Hostname: page-component-cd9895bd7-gbm5v Total loading time: 0 Render date: 2024-12-24T10:41:55.009Z Has data issue: false hasContentIssue false
  • English
  • Français

International investment and colonial control: a new interpretation

Published online by Cambridge University Press:  22 May 2009

Jeffry A. Frieden
Jeffry A. Frieden
Affiliation:
Professor in the Department of Political Science, University of California, Los Angeles.
Get access

Abstract

The impact of economic factors on colonial imperialism in the late nineteenth century has long been a topic of debate. This article examines the expected relationship between different forms of international investment and different patterns of political ties between developed and developing countries. Drawing on the literature on relational contracts and collective action, it argues that direct colonial control was likely to be associated with cross-border investments whose rents were particularly easy to seize or protect, and whose protection did not require multilateral action. Where such rents were difficult to seize or protect unilaterally, colonialism is expected to be less likely. The most common example of the former sort of investment is primary (raw-materials or agricultural) investment; of the latter, multinational manufacturing affiliates. The argument is weighed against both a survey of the qualitative evidence and some simple quantitative evaluations. The approach also has potential applications to more general problems of international conflict and cooperation.

Type
Articles
Information
International Organization , Volume 48 , Issue 4 , Autumn 1994 , pp. 559 - 593
Copyright
Copyright © The IO Foundation 1994

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

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.

31. For a lucid treatment of agriculture in Kenya, see Wolff, Richard D., The Economics of Colonialism: Britain and Kenya, 1870–1930 (New Haven, Conn.: Yale University Press, 1974)Google Scholar. In his An Economic History of West Africa, Hopkins sets out a clear model of the colonial economy and applies it to the West African case. Colonies (such as Kenya) in which metropolitan settler agriculture was important may be seen as a special, perhaps extreme, case. For a fascinating treatment, see Lustick, Ian, State-building Failure in British Ireland and French Algeria (Berkeley, Calif.: Institute of International Studies, 1985)Google Scholar.

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.

35. See p. 654 of Fieldhouse, David K., “The Economic Exploitation of Africa,” in Gifford, Prosser and Louis, William Roger, eds., France and Britain in Africa (New Haven, Conn.: Yale University Press, 1971), pp. 593–662Google Scholar. For excellent discussions of the role of trade, see Hopkins, An Economic History of West Africa; Newbury, C. W., “The Tariff Factor in Anglo-French West African Partition,” in Gifford, and Louis, , France and Britain in Africa, pp. 220–59Google Scholar; Wrigley, C. C., “Neo-mercantile Policies and the New Imperialism,” in Dewey, Clive and Hopkins, A. G., eds., The Imperial Impact (London: Athlone Press, 1978), pp. 20–34Google Scholar; and Ratcliffe, Barrie, “Commerce and Empire: Manchester Merchants and West Africa, 1873–1895,” Journal of Imperial and Commonwealth History 8 (06 1979), pp. 293–320CrossRefGoogle Scholar. Note that “trade” does not involve exports and imports in and of themselves but only the wholesale and retail commercial sectors. For evidence about the French experience, such as that bankers supported cooperation in China, Morocco, and the Ottoman Empire while mining interests wanted a Moroccan protectorate and more exclusive policies elsewhere, see Andrew, C. M. and Kanya-Forstner, A. S., “French Business and the French Colonialists,” Historical Journal 19, No. 4 (12 1976), pp. 981–1000CrossRefGoogle Scholar.

36. Frankel, S. Herbert, Capital Investment in Africa (London: Oxford University Press, 1938), pp. 167 and 204Google Scholar.

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.

38. Frieden, “The Economics of Intervention.”

39. See, for example, Alejandro, Carlos Diaz, Essays in the Economic History of the Argentine Republic (New Haven, Conn.: Yale University Press, 1970), p. 32Google Scholar.

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.

41. The quotation is from p. 323 of Stopford, John, “The Origins of British-based Multinational Manufacturing Enterprises,” Business History Review 48 (Autumn 1974), pp. 303–35CrossRefGoogle Scholar.

42. Tomlinson, B. R., “Foreign Private Investment in India 1920–1950,” Modern Asian Studies 12 (10 1978), pp. 655–77CrossRefGoogle Scholar. Although investment in manufacturing was increasing, within the category of private investment (i.e., excluding government lending), investment in primary production remained predominant: it comprised over 39 percent of all British investment in private enterprise in India. See Tomlinson, B. R., The Political Economy of the Raj 1914–1947: The Economics of Decolonization in India (London: Macmillan, 1979), p. 49CrossRefGoogle Scholar.

43. Tomlinson, , The Political Economy of the Raj 1914–1947, pp. 47–51Google Scholar. In chapter 5 of that work, Tomlinson uses Hopkins's model of the colonial economy to argue that the decay of the economic foundations of colonialism in India made independence a near certainty.

44. If five countries (of seventy-six) in the sample that engaged in blanket expropriations are excluded, the bias is even more evident; among the most selective “takers,” 59 percent of all expropriations are in the extractive sectors. The data can be found on pp. 76, 77, and 80–81 of Kobrin, Stephen, “Foreign Enterprise and Forced Divestment in the LDCs,” International Organization 34 (Winter 1980), pp. 65–88CrossRefGoogle Scholar. Kobrin's study is formulated with the sorts of variables I consider explicitly (along with several others). See also Jodice, David, “Sources of Change in Third World regimes for foreign direct investment, 1968–1976,” International Organization 34 (Spring 1980), pp. 177–206CrossRefGoogle Scholar.

45. Williams, M. L., “The Extent and Significance of the Nationalization of Foreign-Owned Assets in Developing Countries, 1956–1972,” Oxford Economic Papers 27 (07 1975), pp. 260–73CrossRefGoogle Scholar. The author treats oil separately and shows that it is disproportionately not nationalized. Presumably, if the time period were brought up to 1975, this would be strikingly different since between 1972 and 1975 the bulk of foreign oil investments in the LDCs were, in fact, nationalized.

46. For case studies of the former, see Bennett, Douglas and Sharpe, Kenneth, Transnational Corporations Versus the State: The Political Economy of the Mexican Auto Industry (Princeton, N.J.: Princeton University Press, 1985)CrossRefGoogle Scholar; Gereffi, Gary, The Pharmaceutical Industry and Dependency in the Third World (Princeton, N.J.: Princeton University Press, 1983)CrossRefGoogle Scholar; and the essays in Newfarmer, Richard, ed., Profits, Progress, and Poverty: Case Studies of International Industries in Latin America (Notre Dame, Ind.: University of Notre Dame Press, 1985)Google Scholar. On American overseas investment insurance, see Lipson, Standing Guard, chap. 7.

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.

48. On the Chinese experience, especially the American attempts to gain entry to the railroad competition, see Hunt, Michael, The Making of a Special Relationship (New York: Columbia University Press, 1983)Google Scholar. An intriguing perspective on the relationship among diplomacy, finance, and Chinese railroads is discussed in Croly, Herbert, Willard Straight (New York: Macmillan, 1925)Google Scholar. Davis, Clarence, in “Financing Imperialism: British and American Bankers as Vectors of Imperial Expansion in China, 1908–1920,” Business History Review 56 (Summer 1982), pp. 236–64CrossRefGoogle Scholar, emphasizes financial cooperation amidst conflict over the railroads. For a general overview of China, Turkey, and Persia, see McLean, David, ’Finance and ‘Informal Empire’ Before the First World War,” Economic History Review 29 (05 1976), pp. 291–305CrossRefGoogle Scholar.

49. Lewis, Colin, British Railways in Argentina 1857–1914: A Case Study of Foreign Investment, (London: Athlone, 1983), pp. 117–23Google Scholar.

50. There is an enormous literature on risk premia and credit rationing. For a survey, see Eaton, Jonathan, Gersovitz, Mark, and Stiglitz, Joseph, “The Pure Theory of Country Risk,” European Economic Review 30 (06 1986), pp. 481–513CrossRefGoogle Scholar. The concept of “mutual hostage taking” in sovereign lending might be expanded to include some nineteenth-century practices, such as tying debt service to the income of a particular customs house or concession. Such a commitment, however, relied on the indebted sovereign's agreement. Medieval Europe, in which the international financial cartel was poorly organized, provides purer examples of mutual hostage-taking in international lending. For some examples, see Lipson, Charles, “Lending to the Prince: Italian Finance and English Kings in Late Medieval Europe,” mimeograph, University of Chicago, 1988Google Scholar.

51. On the Ottoman Public Debt Administration, see Blaisdell, Donald, European Financial Control in the Ottoman Empire (1929Google Scholar; reprint, New York: AMS Press, 1966); Platt, D. C. M., Finance, Trade, and Politics in British Foreign Policy 1815–1914 (Oxford: Clarendon Press, 1968), pp. 181–218Google Scholar; and Feis, , Europe, The World's Banker 1870–1914, pp. 313–41Google Scholar.

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.

53. An analytically sophisticated and historically informed literature on the issue is now available. For examples, see Lindert, Peter and Morton, Peter, “How Sovereign Debt has Worked,” in Sachs, Jeffrey D., ed., Developing Country Debt and Economic Performance, vol. 1 (Chicago: University of Chicago Press, 1989), pp. 39–106Google Scholar; Fishlow, Albert, “Lessons from the Past: Capital Markets During the Nineteenth Century and the Interwar Period,” International Organization 39 (Summer 1985), pp. 383–439CrossRefGoogle Scholar and Fishlow, Albert, “Conditionality and Willingness to Pay: Some Parallels from the 1890s,” in Eichengreen, Barry and Lindert, Peter, eds., The International Debt Crisis in Historical Perspective (Cambridge, Mass.: MIT Press, 1989), pp. 86–105Google Scholar. The data in these studies might be brought to bear on the topic of interest here. For example, Lindert and Morton show that the nominal interest rates on Australian and Canadian bonds (i.e., within the empire) issued before 1914 were roughly the same as those on Japanese bonds and only slightly lower than Argentine and Brazilian bonds. This indicates, as discussed above, that membership in the empire made relatively little difference to lenders, see Lindert, and Morton, , “How Sovereign Debt has Worked,” pp. 49–50Google Scholar. However, this obviously does not control for other variables (economic performance, macroeconomic policies, political stability) presumably of importance to lenders.

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.

55. See especially Costigliola, Frank, “The Other Side of Isolationism: The Establishment of the First World Bank, 1929–1930,” Journal of American History 59 (12 1972)CrossRefGoogle Scholar; Morgan, Shepard, “Constructive Functions of the International Bank,” Foreign Affairs 9 (07 1931), pp. 580–91CrossRefGoogle Scholar; and Simmons, Beth, “Why Innovate? Founding the Bank for International Settlements,” World Politics 45 (04 1993), pp. 361–405CrossRefGoogle Scholar.

56. The quotations are drawn from Morgan, , “Constructive Functions of the International Bank,” pp. 583 and 588Google Scholar. See also Oliver, Robert W., Early Plans for a World Bank Princeton Studies in International Finance, no. 29 (Princeton, N.J.: International Finance Section, Princeton University Department of Economics, 1971)Google Scholar.

57. In addition to Meyer, Banker's Diplomacy, on the interwar period, see also Eichengreen, Barry and Portes, Richard, “Debt and Default in the 1930s: Causes and Consequences,” European Economic Review 30 (06 1986)CrossRefGoogle Scholar; Eichengreen, Barry, “The U.S. Capital Market and Foreign Lending, 1920–1955,” in Sachs, , Developing Country Debt and Economic Performance, pp. 107–55Google Scholar; and Jorgensen, Erika and Sachs, Jeffrey, “Default and Renegotiation of Latin American Foreign Bonds in the Interwar Period,” in Eichengreen, and Lindert, , The International Debt Crisis in Historical Perspective, pp. 48–85Google Scholar. A more general survey of the Latin American experience is found in Marichal, Carlos, A Century of Debt Crises in Latin America: From Independence to the Great Depression, 1820–1930 (Princeton, N.J.: Princeton University Press, 1989)Google Scholar.

58. For an introduction to this vast topic, see Lipson, Charles, “The International Organization of Third World Debt,” International Organization 35 (Summer 1981), pp. 603–63CrossRefGoogle Scholar.

59. Lipson, Charles, “Bankers' Dilemmas: Private Cooperation in Rescheduling Sovereign Debts,” World Politics 38 (10 1985), pp. 200–225CrossRefGoogle Scholar.

60. For two surveys, see Platt, D. C. M., “British Bondholders in Nineteenth Century Latin America—Injury and Remedy,” Inter-American Economic Affairs 14 (Winter 1960), pp. 3–43Google Scholar; and Lipson, Charles, “International Debt and National Security: Comparing Victorian Britain and Postwar America,” in Eichengreen, and Lindert, , The International Debt Crisis in Historical Perspective, pp. 189–226Google Scholar. That home governments did not commonly use force does not mean that they did not remonstrate on behalf of their nationals.

61. Frieden, “The Economics of Intervention.”

62. Lipson, , “International Debt and National Security,” pp. 201–4Google Scholar.

63. Davis, and Huttenback, , Mammon and the Pursuit of Empire, p. 65Google Scholar. Tomlinson's figures indicate that public debt comprised 63 percent of total British investment in India in both 1921 and 1938. See Tomlinson, , The Political Economy of the Raj 1914–1947, p. 49Google Scholar.

64. For excellent survey of recent work, see Hopkins, A. G., “The Victorians and Africa: A Reconsideration of the Occupation of Egypt, 1882,” Journal of African History, vol. 27, no. 2, 1986, pp. 363–91CrossRefGoogle Scholar. Among the important studies of elements of the case relevant to the issues at hand are Atkins, Richard A., “The Origins of the Anglo-French Condominium in Egypt, 1875–1876,” The Historian 36 (02 1974), pp. 264–82CrossRefGoogle Scholar; Ramm, Agatha, “Great Britain and France in Egypt 1876–1882,” in Gifford, and Louis, , France and Britain in Africa, pp. 73–119Google Scholar; Bouvier, Jean, “Les Intérêts Financiers et la Question d'Egypte” (Financial interests and the Egypt question), Revue historique 3 (07–09 1960), pp. 75–104Google Scholar; Hunter, F. Robert, Egypt Under the Khedives 1805–1879 (Pittsburgh, Penn.: University of Pittsburgh Press, 1984)Google Scholar; Landes, David, Bankers and Pashas (Cambridge, Mass.: Harvard University Press, 1958)Google Scholar; and Schölch, Alexander, Egypt for the Egyptians: The Sociopolitical Crisis in Egypt, 1878–1882 (London: Ithaca Press, 1981)Google Scholar.

65. Hansen, Bent, “Interest Rates and Foreign Capital in Egypt Under British Occupation,” Journal of Economic History 43 (12 1983), pp. 867–84CrossRefGoogle Scholar.

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.”