The Cold War and Its Continuing Impact on the U.S. Economy Now

Geopolitical conflict from decades ago still touches our lives today

Tank crossing Checkpoint Charlie into East Berlin during Cold War.

 Express Newspapers/Getty Images

Table of Contents
Table of Contents

The Cold War was a political, economic, and military confrontation between capitalism and communism that lasted from 1945 to 1991, but it continues to influence our lives today. The countries involved were the U.S. and most nations located in Western Europe, along with their allies, versus the Soviet Union, China, and their allies.

The term “Cold War” was first coined by novelist George Orwell in his 1945 article “You and the Atom Bomb.” Orwell wrote about how the atom bomb enabled a stable “. . . state which was at once unconquerable and in a permanent state of ‘cold war’ with its neighbors.”

Who Was Involved?

After World War II, the Soviet Union set up pro-communist regimes in six border countries in Eastern Europe: Albania, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. It used them as a buffer against the U.S. allies of France, West Germany, Italy, and Greece, who became their non-combatant enemies. 

At its height, the Soviet Union annexed 14 countries beyond Russia: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldavia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. The former Yugoslavia was communist but was not a satellite state.

China became communist in 1949. Communist North Korea, supported by China and Russia, invaded U.S. ally South Korea in 1950, triggering the Korean War. Later, the Vietnam War also was fought by U.S. forces to contain communism, but it was won in 1975 by the communist North Vietnamese.

How the Cold War Started

The Cold War had its roots in World War II. At the war’s end in 1945, the Potsdam Conference divided Germany and its capital, Berlin, as well as Austria and its capital, Vienna. The stakeholders were the Soviet Union, the U.S., the U.K., and France. During the conference, President Harry Truman mentioned to Soviet leader Joseph Stalin that the U.S. had successfully tested an atomic bomb. His implied threat chilled relations between the two former World War II allies and kicked off decades of Cold War animosity and espionage between the two sides.

Lasting Effects

The impact of the Cold War can still be seen worldwide, roughly 75 years after its start. Many of the effects of the Cold War are so ingrained in the American experience that we just take them for granted. We’ve learned to live with the threat of nuclear annihilation and ongoing conflicts in world hotspots. At the same time, we’ve benefited from the technological innovations sparked by NASA and other advances of the era.

Among the institutions and infrastructure that form its legacy are NASA; expanded trade with China; omnipresent nuclear threats; multilateral aid organizations like the World Bank and International Monetary Fund (IMF); and the extensive U.S. interstate highway system.

Space Race

NASA has done more than land a man on the moon. In 2020, for example, it funded 23 research concepts with $7 million to further space technologies.

Between 1976 and 2019, NASA created more than 2,000 inventions that later became products or services. These include kidney dialysis machines, CAT scanners, and even freeze-dried food.

The Space Race started in 1957, when the Soviet Union launched Sputnik I, the world's first space satellite, which then fueled competition with the U.S. NASA was created in 1958 to advance U.S. leadership in rocketry, satellites, and space exploration. That same year, Americans launched the Explorer I satellite.

Expanded Trade With China

The Cold War began to thaw in 1969 with the Nixon Doctrine. The U.S. would no longer send its troops to Asia, except for nuclear threats. The Nixon Doctrine allowed President Richard Nixon to decrease defense spending and open up relations with China, which has led to enhanced bilateral trade with the rising superpower that totaled $558 billion by 2019.

Nuclear Weapons

One chilling component of the bipolar Cold War was its reliance on nuclear threats. Worries about nuclear annihilation led to the Space Race and the construction of the U.S. interstate highway system.

The Cold War divided Europe into free-market versus communist countries. Because both the U.S. and U.S.S.R. had nuclear weapons, other countries felt they needed to be similarly armed. The U.K., France, Israel, Pakistan, China, India, and North Korea all eventually acquired nuclear capabilities.

The Congressional Budget Office (CBO) notes that the U.S.’s current nuclear forces are reaching the end of their service life. They need to be refurbished or replaced by 2040.

Multilateral Cooperation and Aid 

The 1948 Marshall Plan, launched by the U.S. after World War II, eventually poured $12 billion into helping Western Europe rebuild its economies and prevent communist infiltration. This type of multinational cooperation and aid driven by the U.S. was a hallmark of efforts made by the West for years to head off a “domino effect” loss of influence to the communists.

The Bretton Woods agreement of 1944 established the U.S. dollar as the world’s new reserve currency and created the World Bank and the IMF to help with postwar reconstruction and prevent financial crises. The U.S. also supported the formation of the United Nations in 1945 to prevent another world war. In 1949, the North Atlantic Treaty Organization (NATO) was created to defend the European allied nations against the Soviet Union.

Longstanding Conflicts

Some of the current instabilities in the world’s hotspots, from the Korean peninsula to Afghanistan, are rooted in the Cold War. To avoid nuclear annihilation, the two major superpowers conducted proxy wars in non-nuclear countries.

As a result, they were on opposite sides of conflicts in Korea, Vietnam, Angola, and Afghanistan. U.S. support for the Afghan mujahidin indirectly supported transnational Islamic terrorism. In 2001, that led to the direct attack on U.S. soil on 9/11.

U.S. Reliance on the Automobile

The national highway system, started by President Dwight Eisenhower in 1956, led to increased suburbanization and auto use, lower prices across the country, and the expansion of the Midwest. The well-maintained interstate system facilitated commuting. It allowed people to leave cities and move to the suburbs. Regional shopping malls sprang up to serve them. The system also led to the demise of inter-city public transit in most parts of the country, because driving became so much easier.

The system was originally part of Eisenhower’s defense strategy to allow safe transport in case of a nuclear war or other military attacks. The federal government initially allocated $25 billion to the states to build 41,000 miles of national highways.