Great Power Elasticity in the Cold War

Danny Quah
3 min readApr 19, 2021


How did the Berlin Wall come about in the Cold War, when the Soviets were against it and only East Germany wanted it? Do small states (as East Germany was) have special kind of power? Or was it just demand and supply?

The Berlin Crisis, 1958–1961, was one of the transformative events of the Cold War, resulting in the construction of the Berlin Wall. But how did the Berlin Wall fit with the Soviet Union’s ultimate foreign-policy goal of a broad German peace agreement with the Western powers?

It didn’t.

In the view of the Soviets, West Berlin was only a pawn to be used to leverage Western acknowledgement of the status of East Germany. In the East German view, however, West Berlin was a prize in itself, independent of what the Western powers (and the Soviets) thought.

East Germany prevailed when the Soviets agreed to the construction of the Berlin Wall in 1961, preventing further shifts in resources between East and West Berlin, and in effect ending the Berlin Crisis.

How did this small state (East Germany) get its way against the Great Power (the Soviet Union), in contrast to Kenneth Waltz’s famous pronouncement of ridicule? Is this an isolated incident of small states pushing back successfully against Great Powers? Do we need a new concept of power to explain this small state success?

Or is the explanation far more prosaic, namely just demand fluctuations pressing against an elastic supply curve in the marketplace for regional and world order?

In economics, that every consumer is a price-taker is perfectly consistent with market outcomes shifting as demand varies, i.e., price-taking is consistent with the market supply curve having slope both positive and finite. In such thinking, equilibrium is elastic with respect to consumer wants even if each consumer is too small to stand up to any agent on the supply side. Applied to international relations, this idea says that small states have agency, even if they are all price-takers relative to the Great Powers.

But, apart from the Berlin Wall, what evidence is there that world order is indeed elastic with respect to the preferences of small states? When small states choose, are there consequences for the international system as a whole, or only for themselves?

The video is from Asia Global Institute’s Public Policy Webinar, Tue 13 Apr 2021. The event itself was chaired by Prof Heiwai Tang: The first 30 minutes I present, and then the remainder is Q&A. Although Heiwai and I came out of the same Economics shop (me, very long ago), we decided to run this webinar Political-Science style, and so, unlike the usual Economics seminars, I didn’t get interrupted every 2 minutes (normally about something that I would get to in the next minute anyway).



Danny Quah

Danny Quah is Dean and Li Ka Shing Professor in Economics at the Lee Kuan Yew School of Public Policy, NUS.