Devastation of Old Markets

Rebuilding the World: Origins of the Cold War

The Second World War changed how humans made, traded, and consumed goods. The war devastated the nations of Europe and East Asia. As many as 80 million people died in the war. After the war, nations sought to rebuild and rethink the global system, but there was disagreement over how best to rebuild. The biggest disagreements were between the United States and the Soviet Union.

The tensions between the two superpowers sparked the Cold War. It was called a “cold” war because the two superpowers rarely fought directly against one another. Instead, they engaged in an arms race and tried to spread their influence around the world. Each superpower championed their economic model as the path to prosperity and peace. Each portrayed the other as evil. The Soviets believed in state-planned economies (where decisions and ownership are collectively held by the state rather than private owners). But the Americans were champions of free markets. In their attempts to win over other countries to their side of this debate, both governments sent huge amounts of financial and military aid to their allies.

After the Second World War, the Soviet Union was expanding in Eastern Europe and Asia. The United States wanted to rebuild Western Europe and Japan to create a buffer against the Soviet expansion. So in 1948, the United States launched the Marshall Plan, named after Secretary of State George Marshall. This plan gave billions of dollars in economic aid to seventeen countries in western and southern Europe. The Soviet Union and its allies in Eastern Europe refused aid from the Marshall Plan. But American efforts were a huge success in Western Europe. Immediately after the war, the infrastructure of England, France, Germany, and Japan was in ruins. The bombs and tanks of both Axis and Allied powers had destroyed whole cities. In 1945, millions of Germans were homeless, and their money was nearly worthless. Yet with aid from the United States and the implementation of new policies, within two decades, the Germany economy was the largest in Europe. Japan, the United Kingdom, France, Greece, and other American allies underwent similar economic “miracles” as the world rebuilt.

Historian David Landes wrote about the Japanese and German recoveries. He insisted they were built on “work, education, determination,” and American financial assistance. The aim of American aid to these countries was to “parry [block] the perceived Russian threat.” The sociologist Immanuel Wallerstein, however, disagreed. He argued that the post-war recovery of Europe and Japan was less idealistic on the part of the Americans. Instead, he claimed that the Americans helped because the “world-economy needed the re-entry of these countries both as major producers and as major customers for US production.” The Americans embraced the idea of a “free world” in opposition to the communist world of the Soviet Union. They hoped that the success of their allies would convince more countries to join the American side. By the 1950s, the American government saw all foreign policy in the context of the global Cold War.

Decolonization and economic dependency

One of the most important changes after World War II was the collapse of European empires in Africa and Asia. With their economies in shambles from the war, European governments couldn’t maintain the costs of empire. In 1945, over a third of the world’s people lived in a colonized nation. Between 1945 and 1970, nearly every colonial nation gained their independence.

As European nations lost their colonies in Africa and Asia, several things happened. The importance of Europe in global politics declined. From 1946 to 1970, membership in the United Nations grew from 35 states to 127. The leaders of the newly independent nations of Africa and Asia travelled to the United Nations. They spoke out against economic exploitation. They also spoke against racial inequality around the world. In the 1960s, the Non-Aligned Movement emerged. It was led by Indian prime minister, Jawaharlal Nehru. Members of this movement refused to
side with either the United States or Soviet Union. Instead, they decided to invest in their own countries.

West European and Japanese economic revival was built on the exploitation of Europe’s former colonies. Europe and Japan used American money to rebuild their countries. But they also needed raw materials. Under European imperialism, Europeans relied on people in Africa, Asia, and Latin America to produce cash crops. Cash crops were sold abroad to profit the empire rather than consumed locally. Some examples include sugar, cacao, rubber, and cotton. These crops were shipped from former European colonies to the rich nations of Europe and North America. There, they were turned into consumer goods like chocolate bars, car tires, and cheap t-shirts and resold at a profit. This is how African cacao and the labor of workers (many of them children) becomes candy bars in American grocery stores.

African farmers used their best land to produce cash crops, on which they were economically dependent. With less land left for food crops, many African nations depended on food imports or aid from wealthy countries. This created a system of dependency. Wealthy countries became richer by turning resources from poor countries into consumer goods. Poor countries became dependent on foreign trade, foreign loans, and foreign aid to feed their people. The political dominance of imperialism quickly turned into the economic dependency of neo-colonialism, a term coined by Ghana’s first president, Kwame Nkrumah, to describe this cycle of inequality between rich and poor nations.

Leaders in Africa, Asia, and Latin America tried to escape this cycle of dependency. They did this by building industry in their own countries. Often, they would try to do this by nationalizing industry. Nationalizing industry means taking private industries and placing them under the public ownership of the government. Iran’s prime minister Mohammed Mosaddeq nationalized his country’s oil industry. Until 1953 Iran’s oil industry had been controlled by the Anglo-Iranian Oil Company (today known as BP). In Egypt, President Gamal Abdel Nasser nationalized the Suez Canal in 1956. That ended almost a century of British ownership. Other leaders such as President Kwame Nkrumah of Ghana and President Salvador Allende of Chile engaged in similar projects of state- led industrialization.

The American government saw all foreign policy as part of the Cold War. As a result, they were suspicious of these kinds of policies aimed at economic independence. The US suspected them of being associated with communism and the Soviet Union. American presidents, Congress, the military, and intelligence agencies therefore often acted to combat these policies of nationalization. They saw the policies as the spread of communism. Mosaddeq, Nkrumah, and Allende were all removed from power in coups. In each of these coups the CIA played a role or is suspected of doing so. In all three cases, the new governments realigned their countries with the United States and privatized their nation’s industries. Often, the rise of dictators followed the fall of nationalist leaders. In Iran, for example, Mohammad Reza Shah Pahlavi ruled his country after 1953 as a strongman until the 1979 Iranian Revolution.

Consumption and inequality

The revival of Western Europe and Japan and new American wealth created a boom in consumerism. Americans moved to the suburbs to live in houses that they filled with washing machines and new plastic consumer goods. They bought cars to drive them from their houses to jobs in cities. These cars needed oil, first from Texas, and later from countries in the Middle East. As consumerism increased in wealthy countries, demand skyrocketed for raw materials like cacao, coffee, and rubber from poorer countries.

But inequality was also a problem within wealthy nations. For example, as white consumer classes thrived in the United States, black consumers found themselves excluded from the new American dream of cars and homes in the suburbs. In many cases, such as Jim Crow segregation in the south and redlining¹ in the north, official policies and laws systematically denied equal economic opportunity.

1 Redlining is a financial and loan practice of excluding people from certain neighborhoods and denying public services to certain neighborhoods, often with racist motivations.