Cold War

Cold War’s impact on Soviet Union’s Economy
Economics of Transition
Research paper
Content:
1.Introduction ...............................................................................................................................................3
2.Historical Events of Cold War period:......................................................................................................3
2.1General overview..................................................................................................................................3
2.2 Chronological events...........................................................................................................................3
2.2.1Khrushchev Age .............................................................................................................................4
2.2.2 Cuban Missile Crisis.....................................................................................................................4
2.2.3 The “turning point”.......................................................................................................................4
2.2.4 End of the Cold War......................................................................................................................5
3. Official Data..............................................................................................................................................5
3. Statistical data analysis.............................................................................................................................8
3.1Methodology:.........................................................................................................................................8
3.2Analysis of statistical tables:.................................................................................................................9
4.The Cold War's social impact..................................................................................................................10
6.Personal opinion :....................................................................................................................................11
7.Sources : 12
2
Cold Wart's Impact on Soviet Union's Economy
Abstract
1.Introduction :
In order to analyze the impact of "Cold War" is needed a research in the field of History. A
particular issue of this period is that he have a strong impact on development of countries who was
the main actors. In concrete there was two countries : United States and Soviet Union. Both, after the
Second World War have a strategic position, that emphasize different possibilities of growth in
social, economic and military fields. The time shows that the period between 1947-1989 have a many
consequences on the situations in respectively. There is many relations cause - effect, this paper try to
identify if there is a dependency between the events in between 1947-1989, and the fail of economy
of Soviet Union using Average Comparison Method of indices. The main hypotheses is "One of the
results Cold War is the fall of Soviet Union's economy". In order to check this the analysis of two
independent variables: events in Cold War and Statistics of Soviet Union economy, will be provided
3
and using the statistical analysis method the document will try to find if the assumed correlation exist
or not.
2.Historical Events of Cold War period:
2.1 General overview
After the defeat of Nazi Germany, Europe was ruined and soon it became clear that European
countries could no longer compare with the U.S.( capitalist and democratic system) and Soviet Union
(totalitarian system ) became known worldwide as superpower, Europe continues to be the main
arena of political disputes. The presence of the victorious „Soviet Army (Red) was crucial to enforce
Poland, Bulgaria, Romania, Hungary, former Yugoslavia and Albania's 1“ communist government to
suppress any opposition. These countries satellite were directly controlled by the USSR. Communist
states were isolated, the term „Iron Curtain2“ by Winston Churchill describe the borders, of the
Communist bloc.
2.2 Chronological events
The Churchill's „speech in 1946 in Fulton (USA), drew attention to the danger that Western
democracies were on the verge of being swallowed up by communism, and suggested a close Anglo-
American alliance to defend their3“. In 1947 Truman, U.S. president, for not to lose influence in the
eastern Mediterranean basin, gives grant aid of 400 million dollars to Greece and Turkey through the
so-called "Truman Doctrine4." U.S. income in aid of war ravaged Europe, with a relief program (the
„Marshall Plan5“, 1948-1952) to speed up recovery and make it less possible postwar communist
exploitation of the discontent. The power of the Soviet bloc was strengthened after the coup in
Czechoslovakia, in 1948 that brought the communists to power, and the Chinese Communist victory
in the civil war against the Nationalists, but they suffered a defeat in the case of Yugoslav leader,
1
Ion Varta,Tatiana Varta „Istoria universală. Epoca modernă. Manual - clasa XI“, Republic of Moldova,
Chisinau 2003.
2
Source: http://www.ibiblio.org/expo/soviet.exhibit/coldwar.html (accesed March ,2011)
3
Chisinau 2003.
4
Chisinau 2003.
5
Source: http://www.encyclopedia.com/topic/cold_war.aspx#4-1O119:ColdWar-full (accesed March ,2011)
4
Tito , that decided to be separate from the Soviet Union. As for Germany, the aid consisted of the
western part of Germany, after, as a result of reorganization occupation zones were formed in 1949,
two Germans: German Federal Republic and German Democratic Republic. In1948-1949 started
Berlin blockade that occurred as a result of the division between the U.S. occupied Germany, Britain,
France and the Soviet Union. Soviet sector include a part of the Berlin, in June 1948, the they isolate
the capital, the result was airlift of huge proportions, Berlin supplying the West with goods and food.
A part of the Cold War politics and military blocs are formed in different parts of the world under
U.S. leadership. „ On April 4, 1949, U.S. foreign ministers, Britain, Canada, France, Italy, Belgium,
Netherlands, Luxembourg (Benelux), Denmark, Iceland, Portugal signed North Atlantic Treaty
Organization (NATO). In 1952 join N.A.T.O. Turkey and Greece, in 1955, German Federal
Republic6“. In „September 1951, San Francisco politico-military called ANZUS treaty between the
U.S., Britain, France, Australia, New Zealand, Philippines, Thailand, Pakistan. In 1955, the Middle
East ends the Baghdad Pact, which includes England, Turkey, Iraq, Iran and Pakistan (1959, Iraq
withdraw from the pact). Since that pact was called CENTO (Central Treaty Organization). In early
1979, he abolished7“. West Germany's admission into NATO, în1955, led to the creation of similar
alliances in the east - the Warsaw Pact. U.S. demonstrates his extraordinary power in 1945 by
destroying Japanese cities of Hiroshima and Nagasaki with „atomic bombs 8“. In 1949 the Soviet
Union has built its atomic bombs. After both sides develop hydrogen bombs, missiles and other
weapons. Finally it was recognized that a nuclear war would destroy the entire planet. As a result, the
war „between East and West conflict remained cold, formal, involving propaganda, espionage,
economic sanctions and territorial rivalry for influence9“.
2.2.1Khrushchev Age 10
The tension remained non-nuclear, it is important to mention also about the Korean War (1905-
1953), in which interact Soviet Union and U.S. and allied powers. Soviet dictator Joseph Stalin died
6
Chisinau 2003.
7
Chisinau 2003.
8
9
Chisinau 2003.
10
5
in 1953. His successor was Nikita Khrushchev that has sustained the doctrine of „peaceful
coexistence11“. The reforms and Khrushchev's tactics have proved unable to lead Western powers to
withdraw, demonstrated by crisis in Cuba. “ In 1959, Cuban communist, revolutionary Fidel Castro
took control of the island12 “, U.S. did not welcome the presence of a Soviet ally in the region, were
was installed Soviet missiles.
2.2.2 Cuban Missile Crisis13
Eventually the Soviet Union withdraw the missiles. It was a defeat for the Soviets, but Kennedy
avoided to humiliate Khrushchev. In the 1960s and 1970s the Soviet bloc has remained strong despite
the apparent rift between the Soviet Union and China has complicated international relations. Under
his leadership Leonid Brezhnev (1967-1982) the Soviet Union's nuclear arsenal grow in size , and
also Soviet influence seemed, as in many Third World countries was imposed. The U.S. was bogged
down in Vietnam, without managing to defeat guerrillas claiming in South Vietnam, supported by
the communist North. Destruction of North Vietnam was a demoralizing effect on the U.S..
2.2.3 The “turning point”14
During Brezhnev's military expenditure had swallowed nearly 15% of the total national income. As
a consequence of this and the centralized planning system, the Soviet economy has slipped
increasingly into debt. In 1979, the Soviet army intervened in Afghanistan to support a government
of the same orientation and found himself embroiled in a costly and humiliating conflict as the one in
Vietnam. The real weakness of the Soviet Union became apparent in the early „1980s, when
President Ronald Reagan, an anti convinced strengthened U.S. military programs, which culminated
in proposals for installation of a ballistic missile system in space project, Star Wars 15“.
11
12
Chisinau 2003.
13
Sources: http://www.ibiblio.org/expo/soviet.exhibit/coldwar.html (accesed March ,2011)
Chisinau 2003.
14
Chisinau 2003.
15
Chisinau 2003.
6
2.2.4 End of the Cold War16
In 1985 Mikhail Gorbachev became president of the Soviet Union, he realized that Soviet Union
could not support more arms race. In 1987, after accepting some important concessions secured first
nuclear weapons reduction. The Soviet economy which is in rapid decline, Gorbachev decided to
terminate the withdrawal of aid and political support for East European communist regimes, which in
1989 began to collapse. In December 1989 as Gorbachev with George Bush announced the end of the
Cold War. The end of the Cold War also disunited the countries of eastern and central Europe and
much of northern Asia.
3. Official Data17
In providing the statistical data of the Soviet Union's economy must be paid attention to the
variables like Labour Productivity; Social Product; National Income; GNP; Labour Productivity;
Industrial, Production Means, Consumer Goods and Agricultural Outputs; Traffic; Retail Trade;
Fixed Assets Put into Operation and Investments in them; Number of Workers and Employees; Real
Income per Capita; Social Consum; Profit of the National Economy and Foreign Trade. It is
important to mention that “in Soviet statistics, 100% is the base, so if that is listed it means
unchanged. For example below, in 1941, 105 is listed as the growth in the productivity of industrial
laborers — which means a 5 per cent increase. By the end of World War II, in 1946, the productivity
of industrial laborers (listed as 76) had dropped 24 per cent in that year.18”
Statistical table 119
16
Chisinau2003.
17
Source: http://www.marxists.org/history/ussr/government/1928/sufds/ch04.htm (accesed March, 2011)
18
Source: http://www.marxists.org/history/ussr/government/economics/statistics/growth-rates.htm (accesed
March, 2011)
19
March, 2011)
7
20
Source : http://www.marxists.org/history/ussr/government/economics/statistics/growth-rates.htm (accesed
March, 2011)
8
21
Source : http://www.marxists.org/history/ussr/government/economics/statistics/growth-rates.htm (accesed
March, 2011)
9
22
March, 2011)
10
3. Statistical data analysis
3.1Methodology:
Comparison of average values of indices of growth in different sectors with respect to previous years
average values, calculated in per cents.
Formula used: y1=y0-[(u1-u2-u3-u4-u5-u6-u7-u8-u9)/n1-(a1-a2-a3-a4-a5-a6-a7-a8-a9)/n2]
23
March, 2011)
11
Where : y1 is the value of increase/decrease percentage of growth in respective fields;
y0 is the previous value of growth in respective fields;
u1,1…9 are the values corresponding to the 10 years, segment of time line in analysis, in per
cents;
a1,1…9 are the values corresponding to the previous segment of time line (10 years);
n1 is the number of years from 10 that have available data from the segment of time in
analysis;
n2 is the number of years from 10 that have available data from the previous segment of
time;
All used data is in per cents, the sense of growth (increase/decrease) is determined by the sign of the
resulting values: “-“ means decrease with respect to previous period, and “+” means increase with
respect to previous period.
3.2 Analysis of statistical tables:
- For the period 1940-1950(Statistical table 1), assume in comparison with unique level(100%), the
growth rates in average: 1941, only the indices of Labour Productivity(LP) in Industry, Railways and
Construction have grow up with maximum of 5 %, but in 1945 and 1946 these indices fall down in
average with: 27 % LP in Industry, 8% LP in Construction, but increase in LP in Railways with 5.5
%. These changes can be linked mainly with the Collectivistic processes of formation of Soviet
Union and after, Soviet Union invest more in military industrial sector( bombs, missiles and other
weapons). An stimulation factor was year 1945 when U.S. destroy Japanese cities of Hiroshima and
Nagasaki with atomic bombs.
- For the period 1950-1960(Statistical table 2), in comparison with the previous period, the growth
rates in average: National Income Produced(NIP) in average increases with 10.5 %. LP in Industry
increase with 35.14%, LP in Railways increases with 3.1 %, LP in Construction increases with 16.3
%. As for other data, the statistical data for period 1940-1950 are not available, that’s way we just
extract the growth rate in % reported to the unique level: Industrial Output(IO) increase with 12.01
%, Output of Production Means(OPM) increase with 13.11 %, Output of Consumer Goods(OCG)
increase with 10.14 %, Gross Agricultural Output(GAO) increase with 5.42 %, Retail Trade
Turnover(RTT) increase with 12.04 %, Fixed Assets Put into Operation(FAPO) increase with 13.6
12
%, Investments in Fixed Assets(IFA) increase with 13.16%, Number of Workers and
Employees(NWE) increase with 4.06 %, Real Income per Capita(RIC) increase with 8.06 %. The
development in this period is a result of internal politics of Soviet Union, the military investment in
Cuba, other fact is that in 1953 to power came Nikita Khrushchev, who maintain the peace and a
stable growth. economical growth. Also this is a response to the fact of creation of international
political and military organizations as NATO, CENTO.
For the period 1960-1970(Statistical table 3), in comparison with the previous period, the growth
rates in average: NIP decrease with 4.99 %, LP, Industry decrease with 3.09 %, LP, Railways
decrease with 2.94 %, LP, Construction decrease with 2.47%, IO decrease with 4.01%, OPM
decrease with 3.75%, OCG decrease with 2.97%, GAO decrease with 2.75%, RTT decrease with
4.65%, FAPO decrease with 7.03%, IFA decrease with 6.53%, NWE increase with 0.22%, RIC
decrease with 3.23%. This period also is noted with investment in military resources, because of this,
Real Income per Capita decrease and Indices of productivity also decrease. From 1967 to power
came Leonid Brezhnev, during his leadership, the development rates fall down and military
expenditure growth up that have negative consequences on population's real income and welfare.
rates in average: Gross Social Product(GSP),(the previous data is not available) 24 increases with
5.5%, NIP decrease with 1.52%, National Income Used(NIU),(previous data are not available)
increase with 3.82%, Social LP(previous data are not available) increase with 4.37%, LP, Industry
decrease with 0.04%, IO decrease with 1.56%, OPM decrease with 2.64%, OCG decrease with
1.47%, GAO decrease with 0.15%, Freight Traffic(FA),(previous data are not available) increase
with 5.02%, Passenger Traffic(PT),(previous data are not available) increase with 5.19%, RTT
decrease with 1.77%, Fixed APO decrease with 0.53%, IFA decrease with 0.64%, NWE decrease
with 1.96%, RIC decrease with 0.75%, Social Consum. Funds(SCF),(previous data are not available)
increase with 5.15%, SCF per Capita(previous data are not available) increase with 4.25%, Profit of
the National Economy(PNE),(previous data are not available) increase with 8.94%, Foreign Trade
Turnover(FTT),(previous data are not available) increase with 6.9%. The leadership of Leonid
Brezhnev have a decreasing effect on economy of Soviet Union, because of his investment in nuclear
weapons, plus the war in Vietnam and invasion in Afganistan also have his costs, finally the real
economic weakness was emphasized in 1980 when in U.S. was presented the "Star Wars" project.
rates in average: GSP decrease with 2.64%, NIP decrease with 2.43%, NIU decrease with 0.97%,
24
For the data that is not available we calculate the average growth reported to the unique level that is 100 %.
13
GNP(previous data are not available) increase with 3.77%, Social LP decrease with 1.64%, LP,
Industry decrease with 1.77%, IO decrease with 2.09%, OPM decrease with 3.31%, OCG decrease
with 1.82%, GAO decrease with 0.66%, FT decrease with 2.94%, PT decrease with 3.56%, RTT
decrease with 2.09%, FAPO decrease with 2.19%, IFA decrease with 1.51%, NWE decrease with
1.54%, RIC decrease with 2.18%, SCF increase with 0.05%, SCF per Capita increase with 0.2%,
PNE decrease with 1.97%, FTT decrease with 3.52%. The economy of Soviet Union don't have the
power to support more arms race. M. Gorbachev is the new president and he decide to end previous
trends that could have as a result the bankruptcy of Soviet Union's economy and of entire social
system, he disintegrate the territory by giving freedom to member countries.
4.The Cold War's social impact25
By justifying their influence over the world, Cold War facilitated the assertion of global leadership
of the US. By providing Soviet leaders with an enemy to justify their repressive regime, the Cold
War helped the Soviet Communist party maintain its grip on power. In addition, Cold War caused
and perpetuated the post–World War II division of Europe, and, within Europe, of Germany. „Its
impact proved especially great in the Third World, where it interacted with decolonization and
sweeping social and economic changes. The Cold War led to the division of Vietnam and Korea and
to costly wars in both nations, and it escalated conflicts throughout the Third World 26“. Indeed, nearly
”99 per cent of the more than 20 million people who died in wars between 1945 and 1990 perished in
the Third World27". After U.S agenda is modified to domestic preoccupations: „subversion and
disloyalty, expressed in the Rosenberg and Alger Hiss cases and the investigations of Senator Joseph
McCarthy and the House Committee on Un‐American Activities28“. „Civil rights movement leaders
like M. Luther King Jr. and they, exploited Cold War concerns, warning that racism damaged image
of the US abroad". The Cold War was expensive for U.S., it cost „8 trillion dollars in military
expenditures and over 100,000 lives in Korea and Vietnam29“. The Soviet Union spent a big
percentage of Gross National Product(GNP), „60 per cent30“. The Cold War preoccupied every
25
Sources : http://www.encyclopedia.com/topic/cold_war.aspx#4-1O119:ColdWar-full (accesed March 9,
2011) I. Varta,T.Varta „Istoria universală. Epoca modernă. Manual - clasa XI“, RM, Chisinau
2003.
26
Source http://www.encyclopedia.com/topic/cold_war.aspx#4-1O119:ColdWar-full (accesed March ,2011)
27
I. Varta,Tatiana Varta „Istoria universală. Epoca modernă. Manual - clasa XI“, Republic of Moldova,
Chisinau 2003.
28
29
Source : http://www.encyclopedia.com/topic/cold_war.aspx#4-1O119:ColdWar-full (accesed March ,2011)
30
I. Varta,Tatiana Varta „Istoria universală. Epoca modernă. Manual - clasa XI“, Republic of Moldova,
Chisinau2003.
14
president from Harry S. Truman to George Bush, and fueled careers of such „policy‐makers as
George Kennan, John Foster Dulles, and Henry Kissinger” 31. It promoted the rise of new information
technologies. The interstate highway system, the space program, consumerist culture, increased
religiosity, and expanded federal spending on education were all linked to the Cold War. In short, the
home front of the US, no less than its international role, can be understood only in a Cold War
context.
5.Conclusions :
The relationships between U.S. and Soviet Union from 1947 until 1989 was very tense. In this
period we see a variation of average indices of economy: in early 1940s the indices start to growth
due to process of consolidation o Soviet Union; the 1950s the growth is also persistent due to
stimulating example of U.S., the new territories but mainly due to process of industrialization of the
economy; in the 1960s the indices decrease because of huge investments in military resources but
also because of Leonid Brezhnev's leadership that didn't stimulate the growth; in 1970s the
continuation of Brezhnev's leadership did not improve the economic situation but have a continuous
decreasing effect; in 1980s Mikhail Gorbachev comes to power and he, observing the "bad" situation
of Soviet Union decide to disintegrate her, that in reality represented the final of existence of the
Union. from the political and social point of view, the crucial point was in 1945 the destruction of
Hiroshima and Nagasaki using atomic bombs, after Soviet Union built also a atomic bomb. Then
both sides have developed hydrogen bombs, missiles and much more strong weapons. It is important
to remark that economy of Soviet Union was collectivist and centralized, now we can just assume
that this was one of the main reasons for the collapse. Later pressure dropped, reducing to cold
relations of espionage and rivalry. It was clear that a nuclear war can destroy the entire planet. The
stress situation and the fear of a new world war (atomic) start to decrease when in Soviet Union
become to power M. Gorbachev, and this peaceful situation is the base for the social and economic
progress that we have today. It is very important that in the present and the future to not repeat the
situation of Cold War because it was a big danger for our existence.
6. Personal opinion :
According to my opinion, the Cold War was an inevitable result of the World War II, regarding the
consequences, especially from the social and economic point of view. The consolidation of Soviet
Union have high growth rates but from 1960s the arms race was intense, and, Soviet Union start to
lose "the speed" and economic resources, that until the 1980s. prove the incapacity to support more
31
15
arms race. An very good decision was taken by M. Gorbachev, the prosperity, democracy, economic
growth that we have today is an direct result from that decision. In order to keep the stability we have
to supervise that the conditions for developing a new Cold War never to "take live" again.
7. Sources :
“Cold War (1972–1989): the Collapse of the Soviet Union”. JOSEPH PATTERSON HYDER. 2011.
Enotes, informational and educational resources.

http://www.enotes.com/topics/cold-war
Online Enciclopedia „Enciclopedia.com“ (accesed March, 2011)

http://www.encyclopedia.com/doc/1O119-ColdWar.html
Ibiblio - The Public's Library and Digital Archive (accesed March, 2011)
http://www.ibiblio.org/expo/soviet.exhibit/coldwar.html
Ion Varta, Tatiana Varta „Istoria universală. Epoca modernă. Manual - clasa XI“, Republic of
Moldova, Chisinau 2003.
Marxist Internet Archive (accesed March, 2011)
http://www.marxists.org/
http://www.faqs.org/espionage/Co-Cop/Cold-War-1972-1989-the-Collapse-of-the-Soviet-Union.html
http://www.buzzle.com/articles/causes-and-effects-of-the-cold-war.html
http://www.fsmitha.com/h2/ch33-5.htm
16
http://www.coldwar.org/articles/80s/index.asp
http://www.country-data.com/cgi-bin/query/r-12707.html
http://www.culture-of-peace.info/soviet-collapse/introduction.html
http://www.marx2mao.com/Mao/CSE58.html
17

Cold War

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Cold War

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Cold War’s impact on Soviet Union’s Economy

2.Historical Events of Cold War period:

2.1 General overview

2.2 Chronological events

2.2.2 Cuban Missile Crisis13

2.2.3 The “turning point”14

Statistical table 119

3. Statistical data analysis

Formula used: y1=y0-[(u1-u2-u3-u4-u5-u6-u7-u8-u9)/n1-(a1-a2-a3-a4-a5-a6-a7-a8-a9)/n2]

y0 is the previous value of growth in respective fields;

3.2 Analysis of statistical tables:

4.The Cold War's social impact25

Enotes, informational and educational resources.

Online Enciclopedia „Enciclopedia.com“ (accesed March, 2011)

Marxist Internet Archive (accesed March, 2011)

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