1. The most important recent contribution to the debate is Lipson, Charles, Standing Guard: Protecting Foreign Capital in the Nineteenth and Twentieth Centuries (Berkeley: University of California Press, 1985)Google Scholar. Lipson raises issues similar to those discussed here. Though his explanatory argument differs, it is not contradictory to that presented in this article.

2. Lenin and John Hobson were the two best-known analysts of these problems. Apart from Lenin's pamphlet Imperialism: The Highest Stage of Capitalism (New York: International Publishers, 1939)Google Scholar, a summary of his position is contained in Lenin, V. I., introduction to Imperialism and World Economy by Nikolai Bukharin (New York: International Publishers, 1929), pp. 9–14Google Scholar. An outstanding survey of Hobson's theoretical position can be found in Cain, Peter, “J. A. Hobson, Financial Capitalism, and Imperialism in Late Victorian and Edwardian England,” Journal of Imperial and Commonwealth History 13 (05 1985), pp. 1–27CrossRefGoogle Scholar.

3. The two most influential studies were those by Herbert Feis and by Eugene Staley, who looked at previous experiences, especially with European overseas investments, as a guide to potential future arrangements. See Feis, Herbert, Europe, the World's Banker 1870–1914 (New Haven, Conn.: Yale University Press, 1930)Google Scholar; and Staley, Eugene, War and the Private Investor (Garden City, N.Y.: Doubleday, Moran, and Co., 1935)Google Scholar.

4. On the Bretton Woods negotiations, see Gardner, Richard N., Sterling-Dollar Diplomacy in Current Perspective (New York: Columbia University Press, 1980)Google Scholar; and Van Dormael, Armand, Bretton Woods (New York: Holmes and Meier, 1978)CrossRefGoogle Scholar.

5. Contrarily, such plans simply may have been extraordinarily successful so as to render the issue of conflict obsolete. This possibility does not accord with the widespread impression that Bretton Woods institutions did very little of what they were intended to do, and very little at all until the 1960s.

6. Influential statements or surveys of the positions at stake include Cohen, Benjamin J., The Question of Imperialism: The Political Economy of Dominance and Dependence (New York: Basic Books, 1973)CrossRefGoogle Scholar; Fieldhouse, D. K., “Imperialism: An Historiographical Revision,” Economic History Review 14 (12 1961)Google Scholar; Landes, David, “Some Thoughts on the Nature of Economic Imperialism,” Journal of Economic History 21 (12 1961)CrossRefGoogle Scholar; and Schumpeter, Joseph, “The Sociology of Imperialisms,” in Schumpeter, Joseph, Imperialism and Social Classes (New York: Augustus Kelley, 1951), pp. 3–130Google Scholar.

7. For a discussion of the analytical issues in the development of such international institutions, see Keohane, Robert, “International Institutions: Two Approaches,” International Studies Quarterly 32 (12 1988), pp. 379–96CrossRefGoogle Scholar. See also Fratianni, Michele and Pattison, John, “The Economics of International Organization,” Kyklos 35 (1982), pp. 244–62CrossRefGoogle Scholar.

8. See Frieden, Jeffry A., “The Economics of Intervention: American Overseas Investments and Relations with Underdeveloped Areas, 1890–1950,” Comparative Studies in Society and History 31 (01 1989), pp. 55–80CrossRefGoogle Scholar, which also presents some of the ideas contained in the present article. The facts that I exclude other potential explanatory variables from my analysis and that I do not weigh the large number of contending explanations are a problem only if there is reason to believe that one of the alternate explanatory variables is correlated with mine and may outperform it. One exception is the role of economic development, which is probably correlated with types of investment; indeed, in the essay cited above I suggest a complex interaction among development, foreign investment, and foreign intervention. In this context and more generally, it is nonetheless legitimate to argue for the validity of my hypotheses as part of a full explanation of the phenomena in question.

9. An explicit discussion of this concept, specifically in regard to sovereign lending, can be found in Crawford, Vincent P., International Lending, Long-term Credit Relationships, and Dynamic Contract Theory Princeton Studies in International Finance, no. 59 (Princeton, N.J.: International Finance Section, 1987)Google Scholar. Further references to this very large literature can be found therein.

10. An influential example of such an analysis with an explicit contractual emphasis is Williamson, Oliver, The Economic Institutions of Capitalism (New York: The Free Press, 1985)Google Scholar.

11. Ibid., pp. 169–205.

12. The approach presented here is related to that of Keohane; see Keohane, Robert O., “The Demand for International Regimes,” International Organization 36 (Spring 1982), pp. 325–55CrossRefGoogle Scholar. Keohane also relies on the relational contracting literature, especially as regards the role of institutions in reducing transactions costs, in his explanation of regime persistence.

13. In what follows I focus on property rights. The discussion could be extended to include many other policies, from taxation and tariffs to labor relations. In virtually all instances, the same tension between general and specific investor interests recurs. I emphasize property rights partly because they are in some sense primordial—without security of property few other policies matter—and partly because the general point can easily be broadened to other issues.

14. For an analysis of sanctions, see Martin, Lisa L., Coercive Cooperation: Explaining Multilateral Economic Sanctions (Princeton, N.J.: Princeton University Press, 1992)Google Scholar.

15. For a discussion of monitoring and enforcement assurances serving as a welfare-improving public good, see North, Douglass and Weingast, Barry, “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,” Journal of Economic History 49 (12 1989), pp. 803–32CrossRefGoogle Scholar.

16. This broad class of problems has, of course, been the subject of an enormous literature on strategic interaction, to which I allude only in passing here.

17. Hirshleifer, Jack, “From Weakest-link to Best-shot: The Voluntary Provision of Public Goods,” Public Choice vol. 41, no. 3, 1983, pp. 371–86CrossRefGoogle Scholar. Hirshleifer differentiates among different types of collective action problems that concern the provision of public goods in ways that are applicable to the present setting. In a “weakest link” context, supply is a function of the smallest contribution, while in a “best shot” setting, it depends on the largest contribution. In the former case, Hirshleifer shows, the level of the public good provided will be much larger than in the latter.

18. Contractual monitoring and enforcement costs are essentially the same as transactions costs. For a survey of transaction costs, see Williamson, Oliver, “Transaction Cost Economics,” in Schmalensee, R. and Willig, R. D., eds., Handbook of Industrial Organization, vol. 1 (Amsterdam: Elsevier, 1989)Google Scholar. I use the longer term because it is more specific as to the costs involved and can more readily be broken down into component parts for the purposes of more detailed discussion.

19. Diminishing costs of (increasing returns from) monitoring are a common feature of much of modern industrial organization. They are, for example, central to many interpretations of the role of financial intermediaries. See Diamond, Douglas, “Financial Intermediation and Delegated Monitoring,” Review of Economic Studies 51 (07 1984), pp. 393–414CrossRefGoogle Scholar.

20. For a good survey of this process of internationalization, see Caves, Richard E., Multinational Enterprise and Economic Growth (Cambridge: Cambridge University Press, 1982)Google Scholar. On vertical integration specifically, see Martin K. Perry, “Vertical Integration: Determinants and Effects,” in Schmalensee and Willig, Handbook of Industrial Organization.

21. Of course, in our example, the government could presumably sell the expropriated branch plant back to Ford, but few parent companies would be likely to risk double jeopardy.

22. This is too simple, of course. A host government might take over a multinational corporation affiliate in order to eliminate competition to a local firm or for other reasons. In addition, many host policies involve some sort of violation of contractual agreements. However, the general point still holds: government attempts to appropriate rents are affected by how specific those rents are to the corporate structure within which they are embedded.

23. This would, in fact, be a good example of Hirshleifer's weakest link sort of public good: the strength of the creditor position is dependent on the contribution (i.e., willingness to deny credit) of each potential creditor. As Hirshleifer shows, this increases the incentive of each creditor to participate in common action. See Hirshleifer, “From Weakest-link to Best-shot.”

24. Since measurement of other possible outcomes is much more controversial (and may not even be possible), I restrict myself to the analysis of colonialism alone. Although this issue is most relevant to historical debates on the economic theory of imperialism, restricting my evaluation is somewhat arbitrary, done for reasons of simplicity and feasibility.

25. Svedberg, Peter, “Colonial Enforcement of Foreign Direct Investment,” The Manchester School of Economic and Social Studies 26 (03 1981), pp. 21–38CrossRefGoogle Scholar. Svedberg notes especially the tendency of the metropolitan powers to discourage or prohibit investment in extractive industries in their colonies (p. 22).

26. Svedberg, Peter, “The Profitability of U.K. Foreign Direct Investment Under Colonialism,” Journal of Development Economics 11 (12 1982), pp. 273–86CrossRefGoogle Scholar. On the other hand, Davis and Huttenback argue that except at the outset of their period of study (1860–1912), rates of return were not substantially higher inside the British Empire than elsewhere. See Davis, Lance and Huttenback, Robert, Mammon and the Pursuit of Empire: The Political Economy of British Imperialism, 1860–1912 (Cambridge: Cambridge University Press, 1986), chap. 3Google Scholar. Edelstein finds a higher overseas rate of return than at home in Great Britain. See Edelstein, Michael, Overseas Investment in the Age of High Imperialism (New York: Columbia University Press, 1982), pp. 111–59Google Scholar. The issue is important, of course, but does not directly impinge on my argument. No existing study breaks down the data as would be necessary to evaluate my argument (by form of rule and sector at comparable levels of development).

27. The work of P. J. Cain and A. G. Hopkins is paramount in this reassessment. Cain surveys recent work on the British case in Cain, P. J., Economic Foundations of British Overseas Expansion 1815–1914 (London: Macmillan, 1980)CrossRefGoogle Scholar. Hopkin's masterly application to West Africa is in Hopkins, A. G., An Economic History of West Africa (New York: Columbia University Press, 1973), chaps. 4 and 5Google Scholar. For a summary of their views and an outstanding history of the British experience, see Cain, P. J. and Hopkins, A. G., British Imperialism, 2 vols. (London: Longman, 1993)Google Scholar.

28. Davis, and Huttenback, , Mammon and the Pursuit of Empire, p. 62Google Scholar.

29. For details, some of which are discussed below, see Atkin, John Michael, British Overseas Investment 1918–1931 (New York: Arno Press, 1977)Google Scholar; and Atkin, John, “Official Regulation of British Overseas Investment, 1914–1931,” Economic History Review 23 (08 1970), pp. 324–35Google Scholar.

30. For some examples, see Galbraith, John S., Crown and Charter: The Early Years of the British South Africa Company (Berkeley: University of California Press, 1974)Google Scholar; Kubicek, Robert, Economic Imperialism in Theory and Practice: The Case of South African Gold Mining Finance 1886–1914 (Durham, N.C.: Duke University Press, 1979)Google Scholar; and Atmore, A. and Marks, S., “The Imperial Factor in South Africa in the Nineteenth Century,” in Penrose, E. F., ed., European Imperialism and the Partition of Africa (London: Frank Cass, 1975), pp. 105–39Google Scholar. The case of Cecil Rhodes has attracted an enormous amount of recent attention. See Keppel-Jones, Arthur, Rhodes and Rhodesia: The White Conquest of Zimbabwe 1884–1902 (Kingston, Ontario: McGill-Queen's University Press, 1983)Google Scholar; Turrell, Rob, “Rhodes, De Beers, and Monopoly,” Journal of Imperial and Commonwealth History 10 (05 1982), pp. 311–43CrossRefGoogle Scholar; Chapman, S. D., “Rhodes and the City of London: Another View of Imperialism,” Historical Journal 28 (09 1985), pp. 647–66CrossRefGoogle Scholar; Turrell, Robert Vicat, “‘Finance … The Governor of the Imperial Engine’: Hobson and the Case of Rothschild and Rhodes,” Journal of Southern African Studies 13 (04 1987), pp. 417–432CrossRefGoogle Scholar; and Turrell, Robert Vicat and Van Helten, Jean-Jacques, “The Rothschilds, the Exploration Company, and Mining Finance,” Business History 28 (04 1986), pp. 181–205CrossRefGoogle Scholar.

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32. For a strongly contradictory argument, see Krasner, Stephen D., Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, N.J.: Princeton University Press, 1978)Google Scholar.

33. For a case study, see Kent, Marian, Oil and Empire: British Policy and Mesopotamian Oil, 1900–1920 (London: Macmillan, 1976)CrossRefGoogle Scholar.

34. For a summary of the conflict, see Krasner, , Defending the National Interest, pp. 119–28Google Scholar.

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37. Most Japanese-owned industrial enterprises operating in the colonies and Manchuria were related directly to primary production; they were, for example, sugar refineries or iron and steel plants. See especially Peter Duus, “Economic Dimensions of Meiji Imperialism: The Case of Korea, 1895–1910,” Mark Peattie, “The Nan'yo: Japan in the South Pacific, 1885–1945,” and Ho, Samuel Pao-San, “Colonialism and Development: Korea, Taiwan, and Kwantung,” all in Myers, Ramon and Peattie, Mark, eds., The Japanese Colonial Empire, 1895–1945 (Princeton, N.J.: Princeton University Press, 1984), pp. 128–71, 172–210, and 347–398Google Scholar, respectively; and Wilkins, Mira, “Japanese Multinational Enterprise before 1914,” Business History Review 60 (Summer 1986), pp. 199–231CrossRefGoogle Scholar.

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40. For a fascinating case study, see Fieldhouse, David K., Unilever Overseas (London: Croom Helm, 1978)Google Scholar. See also Fieldhouse, D. K., “‘A New Imperial System’? The Rise of Multinational Corporations Reconsidered,” in Mommsen, Wolfgang and Osterhammel, Jurgen, eds., Imperialism and After (London: Allen and Unwin, 1986), pp. 225–40Google Scholar; and the comparisons in Kahler, Miles, “Political Regime and Economic Actors: The Response of Firms to the End of Colonial Rule,” World Politics 33 (04 1981), pp. 383–412CrossRefGoogle Scholar.

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47. A general overview of railroad conflict can be found in Baumgart, Winfried, Imperialism (Oxford: Oxford University Press, 1982), pp. 25–32Google Scholar. On the well-known Baghdad Railway case, see, for example, the essays in Kent, Marian, ed., The Great Powers and the End of the Ottoman Empire (London: George Allen and Unwin, 1984)Google Scholar. For an interesting perspective on the Near East, see Mclean, David, “British Finance and Foreign Policy in Turkey: The Smyrna-Aidin Railway Settlement, 1913–1914,” Historical Journal 19 (06 1976)CrossRefGoogle Scholar.

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52. In Tunisia, for example, financial cooperation between France and Italy was accompanied by bitter conflict over agriculture and railroads; see Ganiage, Jean, “France, England, and the Tunisian Affair,” in Gifford, and Louis, , France and Britain in Africa, pp. 35–72Google Scholar. For the converse, a failed attempt at financial unilateralism in the Ottoman Empire, see Kent, Marian, “Agent of Empire? The National Bank of Turkey and British Foreign Policy,” Historical Journal 18 (06 1975), pp. 367–89CrossRefGoogle Scholar.

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54. On the interwar financial cooperation, see especially Meyer, Richard H., Banker's Diplomacy (New York: Columbia University Press, 1970)Google Scholar; and Clarke, Stephen V. O., Central Bank Cooperation 1924–1931 (New York: Federal Reserve Bank of New York, 1967)Google Scholar.

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66. This suggests a relationship, which I've discussed in more detail elsewhere, among economic development, foreign investment, and intervention. Less developed societies are likely to attract mostly primary investment, and as they develop they typically begin to attract more complex forms of investment. In this context, countries at lower levels of development may be characterized by a preponderance of foreign primary investments and a propensity on the part of the home country to intervene; this pattern would change as economic development led to a diversification of foreign investments. See Frieden, “The Economics of Intervention.”

67. This portion of the argument parallels that of Fratianni and Pattison in “The Economics of International Organization.”