Dollars and Diplomacy in Cold War

Economics led the way to victory over communism

Butter and Guns: America's Cold War Economic Diplomacy

Diane B. Kunz

The Free Press

422 pp., $30

It's often overlooked that economics plays a key role - perhaps the key role - in politics at every level. Even when nationalism, ethnicity, ideology, or religion appears to be the dominant force behind a political movement, the economic condition of societies is always part of the background.

The cold war was no exception. The struggle between the competing ideologies of democratic capitalism and totalitarian communism was as much about the best way to grow and divide the economic pie as it was about free elections, free speech, and freedom of religion. The economic competition between the two superpowers and their proxies was as important - maybe even more important - than the arms race or the exchange of political propaganda.

Most histories of the cold war have focused primarily on the diplomatic and military struggle. In "Butter and Guns: America's Cold War Economic Diplomacy," Yale University professor Diane Kunz tells the economic story, starting with the Marshall Plan for European recovery following World War II right through the collapse of the Warsaw Pact and the disintegration of the Soviet Union.

Kunz's thesis is that the US cold war experience "proved you could have it all. The United States recorded unprecedented domestic prosperity while building a permanent military establishment at home and abroad that triumphed over the Communist challenge." She argues that domestic and foreign economic policy was inseparable from the West's military containment strategy, indeed providing the "engine that drove the economic and security train of the "free world.' "

Analyzing the success of the Marshall Plan and why it succeeded, Kunz compares it to John F. Kennedy's failed "Alliance for Progress," which was intended to radically alter Latin America economically and socially. It failed, Kunz argues, because it tried to do too much and because sufficient resources were never allocated to the program. Kunz describes how Richard Nixon and John Connally tore down the Bretton Woods international financial regime that was launched after WWII but which, by 1970, had probably outlived its usefulness. Nixon's motives were mainly aimed at the 1972 election, Kunz argues (perhaps overmuch), but paradoxically he scored a big victory for the US by freeing it of the ultimate responsibility to prop up the entire Western currency system.

Kunz's retelling of the Suez Crisis in 1956 is particularly useful. Americans have rarely understood how this crisis spelled the end of independent British power or the very different conclusions the French drew from it. Her recounting of the 1973 and 1979 oil shocks, on the other hand, is marred by contentions of antiSemitism in the 1940s State Department (it was certainly there, but is not the only explanation for resistance to recognition of Israeli independence).

And her assertion that State "adopt[ed] the oil company view of Israel" because too many oil-company executives had appointed positions at Foggy Bottom is ludicrous. The West's access to Middle Eastern oil was a geostrategic and economic necessity regardless of US policy towards Israel. At the end, she poses the valuable question: What now? It remains to be seen whether, in the absence of a "clear and present danger," President Clinton, Madeleine Albright, and company will prove as visionary and creative as America's postwar leaders.

* Lawrence J. Goodrich is the Monitor's congressional correspondent.