§ 3.1: Introduction
The aim of this Chapter is, most generally, to explore the important question of why developing countries sign BITs with the world’s major capital exporters. I examine in particular the ways in which the partisan character of government affects the tendency of developing countries to embrace BITs as part of their economic development strategy. Like most current empirical and theoretical work in international relations, I assume that developing countries are rationalistic in their international activities: state leaders will be most likely to enter into investment treaties when it is in their “interest” to do so, that is, when they expect the benefits of the treaties to outweigh the costs. I argue that perceptions of the costs and benefits of the treaties are likely to be filtered through a partisan lens. In particular, when the executive or legislature is dominated by leftist or nationalist political parties, we should expect to see that the host state is less likely to sign or to ratify a BIT. I suggest that this relationship should hold because political parties embody particular economic ideologies that act as lenses through which party leaders and party members evaluate the costs and benefits of particular policy initiatives. Partisans of the left are likely to view the costs of BITs to be particularly high and the benefits rather low, absent strong evidence to the contrary. But where evidence mounts that leftist economic ideas are wrongheaded or
unsuccessful, we should expect to see partisan differences in the willingness to enter into BITs to decline as party leaders adjust their calculations of costs and benefits to converge on a common model. In Section II I develop the theoretical argument. Section III presents results from a large-N empirical analysis that uses negative binomial regression techniques to model the likelihood that a given host state
will ratify an investment treaty in a given year. The results of the empirical exercise offer some support for the theory. Partisanship matters in the expected direction, but only for the period prior to the collapse of the Berlin Wall and the emergence of the “Washington Consensus” as the preferred model of economic development. Less expectedly, after the end of the Cold War leftist governments appear to have embraced BITs much more strongly than governments of the right.
§ 3.2: The Importance of Partisanship
Scholars of what might be called “international public policy,” like scholars of international relations more generally, tend overwhelmingly to analyze state action in the international sphere as the product of a rationalistic decision-making process, in which a unitary state pursues its “national interest.”
What the national interest is, and how precisely to achieve it, is primarily if not solely defined objectively
on the basis of certain “structural” characteristics, broadly understood to include the formal and informal domestic and international institutions in which political actors act and which constrain their autonomous behavior. (While some analysts treat “structure” (usually meaning international anarchy) as distinct from
“institutions”, I follow Wendt in treating the concepts as essentially the same).1
We can identify three main strands of structural theories of international public policy. For
structural realists, the structure that matters is primarily international (or “systemic”) in nature, and is embodied in such basic concepts as the “balance of power,” reflecting variables such as the balance of material possessions and (or) military capabilities. Waltz, of course, provides the most well-known and
influential statement.2 Different flavors of structural realism co-exist (sometimes uneasily) in the
literature,3 but the basic view is that a state’s foreign policies are driven primarily by the state’s power
position in an “anarchic” international system. The international system, very narrowly construed, defines the state’s international policy interest (increasing its “power” or “security”) and the manner in which it pursues it (e.g. through balancing alliances).
Neo-liberal institutionalists, perhaps exemplified best by Robert Keohane,4take a broader view of the structure that matters. The focus remains on the international structure, but it expands to admit that international institutions, whether relatively formal, such as the World Trade Organization (WTO) or the North Atlantic Treaty Organization (NATO), or more informal, such as international “norms”, might meaningfully help both to define the national interest and to provide a rational means of achieving it by promoting and supporting cooperation for joint gain.
And third, an alternate strand of neo-liberal theory, which I call state-centered liberalism, has
broadened the analytic focus to include domesticstructures as drivers of international policy. These
domestic structures may again be relatively informal, including such concepts as national “cultures”5 or
transnational “civilizations.”6 But it is far more common to focus on the more formal aspects of
domestic governance structures to define various “types” of states. The most common and most important typology to emerge in the literature is that of democratic versus non-democratic regimes. Whether a state is a democracy has been said to influence a bewildering array of international
phenomena. For example, democracies are said to be less likely to initiate wars;7 more likely to keep their
international promises; less likely to restrict trade flows; more likely to treat foreign investors favorably; but less likely to use tax incentives to attract foreign investment.
These various structural approaches share an important common characteristic. Whether the
focus is on the international structure narrowly or broadly construed, or on the contributions of the domestic structure in which agents of the state operate, implicit in all three views is the idea that the
international policies that a particular state will pursue at a particular time will not depend on who controls
the state. States may be “weak” or “strong” in terms of the international balance of power; they may be more or less integrated into the most important international institutions; they may be more or less democratic, or they may exemplify one culture or civilization or another. In other words, each approach
necessarily admits that states may differ in theoretically relevant ways in terms of their structural positions and structural characteristics, even if the approaches differ as to the degree and quality of theoretically relevant differentiation. But given a particular state in a particular structural position and with particular structural characteristics, mainstream international relations theory would not expect the identity of the national leadership—of those who actually choose the international policies to pursue, and the means of pursuing them—to meaningfully affect either the choice of policy goals or the means of pursuit. The “state,” viewed as a unitary actor, is the unit of analysis. The people actually acting as the state’s agent in the international arena are given short theoretical shrift.
The principle weakness of the “state-as-actor” models that dominate mainstream international relations theory is, then, that they leave largely unaddressed (but implicitly answered in an unsatisfactory way) the important question of “whether man and his societies pursue goals of their own choosing or are
moved toward those imposed upon them by forces which are primarily beyond their control.”8 This is
certainly not a new observation. Singer’s well-known 1961 essay addressing the “level-of-analysis problem in international relations”, the source of the immediately preceding quotation, makes the point
well,as does work by Wagner, Keohane and Nye, Allison, and others in the 1970s that sought to
“dissolve” or to disaggregate the state’s role in forming international policy, both by looking at
transnational actors situated hors the state and at groups and individuals comprising the state.9 But in the
intervening years international relations theory has been largely consumed by debates between structural realists and institutionalists over whether international institutions “matter”, and between realists and state-centered liberals over whether it is theoretically necessary, or even analytically worthwhile, to differentiate state actors on the basis of domestic structural characteristics. Lost in the shuffle has been much sustained concern with peeling back the abstract skin of the state to identify theoretically relevant agent-level differences in the people that run it.
The predictable result of this state of affairs is that domestic politics in the quotidian sense, in which different actors with different views of the world vie for control of the reins of state, with the selectorate acting as if much hinges on who succeeds in seizing them, is largely missing from accounts of the international policy-making process. This lacuna represents, as Singer noted long ago, one of the “more significant implications and fascinating problems raised by the adoption” of a “state-as-actor” model of international public policy.
The idea that “states” “act” internationally is well-recognized to be a simplifying assumption, and one that in many cases is probably well-warranted on the basis of theoretical parsimony. But as a matter of descriptive accuracy that can have important implications for predictive accuracy, it is worth revisiting the relatively obvious but too frequently ignored point that states are indeed abstractions on whose behalf
actual people act, and that those peoples’ “beliefs and convictions”, “experiences, images, and
expectations” may play a very important role in determining how the “state’s” goals are defined and the
ways in which those goals are pursued.10
It is in something approaching this sense that Byman and Pollack have recently called on
international relations scholars to “bring the statesman back in”.11 Recalling Waltz’s famous division of
the discipline into three “images” of international politics, Byman and Pollack note that international relations scholars, including Waltz himself, have almost entirely avoided any exploration of the “first” image, in which international events are supposedly driven in large part by variance in the “human nature” of individual leaders. Instead, analysts have focused almost entirely on the second image, in which international politics are viewed as primarily driven by domestic political structure (state-centered liberals, in my typology above), or on the third image, in which “the behavior of nations is driven by their
relative position…in an anarchic international system”,12 with the relevant system either narrowly
But it is becoming increasingly difficult to keep first-image theory from taking its seat at the international relations table. In recent years a number of scholars in both international relations and comparative politics have resurrected and greatly expanded upon Weber’s claim that the subjectively held ideas of policymakers operate as the “switchmen” of history by “determining the tracks along which
action has been pushed by the dynamic of interest.”13 Ideational theory has enjoyed its most recent
renaissance in the field of comparative political economy, which typically defines ideas as “subjective claims about descriptions of the world, causal relationships, or the normative legitimacy of certain
actions.”14 For ideational theorists these subjective beliefs do more than to simply “rationalize strategies
chosen for other [e.g. objective] reasons.” Instead, the claim is that subjective beliefs actually serve to
guide policymakers’ actions.15 The approach has been used with some success to identify the effects of
changing ideas on such diverse phenomena as the realization of the post-World War II “class
compromise” and the rise of the welfare state upon which the compromise was based,16 decolonization,17
and the development of the European Union.18
Ideational theories are often contrasted with rational choice theories of public policy, though in fact the two approaches are hardly incompatible. Rational choice theories purport to identify an actor’s supposedly “objective” interest—e.g. power, votes, money—and posit that the actor will rationally seek to maximize that interest within given institutional constraints. The key difference between rationalist and ideational accounts of public policy is that in rationalist accounts it is the analyst who stipulates what the actor should be expected to desire, based on the analyst's understanding of the actor’s objective position, and it is likewise the analyst who stipulates how, precisely, the actor should be expected to most
efficiently achieve that desire.19 By implication, and absent some sort of Darwinian natural selection
process, the actor himself is also aware of his objective interests, and of how to best achieve them. In its most extreme view, this approach leads to the “de-emphasis of ideas in and of themselves, since they are seen mainly as a thin disguise for the play of interests and power…what Clifford Geertz has called the
An ideational approach, in contrast, emphasizes that an actor’s goals are not fixed and
predetermined, but rather reflect his mutable and subjective “beliefs about the nature of the universe, and
about right and wrong,” that is, about what he would like to achieve.21 Nor can we expect the actor to
always choose the “best” way to achieve those goals, as the particular path chosen will itself depends on the actors’ equally subjective and mutable causal beliefs.
Ideational theory is relevant for first-image approaches to international public policy precisely
because it tends to focus the analyst’s attention on the ideas held by policy-makers.22 As Mowle has recently
put it in the foreign policy context, and as in any other policy context,
individuals within the state…direct purposive action… …
A state’s behavior is not reflexive; rather, it flows from the way its foreign policy decision-makers understand what is happening….[their] assumptions—which include images of other actors in the world, causal beliefs about how they interact with one another, and
prescriptions about appropriate courses of action—constitute a “worldview”. The worldview
influences the way individuals interact with reality.23
In other words, ideational theory suggests quite strongly that there is good reason to expand our analytic
focus beyond international and domestic structural variables to include agent-centered variables—precisely
the beliefs, convictions, experiences, images, and expectations (“ideas”, broadly construed) that Singer found lacking in international relations theory long ago.
What do ideas, again, broadly construed, have to do with BITs? This Chapter’s central argument is that the BIT phenomenon cannot be adequately understood without recognizing that it is based in
large part on particular ideas, held by people in power, about the value of FDI in promoting economic
development, and about the value of BITs as a tool to encourage that investment. Ideational approaches do, of course, face well-known limitations, including most prominently the problems of determining
which ideas policymakers actually and sincerely hold, and which ideas they espouse merely as “intellectual
rationales” for actions taken on the basis of unspoken objective interests.24 In consequence, ideational
theories have had great difficulty empirically demonstrating simple causation, e.g. that ideas actually do,
rather than just should, matter. Ideational theory also frequently fails to adequately demonstrate the relative influence of ideas compared to arguably non-ideational factors, like coercion or “power.” And finally, first image theories that focus on individually held ideas risk quickly degenerating into “great man” theories of history that offer little or no prospect of generalizability. Byman and Pollack’s attempt to “bring the statesman back in” falls into precisely this trap by emphasizing Hitler’s supposedly “unique” combination of ideas and psychological traits as the defining cause of World War II.
These are indeed serious problems, and I do not attempt to fully resolve them here, either theoretically or empirically. But I do insist that our ability to test the independent impact of ideas on policy is not necessarily intractable if we can reasonably associate the sincere holding of one policy idea or another with the particular political groups that control the levers of government. In other words, I attempt to move from a simple assertion that “ideas matter” or that “individuals matter” to something
approaching a theory of when certain individuals, holding certain ideas might matter.
My most basic claim is that the decision to sign and ratify a BIT is rationalistic in the sense that the political leaders of a given developing country will tend to sign and ratify investment treaties when they view the likely benefits of doing so to outweigh the likely costs. What makes “ideas” relevant conceptually is that certain political actors are likely to view the costs of BITs to be quite high; others are likely to view the costs as low, both within a particular developing country and over time. A similar story
can be told as to benefits. Given these differences in opinion among political actors, differences which correspond
approximately to the partisan identity of the decision-maker, the outcome of the policy-making process—the decision to enter into or to forgo a BIT—will necessarily depend on who is authorized to perform the relevant calculations.
This is not to say that partisan preferences are set in stone, and that leftist leaders always do x
while rightist leaders always do y. Over time, as evidence of the costs and benefits of particular courses
of action shift and change, or become more clear, we can expect partisan positions to shift as well, and perhaps even to converge or to switch places. Partisans, in other words, are not immune to “policy learning,” either in the narrower sense of adapting their preferred methods of achieving a particular goal, or in the broader sense of shifting their understanding of the goal itself. As Fidel Castro, a long-time opponent of foreign investment, surprisingly admitted in a 1993 speech celebrating the 40th anniversary of his assault on the Moncada Barracks, “[w]ho would have thought that we, so doctrinaire, we who fought foreign investment, would one day view foreign investment as an urgent need?....Greater opening
for foreign investment is one of the solutions we have to tackle the difficult situation we face.”25 The
speech was soon followed by dramatic changes in Cuban foreign investment laws, in which full
repatriation of profits and full foreign ownership were allowed for the first time since the revolution.26
But the possibility of policy learning does not mean that policymakers are also not immune to
the occasional, or even the frequent or long-lived, partisan idée fixe. Partisan ideological rigidity is a
measurable fact of life, and it may even be viewed as rational, as Sánchez-Cuenca has recently argued.27 It
is the orderly and predictable distribution of these relatively fixed ideas that makes it possible to present a partisan-based, ideational, first-image theory of international public policy. Consider, for example, the