Michael De Groot’s Disruption: The Global Economic Shocks of the 1970s and the End of the Cold War is an intriguing attempt to understand the inherent contradictions between the socialist and capitalist socio-economic systems in the late twentieth century. The two protagonists of the story are the former Union of Soviet Socialist Republics (USSR or FSU) and the United States of America (USA or US). As history would have it, by the end of 1991 the USSR would be dissolved, spelling a devastating macroeconomic and political breakup for the small economies of the post-socialist realm. The US would go on to adapt to a new century of capitalist prosperity.
The book argues that the root-causes of the collapse of one model and survival of the other are to be found in each system’s characteristic functional determinants in the face of a host of political and macroeconomic headwinds since the 1970s. Operationally, De Groot introduces a concept of “welfare empire” that aids in his description of the inner workings of the two blocs, namely the socialist and the capitalist spheres.
The author connects the welfare part to the American and Soviet engagement with their respective allies in promoting those countries’ security, economic development, social benefits, and political stability. The empire then is an analytical tool that, as the author suggests, relates to the internal operational hierarchy of the two dominant global centers, each with unique mode of engagement, defining their contractual interactions with smaller economies under their influence.
The narrative boils down to explaining how the global macroeconomic ruptures of the 1970s-80s across international capital and trade flows, piling up of sovereign debt in eastern Europe, and accumulating pressures in the primary commodities markets affected both systems, leading to the collapse of the Soviet “welfare empire.” The author maintains that a more resilient US system could adapt to the external environment, though with still echoing challenges in macroeconomic inefficiencies and social well-being.
The book is comprised of eight chapters (with an introduction and a conclusion) structured in a chronological storyline alternating between the US and the Soviet experiences. The opening chapter details the collapse of the Bretton Woods arrangement and circumstances around it, transforming the global financial system and setting the US dollar on its path to international reserve currency status.
The last chapter brings the reader to the end of the Soviet Union. There is an attempt to relate to more recent times but that is done more through political discourse and less so by way of economic analysis. In presenting the workings of the Soviet system, the book is primarily focused on the density of political communications and socio-economic relations between the Soviet Union and eastern Europe. However, there is no discussion of the small FSU republics and of the multifaceted economic, social, and political dynamics that in the same period molded those countries’ fates and shaped their future.
The history of the multi-flavored attempts at modernization of socialist economies of the USSR and eastern Europe, as well as debates on and searches for efficiency in the capitalist west are well documented in the literature; so are the particulars of the Soviet collapse, both from the economic and political perspectives. This book adds to those readings the results of research based on the author’s reading of official documents from a range of archives, some new, as well as correspondence, speeches, and other statements by the US and Soviet (and other) policy makers at the time. In many cases, those statements help advance the author’s argument but, in some situations, appear to introduce new story lines that could have been explored in additional detail.
Overall, Disruption is an informed effort to interpret the geo-economic competition of the two political and socio-economic systems, with a glimpse into the complexity of history.
