How the CIA got the world to buy American during the Cold War.

The search for better economic policy.
May 24 2010 10:29 AM

Industrial Espionage

How the CIA got the world to buy American during the Cold War.

Augusto Pinochet. Click image to expand.
Augusto Pinochet

After being rejected by a number of large publishers, John Perkins sold his memoirs to a smallish press called Berrett Koehler in 2004. Confessions of an Economic Hitman —equal parts political exposé and James Bond novel—recounts his role in what he claims is a carefully choreographed effort by the U.S. government to promote American commercial interests abroad. In Perkins' retelling, everything from economic advising to CIA paramilitary operations served the same master: U.S. corporate interests. Confessions struck a chord among believers in grassy knolls and Roswell and became a best-seller. (Berret claims on its Web site that 850,000 copies have been sold, making the book its top-seller ever.) The State Department responded with "Confessions—or Fantasies—of an Economic Hit Man," a document disputing many of Perkins' claims of government involvement.

But conspiracy theories die hard. Is the State Department response setting the record straight, or is it just a coverup? Though most of Perkins' book may be pulp fiction—we'll probably never be able to verify his tales of payoffs, espionage, and sexual escapades—one of his claims just received unexpected confirmation from a group of serious scholars. New York University researchers Daniel Berger, Bill Easterly, Shanker Satyanath—together with Harvard economist Nathan Nunn—have analyzed Perkins' "economic hitman" theory—that is, the theory that the U.S. government has used the CIA to promote American corporate interests abroad. (The economists prefer the term "political influence hypothesis" to "economic hitman theory.") Based on information from declassified documents detailing covert CIA operations during the Cold War, the social scientists find that Perkins' claims are backed up by the numbers: Countries targeted for CIA political interventions started importing more U.S. products, a sign of American economic imperialism at work.

The study by Berger and his colleagues is a product of the relatively young field of forensic economics, which aims to shed light on shadowy corners of the economic world that trade in much speculation but few verifiable facts. Forensic economists have applied their analytic techniques to expose shenanigans ranging from vote-trading by Olympic figure skating judges to insider trading to political favor-seeking by companies in America and around the world.

All of this work is based on the insight that backroom deals and illicit transactions often leave traces in the data, which creative researchers can find. The authors never get to hear wiretapped conversations between Richard Helms—Director of Central Intelligence under Nixon—and Augusto Pinochet, the Chilean dictator who came to power in a Nixon-backed coup. But they do see how such political interventions affected American business interests by looking at international trade data.


The authors put together a list of the years that the CIA was active in each of 156 countries, using recently declassified documents detailing the agency's clandestine operations around the globe during the Cold War, when American intelligence was trying to thwart the spread of Soviet influence. (The KGB was similarly engaged in countering the specter of American capitalist imperialism.) The CIA's activities ranged from active interventions, like operatives blowing up dams or "neutralizing" opponents, to the softer touch of handing out propaganda pamphlets and providing funds or expertise for the campaigns of U.S.-friendly politicians. (One shocking fact the researchers mention in passing—fodder in itself for conspiracy theorists—is that the CIA operated secretly in nearly a third of the countries on earth at some point between 1947 and 1989.) They match up this history of CIA interventions to data on imports and exports between the United States and each of its trading partners over the same time span to see whether trade was affected by CIA operations. Indeed it was: In years the CIA was active in a country, the United States enjoyed a boost in exports to that country of about 13 percent. Over a few years, this adds up to a lot of extra business for U.S. companies. For example, the authors estimate that the multi-year commitment of Helms and his successor to support Pinochet may have translated into a doubling of exports to that country by 1988, relative to what they would have been in the absence of CIA involvement.

Unfortunately for the local Chilean economy, the United States didn't reciprocate by taking Chile-produced goods—the authors find no effect on exports to the United States from Chile or other CIA-targeted economies. Nor is it the case that imports were growing simply because U.S.-style capitalism was good for economic development overall: CIA operations don't affect total imports, suggesting that U.S. business came at the expense of imports from other countries.

How did the CIA persuade these friendly governments to "Buy American"? A pair of additional analyses in the study provide some answers. First, the researchers find that the boost to imports came from CIA operations that helped to install or maintain U.S.-friendly dictatorships—it seems that the will of the people in democracies was effective in counteracting CIA influence. So U.S. exports didn't benefit from "softer" interventions like the ones in postwar Japan or failed attempts at regime change, as in Syria, for example. (This may explain why CIA operations so often promoted dictatorships at the expense of democracy, a finding that a subset of the same authors report in a separate study.) Further, the authors report that the CIA-produced increase in U.S. imports is greatest for countries with government-dominated economies. It's not that dictators were foisting U.S. toasters or microwaves on their people. Rather, U.S. interests were served primarily through the export of American-made power plants, fighter planes, and other government purchases.

With this evidence in hand, it seems harder for the State Department to fall back on the "fantasy" defense, at least when it comes to the economic implications of Perkins' storyline. It can provide a statistical rebuttal—the study, after all, is work that has yet to be fully vetted by the academic peer review process. Alternatively, government officials might own up to the fact that America has in its closet economic skeletons to go along with the many political ones that have already been exposed courtesy of the Freedom of Information Act. It might also suggest that American foreign policy in the 21st century is on a more enlightened path than the cloak-and-dagger days of the Cold War. We can then wait for more forensic economists like Berger, Easterly, Satyanath, and Nunn to evaluate whether this is indeed the case.

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Ray Fisman is a professor of economics at the Columbia Business School and co-author of The Org: The Underlying Logic of the Office. Follow him on Twitter.