THE WANING OF ECONOMIC CONTAINMENT: NATO, MILITARY AID, AND NSC 68, 1948-1950
UNTIL THE KOREAN WAR, the growth of the American military establishment did not keep pace with the postwar expansion of U.S. commitments overseas. Defense budgets remained limited primarily because Truman administration officials believed that economic instruments could adequately safeguard U.S. security interests around the world. Their confidence in this strategy appeared well-founded as the United States achieved its most important foreign policy aims without resorting to full-scale rearmament: the reconstruction of Western Europe, Germany, and Japan, their integration into a multilateral system under American auspices, and the containment of Soviet power.
By late 1949, however, three developments had forced a reevaluation of American policy. With the formation of the North Atlantic Treaty Organization (NATO), the United States felt compelled to offer increasing amounts of military aid (and later, ground troops) to its European allies in order to provide solid evidence of the American commitment to their security. The Soviet explosion of an atomic bomb in August 1949 persuaded most American policymakers that they had underestimated Soviet military and technical capabilities while overestimating the ability of economic leverage to protect vital U.S. interests against what was now generally perceived as a military threat. And finally, Mao's victory in mainland China, coming at a time of rising anti-Communist sentiment in the United States, led the Truman administration to give greater support to "democratic" forces in Asia as well as Europe.