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The Political Economy of “Exporting” Democracy


In 1917, President Woodrow Wilson justified the American entry into World War I on the ground that it was necessary to make the world “safe for democracy.” Since that time, U.S. presidents have used this same line of reasoning to justify military interventions around the world. More than eight decades after Wilson’s decree, George W. Bush stated that “it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture, with the ultimate goal of ending tyranny in our world.” And a 2011 White House press release noted the Obama administration’s commitment to the “goal of helping provide the Libyan people an opportunity to transform their country, by installing a democratic system that respects the people’s will.”

Promoting regime change in the name of democracy and freedom sounds noble and heroic to many. But rarely, if ever, do politicians, citizens, and pundits consider whether the U.S. government can actually achieve its stated goals. More common is an unconstrained view that assumes that the U.S. government can do whatever its members put their minds to. The unconstrained view was captured nicely in comments by Secretary of State Hillary Clinton in a 2010 talk to the Council on Foreign Relations, when she noted that “Americans have always risen to the challenges we have faced. That is who we are. It is in our DNA. We do believe there are no limits on what is possible or what can be achieved.”

There are strong moral arguments against the use of military intervention, and those arguments are very important. However, it is of crucial importance to engage in the positive analysis of military intervention. A positive analysis involves taking the ends stated by policymakers as given (e.g., exporting democracy) and focusing on the means invoked to achieve those ends to determine whether they are feasible in practice. Focusing on the actual ability of policymakers to achieve their desired ends is important because discussions of foreign intervention often devolve into ideological debates with no clear resolution.

For instance, Republicans contend that the Democrats are “soft” on the war on terror and can’t stomach the sacrifices that are required to spread democracy and freedom around the world. Democrats often respond that the Republicans botched the current efforts in Iraq and Afghanistan with poor planning and a general lack of “effort.” If only better planning had taken place prior to occupations, the argument goes, the United States would not be mired in these situations.

Employing the tools of economics affords the opportunity to put aside ideological issues. Economists emphasize that people face constraints (e.g., knowledge, information, and income) and respond to incentives. Incentives refer to factors influencing human behavior by changing the relative costs and benefits. When the benefits associated with a certain behavior increase, people engage in more of it. Likewise, when the costs associated with a certain behavior increase, people engage in less of it. From an economic standpoint, military occupation is all about constraints and incentives. All of the various individuals (i.e., members of the military, bureaucrats, policymakers, politicians, citizens and policymakers in the occupied country, and politicians in neighboring countries) involved in foreign interventions face certain constraints and incentives that contribute to ultimate success or failure. The application of the economic way of thinking to foreign intervention goes a long way in explaining why a large majority of U.S. efforts to export democracy abroad through military occupation have failed dismally.

The knowledge problem

The most significant constraint facing policymakers and occupiers is the fundamental knowledge problem of establishing the foundations of a free society where they do not already exist. Many agree on the general characteristics of a free society — protection of individual and property rights, freedom of speech, rule of law — but the knowledge of how to effectively design and impose those characteristics is lacking.

The lack of knowledge regarding the factors leading to liberal democracy is captured in the following list of propositions put forth by political scientist Doh C. Shin:

(1) There are few preconditions for the emergence of democracy;

(2) No single factor is sufficient or necessary to the emergence of democracy;

(3) The emergence of democracy in a country is the result of a combination of causes;

(4) The causes responsible for the emergence of democracy are not the same as those promoting its consolidation;

(5) The combination of causes promoting democratic transition and consolidation varies from country to country; and,

(6) The combination of causes generally responsible for one wave of democratization differs from those responsible for other waves.

Success in military occupation is not simply a matter of taking the rules that work in one society and imposing them on another society. This point is illustrated not only by the many failed U.S. foreign interventions but also by the failure of several Latin American countries to effectively mimic the U.S. Constitution.

The ability to transport rules between societies is constrained by the fact that underlying belief systems, values, and ideals often differ across societies. What works in the United States will not work in the Middle East, just as what worked in Japan and West Germany following World War II is a very poor guide for current and future foreign interventions.

The knowledge problem is almost always ignored by policymakers and supposed foreign-policy “experts.” As Gen. Stanley McChrystal, the former commander of the U.S. forces in Afghanistan, noted, “We didn’t know enough and we still don’t know enough.… Most of us — me included — had a very superficial understanding of the situation and history [of Afghanistan], and we had a frighteningly simplistic view of recent history, the last 50 years.” Given the lack of knowledge regarding the foundations of liberal democracy, why should we expect foreign occupiers to be successful in attempts to establish those institutions at gunpoint? The knowledge problem facing policymakers and occupiers prevents them from creating the incentives necessary for a free society. That realization alone should lead us to be extremely skeptical of the ability of the U.S. government to “export” liberal democratic institutions abroad through military intervention.

Unfortunately, the knowledge problem has not stopped U.S. policymakers from using foreign military interventions to foster political, social, and economic change. Instead of recognizing the fundamental limitations of their efforts, they typically focused on the amount of “effort” in the form of time spent planning, monetary and humanitarian aid, troop levels, the timing of elections, and exit strategy. Unfortunately, that overlooks the deeper issue — policymakers do not have the relevant knowledge to achieve their desired ends.

The economics of politics

Politics is central to any foreign occupation. Therefore, it is important to consider the incentives facing those involved in the political system and the subsequent impact on military interventions and occupations. To illustrate that, consider three of the key categories of actors in military occupations:

Elected officials. Elected officials in the United States make decisions regarding where and when to deploy military forces abroad. Economics suggests that the decisions of elected politicians are often shortsighted in nature. For elected officials who are constrained by a term limit, the main focus is on obtaining benefits during their time in office, even if the shorter-term benefits entail great costs that will be incurred in future periods. That is because current politicians will not incur “bills” that come due in the future, since they will be out of office. That logic applies to military intervention just as to any other policy.

For example, in 2002 Larry Lindsey, an economic advisor in George W. Bush’s administration, announced that the Iraq War could cost in the range of $100–$200 billion. In order to maintain public support for the war efforts, the Bush administration rejected those numbers as a significant overestimate. According to the Cost of War project at Brown University, direct outlays for the Iraq War were more than $800 billion through 2014. Joseph Stiglitz and Linda Bilmes have estimated that the war and reconstruction in Iraq could cost closer to $3 trillion when all is said and done and all direct and indirect costs are taken into account.

Bureaucrats. The occupation and reconstruction of Afghanistan and Iraq have been characterized by infighting among various agencies and bureaus within the U.S. government. Many blame that on poor planning and management on the part of the Bush administration. However, the economics of bureaucracy predicts that this is the outcome we should expect no matter which political party is in power. Consider the incentives that bureaucrats face. Absent profit and loss to judge their effectiveness, the success of a bureau is judged by the size of its budget and the number of bureaucrats employed. Foreign occupations provide an excellent opportunity to increase both. While bureaus are supposed to be working together toward some common goal, the result is that they end up fighting with each other in the hopes of establishing a dominant position and securing a bigger share of the resources associated with the intervention.

Special-interest groups. In addition to bureaucrats, private firms also seek to influence foreign interventions and secure a share of the associated monetary budget. Central to the process of securing contracts and significant roles in the intervention are the relationships between those firms and elected officials and bureaucrats. A recent example from Afghanistan nicely illustrates this logic.

In 2010, the U.S. Department of Agriculture partnered with the American Soybean Association to launch the Agricultural Renewal of Afghanistan Initiative at a cost of $34 million. The stated goal of the initiative was to create a thriving soybean industry in Afghanistan. Four years later, an audit of the initiative concluded that it was a complete waste. There was little to no demand for soybeans in Afghanistan, and the environmental conditions were not conducive to growing the crop. Members of the American Soybean Association were enriched at the expense of American taxpayers who ended up footing the bill for the sham project. This example of pure waste may be considered minor, given that it is estimated that at least $7 billion has been wasted in Afghanistan in total. However, it is an important example precisely because it is so minor. If something like a small agricultural initiative is doomed by rampant cronyism, why should we expect more-grandiose projects to be any different? We should not, as foreign military interventions encourage widespread fraud and corruption.

A massive military-industrial-aid complex emerged in the post–World War II period, consisting of a dynamic set of political, bureaucratic, and economic interests seeking to influence foreign policy regardless of the need or viability of a particular policy. Those bureaucracies and special-interest groups view foreign interventions as a lucrative profit opportunity. Politicians from both of the main political parties rely on the fear of foreign threats to maximize their votes. The perverse incentives created by political institutions affect foreign interventions by influencing policies and outcomes in a manner conducive to dysfunction and failure.

The failure of central planning (again)

The main insights from the economic way of thinking regarding foreign intervention and military occupation can be summarized as follows:

(1) Policymakers and occupiers face an array of constraints, both internal and external to the country being occupied, which make reconstruction efforts more likely to fail than to succeed.

(2) The failure of foreign interventions and reconstruction efforts is not a matter of political ideology or the political party in charge, nor is it an issue of “trying harder” with more troops, money, the timing of elections, or better planning.

(3) The failure of foreign intervention and reconstruction efforts is due to: the fundamental inability of government to centrally plan the complex array of formal and informal institutions of a free and prosperous society, and political incentives that lead to waste, cronyism, and dysfunction.

Together, those implications make me extremely skeptical of the ability of the U.S. government to produce liberal institutional change in foreign societies. The sheer complexity of the situation, combined with the perverse political incentives, is good reason to be predisposed against foreign military interventions. Just as the work of Ludwig von Mises, F.A. Hayek, James Buchanan, Gordon Tullock, and others leads us to be skeptical about the ability of government to achieve grandiose initiatives domestically, so too should we be skeptical that government can do so internationally, where the complexities are often far greater.

With the collapse of socialism, there is widespread consensus regarding the futility of economic central planning. Unfortunately, the same logic has not been extended to foreign interventions that attempt to centrally plan economic, legal, social, and political institutions. Like socialism, more-recent efforts at central planning are likely to fail to achieve the desired end.

If U.S. policymakers and citizens are serious about improving the well-being of those in other societies, there are ways to do so that do not involve military intervention. For example, allowing for the free movement of people, goods, and services would improve the well-being of the poorest in the world. Such policies do not require central planning but, rather, the removal of barriers to individual freedom and discovery. At the same time, that approach will minimize the significant costs of foreign intervention, which include not just monetary costs but also the loss of domestic freedoms and liberties associated with an activist and meddlesome foreign policy.

This article was originally published in the October 2015 edition of Future of Freedom.

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    Christopher J. Coyne is the F.A. Harper Professor of Economics at George Mason University. His most recent book is Doing Bad by Doing Good: Why Humanitarian Action Fails.