A Tectonic Shift

By GEORGE J. CHURCH

Perhaps never has the mood of a decade reversed itself so totally. The 1980s began with the worst U.S. inflation in 60 years and a deepening dread of nuclear annihilation. As they closed, inflation was making a last and unsuccessful assault on an economy that had found new resources, the Berlin Wall was tumbling down, and the Soviet empire was dissolving. The cold war was over--and the West won!

The road between was hardly a smooth climb. Ronald Reagan gave the U.S. a heady draft of optimism while reversing the direction of government policy, recasting social programs and cutting taxes. Unmatched by spending reductions, however, those cuts sent deficits soaring to unheard-of highs, and the double-digit inflation of 1980 was cured only by double-digit unemployment in 1982.

The economy revived, but an outsize share of the benefit seemed to flow to Wall Street. Mergers proliferated wildly, mostly, it seemed, for the enrichment of a few financial manipulators--novelist Tom Wolfe's Masters of the Universe. Moralists bemoaned what they saw as a sanctification of greed--not only in the U.S. but also in Margaret Thatcher's Britain, Helmut Kohl's West Germany and, of all places, Red China. But unlike in the irrationally exuberant 1920s, disaster did not strike. Though stocks fell even faster on Oct. 19, 1987, than they had in 1929, they bounced back higher than ever, setting the stage for what could soon become the longest period of economic expansion in history. Something fundamental had happened to the boom-and-bust cycle that had charted the century.

Something fundamental was happening to communism as well. Reagan's 1982 prediction that it was headed for "the ash heap of history" was lost in a rising sea of angst, captured in a 1983 made-for-TV movie, The Day After, that dramatized the clinical horrors of a nuclear exchange. The U.S. and U.S.S.R. had broken off all arms-control negotiations and were arming rival sides in shooting wars in El Salvador and Nicaragua (whose anticommunist guerrillas would play a central role in the great Iran-contra scandal of the Reagan years).

Beneath the surface, though, the alignment of forces was shifting. Reagan's big military buildup, and in particular his widely derided attempt to create a Star Wars antimissile defense, were putting heavy pressure on the Soviet Union to keep up. Moscow was vulnerable because the Soviet economy was decaying badly, and its leadership was nearly paralyzed. Only in 1985, after three Kremlin funerals in three years, did a leader, Mikhail Gorbachev, emerge who was realistic and vigorous enough to attempt drastic reforms.

In a series of summits, Gorbachev and Reagan brought about a de-escalation of the arms race, which the Soviet leader realized was swallowing more resources than he could afford. The European satellites were too, so Gorbachev told their chiefs that Soviet tanks would no longer keep them in power. That started a chain reaction that left both sides dumbfounded. By the end of 1989, the Soviet bloc had dissolved: Poland, Hungary, Czechoslovakia, East Germany and Romania all installed noncommunist regimes. Even then, nobody would have guessed that in another two years the Soviet Union itself would shatter into 15 pieces. But it was already obvious that the world was entering a strange new era: only one superpower; no cold war.