Prof. Andreas Bieler and Prof. Adam D. Morton
Transnationalism and Interdependence: Neoliberal Institutionalism
'In the United States scholars have brought "interdependence" into general use when what they were describing was actually highly asymmetrical and uneven dependence or vulnerability'
- Susan Strange, 'Cave! hic dragones: A Critique of Regime Analysis'
'Some people think that liberal theory is unparsimonious . . . I am sure my friend John Mearsheimer, who talks about realism, will say "I have just five principles, I can do it much more simply". I think a theory needs to be as simple or complicated as the material it is trying to study. The world is a diverse place. We need a theory that can handle that'
- Andrew Moravscik, Liberal Theory - International Relations (#2)
This Class deals with another mainstream IR theory: liberalism. It is divided into five parts. First, we discuss the historical emergence of liberalism in the period after the First World War. The second section then covers the revival of liberal IR theory in the 1970s driven by the publication of Robert O. Keohane and Joseph S. Nye’s seminal book Power and Interdependence in 1977. Section 3, in turn, is dedicated to an assessment of three key developments out of the revival of liberalism in the 1970s, followed by a discussion of the main common theses and underlying assumptions of the vast variety of different, yet related liberal perspectives. In the fifth section, we return to the issue of the security order in Europe after the end of the Cold War and discuss how a liberal would try to ensure stability and a peaceful order rather differently from John Mearsheimer’s focus on a managed proliferation of nuclear weapons, discussed in Class 2 on neo-realist approaches.
The historical emergence of Liberalism
Liberalism as a theory emerged in the wake of the First World War and is closely related to the establishment of the first chair in International Relations at the University of Wales, Aberystwyth in 1919. Against the background of the slaughter in the trenches in France, the main focus was on how to avoid war in the future. War, these liberals argued, is not the result of human nature, but due to misunderstandings. Institutional innovation was considered to be the answer to the question of how such misunderstandings could be avoided in the future.
Domestically, countries need to develop into liberal democracies, it was argued, because this would bring out the positive features of human nature. Institutional improvements at the international level were sought through the establishment of the League of Nations in 1920, intended to guarantee states’ security via multilateral co-operation. The key assumption underlying these institutional moves were (1) that there is a natural harmony of real interests as all people have similar needs such as food and housing, and (2) that constitutional government and the rule of law are universal principles.
The grim realities of the inter-war period with the rise of fascism in Italy during the 1920s and Nazism in Germany during the 1930s resulting in the Second World War from 1939 to 1945, soon afterwards to be followed by the Cold War from the late 1940s onwards, made liberal IR theory look rather out of touch with empirical conditions. It appeared as wishful thinking and was often referred to as idealism. With the exception of liberal neo-functionalism (see Haas 1958; Lindberg 1963) in the explanation of European integration, liberal IR theory did not really play a role in International Relations until the 1970s.
THINK POINT
Why did European integration constitute an area of investigation, where liberal approaches were still considered to be useful for the explanation of developments?
Power and interdependence – the re-emergence of liberalism in the 1970s
Against the background of the first détente between the Soviet Union and the USA around the late 1960s, early 1970s liberal IR theory experienced a revival. Keohane and Nye’s book Power and Interdependence (1977) was a key text in this respect. ‘Interdependence, most simply defined, means mutual dependence’, they argued. ‘Interdependence in world politics refers to situations characterized by reciprocal effects among countries or among actors in different countries’ (Keohane and Nye 1977: 8). The notions of sensitivity and vulnerability clarify these reciprocal effects further. Sensitivity refers to how quickly and how costly changes in one country bring changes in another, while vulnerability captures how fast and how expensive potential alternatives to current policies affected by sensitivity impact are.
The concept of ‘complex interdependence’, mainly referring to relations between advanced industrialised countries, especially resulted in novel insights beyond realist scholarship. First, ‘complex interdependence refers to a situation in which states are linked through multiple channels. This includes traditional interstate relations, the focus of realist analysis, but also transgovernmental interaction between different government departments of countries as well as transnational relations between a range of nongovernmental organisations across borders. ‘Transgovernmental applies when we relax the realist assumption that states act coherently as units; transnational applies when we relax the realist assumption that states are the only units’ (Keohane and Nye 1977: 25). Domestic borders are understood in a much more porous way than by neo-realism. Second, in situations of ‘complex interdependence’, there is no hierarchy of issues in international relations. Due to the increasing complexity of actors and issues, military security is not necessarily the most important issue. Think, for example, of the relations between the European Union (EU) member states and the USA. Negotiations of the Transatlantic Trade and Investment Partnership and free trade policies in general are clearly at the top of the agenda, while few would consider the EU and USA constituting a military threat to each other. Importantly, in situations of ‘complex interdependence’ the use of military force is highly unlikely. The countries are too interlinked, developments in one country have too many ramifications for the other countries, for any military action to make sense. ‘In most situations, the effects of military force are both costly and uncertain’ (Keohane and Nye 1977: 28) and, therefore, military force is not an option.
Keohane and Nye’s book was also the starting-point of more in-depth analyses of the impact of international regimes, defined as ‘networks of rules, norms, and procedures that regularize behavior and control its effects’ (Keohane and Nye 1977: 19), on international relations between states. In situations of ‘complex interdependence’, international regimes may help setting the agenda, facilitating coalition-formation and providing the opportunity of issue linkages. Keohane and Nye, thereby, distinguish between structure and process. International regimes are understood as an intermediate factor between the power structure of the inter-state system, as understood by neo-realism, and the negotiations between states taking place within it. Of course, the different levels of power capabilities between states are crucial for which state can assert itself in international negotiations. Nevertheless, in the process of negotiations within regimes, at times weaker states may be able to move stronger states towards an outcome, which is more favourable to their position than the initial distribution of power capabilities would have suggested.
Further developments from Keohane and Nye’s work on interdependence
In the wake of renewed Cold War hostilities marked by the Soviet invasion of Afghanistan in 1979 and the publication of Kenneth Waltz’s book Theory of International Politics in the same year, the concept of ‘complex interdependence’ lost attraction. It was the focus on the role of international regimes in international relations, which received most attention during the 1980s.
Robert O. Keohane with his book After Hegemony: Cooperation and Discord in the World Political Economy (1984) was again involved in a leading capacity. In contrast to neo-realist expectations, the decline of US hegemony in the 1970s and the related changes in the underlying power structures of the inter-state system did not imply an end to all international regimes and co-operation. States, understood as rational, unitary decision-makers, very similar to a neo-realist understanding, continued to use regimes, because they increase the efficiency of international co-operation. In particular, Keohane identified the following three ways of how international regimes facilitate agreement: (1) regimes lower the transaction costs of making agreements in comparison with ad hoc agreements. It is much cheaper to negotiate in a stable institutional environment than having to engage in shuttle diplomacy going to and fro between different national capital cities; (2) regimes reduce uncertainty and improve the information available. The more states get to know about each other, the more comfortable they will feel to make agreements with each other; and (3) although to a lesser extent, they provide frameworks for establishing legal liability. Because of these benefits, states as rational-unitary, utility-maximising decision-makers will foster regimes in situations of complex interdependence, even if the underlying power structure changes, Keohane argues.
Another development of the 1980s was an increased focus on how domestic politics may influence states’ actions at the international level. This was a direct response to neo-realism’s treatment of states as black boxes, the domestic politics of which would not matter when it came to analysing international relations. Robert Putnam’s (1988) focus on so-called two-level games left its marks on the discipline. He argued that governments sit at two negotiation tables at the same time, at the domestic level with interest groups and at the international level with other states. On this basis, he hypothesised that states will only accept agreements at the international level, for which they expect to receive the support of a majority of domestic interest groups. Thus, this made it possible to include an analysis of domestic politics in investigations of international relations.
Overall, these developments building on Keohane and Nye’s work of the 1970s and engaging critically with Waltz’s neo-realism shaped the so-called neo-neo debate, i.e. the theoretical contest between neo-realism on the one hand, and neo-liberal institutionalism on the other.[1] The three main points of disagreement were summarised aptly by Joseph Grieco (1988). First, while liberals emphasise the importance of absolute gains in instances of inter-state co-operation, neo-realists focus on relative gains. Unsurprisingly, co-operation is considered to be more likely from a liberal point of view, because as long as a state is likely to gain, it will participate regardless of how much other states benefit from co-operation. For neo-realists, by contrast, states evaluate whether other states may gain more than they do and, if this is the case, will not co-operate, because this would disadvantage them relatively to others in the inter-state system. Second, and closely related to the first point, neo-liberals treat states as atomistic actors, to be assessed in themselves, while neo-realists look at states as positional actors to be investigated in relation to other states within the overall system characterised by anarchy. Finally, on one hand, neo-liberals focus exclusively on how to avoid states cheating in international co-operation. On the other, as a result of emphasising states’ predominant concern with security, neo-realists in their analysis of state interaction examine the possibilities of cheating and, even more importantly, relative gains. Unsurprisingly, while neo-liberals consider co-operation as a possibility in international relations, neo-realists do not. Especially within US academia, the neo-neo debate dominated discussions for many years. Elsewhere, however, with more exciting theoretical developments going on, observers wondered to what extent these theories of neo-realism and liberalism are similar to ‘two bald men, fighting over a comb’. While the participants of the debate considered themselves to be involved in cutting-edge debates, observers from the outside noted how similar the two were in their basic assumptions. Both considered states to be the most important actors in an international system characterized by anarchy. Both assumed that states are unitary-rational and utility-maximizing actors.
Common theses of liberal IR theories and their underlying assumptions
There are a wide range of different strands of liberal IR theory. Mark Zacher and Richard Matthew (1995) provide a good discussion of what all liberal approaches tend to have in common. They identify three common theses. First, liberals assume that international relations are gradually transformed towards the promotion of greater human freedom by establishing conditions of peace, prosperity and justice. Unlike neo-realists’ perception of the anarchic international system, which is perpetually characterized by war, liberals consider development towards a better future while not inevitable, at least a clear possibility. ‘The second thesis is that central to the realization of greater human freedom is the growth of international cooperation’ (Zacher and Matthew 1995: 110). We have already seen with the neo-neo debate that liberals perceive co-operation in the international system to be a clear possibility. The third common thesis of liberal IR theory approaches is that the transformation of international relations is due to processes of modernisation based on the scientific and intellectual revolution of liberalism. There is clear hope in the possibility of progress in humanity, rooted in the intellectual as well as scientific advances of the 18th, but then especially also the late 19th century.
These three common theses, according to Zacher and Matthew, are based on four joint underlying assumptions. First, individuals are considered to be the primary international actors. Of course, states are important for liberals, but as collective actors bringing together individuals, not as unitary actors as neo-realists would argue. Second, liberals accept that national interests can change, essential really for the thesis that progress towards a better future is possible. Third, ‘state interests are shaped by a wide variety of domestic and international conditions’ (Zacher and Matthew 1995: 119), implying a focus on both domestic politics and international developments when analyzing international relations. Finally, liberal IR theories assume that international regimes and co-operation based on mutual interests are possible. This is again an essential assumption for the thesis that progress towards a peaceful order and better future is possible. In the next section, we outline how these common theses and assumptions affect an assessment of the post-Cold War security order in Europe.
KEY LIBERAL ASSUMPTIONS
individuals are the main agents in international relations;
co-operation between states based on mutual interests is possible;
international organisations and regimes facilitate co-operation;
progress beyond a war of all against all towards a stable, peaceful international order is possible.
In sum, especially in situations of complex interdependence, states are highly unlikely to engage in war against each other due to the costs for everyone involved.
The European security structure after the end of the Cold War: Part II
In the Class on neo-realism, we discussed John Mearsheimer’s suggestion that a managed proliferation of nuclear weapons towards a multipolar balance of power would be the best way to ensure security in Europe after the end of the Cold War. From a liberal perspective, this question is assessed rather differently. First, the so-called democratic peace theory argues that considering that democracies do not go to war with each other, the spread of democracy together with market economy towards Central and Eastern Europe (CEE) will ensure a peaceful international order (Doyle 1995). Jack Snyder, however, asserted that slightly more was required to ensure a peaceful transition in CEE and provided a liberal institutionalist analysis in contrast to both democratic peace theory and neo-realism alike. ‘Whereas liberal optimism sees political order as arising spontaneously from a harmony of interests, and Hobbesian pessimism sees it as imposed by hegemonic power, neo-liberal institutionalism sees it as arising from organized procedures for articulating interests and settling conflicts among them’ (Snyder 1990: 15).
Snyder acknowledged the danger of ‘praetorian societies’ characterized by a gap between booming political participation and ineffectual political institutions. In such situation, some may emphasise nationalist demagogy as instrument to advance group interests. Narrow interests may capture both domestic and foreign politics. Active institution building would help to avoid such a course of events. In concrete terms, he demanded a new Marshall Plan. It ‘needs a strategy for using international institutions to fill the gap between booming political participation and a weak domestic order threatened by the competing demands of illiberal organized interests’ (Snyder 1990: 31). The EU would have to play a crucial role in this respect. First, integration in international institution is likely to have a positive effect on domestic politics. EU membership would promise economic benefits, but only in exchange of meeting the precondition for membership of a stable representative democratic domestic order. Thus, ‘a democratic institutional requirement for [EU] membership would directly strengthen the moderating voice of the average citizen in Eastern Europe’ (Snyder 1990: 37).
In the end, it was Jack Snyder’s recommendations, not John Mearsheimer’s, which were adopted in practice. Having fulfilled the requirement of establishing a representative democratic order at home, CEE countries joined the EU as full members first in 2004, with Bulgaria and Romania following in 2007.
Conclusions
The fortunes of liberal IR theories have been closely related to international developments. With the end of the Cold War and a shift in the focus of the discipline on the structural changes associated with globalisation, liberal IR theory seemed again to gain predominance during the 1990s. So-called hyperglobalists made the point that globalisation has drastically changed the international system with non-state actors, especially transnational corporations (TNCs), increasingly taking over core functions, traditionally carried out by states (Strange 1996). In turn, states become mere conduits, adjusting national economies to the requirements of global capital, withering away as increasingly powerless actors (Ohmae 1995). The so-called transformationalists are a liberal variant of IR theory, who acknowledge that globalisation signifies dramatic change (Held et al. 1999), but argue that states are being restructured as competition states within the global economy, rather than becoming obsolete (Cerny 2010). In other words, there was an increasing emphasis on the emergence of a global economy above the inter-state system with a range of new actors such as TNCs rivalling states for authority in the global system. Scholarly interest shifted towards international or, as some argued, global political economy and liberal IR theory appeared to be the more suitable approach. The pendulum, however, seemed to move back after 9/11 in 2001 with neo-realism’s assumed stronger capacity in this area of International Relations.
Neo-realist and liberal approaches are clearly very different in their ontologies. While the former emphasise states as the only important actors in an international system characterised by anarchy, the latter include domestic politics in their analysis and investigate a much broader range of actors including individuals, international regimes and organisations, TNCs and NGOs in addition to states. As different as they, however, are, their epistemologies are both positivist. The main bone of contention is one of which approach can explain better an objective empirical reality. The two main approaches develop rival empirical research pogrammes with testable hypotheses, but they overall agree on the theory of knowledge - or epistemological foundations - and are, thus, part of the mainstream in International Relations.
THINK POINT
In what way are the fortunes of different IR theories related to concrete developments in international relations and why?
References
Cerny, Philip (2010) Rethinking World Politics: A Theory of Transnational Neopluralism. Oxford: Oxford University Press.
Doyle, Michael W. (1995) ‘Liberalism and World Politics Revisited’, in Charles W. Kegley (ed.) Controversies in International Relations Theory: Realism and the Neoliberal Challenge. New York: St. Martin’s Press, pp. 83-106.
Grieco, Joseph M. (1988) ‘Anarchy and the Limits of Cooperation: A Realist Critique of the Newest Liberal Institutionalism’, International Organization, 42(3): 485-507.
Haas, Ernst B. (1958) The Uniting of Europe: Political, Social and Economic Forces, 1950-1957. London: Stevens & Sons.
Held, D., A. McGrew, D. Goldblatt and J. Perraton (1999) Global Transformations: Politics, Economics and Culture. Cambridge: Polity.
Keohane, Robert O. (1984) After Hegemony: Cooperation and Discord in the World Political Economy, Princeton/NJ: Princeton University Press.
Keohane, Robert O. (1989) International Institutions and State Power. Boulder et al: Westview Press.
Keohane, Robert O. and Joseph S. Nye (1977) Power and Interdependence: World Politics in Transition. Boston: Little Brown.
Lindberg, Leon N. (1963) The Political Dynamics of European Economic Integration. Stanford. CA.: Stanford University Press.
Ohmae, K. (1990). The Borderless World: Power and Strategy in the Interlinked Economy. London: Harper Collins.
Ohmae, K. (1995) The End of the Nation State: The Rise of Regional Economies. London: Harper Collins.
Putnam, Robert D. (1988) ‘Diplomacy and Domestic Politics: The Logic of Two-Level Games’, International Organization, 42(3): 427-60.
Snyder, Jack (1990) ‘Averting Anarchy in the New Europe’, International Security, Vol.14/4: 5-41.
Strange, Susan (1982) 'Cave! hic dragones: A Critique of Regime Analysis', International Organization, 36(2): 479-96.
Strange, Susan (1996) The Retreat of the State: The Diffusion of Power in the World Economy. Cambridge: Cambridge University Press.
Waltz, Kenneth N. (1979) Theory of International Politics. New York: McGraw-Hill.
Zacher, Mark W./Matthew, Richard A. (1995) ‘Liberal International Theory: Common Threads, Divergent Strands’, in Charles W. Kegley (ed.) Controversies in International Relations Theory: Realism and the Neoliberal Challenge. New York: St. Martin’s Press, pp. 107-50.
Textbook chapters
Burchill, Scott (2013) ‘Liberalism’, in Scott Burchill et al (eds.) Theories of International Relations, Fifth edition. Basingstoke: Palgrave, Chapter 3.
Conzelmann, Thomas (2014) ‘Neofunctionalism’, in Manuela Spindler and Siegfried Schieder (eds.) Theories of International Relations. Abingdon/New York: Routledge. Chapter 6.
Hasenclever, Andreas (2014) ‘Liberal Approaches to the “Democratic Peace”’, Manuela Spindler and Siegfried Schieder (eds.) Theories of International Relations. London: Routledge, Chapter 8.
Russet, Bruce (2016) ‘Liberalism’, in Tim Dunne, Milja Kurki and Steve Smith (eds) International Relations Theories: Discipline and Diversity, Fourth edition. Oxford: Oxford University Press, Chapter 4.
Schieder, Siegfried (2014) ‘New Liberalism’, in Manuela Spindler and Siegfried Schieder (eds.) Theories of International Relations. London: Routledge, Chapter 7.
Spindler, Manuela (2014) ‘Interdependence’, in Manuela Spindler and Siegfried Schieder (eds.) Theories of International Relations. London: Routledge, Chapter 4.
Sterling-Folker, Jennifer (2016) ‘Neoliberalism’, in Tim Dunne, Milja Kurki and Steve Smith (eds) International Relations Theories: Discipline and Diversity, Fourth edition. Oxford: Oxford University Press, Chapter 5.
Zang, Bernhard (2014) ‘Regime Theory’, in Manuela Spindler and Siegfried Schieder (eds.) Theories of International Relations. London: Routledge, Chapter 5.
[1] We will not refer to neo-liberal IR theory, because this may result in mix-ups with the term neoliberalism as an economic doctrine. Hence, we will continue in the remainder of the lecture to refer to liberal IR theory.