Money with a Mean Streak? Foreign Economic Penetration and Government Respect for Human Rights in Developing Countries

Abstract

This study examines the relationship between foreign economic capital and the level of government respect for two types of human rights in developing countries. Two opposing schools of thought offer explanations as to what this relationship might be like. According to the liberal neoclassical school, the acceptance of liberal economic doctrine will provide positive political benefits to developing countries. The “dependency” school, on the other hand, argues that because ties between core and periphery elites give governments in developing nations an incentive to repress, human rights conditions will worsen as foreign economic penetration increases. The results of previous empirical queries into this matter have been mixed. In contrast to most studies, we focus on a broader measure of foreign economic capital, including foreign direct investment, portfolio investment, debt, and official development assistance. Using ordered logit analysis on a cross-national sample of forty-three developing countries from 1981 to 1995, we discover systematic evidence of an association between foreign economic penetration and government respect for two types of human rights, physical integrity rights and political rights and civil liberties. Of particular interest is the finding that both foreign direct investment and portfolio investment are reliably associated with increased government respect for human rights.