You are using an outdated browser.
Please upgrade your browser
and improve your visit to our site.
Skip Navigation

How Regime Change Breeds Demagogues

Economic liberalization can be just as traumatic as military intervention.

Red Square, Moscow, Russia, December 1, 1992 (Leo Erken/laif/Redux)

In 1989, citizens rose up and tore down the Berlin Wall. As the people toppled statues of Communist leaders in cities across Eastern Europe and rallied in their central squares, world leaders declared a victory for freedom. Meanwhile, economists from Harvard and experts at the International Monetary Fund intervened with a suite of privatization and deregulation measures known by the disturbing shorthand “shock therapy.” Almost overnight, prices for food and utilities skyrocketed. In the former German Democratic Republic, joblessness reached 40 percent; in Russia, inflation spiked to 2,500 percent. GDP plummeted, banks collapsed, and people lost their life savings in sprawling pyramid schemes.

The architects of regime change believed that such problems were a reasonable price to pay for the stable democratic governments that would emerge under free markets. But Levi jeans and Marlboro Lights did little to assuage the pain inflicted by swift liberalization. Almost 30 years later, many of these nations are sliding backward—into the arms of new authoritarian strongmen. Scholars have debated the reasons for this. Why has Hungary embraced an illiberal leader so soon after rejecting communism? Why is Poland, the poster child for economic liberalization, going through its own retrenchment? The answer, at least in part, is that Americans failed to consider how shock therapy reforms might contribute to inequality—which can, in turn, devastate the social trust necessary to sustain and consolidate a newly liberal polity.

The instability that results from recasting a country’s economy has a subtler impact than military intervention, but it can be just as traumatic, taxing entire generations psychologically, exacting a death toll of its own, and creating the social conditions ripe for new autocratic leaders to take power.

In Russia, between 1991 and 1994, life expectancy fell by five years; the transition was blamed for at least a million early deaths. In Germany, researchers found that increased mortality rates were directly related to the social upheavals that East Germans refer to as “the Change.” Psychosocial stress and micronutrient deficiencies combined to leave a lasting mark on a generation of children as well. Babies born as the transition began were on average one centimeter shorter than those born before or after them—about the height differential you might find in a war zone.

Poverty, always hard to bear, is made all the harder by stark comparisons. In Eastern Europe, the sudden introduction of gross inequality to what had hitherto been relatively equal societies shocked, outraged, and ultimately alienated ordinary citizens. People struggling to survive had to contend with the extreme wealth of a new class of predatory oligarchs buying luxury cars and building gargantuan mansions in a style dubbed “mobster baroque,” as well as with the recent memory of comparative security under state socialism.

American policymakers all but ignored these problems, in some cases making decisions that further exacerbated them. In 1993, the Clinton administration briefly considered abandoning its support for shock therapy in Russia. Strobe Talbott, Clinton’s top Russia specialist, rightly worried that they had overemphasized free markets at the expense of ordinary citizens. What they needed, Talbott said, was “less shock and more therapy.” Even Jeffrey Sachs, the Harvard economist who’d convinced Eastern Europeans to adopt shock therapy in the first place, urged the United States to provide additional grants to support Russia’s faltering social safety net, but Clinton refused. Instead, he endorsed and accelerated a crucial $10 billion IMF loan to Russia and dispatched campaign advisers who “rescued” the president, Boris Yeltsin, in the 1996 elections, keeping Russia on the path of radical economic reform for nearly four more years.

By the end of the decade, Western corporations were happily availing themselves of new markets for their goods and services, NATO had expanded eastward, and the United States had gained access to new strategic military bases in the Balkans. Today, shock therapy is still taught as a success story in many American universities.

But millions of Eastern Europeans have never forgotten how their lives were destroyed by these policies, and some have grown nostalgic for the stability and predictability of the old Communist regimes. Two years ago, the Pew Research Center found that fewer than half of the citizens in twelve former Soviet bloc countries preferred democracy to other forms of government, with particularly abysmal results for Russia (where only 31 percent preferred democracy), Moldova (26 percent), and Serbia (25 percent). Close to half of Russians and Moldovans felt that “in some circumstances, a nondemocratic government can be preferable.”

Nobody is advocating a return to the sorts of repressive regimes that fell in Eastern Europe, but we must acknowledge that strongmen often come to power pledging to correct social and economic injustices. People who are suffering inevitably turn to leaders who promise them relief. (Neuroscientists suggest that we feel social pain in the same parts of our brains that we feel physical pain; the mind seems to find them both destabilizing.) As long as the American recipe for regime change results in extreme inequality, citizens will tend to freely choose autocrats making promises of prosperity for all.

Today, American leaders are once again acting to unseat the president of a socialist country: Venezuela’s Nicolás Maduro. Maduro’s policies have indeed been disastrous for many Venezuelans, but if Donald Trump succeeds in toppling Maduro and proceeds to follow the standard recipe for regime change, then he, like Bush and Clinton before him, may soon be responsible for creating a handful of oil-rich oligarchs in a country whose leaders once promised a fairer distribution of wealth. Whatever progress Venezuela can make back toward democracy in the next few years, palpable inequality may eventually undermine it.

As Democrats embrace the fight against domestic inequality, we also need a foreign policy that links the promotion of democracy with targeted efforts to prevent drastic disparities in income, even if this means constraining privatization and economic liberalization. The mitigation of inequality is an essential ingredient to the recipe for stable democracies, both old and new.