Wednesday, October 05, 2011

Reagan, Gorbachev, and the Berlin Wall

Many credit Ronald Reagan with the collapse of the Soviet Union and the fall of the Berlin Wall, citing Reagan's "Mr. Gorbachev, tear down the wall!" and other actions.

First, Gorbachev was no absolute dictator like Stalin. He had many constituencies to please, both hard-line and open-minded. Gorbachev knew the Soviet Union was not working, but he could not like Stalin or Mao simply declare a change of course. He had to move politically rather than autocratically.

Second, Gorbachev's predecessors had put the Soviet Union in a precarious financial position with an overabundance of subsidies. The only thing that propped up the finances of the Soviet Union was the export of oil at $70/barrel.

Then the price of oil collapsed to $10/barrel, and with it the Soviet Union.

The severe drop in the price of oil was caused by millions of consumers saving energy, something Reagan was not enthusiastic about.

Unfortunately, things have turned around and consumption has gone up, the price of oil has gone up, and petro-dictators have been propped up. But blame Americans only indirectly. Many people in the world want to live like us and now they are - in China, India, South America, and many other places. And to live like Americans, they drive cars, air-condition their houses, and power their proliferating gadgets.

See "Hot, Flat, and Crowded" by Thomas Friedman