National Economies After the Cold War

With the end of the Cold War, a basic shift in the global economy occurred. No longer could Eastern Bloc nations rely upon the Soviet Union to prop up their domestic economies. Moreover, among the Communist community of nations, Warsaw Pact-international trade was no longer regulated/dictated by the Soviet hegemon. Since 1989, roughly, the former member nations of the Soviet Union and its sphere-of-influence have been cast into the world marketplace with no safety net. The impact of this event upon their individual national economies has been extremely felt.

That impact has been felt not only in the former Soviet sphere. While the Cold War raged, the Western industrialized nations of the world competed with the Soviet Union for influence in the Third World. In some cases the subsidies were direct: the U.S.S.R. propped up Cuba's economy - and the U.S. financed the Philippines'. Soviet/Nicaragua and U.S./Chile. "Marxist" Ethiopia and "democratic" Pakistan. Larger Third World Nations were able to obtain economic subsidies from both sides, notably India and Iraq. Now, with the bipolar political conflict reduced to a tenuous "New World Order" of multipolar peace, the competition among economic Sugar Daddies has virtually ceased. Third World nations have been left to fend for themselves as the former enemies lick the economic wounds they inflicted upon themselves during the Cold War.

It is important to note that both the former Soviet client states and the Third Wor

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t have been required by regulators or lawmakers. When transferring a utility from government monopoly to competitive status, the question arises: Who assumes responsibility for the stranded costs? Most private sector entities cannot afford to assume the stranded costs wholesale - but is the government simply to absorb the loss and transfer the benefits? The answer to that, usually, is "No". A government transferring a basic utility to the competitive, private sector realm of the economy is doing so for several profit-inspired motives, which usually boil down to (a) reducing national debt, (b) increasing utility cost-effectiveness and service, and (c) attracting capital to the national economy (Cicchetti & Sepetys, Restructuring, p. 99). It is logical to infer from these criteria that governments will be unwilling to absorb stranded costs wholesale. By the same token, the private sector will not be able to take on the stranded costs as a whole, either. Government regulations designed to protect community interests will provide some constraints to the free market competitiveness of utility pricing to begin with. Competition among private sector entities selling like utility services/goods will further lessen the profi

Category: Economics - N