4.3 Global Economics; Capitalism vs Communism

4.3 Global Economics: Capitalism vs. Communism

The conflict between the United States and the Soviet Union, the world's two superpowers, dominated world politics from the end of World War II (1945) until the downfall of the Soviet Union in 1991. This era is known as the Cold War. The United States (Americans) used its economic power and military might to influence countries to maintain capitalist economies, while the Soviet Union (Soviets) used its influence to encourage nations to become communist.

This led to the two countries increasing their supplies of nuclear warheads, which fortunately were never used. Eventually, both countries had enough nuclear weapons to destroy the entire world. This situation was known as mutually assured destruction (MAD): if one of the countries started a nuclear war, it was more or less certain that both countries would end by being destroyed. Partly because of this, the two countries never engaged in face-to-face war with each other. However, proxy wars did occur. These were wars in which both the Soviets and the Americans supported troops doing battle in other countries in the hope that their ideology would win. Both sides feared that their economic system would be taken over by the other, and one nation after another would fall like dominoes in a row. For example, the United States, fearing that much of Asia would fall to communism, fought against communist North Vietnam. They feared that if Vietnam were to become communist, nearby Cambodia, Thailand, Laos, and Burma would also become communist. This domino effect occurred, but only partially. South Vietnam, Laos, and Cambodia (for a few years) became communist after the United States left Vietnam.

Because the two superpowers and their allies were involved in such intense conflict, they became less and less interconnected. They did not trade with each other to any great extent, and immigration from the Soviet bloc to the capitalist world was forbidden. Technological advances slowed in communist countries because communication was limited, and the corporations of the superpowers did not share their advancements. A great deal of energy and expense was channeled to developing weapons and the military rather than economic development. During this period, the term Third World was used to describe nations not aligned with either the United States or the Soviet Union. These nations, former colonies of European powers, did not want to tie themselves to any larger and more powerful force.

— Jeffrey Sachs, economic expert