Securitized political economy, investment regulation and business influence in a geoeconomic era

Abstract

In recent years, many advanced economies have implemented restrictions on cross-border economic activity for national security purposes. The seeming lack of an effective counter lobby against these regulations is puzzling, especially since previous theory and empirical analysis suggests the largest, most globally engaged firms are the best positioned to influence economic policymaking. I develop a theoretical framework to explain firms’ political behavior when economic policy has become “securitized,” meaning that policy entrepreneurs have successfully framed economic regulation as essential for national security. When firms face highly securitized regulatory proposals, they are less able to organize effective opposition. I use a recent case of foreign direct investment (FDI) regulation in the United States to probe and refine the theory’s plausibility. Politicians successfully framed regulation as a national security imperative in a way that limited the business community’s ability to launch public opposition campaigns. Firms responded by either strategically disengaging or using quieter influence tactics that relied on associational groupings. My theory and findings explain why global firms have been largely unable to arrest a substantial and rapid reshaping of the post-war prevailing economic order. These results have broad implications for the domestic and transnational political power of global business in an era of increased geoeconomic competition and raise important questions about how securitized economic landscapes may further erode democratic institutions.