ABSTRACT
International political economy has been dominated by three theories about the relationship between the state and economic activity: economic liberalism, economic nationalism and Marxist economics. This chapter describes each of these three theories of political economy and then identifies the essential distinction between liberal and illiberal investment policies. Economic nationalism, which finds its origins in the seventeenth-century doctrine of mercantilism, appeared contemporaneously with the rise of the nation-state as the dominant form of European political organization. Postwar national policy in the Third World states of Africa, Asia and Latin America has generally emphasized political independence and economic development. Bilateral investment treaties (BITs) have been concluded in many cases because they symbolize a commitment to economic liberalism. The sincerity of that commitment, however, can be measured by examining the provisions of the BIT. If the BITs are to construct the liberal international investment regime they seem to promise, then they must be modified in important and substantial ways.
