The world economy and the Cold War, 1970–1990

Abstract

The 1970s began with the collapse of the gold–dollar exchange standard and the defeat of the United States in Vietnam – two events that jointly precipitated a ten-year-long crisis of US hegemony. The 1980s, in contrast, ended with the terminal crisis of the Soviet system of centrally planned economies, US “victory” in the Cold War, and a resurgence of US wealth and power to seemingly unprecedented heights. The key turning point in this reversal of fortunes was the neoliberal (counter) revolution of the early 1980s orchestrated by President Ronald Reagan and Prime Minister Margaret Thatcher. The purpose of this chapter is to highlight the relationship between this turning point and the preceding crisis of US hegemony on the one side and the subsequent collapse of the USSR on the other. The crisis of US hegemony and the onset of global turbulence US hegemony in the Cold War era was based on institutional arrangements that originated in the widespread belief among US government officials during World War II that “a new world order was the only guarantee against chaos followed by revolution” and that “security for the world had to be based on American power exercised through international systems.” Equally widespread was the belief that the lessons of the New Deal were relevant to the international sphere: “Just as the New Deal government increasingly took active responsibility for the welfare of the nation, US foreign-policy planners took increasing responsibility for the welfare of the world.” To take responsibility, of course, “meant government intervention on a grand scale.”