Since the end of the Second World War, the geopolitics of the world-system has traversed three different phases. From 1945 until around 1970 the us exercised unquestioned hegemony in the world-system. This began to decline during the period between 1970 and 2001, but the extent of the decline was limited by the strategy that the us evolved to delay and minimize the effects of its loss of ascendancy. Since 2001 the us has sought to recuperate its standing by more unilateralist policies, which have, however, boomeranged—indeed actually accelerating the speed and depth of its decline.

If we look back to 1945, we can see that the end of the Second World War marked the conclusion of an 80-year struggle between the United States and Germany to determine which of the two rivals would be the successor to Great Britain—in decline since at least 1873—as the hegemonic power in the world-system. The culminating phase of this struggle involved a thirty years’ war from 1914 to 1945, which came to include all the major industrial powers of the world-system, and in its last phase (the so-called Second World War) inflicted massive physical destruction on the populations of Europe and Asia and devastated most of their industrial equipment. The us won the war against Germany, obtaining its ‘unconditional surrender’, with the indispensable assistance of its main allies, the ussr and Great Britain, who sustained huge losses. In 1945, the us emerged from the war as the only major power that had preserved its industrial plant intact, indeed greatly strengthened by wartime expansion. This meant that, for 15 or 20 years thereafter, the us was able to produce all the key goods so much more efficiently than other industrial nations that it could outsell foreign producers in their home markets. Moreover, the physical destruction in Europe and Asia was so great that many of these countries suffered from food shortages, unstable currencies, and acute balance of payment problems in the immediate aftermath of the war. They needed urgent economic assistance of multiple kinds and looked to the us to supply it.

The us was easily able to transform its absolute economic dominance into political primacy. For the first time in its history it also became the central locus of the geoculture, New York replacing Paris as the capital of world art in all its forms. The American university system quickly came to dominate scholarship in virtually every field. The only domain in which the us remained insecure, with good reason, was the military arena. Internal politics had mandated the rapid postwar reduction of the us army, whose numbers had been sustained by a universal draft system. Washington thus now relied primarily on two military assets: its possession of nuclear weapons and a strategic air command capable of delivering these bombs anywhere in the world. There was one other serious military power in the world—the Soviet Union. Although it had suffered enormous losses during the war, the Soviet army was very large and had not been demobilized. Furthermore, within four years, the Soviet Union was able to acquire its own nuclear weapons and thereby break the us monopoly.

The only rational solution to this military situation was some kind of political deal between what would later be called the two superpowers. The deal struck is referred to by the symbolic name of Yalta, but it involved much more than the formal agreements reached at the Yalta conference. The deal consisted of three parts. The first involved a division of the world into spheres of influence. The Second World War had ended on a certain line in Europe, roughly the Elbe river in Germany, and a hypothetical projection southward to the Mediterranean. Similarly, in East Asia, such a line existed along the 38th parallel dividing Korea in two halves. Each party was to retain control of its side of this line, tacitly pledging not to use military force to try to change the status quo. In effect, this awarded the Soviet Union the areas that had been occupied by the Red Army, about one-third of the world, and granted the us control over the rest.

Since the deal was never explicit, there were a number of occasions when it would be called into question in the years to come—northern Iran, the Greek Civil War, the Berlin Blockade, the Korean War, the Quemoy–Matsu imbroglio, the various uprisings in Eastern Europe (1953, 1956, 1968 and 1980–81), and above all the Cuban missile crisis. It should be noted that in each of these mini-‘crises’ both sides always declined to use nuclear weapons (the so-called balance of terror) and each ended with a return to the status quo ante. The fact is that the mutual acceptance of each other’s geopolitical boundaries lasted throughout the so-called Cold War, despite all kinds of internal pressures in each camp not to respect the terms of the deal.

The second aspect of ‘Yalta’ lay in the economic arena. The us was determined to rebuild the economic infrastructure of its allies. The reason for this was partly political—to ensure their loyalty as satellites—and partly economic: there is no point being the most efficient producer in the world if there are not enough customers for one’s products. What the us did not want to do was pour money into rebuilding the economic infrastructure of the Soviet Union and its bloc. Both sides took advantage of the Berlin Blockade to build what amounted to a dyke between the two economic zones. The us used the Blockade as the political excuse to get Congress to pass the Marshall Plan. It later used the Korean War to justify similar kinds of economic assistance to Japan, Taiwan and South Korea. The Soviet Union, for its part, constructed comecon with its East-Central European satellites and forged extensive economic links with China and North Korea. The result was that the Communist third of the world withdrew from significant interaction with the rest of the capitalist world-economy, into a sort of collective protectionism. The Soviet bloc and its allies used this arrangement to press ahead with industrialization, achieving remarkable growth rates during this period. The us used it to construct an inter-state economic order in which the dollar was the world reserve currency and American industrial and financial enterprises could flourish.

The third part of the Yalta deal was ideological. Each side was allowed, indeed encouraged, to engage in loud denunciations of the other. American rhetoric divided the arena into the free world and the totalitarian states; Soviet rhetoric divided it into the bourgeois and socialist camps. The names were different, but the lists were essentially the same. Neither side accepted the legitimacy of ‘neutrality’ in this ideological war. But ideology was never allowed to determine ongoing political and economic decisions. The real function of the rhetoric was to enable the leaders of each zone to rein in potential dissidents in their own camp, and prevent the emergence of groups that might call existing geopolitical arrangements into question. The result was a world public opinion divided into two camps, with each side having a substantial group of supporters.