How Capitalism Won The Cold War – Freedom Philosophy

How Capitalism won the cold war - Being Libertarian

In the geopolitical climate, those of us within NATO-aligned countries stand in need of a history lesson.
As the cold war in the Middle East between Iran and Saudi Arabia marches on, Russia and NATO continue to move global chess pieces while tensions rise.
We need to remember how NATO won the last cold war, thirty years ago, because Russia has absolutely not forgotten.

There are three causes that demand further investigation for our national security:

Economic superiority

The primary cause was economic superiority. Redistribution of wealth undermines productivity. In the absence of profit, innovation and production decline.

There is an additional issue with their respective economic growth. Throughout the majority of the years of the cold war, Russia was on par with the U.S. in terms of their GDP growth. But GDP growth is measured in many ways, and not all growth is equal.

For example, a government could hire workers to dig a hole, and then hire additional workers to fill it back in – this expenditure is a component of GDP and as such this represents growth but it isn’t a legitimate form of economic growth.

The difficulty is that this doesn’t generate residual cash-flows. I call this stage one of GDP growth, simple growth where the hole-diggers are better off in the short-term. Military spending typically falls under this category.

Stage two is GDP growth that involves residual cash-flow. Manufacturing growth not only provides for employment today, it also involves employing people next year to fill new orders. This is not only growth but linear growth that will continue onward. The manufacturing apparatus can continue to produce. The Soviet Union excelled at this stage of growth.

The third stage of GDP growth is not only residual cash-flow, but more than linear growth it is an exponential growth of cash-flow. Computer chips manufacturing not only require producers, but they promise more efficiency for an economy moving forward. This is not only continued growth, but it will improve growth going forward. NATO excelled in stage three.

As a result of our stage three growth, our economy resulted in more prosperity and allowed for further investment in scientific advancement and the military.

Scientific advancement

The Soviet Union did initially make some important advancement with respect to their military industrial complex and space exploration. As their economies progressed however, it was clear that the communists were being completely outpaced by the capitalists.

Even within the capitalist countries themselves, the government programs like NASA failed to keep up with the growth of innovation from private companies in telecommunications. Not only did capitalism produce more funds for investing in innovation, it provided the innovation itself.

Further, the Soviet Union involved itself with extreme forms of censorship that, combined with a lackluster economy and the ineffectiveness of fiat innovation, compared to private innovation, led to comparatively little innovation. When Ronald Reagan announced project Star Wars as a missile defense system, the Soviets realized that the fact that the capitalists were even able to contemplate such a venture showcased their technological superiority and signaled the end of the cold war.


The Soviet Union’s aggressive militarism exerted itself as another massive strain on the Soviet economy. When they finally faced pushback from Reagan’s aggressive foreign policy they were unable to compete with their already overexerted military commitments, lackluster technological advancements, and poor economy.

My concern is that today we appear to be backtracking. Thought-control in NATO is unprecedented. Free speech on campuses is in retreat. The capacity to challenge paradigm norms is facing backlash over social media. The left and the right both appear to possess a casual disregard for science. NATO’s overexertion of their military, including the same endless war in Afghanistan, is all too familiar.

As we face rising interest rates with the largest debt bubble in our history, there is an all too familiar economic crisis looming that the Soviets once faced, not through debt but through their redistribution of wealth.

Putin has become a geopolitical foe. The cold war is reigniting. Only this time, our economy is in looming peril, science is being impugned, and our militaries are the ones that are overexerted. Our society already stood in need of charting a different course, the cold war serves as a stark reminder that liberty is needed now more than ever.

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Brandon Kirby

Brandon Kirby has a philosophy degree with the University of New Brunswick. He works for a Cayman Island hedge fund service firm, owns a real estate company, and has been in the financial industry since 2004. He is the director of Being Libertarian - Canada. He is a member of the People’s Party of Canada and the Libertarian Party of Canada.