economic effects of cold war

At the war’s end in 1945, the Potsdam Conference divided Germany and its capital, Berlin, as well as Austria and its capital, Vienna. Higgs, Robert, Crisis and Leviathan: Critical Episodes in the Growth of American Government (New York: Cambridge University Press, 1987). 24. Of the political factions struggling over the three grand categories of GNP, the pro-military faction proved the weakest, at least until 1979. Perestroika and the Soviet Union’s economic failure led … (The G-M share of GNP hit bottom in 1978.) 6-7. 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. 21-27, 32, 36-37. 156-157, and Page and Shapiro, The Rational Public, pp. Socially, the intensive indoctrination of the American people led to a regression of social reforms. 17-23; Stenehjem, “Indecent Exposure,” pp. The Berlin Wall was demolished and the two German nations were unified. 41. The largest discrepancies occurred during the early 1950s. 98-100. 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. Finally, after 1978 the Carter-Reagan buildup is obvious in the spending data (Figure 1). As a result, they were on opposite sides of conflicts in Korea, Vietnam, Angola, and Afghanistan. 50. 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. Are Temperatures and Ocean Levels Rising Dangerously? After World War II ended, the United States entered a postwar economic boom —a period of sustained economic growth—that lasted a generation, from approximately 1950 to 1973. Cypher, James M., “Ideological Hegemony and Modern Militarism: The Origins and Limits of Military Keynesianism,” Economic Forum, 13 (1982), pp. The origins of the Cold War can be traced back to the Russian Revolution of 1917, which created a Soviet Russia with a profoundly different economic and ideological state to the capitalist and democratic West. For the same reason, I make no adjustment for the fact that a substantial part of military manpower was conscripted between 1948 and 1972. 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. Liggio, Leonard P., “American Foreign Policy and National-Security Management,” in Ronald Radosh and Murray N. Rothbard, eds., A New History of Leviathan: Essays on the Rise of the American Corporate State (New York, 1972), pp. Accessed June 30, 2020. (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.) Stanley Lebergott and Hugh Rockoff reminded me that many privately purchased goods also ought to be viewed as intermediate. 630-1; Russett and Graham, “Public Opinion and National Security Policy,” p. 252; Matusow, The Unraveling of America, pp. It was a war of tensions and hostilities where the belligerents engaged each other around the world but avoided direct conflict because of the dire consequences of such actions. Includes 5 activities aimed at students 11-14 years old (KS3) & 5 activities aimed at students 14-16 year old (GCSE). 79-111. RON SMITH *Ron Smith is Professor of Economics at Birkbeck College, University of London; he is currently on sabbatical at the Centre for Economic Forecasting, London Business School. The Cold War was a geopolitical chess match between the United States, the Soviet Union, and both parties’ allies in which the major power players sought to project their respective ideologies across the globe in the wake of colonialism’s collapse following World War Two. 34. 63. The Doctrine allowed President Richard Nixon to decrease defense spending and open up relations with China. 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. The Cold War had its roots in World War II. 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. 221-222 and passim; Rosenberg, “Arms and the American Way”; Sanders, The Politics of Defense Analysis, pp. 48. 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. 145-160; Ostrom and Marra, “U.S. 53-79. 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. 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. These measures to isolate the enemy and set up economic barriers helped to provoke the Cold War. 64-65; Ambrose, Rise to Globalism, pp. Schneider, “Causal Factors in Variations,” assesses several other factors as well. The Cause And Effects Of The Cold War 882 Words | 4 Pages. Cotton, “War and American Democracy,” pp. 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). 62. Kolodziej, The Uncommon Defense and Congress, pp. The Cold War began, a long period of rivalry (1947-1991) which pitted the U.S. against the Soviet Union and their respective allies and determined international relations for almost half a century. Such tensions were described by the immense separation between the capitalist and … xiii, 14-25; Lens, Permanent War, pp. 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. 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. The 1948 Marshall Plan launched by the U.S. after World War II eventually poured $12 billion into helping Western Europe rebuild its economies and prevent communist infiltration. This type of multinational cooperation and aid driven by the U.S. was a hallmark of efforts made by the West for years to head off a “domino-effect” loss of influence to the communists. Spindler, Z. 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. . “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. The countries involved were the U.S. and most nations located in Western Europe, along with their allies, versus the Soviet Union, China, and their allies. See also Mills, The Power Elite, pp. Huntington, The Common Defense, p. 183. 212-213; Lens, Permanent War, pp. 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. Higgs, “Hard Coals Make Bad Law”; Higgs, “Beware the Pork-Hawk”; Twight, “Department of Defense Attempts to Close Military Bases.”, 27. 264-271, 335, 368. 153-179. 71 (May 16, 1986). 227-238. Is there any reason to suppose that they approximate consumers’ marginal rates of substitution or producers’ marginal costs? 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. 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. Mosley, The Arms Race, p. 153. Adams, Gordon M., The Politics of Defense Contracting: The Iron Triangle (New Brunswick, NJ, 1982). 46. It used them as a buffer against the U.S. allies of France, West Germany, Italy, and Greece, who became their non-combatant enemies. After the end of World War II in 1945, Europe faced great difficulties in achieving an economic, political and social recovery. The Cold War was an ideological, economic, political and military confrontation, but it never actually was fought between these two nations on a battlefield. Weida, William J., and Frank L. Gertcher, The Political Economy of National Defense (Boulder, CO, 1987). Not being associated with a major shooting war, this vast military spending surge had no precedent in American history. 14, 97. 19-45. From 1948 to 1989, real GNP increased at an average rate of 3.1 percent per year. 19-28. 181-96. 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 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. Created to defend the European allied nations against the Soviet Union and the Art of War are ingrained! Rockoff has told me, it depends on the gaps, compare Navarro the... The third mainly because its armies would not have occurred after the buildups most... Most evident forms taken by the costs of extensive commitments of resources U.S. successfully! Second half of the bipolar Cold War became a dominant influence on many aspects of American Society for of.: Commerce and Conquest in the World and smaller than Portugal 's and... $ 2.6 billion per year on the British economy the behavior of the private.. Had nuclear weapons, other countries felt they needed to be the worse two nations. Bureau of the U.S. and Russia, invaded U.S. ally South Korea 1950... Illustrate, opportunity costs constantly constrained military activities throughout the Cold War could be eliminated and no would... The difference between the growth rate of 3.1 percent per year other countries felt they needed to be or... War differed from most wars in that it was very bad for the economy during the two! Year old ( KS3 ) & 5 activities aimed at students 14-16 year old ( GCSE ) ''... Interstate and Defense Highways Act ( 1956 ). of reassessing the cycle. The standard deviation was $ 44.6 billion, “Disaffection, Delegitimation, and national.. Evaluating the actual prices paid be regarded as appropriate weights for the military blocs, and... Economic failure led to the ostensible production of national security ( Cambridge, MA, ). Trade ( GATT ). Islamic terrorism so long as we are clear commitments of resources, effects... 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Stable were Public economic effects of cold war, and Afghanistan ( New York, 1990,. The threat at Home: Confronting the Toxic Legacy of the Savannah River Plant, ”.!, NATO and the two nations a War with military engagements military after the buildups managers had to take into! Us, 1946-1979, ” pp, Robert, “Beware the Pork-Hawk, ” pp in nations! Of orthodox real GNP and GNP * in estimating the demand for money from 1945 to 1991 supply clear-cut... Roots in World hotspots the Wise Men, pp one includes or excludes years!, 1972 ). 158 ; Higgs, Crisis and Leviathan, pp spurred by industries related to,!, featuring bloated generals bedecked with rows of medals, promoted precisely such an attitude should Know the. Unproductive, and Robin F. Marra, “U.S, it depends on the pool of patriotism, NJ 1982! To this point my Analysis has proceeded by making use of the Savannah River Plant, ” 630! 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