Cold War and Contemporary International Political

Economy
Chapter Three: Cold War and the Contemporary IPE

Brainstorming Questions
-What was the Cold War?
-How did the Cold War end?
-Why was the Cuban missile crisis such an important event in the Cold War?

3.1. The Cold War: Its Origin, Development and Emergence

The Cold War was a battle of ideas/ideologies between the super powers (USA and USSR) and their respective allie

USandtheWestern European Democracies

Soviet Union & Eastern European Bloc Nations

Goal  Spread World-wide Communism Goal “Containment” or limit the

the Spread of Communism

Hence, the Cold War was arising after the end of World War II, between two rigidly hostile blocs, one led
by the Soviet Union (communism/socialism), the other by the United States (capitalism) and their
respective allies. For nearly two somber and dangerous decades this antagonism dominated the fears of
mankind; it may even, on occasion, have come close to blowing up the planet.

The Origin of the War:

The War was originated following the surrender of Nazi German in May 1945 near the close of WWII, the
uneasy wartime alliance between the US and Great Britain on the one hand and the Soviet Union on the
other began to unravel. By 1948 the Soviets had installed left-wing governments in the countries of Eastern
Europe that had been liberated by the Red Army. The Americans and the British feared the permanent
Soviet domination of Eastern Europe and the threat of Soviet-influenced communist parties coming to
power in the democracies of Western Europe. The Soviets, on the other hand, were determined to maintain
control of Eastern Europe in order to safeguard against any possible renewed threat from Germany, and
they were intent on spreading communism worldwide, largely for ideological reasons. The Cold War had

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solidified by 1947–48, when U.S. aid provided under the Marshall Plan (an economic recovery act signed
by president Truman in 1948 and named after the secretary of state who the US provide economic
assistance to restore the economic infrastructure of post war Europe) to Western Europe had brought
those countries under American influence and the Soviets had installed openly communist regimes in
Eastern Europe.
Development of the War:

The Cold War reached its peak in 1948–53. In this period the Soviets unsuccessfully blockaded the Western-
held sectors of West Berlin (1948–49); the United States and its European allies formed NATO, a unified
military command to resist the Soviet presence in Europe (1949); the Soviets exploded their first atomic
warhead (1949), thus ending the American monopoly on the atomic bomb; the Chinese communists came to
power in mainland China (1949); and the Soviet- supported communist government of North Korea invaded
U.S.-supported South Korea in 1950, setting off an indecisive Korean War that lasted until 1953.
Cold War and IPE

 The Conditions that Gave Rise to Animosity between the US and USSR

Beginning with post‐Yalta acrimony/bitterness over the fate of Eastern Europe in March and April 1945,
Soviet relations with America and Britain deteriorated gradually and fitfully during 1945, and then more
sharply and steadily after the turn of the year. Occasionally productive negotiations between the two sides
continued in the Council of Foreign Ministers from the fall of 1945 until early 1947, when mutual distrust
undermined any effort at compromise. For the next five years, the Cold War—as the Soviet– American
rivalry soon became known—dominated international politics amid fears that it would erupt into a “hot war.”

Especially in 1945, President Harry Truman (who took office when Roosevelt died on April 12), Secretary of State
James Byrnes, and other US officials wanted to work with Soviet leaders to build a peaceful, cooperative
postwar world order. Indeed, Truman and Byrnes negotiated diligently for more than two weeks at the final wartime
summit conference in Potsdam, Germany, in July–August 1945, and Byrnes held many meetings with top Soviet
officials during the rest of 1945 and 1946 in order to try to work out a mutually acceptable, durable peace. But, the
ever suspicious, self‐centered Joseph Stalin blocked his foreign minister’s efforts to reach agreement on the
disarmament of Germany and other issues. He believed that, the postwar era would not be a time for continued
collaboration with the West but a new struggle between capitalism and communism, which Stalin was preparing to
meet by seizing all the advantages he could. It is now evident

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that, because of Stalin’s rigid ways of thinking and acting, western efforts to resolve key issues through
negotiations were basically futile.
As mentioned above, of the major issues in dispute, none was bitterer than that of Eastern Europe,
which Stalin believed had been settled in his favor in negotiations before and during the Yalta
Conference. Perhaps partly to compensate for the insecurity he felt upon assuming office, Truman
strongly criticized Soviet actions in Poland in a meeting with Foreign Minister Molotov on April 23,
1945.
But then, realizing that Stalin intended to dominate postwar Poland no matter what western
leaders thought, Truman quietly recognized the Russian‐dominated Polish government in
June 145. A believer in Woodrow Wilson’s ideal of national self‐determination, Truman tried
numerous tactics, including a proposal for the internationalization of the Danube River and
hard bargaining over peace treaties for Rumania and Bulgaria that was intended to weaken
Russian influence in the region. These efforts had little if any effect.
In the early postwar period Stalin did not insist on completely subservient governments in all of
the Eastern European nations; Hungary was relatively independent internally until 1947, and
Czechoslovakia until 1948. But, because he viewed Eastern Europe as vital to Russia’s
security, the Soviet leader was determined to prevent any nation in the region from developing
close economic or military ties with the West. By the late 1940s, handpicked leaders were
installed by means of political purges and show trials of dissidents, until most of Eastern Europe,
including all six countries (Albania, Romania, Czechoslovakia, East Germany, Hungary, and
Poland) that would join the Soviet Union to form the Warsaw Pact, were fully subservient to
Stalin.
Besides Eastern Europe, another frequently acrimonious issue involved policy toward defeated
Germany. At Yalta Stalin got Roosevelt to agree, as a basis for negotiations, that Germany would
have to pay $20 billion in reparations, half of it to Russia. At the Potsdam Conference (Truman
and Clement Atlee now leading the US and British delegations, respectively), Stalin pressed his
demand for $10 billion in reparations, to be collected primarily in Germany’s industrialized
western zones. But Truman and Byrnes, convinced of the need to rebuild German industry and
fearful that US aid dollars in effect would be used to pay for reparations from the western
occupation zones, refused to agree to a dollar figure on reparations for Russia and suggested that
the Soviets remove whatever equipment they could locate from their own zone in the east.
Russian leaders complained that their western counterparts had repudiated the spirit of Yalta
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and had

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shown insensitivity to Russia’s legitimate needs for recovery. The failure at Potsdam (a city near
to Berlin) to develop a common policy on Germany contributed to the gradual evolution of two
Germanys, one allied with the West and one with the Soviet state.
A third issue that produced tensions, especially in 1946 and 1947, related to three nations in
southeastern Europe and western Asia: Greece, Turkey, and Iran. This was a region of
traditional British–Russian rivalry and America was becoming increasingly involved, as it
assumed the role of the economically weakened Britain. Due to their internal instability, their
increasing importance as sources of oil, and their proximity to important trade routes in the
Middle East, these countries offered an inviting target for machinations among the great powers.
Russia had long wanted a guaranteed outlet through the Dardanelles strait to the Mediterranean,
and national minorities in the mountainous regions in eastern Turkey and northern Iran were
susceptible to Soviet influence. Moreover, Stalin did not see why the West should claim
exclusive rights to Iran’s huge oil reserves. Finally, despite Stalin’s acceptance of Britain’s
dominant position in Greece, the right‐wing Greek government was engaged in a bitter guerrilla
war against communist‐led opponents supplied by Yugoslavia and other communist nations to
the north.
In the view of some western leftists, Stalin callously abandoned the Greek rebels in exchange for
British concessions in Eastern Europe. While Greece was in fact an example of Stalin’s emphasis
on pursuing Russia’s self‐interest rather than always supporting communist‐led revolutionary
movements abroad, the rebels were still able to mount a strong campaign against the British‐
backed government.
The first public Cold War crisis occurred in March 1946, in relation to Iran. When the Iranian
government refused to grant Russia an oil concession equal to that given to Britain, the Soviets
supported a revolt in northern Iran, and refused to withdraw their troops on March 2. Britain and
Russia had jointly occupied Iran during the war in order to ensure that the oil‐rich nation did not
fall into German hands.
Byrnes, whom Truman privately and others publicly had labeled as “soft” on Russia, now moved
forcefully to demonstrate his resolve. On March 5 he sent a message to Moscow demanding the
removal of Soviet troops from Iran, informed the press of his strong stand even before receiving
a reply, and encouraged Iran to take the issue to the UN Security Council. After hearing of
alleged Russian troop movements, Byrnes angrily told an associate: “Now we’ll give it to them
with both barrels.”
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Even though the Soviets declared in late March that their army was leaving Iran, Byrnes refused
to remove the issue from the agenda of the UN Security Council. A week later, Russia and Iran
announced an agreement on Soviet troop withdrawal, coupled with oil concessions for Russia.
After the Russian troops were withdrawn, Iran, with US support, reneged on the oil agreement
and settled back into the western sphere of influence.
Economic issues other than those relating specifically to Germany and Iran separated Russia and
the West. Needing to rebuild their economy and at the same time arguing that they could help
prevent unemployment in the United States after the war, in January 1945 the Soviets requested a
$6 billion loan at low interest. The request stirred debate within the administration, but Russia
received no answer at either Yalta or Potsdam. In August the Soviets requested a $1 billion loan
from the Export– Import Bank, but the State Department stalled on the issue, finally telling the
Russians in February 1946 that the loan request was “one of a number of outstanding economic
questions” between the two nations. By then relations had cooled so markedly that the
administration almost certainly could not have obtained congressional approval for a loan even if
it had asked for one. Russia, for its part, chose not to join the two US‐dominated organizations
designed to ensure postwar prosperity, the WB and the IMF. Stalin thus had decided that there
would not be one cooperative world economy, as western leaders had hoped, but rather two
competing ones.
The US–Soviet relations was social instability and the related rise of the political left throughout
Europe in the early postwar years. The devastation caused by the war, combined with the leading
role of communist and socialist parties in opposing right‐wing dictators like Hitler and Spain’s
Francisco Franco, led to the growing influence of left‐wing parties in much of Western and
Southern Europe. Russia was not responsible for the social instability and contributed only
modestly to the rise of the left, but US leaders feared that the Soviets might benefit from these
trends and that such key western countries as France and Italy might end up with governments
dominated by communists with close ties to Moscow.
Another important issue was US–Soviet rivalry in East Asia, especially in regard to Japan and
China. At Yalta, Roosevelt and Churchill had acceded to Stalin’s demands for territorial
concessions from Japan—notably the Kurile Islands and the southern half of Sakhalin Island—
but Russia never achieved an effective voice in the occupation of Japan. “I was determined that
the Japanese occupation would not follow in the footsteps of our German experience,”
Truman
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recalled. “I did not want divided control or separate zones.” Soviet leaders negotiated vigorously
in the early postwar period to try to increase their influence on Japan’s reconstruction, but to no
avail. Although American unilateralism in postwar Japan angered Stalin, there was little he could
do about it short of starting a war.
Under the leadership of General Douglas MacArthur, America dominated Japan, transforming
the former enemy into a close and increasingly prosperous ally. Over Soviet objections, the
United States and fifty other nations signed a peace treaty with Japan in September 1951; and in
a separate security treaty the United States ensured that its armed forces and weapons could
continue to be deployed there. As Edwin O. Reischauer, an eminent scholar of Japanese history,
noted in 1950: “Our position there is not very different from that of Russia in the smaller
countries of Eastern Europe, however dissimilar our motives may be.”

 The Early Stages of the Cold War: Truman Doctrine, Marshall Plan

President Harry S. Truman was determined to keep Soviet influence contained within existing
boundaries. His Cold War policy was known as containment. The Truman Doctrine and Marshall
Plan are examples of how the United States sought to prevent communism from spreading
(containment).

The Truman Doctrine

With Greece in a civil war and Turkey facing a potential Soviet attack, President Truman ordered that something
U.S. effectively abandoned its policy of isolationism, and became involved in conflicts that were far from home.

President Harry S. Truman

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The Marshall Plan

One example of the Truman Doctrine’s impact was the Marshall Plan.

After WWII, much of Western Europe had been physically and

economically destroyed and was at risk for a potential communist
takeover. Communist parties in France and Italy had gained a lot of
popularity, and the U.S. saw the need to take action to stop the spread
of Communism. Secretary of State George Marshall issued a call for
economic aid to help rebuild Western Europe. Marshall feared that the
poor, unemployed, and homeless might turn to communism as a
solution to their problem. The Marshall Plan would provide nearly $12
George Catlett Marshall
billion in aid to rebuild Western Europe. As life in those nations
(1880 -1959)
improved, the appeal of communism faded.

Critical Thinking: Do you agree with the US policy of containment? Why or why not?

 Cuban Missile Crisis (October 1962)

Was a major confrontation that brought the United States and the Soviet Union closer to war
over the presence of Soviet nuclear-armed missiles in Cuba.
Having promised in May 1960 to defend Cuba with Soviet arms, the Soviet premier Nikita
Khrushchev assumed that the United States would take no steps to prevent the installation of
Soviet medium- and intermediate-range ballistic missiles in Cuba. Such missiles could hit much
of the eastern United States within a few minutes if launched from Cuba. The United States
learned in July 1962 that the Soviet Union had begun missile shipments to Cuba. By August 29
new military construction and the presence of Soviet technicians had been reported by U.S. U-2
spy planes flying over the island, and on October 14 the presence of a ballistic missile on a
launching site was reported.
After carefully considering the alternatives of an immediate U.S. invasion of Cuba (or air strikes

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of the missile sites), a blockade of the island, or further diplomatic maneuvers, John F. Kennedy
(US president ) decided to place a naval “quarantine,” or blockade, on Cuba to prevent further
Soviet shipments of missiles. Kennedy announced the quarantine on October 22 and warned that
U.S. forces would seize “offensive weapons and associated materiel” that Soviet vessels might

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attempt to deliver to Cuba. During the following days, Soviet ships bound for Cuba altered
course away from the quarantined zone. As the two superpowers hovered close to the brink of
nuclear war, messages were exchanged between Kennedy and Khrushchev amidst extreme
tension on both sides. On October 28 Khrushchev capitulated, informing Kennedy that work on
the missile sites would be halted and that the missiles already in Cuba would be returned to the
Soviet Union. In return, Kennedy committed the US to never invading Cuba. Kennedy also
secretly promised to withdraw the nuclear-armed missiles that the US had stationed in Turkey in
previous years. In the following weeks both superpowers began fulfilling their promises, and the
crisis was over by late November. Cuba’s communist leader, Fidel Castro, was infuriated by the
Soviets’ retreat in the face of the U.S. ultimatum but was powerless to act.
The Cuban missile crisis marked the climax of an acutely antagonistic period in U.S.-Soviet
relations. The crisis also marked the closest point that the world had ever come to global
nuclear war. It is generally believed that the Soviets’ humiliation in Cuba played an important
part in Khrushchev’s fall from power in October 1964 and in the Soviet Union’s determination to
achieve, at the least, a nuclear parity with the United States.
 Nuclear Proliferation

Nuclear proliferation is the spread of nuclear weapons and weapons-applicable nuclear

technology.
The super powers (USA and Soviet Union) were the most nuclear armed nations under the
shadow of the cold war. The USA developed Nuclear weapons during WWII. They used them to
end the war, dropping two bombs on Japan (Hiroshima and Nagasaki) on August 1945.
The Soviet Union didn’t have access to nuclear weapons until 1949. As they were the USA’s
Allies in WWII they wanted the USA to share the technology with them- but the USA refused
(another reason for tension).
Once both sides had ‘the Bomb’, they each tried to build even bigger version. The Soviet and
then the USA developed a hydrogen bomb, bigger even than the atomic bombs used on Japan.
 Non Allied Movement (NAM)

The Non-Aligned Movement emerged in the context of the wave of decolonization that
followed WWII. In other words, it emerged as an expression of the efforts of a large number of
developing countries, mostly in the process of decolonization, as a kind of political

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alternative to avoid opting for one military-political bloc during the Cold War division of
the world and articulate an independent foreign policy approach.
The principles of peaceful coexistence were outlined at the conference in Bandung
(Indonesia) in 1955, and the first Conference of Non-Aligned Countries was held in 1961 in
Belgrade at the initiative of the Socialist Federal Republic of Yugoslavia. At the 1955 Bandung
Conference (the Asian-African Conference), the attendees, many of whose countries had recently
gained their independence, called for abstention from the use of arrangements of collective
defense to serve the particular interests of any of the big powers.
During the Cold War Era, the Non-Aligned Movement played a significant role in preserving
peace and calming the competition between the two blocks, and especially in accelerating the
decolonization process. It was an important factor in the struggle for the respect of equality
and sovereignty of countries, and in efforts towards a balanced economic and social
development.
Centrally in the context of the Cold War, the NAM argued, countries of the developing world
should abstain from allying with either of the two superpowers (the United States and the USSR)
and should instead join together in support of national self-determination against all forms of
colonialism and imperialism. The Non-Aligned Movement was founded and held its first
conference (the Belgrade Conference) in 1961 under the leadership of Josip Broz Tito of
Yugoslavia, Gamal Abdel Nasser of Egypt, Jawaharlal Nehru of India, Kwame Nkrumah
of Ghana, and Sukarno of Indonesia.
As a condition for membership, the states of the NAM cannot be part of a multilateral military
alliance (such as the NATO) or have signed a bilateral military agreement with one of the “big
powers” if it was “deliberately concluded in the context of Great Power conflicts.” However, the
idea of nonalignment does not signify that a state ought to remain passive or even neutral in
international politics. On the contrary, from the founding of the NAM, its stated aim has been to
give a voice to developing countries and to encourage their concerted action in world affairs.
 New International Economic Order (NIEO)

The NIEO is a set of proposals advocated by the developing countries to end economic
colonialism and dependency through a new interdependent economy. The main NIEO document
recognized that the current international economic order was established at a time when most of
the developing countries did not even exist as independent states and which perpetuates

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inequality. In the spirit of

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trade not aid, the NIEO called for changes in trade, industrialization, agricultural production,
finance, and transfer of technology. The United Nations General Assembly adopted the
Declaration for the Establishment of a NIEO and its accompanying program of action on 1 May
1974. The key elements of the new international economic order include; creation of key
institutions that need to be created for bringing about the new order—a single world
development authority to ensure global equality of opportunity; an international central bank
which allows developing countries to control some of the sources of finance, creation and
regulation of international currency, an international trade organization to ensure greater
market access for developing countries, for more control over trading infrastructure and for free
movement of labour and other goods and services; and a world food authority to ensure that
food is available to all. Its proposals called for the sweeping transformation of the global
economy, but most of them never came to being implemented. In fact, during the following
decades, the world economy evolved not toward the NIEO vision of multilateral oversight and
income redistribution but in the opposite direction, toward a more purely market based
approach that has variously been called globalization, liberalism, market fundamentalism, or
the “Washington Consensus”.
The End of the Cold War and IPE

Gorbachev, Perestroika, and Glasnost

During the forty years from the mid‐1940s through the mid‐1980s, the Cold War melodrama,
starring USA and USSR but also featuring such colorful actors as China and Cuba, held center
stage in world affairs. This melodrama was still going strong when Mikhail Gorbachev took
power in the Soviet Union on March 11, 1985 and would continue to attract audiences for
several years thereafter. But the Cold War was soon eclipsed in the world’s imagination by
several compelling new dramas: Gorbachev’s efforts to revitalize socialism in the Soviet system
through glasnost (openness to public debate) and perestroika (restructuring of the economy);
growing movements to overthrow the communist regimes in eastern Europe; and, finally, the
intertwined movements toward democracy and disintegration within the Soviet Union itself.

Why did these huge changes occur in the Soviet Union and Eastern Europe?

“Four decades of imperial expansion in all directions could not be sustained on the basis of an
unworkable economic model. The US, despite its divisions and vacillations, had preserved the
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essential elements of a situation of strength; over two generations it had built an informal anti‐
Soviet coalition of every other major industrial center and most of the developing world.

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Gorbachev realized that the Soviet Union could not sustain its prevailing course, but he
underestimated the fragility of the Soviet system. His calls for reform—glasnost … and
perestroika
… —unleashed forces too disorganized for genuine reform and too demoralized to continue
totalitarian leadership”.
The Cold War ended in a long series of actions and events that resulted largely from “new
thinking” in the Soviet Union in the late 1980s and early 1990s. Some of the new thinking and
reforms were the following:
 First, unmistakable actions undertaken by leaders like Gorbachev and Foreign Minister
Eduard Shevardnadze in order to put an end to the repression of Soviet citizens and to the
threatening of other countries and thereby, in Gorbachev’s words, to gain acceptance “as a
country like the others in the West”;
 Second, Soviet decisions to reduce Russia’s nuclear and conventional forces, either through
unilateral actions or through negotiations (e.g., the US–Soviet agreement in 1987 to eliminate
all medium‐range missiles in Europe);
 Third, the Soviet decision in 1989 to let the nations of Eastern Europe (including East
Germany) determine their own future, which thus ended both communist rule in the region
and the post‐ World War II division of Europe;
 Fourth, Gorbachev’s decision in 1990 to permit a reunited Germany to remain in NATO; and,

 Fifth, the failure of the coup against Gorbachev and his reforms attempted by conservatives in
the Soviet Communist Party in 1991, which finally ended the ideological conflict between
totalitarian–communist Russia and democratic–capitalist America that had been the central
component of the Cold War.
By exposing most Russians’ hatred of communism and their appreciation of Boris Nikolayevich
Yeltsin’s (first president of Russian Federation from 1991-1999 and who was the member the
Communist Party of the Soviet Union from 1961 to 1990) outspoken opposition to the coup and
to all communist leaders, including Gorbachev, the unsuccessful coup hastened the end of
Gorbachev’s rule—and the end of the Soviet Union—on December 25, 1991. Ironically,
Gorbachev, a communist reformer but not a revolutionary, never intended to bring about either
the end of communist rule or the breakup of the Soviet Union.

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The Collapse of the Soviet Union
Mikhail Gorbachev was the leader of the Soviet Union from 1985 to 1991. In terms of the Cold War, he was known for
He knew his country could not continue an arms race against the USA. Because the Soviet economy was in bad shape. M

Once the people in these countries got a taste of freedom, many of them did not want to remain
citizens under communist governments anymore – now that they could speak out, citizens
demanded independence.
By the late 1980’s, communist governments began to fall and many Eastern European countries
replaced their old communist regimes with more democratic forms of government and allowed
more capitalism.
What was the USA’s involvement in the collapse of the Soviet Union?

3.3.

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The Contemporary IPE : International Institutions, US Unipolarity, Constraints on
US Power, and Global Governance
The post-war world economy

The institutions and framework of the world economy have their roots in the planning for a new
economic order which took place during the last phase of the Second World War. In 1944,
policy- makers gathered at Bretton Woods in the United States to consider how to resolve two
very serious problems. First, they needed to ensure that the Great Depression of the 1930s
would not happen again. In other words, they had to find ways to ensure a stable global
monetary system and an open world trading system (see box 1). Second, they needed to rebuild
the war-torn economies of Europe.

Ronald Reagan was the president of the United States from 1981 to 1989. In term
Germany became a unified country once again. The East German government ope
People celebrated in the streets, climbing on the Berlin Wall and breaking it apart
Eventually, the Soviet Union dissolved in the early 1990s. It broke into several in
The collapse of the Soviet Union marked the end of the Cold War and Western fe

Ronald Reagan
The 40th President of the United States serving from 1981 to 1989

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Box 1: Planning the post-war economy and avoiding another Great Depression
The Great Depression had been greatly exacerbated, if not caused, by `beggar thy neighbor’
economic policies. In the late 1920s and 1930s, governments all over the world tried to
protect themselves from economic crisis by putting up trade barriers and devaluing their
currencies. Each country believed that by doing this they would somehow manage to keep
their economy afloat while all around them neighboring economies sank. The Great
Depression demonstrated that this did not work. At the end of the war, the challenge was to
create a system which would prevent this, in particular by ensuring:
 A stable exchange rate system.
 A reserve asset or unit of account (such as the gold standard).
 International capital flows could be controlled.
 The availability of short-term loans to countries facing a temporary balance of
payments crisis.
 Rules to keep economies open to trade.

At Bretton Woods three institutions were planned in order to promote a new world economic order.

The International Monetary Fund was created to ensure a stable exchange rate regime and the
provision of emergency assistance to countries facing a temporary crisis in their balance of
payments regime. The International Bank for Reconstruction and Development (IBRD and later
called the World Bank) was created to facilitate private investment and reconstruction in Europe.
The Bank was also charged with assisting `development’ in other countries, a mandate which
later

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became the main reason for its existence. Finally, the General Agreement on Trade and Tariffs
(GATT) was signed in 1947 and became a forum for negotiations on trade liberalization.
Box 2: The Bretton Woods Institutions: the IMF and World Bank

Both the IMF and the World Bank were established in 1946 after wartime negotiations held at
Bretton Woods in the United States. The IMF was created to promote international monetary
cooperation and resolve the interwar economic problems, although several of these functions
ended when the Bretton Woods system broke down in 1971. The IMF now has a membership
of 183 countries each of whom contributes a quota of resources to the organization
(proportionate to the size of their economy) which also determines their percentage of voting
rights and the amount of resources to which they can have automatic access. Since the 1980s,
the IMF has become an institution offering financial and technical assistance to developing
and transition economies. The terms on which countries receive assistance include the
government having to commit to undertake specific `conditions’ or policy reforms, called
`conditionality’. What we now call the World Bank started out as the International Bank for
Reconstruction and Development (IBRD), an agency to foster reconstruction in war-torn
Europe as well as development in the rest of the world. It has since become the world's largest
source of development assistance, providing nearly $16 billion in loans annually to eligible
member countries, through the IBRD, the International Development Association (IDA), the
International Finance Corporation (IFC) and the Multilateral Guarantee Agency (MIGA). As
with the IMF, the World Bank requires members to whom it lends money to undertake
specific reforms within their economy. Most recently this has included requiring borrowing
governments to demonstrate their commitment to reducing poverty within their countries.
With the exception of IDA (which is funded by donations), the World Bank’s resources come
from its issue of bonds in the capital markets. These bonds are backed up by guarantees
provided by the governments who belong to the institution.

From G-7 and G-8 to the G-20

In the uncertain years following the 1971 collapse of the Bretton Woods (WB & IMF) system of
fixed international exchange rates tied to the price of gold and the 1973 oil crisis, the need for
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better coordination of economic and financial policy at the highest level became evident. Finance
ministers from key countries led the way. On March 25, 1973, the finance ministers of Britain,

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France, Germany and the United States met and formed the “Library Group,” named after the
venue of their initial meeting — the White House Library. In September of that year, they were
joined by the Japanese finance minister, and this group (subsequently known as the Group of
Five [G5]) met periodically for more than a decade.
Following these exploratory meetings, French President Valery Giscard d’Estaing in 1974,
invited the heads of government from the United States, Britain, West Germany, Japan and Italy
to a summit the next year at Rambouillet, France. In 1976, the group was expanded to seven
(United States, Japan, Germany, the United Kingdom, France, Italy, and Canada), with the
addition of Canada. Beginning in the early 1990s, Russia began participating in some of the
sessions with G7 leaders during their summits and, at the invitation of the G7, Russia formally
joined the group in 1997. The G7 thus became the G8 (United States, Japan, Germany, the
United Kingdom, France, Italy, Canada and Russia).
Hence, the initial composition of the group clearly represented the dominant economic powers of
the day, and these countries shared the additional characteristics of being democratic, largely
“Atlantic-oriented” and militarily allied to the United States.

The G20 or Group of Twenty is an intergovernmental forum comprising 19 countries and

the European Union (EU). It works to address major issues related to the global economy, such
as international financial stability, climate change mitigation, and sustainable development.

The G20 is composed of most of the world's largest economies, including both industrialized
and developing nations; it accounts for around 80% of Gross World Product (GWP),75%
of international trade, two-thirds of the global population, and 60% of the world's land area.

The G20 was founded in 1999 in response to several world economic crises. Since 2008, it has
convened at least once a year, with summits involving each member's head of
government or state, finance minister, or foreign minister, and other high-ranking officials; the
EU is represented by the European Commission and the European Central Bank. Other
countries, international organizations, and nongovernmental organizations are invited to attend
the summits, some on a permanent basis.

At its 2009 summit, the G20 declared itself the primary venue for international economic and
financial cooperation. The group's stature has risen during the subsequent decade, and it is
recognized by analysts as exercising considerable global influence; it is also criticized for its

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limited membership, lack of enforcement powers, and for the alleged undermining of existing
international institutions. Summits are often met with protests, particularly by anti-globalization
groups.

The US Unipolarity

What is polarity? Is a theoretical construct; real international systems only approximate various
polar ideal types. The polarity concept implies a threshold value of the distribution of
capabilities. International relations scholars have long defined polarity as a state that; (1)
commands an especially large share of the resources or capabilities states can use to achieve
their ends and that
(2) excels in all the component elements of state capability, conventionally defined as size of
population and territory, resource endowment, economic capacity, military might, and
organizational-institutional “competence.”
What is a unipolar system? Is one whose structure is defined by the fact of only one state
meeting these criteria. With the collapse of communist regimes in Eastern Europe and
disintegration of the Soviet Union, the bipolar international system dominating the Cold War
period disappeared, leaving its place to basically a unipolar system under the leadership of the
US, speaking especially from a military/political point of view. The former rivals of the US,
especially the Soviet Union and China, have either collapsed or jettisoned the central features of
their ideologies that were hostile to the US. Other countries have turned to American military
protection. The “American Empire” may best be seen operating in the Persian Gulf, Iraq, and the
Middle East, in general, where the armed forces of the US have established a semi-permanent
foothold and thousands of soldiers deployed at bases keep watch on Iran, Syria, and other
“potential enemies”.
The US primacy in the global distribution of capabilities is one of the most salient features of
the contemporary international system. The end of the cold war did not return the world to multi-
polarity or bipolarity. Instead the US - already materially preeminent - became more so. We
currently live in a one superpower world, a circumstance unprecedented in the modern era. No
other great power has enjoyed such advantages in material capabilities - military, economic,
technological, and geographical. Other states rival the US in one area or another, but the
multifaceted character of American power places it in a category of its own. The sudden collapse
of the Soviet Union and its empire, slower economic growth in Japan and Western Europe during
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the 1990s, and Americas outsized military spending have all enhanced these disparities. While in
most historical eras the distribution of capabilities among major states has tended to be
multipolar

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or bipolar - with several major states of roughly equal size and capability - the United States
emerged from the 1990s as an unrivaled global power. It became a "unipolar” state.

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