Political Survival, Energy Policies, and Multinational Corporations

Abstract

We draw on the selectorate theory and detailed historical research to explain how a government relationship with foreign multinationals will depend on the strategies followed by the host country’s ruler to assure his/her political survival. Focusing in three oil-exporting countries (Colombia, Venezuela, and Mexico) and one firm (Standard Oil Company of New Jersey) during the twentieth century, we show that oil rents are a valuable resource for the host country’s ruler to assure the loyalty of his/her winning coalition. We argue that a government depending on a small winning coalition will use oil rents as a private good to be distributed among those close to the ruler, while a government relying on large coalitions will use oil rents as public goods to be distributed among the population. When acting against foreign multinationals, the host government is constrained by the political power of the firms’ home country over the host country and by the relationship between the firm and its home country. Finally, we show that shared political agendas between host and home governments give the host government more space to maneuver against foreign firms.