Investing in Repression? Foreign Direct Investment and Human Rights in Poorer Countries

My dissertation addresses the debate on the impact of foreign direct investment on physical integrity rights. I evaluate competing theories from the neoliberal and historical structuralist schools of thought. According to the former, FDI generally leads to better human rights practices. The latter, in contrast, is characterized as postulating a direct link between FDI and repression. By and large, the literature seems to support the neoliberal view (and, by extension, disconfirm the historical structuralist view). Yet in spite of the scholarly consensus, I argue that it is premature to conclude the debate. Scholars appear to have misunderstood the causal mechanism that historical structuralists believe link FDI to repression of physical integrity rights. They ignore a crucial variable that, as historical structuralists imply, mediates the effects of FDI on the level of repression: domestic unrest. We should only expect repression to increase when high levels of FDI coincide with domestic unrest. In order to safeguard their investments, MNCs lend support to friendly host governments (either directly or through their home government), which paves the way for further repression. In this paper, I will attempt to redress this problem by offering a more refined version of the historical structuralist model, and by assessing – both quantitatively and qualitatively - its effects on human rights. Probit regression models will be used to test both the neoliberal and historical structuralist propositions on a sample of low- and lower-middle-income countries from the years 1981-2004. I then conduct two case studies on Algeria and Lesotho. To briefly summarize this study’s main findings, the quantitative data largely disconfirms the neoliberal theory that FDI reduces the repression of physical integrity rights over time. In contrast, there is stronger evidence for the structuralist theory that countries with large flows of FDI are more repressive in times of domestic unrest. Case study analysis largely supports these statistical findings and, in the case of Algeria, suggests ways to modify structuralism. Specifically, the Algerian case illustrates how repression is more likely in industries that are more labor-intensive and are concentrated in densely-populated regions