Ideology and the Investment Regime

Abstract

This chapter investigates how ideological contestation has shaped the institutions that protect foreign investment from expropriation. It explains how a focus on competition in a low-dimensional ideological space helps one make sense of the emergence of the investment regime and adjustments to it. From the U.S. perspective, the investment regime is partially about protecting the specific assets of American investors. Yet this could be achieved through other means. The institutional regime is also about advancing principles favored by the United States over alternative principles advocated by the Soviet Union and other states. This chapter first details ideological conflict during the Cold War. It then uses the framework from Chapter 4 to analyze the role of ideology in determining which countries did and did not sign bilateral investment treaties (BITs) with the United States. Finally, the chapter shows that governments that changed their ideological orientations since originally negotiating BITs are the most likely to renegotiate or end treaties. The rational functional rationales of investment agreements must be understood against the backdrop of fierce ideological competition in a low-dimensional space.