POST WW II

ECONOMIC
ORDER
The post–World War II economic expansion,
also known as the postwar economic boom, the
long boom, was a period of strong economic
growth beginning after World War II and ending
with the 1973–75 recession.
By mid 1943 the tide of war had turned against the
Germans. The Russians had started their
counterattack. By the fall of that year Mussolini was
deposed and American troops landed in Italy.

The Allies now could look forward to the end of the

war and the kind of world that would emerge
although planning for the postwar economic
environment had started as early as 1942 in the
United States and England.
In both countries the planners—Harry Dexter
White in the United States and John Maynard
Keynes in England—were at work to come up
with arrangements and innovations that
would prevent a repeat of the 1930s.

Their efforts culminated in the Bretton Woods

Conference of 1944, and both can be
considered as architects of the post-War
international economic order.
World War II was fought between two major groups of
nations. They became known as the Axis and Allied
Powers.

Who Were the Allies:

The main Allied powers were Great Britain, The
United States, China, and the Soviet Union. The
leaders of the Allies were Franklin Roosevelt (the
United States), Winston Churchill (Great Britain), and
Joseph Stalin (the Soviet Union), Chiang Kai-shek
(China).

Who Were the Axis Powers:

The main Axis powers were Germany, Japan and
Italy. The Axis leaders were Adolf Hitler (Germany),
Benito Mussolini (Italy), and Emperor Hirohito (Japan)
.
The Gold Standard
Late 19th and early 20th centuries were characterized by a highly integrated
world economy

Supported from approximately 1870 to 1914 by an international financial

arrangement known as the gold standard

When World War I began in 1914, the countries involved in that conflict
suspended the convertibility of their currencies into gold

After the war, there were unsuccessful attempt to return international

financial system back to gold standard

As the British pound was set at an overvalued rate there was a run on the
pound (1931). Forced Britain to cut pound’s tie to gold, leading to many
other countries. By 1937, no countries remained on gold-exchange standard
Bretton Woods System
During the World War II, United States and Britain began to
plan for the post-war economic system

Harry Dexter White and John Maynard Keynes understood

the contribution of previous breakdown in international
economic system to war.

The Bretton Woods Agreement is the landmark system for

monetary and exchange rate management established in
1944. It was developed at the United Nations Monetary and
Financial Conference held in Bretton Woods, New
Hampshire, from July 1 to July 22, 1944.
International Monetary Fund (IMF)

World Bank (WB)

General Agreement on Tariffs and Trade

(GATT)/World Trade Organization (WTO)
What is IMF?
Definition: The International Monetary Fund (IMF) is an organization of 189
member countries. It stabilizes the global economy in three ways.
i) It monitors global conditions and identifies risks.
ii) It advises its members on how to improve their economies.
iii) It provides technical assistance and short-term loans to prevent
financial crisis.

The IMF's goal is to prevent these disasters by guiding its members. These

countries are willing to give up some of their sovereign authority to achieve
that aim.

Created in 1945, the IMF is governed by and accountable to the 189

countries that make up its near-global membership.
 IMF

Goals Responsibilities
• promoting international monetary • promoting sustainable economic
cooperation; growth,
• facilitating the expansion and balanced • increasing living standards,  
growth of international trade; • reducing poverty
• promoting exchange stability; • solving macroeconomic and
• assisting in the establishment of a financial sector issues.
multilateral system of payments; and
• making resources available (with adequate
safeguards) to members
experiencing balance of payments
difficulties
 IMF’s Work
The IMF's fundamental mission is to help ensure stability in the
international system. It does so in three ways: keeping track of the
global economy and the economies of member countries; lending to
countries with balance of payments difficulties; and giving practical
help to members.

Surveillance : The IMF oversees the Technical Assistance: To assist mainly

international monetary system and monitors
the financial and economic policies of its
members. It keeps track of economic
developments on a national, regional, and
global basis, consulting regularly with
member countries and providing them with
macroeconomic and financial policy advice.
low- and middle-income countries in
effectively managing their economies, the
IMF provides practical guidance and
training on how to upgrade institutions,
and design appropriate macroeconomic,
financial, and structural policies
Lending: The IMF provides loans to countries
that have trouble meeting their international
payments and cannot otherwise find
sufficient financing on affordable terms. This
financial assistance is designed to help
countries restore macroeconomic stability by
rebuilding their international reserves,
stabilizing their currencies, and paying for
imports—all necessary conditions for
relaunching growth. The IMF also provides
concessional loans to low-income countries
to help them develop their economies and
reduce poverty
 How member countries’ quotas are determined?

When a country joins the IMF, it is assigned an initial quota in the

same range as the quotas of existing members that are broadly
comparable in economic size and characteristics. The IMF uses a
quota formula to guide the assessment of a member’s relative
position.
The current quota formula is a weighted average of GDP (weight
of 50 percent), openness (30 percent), economic variability
(15 percent), and international reserves (5 percent). For this
purpose, GDP is measured as a blend of GDP based on market
exchange rates (weight of 60 percent) and on PPP exchange
rates (40 percent).
Quotas are denominated in Special Drawing Rights (SDRs), the
IMF’s unit of account. The largest member of the IMF is the
United States, with a current quota of SDR 42.1 billion, and the
smallest member is Tuvalu, with a current quota of SDR 1.8
million.
What is an SDR?

The Special Drawing Right (SDR) is an interest-bearing

international reserve asset created by the IMF in 1969 to
supplement other reserve assets of member countries.

The SDR is based on a basket of international currencies comprising the U.S.

dollar, Japanese yen, euro and pound sterling. It is not a currency, nor a claim
on the IMF, but is potentially a claim on freely usable currencies of IMF
members. The value of the SDR is not directly determined by supply and
demand in the market, but is set daily by the IMF on the basis of market
exchange rates between the currencies included in the SDR basket.
July 1997
Countries
most
affected by
the Asian
Financial
Crisis.
Most affected:
Indonesia
South Korea
Thailand
Hong Kong
Malaysia
Laos
Philippines
Least affected
People’s Republic of China
India
Taiwan
Singapore
Vietnam
IMF Role

$40 billion program to stabilize the

currencies of South Korea, Thailand, and
Indonesia.

Bailouts (rescue packages) for the most

affected economies to enable affected
nations to avoid default.
What is World Bank
The World Bank is an international financial institution
that provides loans to countries of the world for capital
programs.
It comprises two institutions: the International Bank for
Reconstruction and Development (IBRD), and the
International Development Association (IDA).
The World Bank is a component of the World Bank
Group.
The World Bank's stated goal is the reduction of
poverty.
However, according to its Articles of Agreement, all its
decisions must be guided by a commitment to the
promotion of foreign investment and international
trade and to the facilitation of capital investment.
Criteria of World Bank
Various developments had brought the Millennium
Development Goals targets for 2015 within reach in
some cases.
For the goals to be realized, six criteria must be met:
i) stronger and more inclusive growth in Africa and
fragile states,
ii) more effort in health and education,
iii) integration of the development and environment
agendas,
iv) more as well as better aid,
v) movement on trade negotiations, and
vi) stronger and more focused support from
multilateral institutions like the World Bank.
Eight Goals for 2015
World Bank
The World Bank is an international financial
institution that provides financial and
technical assistance to developing countries
for development programs (e.g. bridges,
roads, schools, etc.) with the stated goal of
reducing poverty.
Five Agencies, One Group
The World Bank Group consists of five
organizations:
International Bank for Reconstruction and Development (IBRD)
• Lends to governments of middle-income and creditworthy low-income countries.

International Development Association (IDA)

• provides interest-free loans—called credits— and grants to governments of the poorest
countries

International Finance Corporation(IFC) 

• provides loans, equity and technical assistance to stimulate private sector investment in
developing countries.

Multilateral Investment Guarantee Agency (MIGA)

• provides guarantees against losses caused by non-commercial risks to investors in developing
countries

International Centre for Settlement of Investment Disputes (ICSID)

• provides international facilities for conciliation and arbitration of investment disputes.
 IBRD
The International Bank for Reconstruction and
Development (IBRD) is a global development cooperative
owned by 189 member countries. As the largest
development bank in the world, it supports the World Bank
Group’s mission by providing loans, guarantees, risk
management products, and advisory services to middle-
income and creditworthy low-income countries, as well as
by coordinating responses to regional and global
challenges. 
Created in 1944 to help Europe rebuild after World War II,
IBRD joins with IDA, our fund for the poorest countries, to
form the World Bank.  They work closely with all
institutions of the World Bank Group and the public and
private sectors in developing countries to reduce poverty
and build shared prosperity
 IDA
The International Development Association (IDA) is the
part of the World Bank that helps the world’s poorest
countries. Overseen by 173 shareholder nations, IDA aims
to reduce poverty by providing loans (called “credits”) and
grants for programs that boost economic growth, reduce
inequalities, and improve people’s living conditions.
IDA is one of the largest sources of assistance for the
world’s 75 poorest countries, 39 of which are in Africa,
and is the single largest source of donor funds for basic
social services in these countries.
IDA lends money on concessional terms. This means that
IDA credits have a zero or very low interest charge and
repayments are stretched over 25 to 40 years, including a
5- to 10-year grace period. IDA also provides grants to
countries at risk of debt distress.
 IFC
The International Finance Corporation (IFC) is an international financial institution that
offers investment, advisory, and asset-management services to encourage private-sector
development in developing countries.

The IFC is a member of the World Bank Group and is headquartered in Washington, D.C..

It was established in 1956, as the private-sector arm of the World Bank Group, to
advance economic development by investing in for-profit and commercial projects
for poverty reduction and promoting development. 

The IFC's stated aim is to create opportunities for people to escape poverty and achieve
better living standards by mobilizing financial resources for private enterprise, promoting
accessible and competitive markets, supporting businesses and other private-sector
entities, and creating jobs and delivering necessary services to those who are poverty
stricken or otherwise vulnerable
 MIGA
The Multilateral Investment Guarantee
Agency (MIGA) is an international financial
institution which offers political risk insurance and
credit enhancement guarantees. These guarantees
help investors protect foreign direct
investments against political and non-commercial
risks in developing countries.
MIGA is a member of the World Bank Group and is
headquartered in Washington, D.C., United States.
 ICSID
The International Centre for Settlement of Investment
Disputes (ICSID) is an international arbitration institution
established in 1965 for legal dispute
resolution and conciliation between international investors.
The ICSID is part of and funded by the World Bank Group,
headquartered in Washington, D.C., in the United States.
It is an autonomous, multilateral specialized institution to
encourage international flow of investment and mitigate
non-commercial risks by a treaty drafted by the International
Bank for Reconstruction and Development's executive
directors and signed by member countries.
As of May 2016, 153 contracting member states agreed to
enforce and uphold arbitral awards in accordance with the
ICSID Convention.
History WTO

After World War II many nations had adopted

a protectionist stance on trade
Many felt closed-protectionist positions was a
cause of WWII
Victor nations set up economic institutions to
prevent this from happening again
History
Bretton Woods System of 1946
International Monetary Fund (IMF)
World Bank
International Trade Organization (ITO)
The General Agreement on Trade and Tariffs
(GATT) was signed into place in 1947
The ITO did not fly
The US said it was unfair
GATT took the place of the ITO
History
GATT: main purpose was to reduce barriers to
international trade
GATT was an agreement, not an organization
Became the de facto organization for
international trade
History - GATT
Trade Rounds – negotiation meetings
First 6 rounds reduced tariffs from ~50% to ~12%
7th, the Tokyo Round of the early 70’s was first major
effort at trade reform
Mainly about non-tariff barriers to trade, such as:
Subsidies
Quotas
Foreign exchange controls
Import bans
Restrictive licensing
History – GATT
The 1986 Uruguay Rounds of trade negotiations
covered new trade topics
Trade in services and intellectual property
Sensitive subjects, like textiles and agriculture
GATT was expanded by adding:
General Agreement on Trade in Services (GATS)
Agreement on Trade Related Aspects of Intellectual
Property (TRIPS)
Complexities of globalization strained the
effectiveness of GATT
History – WTO
Uruguay Round ended in 1994 with the
formation of the World Trade Organization

Jan. 1, 1995 – WTO was born

GATT, GATS and TRIPS still exist as the
framework for the WTO’s operations
History

Current Round – Doha

Began November 2001
Ambitious agenda to make globalization more
inclusive of the world’s poor
Talks have been contentious
No agreements have been reached
July 2006 talks were suspended by Director
General, Pacel Lamy, but may go forward at
anytime
The Marshal Plan
World War II was over but Europe was devastated. Factories and roads had been
destroyed, international commerce and trade had been disrupted, and industrial
production was recovering at a very slow pace. To add to the misery there had
been crop failures and bad harvest. There were shortages and hunger everywhere.
It was not surprising that Europeans were discouraged, desperate, and angry.
Perhaps nothing can illustrate the hopelessness of Europe better than neo-realist
films made by the brilliant Italian directors Vittorio de Sica, Roberto Rossellini, and
others.
On the horizon loomed the specter of a communist takeover of European countries.
Some like Albania, Poland, Czechoslovakia, and others were already written off.
But others such as Italy, Greece, France, and Austria were not safe. People in these
countries were desperate and easy prey to communist propaganda. Up to the
spring of 1947, the United States had provided credit and aid to Europe. Although
substantial in sum, these had the nature of relief funds, and credits and loan had
strings attached to them. The fact was that Europe needed long term growth and
a hope for the future. The United States had the means to rescue Europe, and the
Truman administration rose to the challenge.
Secretary of State George Marshall announced the
plan for the European recovery in his
commencement speech at Harvard University on
June 5, 1947. According to Marshall, Europe was in
a critical situation because Long-standing
commercial ties, private institutions, banks,
insurance companies and shipping companies
disappeared, through loss of capital, absorption
through nationalization or by simple destruction. In
many countries, confidence in local currency has
been severely shaken. The breakdown of the
business structure of Europe during the war was
complete.. . . Raw materials and fuel are in short
supply. Machinery is lacking or worn out. . . . Thus
a very serious situation is rapidly developing which
bodes no good for the world.
The Point Four
In his inaugural address of Thursday, January 20, 1949, President Truman outlined four major
courses of action for peace and freedom. The first point noted the continued support for the
United Nations and related agencies; the second referred to the Marshall Plan for the European
recovery and the removal of barriers to world trade; the third point was about the North Atlantic
Treaty organization (NATO).
Fourth, we must embark on a bold new program for making the benefits of our scientific advances
and industrial progress available for the improvement and growth of underdeveloped areas. More
than half the people of the world are living in conditions approaching misery. Their food is
inadequate. They are victims of disease. Their economic life is primitive and stagnant. Their
poverty is a handicap and a threat both to them and to more prosperous areas. . . . I believe that
we should make available to peace-loving peoples the benefits of our store of technical knowledge
in order to help them realize their aspirations for a better life. And, in cooperation with other
nations, we should foster capital investment in areas needing development.
The idea of the Point Four was that a vast area of the world and a large part of humanity were in
the grip of poverty. Whatever the reason, poverty would create a fertile ground for the communists
to sow the seeds of discontent, revolution, and takeover by a puppet of the Soviet Union. The
United States had the resources and technology to help the people of poor nations out of their
poverty and thus deprive the Soviet Union of an easy prey.
Many Point Four programs were small and diffused projects which could not compete with
spectacular projects (Aswan Dam, for instance) in grabbing headlines. Yet their usefulness
could not be denied. Some have wondered why despite American aid to some countries, the
population developed a hostile attitude toward the United States and in some countries the
communist parties gained ground. Indeed, why did in some countries, leftist revolutions or
coup d’états occur? A possible answer to these questions rests on the following
observations.
First, anti-Americanism is more a reflection of the insecurity of a nation that needs to find a
culprit for its own failings. The alternative to blaming the United States for all ills in the
world is to accept responsibility for some of them. Second, the lure of communism has
been due to income inequality rather than poverty. The selling point of Marxism and
communism is the promise of security and equality for everyone; “from each according to
his/her ability, to each according to his/her need.” It promises to take the wealth of the
wealthy and share its fruits with everyone. Many members of communist parties and
definitely most of the party leaders in developing countries have been members of the
middle class and, in many cases, upper class. Finally, the spirit of rebellion and revolution is
directly correlated with economic well-being. It is hard to find a revolution that occurred
during a time of famine or misery. Most revolutions are preceded by a period of economic
prosperity. The discussion above points to one conclusion. There is a connection between
economics and politics but the relationship is neither simple nor mechanical. The
emphasis should be on incentives, partnership, and respect for the dignity of the aid
recipient.
The effect of the Marshall Plan on the recovery of
Europe has been the subject of many inquiries.
Some have argued that except for the first two
years of the plan, the annual amount of the aid was
small compared to the amount of domestic capital
formation of the recipient countries. It is also said
that European economies had already started on
the path to growth when the Marshall Plan went
into effect. Finally, some have emphasized the role
of economic reforms in Europe, for instance, the
German economic and monetary reform of 1948.
The Cold War (1947–1991)
The Grand Alliance formed by the U.S., USSR
and the UK in World War II managed to defeat
European fascism and Japanese expansionism,
but began to crumble even before Allied troops
occupied Berlin.
Two years later, the Allies had broken their
friendship. 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.
The Cold War was fought on the political,
economic, and propaganda fronts. There was
no direct military confrontation between the two
nuclear superpowers: the U.S. and the USSR.
Such a conflict would have led to a nuclear
holocaust on the planet.
However, multiple wars in other locations
punctuated the period. In almost all of these
conflicts, the two superpowers and their allies
supported diplomatically and armed the
contenders.
The Cold War ended with the collapse of the
Soviet bloc. Weapons did not defeat the
USSR, but the ineffectiveness of its economic
system and the lack of political freedoms.
The world is divided into blocks: 1945-1955
The settlement of the communist system in
European countries conquered by the Red
Army alarmed Western leaders. Churchill
proclaimed in 1946 that an "Iron curtain"
separated communist Europe from free
Europe.
In 1947, U.S. President Truman expressed
their willingness to implement a policy of "
containment of communism" to prevent its
expansion to Greece and other parts of world.
To achieve this goal, the US implemented the
Marshall Plan, an economic plan that sent aid
to Europe. The goal of this plan was to
prevent the impoverishment of the populations
that favoured European communist expansion.
• The first stage of the Cold War took place in the
defeated country of Germany. The country had
been divided into four occupation zones:
British, French, American and Soviet. The
city of Berlin was similarly divided. Soon there
were increased differences between Western
and Soviet authorities. The rupture between
the former allies led to the division of
Germany.
• In 1949, the Federal Republic of Germany, in the
western zones, and the German Democratic
Republic in the Soviet zone, were born.
Henceforth, throughout the Cold War, there
existed two Germanys, one a democratic and
capitalist, the other a Soviet-style communist
dictatorship.
That same year the Cold War moved to Asia. The
victory of Mao Zedong's communist forces led to
the proclamation in October 1949 of the Republic
of China. The world's most populous country
joined the communist bloc.
To further increase Western anxiety, a few
months before the Soviet Union had detonated its
first atomic bomb. Thereafter the two nuclear
powers could face off anywhere in the world.
The new point of conflict arose again in Asia. The
Korean War (1950-1953) led to the partition of Korea
into two antagonistic countries. The North was a
tight communist regime backed by the USSR and
China, while the South was a US-backed military
dictatorship. The Korean War clearly showed the
global dimension to the Cold War. Henceforth, Asia
became one of the main stages for the Cold War.
The Bipolar World 1949-1955
The partition of Germany and the Korean War showed the world a
new reality: a division into two separate blocs led by the United
States and the USSR. Thereafter, each block defended its
hinterland against the advance of their opponent block.
U.S. took various measures to establish its global influence.
First, it reinforced its ties with Western Europe. NATO (the
North Atlantic Treaty Organization) was created in 1949. The
great Western bloc military alliance is still in existence to this day.
Second, Washington pushed the European integration process
that culminated in1957 with the birth of the European
Economic Community. Finally, the U.S. wove a network of anti-
Soviet alliances worldwide.
The Soviet bloc was strengthened by the victory of Mao
Zedong in 1949. The USSR signed military agreements and
cooperation with communist China of Mao. Finally, in 1955, the
Warsaw Pact created a military alliance that joined the USSR
with all European countries of the communist bloc with the
exception of Yugoslavia.
Peaceful Coexistence 1955-1962
• Stalin's death in 1953 and the rise to power of a new Soviet leader,
Khrushchev opened a new period in the Cold War. After a period
of great tension, a new and more diplomatic climate in relations
developed between Washington and Moscow, which led to
talk of "peaceful coexistence" and "thaw".
• However, this new environment did not mean the end of
international crises. In this period the Berlin Wall was erected
and the Cold War came to America with the Cuban Missile Crisis. It
was also during these years when, to the delight U.S., that the two
communist giants, China and the USSR, broke their alliance
and became antagonistic powers.
 The main factor that led to the "thaw" in relations between
the two superpowers was what was called the "balance of
terror", i.e. the situation created after the conversion of the
USSR to atomic power and accelerated rearmament for both
powers. There was a general certainty that a war between the
superpowers would lead to mutual destruction of both and
much of the planet.

 Paradoxically, during the new period of peaceful coexistence were

two of the most serious crises of the Cold War: the construction of
the Berlin Wall and the Cuban Missile Crisis. From 1951 to 1958 the
German Democratic Republic (GDR), the German Communist, had
seen more than two million East Germans fled to West Germany.
The differences in living standards and lack of freedoms prompted
this exodus of the population.
 On August 13, 1961, before the astonished eyes of the Berliners, the GDR
authorities began building an impenetrable wall that would surround the entirety of
western Berlin. As it was known in the West, the "wall of shame" became the great
symbol of the Cold War.
 Two years earlier, with the triumph of the Cuban Revolution, Fidel Castro took the Cold
War at the gates of the U.S. Hostility culminated when the US failed to invade
the island and were repulsed by Castro's forces in Playa Girón. The Cuban
Revolution, in principle, was not communist, but the revolutionaries sided with the
communist bloc. The U.S. aggression allowed Cuban dictator to ask the USSR to
deploy nuclear missiles to its territory.
 When U.S. spy planes detected missile ramps, Kennedy reacted by declaring a
blockade of the island and announcing in October 22, 1962 that the U.S. Navy would
prevent the passage of any Soviet ship to be routed to the island. The world held his
breath at the prospect of an incident that could lead to fatal nuclear escalation. Finally,
on October 29, Khrushchev relented and gave the order to their ships to turn back.
The USSR agreed to remove the missiles from Cuba in exchange for the U.S.
commitment not to invade the island. The worst crisis of the Cold War had passed.
 The next major event of this period was great news for the United States. The two
communist giants, the USSR and China, broke relations and initiated a period of
deep hostility. Ideological and strategic rivalries led communist bloc excision.
The Détente 1962-1975
 After peeking "over the edge" in the nuclear missile crisis in Cuba, Kennedy
and Khrushchev decided to start a more systematic and enduring policy of
détente. This opened a new Cold War period in which agreements between the
superpowers did not prevent serious conflicts such as Vietnam or the Middle East.
Among the treaties highlighted was the NPT (Nuclear Non-Proliferation Treaty),
signed in 1968 by the U.S., the USSR, and the United Kingdom and the SALT I
(Strategic Arms Limitation) Agreement (1972) which limited the number of
intercontinental missiles that the USSR and the USA could own.
 The détente did not prevent local conflicts from degenerating into bloody
wars in which both superpowers intervened. The Middle East conflict, which
began with the birth of the state of Israel in 1948, reached a peak with the "
Six Day War" in 1967 and the Yom Kippur War in 1973. Both conflicts brought
major changes in the region: Israel, with U.S. support, went from being a small
country besieged by enemies to becoming the hegemon of the region and occupied
Palestinian territories and part of Syria.
Arab countries reacted by using oil as an economic
weapon against Western countries that supported Israel.
The oil price increases that followed the Yom Kippur War in
1973 triggered the "oil crisis" that marked the end of a
long period of expansion of capitalism in the developed
countries.
The war in Vietnam, a country ravaged by conflict since the
Second World War, is the biggest humiliation of the U.S. during
the Cold War. After a long war in the that saw the US shipping
half a million soldiers and not hesitating to use chemical
weapons and massive bombings, the U.S. government had
to accept defeat. It was impossible to defeat North
Vietnam and the Vietcong guerrillas, who were supported by
the USSR. In 1975, Vietnam was reunified under a communist
government.
The New Cold War 1975-1985
The Western world's economic difficulties following the "oil crisis" of 1973 and the
American reluctance to engage militarily abroad after the failure of Vietnam
encouraged Moscow to intervene in various areas of the world. It was a mirage. American
weakness was apparent. The Soviet was real. However, its economy had entered a period
of stagnation that ultimately led to the collapse of the communist system. US President
Reagan in the eighties returned to a policy of confrontation with the Soviet Union
and the USSR could not cope with the new challenge that came from Washington. The
Soviet economic weakness precipitated the end of the Cold War and the subsequent
collapse of the USSR.
The USSR international misread the situation and launched an expansion of its
international influence regardless of the serious difficulties that depleted its economy.
The last period in the Soviet leadership of Leonid Brezhnev (1964-1982) witnessed
what can be called a deceptive Soviet expansion:
In Asia, Vietnam was reunified in 1975 under a communist government.
In Central America, the Sandinista revolution of 1979 established a revolutionary
regime in Nicaragua with the support of Moscow and Havana.
In Africa, the Soviet expansion was even more spectacular. Starting in 1974, pro-Soviet
regimes in Ethiopia, Angola, and Mozambique were established.

 However, the Soviet expansion was based upon a feeble and stagnant economy. In
1985, a new leader took over power in Moscow: Mijail Gorbachov. Pushed by the serious
economic situation, Gorbachov launched a reformist program called the “Perestroika”,
which eventually dismantled the communist bloc (the Berlin Wall fell in 1989) and led
to the collapse of the Soviet Union in 1991 and consequently the end of the Cold War.
Superpowers at War
After World War II, the United States and the Soviet Union
were the world’s strongest nations. They were called
superpowers. They had different ideas about economics and
government. They fought a war of ideas called the Cold War.
The Soviet Union was a communist country. In communism,
the government controls production and resources. It
decides where people live and work.
The United States is a capitalist country. In capitalism, people
and businesses control the production of goods. People
decide where they live and work.
The Cold War began in Europe after World War II. The Soviet
Union won control of Eastern Europe. It controlled half of
Germany and half of Germany’s capital, Berlin.
The United States, Britain, and France controlled western
Germany and West Berlin. In June 1948, the Soviet Union
blocked roads and railroads that led to West Berlin. The
United States, Great Britain, and France flew in supplies. This
was called the Berlin Airlift
Cold War Conflicts
After World War II, Korea was divided into North and South
Korea. North Korea became communist. South Korea was a
capitalist country. North Korean army invaded South Korea.
The United Nations sent soldiers to help South Korea. China
sent soldiers to help North Korea. The war ended in 1953.
Neither side won. Korea is still divided.
The United States and the Soviet Union were in a nuclear
arms race. In 1959, Cuba became a communist country and
the Soviets secretly put missiles there.
President Kennedy was afraid the Soviet Union would
attack the United States. He sent warships to surround
Cuba. He hoped a blockade would force the Soviet Union to
remove its missiles.
This conflict was called the Cuban Missile Crisis. For six
days, nuclear war seemed possible. Then the Soviet Union
removed the missiles.
Cold War
The Cold War was a period of geopolitical tension
between the Soviet Union with its satellite states (the
Eastern Bloc), and the United States with its allies (the
Western Bloc) after World War II. A common
historiography of the conflict begins with 1946, the year
U.S. diplomat George F. Kennan's "Long Telegram" from
Moscow cemented a U.S. foreign policy of containment
of Soviet expansionism threatening strategically vital
regions, and ending between the Revolutions of 1989
and the 1991 collapse of the USSR, which ended
communism in Eastern Europe. The term "cold" is used
because there was no large-scale fighting directly
between the two sides, but they each supported major
regional wars known as proxy wars.
The Post-Cold War World, main trends:
--Unprecedented expansion of capitalism
--Formation of the global capitalist class, which has
absorbed former communist elites
--Unprecedented rise of US global influence
--Ideological dominance of neoliberalism
--Lack of major ideological alternatives to the new status-
quo
--Logic of the market vs. logic of democracy
--Steady buildup of tensions and conflicts: from relative
peace to a global war mode
--Discovery of climate change: new stage in the growth of
eco-consciousness
--The global economic crisis
The Post-Cold War World:
3 periods
First Period,1991-2000: Triumph of the West
Russia’s transition crisis
The Unipolar Moment: US hegemony at its peak
The Western expansion
Formation of the global neoliberal regime
Second Period, 2001-2008: US Hegemony Tested
The Islamist challenge and the Bush response
Development of a multipolar system
Russia’s resurgence
Relative decline of US hegemony
Third Period, 2008-
The global economic crisis
Gorbama and the Americanperestroika
The rise of China as a global power
Europe: from integration to fragmentation?
Reset in Russia’s relations with the West
2 international perspectives on Soviet foreign
policy
USSR AS A PROBLEM
an empire dominating Eurasian Heartland
a global subversive force undermining capitalism
USSR AS A SOLUTION
a key ally against Hitler
a source of help to developing countries (support of
national liberation movements, economic assistance)
a counterbalance to the US