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A Capitalist Plan for a World Economy & the Soviet Alternative

A Capitalist Plan for a World Economy & the Soviet Alternative
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  • 0:08 Cold War Capitalism
  • 0:49 GATT & Capitalist Plan
  • 3:41 Communist Response
  • 5:21 Lesson Summary
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Lesson Transcript
Instructor: Christopher Sailus

Chris has an M.A. in history and taught university and high school history.

In this lesson, we explore the capitalist plans for the global economy of Western nations in the aftermath of WWII while also discovering the Eastern communist response.

Cold War Capitalism

Though the Cold War may seem a distant memory of your childhood or something your parents only mention in passing, for two generations of Americans, it was a reality which seemed to touch their daily lives in innumerable ways. It was as ubiquitous as your smartphone is today, except this was a global conflict which kept the world on the razor's edge of nuclear oblivion for almost fifty years. But the Cold War was not fought with missiles and tanks, it was a war largely fought in the shadows and with ideology and the world economy as its only open battlefield.

In this lesson, we'll discuss this post-World War II struggle between the Western, capitalist plans for the world economy and the response of the communist East.

GATT and Capitalist Plan

In order to fully understand the importance of the post-war capitalist plan for the world economy and its centerpiece, the General Agreement on Tariffs and Trades (or GATT), it's important to know the basic economics of the pre-WWII world. The 1930s were dominated by the Great Depression, an era of worldwide economic catastrophe which began on the markets of Wall Street before spreading elsewhere. Recovery from the Great Depression was slow, and most nations' economies did not completely rebound until the wartime production of WWII energized global economies.

This was partially because of the depths of the economic depression of the 1930s, and in part because of the protectionist measures many states implemented in order to combat the problem. Many states wrote laws or implemented new policies which attempted to close off their country from the global economy, hoping to insulate themselves from similar problems in the future.

Despite these sentiments, a group of economists in both the United States and the United Kingdom felt differently. They thought that the health of national and global economies depended upon increased integration between nations, not protectionist measures designed to close one nation off from another.

This sentiment gained some support because of the horrors of WWII; in the aftermath, many politicians were looking for ways to prevent the large-scale warfare the world experienced during the war. An increased global interconnectedness of economies and governments was proposed as one way of preventing further bloodshed between nations. After all, countries are far less likely to go to war with other countries with whom they have a successful and profitable relationship.

In the years immediately following WWII, Western economists set out to begin tearing down the economic walls erected in the 1930s. The GATT was a landmark agreement made in 1947 in Geneva, Switzerland, between the United States, the United Kingdom, and 21 other Western countries, who all pledged to remove protective tariffs and trade restrictions in the hope of creating a more global and prosperous economy. This was extremely important to U.S. officials; indeed, U.S. officials even made agreement to certain GATT principles and measures a requirement to the Marshall Plan aid the U.S. was funneling to European countries for post-war reconstruction.

It took several years for the full impact of these measures to be felt. By the 1950s, global capitalist economies were booming and international trade was at its highest level in history. Many historians and economists also credit the principles of the GATT with the post-war economic renaissances experienced in countries like Italy and France.

Over the following century, additional capitalist countries have been added to the GATT talks and the GATT measures are periodically renegotiated, always with an eye toward increasing global trade through reducing tariffs and trade restrictions across international borders.

Communist Response

This was not, of course, the only agreement made between these states. Further military agreements created NATO and other treaties promised closer international cooperation in other areas as well. The 1951 creation of the European Coal and Steel Community, for instance, planted the seeds for what later became the European Union.

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