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READ: Devastation of Old Markets

World War II broke the world. As the United States and Soviet Union tried to put it back together, they clashed in the Cold War. While many economies recovered and grew, the Cold War also produced a global system of inequality between rich and poor nations.
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  1. Why did the United States launch the Marshall Plan?
  2. The article cites two arguments about the “economic miracles” in Germany and Japan. What are the two arguments?
  3. Why were wealthy nations able to continue to exploit their former colonies even after they had gained independence?
  4. How did some African and Asian leaders fight back against this sort of dependency?
  5. What groups of Americans did not share in the new economic prosperity in the United States?

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  1. This article gives the examples of Mosaddeq, Nasser, Allende, and Nkrumah as leaders who resisted economic dependence. What were some ways that decolonization collided with the Cold War to shape global production and distribution after 1945?
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Devastation of Old Markets

Five men stand together in front of a grand staircase.
By Bennett Sherry
World War II broke the world. As the United States and Soviet Union tried to put it back together, they clashed in the Cold War. While many economies recovered and grew, the Cold War also produced a global system of inequality between rich and poor nations.

Rebuilding the world: Origins of the Cold War

The Second World War changed how humans made, traded, and consumed goods. The war devastated the nations of Europe and East Asia. As many as 80 million people died in the war. After the war, nations sought to rebuild and rethink the global system, but there was disagreement over how best to rebuild. The biggest disagreements were between the United States and the Soviet Union.
The tensions between the two superpowers sparked the Cold War. It was called a "cold" war because the two superpowers rarely fought directly against one another. Instead, they engaged in an arms race and tried to spread their influence around the world. Each superpower championed their economic model as the path to prosperity and peace. Each portrayed the other as evil. The Soviets believed in state-planned economies (where decisions and ownership are collectively held by the state rather than private owners). But the Americans were champions of free markets. In their attempts to win over other countries to their side of this debate, both governments sent huge amounts of financial and military aid to their allies.
After the Second World War, the Soviet Union was expanding in Eastern Europe and Asia. The United States wanted to rebuild Western Europe and Japan to create a buffer against the Soviet expansion. So in 1948, the United States launched the Marshall Plan, named after Secretary of State George Marshall. This plan gave billions of dollars in economic aid to seventeen countries in western and southern Europe. The Soviet Union and its allies in Eastern Europe refused aid from the Marshall Plan. But American efforts were a huge success in Western Europe. Immediately after the war, the infrastructure of England, France, Germany, and Japan was in ruins. The bombs and tanks of both Axis and Allied powers had destroyed whole cities. In 1945, millions of Germans were homeless, and their money was nearly worthless. Yet with aid from the United States and the implementation of new policies, within two decades, the Germany economy was the largest in Europe. Japan, the United Kingdom, France, Greece, and other American allies underwent similar economic "miracles" as the world rebuilt.
People walk through a city that has been reduced to ruins. A statue of a man on horseback stands on top of a pile of rubble, next to a bombed-out building. One person drives a military vehicle through the wreckage and several others walk through.
The German city of Nuremberg in ruins, 1945, on the right is a statue of Kaiser Wilhelm I. By National Archives and Records Administration, public domain.
Historian David Landes wrote about the Japanese and German recoveries. He insisted they were built on "work, education, determination," and American financial assistance. The aim of American aid to these countries was to "parry [block] the perceived Russian threat." The sociologist Immanuel Wallerstein, however, disagreed. He argued that the post-war recovery of Europe and Japan was less idealistic on the part of the Americans. Instead, he claimed that the Americans helped because the "world-economy needed the re-entry of these countries both as major producers and as major customers for US production." The Americans embraced the idea of a "free world" in opposition to the communist world of the Soviet Union. They hoped that the success of their allies would convince more countries to join the American side. By the 1950s, the American government saw all foreign policy in the context of the global Cold War.

Decolonization and economic dependency

One of the most important changes after World War II was the collapse of European empires in Africa and Asia. With their economies in shambles from the war, European governments couldn't maintain the costs of empire. In 1945, over a third of the world's people lived in a colonized nation. Between 1945 and 1970, nearly every colonial nation gained their independence.
As European nations lost their colonies in Africa and Asia, several things happened. The importance of Europe in global politics declined. From 1946 to 1970, membership in the United Nations grew from 35 states to 127. The leaders of the newly independent nations of Africa and Asia travelled to the United Nations. They spoke out against economic exploitation. They also spoke against racial inequality around the world. In the 1960s, the Non-Aligned Movement emerged. It was led by Indian prime minister, Jawaharlal Nehru. Members of this movement refused to side with either the United States or Soviet Union. Instead, they decided to invest in their own countries.
Three men sit at a table, smiling, each looking over a piece of paper. One man is writing something down.
Gamal Abdel Nasser (Egypt), Josip Broz Tito (Yugoslavia), and Jawaharlal Nehru (India) at the Conference of Non-Aligned Nations held in Belgrade, September, 1961. Public domain.
West European and Japanese economic revival was built on the exploitation of Europe’s former colonies. Europe and Japan used American money to rebuild their countries. But they also needed raw materials. Under European imperialism, Europeans relied on people in Africa, Asia, and Latin America to produce cash crops. Cash crops were sold abroad to profit the empire rather than consumed locally. Some examples include sugar, cacao, rubber, and cotton. These crops were shipped from former European colonies to the rich nations of Europe and North America. There, they were turned into consumer goods like chocolate bars, car tires, and cheap t-shirts and resold at a profit. This is how African cacao and the labor of workers (many of them children) becomes candy bars in American grocery stores.
African farmers used their best land to produce cash crops, on which they were economically dependent. With less land left for food crops, many African nations depended on food imports or aid from wealthy countries. This created a system of dependency. Wealthy countries became richer by turning resources from poor countries into consumer goods. Poor countries became dependent on foreign trade, foreign loans, and foreign aid to feed their people. The political dominance of imperialism quickly turned into the economic dependency of neo-colonialism, a term coined by Ghana’s first president, Kwame Nkrumah, to describe this cycle of inequality between rich and poor nations.
Two presidents, dressed in suits, stand next to each other at a podium in front of two microphones.
President John F. Kennedy Meets with the President of the Republic of Ghana, Dr. Kwame Nkrumah, March 8, 1961. By Abbie Rowe, John F. Kennedy Presidential Library and Museum, public domain.
Leaders in Africa, Asia, and Latin America tried to escape this cycle of dependency. They did this by building industry in their own countries. Often, they would try to do this by nationalizing industry. Nationalizing industry means taking private industries and placing them under the public ownership of the government. Iran's prime minister Mohammed Mosaddeq nationalized his country's oil industry. Until 1953 Iran's oil industry had been controlled by the Anglo-Iranian Oil Company (today known as BP). In Egypt, President Gamal Abdel Nasser nationalized the Suez Canal in 1956. That ended almost a century of British ownership. Other leaders such as President Kwame Nkrumah of Ghana and President Salvador Allende of Chile engaged in similar projects of state-led industrialization.
The American government saw all foreign policy as part of the Cold War. As a result, they were suspicious of these kinds of policies aimed at economic independence. The US suspected them of being associated with communism and the Soviet Union. American presidents, Congress, the military, and intelligence agencies therefore often acted to combat these policies of nationalization. They saw the policies as the spread of communism. Mosaddeq, Nkrumah, and Allende were all removed from power in coups. In each of these coups the CIA played a role or is suspected of doing so. In all three cases, the new governments realigned their countries with the United States and privatized their nation's industries. Often, the rise of dictators followed the fall of nationalist leaders. In Iran, for example, Mohammad Reza Shah Pahlavi ruled his country after 1953 as a strongman until the 1979 Iranian Revolution.
A picture of two smiling men standing next to one another. Both are dressed in suits and ties.
The Shah of Iran, Mohammad Reza Pahlavi, and American President, Lyndon B. Johnson, June 5, 1964. By Library of Congress, Public Domain.

Consumption and inequality

The revival of Western Europe and Japan and new American wealth created a boom in consumerism. Americans moved to the suburbs to live in houses that they filled with washing machines and new plastic consumer goods. They bought cars to drive them from their houses to jobs in cities. These cars needed oil, first from Texas, and later from countries in the Middle East. As consumerism increased in wealthy countries, demand skyrocketed for raw materials like cacao, coffee, and rubber from poorer countries.
An advertisement for a washing machine shows a picture of a blonde woman in a blue dress smiling in front of a washing machine, holding a pile of neatly folded towels. A headline reads “The World’s Finest Automatic Washer!”
1950 General Electric Automatic Washer Advertisement, Life Magazine, March 27, 1950. By SenseiAlan, CC BY 2.0.
But inequality was also a problem within wealthy nations. For example, as white consumer classes thrived in the United States, black consumers found themselves excluded from the new American dream of cars and homes in the suburbs. In many cases, such as Jim Crow segregation in the south and redlining1 in the north, official policies and laws systematically denied equal economic opportunity.
A billboard reads “The more WOMEN at work the sooner we WIN”, and depicts a woman in a red uniform working on an airplane window.
Woman working in an airplane factory, 1943, by Alfred T. Palmer, Office of War Information, Bureau of Public Inquiries. By Library of Congress. Public domain.
The end of the Second World War also signaled setbacks in gender equality in the United States. Women had kept American factories running while men fought in Europe and the Pacific. Historian Lizabeth Cohen writes that women had driven the wartime economy with their labor and consumption. But they were relegated to the domestic sphere as men returned from the battlefields to the factories. In fact, there were new tax systems in the US They encouraged traditional patriarchal (male- dominated) households "of male breadwinner father and homemaker mother, thereby making women financially dependent on men."
The period from 1945 to 1970 saw the rebuilding of some of the world's largest economies. One third of the human population was liberated from the bonds of empire. However, this period also started the Cold War and the system of dependency. Both produced decades of conflict. They also produced massive inequalities between the richest and poorest nations and people. These inequalities would only worsen in the 1970s and 1980s, and many continue today.
Author bio
Bennett Sherry holds a PhD in History from the University of Pittsburgh and has undergraduate teaching experience in world history, human rights, and the Middle East at the University of Pittsburgh and the University of Maine at Augusta. Additionally, he is a Research Associate at Pitt’s World History Center. Bennett writes about refugees and international organizations in the twentieth century.

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