The author acknowledges with thanks the comments and suggestions of Richard Baum, Leonard Binder, David Dollar, Stephan Haggard, Robert Jervis, Miles Kahler, Paul Kennedy, David Lake, Manuel Pastor, Ron Rogowski, John Ruggie, Richard Sklar, Jack Snyder, Kenneth Sokoloff, Michael Wallerstein, and David Wilkinson.

¹ Gallagher, John and Robinson, Ronald, “The Imperialism of Free Trade,” Economic History Review, 2d ser., 6:1 (1953)CrossRefGoogle Scholar, 1–15; for the ensuing debate, see Louis, W. R., ed., Imperialism: The Gallagher and Robinson Controversy (New York: New Viewpoints, 1976)Google Scholar. Treatments of the debates and of the historical evidence include Platt, D. C. M., Finance, Trade, and Politics in British Foreign Policy, 1815–1914 (Oxford: Clarendon Press, 1968)Google Scholar; Cain, P. J., Economic Foundations of British Overseas Expansion, 1815–1914 (London: Macmillan, 1980)CrossRefGoogle Scholar; Smith, Tony, The Pattern of Imperialism (Cambridge: Cambridge University Press, 1981)Google Scholar; and Doyle, Michael, Empires (Ithaca: Cornell University Press, 1986)Google Scholar. An important example of the new historical work is Hopkins, A. G., An Economic History of West Africa (New York: Columbia University Press, 1973).Google Scholar

² Simple calculations of imperialism's net benefit to the imperial nation are not very telling, since the benefits might accrue to powerful groups while the costs are borne by powerless taxpayers or footsoldiers. Differing intensities of interest are so difficult to measure that the calculation of just how important foreign economic policy is to various domestic actors is nearly impossible. Lebergott, Stanley, “The Returns to U.S. Imperialism, 1890–1929,” Journal of Economic History, 40:2 (06 1980), 229–252, is a fascinating attempt in this mode; unfortunately, the author pays more attention to the potentially uneven distribution of costs and benefits within the backward areas than he does to the same problem in the United States.CrossRefGoogle Scholar

³ Lipson, Charles, standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (Berkeley: University of California Press, 1985), 8–26, summarizes the nineteenth-century experience. There are obvious free-rider problems raised by one nation's enforcement of property rights that could benefit economic agents from all nations; an exploration of this aspect of nineteenth-century colonial policy is unquestionably needed.Google Scholar

⁴ Although a variety of explanations of this common observation can be adduced, the one that holds up best to theoretical scrutiny is that competitive producers have more reason to fear retaliation than do uncompetitive producers. Global free trade is attractive to those who would dominate markets under such circumstances, and, although they might benefit even more by exclusive access to a particular market, their desire for exclusiveness in one area will be outweighed by the fear that it would cause other areas to be sealed off to them. On the other hand, less competitive producers could easily calculate that all of one market is better than very little of all markets, and would be more likely to ignore the attractions of global free trade in favor of smaller but protected markets. It should also be noted that annexation makes more sense when the areas involved are complementary rather than competing. A related treatment is Wrigley, C. C., “Neo-mercantile Policies and the New Imperialism,” in The Imperial Impact, Dewey, Clive and Hopkins, A. G., eds. (London: Athlone Press, 1978), 20–34. The considerations here assume that socioeconomic rigidities make increasing the profits of existing producers more feasible than the more efficient alternative of movement into new economic activities. The assumption is reasonable, and can be justified either on the sector-specificity of physical or human capital or on the uncertainty attached to the adjustment process.Google Scholar

⁵ Reuber, Grant, Private Foreign Investment in Development (Oxford: Oxford University Press, 1973, 72–80), makes a related distinction among “export-oriented,” “market-development,” and “government-initiated” multinational corporations.Google Scholar

⁶ This tendency is visible both historically and today: One recent study has shown that while extractive industries represented only 15 percent of foreign firms in the developing world in 1967, they accounted for 35 percent of the firms expropriated there between 1960 and 1976 (Kobrin, Stephen J., “Foreign Enterprise and Forced Divestment in LDCs,” International Organization, 34:1 (Winter 1980), 76.CrossRefGoogle Scholar

⁷ As Kobrin, “Foreign Enterprise and Forced Divestment,” 80–81, demonstrates, where the local affiliate uses somewhat standardized technology or techniques, host-country interference may be more likely, but most branch factories rely enough on their home offices to make their seizure relatively unlikely.

⁸ The notion that foreign creditors are relatively less prone to invoke home-country intervention than are other investors runs so counter to received historical impressions that it is worth defending at more length. First, it is important to distinguish between true home-country intervention for financial purposes and those instances in which loans were made after metropolitan interventions. In the Caribbean before 1930, it was common for the United States to establish effective military and political control of a country such as Haiti, and then call on a New York investment house to make a small stabilization loan to the new protectorate, generally with the implicit or explicit guarantee of the United States government. These hardly qualify as instances of financial difficulty leading to military occupation. Second, where real debt problems do develop, the almost universal creditor response is some form of creditors' consortium to attempt to enforce market discipline on the errant debtor; the combined power of international financial markets has usually been far easier to muster, and perhaps more convincing, than gunboats. Before World War I, this action generally took the form of financial control committees having representatives of all creditor nations; in the interwar years, these were replaced by consortia organized by the League of Nations; since World War II, the International Monetary Fund has played a similar role. Third, where creditors did use home-country intervention to reinforce claims, the flag was generally shown only briefly to support the creditors' bargaining position. On a few occasions intervention related to local insolvency turned into long-term occupation—Egypt in 1882 is the obvious example—but the reasons the metropolitan power stayed usually had little to do with finance. The more common pattern was a brief period of heightened tension, with or without use of force, after which the debtor agreed to some form of creditor supervision in return for renegotiated terms and, perhaps, new credits. On debtor-creditor relations see, for example, Feis, Herbert, Europe the World's Banker, 1870–1914 (New Haven: Yale University Press, 1930)Google Scholar; Meyer, Richard, Banker's Diplomacy (New York: Columbia University Press, 1970)Google Scholar; and Lipson, Charles, “The International Organization of Third World Debt,” International Organization, 35:4 (Autumn 1981), 603–631CrossRefGoogle Scholar. For surveys of the Egyptian case, see Owen, Roger, “Egypt and Europe: From French Expedition to British Occupation,” in Studies in the Theory of Imperialism, Owen, Roger and Sutcliffe, Bob, eds. (London: Longman, 1972), 195–209Google Scholar; and Doyle, , Empires, 208–18.Google Scholar

⁹ It should of course be noted that there are many instances in which colonialism did not accelerate, and may indeed have retarded, local socioeconomic and political development. The former Belgian and Portuguese colonies are obvious examples, and others doubtless exist. The generalization is nonetheless valid, if not universal.

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¹¹ Data in this is from Lewis, Cleona, America's Stake in International Investments (Washington, D.C.: Brookings, 1938), passim.Google Scholar

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²⁹ A neo-realist variant might look at regional geopolitical conditions of a hegemonic and nonhegemonic nature. This, however, raises as many questions as it answers, primarily concerning the relevance of regional balances, the evaluation of extraregional challenges, and the determinacy of the regional response. While the regional approach gives a reasonable account of how rising American hegemony in Latin American in the 1930s might have led to loosened control, it does very poorly at explaining why American control over the Philippines was being loosened at the same time despite serious regional challenges to the American position. For a more detailed evaluation, see my “Oil and the Evolution of U.S. Policy toward the Developing Areas, 1900–1950,” in Oil in the World Economy, Ferrier, R. W., ed. (London: Croom Helm, forthcoming).Google Scholar

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