politics, to place a high priority on achieving such cooperation. Another reason is to provide time for Europe to achieve its ultimate aspiration of political union, which would render concerns over that "bloc" as obsolete as concerns about preferential treatment within the United States of America.

The second question affecting potential economic conflict is how each of the Big Three would relate to the others. At present the economic powers frequently find themselves aligned with different partners on different issues: America and Europe seek to open Japan's markets for manufactured goods America and Japan push Europe to avoid any new discrimination against outsiders Europe and Japan criticize the United States on its budget deficit and trade unilateralism. Shifting coalitions generally provide a healthy basis for systemic stability, if they occur within a framework of agreed international rules and institutional arrangements.

Historian Robert Gilpin notes, however, that "almost all [students of international relations] agree that a tripolar system is the most unstable configuration."3 History and game theory both suggest a strong tendency for each of the parties in such an arrangement to fear that the other two will line up against it permanently, leading each to adopt excessive policies. Given the inevitable self-perception of vulnerability on the part of each of the three parties, two will, in fact, tend to ally against the third under conditions of rough tripolar equality-possibly to create their own "bi-gemonic" dominance.

In the United States, there is a widespread view that conflict among the Big Three would evolve into an alliance between America and Europe against Japan. Japan would be viewed as an outlier on both trade and investment issues, and thus a target for the other industrial, and perhaps many developing, countries. Racial overtones would be widely perceived even if unintended.

A second possibility is that the United States and Japan would band together against a united Europe. If Europe is the only true bloc, and thereby becomes the world's largest and most powerful economic entity, the other global actors may need to coalesce against it for traditional balance-of-power reasons. Such an outcome would be much more likely if Europe were to turn inward and to discriminate overtly against outsiders.

Americans need to be aware, however, of a very plausible third possibility: a European-Japanese nexus. These regions are likely to enjoy higher growth rates than America during the coming critical transitional period-perhaps by a substantial margin. Their economic policies, especially toward international issues, have tended to be more stable and predictable. They will thus offer attractive markets and business partners for interpenetration, via both trade and investment, as reflected in the recent linkup between Mitsubishi and Daimler-Benz to conduct joint aerospace research and possibly cooperate in automobile production.

Perhaps most important, doubt about America's future dynamism is widespread in Europe and Japan (and other parts of Asia). Europeans and Japanese may come to feel that the United States will reform its domestic policies only if they join together to provide external pressure to do so. Any major protectionist steps by the United States would feed these doubts and drive the two together. Helmut Schmidt and Valéry Giscard d'Estaing created the European Monetary System in the late 1970s partly as a buffer against economic instability emanating from America. Similar linkups between Asia and Europe are clearly possible in the 1990s and beyond.

The emergence of any of these possibilities as permanent configurations would be extremely destabilizing for global politics as well as economic affairs. The region targeted by such an "alliance" would almost certainly turn inward as the external pressures strengthened domestic forces already seeking such a course: protectionists in America, regionalists in Europe, traditionalists in Japan. The target area would probably seek to form (or expand) its bloc of nearby supporters, and the other areas would retaliate in kind. All economies would suffer, and there would be a genuine risk of trade warfare.

There is good news, however. The Big Three enter the new era as political allies with strong security ties and democratic governments. Their cooperation over the past four decades, while uneven, has largely avoided major crises and has proven superior to all historical antecedents. The extensive interpenetration of companies and financial markets throughout the three regions militates against a breakdown of cooperation. Thus there is hope that a new era of interaction between economics and security could be very different from the pre-1914 and interwar periods, when the struggle for world economic leadership coincided with political hostility.

The bad news is that the world economy has enjoyed prolonged periods of stable prosperity only when under the hegemonic leadership of a single country-the United Kingdom in the latter part of the nineteenth century and the United States in the first postwar generation.4 It has never experienced successful "management by committee."

But there will be no new hegemon to supplant the United States. Neither Japan nor even a fully united Europe could achieve anything like the global dominance, even in the economic sphere alone, that is needed to support such a role. Hence effective international economic cooperation will depend on the achievement of joint leadership by the Big Three economic superpowers, just as nuclear deterrence was maintained by the Big Two military superpowers. There is simply no alternative.

The postwar economic powers have proved exceedingly adept at responding to crises with sufficient skill to avoid lasting economic effects. But there have been a number of close calls: American leadership nearly faltered in responding to the Mexican debt crisis in 1982, enormous protectionist momentum was permitted to build in the United States before dollar adjustment and credible trade policies were launched in 1985, and extensive financial disruption resulted from the plunge of the dollar in 1987. Moreover the movements of globalized financial markets could now overwhelm the efforts of individual governments, or even several countries acting in concert. New sources of conflict among nations could well result from contemporary changes in global politics and economic capabilities.

The system no longer provides strong defenses against such threats. As a result, currency misalignments and instability have become endemic large trade imbalances persist protectionism and neomercantilism have intensified Third World debt remains unresolved policy cooperation is ad hoc and fragile.

To restore effective systemic defenses, America, Japan and a uniting Europe must join to provide collective leadership. The Big Three need to start acting as an informal steering committee for the world economy-reinvigorating the existing institutional structures, creating new ones and initiating concrete steps to utilize them consistently.

Such leadership must rest on firm internal foundations in each area. The United States has to make the difficult adjustment from hegemon to partner. It can do so only by restoring its international competitive economic position and, at a minimum, halting a further buildup of foreign debt. These changes would be even more essential for the United States if cooperative global management should turn out to be unattainable. In that case it would become necessary to defend the country's interests aggressively in a world economy characterized by widespread confrontation and even hostility.

The United States will have to increase its government spending in some areas directly related to the country's international competitiveness. Examples include expenditures on education, research and development, export finance and direct help for key industries. It is eminently logical to use part of the "peace dividend" that may result from lessened defense outlays to finance these expenditures, since they will be aimed at achieving many of the same national goals-preserving America's world role and national security-as the military programs that will be cut.

Elimination of the overall budget deficit, however, remains crucial for foreign policy as well as economic reasons. The budget deficit is the chief cause of the trade deficit, which in turn requires the United States to borrow huge sums abroad and thus adds greatly to its external dependence and its insecurity. In addition, as long as the United States drains resources from the rest of the world, it cannot be a net financial contributor to other countries. Indeed the United States competes with others for scarce world savings. Hence America's greatest contribution to recovery in Eastern Europe or the Third World would be correction of its own fiscal position.

President Bush got it backward in his inaugural address when he asserted that "the United States has the will but not the wallet." The reality is that this country has plenty of wallet but a deficiency of will. The United States is both the richest nation in the world and the least taxed. If the peace dividend and other expenditure cuts do not finance the needs of the coming years, revenue increases will be essential.

Changes of this nature call for fundamental alterations in American attitudes. The traditional mind-set in this country, derived from nearly a century of global dominance and a virtually self-sufficient continental economy, has been to adopt whatever public policies and corporate strategies fit the domestic environment. The rest of the world was largely ignored in the formation of policy.

There are a number of stunning recent examples of this abiding phenomenon. The Tax Reform Act of 1986 ignored the international position of the United States and probably made it harder for American firms to compete abroad. Budget policy, as just noted, remains the underlying cause of the huge buildup of foreign debt. Foreign exchange intervention policy ignored the decimation of much of American industry and agriculture caused by the soaring dollar in the first half of the 1980s. The Export-Import Bank, America's only effective governmental tool for promoting overseas sales, ran out of money in 1988 when such sales were finally booming.

Americans will have to start viewing themselves as part of an integrated global economy, and pushing their government and firms to behave accordingly, if they are to prosper and remain world leaders into the 21st century.5

Japan faces the opposite problem. As in the United States, a small minority recognizes the basic change in the country's international position and seeks new policies. (Such arguments inspired the Maekawa Commission reports, for example.) For Japan, this requires adopting the mind-set of a huge creditor country that is confident of its ability to compete throughout the world. It means dropping Japan's perception of itself as a vulnerable island nation that must "export or die" and protect its own market and firms against "powerful outsiders." Indeed, participation as an equal partner in effective tripolar management of the world economy could provide a new rationale for Japanese foreign policy and might have considerable appeal to Japan, as it would play to the country's obvious comparative advantage.

Japan has already begun to change impressively. But much more is needed quickly: further increases in imports of both manufactured (including high-technology) products and agricultural goods, a conspicuous expansion in the presence of foreign investors, eschewal of infant industry protection and industrial policies, additional reductions in its trade surpluses with the rest of the world and especially with the United States. Japan has repeatedly demonstrated an enormous aptitude for reform, as in its responses to the two oil shocks and the doubling of the yen in 1985-87. It can clearly do so again if convinced that such change is a national imperative, although the historical record suggests that continued outside pressure will be needed to galvanize such a strategy.

Europe faces a distinctly different problem: maintaining an outward, global orientation and beginning to operate as a unit in the world arena while completing the enormously complicated task of forging a truly unified regional economy. The key is probably the extent and speed of unification itself. Smooth completion of the process by the mid-1990s, for example, should generate enormous self-confidence in Europe and an appetite for moving simultaneously on global reforms. By contrast, internal divisions and failures could sap both the capacity and will to look outward.

Fortunately German unification seems likely to speed the process. It will intensify the desire of France, most of the other countries, and Germany itself to achieve Thomas Mann's call for "Europeanization of Germany instead of Germanization of Europe" through full economic integration of the continent. The inevitable engagement of the East Europeans may create a two-speed Europe for a while, but the previous EC membership of several less industrialized countries was already pushing in that direction.

The substantive key is EMU, which now seems likely by mid-decade. The continental countries outside Germany have made a fundamental decision to link their currencies to the Deutsche mark, and need EMU to provide political legitimacy for a European zone of monetary stability. Germany has lost the ability to modify its exchange rate vis-à-vis the rest of Europe, since the other countries follow virtually all of its currency and monetary moves, and so sees a compelling need to complete the transition to a full monetary union that will produce a "Germanization of European money rather than a Europeanization of German money." The unification of Europe for trade policy purposes made possible the liberalizing leaps of the Kennedy and Tokyo rounds of the General Agreement on Tariffs and Trade (GATT) EMU should make possible similar leaps in global monetary affairs.

Some observers, including Europeans who want an outward-oriented continent, argue that new global economic initiatives are premature until Europe has completed its regional structure. But the EC seems able to negotiate the Uruguay Round in the GATT while continuing to complete its internal market. It is imperative that EMU be made compatible with stable global monetary arrangements-and thus there is a strong case for devising them in parallel. It would in fact be dangerous to wait until Europe is fully organized to work out the needed international reforms, both because the delay itself could produce serious conflict and because some of the most desirable avenues for global progress could be foreclosed.

If the Europeans were unwilling to negotiate on this timetable or if a unified Europe resisted joining the global initiatives suggested here, perhaps to seek economic hegemony on its own, the United States and Japan might have to proceed bilaterally for a time. America and Japan already took such a step in creating the initial currency "reference ranges" with the Baker-Miyazawa agreement of October 1986, which was subsequently generalized at the Louvre Accord in February 1987. The U.S.-Japanese Structural Impediments Initiative probably heralds similar talks at the global level, as already suggested in several communiqués of the Group of Seven.

But an American-Japanese Group of Two would be decidedly inferior to a Group of Three that included Europe. It could create negative reactions in Europe and feed perceptions that a U.S.-Japanese bloc was being formed. On the other hand, as with monetary arrangements in 1986-87, U.S.-Japanese bilateralism could be a useful tool to increase the proclivity of the Europeans to cooperate, by indicating that the other economic superpowers would be willing and able to proceed without them.

The overall result of these internal changes would be a considerably different Big Three: a newly competitive America, a newly internationalized Japan, and an economically integrated Europe.

Absent such internal developments, each area will lack the internal self-confidence or the international respect needed to play its part in global leadership. But achievement of these crucial changes in each of the Big Three can be promoted, perhaps decisively, by the adoption of new international policy commitments and specific steps to implement them.

First, political leaders of the Big Three need to recognize publicly the dramatic changes in the global environment and declare their intention to construct and maintain a stable international economic order based on shared leadership and mutual responsibility. Such a commitment should be enunciated at the Houston summit this July, the first of the 1990s, to set the essential political framework and begin to define the needed initiatives.

Such a commitment would obviously be credible only if it encompassed effective follow-through steps to translate principle into practice. Money and trade would be the most essential components of such a package. The Big Three should start the process by launching the construction of a new international monetary regime to replace the Bretton Woods system that collapsed in 1971-73. No system worthy of the name has existed since that time, with enormous costs for the world economy. But stable and effective monetary arrangements are as crucial to the world economy as national monetary stability is key to each individual country.

The preferred course is to build in evolutionary fashion on the "reference ranges," the "economic indicators" to guide policy cooperation that were agreed upon at the Tokyo summit in 1986, and the European Monetary System itself. The key countries would set zones for their currencies that, given reasonable consistency of domestic policies, would avoid large current account imbalances (and thus limit both financial risks and protectionist pressures). The zones would be shifted in response to differences in national inflation rates and to major changes in the world economic environment, such as large jumps in oil prices, but the countries would otherwise pledge to adopt new policies as needed to preserve them. Over time, the zones could be narrowed if experience with the system suggested the feasibility of doing so, perhaps leading ultimately to a regime similar to Bretton Woods or the EMS.

The details would of course take time to develop. In any event, global negotiation should proceed in parallel with the European regional effort. Moreover the new regime should be implemented only when actions have been taken that promise correction of today's continuing trade imbalances.

On trade, the immediate key is a successful completion of the Uruguay Round that would convincingly resume market liberalization and refurbish the credibility of the GATT. Realization of the Uruguay Round's full agenda would move significantly in these directions by expanding international disciplines on agriculture and safeguard measures, broadening the rules to encompass services and intellectual property rights, reintegrating textile trade into the GATT, and improving the process for settling disputes. A strong push from the Houston summit will be essential to achieve these results, just as the summits of the late 1970s were decisive in galvanizing a successful conclusion to the Tokyo Round.

Much more is needed, however, to make the needed leap in the effectiveness of global trade arrangements. The Big Three should thus push for the implementation of four sweeping new reforms by 2000: (1) elimination of all tariffs on all industrial trade (2) a complete ban on all quantitative trade barriers including "voluntary export restraint agreements" (3) a sharp expansion in the independence and mandate given the GATT to police the system and (4) creation of an instrument similar to the GATT for investment issues to provide a stable framework for international corporate activities (and help resist protectionist pressures in this area, notably in the United States).6 An even bolder approach would be agreement to finally establish the "International Trade Organization," to cover all these issues and many more, that was originally intended to be the comprehensive "third leg" of the postwar economic system (along with the International Monetary Fund and World Bank).

These proposals should be taken up promptly after the conclusion of the Uruguay Round. The so-called bicycle theory posits that trade policy either moves steadily toward liberalization or topples in the face of protectionist pressures. Launching a new negotiation toward such major steps would keep the "bicycle" moving forward without delay, avoiding the post-negotiation malaise that permitted substantial protectionist pressures to flourish after the conclusion of both the Kennedy and Tokyo rounds. It would also help ensure the outward orientation of the EC by maintaining its engagement in multilateral trade bargaining through to the culmination of its new regional compact.

Initiatives by the Big Three to reform and dramatically improve the international monetary and trade regimes along these lines, as well as to make substantial changes in their internal economic structures, would clearly mark the beginning of a new era of collective leadership of the world economy. It would indicate that each area was fully aware of the new global environment, in both political and economic terms. It would show that each could adopt a new mind-set: for America, a willingness to share power with others for Japan, an acceptance of international responsibility for Europe, a willingness to act jointly on global economic and monetary, as well as trade, policy.

Thus the Big Three could assert control of issues that will inexorably emerge as central to world events if the Cold War does in fact dissipate. They would preempt the risk that removal of the security blanket and economic rivalry itself would generate severe international conflict. They would create an orderly framework for managing some of the elements that will dominate relations among them in the years ahead.

The continuing erosion of the present economic regime, and the failures of recent cooperative efforts, do not bode particularly well for the ambitious reforms proposed here. However, the history of international economic management is replete with cycles of backsliding that eventually grew so serious that the political leadership of key countries was forced to undertake large-scale initiatives to get back on track.

For America, there are important strategic reasons to launch new initiatives. The United States still retains enormous economic power. It is enjoying an extended period of growth, job creation and deregulation that is widely admired-and financed-by the rest of the world. America's security preeminence will remain vital through the East-West transition period, especially in Asia (including Japan), where the security situation has not changed nearly as much as in Europe. The United States has much closer relations with both Europe and Japan than either has with the other, enhancing its ability to shape the evolution to a new world economic order.

The value of America's bargaining assets, however, is likely to fall further in the years ahead. It thus behooves the United States to move sooner rather than later to further construction of a new system that will promote global economic and political stability, as well as its own national interests. Initiatives to do so would indicate that the United States had both the intellectual capacity and the political will to try to shape the historical transformations now under way and is ready to assert continuing international leadership in the post-Cold War era.

2 See Report on Economic and Monetary Union in the European Community, prepared by the Committee for the Study of Economic and Monetary Union, Commission of the European Communities, April 12, 1989 also see "Basic Features of a European Monetary Order," a lecture presented by Karl Otto Pöhl, Paris, Jan. 16, 1990.

3 War and Change in World Politics, Cambridge: Cambridge University Press, 1981, p. 235.

4 See Charles P. Kindleberger, The World in Depression, 1929-1939, Berkeley: University of California Press, 1973.

5 A detailed strategy of "competitive interdependence" for the United States is presented in C. Fred Bergsten, America in the World Economy: A Strategy for the 1990s, Washington: Institute for International Economics, November 1988.

6 A Free Trade and Investment Area among OECD countries has been proposed by Gary Clyde Hufbauer in "Beyond GATT," Foreign Policy, Winter 1989-90. A similar GATT-wide structure would be far superior, however, because it would include at least the more advanced developing countries and strengthen (rather than cripple) the GATT as an institution.


Historical analysis of the Cold War

As the passage of time slowly diminishes important events, it is history that must gather all the facts and emotions and expose it to future generations. One such event, perhaps one of the most important of the twentieth century, no longer exercises relevancy in the daily lives of many- the Cold War. The Cold War shaped American foreign policy and political ideology, impacted the domestic economy and the presidency, and affected the personal lives of Americans creating a climate of expected conformity and normalcy. By the end of the 1950's, dissent slowly increased reaching a climax by the late 1960's. The Cold War was to last almost to the fall of the Iron Curtain and the death of the Soviet Union. The origins of the Cold War can be traced to the late 1910's when America experienced the Red Scare. Suspicion and apprehension of the Soviet Union remained constant throughout the twenties and thirties intensifying with Josef Stalin's brutal regime.

When Russia was invaded by the Nazis, those concerns were temporarily set aside as the Soviet Union became an ally. As World War II came to a close with imminent allied victory, differences surfaced between the Americans and the Soviets. Some historians believed that five major issues separated the two future adversaries: the impending government of Eastern European countries, Poland, economic reconstruction, Germany's future, and the atomic bomb. Some issues focused on the notion of "sphere of influence". The Soviet's sphere originally centered around their borders, while the United States' centered around Western Europe.

Even though Franklin D. Roosevelt (FDR) was prepared to live with this notion, widespread political opposition existed in Washington as exemplified by Congressman John Dingell's statement in August 1943, "We Americans are not sacrificing, fighting, and dying to make permanent and more powerful the communistic government of Russia and to make Joseph Stalin a dictator over the liberated countries of Europe." (1) On the issue of what type of government should rule Eastern Europe, obviously a democratically elected administration was the American expectation. The same was said for Poland and Germany. However, FDR recognized Poland as an integral part of the Soviet's sphere of influence, but he hoped Stalin would give concessions to appear as if the Atlantic Charter was being implemented. In Germany's case, the Soviets and Americans acknowledged the permanent destruction of the German industrial capability as a way to prevent a third conflict, but the plan failed.

The Soviets argued that a pastoral Germany would be unable to make war reparations. American business interests and policy makers strangely agreed, but for different reasons. A strong German industry they argued would be a key to postwar commerce and trade releasing the United States from supporting the German economy for an extended period. The issue of European economic reconstruction was entirely in the hands of the Americans, who possessed the strongest economy during and after the conflict. From the Soviet Union, Stalin was eagerly persuaded by American interests to petition for a loan ranging from $1 billion in 1943 to $10 billion in 1945. As the war ended, enthusiasm turned to skepticism when American diplomats perceived a toughening of Soviet policy. Fearing a return to recession and misuse of funds, Congress placed drastic limits on lend-lease support pointing out that requests for loans after the war would meet deep uncertainty. Ultimately, the Soviets never received any monetary assistance. The final agenda separating the former allies was the atomic bomb. From the moment it became a reality, FDR agreed to share its secrets with the British and no one else except by mutual consent. Agreements were signed, including the reassurance that Great Britain would remain a world power after the war, and also providing for maximum secrecy in regards to atomic weapons. However, it did so in a manner that aroused Soviet suspicions about the intentions of its two allies. As these suspicions mounted and the gulf widened between the two superpowers, the presidency felt the tentacles of the emerging conflict.

The Cold War brought about changes to the presidency of the United States. Internal and external forces influenced those changes. Internally, Truman's hard-line stand against Stalin put enough pressure on his administration to affect many presidential acts. Externally, politicians used anti-communist hysteria to campaign on a strong, rightist platform, occasionally accusing the current administration of softness in order to improve their lot. In one instance Robert Taft blamed Truman for seeking a congress "dominated by a policy of appeasing the Russians abroad and of fostering communism at home." (2) American foreign policy became one of containment as it reacted to the Cold War. As the mutual confidence of the two nations weakened, a kind of chess game evolved using the world map as its board. The United States supported corrupt and anti-democratic governments, but friendly to America. Meanwhile, the Soviets subsidized groups favorable to their own interest.

The Cold War's rhetoric and anti-communist propaganda dictated foreign policy. In scaring "the hell out of the American people", Truman unleashed a fervor that would become part of American life and modify existing relationships to the outside world. American allies depended almost exclusively on their stance on communism. The same applied for domestic policy. The Cold War affected domestic policy two ways: socially and economically. Socially, the intensive indoctrination of the American people led to a regression of social reforms. Economically, enormous growth spurred by industries related to war was aided by heavy government expansion. However, New Deal economics felt the greatest impact of the Cold War. By the 1950's, New Deal reforms were often associated with the left. Its advocates were attacked for promoting programs close to the realm of socialism. The presidencies of Truman and Eisenhower kept away from the Rooseveltian ideals of social and economic reforms. For veterans the economic future brightened as the government spent countless resources through the GI Bill, VA and FHA loans to help them buy new homes or receive an education. Social reforms in the fields of civil rights, labor unions, working conditions, and women concerns were minimum and often ignored.

In human behavior, consensus to anti-communist ideals became the norm for everyone, especially government employees. Firm anti-communist demeanor was expected from everyone, particularly those in government. Campaigns to rid government of so-called "reds" became commonplace. One was the House Committee on Un-American Activities (HUAC), which used the Smith Act of 1940 to prosecute anyone advocating communism. In such a fervent era of anti-communism, the junior senator for Wisconsin, Joseph McCarthy, employed this hysteria to prosecute countless government officials. To promote liberal ideas, civil rights advancements or possible cooperation with communist states was enough to mark a person for persecution. Changes in the "conformity" of America however, did not occur until the end of the 1950's, coming slowly at first.

Consensus may have started changing after CBS newscaster Edward R. Murrow and producer Fred Friendly showcased McCarthy's indictment of Air Force lieutenant Milo Radulovich. Lt. Radulovich had been asked to resign because his father and sister were once accused of reading "subversive newspapers." Murrow and Friendly confronted McCarthy directly, accusing him of assaulting peoples integrity, destroying careers, and using "character assassinations to seize control of the political process." (3) In the television and film industries, many actors and actresses were blacklisted for their assumed leftist views. Movies became a vehicle to exhibit the discontent against the system with films by James Dean and Marlon Brandon among a few.

Literature flourished with themes of individualism versus the system. With poets like Robert Lowell, critics like Dwight McDonald, movies like "Rebel Without a Cause" and "The Wild Ones", rock-and-roll music, and college student unions, "conformity" in the 1950's was all but secured. These critics of "conformity" championed individualism and the younger generation's anxiety over nuclear war. Another area of criticism was the economy. Even though poverty had declined, between one-fifth to one-fourth of the nation could not survive on the income earned. (4) It wasn't until the end of McCarthyism that dissent increased, reaching a crescendo during the Johnson/Nixon administrations of the late 60's and early 70's.

The longest conflict of the twentieth century, the Cold War affected everything, from political ideology, foreign and domestic policy, to the presidency and the personal lives of Americans. With the collapse of the Iron curtain in Eastern Europe, the unification of Germany, the fragmentation and subsequent dissolution of the Soviet Union have all but eliminated the Cold War. International cooperation during the first Gulf War demonstrated that even before the end of the Soviet Union, the rhetoric of the past no longer had any place in American foreign or domestic policy. Notes: 1. William H. Chafe. The Unfinished Journey. page 47 2. Ibid. page 98 3. Ibid. page 132 4. Ibid. page 143 Biblioqraphy: The Unfinished Journey- America since World War II by William H. Chafe. Oxford University Press. Second Edition


A Brief Overview of the Causes and Effects of the Cold War

The Soviet-American combat, known as the "Cold War" hung heavy over global affairs for more than forty long years structuring the world with extensive military buildups, an unceasing nuclear arms rivalry, intensive surveillance, and relentless technological emulations. Further elaborated are the causes and repercussions of this menacing fracas drawn upon the world by the two superpowers the United States of America and the Soviet Union.

The Soviet-American combat, known as the "Cold War" hung heavy over global affairs for more than forty long years structuring the world with extensive military buildups, an unceasing nuclear arms rivalry, intensive surveillance, and relentless technological emulations. Further elaborated are the causes and repercussions of this menacing fracas drawn upon the world by the two superpowers the United States of America and the Soviet Union.

The Cold War dominated the second half of the 20th century, resulting in the collapse of communism. The Cold War was a period of tension and hostility between the United States of America and the Soviet Union from the mid-40s to the late 80s. It began with the end of the Second World War.

Free society would have termed it as World War III, but instead, used a whimsical name pertaining to no direct military confrontation between the two nations, fearing nuclear escalation assured mutual destruction. Nevertheless, both the nations indulged in indirect conflicts and proxy wars by supporting allied nations in places like Korea and Vietnam.

Cuban missile crisis in 1962 was the closest the world ever came to a nuclear war when an American U2 spy plane took photographs of Soviet intermediate ballistic missiles capable of carrying nuclear payloads, sending a total of 42 medium range missiles and 24 intermediate range missiles to Cuba. The US, then threatened to invade Cuba over the issue forcing the Soviets to remove the missiles on America’s assurance of not invading Cuba.

Role of the Soviet Union

Although the Soviet Union and China started off as allies in 1949, there emerged an estrangement between them, which was cleverly exploited by the Americans. The US formed an alliance with China in 1971 to contain the Soviet Union. The Soviet Union invaded Afghanistan in 1980, which led to the United States and its allies boycotting the 1980 Olympic games in Moscow. In retaliation, the Soviet Union and its allies boycotted the 1984 Olympic games in Los Angeles, USA. The US financed and armed the Afghan guerrillas to fight against the Soviet troops. The Afghan War was a major factor in bankrupting the Soviet Union.

In the 󈨔s, President Ronald Reagan of the US dubbed the Soviet Union as an “evil empire” and predicted that it would be consigned to the ash heap of history. He announced a major weapons buildup and the SDI (Strategic Defense Initiative) also dubbed as “Star Wars”. The Soviet Union was too economically enfeebled to reply in kind. In 1985, Mikhail Gorbachev became the leader of the Soviet Union. He adopted a conciliatory attitude towards the Americans and many arms reduction pacts were signed. In 1989, there was a Soviet withdrawal from Afghanistan and in 1990, the Soviets agreed to the reunification of Germany. Movements against communist governments in Eastern Europe followed this. The Soviet Union collapsed in 1991, marking the end of the Cold War.

Causes of Cold War

  • The Soviet Union wanted to spread its ideology of communism worldwide, which alarmed the Americans who followed democracy.
  • The acquisition of atomic weapons by America caused fear in the Soviets.
  • Both countries feared an attack from each other adhering to mutual mass destruction.
  • The Soviet Union’s action of taking control over Eastern Europe was a major factor for US suspicions.
  • The US President had a personal dislike of the Soviet leader Joseph Stalin.
  • America was annoyed by the Soviet Union’s actions in the part of Germany it had occupied.
  • The Soviets feared that America would use Western Europe as a base to attack it.

Effects of Cold War

  • Both the USA and the Soviet Union built up huge arsenals of atomic weapons and ballistic missiles.
  • The military blocs, NATO and the Warsaw Pact were formed.
  • The Berlin Wall was demolished and the two German nations were unified.
  • The Warsaw Pact disintegrated.
  • Led to destructive conflicts like the Vietnam War and the Korean War.
  • The Baltic States and some former Soviet Republics achieved independence.
  • America became the sole superpower of the world.
  • Communism collapsed worldwide.

The Cold War outlined the foreign policies for both the countries through the second half of the twentieth century as both contested for accomplices to uphold and broaden their respective realms of sovereignty around the world. However, it did not escalate to an apocalyptic World War III. The decade-long impasse between American capitalists and Soviet Communists ceased on a nonviolent mutual consent.


    The high-production, high savings strategies of the recovering and developing countries were matched by a U.S. high-consumption, low-savings economy.

In the uncertain years immediately after the Second World War, U.S. political leaders erected a credit-financed, consumption-led economic framework. It was designed in large part to support job creation and the economic growth of its Cold War allies. The strategy succeeded. The United States and its allies won the Cold War. But the strategy put in place a set of conditions that are now the central challenge of the next U.S. presidency.

The United States became the global consumer of last resort for the export goods of first Germany and Japan — and later all the countries surrounding the USSR and China. The goal of the United States was admirable — to help redevelop the economies destroyed by the war and to keep workers in those countries from being attracted to the promises of communism.

The strategy succeeded. The Western democracies prevailed. With the fall of the Berlin Wall, the Cold War ended and democratic and market liberalism became the foundations of future global growth.

Import substitution and later export-led growth strategies were key ingredients of the economic recovery plans of World War II-scarred Japan and Germany and other Western ally countries surrounding the former USSR and China.

This is particularly clear in Asia from the 1950s into the early 1990s.

Japan, followed by the Asian Tigers and other “newly industrialized countries” in the “flying geese formation,” successively pursued national economic plans. All were focused on substituting domestic production of basic goods for imports — and then moving up the production chain to maximize growth through exports to the developed world.

The United States served initially as a capital provider and then as the linchpin importer/consumer-of-last-resort to support these recovery and development strategies. The United States — through grants, development loans and defense arrangements — met the early capital needs of its Cold War allies in the 1950s.

At the same time, the United States de-emphasized savings and encouraged consumption — even to the point of providing tax deductions for consumer credit interest expenses. This policy supported the evolving export-led growth strategies of U.S. allies. The high production, high savings strategies of the recovering and developing countries were matched by a U.S. high consumption, low savings economy.

In the early decades of the Cold War, the United States and U.S.-backed international financial institutions were net suppliers of capital to Iron Curtain allies to finance recovery and import-substitution development strategies.

As these countries stabilized and shifted to export-led growth strategies, U.S. trade deficits appeared and then deepened, and U.S. dependence on capital inflows from Cold War allies became established.

This system of export to the United States started to break down in the 1990s. Diminishing marginal returns to export-led growth set in — and a zeroing-out of the strategy occurred in the mid-1990s.

The explanations offered by the United States and other G7 governments (that the Asian downturns of the mid-1990s were mainly the result of “crony capitalism,” inadequate financial supervision and a lack of transparency) are incomplete.

The downturns were, of course, in part due to these factors, but the important question is how “Asian miracle workers” became “crony capitalists” in a matter of three or four years. Something is missing.

What is missing is a recognition that national security is the highest domestic political priority of any country. Domestic economic policies are shaped to maximize national security. The U.S. Cold War economic policies were in contrast to those the United States pursued to win World War II. To win World War II, the U.S. became a high production, high savings economy.

The United States essentially out-produced its enemies. To win the Cold War, the United States became a low-savings, high-consumption economy. It basically supported its allies in a recovery, development and growth process that out-consumed the USSR and China. The United States exhausted the USSR and forced China to change its policies on domestic investment.

The United States was able to support its allies in a recovery, development and growth process that exhausted the USSR and forced China to change its policies on inward investment.

The matching consumption-led and export-led economics pursued by the United States and its Cold War allies were optimal for addressing the priority of winning the Cold War — but not for a non-war environment.

The magnitude of the Asian adjustments following the end of the Cold War shows that Asian economic, financial and political frameworks were not workable for a post-war environment. As soon as the Western capital markets and democracies were not required to prop up those frameworks, they ceased doing so, and “Asian miracles” became “crony capitalism.”


To what extent was the Cold War caused by post World War 2 economics? - History

The Power of Independent Thinking

“Our government has kept us in a perpetual state of fear—kept us in a continuous stampede of patriotic fervor—with the cry of grave national emergency. Always there has been some terrible evil at home or some monstrous foreign power that was going to gobble us up if we did not blindly rally behind it by furnishing the exorbitant funds demanded. Yet, in retrospect, these disasters seem never to have happened, seem never to have been quite real.”
General Douglas MacArthur 1

For four decades the government of the United States waged the Cold War. Doing so brought about massive changes in the allocation of resources, with effects on many dimensions of the nation’s economic performance. Despite all that has been written by economists, historians, political scientists, and others about the Cold War economy, economic historians have given little attention to it as such. Most textbooks devote scant if any space to discussing it. 2 Now that it can be viewed as a distinct phase of U.S. economic history, an analytical survey is in order.

In the first part of the paper I present such a survey in the form of a statistical anatomy accompanied by a brief narrative of related political and military events. I deal with the magnitudes of defense spending, both absolutely and relative to national product, and the trends and cycles of those magnitudes. Next, I examine opportunity costs, identifying how changes in the military share of national product were related to changes in the private share or the government nonmilitary share, both from year to year and over the course of distinct periods of military buildup and cutback. Finally, I consider how the Cold War economy’s performance looks when we reconsider the measurement of national product along lines that I, among others, consider more defensible than the orthodox ones.

In the second part of the paper I turn more explicitly to issues of political economy. The Cold War economy derived from resource allocation by government. But in the context of American political institutions, the government’s actions cannot be fully understood apart from the public’s preferences and the politics that connected the rulers and the ruled. Post-World War II American military affairs—preparation for as well as actual involvement in war—gave rise to characteristic political processes. In analyzing those processes I focus on information and ideology. Who knew what, and who believed what, about national defense requirements and capabilities? How was the existing information used in the political processes that determined the broad societal allocation of resources? How stable were public preferences, and what made them change as they did? How were conflicts between the national security elite and the public resolved?

A STATISTICAL ANATOMY OF THE COLD WAR ECONOMY

To inquire into how the costs of Cold War military activities were distributed between the private sector and the government nonmilitary sector, I extend the familiar guns-versus-butter metaphor slightly, dividing the gross national product into three exhaustive classes: government military purchases, denoted by G-M all government—federal, state, and local—nonmilitary purchases, denoted by G-NM and all private purchases, whether for consumption or investment (or net exports), denoted by P. 3 This categorization permits us to view the societal opportunity costs of military purchases very broadly. The military purchases include only newly produced final goods and services as designated under the “national defense” heading in the national income and product accounts. Hence, at the beginning of the analysis I am examining the division of the entire national flow of output as conventionally measured.

To provide empirical terms of reference for the analysis, I consider periods of military mobilization to be defined by a rapid uninterrupted multiyear increase of real military outlays, and periods of demobilization by a substantial uninterrupted multiyear decrease of real military outlays. In the United States after 1948 three mobilizations occurred, during 1950-53, 1965-68, and 1978-87, each followed by a demobilization.

An increase of the share of G-M in GNP can occur at the expense of either the share of P or the share of G-NM or of both. For expositional convenience let us employ the usual terms, calling G-M “guns” and P “butter.” G-NM will be called “roads.” A distinction may be drawn between “butter-sacrificing” mobilizations, when the P share declines, and “roads-sacrificing” mobilizations, when the G-NM share declines. Demobilizations may be viewed in parallel terms as “butter-enhancing” or “roads-enhancing.”

Military Spending: Magnitudes and Shares

World War II cast an enormous shadow over the years that followed in the United States. In addition to the immense economic consequences, the war’s institutional and Constitutional legacies loomed very large. 4 The ideological effects were tremendous. Benjamin Page and Robert Shapiro, in their massive survey of public opinion data, describe World War II as “the most pervasive single influence on public opinion” in the entire period since the mid-1930s. Among other things, it “transformed American public opinion concerning virtually all aspects of foreign affairs.” 5 In the dominant view that emerged from the war, “isolationism” and “appeasement” were completely discredited. Within the federal government the president gained power and discretion, especially in foreign affairs—people would later speak of an “imperial presidency.” In these respects important groundwork was laid for a greatly expanded American role in world affairs. But in the latter half of 1945 and throughout 1946 the rapid demobilization of the awesome wartime military machine raised doubts as to whether the United States would possess the means to achieve its newly embraced global goals.

Culminating the demobilization, real military spending hit its postwar low in calendar year 1947 at $10 billion in current dollars, equivalent to about $45 billion in 1982 dollars, or 4.3 percent of GNP. (Henceforth unless otherwise indicated, all dollar amounts are expressed in 1982 purchasing power.) 6 But in 1947 relations with the Soviet Union were deteriorating, especially in the eyes of the President and officials at the Department of State and the newly created Department of Defense. 7 Already Winston Churchill had warned that an iron curtain was descending between Soviet-controlled Europe and the West. For the people on Main Street, however, other concerns had priority. “Though the polls showed growing awareness of Soviet aggressiveness, most Americans were still not ready to undertake the dangerous, expensive job of opposing Russia. . . . The Republicans had gained control of Congress in November [1946] by promising a return to normalcy, not an assumption of Britain’s empire.” 8 To convince the public, and thereby Congress, of the need for additional defense spending to implement the proclaimed Truman Doctrine of containing communist expansion around the world, the administration needed a more visible crisis. The confrontations over Greece and Turkey, which had flared up in 1947, could not carry the full burden of justification required.

Events came to the administration’s rescue when the communists took over the Czechoslovakian government early in 1948. Also, Lieutenant General Lucius Clay, military governor of the U.S. Zone in Germany, helped to create a war scare by sending a telegram, which was subsequently publicized, warning that war between the United States and the Soviet Union might occur “with dramatic suddenness.” In March President Truman called for a supplemental defense approporiation of more than $3 billion (current dollars), which Congress quickly approved. 9 Hoping for a rally-’round-the-flag response from the citizenry as he sought reelection, Truman gave a major speech that stressed the danger of war with the Soviets. He denounced their “ruthless action” and their “clear design” to dominate Europe. 10

With these events the Cold War had definitely begun. Congress approved defense appropriations for fiscal year 1949 about 20 percent higher than those for fiscal year 1948. 11 The Berlin crisis than began in mid-1948, the communist conquest of China, the Soviet nuclear test, and the formation of NATO in 1949, and the outbreak of the Korean War in mid-1950 ensured that the superpower rivalry and confrontation that came to be known as the Cold War—a state of chronic national emergency and sustained military readiness without precedent in American history—would remain the dominant reality of U.S. foreign and defense affairs for the next four decades, ending only with the breakup of the East Bloc and then the Soviet Union itself in 1990 and 1991.

Notwithstanding the sharp jump in real military purchases in calendar year 1949, the first rapid multiyear mobilization of the Cold War era did not begin until after the outbreak of the Korean War (Figure 1). Previously administration officials had encountered stiff resistance from Congress to their pleas for a substantial buildup along the lines laid out in NSC-68, a landmark document of April 1950. The authors of this internal government report took a Manichaean view of America’s rivalry with the Soviet Union, espoused a permanent role for the United States as world policeman, and envisioned U.S. military expenditures amounting to perhaps 20 percent of GNP. 12 But congressional acceptance of the recommended measures seemed highly unlikely in the absence of a crisis. In 1950 “the fear that [the North Korean] invasion was just the first step in a broad offensive by the Soviets proved highly useful when it came to persuading Congress to increase the defense budget.” As Secretary of State Dean Acheson said afterwards, “Korea saved us.” 13 The buildup reached its peak in 1953, when the stalemated belligerents in Korea agreed to a truce.

The ensuing demobilization lasted just two years, leaving annual defense outlays during the next decade nearly three times higher than they had been in the late 1940s (Figure 1). During the period 1947-1950 real annual military spending never exceeded $60 billion after 1952 it never fell below $143 billion and usually was substantially higher (the average for 1956-1965 was $168). Samuel Huntington, a leading student of U.S. defense policy, speculated that “without the war, the increase probably would have been about the size of that of 1948-1949,“ that is, 20 percent instead of nearly 200 percent. 14

During the period 1955-1965 U.S. military policy underwent substantial recasting. First the Eisenhower administration’s New Look put major emphasis on massive nuclear retaliation by the Strategic Air Command’s long-range bombers and intercontinental ballistic missiles then the Kennedy administration’s plan tilted toward flexible nuclear response, counterinsurgency, and forces tailored to limited wars. But these shifts had only minor impacts on overall defense spending, which fluctuated within a range of $143-163 billion. A much-vaunted buildup after JFK took office raised spending by 11 percent between 1960 and 1962, but the decline during the next three years brought the real spending of 1965 below the amount spent in 1957. Because the Kennedy buildup was so brief, so small, and so transient, I do not regard it as belonging in the same category with the three mobilizations identified above.

After 1965 the Vietnam War buildup carried real defense purchases to a mobilization peak in 1968, up by more than one-third. The ensuing demobilization is harder to date with certainty. I put its completion at 1971, when the military share of GNP had fallen below the premobilization share of 1965 (Figure 2). After holding its own in 1972, however, the amount of real military spending continued downward until it hit bottom in 1976. (The G-M share of GNP hit bottom in 1978.) Despite this resumption of the decline that first began after 1968, it would be unwarranted to describe the decline between 1972 and 1976 as part of the Vietnam War demobilization as such. 15 Although this latter phase of decline certainly reflected, in part, disillusionments and convictions engendered by the Vietnam experience, it applied more to the military establishment in general, especially the procurement accounts, than to forces in or supporting military action in Southeast Asia. 16 In January 1973, with only 30,000 U.S. military personnel remaining in Vietnam, the Nixon administration terminated the draft, and the Paris Peace Agreement provided for the withdrawal of all remaining U.S. forces from Vietnam. 17 The bulk of the military retrenchment during 1972-1976 reflected public and congressional revulsion against militarism and the Cold War, as evidenced by such events as the passage of the War Powers Resolution in 1973 and the National Emergencies Act in 1976, rather than savings associated with the reduction and eventual cessation of U.S. engagement in the Vietnam War.

Finally, after 1978 the Carter-Reagan buildup is obvious in the spending data (Figure 1). Between 1978 and 1980, real military outlays increased by $15.7 billion, or 10.4 percent between 1980 and 1987, by $84.4 billion, or 50.7 percent. For the entire nine-year buildup, annual outlays went up by $100.1 billion, or 66.4 percent. (Recall that these figures are expressed in 1982 dollars.) Not being associated with a major shooting war, this vast military spending surge had no precedent in American history.

Before proceeding, one should note two important points. First, I have computed the data on real military spending by deflating nominal-dollar defense purchases by the GNP deflator. (All data are for calendar, not fiscal, years.) While this procedure does not permit one to claim that the resulting real spending series accurately portrays the growth of real defense “quantity”—whatever that might mean—it does permit one to approximate the opportunity cost of military spending in terms of real nonmilitary output forgone. 18 Second, the military spending being analyzed here is for purchasing newly produced goods and services, including foreign military assistance. This component of the national income and product accounts is not the same as budgetary outlays of the Department of Defense, which include substantial sums for transfer payments such as military retirement pay and purchases of land. Also, some defense purchases originate in other federal departments, for example, the Energy Department (previously the Atomic Energy Commission), which purchases goods and services to produce nuclear reactors and warheads for the armed forces. 19

For the entire Cold War period, 1948-1989, real military purchases cumulated to a total of $7,051 billion—equivalent to nearly $10 trillion in 1992 dollars—averaging $168 billion per year. There was, obviously, substantial fluctuation: the standard deviation was $44.6 billion. The trend was slightly upward. A trend equation fitted to the data reveals a tendency for defense purchases to increase by $2.6 billion per year on the average.

From 1948 to 1989, real GNP increased at an average rate of 3.1 percent per year. (This rate and others given in this paragraph were computed from a linear regression of the logarithm of the variable on time.) Average growth rates of the component shares of real GNP were as follows: real private spending, 3.0 per year real government nonmilitary spending, 4.5 percent per year and real military spending, 1.9 percent per year. Thus, while private spending, by far the largest component of GNP, almost maintained its share of the total, the share of G-NM tended to increase while the share of G-M tended to diminish.

By focusing on the long-term trends of the shares, however, one overlooks the abrupt changes early in the period: the share of G-M jumped from 5.0 in 1950 to 13.1 percent in 1952 and 13.2 percent in 1953, after which a gradual downward trend is clear (Figure 2) the private share, in contrast, fell from 86.5 percent in 1950 to 77.7 percent in 1953, recovered to 81.5 in 1955 (a private share never again reached), then leveled off for the long term at about 80 percent. In short, one finds that the composition of real output, as conventionally measured, underwent a permanent once-for-all shift in the early 1950s, when the private share lost about six percentage points at the expense of, first, an abrupt increase of the government military share, and then a gradual long-term increase of the government (federal, state, and local) nonmilitary share, which trended upward until the mid-1970s, then leveled off at about 14 percent (Figure 2).

Table 1 shows that one’s description of GNP shares during the Cold War in some respects depends heavily on whether or not one includes the years 1948-1950 in the long period. With those three years excluded, the private share shows no long-term tendency to decline, and its standard deviation is much smaller the military share falls significantly faster, with the annual figures deviating much less from the trend line. For description of long-term changes of the G-NM share, in contrast, it matters little whether one includes or excludes the years 1948-1950. As a stylized description of the Cold War shares, one comes close to the truth as follows: P share = 80 percent G-M share = 7.6 percent G-NM share = 12.4 percent.


If one begins in 1948, the long-term tendency was for the G-NM share to gain at the expense of both the private share and the military share, with the military share absorbing almost two-thirds of the shift. (Because the three shares exhaust the entire GNP, their trend rates of change must add to zero, which—except for rounding error—they do in Table 1.) Excluding the years 1948-1950 from the long term, one finds that the long-term tendency was for the G-NM share to gain exclusively at the expense of the military share, as the private share remained approximately constant over the long period 1951-1989. Thus, if the United States during the Cold War was simultaneously a warfare state and a welfare state, it is clear that the welfare part expanded much more robustly than the warfare part after the initial military surge of the early 1950s. 20

Given the overarching trends, one may proceed to ask whether increases of the G-M share during military mobilizations occurred at the expense of G-NM or P shares. The answer is clear. There was no systematic tendency at all for the G-NM share to fall when the G-M share rose during mobilizations. In fact, during military buildups the government nonmilitary share of GNP was more likely to rise than to fall. The G-NM share was higher in 1953 than it had been in 1950, and higher in 1968 than it had been in 1965. During the Carter-Reagan buildup the G-NM share fluctuated in a narrow band, sometimes rising and sometimes falling, but the share at the end (13.88 percent in 1987) was nearly the same as it had been before the buildup began (14.06 percent in 1978). A regression of the annual changes of the G-NM share on the annual changes of the G-M share has a slope coefficient that does not differ significantly from zero (t = 0.355) and an R 2 of just 0.003, which shows that the annual changes of the two variables bore no contemporaneous linear relationship to one another.

The behavior of the private share was quite different. Changes in the G-M and P shares were almost exactly offsetting. A trade-off equation fitted to the annual changes during 1948-1989 has a tight fit (R 2 = 0.814) and shows that the implicit cost of a one-percentage-point increase in the military share was a reduction of one percentage point in the private share: the regression slope coefficient is -1.004 with a standard error of 0.077 hence one cannot reject the hypothesis that the slope equals one at any customary level of Type I error. (Deletion of the years 1948-1950 from the data set has no effect on this conclusion.) Figure 3 plainly shows the two offsetting changes to be deviations from a horizontal line representing a zero sum of the two changes. In short, during the Cold War the private sector alone bore the full cost of annual increases in the military share of total output as conventionally defined.

In the metaphors explained above, one may describe the buildup of 1950-1953 as completely butter-sacrificing and the demobilization of 1953-1955 as completely butter-enhancing. But because the magnitude of the military upswing greatly exceeded that of the subsequent retrenchment, over the full cycle of 1950-1955 the net change of the private share was -5.1 percentage points. The buildup of 1965-1968 was also completely butter-sacrificing. The ensuing demobilization was 50 percent butter-enhancing if considered complete in 1971, and 59 percent butter-enhancing if considered complete in 1976. Over the complete cycle of 1965-1971 the net change of the private share was -1.4 percentage points over the period 1965-1976 it was -0.4 percentage points. The Carter-Reagan buildup of 1978-1987 was 89 percent butter-sacrificing: the private share fell by 1.5 percentage points while the military share rose by 1.7 percentage points. During the Reagan portion of the buildup alone, from 1980 to 1987, the mobilization was 76 percent butter-sacrificing, as the private share fell by one percentage point while the military share rose by 1.3 percentage points. The post-1987 demobilization has continued into the early 1990s, so its ultimate character remains to be seen.

Cold War Economy: Unconventionally Viewed

To this point my analysis has proceeded by making use of the conventional categories of the national income and product accounts. I now take a different tack. In the conventional accounting framework the government’s spending for national defense enters fully into GNP. The soundness of this accounting practice can be, and often has been, questioned. The challenges apply in some cases to the accounting treatment of all government spending 21 in other cases, to defense spending in particular. 22 Some critics would deduct all government spending from GNP, others only a portion likewise for defense spending alone. Whether or not one accepts the arguments of the critics, it is worthwhile to consider the grounds of the arguments and to assess how our view of the economy’s performance would be changed by adopting alternative accounting conventions. Among the several bases for rejecting the usual accounting conventions, the following may be noted.

First, because the prices paid for defense goods and services generally are not—in some cases cannot be—determined within a competitive market framework, all such prices are suspect. What do they mean? Is there any reason to suppose that they approximate consumers’ marginal rates of substitution or producers’ marginal costs? If not, why should the actual prices paid be regarded as appropriate weights for the purpose of aggregating physically incommensurable goods and services? The prices paid for conscripted soldiers’ services are only the most incontestible example of a wide class of prices that deviate from competitive equilibrium levels. For many items procured the government and the supplier compose a bilateral monopoly, and the prices reflect only the relative bargaining power of the transactors—not to speak of the supplier’s political pull.

Second, even if the pricing problem be disregarded, defense purchases measure input not output. Obviously, what people value is national security, not the mere devotion of resources to the ostensible production of national security. Because no one knows the production function for national security, and because under certain conditions (e.g., arms races) more military spending may be associated with less rather than more security, one may not suppose even that the relation between spending and security is necessarily monotonic far less may one assume what the specific form of the function might be. 23 Moreover, how one might aggregate individuals’ valuations of security to arrive at a societal value for national security is probematic in theory as well as practice.

Third, defense output, even if it were measurable, ought to be regarded as an intermediate rather than a final good, and on this basis excluded from GNP. As James Tobin and William Nordhaus put it, extending an argument embraced earlier by Simon Kuznets, defense is a “necessary regrettable,” not a source of final utility to anyone. If there were no external threat, all defense spending could be eliminated and no one would be the worse. To the extent that defense spending serves to preserve the social and economic framework within which nondefense production can go forward, its value is already incorporated in the market prices of civilian goods. 24

Finally, following lines of argument familiar in public choice theory (bureaucratic behavior à la Niskanen and rent-seeking à la Tullock), one may argue that political and bureaucratic allocation of resources tends toward the dissipation of net value for all services provided by the government. Hence, at the margin the observed defense spending amounts to transfer payments rather than payments for net additions to the real national product. 25 Students of the politics of maintaining obsolete military bases and other defense boondoggles have demonstrated that at least a substantial portion of defense spending makes no genuine net contribution to national security. 26

The preceding arguments, although not widely accepted within the mainstream economics profession, are scarcely the wild-eyed notions of crackpots. At least three Noble laureates in economic science (Kuznets, Tobin, and Buchanan) are on record as proponents of some or all of the preceding arguments, and many other respectable economists also have subscribed to them. Especially weighty is the position of Simon Kuznets in opposition to the now-standard way of treating defense spending in the national product accounts, because Kuznets was the acknowledged leader in the original development of the accounts. Except for World War II, which he treated as a unique event, Kuznets always insisted on using a “peacetime concept” of GNP. 27

For assessing the long-run trend of real GNP during the Cold War, it matters little whether one examines conventional real GNP or real GNP*, the latter being real GNP minus all defense spending. The two series exhibit a similar upward tendency. Between 1948 and 1989, real GNP grew at an average rate of 3.10 percent per year, real GNP* at an average rate of 3.21 percent per year. (Again, growth rates are obtained from linear regressions of log output on time.) On the basis of this difference, one has little to choose, as the growth rate of orthodox total output and that of civilian output alone differed by just 0.11 percent per year.

Notwithstanding the similarities of their long-run trends, the two series moved quite differently in particular years and, on one occasion, over the course of a conventionally demarcated business cycle. Comparing the annual percentage growth rates of real GNP and real GNP*, one finds that they differed by one percentage point or more in six years, and in several other years they differed by enough to make a substantial difference in, say, the predictive performance of a macro model fitted to them. A linear regression of the growth rate of real GNP* on the growth rate of real GNP accounts for less than 80 percent of the variance (R2 = 0.796) and has a standard error of estimate of 1.2 percentage points. So, how one defines GNP can make an important difference in one’s understanding of the patterns of real output fluctuations in the postwar era. Empirical macroeconomists appear to be oblivious to this issue.

As Figure 4 shows, the differences tended to diminish with the passage of time. The early 1950s witnessed the greatest deviations between the growth rate of orthodox real GNP and that of civilian real GNP. The differences were considerably smaller from the mid-1950s to the mid-1970s, then even smaller between 1974 and 1989. To some extent, the diminution reflected the diminishing share of military spending in GNP (Figure 2 above).

For the early 1950s the choice of an output concept makes a major difference in the description of the business cycle (Figure 5). The conventional concept gives rise to a description that shows an expansion from 1950 through 1953, a mild recession in 1954, and a strong recovery in 1955. Real GNP*, in contrast, shows a much slower pace of expansion in 1951 and virtually no growth in 1952. The year 1953 looks the same for both measures, but 1954 does not. Moving from real GNP to real GNP* transforms 1954 from a mild recession to a weak expansion—a minus 1.3 percent change becomes a plus 1.0 percent change. Both series show strong recovery in 1955, with civilian growth outpacing that of GNP including the military component.

One may not wish to accept GNP* as a replacement for conventional GNP. 28 But the point remains. Whether or not one wishes to exclude defense spending from the measure of total output, one must recognize that some years look good or bad merely because of variations in defense spending—a type of spending with a very tenuous relation to the well-being of consumers, investors, and the beneficiaries of governmentally purchased civilian goods and services. The year 1951 was far better for guns than it was for butter or roads. The year 1952 saw only minuscule growth of road output and actual decline of butter output the year 1954, a bad one for guns, brought slight improvements in the rates of output of both roads and butter. What we call these differences matters little, so long as we are clear. But appreciating the existence of the differences is important for understanding and evaluating the actual performance of the economy during the Cold War.

THE POLITICAL ECONOMY OF THE COLD WAR

The foregoing evidence and analysis raise a variety of questions about the political economy of the Cold War, only a few of which can be considered here. I shall focus on issues related to ideology, information, and the conflict between governing elites and the public.

Consider first the profile of resource allocation to the military during the Cold War. One might ask: (1) What accounts for the unprecedentedly enormous base spending level, that is, the level when the nation was not involved in shooting war? (2) What accounts for the deviations from that base, that is, for the buildups? Until the late 1970s the answers seem fairly transparent. The high base level of spending resulted from the Cold War ideology of global anti-communism and the foreign policy doctrines and military commitments that flowed from that ideology. The spending deviations were associated with the extraordinary costs of engagement in two major shooting wars in Asia. 29 The Carter-Reagan buildup is a different matter. Set in motion by a unique combination of external events, astute partisan political action and information management, kept in motion by executive determination and bureaucratic tenacity, it bore little resemblance to the two preceding buildups. 30

During the “normal” years of the post-Korean War period, 1955-1965 and the post-Vietnam War period, 1972-1978, when neither substantial mobilization nor demobilization was occurring, real defense spending fluctuated within a range of $144-166 billion. This contrasted with the $48-60 billion range of the years 1948-1950. One may conclude that the establishment of the full-fledged Cold War regime caused real defense spending almost to treble. Shooting wars entailed marginal expenditures of another $20-60 billion per year. Even without the periodic buildups, the “normal” expense of a military establishment requiring $150 billion per year for forty years would have cumulated to $6 trillion (1982 dollars). This staggering sum is equivalent to the entire GNP of the United States in the two-year period 1977-l978.

From 1948 to the late 1960s the dominant Cold War ideology and a bipartisan consensus on defense and foreign policy, focused on global containment of Communism and deterrence of a Soviet attack on Western Europe or the United States, gave support to the unprecedented allocation of resources to the “peacetime” military establishment. 31 Having weakened somewhat under the strains of the Vietnam War controversy and its political aftermath, both the ideology and the consensus persisted, subject to a good deal of fraternal squabbling, notably within Congress. 32 President Reagan’s rhetorical hostility toward the Soviet Union’s “evil empire” and the generally hawkish stance of his administration, especially during Reagan’s first term, gave renewed luster to the tarnished Cold War ideology. Despite the public’s waning enthusiasm for foreign military adventures after the near-hysteria of 1980, events such as the U.S. invasion of Grenada and the Soviet downing of Korean Airlines flight 007 in 1983 were “carefully managed and interpreted by the [Reagan] administration” and “proved crucial, at least long enough to save the weapons buildup.” 33

The ideological milieu was important, indeed essential, in maintaining high levels of resource allocation to defense, but it was not sufficient. Ordinary citizens, almost none of whom had any direct contact with conditions or evidence bearing on national security, easily came to suspect that the nation’s security did not really require such vast expenditures and that military interests, especially the uniformed services and the big weapons contractors, were using bogus threats as a pretext for siphoning off the taxpayers’ money. Countless political cartoons, featuring bloated generals bedecked with rows of medals, promoted precisely such an attitude. Citizens did not need to be natural cynics. The problem of creeping skepticism was inherent in the remoteness of the subject from their immediate experience. In addition, as Huntington remarked, “The longer a given level of military force is apparently adequate for deterrence, the greater is the temptation to assume that a slightly lower level might be equally adequate.” 34

Frequent newspaper and television reports of waste, fraud, mismanagement, and bribery fostered the public’s tendency, absent a crisis, to doubt what the defense authorities said. Popular books explained how the military-industrial-congressional complex formed an “iron triangle,” exploiting the taxpayers, distorting defense policies, and blocking progress toward multilateral arms reductions. 35 As Gordon Adams explained, because no one knew the production function for national security, it was “difficult to correlate military expenditure levels to distinct improvements in national security. Citizens [could] only spend and hope.” But “the indeterminate nature of the need to spend,” along with the underlying Cold War ideology, created a potential for political leaders periodically to arouse the slumbering apprehensions of the public. 36

The tendency of chronic background threat to lose its efficacy in supporting high levels of military spending could be offset by episodic crises. In a perceived crisis, public opinion became volatile. Many people suspended their reason, critical faculties, and long-term judgments, reacting emotionally and with heightened deference to political leaders. 37 As Senator Arthur Vandenberg observed when Truman was first attempting to persuade the public to support a policy of containment in 1947, gaining such support required that national leaders “scare hell out of the American people.” 38 Sometimes the outside world presented an inviting opportunity to take advantage of a crisis, as when the North Koreans crossed the 38th parallel in 1950 or when the Soviets invaded Afghanistan at the end of 1979. But usually the world did not supply such clear-cut cases, and the national security managers had to take matters into their own hands.

During the Cold War the authorities alerted the public to a series of ominous “gaps.” 39 Just after World War II, U.S. leaders exaggerated Soviet force levels and offensive capabilities. Of the fearsome 175 Soviet divisions, a third were undermanned and another third were ill-equipped militia. 40 Then came a bomber gap in the mid-1950s and a missile gap between 1958 and 1961, followed within a few years by an antimissile gap and a first-strike missile gap. All were revealed in due course to have been false alarms. Meanwhile the American people received an almost wholly fictitious account of an incident in the Gulf of Tonkin in 1964, which stampeded Congress into giving its blessing to what soon became a major war. 41 Subsequent gaps were alleged with regard to bombers (again), thermonuclear megatonnage, antisubmarine capabilities, and missile throw weights. An influential group of Republican hawks, calling themselves the Committee on the Present Danger, declared the 1970s to have been a “decade of neglect” that opened a dangerous “window of vulnerability.” According to Secretary of Defense Caspar Weinberger, speaking in 1987, an “enormous gap” had “emerged since 1970 between the level of Soviet defense activities and our own,” though fortunately the Reagan administration had “managed to close much of this gap.” 42 Still, as the Cold War passed through its waning years, government spokemen were warning that the country faced a Star Wars gap that could be closed only by spending vast amounts of money. 43

Although not every gap scare led directly to a corresponding U.S. response, the drumbeat succession of such episodes helped to sustain an atmosphere of tension, distrust, and insecurity that fostered the maintenance of an enormous ongoing arms program. Claims about gaps placed the burden of argument on relatively ill-informed opponents of military spending. Among the general public, mood substituted for information—a situation that well suited the purposes of the defense establishment.

Throughout the Cold War the national security elite—the president, the National Security Council (NSC), the Joint Chiefs of Staff and a few other military leaders, a few congressional leaders, high officials of the State Department, the Defense Department, and the Central Intelligence Agency (CIA), plus the heads of other intelligence organizations, various aides, arms contractors, scientists, and consultants, altogether a small group of persons among whom only the president and the vice-president held elective office—possessed a close hold on critical defense-related information. This situation sprang from origins in the National Security Act of 1947, which created the NSC and the CIA and “set in motion a cult of secrecy, a far more pervasive system of classifying information than had ever existed previously, and a growing executive determination to withhold sensitive information from the public and from Congress.” 44 An NSC member once declared, “Policy decisions of the National Security Council are not a fit subject for public discussion.” 45

The need for a certain amount of secrecy was obvious to everybody, but many people suspected that, as Sidney Lens observed, “mostly, secrecy [was] used against the people of the United States.” 46 Not only strategic decision making was kept secret. A substantial portion of the spending for weapons development, intelligence gathering, and covert operations was financed from a “black budget” that by the late 1980s amounted to more than $30 billion per year, entirely shielded from congressional and public debate. As Harvey Sapolsky noted, “what no one knows, no one can criticize.” 47

In view of their exclusive possession of critical information and their perceived need to “sell” their preferred policies to the public, the national security elite did not shrink from dissembling. As J. Russel Wiggins put it, “Our government repeatedly resorts to lies in crises, where lies seem to serve its interests best.” 48 This easily documented observation, which may shock some citizens even in our own, less gullible times, does not surprise political scientists. Lance Bennett has observed that “Information about public issues is an inherently political commodity. It is concealed, revealed, leaked, released, classified, declassified, jargonized, simplified, and packaged symbolically according to the political interests of those ubiquitous ‘informed sources’ who have a stake in the outcome of the issue in question.” 49 Manipulation of information is central to what modern governing elites do. Senator Daniel Patrick Moynihan, himself no stranger to the inner sanctums of government power, observed that “knowledge is power, and the ability to define what others take to be knowledge is the greatest power.” 50

The national security elite’s close hold on critical information would not have been particularly noteworthy if the interests of the elite and the interests of the public had corresponded closely. But nothing in the workings of U.S. political institutions ensured that a close correspondence would always exist, and abundant historical evidence shows that it frequently did not. Plainly, leaders of the defense elite had interests of their own—personal, political, institutional, material, and ideological—interests that they could serve through strategic retention, dissemination, or misrepresentation of the information to which they alone had access. 51

They did not hesitate to exploit the advantages of their privileged access to information. The Iran-Contra affair and the Pentagon briberies and influence-peddling brought to light during the late 1980s were only the latest of a long series of actions shielded by self-serving mendacity. “The entire sequence of decisions concerning the production and use of atomic weaponry,” for example, took place “without any genuine public debate, and the facts needed to engage in that debate intelligently [were] officially hidden, distorted, and even lied about.” 52 Beginning in World War II the government operated a complex of facilities for manufacturing nuclear materials and weapons. These operations caused a variety of radioactive and other toxic contaminations of the surrounding air, water, and soil, yet the managers of the facilities repeatedly misrepresented and lied about the hazards to citizens living nearby. In at least one case of huge significance—the so-called “green run” at Hanford, Washington, in 1949—the operators deliberately released a large quantity of nuclear materials, including some 7,780 curies of iodine 131, onto the unwitting residents of the surrounding area as part of an experiment. 53

Nothing in what I have just said means that the national security elite could do anything they wished. If they could have, retrenchments of the military establishment would not have occurred after the buildups. Certainly the steep decline of 1968-1976, especially its later phase, which defense interests stoutly opposed, would not have been so steep. The fact that the allocation of resources to defense did sometimes fall, and fall substantially, refutes radical arguments that allege the exercise of hegemony by the national security establishment. 54 Although one must appreciate the tremendous political resources possessed by the defense elite, it is possible—and not unusual—to overestimate its strength. It lost some political battles, too. That is why during the late 1980s, notwithstanding the preceding buildup, the defense share of GNP never exceeded 7 percent (Figure 2 above). Defense interests had the political savvy to appreciate that proposals or actions widely perceived as excessively grasping and strategically unjustified would be imprudent and counterproductive. More important, however, were the domestic factors that constrained the defense managers in spite of their unique control of information and their consequent ability to mold, rather than respond to, public opinion. 55

The biggest problem for defense authorities intent on exploiting ideology, controlling information, and molding public opinion arose from that proverbially inevitable duo: death and taxes. Those were the most evident forms taken by the costs of extensive commitments of resources to military purposes. Of the two, death was the more important. John Mueller fitted statistical models to public opinion data gathered during the Korean and Vietnam wars and found that, in both cases, “every time American casualties increased by a factor of 10, support for the war dropped by about 15 percentage points.” 56 Robert Smith reported public opinion data showing that “complaints about taxes were high during the two limited wars and increased as the wars progressed.” 57

As Smith’s data illustrate, opportunity costs constantly constrained military activities throughout the Cold War. In the crisis of 1948 and immediately afterward Truman resisted recommendations for a huge increase in military spending facilitated by either increasing taxes or imposing economic controls because “he was convinced that these courses were not economically or politically feasible.” 58 In the wake of the Soviets’ Sputnik success, Eisenhower opposed the Gaither Committee’s recommendation for a big buildup because he had “a nagging fear that the American people would balk at paying the bill.” 59 Given this abiding popular resistance, it was only to be expected that, as Hugh Mosley noted, the Johnson administration “was reluctant to resort to increased taxes to finance the [Vietnam] war for fear of losing public support for its policy of military escalation.” 60 Nixon was said to have “realized that for economic reasons (the war was simply costing too much) and for the sake of domestic peace and tranquility he had to cut back on the American commitment to Vietnam” the retrenchment was “forced on [him] by public opinion.” 61 Jacques Gansler observed that during the 1970s “the will of the people, who were fed up with the war in Vietnam, was to devote all available resources toward improving the peacetime life of the nation.” 62 Yet at the same time rising real marginal tax rates inspired tax revolts, limiting the capacity of governments to supply more nonmilitary goods. Something had to give. Of the political factions struggling over the three grand categories of GNP, the pro-military faction proved the weakest, at least until 1979.

When the national security elite lacked persuasive rationales to present to the public, they could only draw on the pool of patriotism. But that was not a bottomless reservoir, and without replenishment from sources that the public could understand and support, it tended to run dry. 63 When it did, public opinion could not be effectively controlled by the authorities. As the opinion balance became strongly negative, it worked its way through political processes, reaching both Congress and the administration, to affect the allocation of resources to the military. 64

Figure 6, which is based on 193 comparable nationally representative surveys in which people were asked whether they would prefer that defense spending be increased, decreased, or kept the same, shows a summary variable, opinion balance, defined as the percentage of respondents wanting an increase minus the percentage wanting a decrease. Despite the gaps in the record, the figure shows clearly the positive (but sometimes just barely positive) support for increased spending in the 1950s and 1960s (through 1967), the strong preference for reduced spending at least from 1968 until the late 1970s, the strong support for increased spending from 1979 through 1981, and the substantial balance in favor of reduced spending thereafter. 65

Political histories also provide evidence that the wartime administrations reacted, with variable lags, to swings of public opinion. The Korean War made President Truman increasingly unpopular as it dragged on. 66 Eisenhower gained election to the presidency in 1952 largely on the strength of his promise to end the war, a promise he hastened to keep. 67 Johnson declined to seek reelection in 1968 because of mounting opposition to his war policy. 68 The Nixon administration devoted itself to winding down American participation in the fighting, ending the draft, and eventually withdrawing all U.S. forces from Vietnam, for which it was rewarded with a landslide reelection in 1972. 69 At the very peak of the Reagan buildup, Secretary of Defense Caspar Weinberger complained that “new weapons can be developed by our adversaries . . . much more rapidly because [in the USSR] there are no funding restraints imposed by public opinion.” 70 Ultimately, not even the national security elite could control public opinion, which responded to the heightened opportunity costs of defense programs and actual warfare just as a rational consumer would move toward the northwest along a demand curve. 71

The Cold War era witnessed a new relation of military activity to the political economy of the United States. Before World War II the allocation of resources to military purposes remained at token levels, typically no more than one percent of GNP, except during actual warfare, which occurred infrequently. Wartime and peacetime were distinct, and during peacetime—that is, nearly all the time—the societal opportunity cost of “guns” was nearly nil. The old regime ended in 1939. The massive mobilization of the early 1940s drove the military share of GNP to more than 41 percent at its peak in 1943-44. 72 Despite an enormous demobilization after 1944, the military sector in 1947, at the postwar trough, still accounted for 4.3 percent of GNP, three times the 1939 share. Following the Korean War, military purchases reached an unprecedented level for “peacetime” and, while fluctuating, remained at or above this elevated level ever afterward. During the period 1948-1989 military purchases cumulated to more than $7 trillion (1982 dollars), averaging about $168 billion annually, or 7.5 percent of GNP. The trend tilted slightly upward for absolute real spending, slightly downward for spending as a share of GNP. Increases in the military share of GNP during the Korean and Vietnam wars came entirely at the expense of the private share. The government nonmilitary share increased during the first two post-World War II military buildups and remained approximately constant during the third. Examining GNP*, defined as GNP minus all defense spending, one finds that this measure of national product often moved differently from conventional GNP. The largest discrepancies occurred during the early 1950s. These discrepancies suggest the desirability of reassessing the business cycle in its relation to economic well-being during those years. After the mid-1950s the difference between the growth rates of GNP and GNP* tended to diminish, becoming nearly negligible during the 1980s.

The high base level of defense spending during the Cold War resulted from the dominant ideology of global anti-communism, which called forth various foreign policy doctrines (e.g., the Truman Doctrine, massive retaliation, the Reagan Doctrine) and military commitments (e.g., NATO, bilateral defense treaties, U.S. military “advisers” in Latin America). The ideology alone, however, was an insufficient prop, and episodic crises played an essential part in maintaining public support for vast military expenditures. The national security elite warned of one “gap” after another, most of which turned out to be exaggerated or nonexistent. Given the secrecy in which much defense-related information was held, it was inevitable that the national security elite would use its unique access to information to promote its own interests, which were sometimes in conflict with public preferences. There were limits, however, and in the political struggles military interests sometimes lost. The authorities could not always effectively mislead the citizenry, especially when many deaths and increasing taxes (including unanticipated inflation) were involved. But the constraints on policymakers, being subject to informational and ideological displacement and responsive to perceived crisis, were themselves elastic and manipulable.

For comments on previous drafts and presentations I am grateful to Lee Alston, Ted Carpenter, Price Fishback, Chris Grandy, Stan Lebergott, Dwight Lee, Dennis Mueller, Hugh Rockoff, Murray Rothbard, Bruce Russett, Andy Rutten, Gordon Tullock, and especially Charlotte Twight. I also thank the participants in a Peace Studies Program seminar at Cornell University, economic history workshops at Northwestern University and the University of Illinois, and a session at the meetings of the Public Choice Society.

1. MacArthur, A Soldier Speaks, p. 333.

2. On my own bookshelf I have ten textbooks on American economic history published between 1972 and 1990. Of these, none has a chapter or even a section on the Cold War economy as such, though one has two pages devoted to “Planning and Stability: The Role of Military Spending” and another has a two-paragraph section on “The Role of Military Spending” in relation to the postwar growth of government. Only one has an entry for “Cold War” in the index, but the reference is to a merely incidental mention of the Cold War. Most make only passing comments on the Korean War and the Vietnam War and no remarks at all on military activities or expenditures during the “peacetime” years since World War II.

3. I am not concerned in this paper with how the opportunity costs of changes in the military part of GNP were divided between consumption and investment. For a recent analysis of this question, see Edelstein, “What Price Cold War?” Edelstein’s conclusion that private consumption rather than private investment absorbed the full cost of additional defense spending in the period 1946-1979 is consistent with the conclusion of Weidenbaum, Small Wars, Big Defense, p. 115, and sources cited there. Because of the heavy debt financing that accompanied the Reagan buildup in the 1980s, I suspect that some crowding out of investment occurred then even if not earlier.

5. Page and Shapiro, The Rational Public, p. 332.

6. The source of all basic data for GNP, its components, and the implicit GNP deflator, unless otherwise indicated, is U.S. Council of Economic Advisers, Annual Report, 1991, pp. 286-290. Notice that here and hereafter in this paper national defense spending is defined rather narrowly, as in the national income and product accounts. Other analysts have included some or all of the government’s spending for space exploration, research, education, and veterans’ services as well as the costs of the Department of State and foreign aid. For some purposes it is appropriate to add some or all of these items. Because of the uncertainty with respect to how much of them ought to be considered “national defense” expenditures and because the narrower definition used here allows one to make a better grounded, more conservative case, these more problematical items are left out of the present analysis. For the same reason, I make no adjustment for the fact that a substantial part of military manpower was conscripted between 1948 and 1972. Obviously, conscription gives rise to an accounting understatement of the opportunity costs of military activities, but making a reliable estimate of the amount of the understatement would require research far beyond the scope of the present paper.

7. Huntington, The Common Defense, pp. 33-39.

8. Isaacson and Thomas, The Wise Men, pp. 393-394. See also Kolodziej, The Uncommon Defense and Congress, pp. 35-36, 67-68 Ambrose, Rise to Globalism, pp. 71, 79-82, 93-94.

9. Huntington, The Soldier and the State, p. 425 Kolodziej, The Uncommon Defense and Congress, pp. 74-81 Mosley, The Arms Race, p. 7.

10. Donovan, Conflict and Crisis, pp. 357-361 Ambrose, Rise to Globalism, pp. 95-97 Kolodziej, The Uncommon Defense and Congress, p. 72 Page and Shapiro, The Rational Public, pp. 200-201, 206-209. Page and Shapiro (p. 209) conclude that “during the early Cold War [in the late 1940s], U.S. public opinion can be said, to a significant extent, to have been manipulated”—that is, deliberately misled by the authorities. This is not to say, of course, that the events propelling the United States into the Cold War were completely concocted—far from it—but then, as often thereafter, the foreign policy decisionmakers, perceiving a need to respond to threats, found it useful to exaggerate the threats when dealing with the public and Congress.

11. U.S. Bureau of the Census, Historical Statistics, p. 1114.

12. Huntington, The Soldier and the State, p. 384 Huntington, The Common Defense, pp. 47-53 Mosley, The Arms Race, pp. 7-12 Ambrose, Rise to Globalism, pp. 113-115. According to Morton Halperin, the authors of NSC-68 “made a deliberate decision to exaggerate possible dangers.” Halperin as quoted by Schneider, “Causal Factors in Variations,” p. 67. At the same time they steered clear of revealing how great the costs would be. Secretary of State Dean Acheson instructed Paul Nitze, the principal author of NSC-68, not to mention costs in the report. Weiner, Blank Check, p. 30.

13. Isaacson and Thomas, The Wise Men, pp. 504 (Acheson quote), 513. See also Huntington, The Soldier and the State, pp. 364, 382-384, 445-446 Huntington, The Common Defense, pp. 53-64 Mosley, The Arms Race, pp. 11, 13, 173 Ambrose, Rise to Globalism, pp. 113-131 Kolodziej, The Uncommon Defense and Congress, pp. 124-156 Page and Shapiro, The Rational Public, pp. 209-214.

14. The Common Defense, p. 201.

15. Here I part company with, among others, Stubbing, The Defense Game, pp. 14, 97. But Stubbing’s own account seems inconsistent compare his pp. 299, 327-330. See also Mosley, The Arms Race, pp. 174-177.

16. Korb, The Fall and Rise of the Pentagon, pp. 53-54, 62-64 Gansler, The Defense Industry, pp. 21-22, 26.

17. Stubbing, The Defense Game, pp. 297, 310 Ambrose, Rise to Globalism, pp. 234-235, 242-254.

18. Mosley, The Arms Race, p. 29. Economic statisticians have identified serious shortcomings in the construction of deflators for defense purchases. Statisticians at the Commerce Department’s Bureau of Economic Analysis, who created such an index at the request of the Defense Department, have themselves stated that the index is inappropriate for calculating reliable weapons-specific price changes. Existing indexes do not deal satisfactorily with quality changes in equipment, among other things. See Weida and Gertscher, The Political Economy of National Defense, p. 63, and Smith, “Models of Military Expenditure,” pp. 350-351. Ziemer and Galbraith’s “Deflation of Defense Purchases” offers a more complacent view (the authors are employed by the Bureau of Economic Analysis), but see the comment by Manser that follows their paper.

19. For a discussion of the various sources and measures of military spending, see Mosley, The Arms Race, pp. 17-44.

20. Of course, the more characteristic type of spending of the welfare state, government transfer payments, increased even more enormously. But because these payments are not for immediate purchase of currently produced goods and services—that is, they are not components of GNP—they lie outside the scope of the present analysis. My analysis here and in the following three paragraphs disagrees fundamentally with the interpretation of similar data by Du Boff, “What Military Spending Really Costs,” pp. 6-7.

21. Spindler, “The Overstated Economy.”

22. Dumas, “Economic Power, Military Power, and National Security.”

23. Weidenbaum, Small Wars, Big Defense, pp. 124-125 Weida and Gertcher, Political Economy of National Defense, pp. 46-50, 54, 164-165, 202-203.

24. Stanley Lebergott and Hugh Rockoff reminded me that many privately purchased goods also ought to be viewed as intermediate. Indeed the approaches to consumer theory pioneered by Kevin Lancaster and Gary Becker proceed from precisely this observation. One can grant this objection and still insist that national security differs so greatly from the typical private good in this respect as to present a qualitatively different case.

25. Spindler, “The Overstated Economy.”

27. Ultimately Kuznets seems to have concluded that GNP even for a period that includes World War II should be measured by a “peacetime concept.” For a discussion of Kuznets’s arguments, see Higgs, “War Prosperity?”

28. As Hugh Rockoff has told me, it depends on the question. For example, one might want to use standard GNP rather than GNP* in estimating the demand for money.

29. Ostrom, “A Reactive Linkage Model,” p. 955 Domke, Eichenberg, and Kelleher, “The Illusion of Choice,” pp. 30-31 Ostrom and Marra, “U.S. Defense Spending,” pp. 824-839. Schneider, “Causal Factors in Variations,” assesses several other factors as well.

30. Informative analyses of the Carter-Reagan buildup include Korb, The Fall and Rise of the Pentagon, pp. 151-164 Stubbing, The Defense Game, pp. 12-30 Mosley, The Arms Race, pp. 145-160 Ostrom and Marra, “U.S. Defense Spending,” pp. 819-842 Kaufmann, A Reasonable Defense Luttwak, The Pentagon and the Art of War and Page and Shapiro, The Rational Public, pp. 264-271, 335, 368. The external events included (what was perceived to be) a rapid Soviet arms buildup, the Iranian hostage-taking at the U.S. embassy, and the Soviet invasion of Afghanistan. The rest of the momentum derived from the Reagan team and its political supporters, before as well as after Reagan took office.

31. Huntington, The Common Defense Liggio, “American Foreign Policy” Neu, “The Rise of the National Security Bureaucracy,” pp. 91-92, 100-101 Rockman, “Mobilizing Political Support,” pp. 18, 28-29.

32. All sides agree. For testimony from a variety of ideological perspectives, see Isaacson and Thomas, The Wise Men, pp. 369, 725, and passim Ambrose, Rise to Globalism, pp. 221-222 and passim Rosenberg, “Arms and the American Way” Sanders, The Politics of Defense Analysis, pp. 176-177, 186-187, 201-202 U.S. Senate, Staff of the Committee on Armed Services, Defense Organization, p. 573 Lens, Permanent War, pp. 43-44 Cypher, “Ideological Hegemony and Modern Militarism,” pp. 10-15 Navarro, The Policy Game, pp. 259-262, 273-275 Weinberger, Annual Report, 1988, pp. 15, 41-50.

33. Page and Shapiro, The Rational Public, p. 273.

34. Huntington, The Common Defense, p. 205.

35. Prominent examples include Mills, The Power Elite Fitzgerald, The High Priests of Waste Adams, The Politics of Defense Contracting and Lens, Permanent War.

36. Adams, “Disarming the Military Subgovernment,” p. 467. See also Mancur Olson as quoted in Mosley, The Arms Race, p. 19 Weida and Gertcher, Political Economy of National Defense, pp. 50, 54, 78. From an analysis of public opinion data for the six years 1973-78, a period lacking any great foreign-policy crisis, Kriesberg and Klein concluded that “a latent readiness to support defense spending . . . can be evoked and sustained by established authority figures” and that, although instrumental thinking is sometimes important, “ideology also contributes significantly to explaining variations in attitudes about defense spending.” See Kriesberg and Klein, “Changes in Public Support,” pp. 106-7.

37. Huntington, The Common Defense, pp. 202, 214-215 Bennett, Public Opinion, pp. 113-117, 216-219 Higgs, Crisis and Leviathan, pp. 17-18, 62-67, and passim Rockman, “Mobilizing Political Support,” pp. 21-27, 32, 36-37. Page and Shapiro (The Rational Public, p. 222) note that “abrupt opinion changes occur most often in time of war or international turmoil, not in times of peace.”

38. Ambrose, Rise to Globalism, p. 87.

39. Huntington described U.S. military forecasts between 1946 and 1960 as “a series of prophecies of disaster which never materialized.” Common Defense, pp. 428-429.

40. Kolodziej, The Uncommon Defense and Congress, p. 77 Isaacson and Thomas, The Wise Men, p. 503.

41. Ambrose, Rise to Globalism, pp. 212-213 Lens, Permanent War, pp. 73-74, 123 Kwitney, Endless Enemies, pp. 357-359. Page and Shapiro, The Rational Public, p. 227, call the Tonkin Gulf incident “a classic case of opinion manipulation.” They note (p. 228) that “the administration had made contingency plans for striking at North Vietnam and had prepared a draft congressional resolution for introduction at the appropriate moment.”

42. Weinberger, Annual Report, 1988, p. 17. Page and Shapiro (The Rational Public, p. 269) observe that the Reagan administration “misrepresented the arms balance long enough to take credit for ‘restoring’ U.S. strength.”

43. On the gaps, compare Navarro, The Policy Game, p. 240 Stubbing, The Defense Game, pp. xiii, 14-25 Lens, Permanent War, pp. 170-171 Huntington, The Common Defense, pp. 428-429 and passim Ambrose, Rise to Globalism, p. 168 and Weiner, Blank Check, pp. 19-45.

44. Carpenter, “Global Interventionism,” p. 6. See also Huntington, The Common Defense, pp. 184-188 Mills, The Power Elite, pp. 293-294, 355 Lens, Permanent War, p. 38 Sanders, The Politics of Defense Analysis, pp. 206-207 Adams, “Disarming the Military Subgovernment,“ pp. 467-474, 486 Adams, The Politics of Defense Contracting, pp. 95-96 Stubbing, The Defense Game, pp. 56, 110 Neu, “The Rise of the National Security Bureaucracy,” pp. 89-90, 98-100.

45. Huntington, The Common Defense, p. 183.

46. Lens, Permanent War, p. 44. For an insightful analysis of national security policymaking that proceeds from an explicit recognition of the distinction between the nation and the government that rules the nation, see Hummel and Lavoie, “National Defense and the Public-Goods Problem.“

47. Sapolsky, “Equipping the Armed Forces,” p. 122. On the black budget, see Weiner, Blank Check.

48. Wiggins as quoted by Lens, Permanent War, p. 119 see also pp. 122, 130, 168, 172. For a well-documented survey of the landmark foreign- and defense-policy events involving what they call the manipulation (deliberate misleading) of public opinion by government leaders during the past fifty-five years, see Page and Shapiro, The Rational Public, pp. 172-284, 367-372.

49. Bennett, Public Opinion, p. 311. See also “Lies: The Government and the Press,” in Kwitney, Endless Enemies, pp. 355-378.

50. Moynihan as quoted by Stubbing, Defense Game, p. 5. See also Mills, The Power Elite, pp. 220, 222.

51. Friendly critics have pointed out to me that defense policy is not especially outstanding in these regards: any kind of political interest group, whether inside or outside the government, tries to control or slant information in the service of its policy ends. The distinction I insist upon, however, arises from the unique capacity of defense policymakers to determine what information others can acquire about specific facts and to distort the public’s understanding of the context within which the policy will be implemented. In domestic policy, the closeness of the policy context to a variety of observers, some of whom are partisan opponents of the officials in power, makes information distortion and management much less rewarding for the authorities.

52. Mills, The Power Elite, p. 355. See also Huntington, The Soldier and the State, pp. 382-384 Huntington, The Common Defense, pp. 113-114, 303, 305 and Weiner, Blank Check, pp. 19-28.

53. Marshall, “The Buried Cost of the Savannah River Plant,” pp. 613-615 Steele, “Hanford’s Bitter Legacy,” pp. 17-23 Stenehjem, “Indecent Exposure,” pp. 6-22. On a closely related subject, see Shulman, The Threat at Home.

54. For arguments that strongly suggest, if they do not explicitly allege, that such hegemony was exercised, see Lens, Permanent War Adams, “Disarming the Military Subgovernment” and Cypher, “Ideological Hegemony and Modern Militarism.”

55. On the resistance of public opinion to official manipulation, see Page and Shapiro, The Rational Public, pp. 274-281. These researchers observe (p. 279) that “when information is available that can support critical analyses, especially when elites differ, opinion manipulation is very difficult.”

56. Mueller, War, Presidents and Public Opinion, pp. 60-61.

57. Smith, “Disaffection, Delegitimation, and Consequences,” p. 250. See also Kolodziej, The Uncommon Defense and Congress, pp. 156-157, and Page and Shapiro, The Rational Public, pp. 213, 237-242, 333-334.

58. Kolodziej, The Uncommon Defense and Congress, pp. 91, 119-120.

59. Eisenhower as quoted by Huntington, The Common Defense, p. 113. See also Neu, “The Rise of the National Security Bureaucracy,” p. 89.

60. Mosley, The Arms Race, p. 153. See also Matusow, The Unraveling of America, pp. 153-179.

61. Ambrose, Rise to Globalism, pp. 242-243.

62. Gansler, The Defense Industry, p. 22. See also Neu, “The Rise of the National Security Bureaucracy,” pp. 100-104.

63. Rosecrance, The Rise of the Trading State, pp. 38, 131, 158 Higgs, Crisis and Leviathan, pp. 64-65 Ambrose, Rise to Globalism, pp. 249-250.

64. Ostrom, “A Reactive Linkage Model,” p. 954 Ostrom and Marra, “U.S. Defense Spending,” pp. 830-839 Russett, Controlling the Sword, pp. 98-100. More definitive documentation and analysis of the asserted relation between public opinion and defense spending appears in the paper by Robert Higgs and Anthony Kilduff, “Public Opinion and U.S. Defense Spending.”

65. Figure 6 is based on opinion survey data underlying Higgs and Kilduff, “Public Opinion.” While the figure indicates that public opinion tended to turn against support for further military buildup as each buildup proceeded, it also shows that the three highest peaks of pro-military opinion all occurred in conjunction with a crisis: the North Korean and Chinese invasions in Korea in 1950, the Berlin crisis of 1961, and the aftermath of the Iranian hostage-taking and the Soviet invasion of Afghanistan in November and December 1979.

66. Mueller, War, Presidents, and Public Opinion, p. 199 Rees, Korea, pp. 386-87.

67. Huntington, The Soldier and the State, p. 391 Cotton, “War and American Democracy,” p. 630.

68. Berman, Lyndon Johnson’s War, pp. 176-203 Cotton, “War and American Democracy,” pp. 630-1 Russett and Graham, “Public Opinion and National Security Policy,” p. 252 Matusow, The Unraveling of America, pp. 376-94.

69. Cotton, “War and American Democracy,” pp. 631-2.

70. Weinberger, Annual Report, 1988, p. 16.

71. For an analytical survey of the extensive literature on the relation of public opinion to defense policy, see Russett and Graham, “Public Opinion and National Security Policy.” On pp. 243 and 245 the authors conclude that “governments lose popularity directly in proportion to the length and cost (in blood and money) of the war.” Public opinion unquestionably affects policy, but the relation is complex. “Leaders in a real sense interact with public opinion, both responding to it and manipulating it.” See also Russett, Controlling the Sword, pp. 87-118. From a statistical and historical study, Cotton (“War and American Democracy,” p. 632) concludes: “Over the past century war has had a significant, detrimental, and independent [electoral] effect on elected leaders of the ‘war party.’ The degree of the effect seems to have depended on the level of commitment of the nation’s resources to the war effort.” Finally, see the extensive historical analysis of public opinion in relation to foreign and defense policy by Page and Shapiro, The Rational Public, pp. 172-284 and passim.

72. For reasons discussed by Higgs, “Wartime Prosperity?”, the 41 percent figure can be taken only as suggestive. No genuinely meaningful national product accounting is possible in the institutional context of a command economy, which is what the United States had from 1942 through 1945.

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Factors that Led to the Cold War

The main factor that led to the Cold War was the difference in ideologies between the two nations. This is considering that both nations had a strong economy and were thus considered to be the superpowers. The Soviet Union wanted to spread its communist ideology worldwide which alarmed the United States of America which supported democracy. The United States then began building atomic weapons. After its acquisition of the atomic weapons, the Soviet Union was alarmed and feared that the United States of America will attack it with the atomic weapons[3]. This further caused a lot of suspicion between the two countries. Since both countries were armed with atomic and nuclear weapons, they began fearing each other because of attacks that may occur from any side. The situation almost escalated into a military confrontation during the Cuba missile crisis. The tension was, however, diffused after the two countries came to an agreement. The United States of America spy plane had taken photographs of the Soviet Union ballistic missiles capable of carrying nuclear heads[4]. The Soviet Union on realizing this took the missiles to Cuba. The United States threatened to attack Cuba over the issue. The Soviet Union agreed to remove the missiles proved that the United States will not attack Cuba. This agreement calmed the situation, but the Cold War still continued.

The United States became more suspicious when the Soviet Union took over the eastern part of Europe. This further worsened the situation, and the Cold War continued. The Soviet Union had taken that action because it feared that the United States would use the western part of Europe to attack it. The action of taking over the eastern part of Europe was thus for the purpose of countering the suspicion. The United States was also angered by the fact that the Soviet Union occupied a part of Germany. The Soviet Union was angered when the United States formed an alliance with China to counter the Soviet Union. The United States&rsquo president at the time was also against Soviet Union&rsquos president and referred to the Soviet Union as an evil empire. The Cold War continued when the Soviet Union invaded Afghanistan in 1980. The United States was involved indirectly in the conflict by arming the Afghanistan rebels to fight the Soviet army. This worsened the situation. However, the war was costly to the Soviet Union and it led it to bankruptcy. Changes in leadership in the Soviet Union contributed to the end of the Cold War. The unification of Germany, liberalization of Eastern Europe, and the withdrawal of the Soviet troops from Afghanistan led to the end of the Cold War. The United States of America thus came to the only superpower.


How Did the Cold War Affect Europe?

The Cold War affected Europe by dividing it between communist and democratic countries, which essentially divided Europe into Western Europe and Eastern Europe. This divide caused tension, political unrest and economic difficulties. Germany, for instance, was fragmented, divided literally by the Berlin Wall and torn between American and Russian influence.

The Iron Curtain was the name of the European split between communism and democracy. America and its allies sought to restore democracy to war-torn Europe, while Russia and its allies sought to expand its influence, making several countries part of the Soviet Union. Both Americans and Russians pulled out of Austria to give it neutrality, but at the same time, Hungary, which had a communist government, collapsed, and Russia intervened with a new communist regime. Poland was also under Russian influence.

The former Soviet satellites Hungary and Poland signaled the end of the cold war when they held free elections and established democracies following the revolutions of 1989. East Germany held out a little longer, but its wall eventually came down, unifying a democratic Germany.

The Cold War affected European economies. After Russia relinquished its hold on Eastern Europe, the governments that took over were burdened with poor economies and debt. These newly democratic countries had to deal with both national security and environmental contamination problems left in the wake of the occupation, which required significant financial investment.


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