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As World War II was coming to an end, the Allied powers set up a peacekeeping organization to prevent future wars. Soon, however, tensions arose over the amount of freedom the Soviets would allow the nations they controlled.

Building a New World

How did the conferences at Dumbarton Oaks and Yalta attempt to shape the postwar world?

Well before the war ended, President Roosevelt had begun to think about what the world would be like after the war. Many people in the United States worried that the Great Depression would come back. Others worried that the United States would return to isolationism, and let the rivalries between other countries lead to new wars. Roosevelt was determined, however, to build a new economic and political system that would preserve the peace and promote economic growth in the world.

The Bretton Woods System  

President Roosevelt believed that high tariffs—like the Smoot-Hawley Tariff of 1931—had helped cause the Great Depression. He and his advisors were convinced that the best way to generate prosperity and economic growth after the war was to increase the amount of trade between countries and to create institutions that would keep the trade system stable.

In July 1944, Roosevelt organized a conference for the world’s nations except those that belonged to the Axis. The conference was held at Bretton Woods, New Hampshire and established many international economic institutions that are still part of the world's economic system today.

The first organization set up at Bretton Woods was the World Bank. Its purpose was to help rebuild Europe after the war, and help nations in Asia, Africa, and Latin America develop their economies. The World Bank still performs this role today, loaning money to help nations with their economic development. The second institution set up was the International Monetary Fund (IMF). Its purpose was to help countries with trade deficits. A trade deficit is when a country imports more than it exports. Countries with trade deficits have more of their money flowing out to buy foreign goods than they have flowing in from other countries who are buying their goods. The IMF was to use its funds to prevent trade wars and to prevent each country’s money from changing too much in value. The IMF continues to perform this function today.

In addition to these two institutions, the nations set up a new currency system. The U.S. dollar became the world's reserve currency. All nations set an exchange rate between their currency and the dollar. The dollar in turn was put on a gold standard. One ounce of gold would equal 35 U.S. dollars, and the United States pledged to always keep enough gold in reserve so that anyone with dollars could convert them into gold on demand.

One of the positives of the Bretton Woods system was that it would prevent nations from using inflation to escape their debts. Everyone remembered that Germany had used inflation to make its currency almost worthless after World War I as a way to avoid paying its reparations debts. The Bretton Woods system would keep the world's currencies stable and help keep the world at peace. The weakness of the system was that a gold standard limited the use of monetary policy to fight inflation or get out of a recession. By setting exchange rates, it also meant trade between nations could become unbalanced if the exchange rate did not accurately reflect the market value of goods being traded across borders.
 

Creating the United Nations

Roosevelt not only wanted to create a new global economic system, he also wanted a new political system to help prevent another world war.  He believed one cause of World War II had been the American decision to stay out of the League of Nations after World War I. He wanted the United States and its allies to create a new international organization that would take an active role in preserving the peace.  

In 1944, at the Dumbarton Oaks estate in Washington, D.C., delegates from 39 countries met to discuss the new organization, which was to be called the United Nations (UN). The delegates at the conference agreed that the UN would have a General Assembly, in which every member nation in the world would have one vote. The UN would also have a Security Council with 11 members. Five countries would be permanent members of the Security Council: Britain, France, China, the Soviet Union, and the United States. These five permanent members would each have veto power.

The advantage of the United Nations was that it put all of the great powers that had helped to defeat the Axis in the Security Council. This would force them to consult with each other and work together whenever the United Nations took action. The weakness of the United Nations was that the veto allowed any one member of the Security Council to stop the UN from taking action.

On April 25, 1945, representatives from 50 countries came to San Francisco to officially organize the United Nations and design its charter. The General Assembly was given the power to vote on resolutions and to choose the non-permanent members of the Security Council. The Security Council was responsible for international peace and security. It could ask its members to use military force to uphold a UN resolution.

The Yalta Conference

In February 1945, with the war in Europe nearly over, Roosevelt, Churchill, and Stalin met at Yalta—a Soviet resort on the Black Sea—to plan the postwar world. Several agreements reached at Yalta later played an important role in causing the Cold War.

A key issue discussed at Yalta was Poland. Shortly after the Germans had invaded Poland in 1939, the Polish government fled to Britain. In 1944, however, Soviet troops drove back the Germans and entered Poland. As they liberated Poland from German control, the Soviets encouraged Polish Communists to set up a new government. As a result, two governments claimed the right to govern Poland: one Communist and one non-Communist. President Roosevelt and Prime Minister Churchill both argued that the Poles should be free to choose their own government.

Stalin, however, quickly pointed out that every time invaders had entered Russia from the west, they had come through Poland. Eventually, the three leaders compromised. Roosevelt and Churchill agreed to recognize the Polish government set up by the Soviets. Stalin agreed it would include members of the prewar Polish government, and free elections would be held as soon as possible.

The Declaration of Liberated Europe

After reaching a compromise on Poland, the three leaders agreed to issue the Declaration of Liberated Europe. The declaration echoed the Atlantic Charter, asserting “the right of all people to choose the form of government under which they will live.” The Allies promised that the people of Europe would be allowed “to create democratic institutions of their own choice” and to create temporary governments that represented “all democratic elements.” They pledged “the earliest possible establishment through free elections of governments responsive to the will of the people.”

Dividing Germany

The conference then focused on Germany. Roosevelt, Churchill, and Stalin agreed to divide Germany into four zones. Great Britain, the United States, the Soviet Union, and France would each control one zone. The same four countries would also divide the German capital city of Berlin into four zones, even though it was in the Soviet zone.

Although pleased with the decision to divide Germany, Stalin also demanded that Germany pay heavy reparations for the war damages it had caused. An agreement was reached that Germany could pay war reparations with trade goods and products, half of which would go to the Soviet Union. The Allies would remove industrial machinery, railroad cars, and other equipment from Germany as reparations. Later arguments about reparations greatly increased tensions between the United States and the Soviet Union.

Rising Tensions

The Yalta decisions shaped the expectations of the United States. Two weeks after Yalta, the Soviets pressured the king of Romania into appointing a Communist government. The United States accused the Soviets of violating the Declaration of Liberated Europe. Soon afterward, the Soviets refused to allow more than three non-Communist Poles to serve in the 18-member Polish government. There was also no indication that they intended to hold free elections in Poland as promised. On April 1, President Roosevelt informed the Soviets that their actions in Poland were not acceptable.

Yalta marked a turning point in Soviet-American relations. President Roosevelt had hoped that an Allied victory and the creation of the United Nations would lead to a more peaceful world. Instead, as the war came to an end, the United States and the Soviet Union became increasingly hostile toward each other. The Cold War, an era of confrontation and competition between the nations, lasted from about 1946 to about 1990.

Soviet Concerns

As the war ended, Soviet leaders became concerned about security. They wanted to keep Germany weak and make sure that the countries between Germany and the Soviet Union were under Soviet control. Soviet leaders also believed that communism was a superior economic system that would eventually replace capitalism. They believed that the Soviet Union should encourage communism in other nations. They accepted Lenin’s theory that capitalist countries would eventually try to destroy communism. This made them suspicious of capitalist nations.

American Economic Issues

While Soviet leaders focused on securing their borders, American leaders focused on economic problems. They believed that the Great Depression became so severe because nations reduced trade. They also believed that when nations stop trading, they are forced into war to get resources. By 1945, Roosevelt and his advisers were convinced that economic growth through world trade was the key to peace. They also thought that the free enterprise system, with private property rights and limited government intervention in the economy, was the best route to prosperity.

UN Responses to the War

In response to the atrocities of World War II, the United Nations held a General Assembly in December 1946. They passed a resolution that made genocide punishable internationally. The text of the Convention on the Prevention and Punishment of the Crime of Genocide became the first UN human rights treaty. Former First Lady Eleanor Roosevelt chaired a UN Commission on Human Rights in 1948. The international commission drafted the Universal Declaration of Human Rights, which promoted the inherent dignity of every human being and was a commitment to end discrimination.

Truman Takes Control

 Why did the Potsdam Conference further increase tensions between the United States and the Soviet Union?

Eleven days after confronting the Soviets on Poland, President Roosevelt died and Harry S. Truman became president. Truman was strongly anti-Communist. He believed World War II had begun because Britain had tried to appease Hitler. He did not intend to make that mistake with Stalin. “We must stand up to the Russians,” he told Secretary of State Edward Stettinius the day he took office.

Ten days later, Truman did exactly that at a meeting with Soviet foreign minister Molotov. Truman immediately brought up Poland and demanded that Stalin hold free elections as he had promised at Yalta. Molotov took the unexpectedly strong message back to Stalin. The meeting marked an important shift in Soviet-American relations and set the stage for further confrontations.

The Potsdam Conference

In July 1945, with the war against Japan still raging, Truman finally met Stalin at Potsdam, near Berlin. Both men had come to Potsdam to work out a deal on Germany. Truman was now convinced that industry was critical to Germany’s survival. Unless its economy was allowed to revive, the rest of Europe would never recover, and the German people might turn to communism out of desperation.

Stalin and his advisers were convinced they needed reparations from Germany. The war had devastated the Soviet economy. Soviet troops had begun stripping their zone in Germany of its machinery and equipment for use back home, but Stalin wanted Germany to pay much more.

At the conference, Truman took a firm stand against heavy reparations. He insisted that Germany’s industry had to be allowed to recover. Truman suggested the Soviets take reparations from their zone, while the Allies allowed industry to revive in the other zones. Stalin opposed this idea since the Soviet zone was mostly agricultural. To get the Soviets to accept the agreement, Truman offered Stalin a small amount of industrial equipment from the other zones, but required the Soviets to pay for part of it with food shipments. He also offered to accept the new German-Polish border the Soviets had established.

Stalin did not like the proposal. At Potsdam, Truman learned of the successful U.S. atomic bomb tests. He hinted to Stalin that the United States had a new, powerful weapon. Stalin suspected Truman of trying to bully him. He thought the Americans wanted to limit reparations to keep the Soviets weak. Despite his suspicions, Stalin had to accept the terms. American and British troops controlled Germany’s industrial heartland, and there was no way for the Soviets to get reparations without cooperating. The Potsdam Conference marked yet another increase in tensions.

The Iron Curtain Descends

Although Truman had won the argument over reparations, he had less success on other issues at Potsdam. The Soviets refused to make stronger commitments to uphold the Declaration of Liberated Europe.

The presence of the Soviet army in Eastern Europe ensured that pro-Soviet Communist governments would eventually be established in the nations of Poland, Romania, Bulgaria, Hungary, and Czechoslovakia. The Communist countries of Eastern Europe came to be called satellite nations because they were controlled by the Soviets, as satellites are tied by gravity to the planets they orbit. Although not under direct Soviet control, these nations had to remain Communist and friendly to the Soviet Union. They also had to follow policies that the Soviets approved.

After watching the Communist takeover in Eastern Europe, the former British prime minister Winston Churchill coined a phrase to describe what had happened. On March 5, 1946, in a speech delivered in Fulton, Missouri, Churchill referred to an “iron curtain” falling across Eastern Europe. The press picked up the term, and for the next 43 years, it described the Communist nations of Eastern Europe and the Soviet Union. With the Iron Curtain separating Eastern Europe from the West, the World War II era had come to an end. The Cold War was about to begin.

Winston Churchill and the Sinews of Peace Address, March 5, 1946, Westminster College, Fulton, Missouri. Reproduced with permission of Curtis Brown, London on behalf of the Estate of Sir Winston Churchill. Copyright © Winston S. Churchill.

Analyzing PRIMARY SOURCES
Churchill on the Iron Curtain
“A shadow has fallen upon the scenes so lately lighted by the Allied victory. . . . From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence, but to a very high and, in some cases, increasing measure of control from Moscow.”

—Winston Churchill, from an address to Westminster College, Fulton, Missouri, March 5, 1946

Reviewing Vocabulary

TEKS: 12B

 

Using Your Notes

TEKS: 7B

 

Answering the Guiding Questions

TEKS: 7B, 19E

TEKS: 7B

 

Writing Activity

TEKS: 12B