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Abstract

According to neoliberal theory, foreign direct investment enhances socioeconomic conditions in host countries, which in turn leads to democratization and greater protection of human rights. The structuralist theory, in contrast, holds that, in interaction with domestic unrest, foreign investment fosters repression. Lesotho serves as a fitting laboratory in which to test these competing theories. In 1995, the country had experienced a huge surge in foreign direct investment. In the period leading up to and during this increase, Lesotho was among the most impoverished countries in the world, and had a relatively poor human rights record. This confluence of factors makes Lesotho a suitable case on which to test neoliberal theory. Furthermore, numerous acts of domestic unrest in the form of riots, strikes, and anti-government demonstrations have posed a recurring threat to the country's political and economic stability. Thus, Lesotho also provides an opportunity to evaluate structuralist theory. Which theory is best supported by the qualitative data from Lesotho? Although there is evidence that repression diminished after the 1995 surge in FDI, it is argued that this reduction was not the outcome of a process initiated by FDI flows. The preceding conditions that neoliberals expect to foster greater respect for human rights—including increased living standards and growth in the middle class—were absent in the Lesotho case. In tandem with economic "growth," living conditions for the average Basotho had begun to worsen following the surge. Remaining one of the world's most unequal countries, moreover, Lesotho does not appear to have experienced any sustained growth in its middle class. Further, there is evidence that, in spite of the overall reduction in Lesotho's repression level, there was violent suppression of domestic unrest related specifically to foreign investment projects. As is thoroughly explained, the Lesotho case exemplifies the problem with interpreting such overall trends as reflecting the degree of government respect for human rights principles. In short, the Lesotho case provides greater support for structuralist theory on FDI and human rights.

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