Monday, June 18, 2007

What brought the Soviet Union down? Money.

While this post has nothing to do with religion, it does touch on my most recent post vis-a-vis how our perceptions can differ from reality (in other words, how we can bullshit ourselves) so I don't mind sharing it with you.

Like many, I've had a closely-held belief that Reagan (and by extension the United States) "won" the Cold War because our military buildup of the 1980s overwhelmed the USSR in quantity and technological quality, literally bankrupting the Soviets in their attempt to keep pace.

Turns out that's not what happened: grain and oil prices did them in. I'll spare you the in-depth analysis--feel free to follow the link--but the short of it is that due to the inherent inefficiencies in their command and control economy, the Soviet's inability to produce critical grain shipments domestically meant that they had to import huge quantities of grain to feed themselves and their communist client states. That grain required hard currency in exchange, and their primary source of hard currency was oil exports. When oil prices plummeted in the mid-1980s, their hard currency reserves dried up. They ultimately became a beggar nation. The instrument of their final collapse was a simple letter from the national bank telling the Politburo that they had run out of money.

This case study served as a reminder to me that while ideology can drive foreign affairs, even ideology requires money to survive. Money may not literally make the world spin on its axis, but it certainly does constrain--if not motivate--world politics.

So in my search to make sure my beliefs line up with reality, I find myself having to surrender a rather cherished notion of how the Cold War was "won." In fact, it ended up being lost for all intents and purposes by an empty bank account drained dry by a double whammy of ineffective agricultural policy and an overdependence on oil exports. Would high oil prices have persisted, we could have been talking about how Clinton won the Cold War, and been just as wrong about it.


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