Cold War

The Cold War was a twentieth century conflict between the United States of America, the Soviet Union and their respective allies, over political, economic and military issues, often described as a struggle between capitalism and communism. In Europe, this meant the US led West and NATO on one side and Soviet led East and the Warsaw Pact on the other. It lasted from 1945 to the collapse of the USSR in 1991.

The aftermath of World War II left the United States and Russia as the dominant military powers in the world, but they had very different forms of government and economy. The two nations were rivals who feared each other, each ideologically opposed. The war also left Russia in control of large areas of Eastern Europe, and the US led Allies in control of the West. While the Allies restored democracy in the West, Russia began making Soviet satellites out of its liberated lands; the split between the two was named the Iron Curtain. The West feared a communist invasion, physical and ideological. The US countered with the Truman Doctrine with its policy of containment to stop communism spreading and the Marshall Plan, massive aid aimed at supporting collapsing economies which were letting communist sympathizers gain power. Military alliances were formed as the West grouped together as NATO and the East as the Warsaw Pact. By 1951 Europe was divided into two power blocs, American led and Soviet led, each with atomic weapons. A”cold war” followed which spread globally, leading to a nuclear standoff.

The war was “cold” because there was never a direct military engagement between the two leaders, the US and the USSR.

Post-war Germany was divided into four parts and occupied by the former Allies; Berlin, situated in the Soviet zone, was also divided.

Stalin died in 1953 and hopes of a thaw were raised when new leader Khrushchev began a process of De-Stalinization. In May 1955, as well as forming the Warsaw Pact, he signed an agreement with the Allies to leave Austria and make it neutral.

Cold War in Europe in the 60s and 70s

Despite the tensions and fear of nuclear war, the Cold War division between East and West proved surprisingly stable after 1961. There was instead a conflict on the global stage, with the Cuban Missile Crisis and the Vietnam War. For much of the 60s and 70s a program of “détente” was followed, a long series of talks which made some success in stabilizing the war and equalizing arms numbers. The fear of mutually assured destruction helped prevent direct conflict.

Amidst the Cold War, a series of treaties was issued under the Strategic Arms Limitation Treaty to curtail the buildup of nuclear weapons.  SALT I, as it is commonly known, was the first of the Strategic Arms Limitation talks between the U.S.S.R. and the U.S.  Communist leader Leonid Brezhnev met with U.S. President Richard Nixon in November of 1969 to come up with a treaty that would contain the arms race.  The negotiations lasted until January of 1972, and by May 26 of that same year the treaty was finalized. 

  In late 1972, negotiations began for SALT II and continued for seven years. Finally on June 18, 1979, in Vienna, Brezhnev and President Jimmy Carter signed the SALT II treaty. Since the two countries had developed different strategies, specifications of the previous treaties had to be changed.  SALT II set more specific regulations on the different missiles. The Treaty was sent to the Senate to be ratified, but due to tensions between the two countries, it was never ratified.  Tensions continued up until the end of the Cold War, but war never broke out again and the race to stockpile weapons finally ended in the early 1990’s.

 Reagan's Star Wars

By the 1980s Russia appeared to be winning the US-Soviet confrontation, with a more productive economy, better missiles and a growing navy, even though the system was really corrupt and built on propaganda. America, once again fearing Russia’s domination, moved to re-arm and build up forces, including deploying many new missiles in Europe (not without local opposition). In 1983 President Reagan proposed the creation of the Strategic Defense Initiative (SDI), an ambitious project that would construct a space-based anti-missile system. This program was immediately dubbed "Star Wars."

This system would tip the nuclear balance toward the United States. The Soviets feared that SDI would enable the United States to launch a first-strike against them. Critics pointed to the vast technological uncertainties of the system, in addition to its enormous cost.

Although work was begun on the program, the technology proved to be too complex and much of the research was cancelled by later administrations.

End of the Cold War in Europe

Soviet leader Brezhnev died in 1982 and his successor, realizing change was needed in a crumbling Russia and its strained satellites which they felt were losing a renewed arms race, promoted several reformers. One of them, Gorbachev, rose to power in 1985 with policies of Glasnost and Perestroika and decided to end the cold war and “give away” the satellite empire to save Russia itself. After agreeing with the US to reduce nuclear weapons, in 1988 he addressed the UN, explaining the end of the Cold War by renouncing the Brezhnev Doctrine, allowing political choice and pulling Russia out of the arms race.

The speed of Gorbachev’s actions unsettled the West, and there were fears of violence, especially in East Germany. However, Poland negotiated free elections, Hungary opened its borders and East German leader Honecker resigned when it became apparent the Soviets would not support him. The East German leadership withered away and the Berlin Wall fell ten days later. Romania overthrew its dictator and the Soviet satellites emerged from behind the Iron Curtain.

The Soviet Union itself was the next to fall. In 1991 communist hard liners attempted a coup against Gorbachev; they were defeated and Boris Yeltsin became leader. He dissolved the USSR, instead creating the Russian Federation. The Socialist era, begun in 1917, was now over and so was The Cold War.

Conclusion

Some books, although stressing the nuclear confrontation which came perilously close to destroying vast areas of the world, point out that this nuclear threat was most closely triggered in areas of outside Europe, and that the continent in fact enjoyed fifty years of peace and stability which were sorely lacking in the first half of the twentieth century. This view is probably best balanced by the fact that much of Eastern Europe was, in effect, subjugated for the whole period by Soviet Russia.

The Cold War deeply permeated life in East and West, affecting culture and society as well as politics and the military. The Cold War has also often been described as a contest between democracy and communism, while in reality the situation was more complicated, with the “democratic” side, led by the US, supporting some distinctly non-democratic, some brutally authoritarian, regimes in order to deny countries to the Soviet sphere of influence.

Characterize the Cold War period by completing the following table. Add more issues if necessary. Make use of texts 32, 34, 35 from SUPPLEMENTARY READER:

Politics: 1) _______________________________; 2) _______________________________; 3)_______________________________; 4) _______________________________;

Economy: 1) ______________________________; 2) ______________________________; 3) ______________________________;

Ideology: 1) ______________________________; 2) ______________________________;

Attempts to prevent direct conflict: 1) __________________________________________; 2) _________________________________________ ; 3) _________________________________________; 4) _________________________________________;

Impact on the fate of the world: 1) _____________________________________________; 2) _____________________________________________; 3) _____________________________________________;

Study the contents of texts 3-5 and get ready to make a comparative analysis of the 20-th century economies of the UK, the USA and Australia on the basis of the table that follows the texts. Use additional information if necessary (texts 36, 38, 39 from SUPPLEMENTARY READER and other sources). Remember to make use of your active vocabulary.

TEXT 3. Economy of the United Kingdom

The British economy comprises the economies of the countries of England, Scotland, Wales and Northern Ireland.

In the 18th century the UK was the first country in the world to industrialize, and during the 19th century possessed a dominant role in the global economy. From the late-19th century the Second Industrial Revolution in the United States and the German Empire presented an increasing challenge to Britain's role as leader of the global economy. Despite victory, the costs of fighting both the First World War and Second World War further weakened the relative economic position of the UK, and by 1945 Britain had been superseded by the United States as the world's dominant economic power. Following the end of World War II, there was a long interval without a major recession (1945–1973) and a growth in prosperity in the 1950s and 1960s.

The 20th century is a period of great change. Since 1900 there has been a general change trend of political power shifting from the privileged few (nobility and monarchy) to the majority in society. In some countries democracies have been set up (e.g. Germany) to replace the power of kings (autocracy). In other countries, Communism (Marxism) has been introduced (the USSR, China and Cuba, for example) with the ideal of making all people equal.

In 1900, the world was dominated by European monarchies and their empires (imperial powers), e.g. Britain, Germany (Hohenzollern,) Austria-Hungary (Habsburg,) Russia (Romanov)

Since 1945 two superpowers have dominated the world (the USA and the Union of Soviet Socialist Republics). The European powers have lost their empires and most of their wealth, and power. Their colonies have become independent (e.g. Britain lost India, New Zealand and Canada.) Some countries, that were weak and powerless in 1900, have become major world powers, most notably Japan.

At the beginning of the 19-th century few would have had much doubt about what the UK’s role in the world was. The ‘workshop of the world’, the first industrialised nation had acquired the world’s largest empire. Britain was committed to Pax Britannica, maintaining a balance of power through diplomacy, alliances and military might that it hoped would enable it to continue to dominate world trade.

This position of global dominance was undermined by the emergence of new powers such as the USA and Germany, the costs of two world wars, the struggle for independence among the colonies and the impact of economic globalisation.

The role of the UK in the world has become more widely debated in recent years as the nation struggles to find a post-colonial role and recognises the ambivalent forces of globalisation. Deciding on this role has been influenced by issues such as whether to ally more closely with the USA or Europe, whether an ‘ethical’ foreign policy is desirable or achievable, how ‘British’ our increasingly multicultural society sees itself, and whether the nation-state has any meaning in an era of rapid changes in mobility, technology and communication, facing global challenges such as inequality and climate change.

A new period of neo-liberal economics began in 1979 with the election of Margaret Thatcher. During the 1980s most state-owned enterprises were privatized, taxes cut and markets deregulated. However, Mrs. Thatcher's modernization of the British economy was far from trouble free; her battle against inflation resulted in mass unemployment. However, the British economy slid into another recession during the second half of 1990. Unlike the early 1980s recession the recovery saw a rapid and substantial fall in unemployment.

The Labour Party, led by Tony Blair, returned to power in May 1997 after 18 years in opposition. During Blair's 10 years in office there were 40 successive quarters of economic growth, lasting until the second quarter of 2008. This extended period of growth ended in 2008 when the United Kingdom suddenly entered a recession brought about by the global financial crisis.

Today the United Kingdom is a developed country with social welfare infrastructure. The UK is a member of the Commonwealth of Nations, the European Union, the G7, the G8, the G20, the International Monetary Fund, the Organization for Economic Cooperation and Development, the World Bank, the World Trade Organization and the United Nations.

The UK is one of the world's most globalised countries; it still maintains a significant role in the world economy. London is the world's largest financial centre alongside New York. The British economy is boosted by North Sea oil and gas reserves. The UK is currently ranked seventh in the world (and third in Europe) in the World Bank's Ease of Doing Business Index. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs. The UK retains a significant, though reduced, fishing industry. It is a major centre for engine manufacturing. The aerospace industry of the UK is the second- or third-largest aerospace industry in the world. Tourism is very important to the British economy; the United Kingdom is ranked as the sixth major tourist destination in the world. London, by a considerable margin, is the most visited city in the world.

One of the most disappointing features of the British economy since the Second World War has been its failure to match the growth performance of the other advanced industrialized countries. This relative decline started in the late nineteenth century when a number of European countries began to outstrip Britain.

Britain reconstructed her economy rapidly after the Second World War, and in the late 1940s was still a rich country in comparative terms. But from the early 1950s onwards Britain's growth again tended to lag behind the other industrialized countries. On this occasion, however, it became a greater source of concern, as gradually one country after another overtook her. The result was that by the late 1980s, Britain had fallen well down the international living standards league. The inevitable consequence was that Britain's living standards fell behind those of the other advanced countries.

TEXT 4. Economic history of the United States

The economic history of the United States has its roots in European settlements in the 16th, 17th, and 18th centuries. The American colonies went from marginally successful colonial economies to a small, independent farming economy, which in 1776 became the United States of America. In 180 years the United States grew to a huge, integrated, industrialized economy that still makes up over a quarter of the world economy. The main causes were a large unified market, a supportive political-legal system, vast areas of highly productive farmlands, vast natural resources (especially timber, coal and oil), a cultural landscape that valued entrepreneurship, a commitment to investing in material and human capital, and at times a willingness to exploit labor. The economy has maintained high wages, attracting immigrants by the millions from all over the world.

In the 19th century, recessions frequently coincided with financial crises. The Panic of 1837 was followed by a five-year depression, with the failure of banks and then-record-high unemployment levels. Because of the great changes in the economy over the centuries, it is difficult to compare the severity of modern recessions to early recessions. Recessions after World War II appear to have been less severe than earlier recessions, but the reasons for this are unclear. The Depression of 1893 was one of the worst in American history.

For many years following the Great Depression of the 1930s, when danger of recession appeared most serious, the government sought to strengthen the economy by spending heavily itself or cutting taxes so that consumers would spend more, and by fostering rapid growth in the money supply, which also encouraged more spending. Ideas about the best tools for stabilizing the economy changed substantially between the 1930s and the 1980s. From the New Deal era that began in 1933, to the Great Society initiatives of the 1960s, national policy makers relied principally on fiscal policy to influence the economy. The approach, advanced by British economist John Maynard Keynes, gave elected officials a leading role in directing the economy, since spending and taxes are controlled by the U.S. President and the Congress. The economy and living standards grew strongly during this era, but a period of high inflation, interest rates and unemployment after 1973 weakened confidence in fiscal policy as a tool for regulating the overall pace of economic activity. A combination of loose monetary policy and record budget deficits, both financed with foreign direct investment and public debt became routine economic policy after 1981.

The United States economy experienced a crisis in 2008 led by a derivatives market and subprime mortgage crisis, and a declining dollar value.

The United States is rich in mineral resources and fertile farm soil, and it is fortunate to have a moderate climate. It also has extensive coastlines on both the Atlantic and Pacific Oceans, as well as on the Gulf of Mexico. Rivers flow from far within the continent, and the Great Lakes—five large, inland lakes along the U.S. border with Canada—provide additional shipping access. These extensive waterways have helped shape the country's economic growth over the years and helped bind America's 50 individual states together in a single economic unit.

The number of workers and, more importantly, their productivity help determine the health of the U.S. economy. Throughout its history, the United States has experienced steady growth in the labor force, a phenomenon that is both cause and effect of almost constant economic expansion. After World War I, most workers were immigrants from Europe, their immediate descendants, or African Americans who were mostly slaves taken from Africa, or slave descendants. Beginning in the late 20th century, many Latin Americans immigrated; followed by large numbers of Asians following removal of nation-origin based immigration quotas. Labor mobility has also been important to the capacity of the American economy to adapt to changing conditions.

In the United States the corporation has emerged as an association of owners, known as stockholders, who form a business enterprise governed by a complex set of rules and customs. Brought on by the process of mass production, corporations have been instrumental in shaping the United States. Through the stock market, American banks and investors have grown their economy by investing and withdrawing capital from profitable corporations. Today in the era of globalization, American investors and corporations have influence all over the world. The American government is also included among the major investors in the American economy; government has a powerful effect on the U.S. economy in at least four areas, as the government uses a capitalist system. Strong government regulation in the U.S. economy started in the early 1900s with the rise of the Progressive Movement; prior to this the government promoted economic growth through protective tariffs and subsidies to industry, built infrastructure, and established banking policies, including the gold standard, to encourage savings and investment in productive enterprises.

TEXT 5. The overview of the Australian economy

Australians are proud of their economy and so they should be — it is one of the strongest in the advanced world. The country has very low levels of public debt (less than a tenth of the level across the major advanced economies) low unemployment (around half the level of the US), and a massive pipeline of investments, particularly in resources.

It's worth putting this picture in the broader perspective. The list below shows the forecast peaks of net debt as a proportion of GDP of several advanced economies – that is, the year in which their debt will reach its predicted maximum. It illustrates how well the Australian economy shapes up.

• Average of major advanced economies – 91 per cent in 2016

• Japan – 164 per cent in 2016

• Italy – 101 per cent in 2011

• US – 86 per cent in 2016

• France – 82 per cent in 2013

• UK – 80 per cent in 2013

• Euro area – 69 per cent in 2013

• Germany – 55 per cent in 2012

• Canada – 36 per cent in 2013

• Australia – 7.2 per cent in 2012

Australia is heavily locked into the global economy, increasingly reliant and enmeshed with China and the rest of Asia. Generally, while the weight of the global economy is moving away from Western Europe and North America and towards Asia, more and more of the world’s business is happening in this time zone. Transport and communications are removing the problem of distance. Under these conditions, Australia, according to the experts has little choice but seek further integration with the global economies and especially the fast growing economies of the Asian region. Though Hugh White and the Defence Department might see China as an emerging threat but the economy of the country is dependent on stability and growth in the Asian region. Experts believe that instability would be a much greater and more immediate problem for Australia. They argue that the country will be able to rely on the military protection of the US long after it can rely on it economically.

Australia is dependent on the global economy more than most because it is a commodity exporter and capital importer. This has been true for its entire history since European settlement. The country has a small domestic market. This makes inward looking policies a mistake. Over half its exports are primary exports, whereas over half its imports are manufactured goods.

Nearly half (47%) of the exports go to North Asia. Less than one-fifth go to America and Europe combined. Japan (19%), China (15%). Australia exports more to India than to the UK and just slightly less than to the US.

When the global financial crisis hit, Australia heeded the warnings from the international community that it would be extremely hard for any economy to recover from a recession that was induced by this event, and it acted to avert a recession at home.

The actions that it took during the GFC, along with the hard work of the Australian people, have earned the country a strong outlook, strong job growth and a strong fiscal position. It's meant that despite the fact that it has been hit hard by natural disasters, Australia today sits in one of the most enviable economic positions in the developed world.

		UK	USA	Australia
Positive changes (strengthening)	Issues
	Reasons
Negative changes (slackening)	Issues
	Reasons
Current position in global economy
Problems to overcome