Abstract
AbstractI construct a theory of foreign interventions in which a home country's main trade partner may influence the course of regime change. The foreign country intervenes in support of the group that draws the largest gains from trade, since such a group is willing to concede most in trade agreements. But interventions are more than offset by the domestic political system, which supports in power the group that concedes least (economic nationalism). I allow for geopolitical competition between the main trade partner and a second foreign country as well as for domestic ideological preferences over the two and look at how geopolitical competition interacts with the economic mechanism described above. My results help interpret some of the patterns of Western interventions in the 20th century and the role of economic nationalism in regime change. Furthermore, they help explain why the Cold War strengthened the West's preference for incumbent elites, even when the oppositions did not have a strong communist ideology. I provide detailed historical evidence in favour of my arguments.
Highlights
One line spaceThe political economy literature has recently sought to understand the economic determinants of regime change, and democratization
Historical evidence suggests that foreign interventions played a key role in the 20th century
One line space I have constructed an economic theory of foreign interventions and regime change, which may help explain several patterns of Western interventions in the 20th century
Summary
The political economy literature has recently sought to understand the economic determinants of regime change, and democratization. Payoffs (gross of any cost of revolution, repression and foreign interventions) are a function of who ends up in power, as well as of any agreement signed and the related transfer. In the latter case, the citizens cannot be trusted with foreign policy, since they inefficiently sign with the USSR. The opposition did not want to go to power only to implement redistribution, and to reverse policies deemed too generous towards foreign investments While this third pattern has been given little attention by the economics literature, it played a crucial role in countries with large stocks of foreign investments (I consider the cases of Cuba, Chile and Venezuela in Online Appendix A). As put by Coatsworth (2010), after the end of the Cold War, contenders were compelled to negotiate peace in the context of Western hegemony
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