Abstract
Is expropriation - the seizure of assets from foreign investors - a sign of wider repression in host countries? If so, under which circumstances? The relationship between expropriation and human rights has been under-explored in the international relations and international political economy literatures. We argue that domestic repression and expropriation are interrelated: both can be part of a state’s repertoire of coercive activities, the use of these tools reflecting a leader’s insecurity about their power position. Expropriation, however, often attracts widespread media attention, and thus may signal wider repressive acts against citizens, which are typically harder to detect. We present an exploratory analysis using a cross-country sample of seventy-eight non-OECD countries (1960-2006). Results show that expropriation is connected to higher repression, and that the effect is stronger in countries with higher historical human rights protection, which are in the middle of the democracy-autocracy spectrum. Our theoretical and empirical contributions illuminate a relationship between property rights and human rights, and give important insights to understanding state incentives to repress.
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Notes
To be clear, by ‘political risk,’ we refer to scholarly work on international property rights (e.g., expropriation) in political science, economics, business, and international law that studies the risks that foreigners face when investing abroad, the determinants of those risks, and the consequences for the trajectory of foreign investment abroad. There are also measures of ‘repression risk’ (e.g., Rubin and Moore (2007), but for this article, political risk refers to the property risks that investors face abroad.
Specifically, in this paper, we see expropriation as a simple tool that the government may use, for a variety of reasons. While it may be used for opportunistic reasons, expropriation may create new opportunities for the citizenry. In Peru, for example, the government expropriated from the US owned Standard Oil following years of US-backed contractual exploitation. For international law scholars, expropriation is not inherently illegal: it is sometimes necessary to protect the public good. Legality is often assessed by whether or not the government paid adequate compensation after the taking. Nevertheless, while expropriation is theoretically more of a neutral tool, previous empirical studies find that it is more commonly used by opportunistic governments.
See also “Pressure mounts on Bolivian leader after energy seizure.” Times Online, May 3, 2006.
“Argentina’s Oil Industry: Feed me, Seymour” The Economist, 16 April 2012.
Perhaps the oldest requirement for an expropriation to be considered legal is that it be undergone for a ‘public purpose.’ See Martinez-Fraga and Reetz (2015).
As for expropriation, opportunistic leaders may be in a position of weakness or strength.
As Gohdes and Carey (2017) write, using structural characteristics as proxies “can usually tell us little about when and why governments suddenly change their strategy of torturing, disappearing or killing their own people, because these indicators change extremely slowly.” Even NGOs like Amnesty International and the US State Department have finite capacity, and the literature suggests that the ability to monitor repressive events varies by regime.
Fariss explains that, while many repressive acts do not enter into the historical record as they are occurring, at least the larger ones, like mass killings are better documented as more actors are getting involved, including NGOs, IGOs, lawyers, jurists, activists, human rights courts, and other governments.
With options like creeping expropriation (more technical and more common today), recent outright expropriations are even more likely to be from rogue opportunists: Graham et al. (2017) argue that unconstrained executives are the ones that continue to expropriate, and that more constrained executives (perhaps less brazenly opportunistic) shifted to creeping expropriation. In our data, for example, from 1990-2006, 59% of expropriations took place during regimes that were associated with corruption and/or repression.
Consider that, if repressive events become highly salient, repression may then act as a signal of increased expropriation likelihood. Put differently, and regarding a potential concern of reverse causality, our argument allows for the possibility that either repression or expropriation may function as the independent variable: if we see repression, the argument suggests increased risk of expropriation - they can each be signals for each other because they stem from a similar cause (leader opportunism). Note that expropriation need not always precede repression: it may also indicate a higher likelihood that repression is either occurring or has recently occurred. We focus only on expropriation as a signal because it is much more likely to be visible than repression.
Again, scholarship like Graham et al. (2017) suggests that this correlation may be even more relevant for modern expropriations, than for expropriations in the 1960s and 1970s.
This logic is analogous to intuitions from the theory of repeated-games with incomplete information. In these games, the more firmly established a player’s reputation (i.e. the more previous rounds of compliance/cooperation), the less any one deviation will impact the overall impression of that player’s ‘type’ (e.g. if they are the type that complies or cheats). For players with unestablished types, any deviation will have a more dramatic impact on their perceived likelihood of future non-compliance.
Note that OECD countries have historically not physically seized many foreign assets, with the exception of Mexico, which is included in our sample. Including OECD countries and long-established democracies in the analysis would likely bias the results (in greater support of our hypotheses) given these states have few expropriations and the highest levels of respect for human rights across all cases.
See Kobrin (1984). Recall that throughout this paper we refer to outright expropriation of foreign-owned assets. To our knowledge, there are no databases that record the magnitude of each expropriation (net of compensation); as such, we must make the assumption that each expropriation event has homogeneous effects on human rights. This assumption is relaxed in the within-country case studies.
Four authors, over two generations, created this dataset, thinking deeply about how best to measure the incidence of outright expropriation of foreign assets, cross-nationally. See the online appendix for an extended discussion of this data, and data alternatives.
U.S. State Department 2012 “Investment Climate Statement – Nicaragua.” Bureau of Economic and Business Affairs. Accessed 11 January 2014 from http://www.state.gov/e/eb/rls/othr/ics/2012/191209.htm.
We explicitly do not employ mediation analysis, given that the strong assumptions of sequential ignorability are not likely to be supported by our research design.
The approach simulates a hypothetical confounder that explains variation in both the treatment and outcome, conditional on observed covariates, and assesses the extent to which this confounding alters the estimated treatment effect.
Missingness is not consistent across different PTS codings: the Amnesty International scores drop 16% of the sample compared to 5% using State Department scores; as such, we use the latter.
“UPDATE 3-Argentine Senate, house committee back YPF takeover” Reuters, 26 April 2012. Whether these sentiments stem from aggressive government campaigns is unclear.
“Argentina’s oil industry: Feed me, Seymour” The Economist, 16 April 2012.
“Yoked Petrol Fireworks II,” Buenos Aires Herald, 19 April 2012.
“Kirchner’s Oil Expropriation Backfires,” Wall Street Journal, 3 June 2012, Mary Anastasia O’Grady.
“The Largest Arbitration in History: Three Majority Shareholders in Yukos Awarded Total Damages of Over $50bn from the Russian Federation” Herbert Smith Freehills - Arbitration Notes. (14 August 2014).
ibid.
ibid.
“Russian Federation: The case of Mihail Khodorkovskii and other individuals associated with YUKOS,” Amnesty International Public Statement, 11 April 2005.
“Yukos Owners Win Largest Arbitration Award in History Against Russia for ‘Devious and Calculated’ Expropriation” International Arbitration Attorney Network.
ibid.
See, for example, “Interpol used by Russia in the case of Yukos and Khodorkovsky. The oppression of Pavel Zabelin,” Open Dialog Foundation, 29 June 2015.
“Russia Must Compensate Yukos Shareholders, Says European Court.” Wall Street Journal, 31 July 2014.
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Acknowledgements
We thank the editor and three anonymous reviewers for their detailed and helpful comments. We thank Rod Abouharb, Nate Jensen, Peter Rosendorff, and the participants at American Political Science Association meetings, Cambridge International Studies Association Speaker Series, Evans School of Public Affairs at the University of Washington, Global Public Policy Institute, International Political Economic Society meetings, International Studies Association meetings, Oxford Global Economic Governance Workshop, University of British Columbia, and University College Dublin School of Politics and International Relations for their feedback. All errors remain our own.
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Conceptual Design: N.Janz (60%), N.Johnston (30%), P.M. (10%); Literature Review and Theoretical Argument: N.Janz (30%), N.Johnston (65%), P.M. (5%); Empirical Analysis: N.Janz (10%), N.Johnston (5%), P.M. (85%). The order of authors is chosen alphabetically.
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Janz, N., Johnston, N. & Mahdavi, P. Expropriation and human rights: does the seizure of FDI signal wider repression?. Rev Int Organ 17, 847–875 (2022). https://doi.org/10.1007/s11558-021-09447-9
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DOI: https://doi.org/10.1007/s11558-021-09447-9