Following the Second World War two great powers dominated the globe economically and militaristically and were essentially unchallenged for over forty years. It is early spring 1945, the place is the city of Torgau in eastern Germany and it is the first meeting of the allied forces, emerging from opposite ends of Europe. Despite the fact that these nations were allies during the war a tense relationship grew between the United States and the USSR, since the latter embraced communist principles, and especially since the outcome of the meetings at Yalta. They engaged in what is known as the Cold War, which dominated international affairs and world markets and was the cause of numerous conflicts and crisis around the globe for decades. Post war Europe was the battleground of this standoff between two very different cultures and conflicting philosophical idealists. An "iron curtain", identified by the countries under soviet influence, had fallen over Eastern Europe and Nazi Germany was split between west and east. This situation had spurred a race for dominance that people feared would start a war that could potentially lead to the end of our world as we knew it. Why is it that two allies during the war feared and despised each other so much immediately following the German surrender? The answer is that the war had been won by a coalition whose members where already fighting a war with each other; if not militarily but certainly ideologically and politically. Whatever the victories that the Grand Alliance accomplished during the war would be meaningless as the post war after math would force members to either ratify their way of life or give up much of what they had fought to win.
Capitalism and Communism were the faces of the two fronts; one a democratic nation supporting personal freedom and free markets while the other an autocratic nation with a controlled and censored society with a poor economic base relative to that of present day capitalism in the USA. Liberty and justice and the distrust of concentrated authority were the foundation of the American Revolution while the Bolshevik Revolution embraced the concept of concentrated authority and that of an economy containing one class. However, ironically enough, while the United States experienced a booming economy due to the war the USSR was left crippled having much of its countryside ravaged and its industries ruined or in critical condition. Some 27 million Soviet civilians died as a result of the war, roughly 90 times that of American casualties and yet the role of shaping post war Europe was not evenly distributed by amount of wartime blood and resource expenditures. The Red Army was scattered throughout Eastern Europe and the Soviet Union had now gained much territory and were not in any way ready to give it up. With Britain left in economic ruin and many European counties on the brink of bankruptcy there was a shift in the balance of power and a struggle for post war dominance economically and militaristically ensued. This would create the greatest standoff between two superpowers with the capability of destroying the world resting between them. A non violent confrontation will occur between the USA and USSR which includes a battle for market dominance, the use of other countries as pawns and political intrigue that would come to shock the world.
Post war USA, with the rise of the union movement in the depression of the 1930's and a working class populace eager to make up for lost ground during the Second World War, embraced the Cold War resulting in a culture of fear that lead to McCarthyism, an epic fear of the spread of communism within the US borders, in the late 1940's and early 1950's. Thus, this greatly amplified Cold War tensions. The Cold War was a sharp diplomatic and economic conflict between the USSR and USA without actual warfare during the period of 1946 to 1989 characterized by tensions between the USA and Soviet Union. Although the word war is routinely defined as the waging of armed conflict against an enemy, during the 40 year period barely a shot was ever fired and no significant direct military action was ever engaged between the two superpowers Thus, it is more appropriate to understand and consider the economic influences that lead to the end of the Cold War as opposed to direct military encounters. My paper will reference several economic factors that contributed to the end of the Cold War and the demise of the USSR's imperialist notions for world domination. It will be shown that the collapse of the soviet economy rather than military intervention ended the Cold War.
Following the end of the war much of Europe was left in economic ruin and needing immediate aid to lessen post war destitution. There was a need for these bankrupt nations to be able to self sustain themselves economically and to not relive the troubles that Germany experienced post World War I which many believe lead to the rise of Hitler and ultimately World War 2. The proposed solution to manage the international economy post war peacetime was the Bretton Woods System. To some countries demise Europe accepted American leadership due to the fact that their financial help was desperately needed. In July 1944 Soviet representatives and 730 delegates from the 44 allied countries met to discuss commercial and financial relations amongst the countries of the world. This conference would lead to the formation of the World Bank and the International Monetary Fund (IMF) and solutions to quicken post war recovery. The principles that were formed included price stability through fixed exchange rates, reductions to international trade barriers and the beginning of integration of markets through government intervention. This in turn was an effort by the Americans to salvage capitalism and to incorporate the Soviet Union into their plans for post war reconstruction. With a degree of reluctance many European countries accepted US leadership due to the fact that it was necessary to receive a loan to bolster their domestic production and kick start international trade. Soviet co operation was a crucial requirement for the plans of the US, as chief architect, Harry Dexter White, the assistant treasury secretary stated: "You can't have a cannon on board ship that isn't tied down because [the Russians] can do a lot of damage if they are not in" (Gaddis 194). This in turn is the reason the Americans dangled a six billion dollar loan in front of the Soviet Union in hopes that the Russians would use this money to purchase capital goods from within the USA. The Americans believed that the isolation of the Soviet Union would resurrect the tensions of the 1930's and an increased rivalry. The formation of the IMF and World Bank was an effort to aid the developing countries of Europe who did not have the privileged robust economy of the US to increase domestic production and give additional financial support to their growing economies. However the Soviet Union chose to reject this international aid and thus thwart much needed economic help. The USSR chose isolation from the growing economic alliances of the post war era. The access to capital is imperative to the growth of any economy and the Soviet Union lacked the advantages of the US and other IMF members in this crucial area. Additionally, due to the growing Soviet-American disagreements over the future of Eastern Europe, it further lessened the likelihood of a loan from Washington to Moscow, as the US Congress was growing weary of lending any support to the soviets. This evidently forced the USSR to turn to reparations from Germany and their newly acquired satellites for an initial source of economic assistance. The Soviet government's view on the matter is as follows, "as the government of the USA did not offer the USSR a credit, our membership in these organizations could be read as our weakness, as a forced step taken under the pressure of the USA. Our negative attitude...would show our independent position in the matter" (Gaddis 205). The Soviet Union in turn chose isolation from international aid from the capitalist countries of the world. This decision and position of forced isolation would eventually contribute greatly to the economic collapse of the Soviet Union.
An economic collapse is defined as being a devastating breakdown of a national, regional, or territorial economy. It is essentially a severe economic depression. It was the neglecting of initial international aid that lead to the eventual downfall of the Soviet Union due to their inability to borrow or access financial capital. The inability to gain foreign economic assistance from the IMF led to many difficulties when trying to run such a large, widespead read economy. The Russian economic model was based on their own markets and resources as well as that of the eastern block countries. Thus, Russia had to support many weaker economies and protect these countries that were also not part of the IMF and could not seek foreign economic assistance. By the 1980's the USSR was having tremendous difficulty supporting such a large widespread army and their military expenditure was skyrocketing through the roof in an attempt to keep on par with the USA in terms of the build up of their nuclear arsenal. Military expenditures and the arms race essentially drained the Soviet treasury to the brink of collapse. Furthermore the crash in the price of oil and grain in the 1980's lead to an economic calamity that the Soviet Union was unable to climb out of due to their isolation from the IMF and World Bank. Thus, economic isolation and the resulting impact that had on their market economy were some of the factors that caused the downfall of the USSR and the end of the Cold War. The tension and rivalry that was fashioned between these two great superpowers following the war eventually lead to the economic downfall of the USSR due to their inability to raise adequate funds to support their spending during cyclical economic hardships that plagued the Republic. In addition to being isolated from several non Soviet block economic organizations, with the exception of the exportation of military hardware, the USSR economy was limited for the most part to the eastern block countries which greatly influenced the economic collapse of the 1980's. Stalin believed in the integration of markets within the iron curtain and he possessed a strong desire for the economies of Eastern Europe to rely on the leadership of the USSR. Stalin sought to "extract benefits unilaterally from the countries within his sphere of influence without encouraging their economic co operation. The result was to retard and perhaps even reverse modernization" (Gaddis 235). Stalin hoped and truly believed that the USSR would extend its borders due to the notion of the instability of capitalism in Western Europe and the fact that other countries would eventually choose the Soviet model. However the economic influence that the Soviet Union practiced within the eastern block countries was seen to be exploitive and crucial loyalty was lost or not gained by the people that Stalin needed to incorporate into his Empire. Eventually this would be one of the economic influences that would contribute to the end of the Cold War.
Stalin planned to put the Soviet Union through a radical change in which they would move away from their traditional agricultural roots and engage in an industrial revolution. Stalin moved millions of farmers from their fields into cities to work in factories as the labour engine for the large corporation that can be called USSR Inc. In order to accomplish this radical change the USSR needed the ability to increase their technological base to increase domestic production. If the Soviet Union had any hope of competing with the USA on the world market they had to make the transition from pulleys to cranes. Industrial growth can be credited to three factors: human labour power, natural resources, and technology. The Soviet Union had ample assets of the first two but required the crucial transition into becoming a more technologically inclined country. The USA was the only other developed country in the world that could compete with the USSR in available resources, man power and land mass. Therefore it was necessary for the USA to do whatever they could to limit the access of foreign machinery and technology to be filtered into the USSR. Thus, the USA put into place trade embargos against the USSR and their associated satellites through their political influence and economic superiority through the aid given by themselves to their allies in Western Europe through the Marshall Plan. The countries that received the aid were not able to elect a communist or socialist government and also allow their economy to become incorporated into a capitalist trading bloc and eliminate any ties that they may have with the USSR and its allies. This meant that these countries were unable to provide the much needed products that the Soviet Union desired and required for major economic growth. The USA sponsored trade embargoes continued over the years and were even strengthened as a result of the mutual boycott of the 1980 Moscow and the 1984 Los Angeles Summer Olympic games and the staunch anti communist influence of President Ronald Reagan. In addition, more economic pressure was put on the Soviet Union by their failed war with Afghanistan. There were great world wide effects from the grain embargo, with the cost of grain changing so does the demand for grain and new patterns and trends of economic consumption of grain in the world. From the grain embargo that was implemented the CIA reported that they believed the Soviet meat consumption would decline by 20% due to a poor domestic grain harvest and it would be impossible to support and upkeep a large livestock population. This included shipments of wheat, feed grains, soybeans, meat, dairy products, poultry, animal fats, and agrichemicals that were essential products for the government and its people. Even though significant compensation was needed for American farmers, the US government proceeded with the embargo. Following the embargo there was a great decline in world grain trade. With the grain embargo the CIA predicted the Soviet Union meat consumption would drop by 20% due to the fact that domestic grain harvest were low and a large livestock population would not be able to be supported. Unfortunately for the Soviet Union the same year dry weather had left domestic grain intake to be 20% less than the projected figure. The USA also counted on support from its European and economic allies to not meet the needs of the Soviet grain demand. Not only did the USA implement a grain trade embargo but they also restricted much needed American technology being filtered into the USSR. The Americans urged their allies to not allow the Soviets to get their hands on American equipment to aid in the construction of gas pipelines. The Soviets needed to constantly update their technology to continue their economic revolution and increase the efficiency of a worker and inevitably increase production on a large scale. With the sharp increase in urban population the demand for grain increased and "Russia, which before World War I was the biggest grain exporter--significantly larger than the United States and Canada, started to be the biggest world importer of grain, more so than Japan and China combined" (Yegor Gaidar). The result was that the Soviet Union had to pay increasingly high prices for grain. Furthermore, the Soviet Union's economy was also in trouble due to the fact that their main export consisted largely of raw materials. Countries like Japan that were not supported on raw materials or food exports depended on machinery production and technology industries. "Due to the "socialist industrialization" that had resulted in the Soviet industry being unable to sell any processed (value-added) products, Nikolai Ryzhkov, chairman of the USSR Council of Ministers, expressed the sentiment clearly at another meeting of the Soviet leadership: "No one will take our machinery production. That is why we are exporting mainly raw materials" (Yegor Gaidar). Therefore the Soviet economy was now dependant on exporting raw materials, namely oil and gas to the world markets. This reliance on solely on the exporting of raw materials would hamstring the Soviet economy due to the fact that such a large economy could not be supported on strictly these exports alone. In conclusion this would influence to the ending of the Cold War following the USSR economic collapse.
Fortunately for the Soviet Union during the same time as the grain crisis rich oil fields in Siberia were discovered. However the USSR was not able to drill the sufficient amount of oil to meet the growing demand of oil consumption. New oil wells had dramatically decreased by 1980 and the price of oil began to greatly fluctuate in the world market. Starting in 1974 and lasting for almost a decade. The price in oil skyrocketed and then came to a crashing downfall in 1985 which evidently reduced the value of all Soviet exports and in turn greatly hindered economic growth. Furthermore, the Soviet Union had been fighting an expensive war campaign against Afghanistan, costing roughly $8.2 billion a year. In addition, casualties have been estimated to be between 40,000-50,000 without including the wounded and sick. The Soviet government was unable to censor details of the war as a result of the new technologies being made available to Afghanistan. Information regarding the war was seen around the world and within the USSR. The Afghan war proved many myths wrong in regards to the Soviet Union military prowess and political suppression began to show. The Afghan war had a shockingly enough dramatic effect on the USSR, "economic devastation, political suppression, despotic rule, and forced virtues were Stalinistic old-school policies, which held the chains surrounding a society that no longer could be held from change. Afghanistan was a major factor in breaking the myths which had surrounded the Soviet Empire for decades. Acknowledging the speedy implementation of Perestroika and Glasnost, coupled with a breakdown of the economics and changing Soviet ideology were elements breaking apart the Soviet Union." (Rameen Moshref). After Saudi Arabia stopped controlling oil prices the USSR economy took a dramatic blow causing its economy to crash. "The Saudis stopped protecting oil prices, and Saudi Arabia quickly regained its share in the world market. During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms" (Yegor Gaidar). The Soviet Union then proceeded to lose 20 billion dollars a year, money that the USSR greatly needed and greatly lacked. Due to the state of isolationism that the USSR had created they were unable to call upon any foreign loan aid from the IMF or World Bank and had basically crippled themselves along with their economy. From 1985-1988 the Soviet government borrowed money from abroad while their credit rate was still relatively high but following 1989 their economy came to an abrupt halt. Without the ability to borrow money from the IMF the Soviet Union had to look to the West for a giant bail out. They had to turn to their greatest enemy, namely the US, to support their crippled and exhausted economy. The Americans then proceeded to give the USSR a 100 billion dollar loan to bail out their oil dependent economy before the Soviet economy was completely devastated. Unfortunately for the Soviets they experienced a crippling food shortage and now negotiations were started to dismantle the once mighty empire. Thus began the process of dismantling the soviet military influence and the control of the former borders of the eastern block, "A state that does not control its borders or military forces and has no revenue simply cannot exist" (Yegor Gaidar). The Soviet Union was now bankrupt and did not have the ties or resources to come up with the enormous amount of money that was needed to save and stabilize the USSR economy. Yegor Gaidar also comments "The money was suddenly gone. The Soviet Union tried to create a consortium of 300 banks to provide a large loan for the Soviet Union in 1989, but was informed that only five of them would participate and, as a result, the loan would be twenty times smaller than needed. The Soviet Union then received a final warning from the Deutsche Bank and from its international partners that the funds would never come from commercial sources. Instead, if the Soviet Union urgently needed the money, it would have to start negotiations directly with Western governments about so-called politically motivated credits" (Yegor Gaidar). In conclusion, it was many economic influences on the world stage and the fact that the Soviet economy was dependent on itself that brought about the eventual downfall. Due to the dependence on natural resources, the crash in the price of oil, costly wars and the inability to sell processed products the USSR was brought to knees in economic ruin. Without one direct military intervention the USA was able to gain dominance over the Soviet government in their time of need.
Another contributing factor was the lack of economically sound foreign investment partners that the USSR was able to secure. Early on it seemed that there would be a future in USSR-Chinese relations due to the fact that China was also a communist government. However, due to tense relations and the fear of one another, the USA under the Nixon regime established economic ties with China that would greatly benefit them for years to come. The competition for military superiority that spurred the arms race also greatly drained the Soviet economy. The USSR was spending almost one third of its GNP on military advancements. It seemed that the USSR was constantly playing catch up with the US military and lacked the resources to survive such a lavish military budget. The USSR greatly lagged behind the USA in technological advancements and strategic military positions, thus spurring the Cuban Missile Crisis of the 1960's. The Soviet Union struggled to compete and be on the same playing field as the USA in regards to the building up of nuclear weapons and this furthered the political aggression between the allied capitalists and the Soviet regime. The USSR greatly lagged behind the USA in technological advancements and strategic military positions, thus spurring the Cuban Missile Crisis of the 1960's. The USSR struggled to compete with the USA in the building up of nuclear arsenal and in addition, this created political aggression and pressure from the allied capitalist countries of the Western world, primarily that of the USA. Much government spending and resources were spent in effort to increase their nuclear warhead arsenal. The USSR was a great empire and stretched over vast amounts of land. It proved costly to defend the many countries within the iron curtain and to police its people through military intervention. After a decade of military expenditure, Soviet President Gorbachev came to power and attempted to install new economic reforms to save the crumbling Soviet economy. Gorbachev's economic reforms were centered on reconstruction but were poorly executed. Gorbachev made an attempt to experience a greater output of production through the modernizing of the Soviet industrial equipment. He also attempted to decentralize the Soviet economic sector giving certain regions control over the industry that fell within their borders. Gorbachev also attempted to change the current social aspect of the USSR from their current Stalinistic views and tried to bring back the traditional Lenin views. Thus, a revolution amongst the people began and they started to question the efficiency of their government. Also with the dwindling KGB influence, the people of the USSR were able to voice their concerns and express anti communist views. This process started with the breaking of old ties with Poland in the early 1980's. Gorbachev was forced to lift the Soviet political monopoly and the dismantling of the empire. Condoleezza Rice comments, "The Soviet Union was more than just a traditional global competitor; it strove to lead a universal socialist alternative to markets and democracy. The Soviet Union quarantined itself and many often-unwitting captives and clients from the rigors of international capitalism. In the end, it sowed the seeds of its own destruction, becoming in isolation an economic and technological dinosaur" (Leebaert 54). Due to the failure to advance technologically the Soviet economy could not compete with the Capitalist countries of the west. Through controlling the world economy the USA was able to greatly influence the falling of the USSR.
The USSR and the USA never came in direct military conflict with one another. Though it is true that the Americans and the Soviets supported governments and militants engaged in military conflicts against one another, no direct military conflict ever occurred between the two great superpowers. American soldiers battled Soviet backed Viet-Kong soldiers in the Vietnam War, and allied forces clashed against the combination of Chinese and Soviet backed North Korean soldiers in the Korean War. In their Afghani campaign the USSR fought against American equipped Afghan soldiers. Therefore it can be concluded that since no military conflicts ever took place, economic factors were the main contributor to the downfall of the USSR. By not being able to modernize its industrial technologies and a lack of world market trade, it made it impossible for the USSR to experience and more importantly to maintain the find of domestic growth that the Western World had enjoyed over the course of the Cold War. No wars or battles were ever fought between American and Soviet forces and even during the Cuban Missile Crisis even when tensions were at an extreme high.. The USSR while trying to establish a missile launching site from Cuban soil was only an attempt to intimidate the USA as the Americans were doing likewise by having their own sites in Western Europe and Germany. It can be stated that this formed a culture of fear for one another but the fear never lead to conflict. However, it is true that the Soviet's shot down an American spy plane in 1960 no military interaction followed. The ideological beliefs of the Soviet Union caused their eventual downfall. The practices of isolationism deprived the Soviet Union of much needed economic aid and the centralism of the economy proved to be a contributing factor. Also, the dependence on natural resources and the lack of foreign technology lead to a great economic decline after the crash of oil and grain in the 1980's. In conclusion, it is reasonable to conclude that economic not military means lead to the Soviet Union's eventual collapse. A clear lack of militaristic intervention and direct conflict between the two superpowers existed, as both sides feared nuclear annihilation, and thus it is more appropriate to understand that economic influences lead to the end of the Cold War through the dismantling of the Soviet Empire.