At Yalta, Roosevelt and Churchill entered only a mild protest against Soviet plans to retain control of the Baltic states (Estonia, Latvia, and Lithuania) and a large part of eastern Poland, in effect restoring Russia’s pre-World War I western borders. Stalin agreed to enter the war against Japan later in 1945, to include noncommunists in the pro-Soviet government of Poland, and to allow “free and unfettered elections” there. But he was intent on establishing communism in eastern Europe. He believed, as he put it to Yugoslav communist leader Josip Broz (“Tito”), that in modern war, “whoever occupies a territory also imposes his own social system.” Yalta saw the high-water mark of wartime American-Soviet cooperation. But it planted seeds of conflict, since the participants soon disagreed over the fate of eastern Europe.

The Big Three—Stalin, Roosevelt, and Churchill—at their first meeting, in Tehran, Iran, in 1943, where they discussed the opening of a second front against Germany in western Europe.

Tension also existed between Britain and the United States. Churchill rejected American pressure to place India and other British colonies on the road to independence. He concluded private deals with Stalin to divide southern and eastern Europe into British and Soviet spheres of influence.

Britain also resisted, unsuccessfully, American efforts to reshape and dominate the postwar economic order. A meeting of representatives of forty-five nations at Bretton Woods, New Hampshire, in July 1944 replaced the British pound with the dollar as the main currency for international transactions. Dining the 1930s, as noted in the previous chapter, FDR had taken the United States off the gold standard, allowing the government to issue more money in the hope of stimulating business activity. The Bretton Woods conference reestablished the link between the dollar and gold. It set the dollar’s value at $35 per ounce of gold and gave other currencies a fixed relationship to the dollar. The conference also created two American-dominated financial institutions. The World Bank would provide money to developing countries and to help rebuild Europe. The International Monetary Fund would work to prevent governments from devaluing their currencies to gain an advantage in international trade, as many had done during the Depression.

Although the details took many years to emerge, Bretton Woods created the framework for the postwar capitalist economic system, based on a freer international flow of goods and investment and a recognition of the United States as the world’s financial leader. Determined to avoid a recurrence of the Great Depression, American leaders believed that the removal of barriers to free trade would encourage the growth of the world economy, an emphasis that remains central to American foreign policy to this day.

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