1. New crises and new economic models

Contents

1. The decline of Keynesianism and the birth of neoliberalism
2. From détente to dislocation: the unravelling of Soviet power and the Western ascendancy

Key issues

How far do you agree that inflation was the key factor in Britain’s economic problems in the 1970s?
How justified were right wing criticisms of Social Democracy in Britain in the 1970s?
Britain’s economic problems in the 1970s were largely brought about by factors beyond their control. How far do you agree?
Assess the role of Ronald Reagan in bringing the Cold War to an end.
Assess the role of Mikhail Gorbachev in bringing the Cold War to an end.

Key terms

Neoliberalism
Inflation (Britain in the 1970s)
British industrial relations in the 1970s
Mixed Economy (Britain in the 1970s)
Détente
Reagan
Gorbachev

Discussion points

Who Governs Britain? (1974)
The Invasion of Afghanistan (1979)
The INF Treaty (1987)

The 1970s and 1980s were marked by profound ideological changes across the world. In the Western countries, a major economic crisis called into question the post-war model of the Welfare State, which had been built on strong state intervention and social safety nets. At the same time, the Eastern bloc was facing its own economic difficulties, which triggered ideological shifts and a wave of liberalisation. These changes eventually led to the collapse of the Soviet bloc and brought an end to the Cold War. This period clearly illustrates how economic pressures can influence and transform both social dynamics and political structures.

To understand these changes, it is important to recall the context that preceded them. After the Second World War, the United States played a central role in establishing what was known as the “New World Order”, particularly in the economic sphere. In 1944, the Bretton Woods Agreement was signed by 29 countries. It laid the foundations for the International Monetary System. Under this system, the US dollar became the only currency convertible into gold, with 30 grams of gold equating to 35 dollars. In 1944, the United States held three-quarters of the world’s gold reserves, which helped consolidate the dollar as the global reserve and reference currency. Other currencies had their exchange rates fixed against the dollar.

To support states in economic distress, two key financial institutions were created in Washington. The International Monetary Fund (IMF) was tasked with ensuring financial stability by overseeing national economic policies. It could intervene during economic crises, often in exchange for the implementation of free-market reforms. Alongside it, the World Bank was initially responsible for financing post-war reconstruction but later extended its role to provide loans to countries facing economic challenges.

In parallel, the United Nations, founded in 1945, contributed to the shaping of global economic governance through the General Agreement on Tariffs and Trade (GATT). Signed in 1947 by 23 countries, the GATT encouraged free trade by promoting progressive reductions in tariffs. It operated through negotiation rounds rather than as a formal institution. As a result of these efforts, customs duties on industrial products fell from 40 percent of their value in 1947 to 10 percent by 1971. The value of global exports soared, from 58 billion dollars in 1948 to 579 billion dollars in 1976.

#1. The decline of Keynesianism and the birth of neoliberalism

#A. The oil shocks’ consequences: economic crisis and the emergence of neoliberalism

#a) Origins of the 1970s economic crisis

The decline of Keynesianism and the emergence of neoliberalism can be traced back to the economic upheavals of the 1970s, particularly the consequences of the oil shocks. These shocks triggered a deep economic crisis that ultimately led to a rethinking of dominant economic models and the rise of neoliberalism as a new guiding ideology.

The roots of the 1970s economic crisis lay in a context of growing instability, marked by deindustrialisation and the breakdown of the post-war international monetary system. In Western countries, unemployment rose sharply, driven in part by the decline of traditional industrial sectors. At the same time, the collapse of the Bretton Woods system further disrupted the global economic order. From the 1960s, the United States began to run a persistent deficit, with more dollars circulating internationally than could be backed by American gold reserves. This was exacerbated by the financial pressures of the Cold War, including the Vietnam War and the space race. US gold reserves declined from 24 to 10 billion dollars between 1944 and 1968. In 1971, President Nixon responded by suspending the dollar’s convertibility into gold, effectively ending the Bretton Woods system. This allowed the US to print money without constraint. By 1976, the Jamaica Accords had formalised the end of fixed exchange rates. Currency values were now determined by financial markets, giving unprecedented power to global capital and signalling a shift towards a market-led monetary system.

The final spark came from the Middle East. In October 1973, the Yom Kippur War erupted between Israel and a coalition of Arab states, notably Egypt and Syria. In response to American support for Israel, oil-producing countries, organised through OPEC, retaliated by quadrupling the price of oil. Petrol stations in the West ran dry, and a worldwide energy crisis began. Oil had become a political weapon, and its impact was felt across every sector of the global economy. This marked the beginning of a long and painful economic downturn, which exposed the limitations of Keynesian policies and opened the door for neoliberal solutions centred on deregulation, privatisation, and a reduced role for the state.

#b) The end of the ‘Glorious Thirty’ (1945–1975)

The first major rupture in the post-war economic boom came with the oil crisis of 1973. Western economies, heavily reliant on oil for transport and heating, were severely impacted by the sudden increase in oil prices. This led to a major economic crisis, with clear symptoms such as rampant inflation, a sharp slowdown in economic growth, widespread business failures, and a dramatic rise in unemployment. The combination of stagnating economic activity and soaring prices gave rise to a new phenomenon: stagflation. This term refers to the stagnation of economic growth alongside inflation, resulting in persistently high unemployment and reduced industrial output.

The second oil shock came in 1979 as a direct result of the Iranian Revolution. That year, the authoritarian regime of the Shah of Iran was violently overthrown by a coalition of religious and popular forces. Leading the opposition from exile, Ayatollah Khomeini returned to Iran and established an Islamic Republic based on strict adherence to Islamic law. This internal upheaval, followed soon after by the Iran-Iraq War (1980–1988), severely disrupted oil exports from two of the world’s leading producers. The resulting decline, and in some cases, complete halt, of oil exports caused prices to spike once again. Rising energy costs drove up production expenses, which in turn reduced both output and consumption. Mass unemployment re-emerged as a structural feature of global economies.

This second oil crisis did not only affect Western capitalist countries. Its impact was felt worldwide, striking both communist nations and countries of the Third World. Throughout the 1980s, unemployment remained high and social inequalities deepened, confirming the end of the post-war era of sustained growth and prosperity.

#c) Responses to the crisis: a new global economic governance and the rise of neoliberalism

In response to the economic instability of the 1970s, a new form of international cooperation began to take shape. In 1975, on the initiative of French President Valéry Giscard d’Estaing, the leaders of the six richest industrialised nations, namely the United States, the United Kingdom, France, West Germany, Italy, and Japan, gathered for the first time, forming the G6. In 1976, Canada joined the group, creating the G7. The goal of these annual meetings was to bring together the heads of the world’s leading economic powers to address major global economic issues. However, despite the high profile of these summits, their concrete results were often limited. The G7 quickly came to be seen as a “club of rich countries”, hampered by conflicting national interests and a lack of representation from the broader international community.

At the same time, neoliberalism began to emerge as the dominant socio-economic model in the Western world. This shift was heavily influenced by economists like Friedrich Hayek (The road to serfdom) or Milton Friedman, who won the Nobel Prize in 1976. Friedman criticised the post-war model of state-led governance and the Welfare State, which he viewed as burdensome due to its high taxes and extensive regulation. According to him, state intervention was a major cause of the economic crisis, as it stifled entrepreneurial freedom and market efficiency. He advocated for the self-regulation of markets, with minimal state interference.

Friedman’s ideas gained political traction, helping to elect Ronald Reagan as President of the United States (1981–1989). Reagan’s campaign slogans, such as “government is not the solution to our problem, government is the problem”, embodied this new ideology. He promised less bureaucracy, lower taxes, and more disposable income for individuals. Across the Atlantic, Margaret Thatcher, Prime Minister of the United Kingdom from 1979 to 1990, was similarly inspired. She had read The road to serfdom when she was a student. She argued that entrepreneurial spirit had been suppressed by decades of socialist policy, famously suggesting that the best tool for reform was a household broom, symbolising the sweeping away of state control.

Reagan and Thatcher implemented policies that significantly reduced the state’s role in the economy. They promoted the privatisation of public services and dismantled many of the regulations that had governed financial and labour markets. This neoliberal approach quickly spread throughout most developed countries, becoming the prevailing economic model. Reagan’s economic strategy, is often termed “Reaganomics”.

In essence, neoliberalism can be defined by several key principles. It involves a critique of the post-1945 Welfare State and a push to reduce government spending, often through austerity measures. It champions free market economics, arguing that economic freedom and competition are more efficient than government intervention. Neoliberalism also calls for deregulation, believing that markets can best regulate themselves through competitive forces. Finally, it encourages the gradual disappearance of the public sector in favour of private enterprise, thereby reducing public expenditure and shifting economic control away from the state.

#B. Britain case study: socio-economic crisis in the 1970s, criticisms of the Welfare State and the neoliberal alternative

#a) Understanding the critical shift

In examining the critical economic and ideological shift of the 1970s, Britain provides a compelling case study. This period marked a turning point, as the post-war consensus around state intervention and the Welfare State began to unravel under the pressure of persistent socio-economic problems. The key question is why this breakdown occurred, and why so many began to lose faith in the Keynesian model that had defined Britain's economic governance since 1945.

The Welfare State had long enjoyed broad political support. Both the Labour and Conservative parties had accepted its foundations, with governments from 1964 to 1979 largely agreeing on the principle of a mixed economy. This consensus supported a balance between free-market capitalism and state intervention, with the government regulating strategic sectors, redistributing wealth, and protecting the most vulnerable. The system aimed to provide both economic stability and social justice.

However, the 1970s brought mounting challenges that tested this model. Britain faced high inflation, low growth, rising unemployment, and repeated industrial unrest. The country experienced widespread strikes, power shortages, and an overall sense of national decline. As these problems deepened, critics began to blame the very institutions and policies that had underpinned post-war recovery. The Welfare State, once seen as a safeguard against inequality and economic instability, was now portrayed by some as inefficient, bloated, and unsustainable.

Criticism was also directed at Keynesian economic policies, which were accused of fuelling inflation and encouraging government overspending. The state's role in the economy was increasingly questioned, with detractors arguing that it stifled innovation, individual initiative, and the natural efficiency of market forces. The notion of the “nanny state” began to take root, suggesting that excessive government support had led to dependency and a decline in work ethic.

In this climate of disillusionment, neoliberalism emerged as a compelling alternative. Its advocates argued that economic freedom was the cornerstone of both political liberty and national prosperity. They contended that markets, if left to function freely, were more efficient and more responsive than state bureaucracies. A key belief was that state intervention distorted competition and led to poor allocation of resources.

Neoliberal theorists also saw their model as essential to the health of a democratic society. They argued that by reducing the size and influence of the state, individuals would gain more personal autonomy and economic choice. A leaner state meant lower taxes, more private enterprise, and less regulation, conditions they believed would revitalise productivity and restore Britain’s competitiveness.

Thus, the crisis of the 1970s did not simply provoke technical adjustments in policy. It also ignited a deeper ideological battle over the role of the state, the purpose of economic policy, and the very definition of freedom and responsibility in a modern democracy. In the British context, this shift laid the groundwork for the rise of Margaret Thatcher and the full-scale implementation of neoliberal reforms in the 1980s.

#b) The Edward Heath government (1970–1974): a Conservative turn from consensus

The Edward Heath government marked an important moment in Britain’s post-war political landscape. Elected in 1970, Heath’s Conservative Party, known as The New Right made a conscious shift away from the long-standing post-war consensus around Keynesianism and state intervention. This was symbolised by the figure of “Selsdon Man,” an imaginary individual representing the new Conservative ideal: pro-market, anti-Keynesian, and self-reliant. The name "Selsdon Man" was meant as an insult (it referred to “Piltdown Man“, which people once thought was an early human, but it turned out to be a fake) . At the Selsdon Park conference in 1970, the party endorsed policies promoting a minimal role for government in economic management and encouraging individual initiative. Labour leader Harold Wilson famously condemned this vision, accusing it of favouring the “ruthless and the pushing” while abandoning the vulnerable.

Heath’s early policy direction reflected a clear break from the previous bipartisan approach. His government abandoned the incomes policy, choosing not to impose wage or salary controls and instead allowing market forces to determine pay. This approach aimed to encourage genuine and fair wage negotiations, but also sought to limit the power of trade unions, which were seen as distorting the balance. To this end, the 1971 Industrial Relations Act was introduced, which attempted to regulate union activity by restricting the right to strike and requiring unions to register with the government. The act was fiercely opposed by the unions, and none complied with the registration requirement. Meanwhile, other neoliberal-style reforms were introduced, such as cuts to income tax and reductions in public spending. A symbolic and controversial move came when Education Minister Margaret Thatcher ended the provision of free school milk, earning her the nickname “Thatcher the milk snatcher.”

In 1973, Britain also took a historic step by formally joining the European Economic Community (EEC), a move that would have lasting implications for its economic and political alignment.

However, by 1973, Heath’s initial vision was crumbling in the face of a deepening economic and social crisis. The oil price shock following the Yom Kippur War led to rising energy costs and contributed to the broader phenomenon of stagflation, an unusual combination of high inflation, stagnant growth, and rising unemployment. By that point, over one million people were out of work. Heath also found himself embroiled in an escalating conflict with trade unions, particularly the powerful National Union of Mineworkers (NUM), which launched major strikes in 1972 and early 1974 over wages and pit closures. The use of “flying pickets” aimed to shut down coal distribution and pressure the government further.

At the same time, the government faced political instability in Northern Ireland. The attempt to broker a settlement was overshadowed by events like Bloody Sunday in 1972, in which British troops killed unarmed protesters, fuelling further unrest.

Under mounting pressure, Heath was forced into a dramatic U-turn in 1972. Despite having come to power on a platform of reducing state intervention, the government began to nationalise struggling industries, such as Rolls-Royce, and returned to price and income controls in an effort to curb inflation. By early 1974, Britain was in a state of emergency. Coal shortages led to the introduction of a “three-day working week” to conserve electricity and fuel, casting a stark image of national decline.

In February 1974, Heath called a general election under the slogan “Who governs Britain?”, a challenge to the trade unions and a plea for a public mandate. The result, however, was a hung parliament, with no party gaining an outright majority. Labour won five more seats than the Conservatives, and Harold Wilson returned as Prime Minister, though without a majority. Heath was unable to form a coalition, and the political crisis deepened. In a second election held in October 1974, Labour won a narrow majority, gaining 18 additional seats.

This turbulent period demonstrated the profound social, economic, and political challenges Britain faced. The perceived failure of the Heath government, especially in confronting the trade unions and managing the economy, further eroded faith in the post-war consensus and paved the way for the eventual dominance of neoliberal policies under Margaret Thatcher.

#c) The Labour governments, 1975–1979: crisis, constraint and collapse

The Labour governments of the mid to late 1970s, led first by Harold Wilson and then by James Callaghan, were marked by mounting economic and political difficulties. These governments were hamstrung by three interrelated problems, economic turmoil, political fragility, and deteriorating relations with the trade unions, that eventually led to their downfall and the rise of Thatcherism.

The first challenge was economic. Britain was still suffering from the effects of stagflation, triggered by the oil price shock of 1973. Inflation soared to around 20%, eroding the value of money and weakening public confidence in the economy. The pound reached an all-time low, falling below two US dollars in 1976. The country faced a widening trade deficit and fears of national bankruptcy. In response, the government introduced tough measures: the 1975 budget included large tax increases, and in 1976 the government turned to the IMF for an emergency loan of £3.9 billion. However, the loan came with stringent conditions, chief among them, significant cuts to public spending. In the 1976 budget, wage rises were capped at 3%, a move that triggered discontent among both workers and trade unions. Although inflation fell by the end of the decade, this came at the cost of rising unemployment, which had reached 1.6 million by 1978. Relief came only gradually, with the development of North Sea oil fields offering some economic respite.

The second issue was political weakness. Labour’s majority in Parliament was extremely narrow, at no point did it exceed three seats. To maintain a workable government, Callaghan entered into a Lib-Lab Pact in 1977, securing the support of 12 Liberal MPs in exchange for pushing forward plans for devolution in Scotland and Wales. However, this arrangement underscored the government's vulnerability. Decisions such as the nationalisation of British Leyland, criticised as an attempt to rescue a failing “lame-duck” industry, further alienated parts of the public and fuelled accusations of poor economic management. Meanwhile, deep divisions within the Labour Party itself weakened internal unity. On one side were moderate Social Democrats, willing to compromise and pursue realistic policies; on the other, more radical left-wing MPs remained closely tied to the trade unions and fiercely opposed to cuts in public spending. These internal tensions made consistent governance increasingly difficult.

The third and perhaps most damaging problem was Labour’s relationship with the trade unions. Initially, Labour’s repeal of Heath’s Industrial Relations Act in 1974 and Wilson’s favourable stance towards unions helped maintain a degree of cooperation. This was formalised in the so-called “social contract,” an agreement whereby the unions accepted wage restraint in return for pro-worker industrial policies. However, the austerity measures imposed following the IMF loan, including cuts to public spending and a 5% ceiling on wage rises, soured relations. Disillusioned with the government, unions began to abandon the social contract. Strikes broke out in 1977, including among firefighters, and escalated dramatically in 1979, with walkouts at Ford Motors and among lorry drivers.

The discontent reached its peak during the “Winter of Discontent” in 1978–1979. Borrowing its name from Shakespeare’s Richard III, this period saw a wave of strikes across the public sector, involving train and lorry drivers, refuse collectors, and even grave diggers. In January 1979 alone, around 1.5 million workers went on strike. Schools were closed, rubbish piled up in the streets, and the dead were left unburied in some areas. These scenes had a catastrophic impact on public morale and confidence in the government. The chaos reinforced the perception that Labour was unable to manage the country and that it had lost control of the unions.

The public’s frustration was captured in the Conservative Party’s now-iconic slogan: “Labour isn’t working.” The Labour government's failure to resolve Britain’s deepening economic and social crisis created the perfect conditions for the election of Margaret Thatcher in 1979. Her victory marked the beginning of a new political era and the definitive break with the Keynesian post-war consensus.

#2. From détente to dislocation: the unravelling of Soviet power and the Western ascendancy

The end of the Cold War and the collapse of communism in Eastern Europe marked a seismic shift in world history. It represented not only the disintegration of the Soviet sphere of influence but also the apparent triumph of liberal democracy and free-market capitalism as the dominant global paradigm. This dramatic transformation did not happen overnight, it was the product of a complex interplay of political, economic, and ideological factors. The long road from détente to the Velvet Revolution reveals how both internal weaknesses and external pressures contributed to the unraveling of the Eastern bloc.

#A. Détente in the 1970s

Détente, the period of eased tensions between the United States and the Soviet Union during the 1970s, was initially seen as a moment of potential cooperation and stabilisation. However, it also revealed the limits and vulnerabilities of both superpowers, particularly the United States, which experienced a significant decline in both hard and soft power during this decade.

#a) The weakening of the United States in the 1970s

The United States faced a series of setbacks that undermined its global standing. In terms of hard power, the failure in Vietnam was a turning point. After years of military involvement, the U.S. was forced to withdraw in 1973, conceding defeat in a war that had cost immense resources and left deep divisions at home. This retreat signalled a decline in American influence in Southeast Asia and called into question its capacity to project power abroad.

The economic burden of the Vietnam War also had far-reaching consequences. In order to cope with rising costs and deficits, the U.S. was forced to abandon the Bretton Woods system in 1971, ending the dollar’s convertibility into gold. This shift allowed the U.S. to freely print money but also marked the beginning of a new, more unstable phase in global finance, driven by fluctuating exchange rates and market speculation.

Alongside this erosion of hard power came a significant loss of soft power. The moral authority of the United States suffered as reports of atrocities committed by American troops in Vietnam, such as the My Lai massacre, were publicised and condemned around the world. The war, once framed as a fight for freedom, now appeared to many as an act of imperial aggression.

Further discrediting the U.S. was the Watergate scandal. President Richard Nixon, already under scrutiny for his handling of Vietnam, was implicated in a major political espionage operation. His eventual resignation in 1974, following revelations that he had lied to the American public and obstructed justice, plunged the nation into political crisis. The scandal not only damaged trust in government but also tarnished America’s global image as a stable and transparent democracy.

These events combined to weaken the credibility of the United States as a leader of the Western world. Though détente continued as an official policy, the 1970s exposed cracks in the American model, cracks that the Soviet Union initially sought to exploit but would later find mirrored in its own system.

#b) The USSR gained influence by taking advantage of the weaknesses of the United States

As the U.S. entered a period of internal crisis and external retrenchment in the 1970s, the Soviet Union appeared to many as a rising power. It seized the opportunity to expand its influence, particularly in regions where anti-colonial movements and political instability opened the door to ideological and strategic alignment with Moscow. With the U.S. temporarily weakened both militarily and diplomatically, the USSR aimed to present itself as the leader of global revolution and the protector of anti-imperialist struggles.

In Latin America, the Soviet Union increased its support for revolutionary movements and left-wing insurgencies. These movements, often in conflict with right-wing, U.S.-backed regimes, found moral and sometimes material support from Moscow. The USSR positioned itself as an ally of national liberation and social justice, gaining ideological traction in parts of the continent.

In Africa, the Soviet Union created new commercial and political partnerships with recently decolonised countries. Some of these nations, particularly those emerging from Portuguese rule in 1975, aligned themselves with Moscow’s Marxist-Leninist model. Mozambique and Angola are prime examples. In Angola, the USSR, alongside Cuba, supported the MPLA (Movimento Popular de Libertação de Angola, People’s Movement for the Liberation of Angola) in a brutal civil war. In Ethiopia, the Soviet Union intervened more directly, backing the Marxist regime of Mengistu Haile Mariam, often referred to as the “Red King”, against internal opposition and regional threats. This support reinforced Soviet presence in the Horn of Africa and demonstrated its willingness to use both soft and hard power to maintain influence.

Meanwhile, in Southeast Asia, the American withdrawal from Vietnam created a vacuum that was rapidly filled by communist regimes. In 1975, within months of the U.S. exit, both Laos and Cambodia fell under communist control. In Cambodia, the Khmer Rouge, led by Pol Pot, launched one of the most brutal totalitarian experiments in modern history. In the span of just three years, they carried out mass purges and forced collectivisation, resulting in the death of an estimated quarter of the Cambodian population. Although the Khmer Rouge operated independently from Moscow, their rise was indirectly enabled by the broader decline of American influence in the region.

Thus, the 1970s saw the USSR expanding its global reach by stepping into spaces vacated or weakened by U.S. retreat. It capitalised on revolutionary fervour, forged alliances in the developing world, and positioned itself as the alternative to the Western capitalist model, seemingly strengthening its hand in the Cold War, even as internal cracks within the Soviet system were beginning to emerge.

#c) Triangular diplomacy during the détente: USA, USSR, and China (1969–1979)

One of the most strategic and complex dimensions of the détente period was the development of a triangular diplomacy between the United States, the Soviet Union, and the People’s Republic of China. In the context of Cold War rivalry, the U.S. sought to exploit the growing rift within the communist world, particularly the Sino-Soviet split that had deepened since the early 1960s. This diplomatic strategy aimed to improve America’s global positioning by playing Moscow and Beijing off against each other.

For the United States, rapprochement with China served multiple purposes. It provided a way to divide the communist bloc, thereby weakening the overall cohesion of America's ideological adversaries. It also offered an indirect means of negotiating with North Vietnam by using China’s influence. The U.S. hoped that engagement with Beijing would pressure Hanoi into a more favourable settlement in the ongoing Vietnam War.

China, meanwhile, had its own strategic motives. After its rupture with the Soviet Union, Beijing found itself increasingly isolated. Facing the possibility of conflict with both superpowers, Chinese leaders sought to re-calibrate their position by opening a channel to Washington. Improved relations with the U.S. would serve as a counterbalance to Soviet pressure and help China assert itself as an independent actor on the global stage.

A breakthrough came in 1971 with the unexpected success of what became known as Ping Pong Diplomacy. When an American table tennis team was invited to visit China, it marked the first official contact between the two nations in over two decades. This symbolic gesture paved the way for more serious negotiations.

In the same year, the PRC achieved a major diplomatic victory when it was granted a permanent seat on the United Nations Security Council, replacing Taiwan. This shift signalled growing international recognition of the PRC and confirmed its centrality in global affairs.

Meanwhile, the U.S. also maintained its dialogue with the Soviet Union. In 1972, the Strategic Arms Limitation Talks (SALT I) produced the first major agreement between the two superpowers to limit the growth of their nuclear arsenals. Though it did not reduce existing stockpiles, the treaty was a significant step towards arms control and reflected a temporary thaw in the arms race.

Triangular diplomacy allowed the U.S. to regain some leverage during a decade in which its global influence was under strain. By simultaneously engaging with both the USSR and China, Washington reasserted its strategic flexibility and helped shape a new phase in the Cold War.

#d) Ostpolitik: Détente in Europe from 1969

Alongside superpower diplomacy, the détente era also saw significant changes in intra-European relations, particularly through the policy of Ostpolitik, literally “Eastern Policy”, pioneered by West German Chancellor Willy Brandt from 1969. This marked a bold and pragmatic shift in the foreign policy of the Federal Republic of Germany (FRG), aimed at normalising relations with the Soviet Union, the German Democratic Republic (GDR), and other Eastern bloc states.

Brandt’s strategy was rooted in the desire to ensure long-term peace and stability in Europe by accepting the post-war status quo and engaging with communist governments rather than confronting them. Ostpolitik reflected a growing recognition within the FRG that peaceful coexistence and open dialogue were preferable to continued division and confrontation. Brandt famously fell to his knees in Warsaw in 1970, in a symbolic act of apology and reconciliation for Nazi atrocities, an image that captured the spirit of this new approach.

One of the key features of Ostpolitik was mutual recognition. Until then, the FRG had refused to acknowledge the GDR as a legitimate state, insisting on the principle of German unity. Ostpolitik marked a break from that position. Agreements were signed allowing West Germans to visit the East for short stays, such as one-day visits to see relatives. These arrangements helped humanise the relationship between the two German states and built modest but meaningful bridges between divided families and communities.

Beyond symbolic gestures, Ostpolitik encouraged economic and cultural exchanges between East and West. These interactions, however limited, exposed the stark differences between the two systems. As the 1980s progressed, it became increasingly clear how far behind the East had fallen. The FRG’s economy was flourishing, while the GDR remained heavily dependent on subsidies and loans from the West to maintain basic standards of living. Ironically, while Ostpolitik aimed to stabilise relations, it also unintentionally highlighted the growing economic and social gulf between the two parts of Europe, drawing sharper attention to the inherent weaknesses of Eastern bloc regimes.

In the long term, Ostpolitik contributed to a climate of openness and contact that would play a part in the eventual peaceful revolutions of 1989. It showed that engagement, rather than isolation, could be a powerful tool for change, setting the stage for the fall of the Berlin Wall and the eventual reunification of Germany.

#B. The Reagan era and the intensification of Cold War tensions

#a) The election of Ronald Reagan in 1981: a key shift in bipolar relations

The election of Ronald Reagan in 1981 marked a decisive shift in Cold War dynamics and signalled the end of the era of détente. Reagan adopted a much more confrontational approach toward the Soviet Union, rooted in his belief that communism was a moral evil and that the West must act decisively to secure its victory. This approach crystallised in what became known as the Reagan Doctrine, a strategy aimed at exhausting the USSR by pushing it into an unsustainable arms and proxy war race. As Reagan put it, the United States must "seek and find peace through strength."

The Reagan Doctrine involved increased support for anti-communist movements around the world, particularly in regions where Soviet influence was strong. The U.S. funded and armed insurgent groups in Africa, Asia, and Latin America, portraying them as freedom fighters resisting communist tyranny. This strategy sought not only to roll back Soviet influence but also to drain Soviet resources by forcing them to defend or support their allies.

One of the most significant battlegrounds of this strategy was Afghanistan. Following the Soviet invasion in 1979, the U.S. dramatically increased its support for the Afghan mujahideen, Islamist fighters resisting the Soviet occupation. Through the CIA’s covert operations, the U.S. provided weapons, intelligence, and training to these insurgents. The objective was not necessarily to defeat the Soviet Union outright, but to increase the military, financial, and human cost of its involvement in Afghanistan.

This strategy proved effective. The war became increasingly unpopular within the USSR, particularly among the families of young soldiers sent to fight and die in what seemed like an unwinnable conflict. The prolonged war also stoked, nationalist unrest, in the USSR’s own Muslim-majority republics, such as Uzbekistan and Tajikistan, where sympathy for the Afghan cause resonated strongly. The conflict is often referred to as the, Soviet Union’s "Vietnam", , evoking both the military quagmire and the internal disillusionment it produced.

Reagan’s aggressive posture, combined with the strain of the Afghan war and other economic pressures, placed the USSR under increasing stress. This period of renewed Cold War confrontation would eventually give way to a new phase of diplomacy in the second half of the 1980s, but not before forcing the Soviet leadership to confront the growing unsustainability of its global ambitions.

#b) Reagan’s arms race to exhaust the USSR

With Ronald Reagan’s presidency came a dramatic rhetorical and strategic escalation of Cold War tensions. Declaring that “America is back”, Reagan cast the Cold War as a moral battle between liberty and tyranny, famously referring to the Soviet Union as the “Evil Empire”. This stark language marked a return to ideological confrontation and rejected the previous policy of détente. Reagan believed that by confronting the USSR head-on, militarily, economically, and ideologically, the West could force it into submission or collapse.

One of the central pillars of this renewed confrontation was a massive rearmament programme, designed not only to reinforce U.S. military superiority but also to provoke a new arms race that would strain the already fragile Soviet economy. The logic was clear: the United States, with its advanced technology and stronger economy, could afford to outspend the USSR in defence, while the Soviets, struggling with economic stagnation, would be pushed to the brink trying to keep up.

A key feature of this strategy was the announcement in 1983 of the Strategic Defense Initiative (SDI), commonly known as “Star Wars.” This ambitious and futuristic project proposed creating a high-tech missile defence system that would use satellites and ground-based lasers to detect and destroy incoming nuclear missiles before they could reach U.S. territory. Though the technology was in its infancy and the project was never fully realised, its strategic implications were significant.

The SDI fundamentally challenged the doctrine of Mutually Assured Destruction (MAD), which had maintained nuclear stability for decades. If the U.S. could defend itself against a Soviet strike, it could, in theory, launch a first strike without fear of retaliation. From the Soviet perspective, this was deeply unsettling. It threatened to undermine the nuclear balance and accelerated the arms race, compelling the USSR to invest heavily in both offensive and defensive systems in response.

Reagan’s aggressive posture, coupled with his investment in high-tech military innovation, intensified the pressure on the Soviet Union. The USSR was forced to divert scarce resources into defence spending at the expense of its already underperforming economy. In this way, the arms race became a critical tool in exhausting the Soviet system and widening the internal contradictions that would ultimately contribute to its collapse by the end of the decade.

#c) The Euromissiles crisis (1982–1983): the peak of Cold War tensions and the path to disarmament

The early 1980s witnessed one of the tensest episodes of the late Cold War: the Euromissiles crisis. This confrontation unfolded in Europe and became a focal point of the broader East-West rivalry, highlighting both the danger of nuclear escalation and the fragile nature of Cold War diplomacy.

The crisis began when the Soviet Union deployed SS-20 nuclear missiles in Eastern Europe, capable of striking key cities in Western Europe with little warning. These missiles represented a direct and immediate threat to NATO countries and were perceived as a major escalation in the arms race. The USSR sought to shift the nuclear balance in its favour by targeting Western Europe specifically, without provoking a direct response from the United States.

In response, Washington escalated further. Under Reagan’s leadership, the United States deployed Pershing II and Cruise missiles to Western Europe. These were fast, highly accurate weapons stationed in countries such as West Germany, Italy, and the United Kingdom. The move was framed as a necessary deterrent, but it also sparked massive anti-nuclear protests across Europe, as many feared that the continent was becoming a nuclear battlefield in a superpower conflict.

The Euromissiles crisis brought Cold War tensions to their most dangerous point since the Cuban Missile Crisis of 1962. Diplomatic relations between East and West were extremely strained, and the arms race threatened to spiral out of control. However, the crisis also laid the groundwork for a major breakthrough in arms control.

Following a series of negotiations, and in the context of broader shifts in the USSR under Mikhail Gorbachev, both sides agreed to the Intermediate-Range Nuclear Forces Treaty (INF) in 1987. This historic agreement led to the withdrawal and destruction of all intermediate-range missiles on both sides and included strict verification procedures. It was a significant step toward reducing nuclear tensions and signalled the beginning of a new phase in international diplomacy.

This sequence of events allows for a critical assessment of Reagan’s role in ending Cold War hostilities. On the one hand, his aggressive posture in the early 1980s undoubtedly escalated tensions and fuelled fears of nuclear war. However, Reagan’s willingness to engage in serious arms negotiations once he saw an opportunity for real change was equally important. His shift from confrontation to diplomacy, particularly in his later partnership with Gorbachev, was instrumental in achieving disarmament and rebuilding trust between the superpowers.

Ultimately, Reagan’s dual strategy, strength through military pressure and peace through negotiation, was a key factor in moving the world from the brink of conflict toward the peaceful end of the Cold War.

#C. The Soviet Union: economic and political crisis since the 1970s

By the 1980s, the Soviet Union was facing a deep economic and social crisis, exposing the structural weaknesses of its centrally planned economy and its authoritarian political model. Despite its superpower status and vast natural resources, the USSR found itself unable to keep pace with the dynamic changes unfolding in the Western world, particularly under the pressure of the escalating arms race with the United States.

Economically, the Soviet system was on the brink of collapse. The state-run economy was marked by chronic shortages of basic consumer goods. Soviet citizens frequently faced empty shelves in shops, with essential items such as food, clothing, and household goods in short supply. The planned economy was not only inefficient but also technologically outdated. The explosion at the Chernobyl nuclear power plant in 1986 tragically underscored the ageing and unsafe nature of Soviet infrastructure. More than a national disaster, Chernobyl became a symbol of systemic decay and governmental incompetence. The regime’s slow and secretive response further eroded public trust.

One of the most crippling economic burdens was the Cold War arms race. By 1985, military spending accounted for more than 20% of Soviet GDP, a figure vastly higher than in the West. Resources were poured into maintaining military parity with the United States, leaving little for consumer needs or industrial modernisation. The Soviet economy, highly centralised and riddled with corruption, could neither produce in quantity nor match Western quality standards. It became increasingly clear that the USSR could no longer economically compete with the capitalist world.

The economic decline was mirrored by a profound social crisis. As the population became more disillusioned, indicators of well-being fell. The Human Development Index (HDI) declined throughout the 1980s. Alcoholism became rampant, and with it came a host of social problems, workplace absenteeism, declining productivity, and deteriorating public health. Life expectancy for Soviet men dropped below 60 years, a shocking statistic for a developed state.

Another source of tension was the growing inequality between the ruling elite and the general population. While the majority of citizens lived in modest or cramped conditions, often in communal apartments, the Nomenklatura, the privileged elite of the Communist Party, enjoyed a lifestyle far removed from the average Soviet reality. With access to private vehicles, luxurious apartments, special stores, and even household staff, the elite appeared increasingly detached and corrupt in the eyes of ordinary citizens. This widening gulf fed resentment and discredited the Communist Party’s claims of equality and justice.

These economic and social pressures contributed not only to a loss of public confidence but also to a growing ideological and political crisis, which would soon demand radical reforms. The USSR, once feared and respected as a global power, was now visibly decaying from within.

#b) Reforms to try to stop Soviet crises: Gorbachev’s attempt to save the system

When Mikhail Gorbachev came to power in 1985, he inherited a Soviet Union in profound crisis, economically stagnant, socially discontented, and politically paralysed. Recognising the severity of the situation, he famously declared, ”Comrades, undoubtedly we need reforms.” His goal was not to dismantle communism but to reform and revitalise it, preserving the Soviet system by adapting it to the realities of the modern world. Although the phrase “socialism with a human face” was originally coined by Alexander Dubček during the Prague Spring of 1968, it captures well the spirit of Gorbachev’s project: to humanise socialism through greater openness and efficiency, without abandoning its ideological foundations.

Gorbachev’s reform programme rested on two major pillars: Perestroika and Glasnost.

Perestroika, meaning "restructuring", aimed to reform both the economic and political systems. Economically, it introduced elements of a market economy into the rigid planned system, legalising small private enterprises, encouraging foreign investment, and initiating massive cuts in defence spending. Politically, it included modest democratising steps, such as allowing competitive local elections and reducing the Communist Party's total control over government structures.

Glasnost, meaning "openness" or "transparency", sought to end the climate of censorship and secrecy that had defined Soviet rule. Gorbachev promoted freedom of expression and association, believing that a better-informed public could support and participate in reform. New publications openly tackled subjects long suppressed, corruption, economic inefficiency, and historical injustices. A landmark moment came in May 1988, when Novy Mir, a once tightly controlled literary magazine, published revelations that even Lenin, the founding father of the Soviet state, had ordered the creation of the first gulag camps.

However, these reforms backfired. Instead of stabilising the USSR, Perestroika caused further economic disruption, breaking the old command structure before an effective market mechanism could replace it. Meanwhile, Glasnost unleashed a wave of criticism and empowered opposition voices, including nationalists and reformers who no longer believed in saving the system at all.

In trying to reform communism, Gorbachev inadvertently weakened the foundations of Soviet power. Rather than securing its future, he accelerated its disintegration. His legacy remains controversial: a 2015 survey by the Levada Center found that nearly 55% of Russians disapproved of his reforms, associating them with the chaos and decline that followed. While Gorbachev never intended to abandon socialism, his reforms unleashed forces that would ultimately bring down the very system he sought to preserve.

#c) Effects of the reforms and the collapse of the Soviet Union

Despite Gorbachev’s efforts to reform and preserve the USSR, the very measures he introduced ended up accelerating its collapse. His reforms loosened the authoritarian grip that had held the system together, unleashing forces that neither he nor the Soviet state could control. A combination of external and internal factors contributed to the disintegration of Soviet communism and the end of the Cold War.

Externally, the most symbolic and damaging failure was the Soviet war in Afghanistan, which lasted from 1979 to 1989. The invasion was driven by a combination of strategic and ideological motives: the USSR sought to support a friendly Marxist regime in Kabul threatened by internal rebellion, prevent the spread of Islamic fundamentalism near its southern borders, and maintain influence in a region of geopolitical significance during the Cold War. However, it quickly turned into a military and political quagmire, highlighting the limits of Soviet power and draining resources from an already weakened economy. The prolonged conflict deeply disillusioned Soviet citizens and exposed the army’s inability to achieve victory, contributing to a growing sense of national decline.

In 1988, Gorbachev delivered a groundbreaking speech at the United Nations, declaring that "freedom of choice is a universal principle to which there should be no exception." This statement had monumental consequences. In 1989, the USSR officially renounced the Brezhnev Doctrine and replaced it with what came to be known informally as the Sinatra Doctrine, the idea that each Eastern Bloc country could now “do it their way.” This dramatic shift meant that the USSR would no longer intervene militarily to uphold communist regimes in Eastern Europe.

The Sinatra Doctrine directly empowered popular opposition movements, most notably Solidarnosc (Solidarity) in Poland. Founded in 1980 under the leadership of Lech Wałęsa, Solidarity began as a trade union but quickly evolved into a broad anti-communist social movement advocating for workers’ rights, democracy, and political pluralism. After years of repression and negotiation, Solidarity played a central role in the peaceful transition to democracy in Poland in 1989, becoming a model for other countries in the region. Across Eastern Europe, communist regimes began to collapse, beginning in the summer and autumn of 1989, either peacefully, as in the Velvet Revolution in Czechoslovakia in November–December 1989, or violently, as in Romania, where Nicolae and Elena Ceaușescu were executed on 25 December 1989 after a brief but brutal uprising. The fall of the Berlin Wall on 9 November 1989 symbolised the broader disintegration of the Eastern Bloc and marked a turning point in the collapse of Soviet influence over Eastern Europe.

Internally, Gorbachev’s reforms also destabilised the USSR itself. In the spring of 1989, the Soviet Union held its first semi-free elections, which allowed liberal and nationalist voices to gain traction. This electoral experiment emboldened reformers and opposition figures who had previously been marginalised or silenced. By spring 1991, several Soviet republics, beginning with the Baltic states, had declared their independence. Gorbachev, unwilling to use violence to suppress these movements, refused to deploy the Red Army to crush the secessionist wave.

The breaking point came in August 1991, when hardline communists within the CPSU attempted a coup to remove Gorbachev and restore authoritarian control. The coup failed, largely due to the defiance of Boris Yeltsin, president of the Russian Soviet Federative Socialist Republic, who emerged as a national hero. The failed putsch shattered what remained of the Soviet regime’s legitimacy. The Communist Party was discredited, and the once-feared KGB and Red Army were seen as powerless and divided. The Soviet Union’s final instruments of totalitarian control had fallen.

On 8 December 1991, Yeltsin and the leaders of Ukraine and Belarus signed an agreement dissolving the USSR and replacing it with the Commonwealth of Independent States (CIS). Seventeen days later, on 25 December 1991, Gorbachev resigned from his now defunct post as President of the Soviet Union. The Soviet Union no longer existed. As some have observed, "Russia and Yeltsin ate the USSR and Gorbachev." Russia, not the USSR, was now the political centre, and Yeltsin its president.

In the end, Gorbachev had set out to rescue communism but instead oversaw its disintegration. His reforms, though intended to revitalise the system, removed the pillars that had propped it up for decades. Glasnost encouraged free speech, which undermined the ideological monopoly of the Communist Party. Perestroika destabilised the economy without delivering improvement. The withdrawal from Eastern Europe, formalised under the Sinatra Doctrine, ended Soviet imperial dominance. In trying to save the USSR, Gorbachev had inadvertently become the architect of its demise, and with it, the Cold War came to an end. The Soviet collapse was both an ideological and structural implosion, a moment that signalled the global ascendancy of Western liberal democracy.

#d) National independence movements as a factor

One of the decisive internal factors that contributed to the collapse of the Soviet Union was the rise of nationalist movements within its constituent republics. As glasnost opened up political space and weakened central authority, long-suppressed aspirations for national self-determination resurfaced with growing intensity.

In Lithuania, the independence movement Sąjūdis led a non-violent push for sovereignty, culminating in the declaration of independence on 11 March 1990, the first Soviet republic to do so. This was soon followed by Latvia and Estonia, both of which reasserted their independence in 1991. These Baltic states had been forcibly incorporated into the USSR during the Second World War and had never fully accepted Soviet rule. Their peaceful defiance inspired other republics to follow suit.

In Ukraine, a growing independence movement led to a referendum on 1 December 1991, where over 90% voted in favour of independence, including a majority in traditionally Russian-speaking regions. This overwhelming result not only affirmed Ukraine’s national identity but also made the continued existence of the USSR politically untenable. Other republics, such as Georgia, Armenia, and Moldova, also declared independence, effectively dismantling the union from within.

Gorbachev, committed to reform rather than repression, refused to use force to keep the republics in line, a marked departure from previous Soviet leaders. This decision spared the USSR a violent end but also accelerated its disintegration. His willingness to tolerate independence movements, combined with his renunciation of the Brezhnev Doctrine and acceptance of democratic transitions in Eastern Europe, made Gorbachev a key figure in the peaceful end of the Cold War.

In assessing his role, Gorbachev can be seen as both a reformer and a reluctant dismantler. While he never intended to bring down the Soviet Union or end its communist system, his policies unintentionally did both. Yet, by refusing violence and embracing dialogue, he helped ensure that the Cold War ended not in nuclear conflict, but in negotiation and diplomacy. His legacy, though controversial in Russia, is widely respected internationally for making that peaceful transition possible.