EVERGREEN SCHOOL

Social Studies DEPARTMENT

Economic Processes during the Cold War

The Cold War's impact extended beyond the political and ideological spheres, deeply affecting the
economic fabric of the involved superpowers and the world. The arms race, foreign aid policies,
economic growth, and technological competition were among the crucial economic processes in
this era.

One significant economic aspect of the Cold War was the arms race, a competition between the
United States and the Soviet Union to build up their military capabilities. This continuous striving for
military superiority resulted in massive defense spending, which stimulated both economies. In the
U.S., it gave rise to a phenomenon known as the military-industrial complex, wherein a close-knit
relationship between the military, government, and defense industries led to extensive economic and
technological developments. However, this also engendered a reliance on continuous defense
spending, potentially crowding out investment in other critical sectors. The Soviet Union's economy
also saw growth due to the arms race, but it was often at the expense of consumer goods and
services, leading to widespread scarcity.

Post World War II, the U.S. implemented the Marshall Plan to assist in the economic recovery of
war-devastated Europe. Through massive aid, it aimed to rebuild economies, prevent the spread of
communism, and create a market for American goods, thus stimulating the U.S. economy. In
contrast, the Soviet Union offered the Molotov Plan to Eastern European countries, forming the basis
of economic cooperation within the communist bloc.

Another characteristic of the Cold War was the economic growth witnessed, especially in the U.S.,
which saw the rise of the middle class and the expansion of consumer culture. The Soviet Union also
experienced economic growth until the 1970s, after which it stagnated due to inefficiencies in the
planned economy.

Technological competition, especially in aerospace and electronics, stimulated the economies of

both superpowers. The space race led to substantial advancements in various fields, with spillover
effects benefitting the broader economy. However, the high cost of technological competition
placed a significant strain on the Soviet economy, contributing to its eventual collapse.

The collapse of the USSR in 1991 had far-reaching economic implications. The transition from a
centrally planned economy to a market-based one was fraught with difficulties, leading to
economic contraction, hyperinflation, and widespread poverty in the former Soviet states.

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 EVERGREEN SCHOOL
Social Studies DEPARTMENT
Internationally, it ended the bipolar economic order, with the U.S. emerging as the single economic
superpower, leading to increased globalization.

Comprehension Questions

● How did the arms race contribute to the economies of the USA and USSR?
● What was the Marshall Plan, and how did it shape post-WWII Europe?
● Discuss the economic implications of the collapse of the USSR.
● How did technological competition impact the economies of the USA and USSR?

Bibliography

Engel, Jeffrey A. (2017). When the World Seemed New: George H.W. Bush and the End of the Cold
War. Houghton Mifflin Harcourt.
Gaddis, John Lewis. (2005). The Cold War: A New History. Penguin Press.
Hogan, Michael J. (1987). The Marshall Plan: America, Britain, and the Reconstruction of Western
Europe, 1947-1952. Cambridge University Press.
Hixson, Walter L. (1995). Parting the Curtain: Propaganda, Culture, and the Cold War. Palgrave
Macmillan.
Leffler, Melvyn P., and Odd Arne Westad, eds. (2010). The Cambridge History of the Cold War (3
vols.). Cambridge University Press.
Zubok, Vladislav M. (1996). Inside the Kremlin's Cold War: From Stalin to Khrushchev. Harvard University
Press.
Sivachev, Nikolai and Nikolai Yakolev (1979). Capitalism: The American Way. Moscow: Progress
Publishers.
Siegelbaum, Lewis and Andrei Sokolov. (2000). Stalinism As a Way of Life. Yale University Press.

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