The political economy of foreign investment : constructing cultural categories of capitalist legitimacy in India

Abstract

The dissertation addresses a fundamental question in the social sciences: Where do economic interests and policy preferences come from? How do interests and preferences shape political and economic behavior, government policy, firm strategy and ultimately market outcomes? The dissertation addresses this question by analyzing political contestation over foreign direct investment (FDI) rules in India from the late colonial period through the present (1870-2012). This dissertation employs extensive archival and field research to find that conventional theoretical approaches that naturalize economic interests and deduce economic actors preferences from their socio-economic structural position are inadequate to explain the dynamic shifts in government and firm preferences towards FDI over the course of India's modern economic history. Attention must be paid to the ways in which actors make sense of the complexities of their institutional environment. The dissertation argues that preferences are shaped by cognitive and cultural schemas: rationalized causal ideas imbued with historically salient social meaning. These schemas posit causal and historically meaningful means-ends relationships between the role of domestic and foreign firms and industrial development outcomes. They serve as interpretive frameworks through which business, state and societal actors make sense of the complexities of the economy. This dissertation assesses the sources of FDI policy preferences by identifying the origins and evolution of rationalized causal ideals that posit the relative costs and benefits of foreign and domestic capital and the cultural meaning systems in which these causal ideas are embedded. However, it argues that there are competing theories and causal ideas at play in the scholarly, policy and managerial discourse that shape actors' beliefs about the economic effects of FDI. This creates significant uncertainty and opens the door for massive contestation between rival actors wielding competing causal ideas. However, there is a second cultural element of preferences that receives less analytic attention in the literature. This cultural dimension plays a complementary role by providing the socially meaningful and historically rooted cultural symbols, narratives and tropes that are essential for motivating human action. The stress on agency and the identification of this cultural dimension and the role it plays in preference formation, political contestation and policy and market outcomes is an important contribution this dissertation seeks to make.