There are three types of liberal theory in international relations – liberal internationalism, economic liberalism, and theories of foreign policy. In this video, I discuss economic liberalism – the idea that economic interests shape international relations. This theory is often simplified to the idea that economic interdependence leads to peace, but in this video I will provide more structure to the theory and discuss how economic interests can lead to both cooperation and conflict. In doing so, I draw heavily from the work of Andrew Moravcik.
Like all theories, economic liberalism makes several assumptions about the nature of the international system and the groups that participate in it. Liberalism assumes that they key players in international relations are interest groups. The global economy creates winners and losers within and across countries, and the winners determine international relations. So while realism focuses on relations between states, liberalism focuses on interest groups and how they define state action. Both theories, however, assume that these actors are rational actors – they make strategic decisions based on their interests.
Liberalism argues that states decide how to act in the international system – they define their national interest – based on the interests of groups within their countries. We’ll talk more about this when we talk about domestic politics and international relations, but this is one reason why countries that have different institutions to represent interest groups (like democracies and dictatorships) may approach foreign policy differently.
In addition, while groups can define their states’ national interests any way they like, economic liberalism assumes that economic interests take priority. Since it is the economic winners in a country who have the power to shape policy, they will take steps to maintain that economic and political power. So while realism tends to focus on military power as being decisive, liberalism argues that economic power matters more.
Finally, while realism argues that the fundamental nature of the international system is anarchy, liberalism argues the international system is a network. There is still no one in charge of global politics, but liberalism argues that the interdependent nature of the networked system shapes state behavior. States do not act independently from each other; instead their economic, cultural, and informational connections influence the choices leaders make for their nations.
Combined, these assumptions point to certain behaviors. Economic liberalism argues that states decide their actions based on rational cost-benefit analysis. Rather than always focusing on security maximization, states will cooperate when the benefits of that cooperation outweigh the costs. They will be in conflict when the benefits of cooperation are low.
The nature of the international economic system determines both sides of that cost-benefit analysis. When the international system is based on monopoly control of natural resources, imperial control of territory, and slavery, economic leaders benefit from conflict and expanding that monopoly control. When the international system is based on free trade and commerce within and among states, there can be greater benefits to cooperation.