Post War Design and Emergence of the Cold War

I. Designing the Peace 

A. In general terms, the US had one main objective in designing the post-WWII world—avoid the mistakes that had been made in settling WWI. The basic vision of the post-war order was outlined in The Atlantic Charter, drafted by Roosevelt and Churchill in 1941. The Atlantic Charter envisioned a world in which nations abandoned balance of power politics, with shifting military alliances and spheres of influence. Instead, the world would govern itself through democratic processes, with an international organization serving to arbitrate disputes. All peoples would enjoy the right of choosing their own form of government. 

B. The post war order was discussed at five conferences held during the war: Casablanca, Teheran, Yalta, Potsdam, and Bretton Woods 

1. The Casablanca (Jan, 1943) meeting was supposed to include Roosevelt, Churchill, and Stalin, but Stalin failed to appear. Roosevelt and Churchill did not meet Stalin’s demand that a second front against Germany be opened, but they did assure Stalin that the West would not accept anything less that the unconditional surrender of the Axis Powers (they would not agree to a separate peace). 

2.  At Teheran (Nov., 1943), Stalin agreed to a request by Roosevelt that Russia would enter the war in the Pacific after the war in Europe was over, while Roosevelt finally assured Stalin that a Second Frond would be opened in Europe within 6 months. The Teheran conference exposed some weaknesses in the alliance—in particular, the US and Britain were demanding influence in establishing post-war governments in Eastern Europe, but refused to consider Russian demands for similar influence in Western Europe or elsewhere (e.g. Italy and Greece). 

3.  The conference in Yalta (Jan, 1945) followed a private meeting between Churchill and Stalin in which the two secretly planned the division of Eastern Europe into spheres of influence. Roosevelt objected strongly to the arrangement. Yalta agreements included: 

a. Russia would enter the war against Japan and in return would receive territories it had lost to Japan in the war of 1904. It would also be able to influence events in Manchuria. 

b. The basic plan for the United Nations—negotiated the previous summer in Washington DC-- was agreed to. 

c. Yalta failed to resolve a number of issues—chief among which was what to do with Poland. 

i. Basically, Stalin wanted Eastern Europe, particularly Poland, to serve as pro-Soviet buffer states to prevent the possibility of another invasion from Europe. Churchill was willing to meet some of Russia’s concerns, but Roosevelt insisted on self-determination. 

ii. The problem was that by the time of Yalta, Stalin had already put in place a pro-Soviet government there. Moreover, Soviet troops were in physical possession of the countries of Eastern Europe.

d. The question of what to do with Germany was also unsettled. Stalin wanted huge reparations ($20 billion) while the British and US wanted to de-militarize and even de-industrialize Germany. At Yalta, Roosevelt changed his mind, realizing that if Germany was forced to pay reparations, she would need industry to generate the income necessary to do so. 

i. in addition, Russia wanted to dismember Germany permanently while the US and British wanted to keep it together. 

e. Following Yalta, Stalin proceeded to setup pro-communist governments throughout Eastern Europe where his troops were in control on the ground. Roosevelt was furious, but he believed that he could eventually negotiate with Stalin. 

II. Roosevelt died of a massive heart attack shortly after Yalta, however (12 April 1945) and was replaced by his new vice-president,, Harry S. Truman. 

A. This was a huge development in the shaping of the post-war order—personality differences, differences in outlook, lack of experience, mistrust of Stalin. 

B. Truman tried to get tough with Stalin at the last conference that aimed at determining the postwar world—Potsdam. He told the Soviets that they must honor their Yalta agreements –or else. 

1. However, he had no “or else.” The Russians were in control on the ground in Poland and elsewhere, and the US was still occupied in Asia. 

2. At Potsdam (immediately after the fall of Germany) Truman was forced to give up on Poland and the leaders agreed to split Germany into four pieces—but he refused to accept Russian claims for reparations from the Western-controlled areas. This meant in effect that Germany would be divided indefinitely, as Stalin immediately began extracting reparations from the area of Germany he controlled. 

C. The Potsdam meeting was the end of the One World vision of the Atlantic Charter. Rather than attempting to create a new world order in America’s image, the focus shifted to trying to stop further expansion of Soviet influence. The word “containment” emerged to describe the new policy after crises with the Soviets in Greece and Turkey (the Soviet-backed Communist party tried to take control there), and particularly after George Kennan, an expert on the Soviet Union, insisted that the modus operandi of the Soviet Union was to push relentlessly in every direction and fill every void with communism. 

D. On 12 March 1947, Truman, on the advise of Kennan, formally announced that it would henceforth be the policy of the US to contain further expansion of Soviet influence world wide. 

1. The Containment Doctrine would dominate US policy for the next 40 years. 

2. Following Truman’s 1947 speech, the US Congress began to re-organize the US defense and military system to get it ready for the new world reality—a world split into two competing political and economic systems. 

a. The National Security Act (1948) created the Department of Defense, which consolidated the old Departments of the Army and Navy into one organization. It also created the CIA and the National Security Counsel to advise the President on national security. 

3. Partly in response to the actions of the US, Stalin took the bold step of closing the road from western-controlled Germany to the western-controlled areas of Berlin. 

a. There was nothing in the Potsdam or earlier agreements that guaranteed the West the right of passage across Russian-controlled area of Germany. 

b. The resulted in the first of several “Berlin Crises.” The US responded by mounting a food airlift campaign that brought food and other supplies into the western controlled area of Berlin for over 10 months. Berlin became the ultimate symbol of the Cold War. The Berlin Crisis did more than anything to inspire the creation of NATO--the North Atlantic Treaty Organization, in April 1949.

III. In planning the economic side of the post-war world, Russia was deliberately excluded.  The US was determined to provide leadership in the creation and management of the post-war economic system--something it had failed to do following WWI.

A. The primary venue for the design took place at Bretton Woods, New Hampshire in July 1944. The principle architects were the British and the Americans, who disagreed on a variety of points. 

1.  The experience of the 1930s convinced US planners that the new economic order should be based on a system of fixed exchange rates. Bretton Woods planners decided that, all national currencies were to be based on gold at a fixed rate, and countries pledged to maintain exchange rates based on this value.

2. The Bretton Woods Conference also set up the major international economic institutions of the post war world—the World Bank (International Bank for Reconstruction and Development), the IMF (International Monetary Fund), and an outline for a post-war trading system based on non-discrimination and free trade. 

a. The World Bank was envisioned as the primary vehicle for post-war reconstruction, a reservoir of capital that could be tapped by countries to speed up their post-war reconstruction. Thinking at first that other countries would be quick to recover and contribute to the Bank, the US deposited a paltry $570 million to get the bank started.

b. The International Monetary Fund was actually intended to be the more important of the two Bretton Woods institutions. Voting rights in the IMF were to be based on national contributions and because the US contributed most, it would have a de facto veto power within the agency. The IMF was to be the rule-keeper of the system, with the primary mission of ensuring that countries follow the exchange rate rules agreed upon. The plan was that all exchange rate changes would have to be approved by the IMF. It was also intended to give advise on monetary policy to countries and, in emergencies, to extend short-term loans to countries experiencing payments deficits. The IMF was supposed to have $8.8 dollars in gold and various national currencies, but only the US met its quota for the first several years of the IMF's existence.

c. The post-war trade system was outlined at Bretton Woods, but the actual agreement was the result of negotiations conducted in Havana, Cuba that began in 1946.

i. The Havana Charter included two elements: a set rules that were to govern international trade (known as the General Agreement on Trade and Tariffs or GATT) and an organization that would oversee the rules (the International Trade Organization—ITO). 

ii. The US eventually opposed the ITO, but it accepted the GATT. 

                                               iii. Eventually, of course, in 1995, the WTO was created.

3. The Bretton Woods negotiators proved to be over-confident in the ability of the world to recover after the war. Europe and Japan were devastated and their needs were simply too great. Neither the World Bank nor the IMF were able to function as designed. When the British tried (and failed) to stabilize the pound (after receiving $3.75 billion) from the US, the US realized it was going to have to manage the world economy unilaterally. It was clear that only the dollar was stable enough to be tied to gold at a fixed rate.  Thus, in 1947 a new system was introduced--the dollar would be based on gold at a fixed exchange rate ($35 per ounce of gold) while all other currencies would be pegged to the dollar.  The US thus became the Central Banker for the entire world and the Bretton Woods system could not be fully implemented until the end of the 1950s. 

a. The basic problem that remained was that because the US economy was the only economy that was healthy, the US was running huge trade surpluses with everyone. The European industrial base had been destroyed and they needed everything. This meant that instead of flowing out (revitalizing the economies of Europe and Asia), dollars were flowing in to the US.

b. The US thus had to find ways to export dollars. A key vehicle for this was the Marshall Plan (The European Recovery Program--1948).  The Marshall Plan (named after US Secretary of State George C. Marshall) set up a European reconstruction agency that would funnel $16 billion into Europe over three years. 

c.  In addition to the Marshall Plan, the Truman Plan (for assistance to Greece and Turkey), economic aid to Japan, US expenditures in  Europe for NATO, and for the Korean War were all part of an effort to get the world economy back on track. In addition to direct aid, the US allowed Europe and Japan to ignore the GATT trading system that was also part of the Bretton Woods system. Thus, protecting domestic industries, these countries were able to establish trade surpluses with the US.

i. it worked very well, and by 1950, European industrial production had risen 64%. Real recovery didn't really allow the full implementation of the Bretton Woods system, however, until 1960.

Click Here for a thorough look at the Bretton Woods System

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