ArticlePDF Available

After War: The Political Economy of Exporting Democracy



Why does liberal democracy take hold in some countries but not in others? Why do we observe such different outcomes in military interventions, from Germany and Japan to Afghanistan and Iraq? Do efforts to export democracy help as much as they hurt? These are some of the most enduring questions of our time. Historically, the United States has attempted to generate change in foreign countries by exporting liberal democratic institutions through military occupation and reconstruction. Despite these efforts, the record of U.S.-led reconstructions has been mixed, at best. For every West Germany or Japan, there is a Cuba, Haiti, Somalia, or Vietnam. After War seeks to answer these critical foreign policy questions by bringing an economic mindset to a topic that has been traditionally tackled by historians, policymakers, and political scientists. Economics focuses on how incentives influence human action. Therefore, within an economic context, a successful reconstruction entails finding and establishing a set of incentives that makes citizens prefer a liberal democratic order. Coyne examines the mechanisms and institutions that contribute to the success of reconstruction programs by creating incentives for sustained cooperation. Coyne emphasizes that the main threat to Western nations in the post-Cold War period will not come from a superpower, but rather from weak, failed, and conflict-torn states—and rogue groups within them. It is also critical to recognize that the dynamics at work—cultural, historical, and social—in these modern states are fundamentally different from those that the United States faced in the reconstructions of West Germany and Japan. As such, these historical cases of successful reconstruction are poor models for todays challenges. In Coynes view, policymakers and occupiers face an array of internal and external constraints in dealing with rogue states. These constraints are often greatest in the countries most in need of the political, economic, and social change. The irony is that these projects are least likely to succeed precisely where they are most needed. Coyne offers two bold alternatives to reconstruction programs that could serve as catalysts for social change: principled non-intervention and unilateral free trade. Coyne points to major differences in these preferred approaches; whereas reconstruction projects involve a period of coerced military occupation, free trade-led reforms are voluntary. The book goes on to highlight the economic and cultural benefits of free trade. While Coyne contends that a commitment to non-intervention and free trade may not lead to Western-style liberal democracies in conflict-torn countries, such a strategy could lay the groundwork for global peace.
After War: The Political Economy of Exporting Democracy
Chapter 1 Can Liberal Democracy Be Exported at Gunpoint?
Christopher J. Coyne
Department of Economics
West Virginia University
Morgantown, WV 26506
© 2006 Christopher J. Coyne
Chapter 1 Can Liberal Democracy Be Exported at Gunpoint?
“We are led, by events and common sense, to one conclusion: The survival of liberty in
our land increasingly depends on the success of liberty in other lands. The best hope for
peace in our world is the expansion of freedom in all the world.”
“…[I]t 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.”
- George W. Bush, Inaugural Address, January 20, 20051
On February 15, 1898, the battleship USS Maine exploded and sank in the port of Havana, Cuba.
This event occurred at the same time that support was increasing among Americans for military
intervention in Cuba. Civil violence between Spanish occupiers and Cuban rebels seeking
independence was ongoing within the Spanish colony, and public opinion in the U.S. concerning
this situation was largely shaped by the spread of often exaggerated stories in the major
newspapers detailing the inhumane treatment of Cubans by the Spanish.2 Debate continues to
this day about the cause of the explosion on the USS Maine, but the papers at the time claimed it
was an act of sabotage by the Spanish. In fact, with such headlines as “Remember the Maine!”
serving as rallying cries for those in favor of intervention, U.S. public opinion supporting
military action reached an all-time high.
With public opinion behind him, President William McKinley asked Congress on April
11, 1898 for the authority to send troops to Cuba to end the civil unrest. In addition to the
reported inhumane treatment of Cubans, however, McKinley’s greater, and unspoken, concern
was the protection of American economic interests.3 Eight days later, Congress passed a joint
resolution proclaiming Cuba to be “free and independent” and calling for a complete Spanish
withdrawal. The resolution also authorized the president to use as much force as necessary in
achieving this goal. The Teller Amendment to the resolution indicated that it was not the
intention of the United States to control Cuba and made clear that, once the U.S. military
defeated the Spanish occupiers, Cubans would be granted their freedom. On April 25, Congress
officially declared a state of war between the U.S. and Spain.
In a series of battles with the Spanish naval fleet, the U.S. quickly gained control of the
waterways around Cuba, preventing Spanish ground troops from receiving additional supplies
and support, and within a month, Cuba was securely under U.S. control. The signing of the
Treaty of Paris in December 1898 marked the official end of the war. Per the terms of the treaty,
Spain relinquished Puerto Rico and Guam to the U.S. while sovereignty of the Philippines was
transferred to the U.S. for $20 million. In addition, Spain ceded its claim to Cuba, but as per the
Teller Amendment, the U.S. did not assume permanent control.
Despite the fact that it never assumed official sovereignty over Cuba, however, the U.S.
military continued its occupation through 1902, serving as the active government. During the
occupation, the U.S. built infrastructure, including public sanitation, an education system, and a
postal service. In 1900, a constitution was drafted and municipal elections were held. Under U.S.
pressure, a series of amendments were attached to the constitution that simultaneously allowed
the U.S. the ability to influence Cuban policy while disengaging from daily operations of the
country in order to comply with the letter of the Teller Amendment if not its spirit.
One such amendment to the constitution, the Platt Amendment, provided the conditions
for the withdrawal of U.S. troops from Cuba. The amendment also granted the U.S. control of
Guantánamo Bay, a naval base, which somewhat infamously, or perhaps notoriously, it continues
to utilize to this day. It also restricted Cuba from transferring land to any nation other than the
U.S. Finally, the amendment provided rules regarding Cuba’s ability to float foreign debt and
enter into treaties with non-U.S. countries. Perhaps most important, the Platt Amendment
specified that the U.S. could intervene in Cuban affairs whenever the U.S. government deemed it
appropriate. With the adoption of the constitution, U.S. troops were withdrawn in 1902, and
Tomás Estrada Palma, a strong supporter of the initial U.S. intervention and of U.S. policy
regarding Cuba in general, became Cuba’s first president on May 20 of that year.4
The American occupation of Cuba was important for several reasons. As highlighted
above, it was the catalyst for Cuba’s independence from Spain, but more important from a U.S.
foreign policy perspective, the occupation marked one of the first U.S. attempts to shape
political, economic, and social outcomes via military intervention and occupation. The
experience in Cuba marked the beginning of a trend of intervention and occupation that has
continued into the twenty-first century with the occupation of Iraq and Afghanistan.
The U.S. would utilize the stipulations of the Platt Amendment twice more over the
twenty-year period following the initial occupation. In 1906, the U.S. again occupied Cuba to
surpress civil insurgency. President Estrada Palma’s reelection was met with violent opposition
from the Liberals (the National Liberals and the Republic Liberals), and the U.S. occupation,
which lasted until 1909, focused on restoring order and establishing a new democratic
government in the wake of Estrada Palma’s eventual resignation. Yet another U.S. occupation of
Cuba occurred from 1917 to 1922 due to an uprising inspired by the Russian Revolution. The
U.S. military was charged with ending the uprising and protecting U.S. property and interests.
If the goal of this series of U.S. occupations in Cuba was to plant the seeds of a sustaining
liberal democratic government that would ultimately become a long-term ally of the U.S., one
must obviously consider it a failure. Since the end of the last U.S. occupation in 1922, Cuba has
had several short-lived governments followed by the emergence of two oppressive dictatorships,
those of Fulgencio Batista (1940-1959) and Fidel Castro (1959-present).
Over two decades after the United States exited Cuba for the final time, at the conclusion
of World War II, the U.S. engaged in the most ambitious effort in its history of democratizing
war-torn countries with the occupation and reconstruction of West Germany and Japan. In both
cases, the outcome was drastically different than that in Cuba. In both West Germany and Japan,
military occupiers were able to successfully transform war-torn countries into liberal
democracies that have survived to this day.
In May of 1945, Germany surrendered unconditionally to the Allied forces. Leaders from
the Allied countries had gathered in a series of conferences both before and after Germany’s
surrender to determine a common occupation policy. The main tenets of this policy were that
Germany would be partitioned and each Allied power would control a zone, Nazism would be
abolished, the country would be democratized, war criminals would be punished, and reparations
would be paid. The U.S. would carry out the reconstruction of its Western zone from 1945-1955.
The physical infrastructure, economy and morale of the German people had been
devastated by the war. During the occupation of its zone, the U.S. disbanded the government and
assumed control of the provision of public goods at the municipal and local level and managed
administrative and budgetary functions. Despite the destruction of the country, economic
recovery occurred relatively quickly. Although there were many economic ups and downs,
annual economic indicators showed double-digit growth in the GDP of West Germany from
1947 to 1952.5 Historians and policymakers continue to debate the factors that contributed to this
recovery. Some attribute it to the aid delivered under the Marshall Plan, and others emphasize
the currency and fiscal reforms of Ludwig Erhard as the catalyst of the recovery.6 Whatever one
concludes on this issue, few would disagree that the reconstruction effort was able to transform
West Germany into a liberal democracy. This is not to indicate that the reconstruction process
did not suffer any setbacks. The process was far from smooth, both within each zone and also
across zones. Progress occurred at different rates and on different margins, but overall, if the
standard against which the reconstruction of West Germany is judged is the sustainability of the
reconstructed orders, it must be deemed a success.
Although the specifics of the U.S. experience in Japan were clearly different, the outcome
was very similar to that of West Germany. Following the use of nuclear bombs on Hiroshima
and Nagasaki, Japanese officials surrendered unconditionally in September 1945. As with
Germany, Japan’s infrastructure, economy, and morale had been severely damaged during the
war. The terms of Japan’s surrender had been determined by the U.S., the United Kingdom, and
China at the Potsdam Conference in July of 1945. In addition to unconditional surrender, the
Potsdam Declaration required the purging of certain government officials, as well as the
democratization of Japan, military disarmament and the establishment of freedom of thought,
speech and religion.
Despite the fact that several countries agreed to the terms of surrender at Potsdam, the
Supreme Commander for the Allied Powers, U.S. General Douglas MacArthur, directed the
occupation unilaterally. He decided basic policies and utilized his position of power to
implement them. The unilateral power of the United States in Japan during this period is
evidenced by the fact that no other Allied nation challenged U.S. authority during the
reconstruction process.7 MacArthur orchestrated sweeping and drastic changes throughout
Japanese society, including the government and civil administration, the economy, education,
civil society, the education system, and the military. In the process, MacArthur achieved icon-
like status among the Japanese populace.8 A new constitution was drafted over a relatively short
period of time and went into effect in May 1947. According to the guidelines of the constitution,
the emperor lost all military and political power and became a figurehead of the state. As with
Germany, there were many bumps in the road, but most observers would agree that occupiers
had established a sustainable liberal democracy by the time they exited Japan in April 1952.
The successful cases of Japan and West Germany have lasting importance. Not only do
they exist in contrast to the failures in Cuba, these cases laid the groundwork for the perception
that the United States’ had the ability to successfully export liberal democracy at gunpoint.
Indeed, the U.S. undertook several subsequent efforts to export liberal democracy during the
Cold War, including to Vietnam, Cambodia, and the Dominican Republic. Although these
attempts largely failed, efforts to establish liberal democracy abroad continue to this day.
In October 2001, the U.S. began military operations in Afghanistan in response to the
September 11, 2001 attacks on the World Trade Center and the Pentagon. The aim of the
operation was to eliminate the Taliban government and the al-Qaeda organization. Military
operations were swift and effective. With the assistance of the Northern Alliance, the U.S. gained
control of Kabul, the capital city of Afghanistan.9 In December 2001, representatives from the
U.S. and the Northern Alliance as well as expatriate Afghan leaders met in Bonn, Germany. The
result of the conference, the Bonn Agreement, outlined a roadmap and timetable for bringing
peace, stability, and democracy to Afghanistan. In January 2004, Afghanistan’s constitutional
Loya Jirga approved a new constitution.
In March 2003, while U.S. forces were still attempting to reconstruct Afghanistan along
the guidelines put forth in the Bonn Agreement, the U.S. began a military operation in Iraq. The
specific aim of the operation was to overthrow the regime of Saddam Hussein and replace it with
a liberal democracy. The hope was, or seemed to be, that establishing democracy in Iraq would
have positive spillover effects for the rest of the Middle East. The 2003 operation, much like the
earlier U.S. military operation in Iraq in January 1991, went smoothly and met little resistance.
The U.S., with superior military technology and leadership, was able to topple the comparatively
poorly trained and ill-equipped Iraqi army quickly. The result was the collapse of the Hussein
regime. President Bush publicly declared on April 16, 2003 that Iraq had been “liberated.”10
As of this writing, the situations in Afghanistan and Iraq continue to unfold. It is too early
to determine with certainty whether these reconstructions will achieve their desired end of
creating sustaining liberal democracies. However, while the initial military operations in both
countries were successful, the aftermath has been a different story. In both cases, the existing
governing regimes were easily toppled, but subsequent reconstruction efforts have been met with
strong resistance.11 Dispersed pockets of insurgents located throughout each country characterize
the nature of the resistance – there is no longer a central enemy that can be confronted head-on.
Moreover, costs – both monetary and human – have substantially exceeded initial predictions.
Further, public opinion in the U.S. seems to be turning against prolonging the occupations and
support is increasing for withdrawal sooner rather than later.12 It may take several years, or even
decades, before the outcomes of these efforts can be judged as successes or failures, but at least
in the short-term, the likelihood of success is not looking good compared to what happened after
World War II in West Germany and Japan.
These brief narratives are not meant to do justice to the complexities of the cases
discussed. Instead, the purpose is to highlight the long and varied history of U.S. attempts to
utilize military forces to occupy and reconstruct countries along liberal democratic lines. It is
interesting to note that early failures in Cuba did not prevent the U.S. from further military
intervention before and after World War II, and certainly West Germany and Japan are clear
cases of successful reconstruction. However, the failure of a series of reconstruction efforts
between the 1960s and the 1990s, coupled with the current difficulties in Afghanistan and Iraq,
seems to call America’s ability to export liberal democracy via military occupation into question.
Given the ongoing struggle in both Afghanistan and Iraq and the growing discontent
among the U.S. electorate, we should expect the issues associated with reconstruction to remain
at center stage for the foreseeable future. In August 2004, a new office – the Office of the
Coordinator for Reconstruction and Stabilization – was created within the State Department to
oversee U.S.-led reconstruction efforts. If the present paradigm is maintained in spite of the
widely publicized logistical issues and changing public sentiment, we can safely assume that
U.S. involvement in such efforts will only increase.
The effort to win the “war on terror” has been a driving force behind the emphasis on
spreading democracy via military occupation. In this context, the underlying logic is that the
spread of democracy will greatly reduce, if not eradicate, the terrorist threat. It is widely
recognized that the major threat to the U.S. is no longer a few powerful countries, as during the
Cold War, but instead the threat posed by countries lacking a strong and effective central
government.13 Reconstruction efforts attempt to remedy this situation by establishing the
foundations of sustaining liberal democratic institutions.
Moreover, there is also an increasing call in the academic literature for the U.S. to
embrace its role as an empire. A key advocate of this position, Niall Ferguson, contends that
America should utilize its relative position of power in the world to impose liberal political and
economic institutions in weak and failed states.14 These efforts, Ferguson contends, should not be
constrained by the “light footprint” approach to occupation, but instead should establish colonial
administrations, when necessary, to achieve the desired ends. I will return to this “brute force”
theory later, but for now, the key point is that there is good reason to believe that U.S.
involvement in reconstruction efforts will continue beyond Afghanistan and Iraq.
Given the long history of U.S. reconstruction efforts, coupled with what is sure to be the
continued relevance of the issue in the future, a central question comes to the forefront: Is
military occupation and reconstruction an effective means for exporting liberal democracy? The
purpose of this book is to answer that question. Looking at the historical record, and as noted in
this chapter thus far, one observes some clear cases of success, such as the post-World War II
reconstructions of Japan and West Germany, but the historical record also includes a large
number of clear failures. I seek to contribute to our understanding of these drastically different
outcomes. Specifically, my goal is to understand the precise mechanisms and contexts that
contribute to or prevent success.
To pursue this line of inquiry, I will ask some fundamental questions about how
economics can explain the logic of continued conflict as well as efforts by external parties to
resolve those conflicts by establishing cooperation grounded in liberal democratic institutions.
Why does conflict persist? What mechanisms facilitate, or impede, the transformation of conflict
to cooperation? What constraints do occupiers face in the reconstruction process? Can occupiers
cause more harm than good? Are there alternatives to reconstruction that can generate
institutional and social change toward liberal institutions? Finding answers to these questions is
critical to understanding the viability of reconstruction as an effective means of exporting liberal
I contend that the tools of economics can shed light on these questions by illuminating
the ability of foreign powers to construct sustaining liberal democracies in weak, failed, and
conflict-torn states. Economics can also offer insight into the process of social change.
Sustainable social change requires a shift in underlying preferences. This shift can be influenced
through brute force or through voluntary acceptance. I contend that the latter is more effective in
generating liberal democracy. I further argue that a key mechanism for generating sustainable
change is a commitment to free trade, not only in goods and services, but also in cultural
products, ideas, and institutions. Unfortunately, throughout the history of U.S. foreign policy,
including the recent occupations of Afghanistan and Iraq, emphasis has been placed on military
occupation and reconstruction while inadequate attention has been paid to the alternative of
exporting liberal values, ideas, and institutions through non-intervention, trade, and exchange.
What’s Economics Got to Do with It?
For the most part, research regarding the fundamental questions stated in the previous section has
been limited to the disciplines of history, political science, and public policy, and my primary
aim is to contribute to this existing literature by employing the tools of economics.
Reconstruction was a popular topic among some prominent twentieth-century economists,
including Walter Heller, John Maynard Keynes, Ludwig von Mises, and Bertil Ohlin.15
Nonetheless, few recent economists have turned their attention to this problem. To fill this gap, I
seek to analyze the reconstruction process through an economic lens. I contend that doing so will
contribute substantially to the ongoing debate regarding the ability of governments to effectively
export sustainable liberal democracy via military occupation.
When one looks at the fundamental nature of the reconstruction process, it becomes
evident that economic issues are of central importance. That is, postwar reconstruction requires
the creation of political rules and can therefore be considered a problem in political economy. A
central emphasis of political economy is “the reason of rules.”16 The underlying logic is that
rules provide the parameters within which individuals can carry out private activities while
simultaneously establishing the scope and strength of political institutions and the activities of
political agents within those institutions.
Viewed from the perspective of political economy, the reconstruction process can be seen
as an issue of incentive compatibility. Occupiers must establish the “rules of the game” but also
ensure that institutions are in place that provide incentives for the populace of the reconstructed
country to follow those rules once occupiers exit. As the economist Avner Greif emphasizes,
institutions are patterns of behavior that persist because they provide incentives that lead people
to behave in ways that reproduce those same patterns over time.17 The economic view of
successful reconstruction thus entails finding and establishing a set of incentives that make
people prefer continuing within a liberal democratic order as compared to any available
alternatives. Economic analysis can assist in understanding if the formal and informal rules and
institutions of the reconstruction “game” provide such incentives.
A discussion and analysis of reconstruction must draw on knowledge from a wide range
of disciplines. As an economist, I perhaps lack the insights a historian, political scientist, or
regional expert might provide given their purviews. However, the tools of economics have not
been used to examine the basic nature of the problems faced in reconstruction. A lack of
theoretical understanding of the challenges involved in reconstruction has led to bad policy and
repeated failures in efforts to reconstruct weak, failed, and conflict-torn states; hence this book.
To illuminate this last point, consider the growing literature that criticizes the current
efforts in Iraq for a lack of foresight, planning, and execution.18 The analysis provided here can
assist in understanding not only the current situation in Iraq but also the limitations of future
efforts to construct liberal democracies via military occupation. Applying the economic way of
thinking to the topic of reconstruction will yield insights that are of interest not only to
academics in a wide range of disciplines but also to policymakers as well.
What Does Reconstruction Entail?
For purposes of clarification, I should specify the terminology and assumptions that serve as the
foundation for the analysis that follows. I define reconstruction as the rebuilding of both formal
and informal institutions.19 More specifically, the reconstruction process involves the restoration
of physical infrastructure and facilities; minimal social services; and structural reform in the
political, economic, social, and security sectors.
The terms “reconstruction,” “state building,” “nation building,” and “peacekeeping” are
often used interchangeably. For my purpose, however, these terms capture overlapping but
essentially different activities. Reconstruction requires rebuilding, and in some cases building
from scratch, both formal and informal institutions in order to achieve fundamental political,
economic, and social change. State building and nation building can be seen as a subset of
reconstruction and involve transferring governance capabilities. Likewise, peacekeeping can be
seen as a subset of reconstruction that involves stabilizing a conflict-torn society.
When I use the term “reconstruction,” I am referring to the process in its entirety, from
the initial occupation through the exit of occupying forces, as well as the wide array of activities
that occupiers undertake in the political, economic, and social arenas. The reconstruction process
includes nation building, state building and peacekeeping, but it also goes beyond these activities
as well. It is possible for foreign governments to undertake nation building or peacekeeping
missions without engaging in a broader reconstruction effort. For example, the operation in
Somalia in the mid-1990s started as a humanitarian peacekeeping mission and only later became
a broader effort at reconstruction.
Post-conflict reconstruction efforts can be categorized depending on the nature of the
conflict that precedes the reconstruction. Categories would include civil wars or humanitarian
efforts (for example, as in Somalia and Kosovo), the perceived threat of future conflict (as in
Afghanistan and Iraq), or international wars (as in Germany and Japan). Within these various
categories of conflict, one can further classify the role of the occupying power. At one extreme is
long-term colonization and at the other extreme is liberation – and there is a range of possibilities
in between.
Part of classifying the role of the occupying power involves clarifying the means used to
achieve the desired ends. On the one extreme in this regard is the “brute force” approach, which
emphasizes the complete domination of the post-conflict country using whatever force is
necessary to impose liberal democratic institutions. At the other extreme is the “light footprint”
approach, which places heavy emphasis on the involvement of local indigenous actors coupled
with as little international presence as possible. Under the light-footprint approach, the role of
international forces tends to be limited to peacekeeping-oriented operations, such as maintaining
general order and stability. This does not mean that international forces are restrained from
intervening in specific affairs as deemed necessary, but rather that such “hands-on” interventions
are viewed as a last resort. These categorical distinctions will influence the issues involved in the
reconstruction process and will be considered throughout the analysis.
I define ultimate success in the reconstruction process as the achievement of a self-
sustaining liberal democratic, economic, and social order that does not rely on external monetary
or military support.20 A successful reconstruction does not require fully mature or “consolidated”
institutions, but it does require that the seeds for such institutions be planted. In other words,
several years after the exit of occupiers, we should observe movement toward a consolidated
liberal democracy.
I take this goal as the given end of reconstruction efforts, meaning that I do not consider
whether the end goal is itself good or bad. In the context of U.S. politics, the view that
sustainable liberal democracy is critical to peace can be traced back to at least Woodrow Wilson,
the twenty-eighth president of the U.S., who sought to make “the world safe for democracy.”21
Historically, military occupation and reconstruction have been the means used to achieve this
desired state of affairs.
Ultimate success does not necessarily mean military forces have entirely left the postwar
country, however. For instance, the U.S. still has troops stationed in Japan and Germany. The
main characteristic of a successful effort is the official end of the reconstruction by the occupiers,
coupled with the sustainability of reconstructed political, economic, and social orders in the
absence of military interventions or monetary support. For instance, neither Germany nor Japan
would collapse if the U.S. withdrew existing forces currently stationed in those countries. If, in
fact, a reconstructed country’s institutions would unravel once troops exited or monetary or
humanitarian aid ended, the reconstruction is deemed to have failed to achieve its goal.
Throughout the analysis I will be careful to use the term “liberal democracy.” As Fareed
Zakaria has emphasized, “democracy” is often confused with “liberal democracy.”22 Democracy
deals with the method of selecting government officials, while liberal democracy deals with the
goals of government: the protection of individual rights, the rule of law, and so on. In the
absence of constitutional liberalism, democracy will not necessarily yield the desired results as
defined by U.S. foreign policy objectives. The election of Hitler in Germany or the elections in
Iran, considered by most to be a corrupt sham, provide but two illustrations of the point that
democracy in itself is not enough to obtain the desired outcome of liberal democracy.
Although politicians and policymakers often state the end goal of reconstruction efforts
as “spreading democracy,” what they implicitly mean is the establishment of liberal democratic
institutions along Western lines – if not in specific design then at least based upon Western
principles. This difference is more than semantics. Compared to establishing a lasting liberal
democracy, holding elections is relatively easy. During U.S.-led occupations, elections have been
held in Haiti, Bosnia and Kosovo. However, it remains far from clear that these countries could
be classified as self-sustaining liberal democracies.
The means available to occupiers to achieve the goal of sustainable liberal democracy
include an array of resources that consist of physical assets as well as knowledge and
information about the specific country and reconstruction in general. The use of these means is
constrained by other factors, such as culture and historical experiences in the country being
reconstructed and domestic and international public opinion. Along these lines, I will also pay
careful attention to the important distinction between controllable and uncontrollable variables.
Controllable variables include those factors that occupying forces can vary as they choose: troop
levels, monetary aid, timing of elections, and so on. Uncontrollable variables are those factors
that cannot be varied at will by occupiers. Examples would include the beliefs and norms of the
individuals in the country being reconstructed, or the pressure of domestic and international
opinion to follow a certain course of action.
Although I recognize their critical importance, I will not address the normative issues
associated with military intervention and occupation. Instead, I will argue purely as an economist
and limit my discussion to empirical questions. My focus on the positive aspect of reconstruction
is not intended to downplay the importance of ethical issues. Instead, the normative aspects of
the reconstruction issue are beyond the scope of what I address in this inquiry.23
My starting point in this argument is that reconstruction efforts have taken place in the
past and are currently under way in Afghanistan and Iraq. In addition, on the basis of the
indications provided by policymakers and the realities of the world, I assume that further
attempts at reconstruction will take place in the future. Given the historical reality and the
assumption about future efforts, I will focus on understanding what economics can contribute to
our understanding of whether military occupation and reconstruction are effective means for
achieving the desired ends of spreading liberal democracy to conflict-torn, weak, and failed
Is Military Occupation the Means to Liberal Democracy? A First Take
The narratives that began this chapter provided some insight into the U.S. experience with
occupation and reconstruction. Now that we have established what reconstruction entails, as well
as the end goal of reconstruction efforts, it makes sense to take a closer look at the historical
record of U.S.-led reconstruction efforts. Doing so will provide some initial insight into the
question of whether military occupation is an effective means for generating sustainable liberal
To see if a general pattern exists regarding the success and sustainability of U.S.-led
reconstruction efforts, I will utilize the well-known Polity IV Index.24 The Polity IV Index ranks
the political institutions of a country on a twenty-one-point scale of institutionalized democracy.
A combined “Polity Score” is then calculated by subtracting the Autocracy (0 to 10) score from
the Democracy (0 to 10) score. The resulting scale ranges from +10 (fully democratic) to -10
(fully autocratic). This index is especially useful because data are provided for most countries
from the 1800s through 2003.
The categories of democracy and autocracy incorporate several key dimensions.
Institutionalized democracy, as defined by the authors of Polity IV, consists of three key
elements: (1) the presence of institutions and procedures through which citizens can express their
preferences, (2) the presence of institutionalized constraints on the executive, and (3) the
guarantee of civil liberties for all citizens in both their daily lives and political participation. The
authors define autocracy by a specific set of characteristics as well. Autocracies “suppress
competitive political participation. Their chief executives are chosen in a regularized process of
selection within the political elite, and once in office they exercise power with few institutional
To provide some concrete examples of what these scores mean in terms of actual
governments, Iraq under the Hussein regime had a Polity Score of –9 in 2002, while Afghanistan
scored a –7 under the Taliban in 2000. As of 2003, Egypt scored a –6, Syria a –9, and Saudi
Arabia a –10. In contrast, as of 2003, all of the members of the G-8 had a Polity Score of +10
except for France, which scored a +9, and Russia, which scored a +7.
A key question in this inquiry concerns which Polity Score to use as a benchmark for a
successful reconstruction. The Polity Project has considered a score of +7 or more as necessary
for a country to be a mature and “internally coherent democracy.”26 This same benchmark has
been employed in several studies focusing on democratic peace.27
To be as charitable as possible, however, I will employ a substantially lower score of +4.
To put this score in context, as of 2003, Iran, which President Bush declared to be a member of
the “Axis of Evil,” was a +3. By employing a +4 score as a benchmark, I am essentially asking,
“Were U.S.-led reconstruction efforts able to generate a political regime slightly better than
present-day Iran?”
Timing is yet another issue in making a judgment regarding the success of a
reconstruction process. If the end goal of reconstruction efforts is to establish a self-sustaining
liberal democracy, one must consider the status of these countries well after occupying forces
exit the country. In some cases, as in postwar Japan and West Germany, liberal democracy might
occur relatively quickly, but in other instances, reconstruction efforts might plant the seeds of
liberal democracy that only blossom several years down the line. Likewise, a country might
appear to be a liberal democracy when occupiers initially exit the country only to unravel soon
thereafter. What is important in our consideration here, and I would argue, on the largest of
scales, is whether reconstructed liberal democratic institutions are sustainable over the long run.
There is debate among political scientists regarding the time frame of when a democracy
becomes established or “consolidated.” The suggested time frame ranges anywhere from ten to
twenty-five years.28 Recognizing that there is not a consensus on this issue, I will consider the
Polity Score for U.S.-led reconstruction efforts in five-year intervals: five, ten, fifteen, and
twenty years after the exit of occupying troops. In other words, I want to understand if these
countries had a political regime that scored at least a +4 in five-year increments after the official
and final exit of U.S. occupiers. The results are summarized in Table 1:
Democracy after…?
Country Occupation
Period 5 Years 10 Years 15 Years 20 Years
Cuba 1898-1902 No No No No
Philippines 1898-1946 Yes Yes Yes Yes
Panama 1903-1936 No No No Yes
Cuba 1906-1909 No No No No
Nicaragua 1909-1910 No No No No
Nicaragua 1912-1925 No No No No
Mexico 1914-1917 No No No No
Haiti 1915-1934 No No No No
Cuba 1917-1922 No No No No
Dominican Republic 1916-1924 No No No No
Nicaragua 1926-1933 No No No No
Italy 1943-1945 Yes Yes Yes Yes
South Korea 1945-1948 No No No No
Japan 1945-1952 Yes Yes Yes Yes
Austria 1945-1955 Yes Yes Yes Yes
West Germany 1945-1955 Yes Yes Yes Yes
Lebanon 1958 No No Yes No
South Vietnam 1964-1973 No No No No
Dominican Republic 1965-1966 No No Yes Yes
Cambodia 1970-1973 No No No No
Lebanon 1982-1984 No No No No
Grenada 1983 Yes Yes Yes Yes
Panama 1989 Yes Yes Yes -
Somalia 1993-1995 No No - -
Haiti 1994-1996 No No - -
Bosnia-Herzegovina 1996-2002 - - - -
Kosovo 1999 – present - - - -
Afghanistan 2001 – present - - - -
Iraq 2003 – present - - - -
Table 1: 2003 Polity IV Scores – U.S. Military Occupations 20th and 21st Century29
For those entries in italics, there is no data available from the Polity Index for the country
or time period in question. Nevertheless, I have attempted to fill in data as much as possible
using supplemental metrics and common sense about the situations of the countries in question.
For instance, most would agree that given the current developments in Somalia, it does not have
the necessary score at the end of 2005 – ten years after the exit of U.S. occupiers – to consider it
a success. Similar reasoning applies to Haiti, which the U.S. exited in 1996. As of 2006, Haiti
remains in a state of utter disarray. It is the poorest country in the Western hemisphere, with
approximately 80 percent of the population living in abject poverty. United Nations
peacekeepers are a central means of security for the country. The presidential election in
February 2006 was characterized by accusations of corruption, fraud, and vote manipulation.30
Likewise, instability continues to plague Lebanon because of such issues as the constant threat of
assassination of the country’s leaders and ongoing tensions with neighboring Israel and Syria. In
contrast, Panama had relatively stable political institutions through 2004, fifteen years after the
exit of U.S. occupiers. Presidential elections between three competing parties were held in 2004.
Public protests against government are generally tolerated, and civil and political rights are, for
the most part, protected. Given this, I assume its Polity Score will either stay consistent or
increase for the better once the index is updated.
Unfortunately, Grenada is absent from the Polity IV Index altogether. To categorize its
performance, I use the Freedom House’s Freedom in the World report.31 Freedom House is an
independent nongovernmental organization that focuses on understanding and analyzing
worldwide trends of democracy and individual and political freedoms. The organization’s well-
known Freedom in the World report is an annual comparative study of individual and political
rights at the global level. According to this report, Grenada has consistently fallen into the
category of “free.”32 As such, I consider it to be a case of success. The relevant time increments
have not yet passed for Bosnia, Afghanistan, or Iraq; and the final political status of Kosovo has
yet to be determined, so it cannot be considered an independent state for scoring purposes.
What do the data indicate regarding the effectiveness of reconstruction as a means of
achieving liberal democracy? In short, the historical record indicates that efforts to export liberal
democracy at gunpoint are more likely to fail than succeed. Of the twenty-five reconstruction
efforts, where five years have passed since the end of occupation, seven have achieved the stated
benchmark, resulting in a 28 percent success rate. The rate of success stays the same for those
cases where ten years have passed. For those efforts where at least fifteen years have passed,
nine out of twenty-three have achieved the benchmark for success, resulting in a 39 percent
success rate. Finally, of the twenty-two reconstruction efforts where twenty years have passed
since the exit of occupiers, eight have reached the benchmark, resulting in a 36 percent success
Note that this says nothing about the magnitude of the U.S.’s impact in the outcomes of
these countries. For instance, the Dominican Republic reached the relevant benchmark fifteen
years after the exit of U.S. occupiers. However, it is difficult to judge the influence of the U.S.
occupation fifteen years earlier on this outcome. In other words, it is unclear what the magnitude
of the U.S. intervention actually was on the trajectory of this country. Similarly, Lebanon
reached the benchmark fifteen years after the exit of U.S. occupiers in 1958. However, the
country’s political institutions unraveled only two years later and again fell below the
benchmark. Nonetheless, considering U.S.-led reconstruction efforts in this manner sheds some
light on the general pattern of success and failure. The general pattern indicates that attempts to
spread liberal democracy via military occupation will fail more often than they will work.
Of those cases in Table 1 that failed to achieve a score of +4, have reconstruction efforts
generated any positive change in the country’s pre-occupation Polity Score? I assume no
benchmark in this consideration but simply ask the question more specifically as follows: “Did
the reconstruction effort have any positive impact on the country’s pre-occupation Polity Score
as measured five, ten, fifteen, and twenty years after the end of the occupation?” The results are
summarized in Table 2:
Did Polity Score improve after…?
Country Occupation
Period 5 Years 10 Years 15 Years 20 Years
Cuba 1898-1902 - - - -
Panama 1903-1936 No No Yes Yes
Cuba 1906-1909 No No No No
Nicaragua 1909-1910 Yes Yes Yes Yes
Nicaragua 1912-1925 No No No No
Mexico 1914-1917 No No No No
Haiti 1915-1934 Yes Yes No No
Cuba 1917-1922 No No No No
Dominican Republic 1916-1924 No No No No
Nicaragua 1926-1933 No No No No
South Korea 1945-1948 - - - -
South Vietnam 1964-1973 No No No No
Cambodia 1970-1973 Yes No Yes Yes
Lebanon 1982-1984 No No No No
Somalia 1993-1995 No No - -
Haiti 1994-1996 Yes No - -
Table 2: Impact of reconstruction on Polity Score for countries where reconstruction failed
Any positive increase in the score is recorded as a “Yes,” while any score that stays
constant or falls is recorded as a “No.” As Table 2 indicates, in only five instances did a country
where reconstruction failed to achieve a +4 score experience any increase in its Polity Score
from the pre-occupation level. In Panama, the pre-occupation score was –3 and increased to –1
fifteen years later, in 1951, and to +4 twenty years later in 1956. Panama’s score would fall to a -
8 prior to the subsequent U.S. occupation in 1989. In Nicaragua, the Polity Score prior to the
U.S. occupation in 1909 was –5 and improved to –3 after the exit of occupiers in 1910. Haiti saw
an improvement from its pre-occupation score of –3 in 1914 to a score of 0 in 1938 and 1944,
but this increase did not last, as a military coup occurred in 1946. Finally, Cambodia experienced
an increase in its pre-occupation score of –9 in 1969 to a score of –7 in 1978, although this was
not sustainable, as the country has been plagued by instability. Data for Cuba do not start until
1902, while the scoring for South Korea starts in 1948.
While fully recognizing that there is a wide array of factors contributing to the Polity
Score of a country, a high-level review of the historical record of reconstruction efforts indicates
that U.S. efforts have been either very successful or very unsuccessful. Where U.S.-led
reconstruction efforts have been successful, they have generated consolidated liberal
democracies. Japan, Austria, Italy, West Germany, and Panama, after the 1989 occupation, all
have scores of +9 or above, which places them in the category of established and sustaining
liberal democracies.
However, where these efforts have failed, they have either had no sustainable positive
impact or have resulted in a lower score. Of the failures, Cuba is the closest to the benchmark of
+4, scoring a +3 after the two latter U.S. occupations of the country. This is the same score Cuba
possessed prior to these occupations, indicating that U.S. forces had no impact in either direction.
However, as discussed in the opening narrative, the seeds of liberal democracy were not planted
in Cuba, as evidenced by the Batista and Castro dictatorships. All of the other failures had
negative scores or were considered in a state of transition or civil war for the relevant time
This exercise is meant to provide a first take, a basis for understanding whether military
occupation is an effective means for achieving liberal democracy. Although there is no clear
indication of what a “good” success rate might be, as noted earlier the U.S. has achieved a 28
percent success rate for reconstructions that ended at least ten years ago, a 39 percent success
rate for those that ended at least fifteen years ago and a 36 percent success rate for those that
ended at least twenty years ago. In short, at the very least, the historical record shows more
failures than successes and indicates that liberal democracy cannot be exported in a consistent
manner at gunpoint. Admittedly, there are clear cases of success, but there are more clear cases
of failure. Understanding these drastically different outcomes is the main aim of this book.
Overview of the book
As stated previously, I analyze the issue of post-conflict reconstruction using the tools of
economics, and in order to do so, I will draw on various economic fields, including Austrian
Economics, Behavioral Economics, Constitutional Political Economy, New Institutional
Economics, and Public Choice Economics. It is my view that each of these theoretical
perspectives can offer us important insights that will contribute to answering the question driving
this analysis. I do not assume any specialized knowledge of these fields on the part of the reader,
but rather, I merely point out the synthesis of perspectives that the following analysis entails.
Economics is a broad field of many complementary and contending perspectives, and this fact
allows any economic investigator many tools with which to explore the issue at hand.
The methodology employed in this book is what has been called the “analytic narrative,”
which blends the analytical tools of economics with the narrative form of exposition common in
historical research.34 In other words, it combines the framework provided by economics with the
emphasis on the context of historical occurrences. As such, this method provides a means of
understanding past events and causal mechanisms that allow for the generation of policy
implications for the present and future. For instance, the narrative approach allows for the
exploration of strategic interaction and the impact of historical experiences on past and current
reconstruction efforts.
This method is especially conducive to the analysis of reconstruction, which for a variety
of reasons is a difficult topic to handle formally. There are some general databases, such as the
aforementioned Polity IV Index, but the number of relevant and interacting variables in the
reconstruction process is large and the actual variable set contains the histories of many different
cultures for which no systematic database exists. As the political scientist Samuel Huntington has
noted, there is no single factor, or set of factors, that “causes” democracy across countries and
across time. Instead, democratization, or the lack thereof, in different countries is a result of
differing causal combinations specific to the country.35 Given this complexity, the analytic
narrative method fits well with an analysis of reconstruction efforts generally in as much as
attempts to establish liberal democracy have occurred in different countries at different times.
Given these broad parameters, any approach will be relatively informal compared to that
employed by my colleagues in most other fields of economics. Nevertheless, I feel that the
importance of the topic and the potential contribution of the field of economics to our
understanding of the reconstruction process militate in favor of study rather than neglect.
Chapter 2 provides a model to understand the reconstruction process, wherein I draw on
some basic concepts from game theory in order to understand the reconstruction “game.” I
postulate that successful reconstructions are those in which occupiers are effectively able to
transform situations of conflict into situations of coordination around a set of conjectures,
beliefs, and expectations that support liberal democracy. The following two chapters then
consider the mechanisms that contribute to, or prevent, the necessary transformation from
conflict to cooperation. Chapter 3 focuses on the mechanisms that facilitate or prevent
cooperation among the indigenous citizens of the country being reconstructed. Chapter 4
considers the mechanisms influencing the behavior of occupiers in their efforts to export liberal
After exploring the specifics of these mechanisms, I apply them to historical and current
reconstruction efforts. I dedicate a chapter each to case studies for the following categories of
1. Successful reconstructions (as in Japan and West Germany),
2. Unsuccessful reconstructions (as in Somalia and Haiti),
3. Current reconstruction efforts (as in Afghanistan and Iraq).
The aim of these case studies is to illuminate how the framework and mechanisms developed in
earlier chapters apply to historical and current reconstruction efforts. These case studies will also
highlight the main implications of the analysis. I conclude by considering some competing
alternatives to military occupation and reconstruction as means of generating sustainable liberal
democracy. In doing so, I consider the strengths and weaknesses of each alternative.
Although my main focus is on past and current U.S.-led reconstruction efforts, the
insights of this analysis, to be developed in the following chapters, can be generalized and
applied to all reconstruction efforts across time and place. The results of this analysis will
suggest four primary themes, or lessons to be learned, as described in the following text:
While policymakers and social scientists know what factors constitute a successful
reconstruction, they know much less about how to bring about this end.
We possess a firm understanding of what a successful reconstruction seeks to accomplish. For
instance, we know that the rule of law; protection of individual, political and property rights; and
the smooth transfer of power between elected officials characterize a liberal democracy. Despite
this understanding, however, much less is known about the appropriate steps to take to achieve
this desired end. Stated differently, while we know what a successful reconstruction entails, we
lack an understanding of how to bring about the desired end. Indeed, as the previous general
analysis of U.S.-led reconstruction efforts has illustrated, liberal democracy via occupation has,
more often than not, remained elusive. Thus, failure is not due to a lack of a clear end-goal, but
instead, failure is due to the lack of knowledge of how to go about achieving the desired end. In
other words, failure is due to the gap between the know-what and know-how.36
This uncertainty is evident in the ongoing debate among social scientists regarding the
social and economic conditions that are conducive to a sustainable liberal democracy. Academics
have long considered several factors, including a middle class and a certain level of economic
development, ethnic homogeneity, historical experience with constitutions and liberal
democracy, and a national identity, to be preconditions for a sustainable liberal democracy.37 But
recent research has called these previously assumed preconditions into question.
For instance, a recent cross-country study by Steven Fish and Robin Brooks finds,
counter to prevailing wisdom, that social heterogeneity does not increase conflict or stifle
democracy.38 As Larry Diamond, a leading expert on democracy, has recently pointed out,
scholars have spent decades attempting to understand the factors that contribute to stable
democracies, but the wave of new democracies that arose between 1974 and 1994, a period
wherein democracy spread to countries that lacked these conditions, “raised the prospect that
democracy could emerge where the social scientists would least expect it.”39 On the one hand,
this fact can be viewed as a positive since it indicates that all countries have some democratic
potential. On the other hand, however, this realization highlights the limited knowledge of
scholars regarding the factors and causes of sustainable democracy. It is my contention that this
latter realization should be reason for pause when considering reconstruction via military
occupation as a policy option.40
Attempts to understand the various factors by comparing historical cases have yielded
inconclusive results. For instance, a RAND study of several U.S.-led reconstructions attempts to
generate “lessons learned” from these cases by focusing on several controllable variables. But in
truth, when one looks across cases, it is unclear that there are any uniform lessons to be drawn.
For instance, the number of troops per thousand inhabitants was significantly higher in Bosnia
and Kosovo (18.6 and 20 per one thousand inhabitants respectively) as compared to Japan (5 per
one thousand inhabitants). Along similar lines, Somalia had either the same number or more
troops per thousand inhabitants than Japan over the first two and a half years of occupation and a
drastically different outcome.
Likewise, it may appear that initial total monetary aid is an important controllable factor
that contributes to ultimate success or failure, and indeed, total aggregate assistance during the
first two years of occupation has varied greatly across historical reconstruction efforts, from $12
billion in Germany to approximately $5 billion in Bosnia, $4 billion in Japan, and slightly under
$2 billion in Kosovo and Afghanistan. However, when adjusted for per capita assistance, one
finds that Bosnia received approximately $1,400 per capita in aid, Kosovo received more than
$800 in per capita in aid, Germany received approximately $300 per capita in aid, and Japan less
than $100 per capita in aid.41
When it comes down to it, policymakers and social scientists know what ultimate success
entails. They also have an understanding of the array of factors that influence the reconstruction
process. The level of military forces, foreign aid, the timing of elections, culture, historical
experience, ethnic tensions, and the many other variables all matter for the ultimate outcome of
reconstruction efforts. However, lacking is an understanding of how these controllable variables
interact and influence each other as well as the “right” levels required for success on a consistent
basis. In short, although the end goal is clear, the knowledge of how to employ various means to
achieve this end is lacking. It is critical to keep this distinction in mind between the “know-what”
– knowing what a successful reconstruction looks like – and the “know-how” – understanding
how to bring about the desired end. It is only by recognizing this distinction that we can hope to
understand why reconstruction efforts have failed to be consistently successful, and in some
cases have caused more harm than good.
Uncontrollable variables serve as a constraint on controllable variables.
A key element of the economic way of thinking is the recognition of constraints. For instance,
the amount of goods and services a consumer can purchase is constrained by his or her income
and prices. In the context of reconstruction, key constraints are often neglected. Focus is often
placed on the political and military leaders of the occupying forces as the main constraints. One
hears criticisms of these individuals for poor planning, too few troops, too little funding, lack of
an exit strategy, and so on. If only these leaders would adjust their behavior either by shifting
strategy or increasing monetary or physical resources, critics contend, the outcomes of
reconstruction efforts would be drastically different. But focusing solely on political and military
leaders as the key constraints overlooks the contextual constraints within the country being
In his analysis of Central and Eastern Europe, the economist Svetozar Pejovich
concluded that the transition from communism to capitalism is not merely a technical issue.42 In
other words, the same expenditure of resources in different transition efforts will yield different
outcomes. Similar reasoning applies to the case of reconstruction. Why is this the case? To
borrow a phrase from Pejovich, “It’s the culture, stupid.”
Economists are often uncomfortable with the concept of “culture” because it is difficult
to define let alone neatly quantify.43 Indeed, there is no definition of culture that is universally
accepted by social scientists. When I use the term culture in this analysis, I will follow those
scholars who define the term as the informal rules that constrain human interaction.44 From this
viewpoint, a society’s culture is the existing array of values, customs, traditions, belief systems,
and other mores passed from one generation to the next. By this definition, culture is an
“informal institution,” which means that it is not formally mandated but coexists with formal
institutions such as constitutions and written laws.
Acting within these formal and informal institutions are various individual actors and also
organizations, which are groups of individuals joined for some common purpose.45 Culture
constrains the actions of individuals and the various organizational forms that individuals can
achieve within a given set of formal institutions. In other words, the creation of a wide array of
organizations – political groups (parties, councils, senates), economic bodies (families and
firms), and social bodies (associations) – will be constrained by the existing endowment of
culture. For instance, the economist Timur Kuran has analyzed how certain informal institutions
in the Middle East have created “evolutionary bottlenecks” that serve as constraints on certain
organizational forms.46 Indeed, the limitations on certain organizational forms have been a main
cause of economic stagnation in the region.
Culture is perhaps the greatest constraint on reconstruction efforts. Francis Fukuyama has
argued that democratic consolidation must take place on four levels. Culture is the “deepest”
level and therefore is “safely beyond the reach of institutional solutions, and hence of public
policy.”47 In other words, controllable variables matter, but only up to a point. The same level of
resources – monetary aid, troops, organization of elections, and so on – as was invested in West
Germany and Japan in 1945 will generate a drastically different outcome in Afghanistan and Iraq
in 2005. This is due to the fact that these countries have different endowments of culture –
capital and knowledge that constrain the effectiveness of those resources.
The reader should note that this is not an argument for long-run cultural determinism.
Indeed, research shows that all states possess some democratic potential.48 Instead, culture can be
seen as a short-term constraint on the process through which liberal democracy is established and
evolves. Culture establishes the limits to the indigenous acceptance of policies implemented by
occupiers at the time of the reconstruction, and formally reconstructed institutions require the
existence of certain complementary institutions and capabilities to operate in the desired manner.
Absent these complementary informal institutions, the same institutions transplanted in different
societies will yield drastically different results. When the underlying culture and reconstruction
efforts coincide, liberal orders will flourish, and absent this coincidence, the sustainability of
reconstructed orders will be a constant struggle.49 Continued force will be required where
voluntary acceptance is absent. Given that the projected end of reconstruction is a self-sustaining
liberal democracy, this is not a desirable state of affairs.
Reconstruction efforts suffer from a nirvana fallacy.
The term nirvana fallacy was first used by the economist Harold Demsetz to describe the
comparison of real markets to ideal government institutions lacking imperfection.50 Such a
comparison leads to the conclusion that government intervention is required to overcome the
failures of markets. Flawless government intervention is desirable when compared to imperfect
market outcomes.
Demsetz argued that such comparisons were unrealistic, leading to faulty analyses and
conclusions. The reality is that government also suffers from imperfections, and due to these
imperfections, government actors may fail to allocate resources as effectively as even an
imperfect market. In short, one cannot assume that “the grass is greener on the other side,” that
government intervention will yield a better outcome as compared to the situation, which would
exist in the absence of those interventions.
A similar fallacy often applies to reconstruction efforts. In the context of reconstruction, a
nirvana fallacy occurs when it is assumed that, in the face of a weak, failed, or illiberal
government, external occupiers can provide a better outcome relative to what would exist in the
absence of those efforts. This is not to say that reconstruction efforts can never have beneficial
effects, but neither can it be assumed that occupation will yield beneficial outcomes.
As subsequent chapters will make clear, occupiers face constraints not just within the
country being reconstructed but also from their home country as well. For instance, the political
decision-making process in the country carrying out the reconstruction will influence the overall
effort. As will be discussed, the incentives created by the political system often lead political
actors to produce policies that fail to align with the broader goals of the reconstruction effort.
Reconstruction efforts might not merely fail to achieve the desired end – there is also the
real possibility that the efforts of foreign occupiers can cause more harm than good. Obviously,
such harm is usually an unintended consequence, and as will be discussed further in subsequent
chapters, these negative unintended consequences can occur along two key margins.
The first margin consists of unintended consequences that are internal to the country
being reconstructed. In other words, the actions of occupiers may cause unintended harm within
the country being reconstructed. One example of internal negative unintended consequences is
the possibility that reconstruction efforts can distort the evolution of indigenous social structures
and governance mechanisms. Perhaps the best example of this is the case of Somalia. To date,
there have been seventeen failed foreign-led attempts – both by the U.S. and others – at national
reconciliation in Somalia since the collapse of the Siad Barre regime in 1991. As will be
discussed in more detail in Chapter 6, efforts to establish a central liberal democratic government
have often increased conflict between various clans throughout the country instead of generating
One can envision many other examples of negative internal unintended consequences as
well. For instance, the U.S. supplied arms and financial support to Afghani rebels in the 1980s to
fight Soviet forces. Some of those same weapons were used against U.S. forces during the
invasion of Afghanistan in 2001. Clearly, the U.S. did not intend for the weapons to be used in
this manner when they initially gave them to the rebels.
External unintended consequences can also result from reconstruction efforts. In other
words, the actions of occupiers may generate “neighborhood effects” that cause harm to those
outside the country being occupied. For instance, in a recent study, political scientists Edward
Mansfield and Jack Snyder explore the claim that democracies are less likely to go to war. Their
main finding is that, while it is true that consolidated democracies tend not to engage in conflict
with one another, immature democracies making the transition from authoritarian regimes do
tend to engage in conflict. What some may find more surprising is that the authors of this study
find that immature democracies are more likely to engage in conflict and war than are
authoritarian regimes. This is due to the fact that individuals vying for political positions in
democratizing countries tend to appeal to hard-line nationalism in order to gain support, while
separating themselves from both competitors within the country and foreigners as well.
To understand the implications of external unintended consequences, assume that the
U.S. is successful in planting the seeds of democracy in Iraq. In such a case, political, economic,
and social institutions would be fragile, as their full development would be far from complete.
With a semi-democratized Iraq, one could envision an array of political competitors employing
nationalism against neighboring countries to obtain positions of leadership and power. While
these fragile institutions might provide minimal stability within Iraq, appeals to Iraqi nationalism
might very well generate conflict between Iraq and its neighbors along the lines that Mansfield
and Snyder outline. In such a situation, the U.S. might achieve the goal of bringing some
semblance of stability to Iraq, but only at the cost of increasing the potential for conflict in the
larger Middle East region.51
There are many other examples of external negative unintended consequences as well.
For instance, some have argued that the current war in Iraq will generate a “blowback,” whereby
current reconstruction efforts will create the future generation of insurgents who will seek targets
around the world.52 As just discussed, in this case, efforts to bring stability to Iraq through
reconstruction would generate negative consequences for other countries around the world.
To summarize this lesson to be learned, while the failure of endogenous institutions in
countries with weak, failed, or illiberal governments may indeed be significant, the failures
generated by foreign governments can be even greater. Interventions by foreign governments in
these countries do not necessarily generate a preferable state of affairs in spite of the best
intentions. While an effective and strong liberal government might be preferable to the current
situation in such countries, often such an outcome is not a realistic option. Further, unintended
consequences resulting from foreign intervention may not just affect the country being
reconstructed but may also inflict harm externally as well. This implies that a reconstruction that
generates peaceful coordination on one margin may simultaneously increase conflict on other
Finally, sustainable social change toward liberal democracy requires a shift in
underlying preferences and opportunities.
The economic way of thinking emphasizes that individuals have preferences and act within a set
of constraints that place limits on their opportunities. A preference can refer to a predilection for
certain goods or services or for a certain type of behavior. Preferences and a set of associated
feasible opportunities are constrained by such things as cultural norms, mental capabilities,
income, laws, and economic and political institutions. For instance, an individual has one set of
opportunities within a context wherein individual and property rights are protected and a
different set within a context wherein they are not, just as an individual who has never been
exposed to a certain technology cannot possibly have a strong preference for a given
technological product since he is unaware of its existence.
Preferences and opportunities can change as the underlying factors and constraints
change. For instance, individuals’ preferences may change as they are introduced to new goods
or services of which they were previously unaware. Likewise, an individual’s opportunity to
consume a certain good or service may change, perhaps through a change in income or a change
in laws and political institutions that allows for the protection of individual and property rights.
Likewise, changes in cultural norms may make previously unacceptable activities acceptable,
which would increase the opportunities available to the individual.
Similar reasoning applies to specific behaviors in which individuals choose to engage. An
individual’s choice to engage in cooperation, civic activities, crime, terrorism, or insurgency is
influenced by preferences and opportunities. Given that, sustainable social change requires either
a shift in preferences or a shift in the opportunities facing members of society. If the aim is for
members of a society to engage in activities that support liberal democracy, their preferences and
opportunities must be such that they demand these behaviors. Individuals must possess the
complementary informal institutions necessary for the operation of formally reconstructed
institutions. Further, their preferences must include a commitment to the rule of law, individual
and property rights, and markets – and they must have the opportunities to carry out this
Indeed, a key purpose of reconstruction efforts is to change the preferences and
opportunities of the members of the country being reconstructed. Reconstruction efforts seek to
foster preferences for freedom, democracy, the rule of law, markets, and tolerance. Likewise,
these efforts seek to create a new set of opportunities that were not feasible prior to the
occupation. These opportunities might include the ability to vote, open a business, worship in the
church of one’s choice, or to utilize the legal system, among other possibilities.
The main implication is that successful social change requires a shift in underlying
preferences and opportunities. The best way to bring these changes about remains an open
question. Reconstruction efforts have been successful in changing the opportunity set that
citizens face. For instance, overthrowing a political regime via military force has proved to be an
achievable task, as evidenced by the recent efforts in Afghanistan and Iraq. Toppling a political
regime clearly provides a new set of opportunities for citizens that were not previously available.
The more difficult task for military occupiers has been to effectively shift the underlying
preferences to support liberal democracies and Western-style institutions.
For instance, in the cases of Haiti, Somalia, Iraq, and Afghanistan, occupying forces have
failed to coordinate citizens around reconstructed liberal institutions. In stark contrast, military
occupation in these countries has produced a backlash that has contributed to increased violence
and conflict. To reiterate, while formal rules can be changed quickly, they must be grounded in
the informal everyday practices of a society in order to operate as desired. In the absence of
complementary informal institutions, formally reconstructed institutions will be dysfunctional.
Where these institutional complements are lacking, formal institutions will be ignored or fail to
have the desired impact.
While policymakers and academics have typically focused on reconstruction efforts as a
means of generating changes in preferences and opportunities, alternative mechanisms have been
neglected. This is a mistake. It is my contention that political, economic, and social change that
is imposed at the point of a gun is more likely to be met with resistance and is less likely to
“stick” once occupiers exit the country. Among the key neglected mechanisms for fostering
sustaining change is a commitment to non-intervention coupled with free trade and exchange, not
just in physical goods and services but also in cultural products, ideas, beliefs, and institutions.
Instead of employing illiberal means (occupation and coercion) to achieve liberal ends, the focus
should shift to liberal means (non-intervention and free trade) to achieve liberal ends. As I will
discuss, a commitment to non-intervention and free trade has a long tradition in the U.S.
A commitment to non-intervention and free trade is one means of exercising what the
political scientist Joseph Nye has called “soft power.” The notion of soft power entails attracting
and convincing others to shift their preferences in the desired manner.53 This stands in contrast to
“hard power,” which relies on coercion to achieve the desired end. Free trade provides the
potential to attract others to voluntarily adopt liberal values and institutions.
In addition to the widely recognized economic benefits, free trade produces cultural
benefits by increasing the menu of choices available to all.54 As Tyler Cowen, an economist,
indicates, cross-cultural exchange allows different cultures to simultaneously maintain certain
aspects of their unique identities while merging with others and becoming similar on other
margins. Given that, free trade can be seen as a means of finding a common ground between
cultures both within and across borders. A commitment to trade, coupled with non-intervention,
provides the opportunity to exchange cultural practices and ideas and the potential for enemies to
be transformed into trading partners. Along similar lines, free exchange allows for the imitation
of both formal and informal institutions, as well as organizational structures within these
institutions, across national borders, resulting in social change through peaceful interaction.
Because of the potential for these positive outcomes, non-intervention and free trade deserve at
least a fair hearing as a viable alternative to spreading liberal democracy via military occupation.
Given the less-than-stellar record of the U.S. in spreading liberal democracy at gunpoint, such
alternatives must be seriously considered.
1 The Inaugural Address is available at: Last accessed December 7,
2 See Offner 1992, 229-230.
3 On the motivations of the U.S. behind the intervention in Cuba, see Pérez 1990, Hunt 1987 and
LaFeber 1993. The common historical interpretation is that the U.S intervened for humanitarian
reasons (see, for instance, Offner 1992). LaFeber contends that the U.S. was motivated not by
humanitarian ends but by furthering its own interests and power.
4 For a detailed history of Cuba, see Gott 2004.
5 See Dobbins et al. 2003, 19.
6 For more on Erhard and his role in the reconstruction of Germany, see Mierzejewski 2004.
7 See Dower 1999, 736.
8 Ibid., 226-233.
9 The Northern Alliance, which was the main resistance to the Taliban government prior to U.S.
intervention, is a coalition consisting of Tajik, Uzbek, Hazara and some Pashtun elements.
10 For a narrative of the timeline of events that occurred in Iraq, see Polk 2005, 166-183.
11 For recent documentation of the problems in Iraq, see Baker and Hamilton 2006. For a
discussion of some of the problems in Afghanistan, see Rubin 2007.
12 A Pew Research Center for the People & the Press survey conducted November 9-12, 2006
found that approximately 64 percent of those Americans polled believe the war in Iraq is going
“Not to Well” or “Not Well at All,” while 51 percent of those polled believe the U.S. made a
mistake sending troops to Iraq. Poll results available at,,
last accessed December 1, 2006.
13 See, for instance, Fukuyama 2004 and Rotberg 2004a.
14 See Ferguson 2004. Scholars and policymakers often use the terms “weak state” and “failed
state” without clarifying what the terms mean. When I utilize these terms, I follow Eizenstat et
al. (2005, 136), who measure the strength or weakness of states along three margins: security, the
provision of basic services, and the protection of essential civil freedoms. Failed states do not
provide any of these functions, while weak states are deficient along one or two of these margins.
15 See Heller 1950, Keynes 1980, Mises 2000 and Ohlin 1929.
16 See Brennan and Buchanan 1985.
17 See Greif 2006, 29-53.
18 See for instance Diamond 2005, Phillips 2005 and Ricks 2006.
19 Whenever I use the word “institutions,” the reader should interpret this term as incorporating
the formal and informal rules governing human behavior and the enforcement of these rules
through the internalization of certain norms of behavior, the social pressure exerted on the
individual by the group, or the power of third-party enforcers who can use the threat of force on
violators of the rules.
20 Regarding the current effort in Iraq, President Bush stated that the goal of U.S. policy is an
Iraq that can “govern itself, sustain itself and defend itself” (quoted in Baker and Hamilton 2006,
40). It should be noted that there is a debate regarding the relationship between democracy and
economic growth. See for instance, De Haan (1996), Knack and Keefer (1995) and Tavares and
Wacziarg (2001). Although an important discussion, it is not my aim to contribute to this debate.
There is also a debate regarding what “democracy” actually entails. For a discussion, see
Diamond, Linz and Lipset (1995). These authors point out that “democracy” refers to a political
system that is separate from the economic and social realms. While this may be true, it seems
clear that the aim of the U.S. in modern reconstruction efforts is to establish not only a liberal
democracy but also a liberal market and social institutions as well. See for instance, King (2003),
who discusses the plan to implement a liberal market economy in Iraq.
21 For more on “Wilsonianism,” see Paris 2004.
22 See Zakaria 2003. The argument that increasing political participation can lead to conflict and
instability in states where political institutions are weak was originally made by Huntington
(1968). Dahl (1971) and Nordlinger (1971) develop similar arguments.
23 For a discussion of the ethical issues involved with foreign intervention and reconstruction, see
Damrosch 1993, Heiberg 1994, Hoffmann et al. 1996, Ignatieff 2003 and Lugo 1996.
24 See Marshall and Jaggers 2003. On the different indices available and why the Polity IV Index
is the most reliable and valid, see Munck and Verkuilen 2002.
25 See Marshall and Jaggers 2003, 13-14.
26 Ibid., 14, 36.
27 See Keller 2005 and Rousseau et al. 1996. Other studies have found that a score of +8 is a
more suitable benchmark. See Dahl 1998, Davenport and Armstrong 2004, and O’Loughlin et al.
28 See Gasiorowski and Power 1998 and Mainwaring 1993.
29 There is debate over which countries are in fact U.S.-led reconstructions. I have tried to
consider as broad a list as possible. I have drawn the countries on my list from Lawson and
Thacker (2003), Dobbins et al. (2003), Payne (2006), Pei and Kasper (2003) and Pei (2003). I
recognize that there are many cases of U.S. military interventions that are not included on this
30 CIA World Factbook 2005.
31 The Freedom of the World report is available at the Freedom House website
32 For more on how Grenada compares to other reconstruction efforts using the Freedom of the
World report as a metric, see Lawson and Thacker 2003.
33 For more on the failure of the U.S. to export democracy to Mexico, Central America and the
Caribbean via military occupation, see Lowenthal 1991.
34 See Bates et al. 1998.
35 Huntington 1991, 38. Also see Shin 1994, 151.
36 The distinction between the know-what and the know-how can be traced back to the
philosopher Gilbert Ryle (1949). Hayek (1973, 72) appropriated the distinction to examine the
importance of tacit knowledge in the social coordination process. Boettke (2001b: 251-252) also
uses the distinction to explore the gap between the wealth of nations.
37 These are only a few of the preconditions for consolidated democracy that have been raised in
the literature. For a more complete list, see Huntington 1991, 37-38.
38 See Fish and Brooks 2004.
39 See Diamond (2005, 19-20). In earlier work, Diamond, Linz, and Lipset (1995) discuss the
factors that contribute to the establishment and consolidation of a democracy.
40 See also Shin (1994, 151), who puts forth several general propositions on the third wave of
democratization, which include: (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.
41 For troop and aid numbers, see Dobbins et al. (2003, 149-158). Both aggregate and per capita
aid numbers are in constant 2001 dollars.
42 See Pejovich 2003.
43 Hayek (1960, 1973) and North (1990, 2005), Platteau (2000), and Pejovich (2003) are clear
44 See Gellner 1988 and North 1990.
45 North (1990) makes the critical distinction between institutions as the rules of the game and
organizations as the players within those rules.
46 Kuran 2004a, 2004b.
47 Fukuyama 1995a, 9.
48 See Diamond 2005, 19-20 and Goldstone and Ulfelder 2004, 10.
49 The importance of culture for the acceptance or rejection of social and economic change is
recognized by Boettke (2001b) and North (2005, 48-64).
50 See Demsetz 1969.
51 Owen (2005) extends Mansfield and Snyder’s analysis of war between democracies to Iraq.
52 The term “blowback” refers to the unintended consequences of U.S. actions abroad. On the
potential blowback generated by the war in Iraq, see Bergen and Reynolds 2005. For a broader
analysis of the blowback generated by American foreign policy, see C. Johnson 2000.
53 See Nye 2002, 2004.
54 See Cowen 2002.
... A rather problematic situation, the Samaritan's Dilemma is also striking by its "pervasiveness" (Pasour 1991). It was identified in a large variety of situations: private settings-families, for instance (see Futagami et al. 2004)-as well as public environments-redistribution and poor relief (Wagner 2005;Skarbek 2016), medical care and national health insurance, social programs (Bovard 1983;Boettke and Martin 2010), international aid, in particular in case of natural disaster such as hurricanes or earthquakes (Boone 1996;Gibson et al. 2005;Coyne 2008;Williamson 2010;Stone 2008;Rajan and Subramanian 2005; Burnside and Dollar 2000, among others). Therefore, preventing the Dilemma from occurring and finding ways to help Samaritans and recipients to get out of it seems particularly important. ...
Full-text available
The Samaritan’s Dilemma has largely been investigated, frequently by assuming that Samaritans help recipients out of altruism. Yet, Buchanan did not make any behavioral assumption regarding the Samaritan’s motives. In this paper, we explicitly introduce this assumption in Buchanan’s original model and analyze how it changes the nature of the game. We show that altruism alone does not explain the Dilemma. A parameter that captures the disutility the Samaritan feels when helping someone who does not reciprocate her benevolence must be introduced to make sense of the different version of Buchanan’s Samaritan’s Dilemma. We also show that the Samaritan’s Dilemma is an evolutionary stable outcome, which confirms Buchanan’s intuitions. Finally, a third important point put forward in the paper is that the more altruistic are the Samaritans, the less likely it is that they will show the kind of strategic courage envisaged by Buchanan, which is one of the most important traits Samaritans should display to avoid being trapped in a Dilemma.
... 2 The knowledge problem (Hayek, 1945;Shughart et al., 2020), however, makes it less likely that domestic governments will be able to choose institutional reforms that "stick". Externally imposed changes are those imposed by groups outside a society, such as in the case of post-war reconstruction (Coyne, 2008). Top-down reforms are least likely to persist because foreign governments and non-government actors are unfamiliar with domestic institutions and beliefs (Boettke & Fink, 2011). ...
Full-text available
This paper investigates the impact of international state-building efforts on economic development in Somalia. Owing to non-existent or poor-quality national income accounts, we use satellite data capturing nightlight emissions to measure economic activity. Using the synthetic control method, we find that the establishment of the Transitional Federal Government in 2004 was associated with economic stagnation relative to the preceding years, when Somalia did not have a formal central government. The result remains whether we enter the total lights emitted from the country or the distribution of lights across the country. Our empirical findings are consistent with the idea that the exogenously imposed Transitional Federal Government destabilized the nation by creating inconsistencies with the informal institutions that had led to development during Somalia’s statelessness.
... The robust political economy approach has already been applied to the poor responses of governments in the face of unexpected shocks such as Hurricane Katrina Leeson, 2006, 2007;Boettke et al., 2007;Chamlee-Wright and Storr, 2010) and to the resiliency of non-political actors in the face of the similar shocks Coyne, 2008;Chamlee-Wright and Storr, 2011;Grube and Storr, 2014;Storr et al., 2015Storr et al., , 2018. A key point from this literature is that the resiliency to shocks of non-political actors was observed in spite of government actions hindering the discovery and adoption of economic solutions. ...
What is the relationship, if any, between economic freedom and pandemics? This paper addresses this question from a robust political economy approach. As is the case with recovery from natural disasters or warfare, a society that is relatively free economically offers economic actors greater flexibility to adapt to pandemics. We argue that societies that are more economically free will be more robust to the impact from pandemics, illustrated by shorter time for economic recovery. We illustrate this relationship by testing how initial levels of economic freedom (at the start of the major influenza pandemics of the 20th century) temper contractions and accelerate recoveries for 20 OECD countries.
... In particular, this leads to greater sensitivity to the expectations of external donors than to the preferences of local people (Eriksen 2011, 240). Combined with the limited access of foreign institutions to local knowledge, this produces problems with implementing "external" aid projects (Bueno de Mesquita and Downs 2006;Coyne 2007;Moyo 2010) and explains the negative impact of foreign aid on the condition of democratic institutions (Djankov et al. 2008). Moreover, it allows us to identify the cause and mechanism of the so-called resource curse in some countries. ...
In order to fully understand the contributing factors of economic development in Hong Kong and Singapore, it is essential to explore their respective histories. This is especially warranted considering that both city-states were British colonies since the early nineteenth century. Founded in 1819 and 1843, respectively, by the British, Hong Kong and Singapore witnessed the introduction of British institutions, governance, and policies for more than a century before WWII. The role that British colonialism played in the development of both countries must be assessed.
Dr. Mahathir bin Mohamad is often credited with Malaysia's dramatic economic success post‐1980. It is well known that the Mahathir regime installed centralized power in the Office of the Prime Minister (PM) and greatly extended state capacity through a far‐reaching clientelist system. Prima Facie, the Malaysian experience appears to validate power centralization and state capacity as complementary to economic development. Though these changes did make Malaysia more susceptible to corruption, dramatically exhibited in 2015 with the 1MDB 5 billion dollar scandal, it has been argued that the clientelist political structure installed in Malaysia generally manages corruption at tolerable levels in order to provide the state the capacity needed to implement controls for economic development that began in the 1980s. While Malaysia experienced impressive economic growth during the Mahathir administration, our test using the Synthetic Control Method finds that GDP per capita fell well below what would have been expected under the governing structures in place in the 1970s, before Mahathir took office—a loss of approximately $4000 per capita below its potential. This study provides evidence of powerful negative economic consequences attributable to greater power centralization and enhanced state capacity inaugurated under Mahathir.
Full-text available
The fatal conceit of foreign intervention refers to the limitations faced by governments using discretionary power to address perceived problems in foreign societies. Drawing on evidence from the “Afghanistan Papers”—a collection of internal government documents compiled by the Special Inspector General for Afghanistan Reconstruction (SIGAR) and released in December 2019—we demonstrate how the failure of the U.S.-led intervention in Afghanistan to meet the stated objectives illustrates the fatal conceit of foreign intervention. We explore the limitations faced by foreign government interveners in three stages, reflecting distinct decision nodes within a means-ends framework in which the policies relating to foreign intervention are formulated and implemented.
Full-text available
A comprehensive and integrated framework for the analysis of data is offered and used to assess data sets on democracy. The framework first distinguishes among three challenges that are sequentially addressed: conceptualization, measurement, and aggregation. In turn, it specifies distinct tasks associated with these challenges and the standards of assessment that pertain to each task. This framework is applied to the data sets on democracy most frequently used in current statistical research, generating a systematic evaluation of these data sets. The authors’ conclusion is that constructors of democracy indices tend to be quite self-conscious about methodological issues but that even the best indices suffer from important weaknesses. More constructively, the article’s assessment of existing data sets on democracy identifies distinct areas in which attempts to improve the quality of data on democracy might fruitfully be focused.
Full-text available
We combine two experiments and a survey to measure trust and trustworthiness—two key components of social capital. Standard attitudinal survey questions about trust predict trustworthy behavior in our experiments much better than they predict trusting behavior. Trusting behavior in the experiments is predicted by past trusting behavior outside of the experiments. When individuals are closer socially, both trust and trustworthiness rise. Trustworthiness declines when partners are of different races or nationalities. High status individuals are able to elicit more trustworthiness in others.
Full-text available
A successful post-conflict reconstruction is characterized by a self-sustaining liberal political, economic and social order that does not rely on external support. It is argued that the extent of reconstructed orders is constrained by their institutional prerequisites. These prerequisites—a shared ideology and ethic of individual and private property rights, a commitment to markets and the rule of law—are fundamental. Without these preconditions to serve as a foundation, reconstructed liberal orders will fail to be self-sustaining over time. It is argued that the viability of a shared ideology and ethic, and hence success, is directly dependent on the extent of horizontal ties in the post-conflict country. The main conclusion is that societies lacking adequate horizontal ties will require a high level of continual intervention and reconstruction efforts will have a lower probability of success. Copyright Springer Science + Business Media, Inc. 2005
Following the botched Somalia operation, the terms “military intervention” and “nation building” were mostly exorcised from the vernacular of policymakers. Yet, behind the scenes and subsequent to that intervention, the U.S. government has continued to engage in similar activity in Haiti, Bosnia, Kosovo, and now East Timor. The onset of the millennium gives us the opportunity to reflect on what we have learned about these operations since the end of the Cold War. Is our response better today? Where are our soft spots, and how can they be redressed? Examination of developments in nation-building after U.S.-sponsored military intervention in the last decade reveals the factors that put the U.S. government on the path to military action in the first place, the changes in peace-support operations, the advances in nation-building efforts and the recommendations for improving future operations. Democratization and Nation-Building Defined The promotion or support of democracy by the U.S. government, also known as democratization, has shifted in focus since the Allied occupation of Germany and Japan after World War II. Then it stood for demilitarization (and denazification in Germany), establishment of democratic institutions, and reeducation of the entire country’s population. In Vietnam, and later in much of Central America during the Cold War, democratization came to
Freedom House president Adrian Karatynycky has claimed in the Journal of Democracy that "democracy has been significantly more successful in monoethnic societies than in ethnically divided and multiethnic societies." Is this often-heard claim true? Does heterogeneity promote conflict and harm democratization? Our cross-national analysis finds scant evidence for this notion. Since the obverse of this argumentÑi.e., that social diversity portends disastrous confict and therefore calls for authoritarian politicsÑis a favorite rationale put forward by undemocratic leaders in Asia, Africa, the Middle East, and elsewhere, we suggest that students and friends of democracy should treat the alleged link between diversity and division with skepticism.
Is the United States government really any good at "helping people" in troubled places? America's recent encounters with nation building suggest the contrary. Indeed, Washington said it would bring order to Somalia but left chaos; it went to Haiti to restore democracy but produced tyranny; it intervened in Bosnia to reverse the effects of a civil war but now oversees an unsustainable peace; and it occupied Kosovo to build a multiethnic democracy but has instead witnessed ethnic cleansing on a widespread scale. That all these recent attempts at nation building have not actually solved the problem they set out to address seems not to have phased policy makers. Yet before Washington's troubling pattern of failures can be accounted for in more detail, it is first necessary to define the term nation building and its place within America's post-Cold War foreign policy.
This paper provides a theoretical explanation for the democratic peace hypothesis (i.e., the observation that democracies rarely fight one another). We show that, when information asymmetries and strategic complements are present in the conflict resolution game, the strategic interaction between two democracies differs from that of any other dyad. In our model, the interaction of two democracies produces the highest probability that a conflict will be peacefully resolved. But, it takes two democracies for peace; a conflict involving only one democracy will not be resolved in a peaceful way more often than a conflict involving two nondemocratic regimes. (JEL: D82, D74) Copyright (c) 2004 by the European Economic Association.
The process of transition in Central and Eastern Europe from socialism to capitalism is a cultural issue rather than a mere technical one. To support this proposition, economic analysis must explain why and how informal rules affect the results of transition. Copyright Kluwer Academic Publishers 2003
Although a millennium ago the Middle East was not an economic laggard, by the 18th century it exhibited clear signs of economic backwardness. The reason for this transformation is that certain components of the region's legal infrastructure stagnated as their Western counterparts gave way to the modern economy. Among the institutions that generated evolutionary bottlenecks are the Islamic law of inheritance, which inhibited capital accumulation; the absence in Islamic law of the concept of a corporation and the consequent weaknesses of civil society; and the waqf, which locked vast resources into unproductive organizations for the delivery of social services. All of these obstacles to economic development were largely overcome through radical reforms initiated in the nineteenth century. Nevertheless, traditional Islamic law remains a factor in the Middle East's ongoing economic disappointments. The weakness of the region's private economic sectors and its human capital deficiency stand among the lasting consequences of traditional Islamic law.
151), who puts forth several general propositions on the third wave of democratization, which include: (1) there are few preconditions for the emergence of democracy, (2) no single factor is sufficient or necessary to the emergence of democracy
  • Shin
40 See also Shin (1994, 151), who puts forth several general propositions on the third wave of democratization, which include: (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 1-44