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HIST 3045, Week 5 Notes

by: Caroline Jok

HIST 3045, Week 5 Notes HIST 3045

Caroline Jok
GPA 3.8

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Week 5 Notes for International History of the Cold War Professor Paul Pitman HIST 3045 Pre-Cold War Economics 27 Sept. & 29 Sept.
International History of the Cold War
Dr. Paul Pitman
Class Notes
history, Cold War
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This 7 page Class Notes was uploaded by Caroline Jok on Thursday September 29, 2016. The Class Notes belongs to HIST 3045 at George Washington University taught by Dr. Paul Pitman in Fall 2016. Since its upload, it has received 2 views. For similar materials see International History of the Cold War in History at George Washington University.


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Date Created: 09/29/16
International History of the Cold War 27 September 2016 Economic Miracles East and West Economic Miracles: 1. Promises to Keep 2. Bretton Woods Fails 3. Marshall Plan Fails (also Dodge Plan) 4. The Cross of Iron 5. Reconstruction of Japan 6. Conclusions Economic Formulas: • GDP = C+I+G o Spending = what's produced in the country o The more people consume, the more people invest, the more the government spends, the more someone has to produce • GNP = GDP +(X-M) o Open economy o X = Exports o M = imports o (X-M) = Trade • BOT = (X-M) o Balance of Trade • BOP = (X-M) + K + G + Errors & Omissions Vocabulary: • Bretton Woods - 1994 --> IMF • GATT - 1947 • Marshall Plan 1947 - 3 years '48-51 • Tariff = Tax on M • Quota - Limit on M • ECSC = Coal & Steel - may 1950 • EDC = Defense - October 1950 • Dodge Plan - 1949 Korea Boom (1950 - 52) • End of World War 2 up to the Late 50's (Cuban Missile Crisis): They tried a bunch of stuff and they finally figured out something that would work, and then eventually fell apart (1967… this portion won't be on the midterm) At the end of WW2 Western Countries had promises to keep, they tried Bretton woods and the Marshall plan, both of which failed. The Korean War and the Korean Boom had a result of putting into place of some kind of settlement that would work as well. • The western governments had gotten people to fight world war 2, they had gotten people to poor off the bacon fat and donate it to the soldiers, rations, etc. With the promise of better days to come. o No more war o No more depression • How did governments try to fulfill this problem? • The definition of security was expanded during the 30-40's o Job security o Social security o Etc. • Result of WW2: The welfare state is legitimized (form is different in various countries) o French Sociologist: National Socialism o A basic level of Social provision • What are the international Implications? How does this change their foreign economic policy? • Bretton Woods: finalization of the IMF between British and Americans o Began in 1944 o It was a system o It never really went into effect, nor did it work o The US was in the position to dictate the terms that it wanted for the transaction of funds international. o This was the Brits and the Americans debating "It's true, they have all the money bags, but we have all the brains" o Americans wanted: • Reinstitute the Gold Standard: The money supply in your country is a direct function of how much gold you have. § Countries that ran a balance of payment deficit would have to change their domestic policies to fix the balance of payment § Gold Exchange standard: instead of sending gold bars, everyone sends dollars back nad forth § $35 = 1 oz of Gold • Convertible currencies: If you have one currency and you want to buy something, you can exchange your money for another currency - no paperwork, or regulations. • Free Trade (Based on the argument that trade restrictions make it harder for people to cooperate) o British: • Keynesian Economics • Wanted to increase investments in schools and social welfare • If non one will lend them any money, after a while they will run out of money and be unable to keep the program going, thus they would have to slow down the economy. o IMF conditionality • In order to get an IMF loan you needed to meet the following conditions § Cut consumption so you can increase investment and government spending. Increase exports, decrease imports. § Pushing for export led growth. • PROBLEM: it's impossible for every country in the world to have a BOT surplus at the same time. o British concerned with Sterling Balances o Get back to Balance & Sustainability o Failures: • Backlog of demand • Traditional partnerships had failed • War debts • Not liberal enough for the Americans, not Keynesian enough for the British and Americans of this school of thought. § Why is the Keynesian factor important?: important to keep the communist countries from coming to power. • If they make Italy, France etc. extreme austerity in their economics which will feed the vote for the communist party • Still the danger that the world is in closed economic empires • Doesn't fit with the domestic economic plans of the countries that joined (Signed up under duress) § As such they have to get exceptions and the rules of Bretton Woods didn't go into play until 1958. o In the meantime the US provided short time emergency aid. • At the time, the US had a huge BoT surplus (up until 1958), it was the only country with all of its own factories in place, we had a huge skilled workforce, and all of our transportation was in place. • General Agreement on Tariffs and Trade - 1947 o Agreement o Article 24 • Allowed to have external tariffs. • Marshall Plan o 2 Goals • Start European economies again § At this point the united states is literally delivering food to Germany… • Talk them into trading with each other - Facilitate international trade. § Counterpart funds: how we cooperate for them o All countries supposed to get out of BOP deficits by 1951 (in three years) o Failures: • British block the powers of the organizations set up to run the Marshall plan § OEEC -- Organization for European Economic Cooperation • Brits refuse to cooperate § The Brits were running big deficits and couldn't afford to let imports in from Europe § 1949 sudden devaluation of the Pound. (competitive devaluation - boost exports, cut imports) • Didn't have the teeth to integrate Europe o 1949 Americans are worried about what is happening in Europe. • European countries still have large BOP deficits, their economies aren't growing and they aren't trading. • June 1950: Korean War breaks out o Led by the United States, all of the Western Countries start to rearm. o We replace the Marshall plan with the Mutual Security Plan which is also set to run for 3 years (52 - 55) • Transfers roughly as much money to Europe as the Marshall Plan does o US Producers become defense oriented again which starts to open up space for Europeans to export to the United States. o Korean Boom: Mostly the result of the increase of US defense spending (and European countries) • All of these centrist governments are getting more aid from the United States and they stay in power § Danger in 1949 - the parties that were willing to align with the U.S. would not have enough votes to stay in power and these governments would become communist or at least more socialist. § Diplomacy and aid kept the centrist parties in power § 1952 there is a Balance of Payment Crisis in Western Europe. o Willingness on the US on being more flexible with building regional Economies o 1950 - Europe starts to share their Foreign Exchange o Germans had a huge surplus because they weren't allowed to buy weapons but they have the materials to export. o By '53-'54 the European countries are finally balancing their payments o Summary: It took 2 Marshall Plans and the Militarization of the Cold War to build an Atlantic system. o Everyone had to compromise • The United States agreed to tighter, regional cooperation in Europe (bothers us because we don't export to them, despite the aid that we are giving them) • Up till 1958 the trade restrictions on the US were on Money. In 1958 they restore convertibility for goods and services, rather than capital. 29 September 2016 An American Attitude to Foreign Policy Time Period: 1939 • What is the United States doing? • Lending a lot of money • Trying not to intervene directly • Churchill is advocating for aggression toward Germany • Chamberlin is the current PM • Churchill comes in May 1940 • England is trying to make Back channel negotiations with Germany even though they are officially at war. o There are people who are in favor of peace with Germany (Conservatives) o Trending: Hegemonic powers in different regions. o Puzzle: Why have a war when you could just divide up the world between major industrial countries o Argument: after 1945 the world faced the same problem • How will these countries relate to each other and lesser developed countries The Dean Acheson Piece: • Acheson: worked for Roosevelt, had been in the Treasury, in favor of intervention, also a lawyer The origins of the World crisis according to Acheson: • Threats to the United States according to Acheson: 4 systems that are falling apart and now failing, 3 of which are heavily economic o Credit no longer provides production of wealth in other countries. o Free trade areas (not world wide) no longer exist • Exclusive Economic zones (main theme of the revisionist strand of writing about the cold war) o British Navy has deteriorated o Emigration to the Untied States (good for the place that they left, but not necessarily for America) no longer can alleviate population surplus. • Result of the 19th century system falling apart: the rise of totalitarian systems. o In the 19th c. UK was the leader of the international system and the British navy was around as an offshore balancer. o Result: Totalitarian and military governments (German, Italian, Soviet, and Japan) • Soviet Union and the Germans are in Poland Italians are in Africa • • Japanese are in China o Jump: Bad economic conditions = totalitarianism • In bad economic times it leads to extremes Why we care according to Acheson: • Germany and Italy are no longer western (Shorthand - no longer civilized) • "The destructive consequences to our constitutional guarantees of individual liberties cannot be over estimated" • "…we have come to the end of an American experiment" • Hints at being worried about ethnic groups within the US that would tend toward non- democratic actions • The US would suffer if we can't export to other countries o If the economy gets even more closed we are in trouble • Unemployment (another group of people who could be disaffected) • Another connection between social stress (unemployment) and "bacteria" § Link to the long telegram "Malignant parasites" What can we do to help? • Make more loans to the countries that are fighting (ends up foreshadowing a lot of what comes in the future) • Long term program: rebuild the world economy (recreate the 19th c. system) • "We shall find that we can make a great and essential contribution to reestablishing the foundations of peace with tolerable costs to ourselves." • Join with other financially strong nations to help out Europe on the conditions that Europe does its part to remove obstructions with trade within itself (Marshall Plan) • We can join in offering a broader market for goods made under decent standards o Unions and work standards o (At this time the Unions in the United States are very strong) o The fascists in Italy came to power by breaking trade unions • In order to have trade around the world there must be a stable and organized system around the war. • In 1939 the United States is running a trade surplus and Acheson claims we are messing up the world economy by doing so. • Have to make sure that there is a supply of raw materials o Who would restrict this? Countries that own places with raw materials. Such as the colonization countries. (French, Portugal, Dutch, the UK) Take away: Conflicting international economic goals This is a radical platform for reorganizing the global economic market & This is his future view of the US role in world politics. These policies are basically trying to win over public support from other countries. (perpetuation of democratic policies etc.) • Increased role for government welfare o Outside the united states throughout western Europe the welfare programs were run almost exclusively by the government. o Trade Unions are growing o All of these external countries are demanding democracy (voting and on the factory floors in the form of unions) • In favor of deep reaching reform in the social system • The established parities and the business leaders compromised with the Nazis and were therefore discredited at the end of the war • The communist led the resistance to the Nazis (Especially the communist trade unions) • Everyone had said at the end of the war things will be better, so they expected this to be fulfilled. o These are all popular demands • The governments of western Europe wanted to modernize and invest in the most advanced industrial goods. ^^ Requires spending more (a lot of investment and consumption which is greater than what they produce) Therefore: vv • Tension between the public who wants to make things good for their family and the government who wants to modernize by holding wages and consumption down. • All of this involves budget deficits so the one country that still has a big intact economy (US) is ready to supply the expensive producer goods. • More tension: They want a stable international monetary system and free childcare etc. o If everyone wants to produce the very best products … o The US international policies aren't consistent with the goals of other countries wanting welfare and trade unions, etc. (The US wants to be an exporter and doesn't want to import what the Europeans and Japanese produce) • It's only with the rearmament programs of the 1950s onwards that the US opens its market to goods from Japan (the financial crisis of Japan and how the Korean war saved them) and Europe. • No long term consensus in the United States to open our markets as Acheson suggested (the war was an extreme case)


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