118 International Investment and Colonial Control: A New Interpretation
the benefits of such sanctions to each creditor rise dramatically with the scale of
the cooperative effort.
There are many obstacles to collective action among creditors. Their numbers
are often large and credit is undifferentiated, to name but two. However, financial
institutions tend to have many connections among themselves, from correspondent
banking to joint ventures, so that their reputations with each other may be important.
This will conduce to cooperation.
In the case of foreign lending, then, I expect the use offeree by home countries
against debtors in default to be relatively rare. However, I expect to find a great
deal of cooperation among creditors, for the benefits of creditor unity are large.
Collaboration also will depend on circumstances that affect the costs of collective
action, such as how close the ties among the creditors are along other dimensions.
To summarize, I expect foreign investment in primary production for export to
be most closely associated with the unilateral use of force by the home country. I
expect public utilities to be less tied to the use of force, although characterized by
home-country unilateralism. Foreign loans should seldom be linked to military
intervention, and I expect home governments to be relatively cooperative.
Multinational manufacturing affiliates are unlikely to be seized by force and are
therefore unlikely to become the focus of violent disputes and unlikely to lead to
home-country cooperation....
These analytical expectations do...lead to some straightforward predictions about
the relationship and different forms of foreign investment. I expect colonial rule to be
most commonly found in association with foreign investment whose problems can be
resolved most easily by unilateral intervention, for colonialism is unilateral and
interventionist. Thus, I expect colonialism to be especially strongly associated, not with
foreign investments in general, but rather with foreign investments in primary production....
COLONIALISM AND INVESTMENT
Evidence from the British Empire
The analytical considerations presented above lead, most concretely, to hypotheses
correlating colonialism with foreign investment in primary production. Although
it is theoretically possible to evaluate the other hypotheses presented above, such
as the likelihood that foreign lending is associated with private lender cooperation
but not military intervention, colonialism is the most easily measured outcome. It
is to an evaluation of this claim that I now turn....
The most straightforward way to weigh my approach is to see whether colonial
control is correlated with the investments I anticipate will be associated with the
use of force and home country unilateralism. Some data along these lines are
available for the United Kingdom. However, almost no analogous data are available
for other European colonial experiences. Hence, my statistical analysis is confined
to the British case.
It is worth starting with some consideration of evidence that colonialism could
and did affect the composition of foreign investment in the colonial area. Although