Invested interests:the politics of national economic policies in a world of global finance Jeffry A.Frieden A striking characteristic of the contemporary international economy is the great mobility of capital across national borders.Technological innovations, economic trends,and government policies have brought international invest- ment to extremely high levels.Many business executives,politicians,and observers believe that capital now moves so freely that the financial markets of industrialized countries are essentially subsets of one global market.This is widely regarded as a fundamental change in the international economy- something new or at least not seen since the classic gold standard.It is also widely believed to have generated such prominent developments as European Community (EC)movement toward a single currency,harmonization of taxes across national borders,and international convergence of macroeconomic policies. Economists have devoted a great deal of time and energy to analyzing the economic implications of the movement of capital across national borders. Other social scientists have also analyzed the political implications of interna- tional investment.The studies of this latter group have tended to focus on one or another subset of the issue,such as multinational corporations in developed and developing countries,foreign borrowing by developing nations,and the politics of international banking.'Despite the quantity and quality of work on I am grateful to the Social Science Research Council,the German Marshall Fund,the UCLA Academic Senate Committee on Research,and the UCLA International Studies and Overseas Programs for their financial support.I also thank Benjamin J.Cohen,Barry Eichengreen,Judith Goldstein,Joanne Gowa,Robert Keohane,Stephen Krasner,David Lake,Edward Leamer, Timothy McKeown,Louis Pauly,Frances Rosenbluth,John Ruggie,and Michael Wallerstein for their helpful comments and suggestions. 1.For prominent examples from each of these issue-areas,see Helen V.Milner,Resisting Protectionism:Global Industries and the Politics of Interational Trade (Princeton,N.J.:Princeton University Press,1988);Peter Evans,Dependent Development:The Alliance of Multinational,State, and Local Capital in Brazil (Princeton,N.J.:Princeton University Press,1979);David G.Becker et al.,Postimperialism:International Capitalism and Development in the Late Twentieth Century (Boulder,Colo.:Lynne Rienner,1987);Robert Kaufman and Barbara Stallings,eds.,Debt and International Organization 45,4,Autumn 1991 1991 by the World Peace Foundation and the Massachusetts Institute of TechnologyInvested interests: the politics of national economic policies in a world of global finance Jeffry A. Frieden A striking characteristic of the contemporary international economy is the great mobility of capital across national borders. Technological innovations, economic trends, and government policies have brought international invest￾ment to extremely high levels. Many business executives, politicians, and observers believe that capital now moves so freely that the financial markets of industrialized countries are essentially subsets of one global market. This is widely regarded as a fundamental change in the international economy￾something new or at least not seen since the classic gold standard. It is also widely believed to have generated such prominent developments as European Community (EC) movement toward a single currency, harmonization of taxes across national borders, and international convergence of macroeconomic policies. Economists have devoted a great deal of time and energy to analyzing the economic implications of the movement of capital across national borders. Other social scientists have also analyzed the political implications of interna￾tional investment. The studies of this latter group have tended to focus on one or another subset of the issue, such as multinational corporations in developed and developing countries, foreign borrowing by developing nations, and the politics of international banking.' Despite the quantity and quality of work on I am grateful to the Social Science Research Council, the German Marshall Fund, the UCLA Academic Senate Committee on Research, and the UCLA International Studies and Overseas Programs for their financial support. I also thank Benjamin J. Cohen, Barry Eichengreen, Judith Goldstein, Joanne Gowa, Robert Keohane, Stephen Krasner, David Lake, Edward Leamer, Timothy McKeown, Louis Pauly, Frances Rosenbluth, John Ruggie, and Michael Wallerstein for their helpful comments and suggestions. 1. For prominent examples from each of these issue-areas, see Helen V. Milner, Resisting Protectionism: Global Industries and the Politics of International Trade (Princeton, N.J.: Princeton University Press, 1988); Peter Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton, N.J.: Princeton University Press, 1979); David G. Becker et al., Postimperialism: International Capitalism and Development in the Late Twentieth Century (Boulder, Colo.: Lynne Rienner, 1987); Robert Kaufman and Barbara Stallings, eds., Debt and International Organization 45,4, Autumn 1991 o 1991 by the World Peace Foundation and the Massachusetts Institute of Technology