The Effects of Cold War on the United States Economy

The 20th century is known as an age of wars; for instance, the first two World Wars had detrimental consequences all around the world. Nevertheless, the confrontation between countries did not stop on that. The differences in political and economic systems, the competition for global influence, and the development of nuclear weapons caused the U.S. and the USSR to engage in the Cold War. However, this war was fought not on battlefields, but political fronts through the means of negotiations and confrontations between country leaders. Moreover, the economic confrontation also prevailed, as well as the rise of propaganda.

Two powerful nations tried to overpower each other by creating new military forces, space engines, which had an impact on their economies. The Cold War lasted for almost 50 years until the collapse of the Soviet Union in the early 1990s, which marked the victory of the U.S. Nonetheless, even though it was not an open conflict, such a prolonged war had a significant impact on every field of American life. The aim of this paper is to analyze the events of the Cold War and the effects it had on the economy of the U.S.

First of all, it is important to define the term “Cold War”. It was created by George Orwell in 1945 when he expressed the concerns about a nuclear stalemate between “two or three monstrous super-states, each possessed of a weapon by which millions of people can be wiped out in a few seconds” [1]. The first signs of confrontation occurred even before the end of World War II when it was already certain that Germany will be defeated. According to sources, Germany experienced many struggles as Allied forces brought destruction upon cities in 1943-44 [2]. Moreover, the amount of deaths rose as the Soviet army advanced in 1945. For this reason, when the first American soldiers came to Berlin in order to take over the Western half of the city, German citizens saw them as saviors [2]. Since both countries wanted to occupy the territory, the situation created a conflict of interest, which later became one of the primary causes of the Cold War. Therefore, the first stage of the extended battle of ideologies took place in Germany.

The main goals that America was trying to achieve during that time were to prevent any possible attacks from the USSR, including both military and ideological. Stopping the spread of communism around the world was one of the most important objectives of the U.S. The reason for this was the perception of communism as an unwanted political and economic system, which contradicted the ideas of capitalism. The country implemented several tactics, such as building extensive military forces, making alliances with other countries with promises to provide protection from the Soviet army. Thus, the United States gathered a large amount of international support. As the documentary The Fog of War states, America tried to convince other nations that its economic, political, and military superiority is to their advantage [3]. In order to prove this claim, the country carried out the financial plan, which was supposed to financially help European countries that suffered during World War II [4]. It was called the Marshall Plan, and even though it caused massive capital costs, it guaranteed the support of Western Europe.

Another major event of this war was the confrontation in 1983. According to primary sources, French President Francois Mitterrand considered the situation to be so severe that it could be compared “to the 1962 Cuban missile crisis and the 1948 face-off over Berlin” [5]. Nevertheless, the war was fought not by means of weapons, but through words. The former diplomat Dobrynin states in his book that in March 1983, the tension was exceptionally high. Two leaders engaged in a verbal conflict, where the American President called the Soviet Union the “focus of evil in the world” [6]. At the same time, the Soviet Secretary denied his accusation, calling Reagan a liar [6]. However, even if the relationship between the U.S. and the USSR were especially bad at this time, it never escalated into a nuclear war.

As for the impact of the war on the American economy, it is important to note that military spending was enormous. According to the study by the Institute for Economics and Peace, “the dominant economic narrative was the need to reduce inflation from the very high levels of the late 1970s” [7]. Besides, they state that in the 1980 the economy experienced a sharp recession; however, the ultimate goal was achieved in 1983. Nevertheless, aside from the issue of inflation, the country suffered from the problem of unemployment since the level had risen to 10.8% by the end of 1982 [7]. Reagan tried to implement new policies and lower taxes, but since the military expenditures were still high, it increased the budget deficits. In conclusion, it would appear that the Cold War heavily influenced the economy of the U.S. While providing financial help to other countries and the development of military forces has ensured success, it caused several problems for the country, such as inflation, unemployment, and deficit.

References

1. “Cold War Causes, Facts, & Summary”, Encyclopedia Britannica. Web.
2. D. P. Steury. “On the Front Lines of the Cold War: Documents on the Intelligence War in Berlin, 1946 to 1961”, Cia.gov. Web.
3. E. Morris. “The Fog of War: Eleven Lessons from the Life of Robert S. McNamara”. Web.
4. “The Cold War (1947-1991)”. Historiasiglo20.org. Web.
5. “A Cold War Conundrum: The 1983 Soviet War Scare — Central Intelligence Agency”, Cia.gov. Web.
6. A. Dobrynin, In Confidence: Moscow’s Ambassador to Six Cold War Presidents, Seattle: University of Washington Press, 2016.
7. “Economic Consequences of War”, Institute for Economics and Peace. Web.