Neoliberalism

Neo-liberalism in International Relations
Definition:
“A theoretical perspective that emphasizes role of international institutions to bring peace,
prosperity and cooperation among states and accepts some hard realities pertaining to
states’ power”.
Introduction:
• Neoliberalism concerns itself with the study of how to achieve co-operation among states
and other actors.
• Neoliberals accept that co-operation may be difficult to achieve but argue that it has been
facilitated by growth of international institutions and international regimes.
• A general characteristic of neoliberalism is the desire to intensify and expand the market,
by increasing the number, frequency, repeatability, and formalisation of transactions.
• Nation-states are, or at least should be, concerned with absolute gains rather than ‘relative
gains’ to other nation-states.
• Neoliberalism holds that interactions between countries can be win-win situations.
• They believe in the idea that the world can be set up in such a way that cooperation will be
rewarded and countries can stop emphasizing competition.
• Since the 1990's, activists use the word 'neoliberalism' for global market-liberalism
('capitalism') and for free-trade policies.
Neoliberal Approach and Realism:

Neoliberal approach differs from earlier liberal approaches in that it accepts two important
assumptions of realism:
1. States are unitary actors rationally pursuing their self-interests, but they say states
cooperate because it is in their self-interest.
2. Mutual gains better (more rational) than cheating or taking advantage of each other.
• Neoliberalism adopts a state-centric perspective, which, like structural realism, considers
states to be unitary, rational, utility-maximising actors.
• Neoliberalism is heavily indebted to the study of rationality and utility-maximization in

economics.
• They recognize the difficulties involved in overcoming anarchic environment in
international politics.
• Key neoliberal texts, such as Keohane and Nye’s Power and Interdependence, sought to
challenge realist pessimism, but adopted the realists’ assumption of self-interested
egocentric actors.
• Ø It should not be forgotten, however, that there are differences between realist and
neoliberal approaches, for example, on their understanding of the meaning of anarchy.
Neoliberals’ view about barriers to co-operation:

§ Neoliberals recognize that there are barriers to co-operation, such as free-riding.
§ Game theory, the game of Prisoner’s Dilemma for example, are used to clarify the rational
decision-making processes involved in co-operation.
Challenges to the design of institutions:

There are three major challenges to the design of institutions that neoliberals recognize:
1) bargaining (how it is facilitated)
2) defection (how it is mitigated), and
3) autonomy (do institutions have autonomy from states).
Kinds of Neoliberalism
Sociological Liberalism:
v Sociological liberals see international relations in terms of relationships between people,
groups and organisations in different countries.
v Many sociological liberals believe that increased transnational relations could help create
new forms of human society.
Interdependence Liberalism:
• In 1970s, Robert Keohane presented this theory.
• It focused intense interconnectedness of mutual relations between Western countries and
Japan.
• Along with the improvement in trade, economic goals, relation between the people of
these societies also grew positively that, resultantly increased the interdependence over
each other.
• Interdependence Liberalism argues that increased interdependence between countries
reduces the chance of them engaging in conflict.
• Interdependence liberals see modernisation as increasing the levels and scope of
interdependence between states leading to greater cooperation. Such thinkers also see
welfare as the primary concern of states, and the military force becoming less useful.
Institutional Liberalism:
• Liberal institutionalism argues that emphasis should be placed on global governance and
international organizations as a way of explaining international relations.
• Institutionalism places emphasis on the role that common goals play in the international
system and the ability of international organizations to get states to cooperate.
• Institutional Liberalism is considered as the main analytical competitor to realism in
International theory.
Republican Liberalism:
• Republican liberal theories stress the role of domestic representative institutions, elites
and leadership dynamics, and executive-legislative relations.
• Such theories were first conceived by visionary liberals such as Immanuel Kant, Adam
Smith, John Stuart Mill, John Hobson, Woodrow Wilson, and John Maynard Keynes
NEO-LIBERALISM (SCHOOL OF THOUGHT)
1) Introduction:
Neo-liberalism generally refers neo-liberal institutionalism or now what is called

Institutional Theory. However, in the policy world, neo-liberalism means something
different. Neo-liberal policy promotes free trade and open market and western democratic
values and institutions. Most of the leading western states have joined US led chorus, calling
for the enlargement of community and of democratic and capitalist nation-states. In reality,
neo-liberal foreign policies tend not to be as wedded to the ideals of democratic peace, free
trade and open borders. National interest takes precedence over morality and universal
ideas, and much to the dismay of traditional realists, economic interests are given priority
over geo-political ones.
Neo-liberals study political economy and focus on cooperation and institutions.
2) David Baldwin’s varieties of liberalism:
These four varieties of liberalism influence contemporary international relations.
I. Commercial Liberalism: it advocates free trade and a market or capitalist economy

towards peace and prosperity. Today it’s view is promoted by global financial institutions,
major trading states and MNCs.
II. Republican liberalism: it states that democratic states are more inclined to respect the
rights of their citizens and are less likely to go to war with their democratic neighbours. This
view is presented as democratic peace theory.
Commercial and republican liberalism combine to form core foreign policy goals of many of
the world major powers. The new liberal internationalism is promoted by the US and its G-8
partners in trade, aid and security policies.
III. Sociological Liberalism: the notion of community and the process of interdependence are
important elements. As transnational activities increased, people in distant lands linked and
the governments become more interdependent. Resultantly, it becomes more difficult and
more costly for states to act unilaterally and to avoid cooperation. Many of the assumptions
of the sociological liberalism are presented in current globalization literature dealing with
popular culture and civil society.
IV. Institutional liberalism: neo-liberal institutionalism is the most convincing challenge to

realist and neo-realist thinking. Its study suggests that the way towards peace and
prosperity is to have independent states pool their resources and even some of their
sovereignty to create integrated communities to promote economic growth. EU is one such
institution that began as regional community for encouraging multilateral cooperation. Neo-
liberal institutionalists see institutions as mediator and the means to achieve cooperation
among actors in the system. They are focusing their research on the issues of the global
governance and creation and maintenance of institutions associated with managing the
processors of globalization.
THE MAIN FEATURES OF THE NEO-REALIST/NEO-LIBERAL DEBATE
According to Baldwin:
1) Both agree that the international system is anarchic. Neo-realists say that the anarchiy
puts more constraints on foreign policy and that neo-liberals minimize the importance of
survival as the goal of each state. Neo-liberals claim that neo-realists minimize the
importance of international interdependence, globalization and the regimes created to
manage these interactions.
2) Neo-realists believe that international cooperation will not happen unless states make it
happen. They feel that it is hard to achieve, difficult to maintain, and dependent on state
power. Neo-liberals believe that cooperation is easy to achieve in areas where states have
mutual interests.
3) Neo-liberals think that actors with common interests try to maximize absolute gains. Neo-
realists claim that neo-liberals overlook the importance of relative gains. They believe that
the fundamental goal of states is cooperative relationships is to prevent others from gaining
more.
4) Neo-realists state that anarchy requires states to be preoccupied with relative power.
Security and survival in a competitive international system. Neo-liberals are more concerned
with economic welfare or international political economy issues and other nonmilitary issue
areas such as international environmental concerns.
5) Neo-liberals see institutions and regimes as significant forces in international relations.

Neo-realists state that neo-liberals exaggerate the impact of regimes and institutions on
state behaviour.
Neoliberalism anf globalization linkage and

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Neo-liberalism in International Relations

Neoliberal Approach and Realism:

• Neoliberalism is heavily indebted to the study of rationality and utility-maximization in

Neoliberals’ view about barriers to co-operation:

Challenges to the design of institutions:

NEO-LIBERALISM (SCHOOL OF THOUGHT)

Neo-liberalism generally refers neo-liberal institutionalism or now what is called

Neo-liberals study political economy and focus on cooperation and institutions.

2) David Baldwin’s varieties of liberalism:

These four varieties of liberalism influence contemporary international relations.

I. Commercial Liberalism: it advocates free trade and a market or capitalist economy

IV. Institutional liberalism: neo-liberal institutionalism is the most convincing challenge to

THE MAIN FEATURES OF THE NEO-REALIST/NEO-LIBERAL DEBATE

5) Neo-liberals see institutions and regimes as significant forces in international relations.

Neoliberalism anf globalization linkage and

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