The Cold War is the period of time roughly from the end of World War II, until the collapse of Communism in the Soviet Union and Eastern Europe. The Cold War was the conflict between the United States and the Soviet Union. This conflict divided the world between the two Superpowers, resulted in a dramatic arms race, and led to numerous violent conflicts around the world. However, the Cold War is also a period of economic change around the globe, as nations aligned themselves with the superpowers. New nations become ecnomic powerhouses, and global interdependence becomes reality in an ever shrinking market place.
Germany & Japan Recover
After World War II, both Germany and Japan were politically, socially, and economically devastated. The Allies occupied these nations and began a program of recovery.
Germany was divided among the victorious Allies, with the Sivets holding the eastern half, while France, Britain and the U.S. held the wester. The western half became the Federal Republic of Germany, or West Germany. The wester Allies enacted reform that setup a representative democracy, and put Germany on the road to recovery. These programs were enacted using money provided by the United States under the Marshall Plan, which offered economic aid to rebuild after the war. East Germany suffered for decades under the control of the Soviet Union, who did little to improve the war torn country.
Japan was occupied solely by the United States. Like Germany, Japan formed a representative democracy with a new constitution. Japan also rebuilt their industries using aid from the U.S.. Occupation ended in 1952, and Japan has since become the United State's strongest ally in the East, and also its main economic competitor around the world.
Market vs. Command Economy
A large part of the Cold War was nations aligning themselves economically with either the U.S. or the Soviet Union. Capitalism, or a Market Economy and Communism, or a Command Economy came to dominate global economics. The conflict became about which system better provided for the people.
Comparison of Market & Command Economies
Ownership All property and means of production is privately owned. The government owns the means of production, distribution and exchange. Economic Decisions Little public control; private citizens and business makes decisions. Government makes all economic decisions Market Controls Prices are determined by supply and demand. Competition promotes low prices and high quality. Government plans economy. Limited production of consumer goods, focus on industrial growth.
During the Cold War the world became more interdependent economically. Examples of this include the European Union, OPEC, and NAFTA.
European Union: The EU started as a small coummunity in 1952 to regulate steel and coal production in Europe. By 1957, the initial 6 nations, West Germany, France, Beligium, Italy, the Netherlands, and Luxembourg, formed the European Community, or EC. The EC was a free trade association that lowered economic barries, such as tariffs, between members. During the 1980's and 1990's, the EC expanded and became the EU and continues to work toward a common economic infrastructure.
OPEC: The Organization of Petroleum Exporting Countries was formed by Iraq, Iran, Kuwait, Saudi Arabia and Venezuela in 1960. Their goal was to control the oil industry by setting prices and producation levels (how much oil is made). Control of the majority of the world's oil supply has given OPEC strong political powers. In 1973, OPEC stopped the sale of oil to certain contries, namely the U.S.. This caused a major slow down of many western nation's economies, and made them realize how dependent they were on foreign oil. This continues today with OPEC limiting producation of oil, which in turn causes gas prices to soar.
NAFTA: The North American Free Trade Association was created by the United States, Mexico, and Canada in 1993. Its purpose was to provide free trade between the three nations by elimitating trade barriers like tarrifs.
Pacific Rim: The Pacific Rim is a group of nations in Asia and the Americas that border the Pacific Ocean. Economic interest in this area has grown dramatically since the end of World War II. Many predict that the Pacific Rim will come to dominate world economics due to their large market size. Many nations in this area, including, Taiwan, Singapore, Hong Kong, and South Korea (known as the Asian Tigers) have experienced rapid economic growth and prosperity due to industrialization. These nations were also aligned both politically, and economically with the West throughout the Cold War.Unit Materials:
Cold War Vocabulary Cold War Intro Notes Cold War Notes Cold War Review Games Cold War Stations - Korean War Cold War Stations - Vietnam War Cold War Stations - CambodiaOverview Video:Overview provided by Oswego regentsprep.org