The end of the Cold War and the decline of the West

Clara Figueiredo, untitled, essay Films Overdue Analog photography, digitized, Florianópolis, 2017
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By GILBERTO LOPES*

History is not over and its development is very different from what the Cold War victors dreamed of

Introduction

Perhaps David Miliband, United Kingdom Secretary of State between 2007 and 2010, described it with particular sensitivity: the gap between the West and the rest of the world is the result of anger provoked by the way they have dealt with the globalization process since the end of the Cold War. This is what he wrote in an article published in the May/June edition of last year's magazine Foreign Affairs.

On the end of the Cold War and the emergence of neoliberalism, Fritz Bartel,[I], professor of International Affairs at the University of Texas, has written a remarkable book, based on careful research and an original interpretative framework, that draws on the economic changes of the 1970s and 1980s to explain both phenomena.

He makes special reference to two aspects: the abundance of capital available in the world, a consequence of the extraordinary increase in the price of oil after the Yom Kippur War, in October 1973, and the change in the economic policy of the United States, when Jimmy Carter placed Paul Volcker headed the Federal Reserve, shortly before the 1980 elections, with the mission of combating inflation. His restrictive monetary policy increased interest rates to unimaginable levels, causing the most serious post-war depression and the unemployment of millions of people. But it created the conditions for capital to be attracted by the high income paid by the United States and gradually abandon the economies of Eastern Europe.

His book is dedicated to showing, in particular detail, how both measures created the conditions for the crisis to make the survival of the economies of the European socialist world unviable, while creating the conditions to impose the drastic demands of neoliberal reforms on the entire world. , spending cuts and privatizations. Gradually, Western states abandoned their commitment to protecting the interests of workers to protect those of capital.

The author concludes his book by highlighting that neoliberalism – the ideology that governs capital – was imposed at the end of the 20th century because the dependence of nation-states on financial capital to guarantee their social commitments continued to increase.

Fritz Bartel analyzes why the United States and England – Ronald Reagan and Margaret Thatcher – were able to impose their conservative policies, and were able to protect the interests of capital in relation to the interests of labor, while, in socialist countries, all attempts to reforming the economy while maintaining the political regime failed. Fritz Bartel attributes the greatest merits of this “success” to the characteristics of democratic capitalism (superior to those of state socialism).

In my opinion, your own book gives different reasons. It shows us the enormous disparity in resources between Western capitalism and Eastern European socialism. More than the political systems, it was the support of capital, the immense resources made available to Washington and London, that constituted the secret of this triumph.

The post-war world, organized according to the military power developed by each power during the war, divided Europe into two large blocs, which seemed equally powerful. But it hid the weakness of the Eastern European economy, which Fritz Bartel's book demonstrates.

Another view on the outcome of the Cold War

If, for Fritz Bartel, the dominant political order in each bloc was decisive for the outcome of the Cold War, careful reading of his book led me, as I have already pointed out, to another conclusion: the enormous difference in economic power as a fundamental explanation for such an outcome.

I worked on my text with the data – especially economic data – presented by Fritz Bartel in his book, although I consulted other sources for some data and reports of events that seemed indispensable to me. Naturally, the responsibility for these decisions lies exclusively with me.

But I wanted, above all, to emphasize this different view of the factors that influenced the outcome of the Cold War. This is not any intellectual pretension. My interest is rather political, as the different interpretations also lead to very different analyzes of current political challenges.

The economic conditions that led to the outcome of the Cold War in the 1980s are radically different today. And, if this was the fundamental question (and not the political orders that Fritz Bartel defined as “democratic capitalism” and “state socialism”), the analysis of the current international order, the perspectives for the future, are also the same.

They allow us to understand that, in the triumph of the West in those years of the Cold War, the germ of its decline was already found, especially in a policy of endless debt, which made the United States the largest debtor in the world.

On the other hand, abandoning the impossible burden of subsidizing Eastern European countries created the conditions for Russia's economic recovery. While the United States managed globalization in the terms denounced by Miliband, waging permanent wars around the world, China organized its economy and political order along new lines, which proved to be particularly successful.

This is the current world, which I intend to analyze by discussing the framework that Fritz Bartel offers us in his remarkable book.

A decadence of the West

In his work, Fritz Bartel makes a careful and original analysis of the end of the Cold War and the rise of neoliberal policies in the late 1980s and early 1990s.

The book leaves us with a proposal for interpreting these events, which is not the topic of this article. It is not the past that I intend to talk about, but about the world that won the Cold War, the process in which the roots of its decline were laid. This is what I refer to when I talk about “the end of the Cold War and the decline of the West”. As we will see, Fritz Bartel's book provides us with solid data on this subject, even if his analysis is not oriented in that direction.

Attacking the unions

One of the triggers of the process that determined the outcome of this war was the change in economic policy when, in August 1979, Jimmy Carter replaced William Miller with Paul A. Volcker at the head of the Federal Reserve. The economic scenario in the United States was mediocre: the unemployment rate was 7,5%; inflation of 13,3%; and the fiscal deficit, at 59 billion dollars, was the second highest in history, behind only Gerald Ford's 66 billion dollars in 1976.

For Paul Volcker, the big challenge was controlling inflation. His monetarist policy resulted in an increase in interest rates to an unimaginable level today, of almost 18%. There are those who believe that this measure cost Jimmy Carter's re-election, but there are also those who believe that it was the basis of the United States' economic recovery.

Jimmy Carter lost the election in November 1980, but Paul Volcker remained in office when Ronald Reagan took office in January of the following year. Paul Volcker would help him impose a change of mentality in the country: end the concern with full employment (which had characterized economic policies after the Second World War) and impose the idea that the government was not the solution, but rather the problem.

It was the same vision and proposal that John Hoskyns had made to Margaret Thatcher: imposing an adjustment that, like Paul Volcker's, led to the bankruptcy of thousands of companies and huge unemployment. A model of the so-called “supply-side economy” that bets on the deregulation of the economy as an instrument for its reactivation, regardless of the enormous social costs of the adjustment period.

But not only that. Like his colleague Margaret Thatcher who, faced with the challenge of eliminating the influence of unions in politics, launched a war against the powerful British mining unions, Ronald Reagan fired thousands of air traffic controllers, changing the character of labor relations in the country. A measure that, indirectly, helped to change the “psychology of inflation” attributed to workers’ struggle for better wages. From then on, economic policy would be oriented to meet the interests of big capital.

England and the United States were deeply in debt, and continued to be in debt. They had the support of large financial resources from the sectors benefiting from their reforms. They had sufficient resources to impose their policies on England and the United States and, ultimately, on much of the world.

But the immense amount of resources – as Fritz Bartel himself highlights – was not the product of new economic initiatives by North American capitalists, stimulated by “supply-side economics”, but a consequence of globalized capitalism, fueled by the free circulation of capital in Worldwide.

Socialist countries, faced with a scarcity of resources and rising oil prices, did not have the support of global financial capital, which sealed their fate in the Cold War.

As Fritz Bartel shows – and this is perhaps one of the most solid achievements of his work – the growing difficulty in accessing credit began to erode the conditions in which the economies of Eastern European countries developed, increasingly indebted to banks. westerners.

The same capital market forces that weakened the position of the socialist bloc helped to reestablish, above all, the position of the United States in the international system.

For this, both the permanence of the dollar as the world's reserve currency and the possibility of living with a growing fiscal deficit were fundamental, as a result of the confidence that Paul Volcker's policies gave to capital holders: their investments provided them with high income in the United States. United.

These two factors are fundamental to considering the current state of the United States economy and politics. On the one hand, the dollar continued to weaken, a consequence of an unstoppable fiscal deficit. In April this year, the IMF issued two warnings about the risks that this deficit poses to the North American and world economy, increasing interest rates and financial instability. This, added to political tensions, led to a multiplication of initiatives to abandon the dollar as a currency of exchange between countries in the “global south” and, in particular, in trade between Russia and China.

The characteristics of this process are the key to understanding the changes we are currently witnessing. Contrary to what is often thought, the conditions for the decline of a model that then seemed triumphant were already created.

The relentless interests of capital

As Fritz Bartel highlights, the decision to impose economic adjustment on the North American population showed capital holders that political leaders were determined to “protect the interests of capital to the detriment of the interests of labor”.

Reagan and Volcker's tax cut policy had enormous consequences for several groups, “mainly American workers and those from countries in the Global South”. Although it increased inequality, it relaunched North American “prosperity” and projected its interests and policies onto the rest of the world. It was the beginning of the neoliberal period.

Neoliberalism did not prevail because it offered a “relatively attractive ideological vision.” It prevailed because it had the financial and political resources to do so. As Hoskyns made clear, he placed the state at the service of capital. At the service of a few rich people, as Fritz Bartel says.

For the “communist world”, the results were different. With the redirection of capital to the United States, it did not completely and definitively lose access to the world capital market in the early 1080s. But, Bartel recalls, it never again had the unconditional support of the holders of that capital, who had generously financed it in the late 1970s, thanks to the enormous abundance of dollars resulting from the rise in oil prices from 1973 onwards.

Socialist countries were losing access to capital markets. Western governments, international financial institutions and world capital, sometimes acting together and at other times independently, found themselves with all the power in their hands to decide the fate of their adversaries, leaving the governments of Eastern Europe no alternatives. There were resources available and they were willing to grant new loans, but in exchange for political and diplomatic concessions.

What, for the United States, constituted an enormous stimulus for its economy, for the socialist camp was an impossible burden to bear. In my opinion, it was the fundamental reason for his triumph in the Cold War, the result of a reality inherited from the post-war world.

The end of popular power

For Fritz Bartel, the people of Eastern European nations played an essential role in the fall of the regimes that governed them. The fall of communism and the rise of electoral democracies represented a new era of popular sovereignty and self-determination.

This is his interpretation, but his report shows us something else: the importance of the financial siege, which left these governments without alternatives, and generated despair among their citizens. Following the same guide as his book, it is clear that the directors of this film were not the people of these nations, but the capital capable of developing the guide.

Always sensitive to the various angles of problems, Fritz Bartel does not fail to notice this when he states that, with the fall of the socialist regime in Poland, the Poles felt that they finally had “their” government running the country. But, he adds, it was a government that served two masters: the people and the market, capital and labor. As we know, it is not possible to serve these two masters equally, and labor was not in a position to impose any conditions, except to accept those imposed by capital.

In any case, there is one aspect that cannot fail to be considered here. The governments of Eastern European countries resulted from the Second World War and were imposed by the political interests of the Soviet Union, supported by its enormous military effort, the basis for the defeat of Nazism. But, as history has shown, this military power had, at that time, neither political nor economic power capable of consolidating its military triumph.

While it was associated with the power of the West to defeat Nazism, it was able to play a fundamental role in the war. But once the war ended, she was isolated. The Western world consolidated around Washington's capital and interests. In Eastern Europe, the internal political structure of the Soviet Union was first weakened by the deviations of Stalinism. Then, its economic structure, dependent on the power of the West, then far superior to that of the socialist world.

This is how history conditioned the results. When the economic conditions on which the socialist market world was based disappeared, neither the political nor the military were sufficient to maintain the coalition and the order on which it was sustained.

In any case, I cannot agree with Fritz Bartel – for the same arguments presented in his book – in his conclusion that the end of the Cold War was the moment when popular power reached its maximum expression. It seems to me exactly the opposite: it was the end of popular power, the moment of triumph of the power of capital.

Once again, Fritz Bartel intuits this when he states that, at a time when the relationship between citizens and the State is increasingly mediated by capital loans, when the sovereign debts of States reach stratospheric values, it should not be surprising that become a relationship between debtors and creditors, even if the State has to renounce its role in protecting the interests of labor, to defend the interests of capital. Fritz Bartel's own reference to the fall of the socialist government in Poland makes this clear.

The end of the story

When the political world of Eastern Europe collapsed, the euphoria of the West led it to dream of the “end of history” and of socialism, including in the countries where it still survived: China, Cuba, Vietnam, North Korea. But – and here is the key to the explanation – the political regimes in these countries did not result from the imposition of Soviet troops as a result of the Second World War, but from national political revolutions, which the West was unable to defeat.

The case of Cuba is particularly pathetic in Latin America. Subjected to a blockade lasting more than 60 years, the island paid an exorbitant price for an illegal siege, which is urgently needed to put an end to.

Unlike other Latin American countries, where all reformist attempts were overturned by conservative civilian groups supported by the military and Washington, this did not happen in Cuba, despite the dramatic living conditions imposed on its people.

It is clear that history is not over and that its development is very different from what the victors of that Cold War dreamed of.

*Gilberto Lopes is a journalist, PhD in Society and Cultural Studies from the Universidad de Costa Rica (UCR). Author, among other books, of Political crisis of the modern world (uruk).

Translation: Fernando Lima das Neves.

Note


[I] Fritz Bartel. The triumph of broken promises. The end of Cold War and the rise of neoliberalism. HarvardUniversityPress, 2022.


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