Coyne on Exporting Democracy after War
Apr 7 2008

Christopher Coyne of West Virginia University and George Mason University's Mercatus Center talks with EconTalk host Russ Roberts about his book, After War: The Political Economy of Exporting Democracy. They talk about the successes and failures of America's attempts to export democracy after a war. In some cases, Japan and Germany, for example, after World War II, American efforts have led to stability and democratic institutions. In many other cases, Cuba, Somalia, and Haiti, for example, and so far, Iraq, American efforts have failed, often repeatedly and have sometimes made things worse. Coyne tries to identify factors that lead to an improved likelihood of success or failure. Ultimately, he concludes that a non-interventionist posture accompanied by unilateral free trade is more likely to benefit citizens under repressive governments.

Explore audio highlights, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Apr 7 2008 at 10:20am

I must say I was a bit disappointed about not even getting a sketch of a theory of when installing democracy works out of this podcast. Given that, however, I agree with Dr. Coyne’s policy prescriptions: If in doubt, stay out!

A lesson I do take away from the podcast – although this wasn’t highlighted – is that the differences between cultures mean that there’s no one-size-fits-all solutions for these kinds of problems.

As a German who has read two Hitler biographies and has been bombarded with stuff on the Third Reich in school and via the media (non-Germans: you have no idea), I would suggest that part of the success of post-war Germany was due to a) the Nazis never having been that popular in the first place and b) Germans being really tired of the war.

I had never heard that specific story about Ludwig Erhardt. He is revered in Germany as The Father of the Economic Miracle (Economic Miracle = the very rapid economic growth Germany experienced throughout the 1950s). That term might sound like hyperbole to many, but I’ve heard first hand accounts of the end of price controls. Suddenly stuff appeared in the shop window: It was like manna from heaven!

Apr 7 2008 at 12:18pm

LemmusLemmus’ point b is well taken: one thing that unites the Germans and Japanese after WWII and the Confederate States after the US Civil War is that all three had been comprehensively, brutally defeated in their own territory. Iraq was defeated quickly, but a chink immediately appeared in the armor of the US when it failed to shoot looters on sight in the days immediately following. It can be argued that Germans did not feel as defeated and war-weary after WWI, since the fighting was not chiefly in Germany and civilians did not feel the effects the way they did in WWII.

For a detailed (and rather frightening) theory of how intervention might be done right, see the work of Thomas PM Barnett. In a nutshell, he recommends beefing up post-war forces such as MPs and peacekeepers and securing buy-in in advance from allied countries and NGOs that can provide the necessary security and aid.

I agree with Dr Coyne that such interventions are dubious and economic openness is the strongest weapon in “our” quiver (as a long-term expat and a libertarian, I’m not a big fan of the first-person pronoun when speaking of states and militaries). This seems particularly true of the looming case of Iran, where an educated populace (and a wealthy, westernized diaspora) is reportedly tired of the mullahs’ oppression. More trade seems like the safest tool to secure their ouster.

By the way, the story of Erhardt and price controls is told well in The Commanding Heights, available both in book form and as an excellent PBS documentary.

Apr 8 2008 at 3:49am

I think you are totally wrong comparing Germany-Japan experience and wars in Iraq, in Cuba etc. One may not compare apples with pine-apples. Germany-Japan coalition and their military regimes were not destroyed by the United States. It was a whole situation in the whole world that times so that those regimes were completely destroyed by themselves. The US then helped to build a new environment to those who wanted to build it as soon as possible and wanted to forget about the past as soon as possible. Now Iraq. Were they destroyed before the US intervention? Did the Iraqis regime destroy the whole world environment? Did the population want to forget about the past and to build a new society as soon as possible? In the article you want to compare different mentalities of Germans, Japanese and Iraqis. But I think this is not about the nationalities, this is about the situation. The chain “(1) destroy old – (2) build new” is not comparable in case of Germany-Japan and Iraq at all. At least in the first stage. One may not compare apples with pine-apples.

Arvind Srinivasan
Apr 8 2008 at 7:57am

Thanks for another wonderful podcast. When you guys talk about ‘not knowing whether the reconstruction effort will be a success or a failure, before you went into Japan and Germany’. I believe one principle the US should have followed in Iraq was to get the ‘underlying reasons for the invasion’ right. The reasons should have been to help the people of Iraq and rebuild the country.

The US went in to over throw the regime of Saddam, which they were very good at because that was exactly what they had planned for. If the US went in with the intention of helping the people, then you would have a completely different plan and set of priorities, given the social and political structure in Iraq under Saddam. Success would still not be guaranteed, however the US would have been on the right track and they could have garnered more support from the international community.

Apr 8 2008 at 11:06pm

First a mea culpa: I did get overly excited when the Iraqis first went to vote…how silly of me.

Of course, Chris’s analysis is deep and insightful (I’m only halfway through the book). However, I’m puzzled when he says that Iraq is much more like Somalia and Haiti rather than Germany and Japan. Russ tried to push the issue a bit, but I would go further. There is a blatant example that has been left out of this discussion and that is the third power in the axis alliance: Italy. The period 1943-1945 in Italy was total chaos: Mussolini on the run, the allies slowly crawling up every hill in the south, the Nazis still around, the fascists, the partisan brigades, some catholic some communist, some anarchist etc….Not many people know that after April 25, 1945 the communist party actually tried a mini-communist revolution, killing thousand’s innocent civilians (only barely connected to the fascist regime, if at all in certain cases). And yet, things worked out in the end. How? All the game-theoretic problems that Chris points out: games within games, different historical paths (North/South), various fundamentalisms, etc…were there.

It seems to me that the difference in the case of Italy, is that outside of the Communist Party attempt at a revolution, with the help of the Soviet Union (in a weak condition at the time), things eventually settled in Italy because there wasn’t substantial foreign meddling. On the other hand in Iraq it seems fairly clear that there is a proxy war going on between the US and Iran, or the transnational entity which is AlQaida.

After all, even the American Civil War might not have resolved itself had foreign powers intervened more forcefully.

Apr 9 2008 at 3:52am

Where to start

Russ, I thought you at least tried to temper Coyne’s odd inconsistent arguments.

Just to be clear, when Coyne says that we should allow a country to descend into chaos he is really saying that it a good thing to sit back and watch a Rwanda, Cambodia, Nanking, Somalia or any mass killing. Hell, he thinks we should not only not oppose such actions but just go on trading with the killers!!!. I suppose he would set up a company and sell Zyklon-B to the Nazis or machetes to the Hutus. How sick can one get.

What a wildly inconsistent analysis of rebuilding German and Japan. He states again and again that since we don’t know how to rebuild a country we should not try. We did not “know” how to rebuild Germany or Japan before we started. What we did know is that we had to do it. So we got lucky and some of the things we tried early on worked. Good on us. If our efforts had failed that would not mean that we would have just packed up and went home. That was not an option. We would try something else and something after that. We had no choice, if we did not fix them, we would be fighting them again.

His opinions about the Iraqis are very close to being racist. Those silly Iraqis, they just don’t have what it takes to make a modern functioning society, not like Europeans or Japanese. What about the Kurds?

While Iraqi’s may owe primary loyalty to their tribe, why does Coyne assume this is unchangeable? At America’s founding Americans owed their loyalty to their states, not the country as a whole. Over time we grew beyond this. People are loyal to what works and there has not been a Iraqi central government worth being loyal to. Hopefully this will change as violence declines and a central government evolves.

BTW, this tribal loyalty issue occurs all over the world and somehow we will have to find ways to overcome it or adapt to it. Only the unfeeling can ignore it.

Why is is that laissez-faire economists, who will always bet that human creativity and ingenuity will find a way around economic or resource limitations, always assume that outside the economic realm people are doomed to never adapt, evolve or change their culture. Have some faith.

Coyne can think of nothing good going on in Iraq? And he has been there when? If not, what data is he relying on? Is it trustworthy? What is the affect of millions of new cellphones? Ubiquitous satellite TV? Hundreds of thousands of new small businesses? What is the state of the informal economy in Iraq? Is there truly no rule of law in Iraq or property rights? Are contracts enforceable by tribes? Where is the oil money being spent? The insurgency is mostly active in a few provinces – what about the others? These are all great areas for economic research based on DATA. Instead all we get is opinion.

Suicide bombers in Iraq are rarely disenfranchised Sunni’s but rather AQI who are not upset about not being allowed to participate in writing a new constitution, but rather want to murder anyone who disagrees with their version of Islam.

And another thing…

The US did not arm OBL. This is a myth. The US armed Afghan fighters. Also the Taliban arose long after the Soviets (and the CIA) left.

US aid to Iraq in the Iran Iraq war was minor – mostly intelligence and allowing Iraq to get loans – but what were the options? – should we have really sat back and let the Iranian army role through the Iraq, Kuwait and Saudi Arabia? We had no other options. No one liked it.

Apr 9 2008 at 8:51am

Prof. Roberts mentioned a book about the reconstruction of the South after the civil war, i didn’t quite catch the title. Does any know what it was?

Apr 9 2008 at 11:13am

There were some good points in the podcast, but a few important oversights where I think the analogies begin to breakdown. Iraq was not singled out as merely a country we decided we should export democracy to to improve the standard of living of the oppressed people living in a dictatorial regime much like Haiti, Cuba, or Somalia.

Nation building in the Iraqi and Afghani sense is not the ends, but the means. Initially we went into Afghanistan after 9/11 to go after terrorists and the regimes that support them – the Bush doctrine. Iraq’s rational truly was initially in search of WMD and to remove the state sponsorship and harboring of terrorism of the Hussein regime, including Saddam’s long symbiotic if not direct operational relationship with Al Qaeda.

We also have narrow self interest in having access to a secure oil supply for the purposes of fueling the engine of Democracy and preventing the use of the resource to fund terrorism and Saddam’s lavish lifestyle.

The success of the WOT in preventing further attacks on the US and the success of exporting democracy to Iraq are two different things, but I don’t think this distinction was made.

I did pick up some interesting arguments from this enjoyable podcast, mainly about how to sustain credible commitments among the Iraqi factions, the interesting role of the Japanese Emperor in the post war, and the role of bureaucracy and trade in previous attempts to export Democracy, but as I say, democracy is by no means what its all about this time around.

What about South Korea as a successful example as well?

Russ Roberts
Apr 9 2008 at 3:50pm


That doesn’t ring a bell. Any more info?

Apr 10 2008 at 6:46pm

Wow, the comments here. Maria is commenting without apparently having listened to the podcast and therefore wastes my time by writing a pointless post. Similarly, Norm decides that since Coyne points to our ability to make things worse it must be that he is racist. Kudos on your ability to think in terms of the alternatives.

Apr 11 2008 at 7:45am

I would point to Napoleon’s conquest of Russia as how the economy of war works. The Napoleon case is very similar to Iraq. Napoleon march into Moscow undefeated in all battles. Moscow was abandon by the Citizen’s and it burned (whether it was arson or just an empty wooden City Moscow burned. The point of why is probably still debated). With an empty City Napoleon march back to Paris again undefeated in battle, but with his army destroyed due to lack of food and the cold.

The Iraqis are using the same tactics as the Russians. They calculated the economic value of traditional warring methods and have chosen the method that works best for them is to slowly peck at the concentrated power until it leaves.

I think Dr. Coyne’s point and to a similar extent Dr. Buena de Mesquita’s point that insentives matter for warring methods or forming a democracy.

Salaam Yitbarek
Apr 11 2008 at 9:05am

This is a subject dear to my heart, and probably to many of your non-U.S. listeners, especially those in the Third World.

A couple of points:

1. I understand why you wanted to assume democracy promotion as the first priority, but given that it’s so far from reality, how much real knowledge can we gain from making this abstraction? Can we really use this to illustrate anything about the law of unintended consequences? I’m not sure.

2. Incentives, incentives! What are the incentives of the relevant government departments? What is the level of accountability? Would you not say that since the public cares less about foreign policy and foreign aid (compared to, say, internal revenue), that these may be the least efficient departments? What does that imply about the effectiveness foreign policy and the lessons we can derive?

Andy Kneeter
Apr 11 2008 at 3:15pm

The big differences between WWII & the Iraq war is the scale of the fighting & the breadth of the defeat. In WWII, the Allies, motivated by shear survival, devoted far more resources & commitment to defeating an enemy. The result was all the Axis powers were thoroughly vanquished before nation building proceeded. Contrast this with the limited war fought in Iraq. Viable enemies (i.e. – Iran) remain to actively ruin the nation building process. At this point in time, we don’t have the political will to do the things that have worked in the past, so the results won’t be as successful.

Apr 11 2008 at 6:22pm

JD and Russ,
After a rewind and quick google, I think this was the book mentioned:

April 1865: The Month That Saved America
by Jay Winik

Apr 14 2008 at 12:24pm

Coyne’s argument that liberal institutions must be built from the ground up and not imposed from above reminds me a great deal of arguments in education about not pushing kids to learn, letting them “bloom” on their own. Both arguments fail to address the all-to-common situation of failure to “bloom”. I mean, isn’t that the whole problem with Africa? That it never bloomed on its own? The world bank and all weren’t invented for people who can handle their own business, they were made for those who can’t. I think the counter-argument against Coyne is, so what if intervention doesn’t work, non-intervention doesn’t either, and at least this way we can say we tried.

I know the reaction will be that free trade, rather than intervention, is the medicine Africa needs. However, it’s hard for me to be optomistic about what free trade can really do. I mean, didn’t we have free trade with Africa for hundreds of years in the past?

Russ Roberts
Apr 14 2008 at 12:44pm


Saying we tried (while failing miserably) is expensive and can lead to the illusion of success. I don’t think the lesson is to give up, it is to spend resources in ways that make success more, rather than less likely. Even worse is trying and not just failing, but making things worse.

I don’t think free trade will solve the problems of Africa or the Middle East (though I do think it is at most benign, rather than harmful). We have had a number of EconTalk episodes on Africa and poverty that you might enjoy–check out Easterly, Collier, and Karol Boudreaux.

Apr 14 2008 at 12:52pm

One other slightly important but unmentioned difference between Germany/Japan and Iraq: native intelligence.

Germany: 102
Japan: 105
Iraq: 87

Bit of a gap there…think it might affect their ability to put long-term advantage (good governance) ahead of short-term gain? Don’t have much experience with Iraqis, but my general experience with people is that more intelligent individuals tend to be the ones interested in organization, human rights, law, etc. Those less intelligent have a hard time seeing past their immediate tribe and creed, and are more interested in violence. Hardly seems like a controversial observation…

Apr 14 2008 at 1:08pm

great conversation… love this podcast. the one objection i would have is with coyne’s view is his wholesale austrian objection to top-down controls. specifically in reference to iraq. the history of state building in the middle east has been a battle against what steve simon calls tribalism, warlordism and sectarianism. our current surge strategy is a bottom up, grass-roots effort that is empowering these three forces. the only hope for a unified stable iraq is a top-down political effort as we exit.

Apr 14 2008 at 1:09pm

I few points on some important differences between post-war Germany and Iraq now. First on the question why the situation of Weimar Germany was so unlike the circumstances in 1945:
In 1945 no German could question the fact that Nazi-Germany had lost WWII and decisively at that. Quite the contrary in 1918/19. The German generals refused to sign the treaty of Versailles and thus acknowledge defeat. Instead representatives of the first elected German government (leftists) were sent to Paris, which became a heavy liability for democracy in the eyes of many Germans. After WWI militants on the right propagated that the German army actually had not been defeated on the battlefield, but rather it had been stabbed from behind by communist revolutionaries [in fact there was a revolution in Germany started by a mutiny of German sailors in the imperial navy refusing to set out on a suicidal mission through the English channel against superior allied naval forces] and Jews. What you had after the First World War was a ‘democracy without democrats’ as some historians have dubbed it. As a consequence the democratic Weimar Republic came under attack from the left as well as the right, which both quite frankly stated their intention to abolish the democratic system.
The situation after WWII could hardly have been more different. There wasn’t a German state anymore, the defeat had been total. Quite frankly the Germans were sick of war, with many men dead or in captivity and all the destruction and misery it brought upon them, witness the bombed out cities, so they feel like resorting to violence again so quickly. Even today Germany is wary of foreign military entanglements like in Afghanistan for example, as “Never again war” has become something of a national mantra. In addition the regime had been delegitimized by its crimes and the war in general in the eyes of many Germans, at least the ones who hadn’t have had much sympathy for its ideology in the first place. In Iraq today a similar kind of unifying experience is lacking. Besides, most Germans knew that horrible things had happened in the “east”, and knew from the start that this war was unjust(-ified) or even morally wrong. Also you didn’t have many men around for staging an insurrection, during the first decade after the capitulation, since many of them were either killed during the war (on a scale incomparable to the second Iraq war), POWs of the Western allies or in the Gulag in the USSR. And quite a few Nazis had successfully escaped to South America. So there was fewer ideological support than there is today in Iraq. Crucially there were no outside powers giving insurgents the resources to keep on resisting against the occupiers.
Not to dismiss is also the fact that Germany (and Japan) were ethnically homogeneous societies and religious strife was if not unknown very much muted, meaning the opposition between Catholic and Protestants of course. Even in the 19th century when the differences between the two denominations were greatly more marked, a religiously fueled civil war like we witness today in Iraq had arguably been unthinkable. One should not forget though that creed is not the only force that drives people to kill each other, the others being need and greed, which both play definitively a non-negligible role in Iraq.
Lastly, I would point out that some sort of competition between the US and the Soviet Union was important, too. People in West Germany were genuinely afraid of the Russians invading their country after a conceivable American withdrawal. So they had every reason to get on good terms with their occupiers. In fact the enemies of yesterday became friends very quickly, which holds for both sides. Well, and the Americans knew that they couldn’t get Europe going and defend it against the Soviets without the Germans, so they too were willing to spend more resources and reconstruction (Marshall-Plan) than they are today for the people in Iraq.

Apr 14 2008 at 1:10pm


Thank you for responding. I’m a big fan, I’ve listened to all of those you mentioned. Very good episodes.

You are right of course, just trying to play devil’s advocate. Also, Coyne did seem more laissez-faire than many of the other development economists you have interviewed. I mean, he failed your test about WWII reconstruction in Germany. By his logic, we certainly shouldn’t have attempted to democratize Germany after the failure of the Weimar Republic.

As for finding better solutions, I would like to hear ideas about how to do more effective top-down “encouragement” of bottom-up development of institutions and liberal ideas. Isn’t that kind of the idea behind programs like the Peace Corps?

Chris Coyne
Apr 14 2008 at 4:39pm


The argument isn’t that reconstruction efforts always fail. I point out in the book that several have succeeded. The point of the analysis is to understand the factors and variables that lead to success vs. failure. After analyzing these factors, I am skeptical of the ability of the U.S. to be successful in these endeavors. It is not that they can NEVER be successful, but rather that failure is the likely outcome. Further, as Russ and I discussed, post-WWII Germany and Japan are terrible examples for the more recent reconstruction efforts in Somalia, Haiti, Afghanistan, Iraq, etc.

Your example of school kids failing to “bloom” is a perfect. Focusing on the quantity of resources neglects the importance of incentives and information. Sticking with your education example, spending per public school student in the U.S. has more than doubled since 1970. At the same time test scores have remained relatively flat. But hey, we tried! Now take into account Russ’s response to your comments (we also discussed this in the podcast) – it is also possible that more resources can make things even worse! I would suggest that you listen to the podcast with Bill Easterly and also read his two books on foreign aid.

I am very clear that free trade is not a panacea. I am not under the illusion that free trade will solve the world’s problems. However, I am extremely confident that central planning on a global scale will not only fail, but will generate disastrous consequences.

Chris Coyne
Apr 14 2008 at 4:47pm

Salaam Yitbarek,

Thanks for listening. I will respond in the same order as the points listed in your comment:

1. I don’t think that starting from the premise that policymakers want to establish liberal democracy via reconstruction efforts is faulty. I assume the best of intentions on the part of policymakers. In other words, I assume that they actually want to accomplish what they say they want to accomplish. Look at the rhetoric used by politicians and policymakers regarding military occupation – you will see talk of liberation, freedom, democracy, etc. You may respond that they have to use this rhetoric to get the public behind the effort. This should make us all the more skeptical since we recognize that our leaders are blatantly lying about occupying other countries. I take the stated ends as given and focus on the means. In other words, are the means available to policymakers and occupiers effective in achieving the stated ends of liberating countries and establishing liberal democracies?

2. I talk about the incentives facing government bureaus and agencies in the book and how they often generate perverse incentives.

Apr 15 2008 at 1:41am

This was a tough podcast to listen to, but still worth the time and effort. Some points:
1. Iran, Syria, Saudi Arabia, Turkey and Al-Queda are all, to varying degrees, destabilizing externalities on our project in Iraq. Perhaps I’m wrong, but it seems that similar externalities were missing from Germany and Japan.
2. Al-Queda was also an and still is an externality in Somalia as witnessed by Ethiopia’s invasion several months ago.
3. Most of our progress in the surge seems to have come from local tribesmen buying into our project, getting sick and tired of Al-Queda brutality and genuinely reconciling some religious differences all from the bottom up. I agree that this is the best way to make our project work, but our commander Gen. Paetreus seems to have his eye on the correct ball in this regard.
4. Lawerence Wright’s “The Looming Tower” is a pretty good history of the CIA’s involvement with the muhajadeen and its connection to Osama Bin Laden.

Declan Trott
Apr 15 2008 at 7:00am

Pascal has some good points about Germany. They apply to Japan too – no-one in either country could credibly argue that WW2 was lost because of traitors on the home front, or that a rematch would be a good idea. Machiavelli had some great things to say on the subject – basically unified countries like Germany and Japan will fight like hell but submit totally once they are beaten, while weak countries like Iraq are easy to conquer but hard to hold. (It’s chaper 4 of the Prince if the link doesn’t work.)

But no-one has mentioned – THE GREAT DEPRESSION!

In 1928 Hitler had 2.6% of the vote, despite the humiliation of Versailles, reparations, hyperinflation etc. And Japan was functioning more or less as a democracy. See and

Compare this to the worldwide boom after WW2.
Even then there was a lot of bad luck, particularly in Germany – Hitler was losing support in 1932 and only got to power because Papen wanted revenge on Schleicher.

Which all underlines the point, I guess, that we can’t predict the results of any intervention, and that there are a lot of ways for things to go wrong.

Declan Trott
Apr 15 2008 at 7:13am

Shorter version – I think Weimar Germany and Taisho Japan were in much better shape than they were given credit for in the podcast, which helped make the post ’45 successes possible. The statement “Japan had no democratic leanings” is just wrong.

Apr 16 2008 at 11:05am

The missed point in Christopher Coyne’s recommendation is that we often don’t have a choice about intervention. It is nice to be able to say we don’t succeed at intervention so don’t do it but I don’t think that covers the reality that there are times when we have to.

Jun 6 2008 at 5:43am

Maybe its just me, but I found some the information about Iraq to be a bit glib and outdated, like the throwaway about the surge just being adding more men, which ‘of course would lead to less casualties.’ Hmmmm, the Soviets put more men in Afghanistan but it led to more casualties. (The Surge is actually the application of classic counter-insurgency doctrine which should have happened in 2004-2005, but didn’t.)

I also wondered why there was no mention of Sistani to be comparable to the Emperor in Japan. He has been a consistent moderating force for the Shia in Iraq.

I also wondered why there was no talk of Afghanistan? There we used a Loya Jirga to good effect. (maybe its in the book.)

Final point: Democracy is spreading throughout the world. You can imagine all you want that some cultures don’t want it, but in reality, segments of those cultures do want it and are usually growing faster than those that don’t, though often are not as visible as the more traditional elements. Is Iraq any “less ready” than Indonesia? Than Taiwan? Than S. Korea? Than Turkey? Than Chile?

About this week's guest: About ideas and people mentioned in this podcast:

Podcast Episode Highlights
0:36Intro. Post-war reconstruction: democracy not successful in Iraq but were successful in Japan and Germany after WWII. But those are only a two data points. Cuba 1898-early 1920s (not talking about the Bay of Pigs), U.S. intervened three times. McKinley, 1898-1902 for civil unrest, then 1906-1909, 1917-1922. Political instability; result was Batista 1940-1959, Castro, 1959-recently. U.S. made significant investment, with very little return. Could argue that they made things worse. U.S. puts regimes in place that are friendly to its interests but that do not necessarily benefit the citizens themselves. Two themes: law of unintended consequences; other is law of intended consequences--maybe our goal really was to put regimes in place that were friendly to our interests even if it didn't benefit the citizens. Assume goal of intervention might lead to liberty and democracy.
6:27Why has intervention been so unsuccessful in Iraq? What incentives face Iraqi people that are causing it to go so badly? Incentive: factor that provides motivation for particular course of action. Reconstruction process is all about incentives. Do citizens have incentives that align with liberal democracy? In the case of Iraq: historical experience of the various groups, Kurds, Sunni, Shia; actually more complex, subgroups. When you don't get along with various parties it's hard to establish liberal democracies. Transaction costs, bargaining costs, are higher than they might be because the groups don't trust each other. Ideally if Iraq could move toward a decentralized democracy with a market economy, the pie would get dramatically larger. But if you don't know if that will happen and what your share of that pie will be, people may fight so much over that that they forego the gains. When you get the parties around the table they don't want to negotiate because they don't trust each other, in part because of history of the groups coercing each other in the past. Issue of credible commitment: why would they think the commitment, whatever they agree on, is binding, if the enforcers--the U.S.--will leave shortly? Even if they do trust each other you have additional problems because people fight over who gets the bigger share and are willing to use violence to keep people from cooperating. McCain, stay 100 years, but part of the conflict involved U.S. statement that we are not occupiers. Get involved with politics the longer you stay. Citizens don't view us as benevolent liberator. The longer you stay you can enforce contracts, but at the same time you can't say we are here to liberate you to engage in self-determination, but if we don't like the outcome we can change it, at the point of a gun if necessary.
14:18The word "occupier" can mean something neutral, coercive, or exploitive. Car bombs in the news make it look like occupation must be oppressive. But it doesn't have to be oppressive. It could mean that the car bombers think they'll do better in a world where there is chaos and where the U.S. is not controlling things. Iraqis want to have a more dominant role than they have with the U.S. there. If you don't feel like you are part of the game and won't have a role in the new Iraq, one response is to fight the occupation; and one form of that is terrorism. Other factors also influence terrorism. How the U.S. perceives the occupation is very different from how the Iraqi citizens view it, as well as other countries. We view ourselves as being benevolent. Who doesn't like private property, wealth, representative government? But Iraqis don't necessarily view it that way. Role of fear: incentives change dramatically; cooperating can be seen as a badge of honor or as a badge of shame.
19:17Is anything going well in Iraq? Hussein is gone. Is there any source of optimism for the creation of liberal democracy in Iraq? Different factions, small incentives to cooperate, impose social costs on each other. Are there any positive signs? Best we can hope for is some kind of stability, cooperative equilibrium, but not one that we like or that is what our initial goals were when we went in. Likely we will have troops there for a long time, maybe not continuous but may have to re-enter. Not too long ago the U.S. was supportive of Hussein; funding and arms to Bin Laden when he was fighting the U.S.S.R. Incentives for politicians--hard to exit and hard to stay for political reasons. Cuba analogy--we've been involved a long time.
23:05Japan and Germany. Why did they turn out differently? Initially looked like no cause for optimism. Japan had no democratic leanings; Germany was only a democracy briefly under Weimar Republic. Both were relatively developed countries; had national identities, no internal conflict within groups or subgroups. Both were nation-states involved in a conflict and had clearly lost, official surrenders; clear that the Allies were in charge when they entered, clear that they were being occupied. Psychological as well as physical devastation. Many Japanese were initially scared of us. Tried to provide food, services; respected their rights and property. U.S. troops didn't have to worry about getting shot at; makes it easier to carry out reconstruction. Infrastructure can only be used successfully if it can be used in cooperation and peace. A school is not useful if it can be blown up. Microsoft culture is what makes it the company it is. If its building burned down, rebuilding it would just be a matter of resources. The MS building in the middle of Iraq wouldn't be useful; culture isn't there to use it. Underlying culture and institutions existed to use the infrastructure in both Germany and Japan. Is that hindsight? Japan had a culture of militarism; people were certainly unsure of what their role would be in the post-war world and new hierarchy. Why didn't they try to disrupt the reconstruction as we see in Iraq? Protests, problems with food delivery. But there were already national institutions in place that had carried over. MacArthur realized that to overcome the trust issues he had to overcome the trust issues. First thing he did was have his picture taken with the Emperor--viewed as being a leader. Used the Emperor to help sell reforms, facilitated cooperation among the citizens. Played a key role in writing the Constitution; passed it through the Diet, got their approval. Improved the credibility of the efforts, lowered the transaction costs. Meeting the Emperor could have gone the other way. Communist element as well that wanted a say in the new Japan.
35:05On the surface the Iraqi story looks somewhat similar. What's the difference? Japanese citizens vs. Iraqi citizens; in Iraq people have primary identifications within their group or subgroups. We all want different stuff; is my group or subgroup being represented? Constitution was approved by a representative body but the U.S. played a key role in selecting the people in the representative body. Baathist party members couldn't be trusted; but then people disenfranchised. Japan much more inclusive because existing political institutions existed. Diet before the war had limited power but was well-established institution, well-known by Japanese citizens. Instead of wholesale change it was tinkering on the margins. Lower-cost effort (not monetary cost). Not suggesting that sparing Hussein would have been a good idea. Emperor didn't need to coerce citizens to get their cooperation. Iraq was relatively peaceful inside the country under Hussein; but how did you get that peace? If you were a threat to it, throw you in jail or kill you. Large segments of the population didn't trust Hussein, whereas the Emperor had the affection and respect of the Japanese citizens.
39:56Germany. International war, national government that we were fighting and that we defeated; clear government that we were taking over. Lucius Clay. MacArthur had a lot more unilateral power in Japan than Clay had. Clay received a lot of influence from D.C. Reconstruction of Germany was successful not because of occupation but despite it. Kept many economic controls, rationing schemes, that were in place under the Nazis; didn't allow market forces to operate. Doing same thing in Iraq. Central planning, attempting to rationally construct a set of institutions that can't ever be constructed by a foreign government. Ludwig Erhard went on the radio and lifted the price controls. Knew economy was suffering under the controls and rations. Clay scolded him; Erhard responded that if he'd told them they wouldn't let him do it. Occupation had brought him in as an advisor. Key driver behind the opening of the economy. Wasn't the central planning. Historical accounts, all this infighting between government agencies and bureaus. Seen in Iraq now. Public choice problem. People blame Bush for having no plan, not trying hard enough. But another way to view it is that the bureaucrats measure success by the number of their employees and size of their budgets, so you get infighting between agencies and bureaus. Not limited to Iraq or Republican administration. Issue of government and ability of government to centrally plan the complex array of institutions necessary for liberal democracy. Failures are bipartisan if you look at it historically.
47:08Somalia and Haiti: U.S. tried to do something from the top down and failed. More relevant for Iraq and Afghanistan. Also more relevant because the threat to the U.S. in the future is not likely to be from a superpower but from weak and failed states and rogue groups. Noble motivations, U.S. and U.N. went into Somalia just to keep the peace. Mission creep; one way to get power is to expand the mission. Humanitarian aid brought to one side is viewed by the other side as helping the enemy and shoot. U.S. had to decide whether to shoot back or to exit. Black Hawk Down. Trying to impose solutions top-down where it doesn't fit. Haiti: Aristede overthrown, U.S. restored him to power; elected originally, sham, but friend of the U.S., illiberal. Liberal in the classical sense, devoted to liberty. Care about liberal democracy, protection of property, civil freedoms, don't want elected person able to exploit the minority. Majority rule. Hamas is a democracy. Organizing elections is the easy part. Establishing binding constraints on the people who win the election is the hard part. Collective decision making but winner can't abuse minorities or its political rivals. Aristede's rivals didn't view him as legitimate and used violence to overthrow him. U.S. went in 1994, there until 1996. Failed in our goals, Aristede forced into exile. Looked to U.S. to intervene to help him retain his power. No investment in infrastructure, subsistence level because government takes your stuff. Policy makers have a fetish with nation states; but consider alternatives. Trying to prop up states might get democracy but not liberal democracy. Good argument for allowing weak and failed states to collapse. Pure cost on their citizens, provide benefits to their cronies at the expense of their citizens. Empowering the worst governments in the world. When a state is collapsing it indicates something. Like most interventions it's motivated by the view that we can do better; but when we recognize the limits, unintended consequences, public choice issues, we should be skeptical.
58:07Optimism for Iraq initially: highly educated population, commercial infrastructure. Why was that wrong? Debate over foreign aid. Foreign aid is a form of intervention, to manipulate outcomes. Development/ foreign aid debate. They don't save enough, so we need to fill up the gap; fails; well, they just don't know how to use it; invest in schools; giving them money to invest, why aren't we seeing convergence to development? Incentives and information, lack of property rights. Information problem, don't know how to allocate aid correctly because there is no market feedback or profit-loss mechanism. Easterly's work: have to focus on the searchers, the low level, not top-down. Education is an input, human capital, invest in it to produce other stuff. But need other inputs. Iraq had some entrepreneurship. Why hasn't U.S. been able to leverage that? There was private initiative, but profit opportunities were minimal. Workers in factories waited for directives. Black market, merchants, but big issue is one of security. Worrying about safety, curfews make it hard to engage in trade. State is important, police, but the state can't be everywhere. People are cooperative on their own. Where those beliefs and values are absent at the present moment in time, need continued coercion and force to maintain certain amount of cooperation.
1:04:45Ex post it's easier to look smart than ex ante, before the fact. Before the fact, people thought Iraq would turn out well. Historical challenge: Germany, back to reconstruction in 1945 compared to 1919. After WWI, Kaiser pushed from the scene, democracy imposed, and it failed. Reparations burden, inflation; but probably not the only answer. At the time people said it had always been ruled by a King so you can't expect it to just become democratic. Unintended consequence led to worst leader in history. WWII comes along, but could make same argument. What was different? At the time or before the fact we don't know. Always doubts. Implication is that we should be skeptical towards doing it. If we don't know how to go about getting liberal democracy, even if we come up with a list of institutions we want, an ingredient list, we shouldn't be surprised when we get bad outcomes. Germany, people point to the Marshall plan, but monetary resources don't do anything by themselves; right time in history, too broad; factors came together. Lucius Clay over time became less directly involved and allowed citizens to do their thing. Emergent path. Identifying factors and using them out of context is worthless. Insurgency against the U.S. occupation in Germany after WWII, but nothing major. American Civil War, chance that South would refuse to accept the peace. North let people keep their horses, could have fought. Lee's leadership. No counterpart in Germany. U.S. did utilize existing institutions, didn't completely dismantle them. Can work in both directions. A national leader can be in charge for many different reasons and can maintain power in many different ways. Success is unpredictable and low probability. Going against that is that people desire to make the world a better place. What can we do? Non-intervention and unilateral free trade. Strategy has been to isolate them, refuse to trade with them, impose sanctions. But trade is a powerful and voluntary mechanism of change. Typically hurt the citizens and provides bad leaders with fodder to speak out against the U.S. Instead, we should integrate, allow them to exchange and interact with our citizens. Free trade increases wealth but also has cultural benefits. Tyler Cowen's work. People have to self-determine, decide they want freedom. We want them to choose it.

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