How Did The Cold War Affect The Economy

Graham Rasy

Mr. Kramek

History Period 5

6/2/23

American Economy During the Cold War

“But the biggest thing that has happened in the world in my life, in our lives, is this: By the grace of God, America won the Cold War '' (President George H.W. Bush). The United States was deemed to have won the cold war but it came at a big risk. With the fear of communism at hand, the U.S. created new policies to strengthen the government and improve the economy. However, throughout the Cold War, the American economy suffered greatly from many economic problems. These issues were constantly overlooked causing more problems throughout the entity of the country. The inner struggles got to a state where most citizens of the U.S. had to endure complications

A high base level of defense spending during the Cold War resulted from global anti-communism(Higgs). Countries around the world were afraid of the spread of communism and so most of them focused on internal issues to prevent the spread of it. Regan amplified defense spending through his terms and as a result, overspending in the government left America in debt and with a broken and unstable economy. “Between 1978 and 1980, real military outlays increased by $15.7 billion, or 10.4 percent; between 1980 and 1987, by $84.4 billion, or 50.7 percent. For the entire nine-year buildup, annual outlays went up by $100.1 billion, or 66.4 percent”(The Cold War Economy). America went through a huge increase in military spending as the Cold War went on costing the U.S. 9 trillion dollars and under Reagan national debt tripled. American military spending also continued to rise with multiple economic regressions. “For the entire Cold War period, 1948-1989, real military purchases accumulated to a total of $7,051 billion—equivalent to nearly $10 trillion in 1992 dollars—averaging $168 billion per year” (The Cold War Economy). With a constant high spending in military and government spending, it shows why the American economy was as bad as it was during the cold war. A large sum of money was used in order to gain power in an attempt to stop the spread of communism throughout the world and

Low demand during a recession led to unemployment, cap price increases, and lower inflation(Nielsen). When a recession happened, if unemployment rose then inflation decreased and the other way around. This occurs if demand is low, inflation will lower as well just due to the fact that jobs are not needed to fill out a small need. From the years 1970-1985 Unemployment rose and fell between 4.9% to 10%. 1 ⁄ 5 to 1 ⁄ 4 of the nation could not survive on the income they earned(Naranjo). This mostly had to do with the fact that the economy was high consumption and low-savings. Because of this many people couldn't survive just on their income alone showing how much economic troubles left people in debt and some, poverty stricken. Demand-pull inflation allowed consumers to spend more money, driving up prices. Cost-push inflation resulted in higher prices but consumers were not getting the money they needed. In the mid 1970s, unemployment rose(Rust). Even with the amount of unemployment at its highest, people with jobs still could not compete with the rising inflation. Lots of things were continuing to increase and prices skyrocketed also begetting less jobs on the market for