Effects of the Cold War on U.S. Economics

Effects of the Cold War on U.S. Economics

Introduction

War comes along with numerous disturbances that cause instabilities within a country and jeopardize the fabric of the country. Cold war, therefore, is referred to as a dominating and influential factor in the United States of America’s society for the better part of the late 20^th century. The cold war was elicited by the variation of ideologies between the United States of America and the Soviet Union. The Soviet Union was in representation of authoritarianism and communism while America was in the image of capitalism and democracy. A fight, therefore, erupted due to a conflict on who was supposed to take over the authority. America and Soviet Unions are known to be full of superpowers, therefore, as the war continued, global conflict emerged, thus extrapolating critical effects on the rest of the countries in the world. It is valid that the cold war was an important event that occurred in the history of America and significantly affecting the nature of the country not only from a political perspective but also from an economic outlook. The paper will, therefore, discuss the adverse effects of the cold war on the economy of the United States of America.

Discussion

The cold war developed significant cases of a breakthrough in the economy of America. On an ideal view, one of the fundamental ideologies that the Americans stood for during the cold war was the free market capitalism policy. On the other hand, the Soviet Unions were so much against it, arguing that it would not lead to the liberalization of the economy to the thresholds that were required. Instead, the Soviet Union advised for the adoption of communism and promoted it by all means. This breakthrough, therefore, developed a discovery in the economic face of the country. It initiated and championed on affluence and innovation within the state. Numerous business opportunities were identified, and citizens were able to venture into various exploitative ventures and areas. Today, the citizens in America have been able to develop and adopt a consumer culture with a unified goal to empower the country economically. Today, America is one of the most dominating economic power countr

ies.

Although America and Soviet’s advocated for different things, both of the sides were able to accrue benefits for their systems and benefit from the deficiencies of the other while claiming greater freedom for their citizens. Americans were able to help more from the cold war as compared to the Soviets. For instance, the Americans were able to champion in the innovative sector, and they were able to implement capitalism within the country as they were co-relating with communism with domination. On the other hand, the Soviets were disadvantaged as they performed egalitarianism amongst its citizens and portrayed itself as materialistic and greedy. This helped the economy in America to thrive.

At the dawn of the Cold War, Americans felt that it was their patriotic duty and right to buy the consumer goods with a common goal of assisting the growth of the country. On adopting their patriotic rights to purchase consumer goods, the United States of America is termed as a dominant economic power. The cold war also initiated the “Consumer Culture,” which in return demonstrated the superiority of the America Economic culture to communism, and by virtual means, it extended the historic capability to influence freedom to other countries. The United States of America, therefore, utilized the economic power against the Soviet Union after the cold war. For instance, in the 1980s, President Reagan initiated and influenced a stimulation for massive growth in the economy by deregulating tax and implementing tax cuts. In the windfall, the revenues acquired from the tax rapidly increased, thus leading to a dramatic growth of the economy. President Reagan, however, directed much of the money received into aggressive growth to ensure that security was also enhanced to provide a stable economy. Much of the military spending went to the Lofty Strategic Defense initiatives. This helped in strengthening security and stability in the country. In response, the Soviets felt like they were also obliged to increase their spending on the militants, which in return led to bankruptcy.

Among the numerous impacts of the Cold War on the economy of the United States of America is the development of a substantial fiscal mortgage that was placed on many domestic savings in the world. Financial obligations emerged, including some that were necessary to avoid adverse dislocations while the variations took place from a wartime footing to creating a peaceful environment that could enhance the growth of the economy. Economy alliances were reconfigured. Additionally, highly dependable institutional frameworks were reconstructed, and the nation assumed contemporary economic obligations. The U.S. Economic legacies were also enhanced by new countries inheriting financial expenses, resources, and commitments for which they were not prepared in favor of America. Additionally, the successor nations also found themselves in national security burdens and a substantially contaminated environment, which adversely led to the growth of America.

Among the effects of the Cold War on the U.S. economy was the rise in the GDP. Due to the increased tension between the Soviet Union and the United States, in the late 70s through the mid-’80s, President Reagan found it fit to invest the revenues in the military. The military expenditures as a percentage of the GDP reached its maximum. This led to the development of an oppressive economic narrative at the start of the period. In 1986 the GDP was at 6.2%, which was approximately half the size of the non-military expenses, which had drastically reduced from 14.8% of the accumulative GDP in the year 1981 to 12.5% of the total GDP in the year 1988.   There developed a quest to reduce the inflation levels from the very high levels of the late ’70s. However, it is essential to note that a reduction in inflation had decreased but was limited by the expense of economic growth, which led to a significant recession in 1980. In 1983 economic boom was not viewed to be such a severe problem, the unemployment rate was now the issues, and it had to be addressed as it was rising to over 10.8% by the year 1982. It remained above 10% up to the end of 1983. President’s Reagan policy to increase the expenditures on military, and a reduction of the taxes, led to an increase in the deficits of the economy budget from 2.5% of the total GDP in the year 1981 to 6% in the year 1983. This lead to dual commitments on consumption, which was also accompanied by high levels of interest rates and deficit in trade.

Conclusion

The cold war was significant in the growth of the U.S. economy; however, in one way or the other, it had adverse effects on the same marketplace as well. The Cold War was regarded as the root cause of some economic crisis. For instance, after the war, the economy in America was termed as low savings economy. The U.S. initially served as the chief capital source, and later it served as the support provider of consumer and support developmental strategies. The country used grants, developmental loans, and other arrangements in defense to meet the requirements of the war. However, at the same time, the country neglected savings and emphasized more on consumption. Consumption was to the extent of implementing tax cuts and increasing the consumer interest expenses. This low savings policy led to an export initiated economic growth in the U.S. The extremely high production and peak saving strategies during the recovery led to the development of a low saving economy and high consumption.

The break-down of the export system was an outcome of the Cold War. During the early ages of the war, the U.S. backed up international monetary institutions and implemented import substitution approaches. As other countries stabilized and shifted to an export-led state, the U.S. was being faced with trade deficits, and with time they appeared to deepen. United States of America also developed to being more dependent on external cash flows. The export system in the U.S., therefore, began to break down in the early 1990s. In return, it led to diminishing performances of the export growth report. Finally, due to the development of a low savings economy, the United States Federal government budget became entirely unsustainable, leading to weak American households.