COURSE MATERIAL REVIEW 2

160 R O 8 ER T o. KE o HAN E / From Interdependence and Institutions

for wars with nonliberals would disappear as nonliberal regimes disappeared. . .

5. Kant's foedus pacificum 1s thus neither a padum pacis ( a single peace treaty) nor a civitas gentiu~ ( a "".orld state). He appears to have anticipated someth11:g like a less formally institutionalized Leagu~ of N~t1ons or United Nations. One could argue that m practice, th~se two institutions worked for liberal states and only for lib- eral states, but no specifically liberal "pacific union'' was institutionalized. Instead, liberal states have behaved for the past 180 years as if such a Kantian pacific union and treaty of perpetual peace had been signed.

6. In the Metaphysics of Morals (the Rechtsleh~e) Kant seems to write as if perpetual peace is only an epistemo- logical device and, while an ethical duty, is empirically merely a "pious hope" (M1;f, pp. ~64:"75)-~~ough e:7en here he finds that the pacific umon 1s not rmpractica- ble" (MM, p. 171). In the Universal History (UH), Kant writes as if the brute force of physical nature drives men toward inevitable peace ....

7. For a comparative discussion of the political foun- dations of Kant's ideas, see Shklar (1984, pp. 232-38).

References Babst, Dean V. 1972. A Force f6r Peace. Industrial

Research. 14 (April): 55-58. Bizezinski, Zbigniew, and Samuel Huntin~~n. 1963.

Political Power: USA/USSR. New York: Viking Press. Carnesale, Albert, Paul Doty, Stanley Hoffmann, Samuel

Huntington, Joseph Nye, and Scott Sagan. 1983. Living With Nuclear Weapons. New York: Bantam.

Doyle, Michael W. 1983a. Ka1_1t, Liberal Legac~es, a~d Foreign Affairs: Part 1. Philosophy and Public Affairs 12: 205-35.

Doyle, Michael W. 1983b. Kant, Liberal Legac~es, a~d Foreign Affairs: Part 2. Philosophy and Public Affairs 12: 323-53.

Hume, David. 1963. Of the Balance of Power. Essay~: Moral, Political, and Literary. Oxford: Oxford Um- versity Press. , . . . .

Kant, Immanuel. 1970. Kants Political Writings. Hans Reiss, ed. H. B. Nisbet, trans. Cambndge: Cam- bridge University Press.

Keohane, Robert, and Joseph Nye. 1977. Power and Inter- dependence. Boston: Littl~ Brown. . . .

Neustadt, Richard. 1970. Alliance Politics. New York. Columbia University Press.

Polanyi, Karl. 1944. The Great Transformation. Boston: Beacon Press.

Rummel, Rudolph J. 1983. Libertaria1:ism and I1_1terna- tional Violence. Journal of Conflict Resolution, 27: 27-71.

Schumpeter, Joseph. 1950. Capitalism, Socialism, and Democracy. New York: Harper Torchbooks. . .

Schumpeter, Joseph. 1955. The Sociology oflmpenahsm. In Imperialism and Social Classes. Cleveland: World Publishing Co. (Essay originally publishe~ in 1919 .)

Shklar, Judith. 1984. Ordinary Vices. Cambndge, MA: Harvard University Press.

Streit, Clarence. 1938. Union Now: A Proposal for a Fed- eral Union of the Leading Democracies. New York: . Harpers.

Thucydides. 1954. The Peloponnesia~ War. Rex Warner, ed. and trans. Baltimore: Pengum.

Waltz, Kenneth. 1964. The Stability of a Bipolar World. Daedalus, 93: 881-909.

Walzer, Michael. 1983. Spheres of Justice. New York: Basic Books.

From Interdependence and Institutions to Globalization and Governance

ROBERT 0. KEOHANE

The author provides his understanding of how the world works that is "both individua(ist ~nd _instituti~nal- ist." He summarizes much of his earlier work on interdependence ~nd subsequ~ntly on m~tttutions and ideas rooted in liberalism. With increasing globalization (albeit in a still only partially global~zed world), he sees greater institutionalization as the world becomes more like a polity with governance esse~ttal {° :r~f e, ~na~ce, environment, security, and other matters of global import. Devising better, more effective g o a institutions

to serve the needs of humankind is an imperative.

From Power and Governance in a Partially Globalized World by Robert 0. Keohane. Copyright © 2002, Routledge. Reprinted by permission of Taylor & Francis Books UK.

Ro B ER T o. KE o HAN E / From Interdependence and Institutions 161

The ... conception ... of how the world works is both individualist and institutionalist, regarding institutions both as created by human action and as structuring that action.1 The principal motor of action in this view is self-interest, guided by rational- ity, which translates structural and institutional condi- tions into payoffs and probabilities, and therefore incentives. But my conceptions of self-interest and rationality are broad ones. Self-interest is not simply material; on the contrary, it encompasses one's in- terest in being thought well of, and in thinking well of oneself. One's self-interest is not divorced from one's principled ideas or identity but closely con- nected with them. Furthermore, not all action is necessarily self-interested: actions such as those of firemen rushing into the burning World Trade Center on September 11, 2001, reflect commitment and courage rather than interest.

The resulting conception of how the world works is complex, seeking to take into account subjectivity as well as objectivity, primal urges for power as well as institutional constraints, princi- pled beliefs and worldviews that cannot be vali- dated as well as rational calculation. It therefore lacks parsimony. The core of my contribution to this view of the world has been to explore how in- ternational institutions operate, in the context of interdependence. But my exploration of institu- tions and interdependence has taken place in the context of an awareness of how they are affected by other, broader factors. Hence, I do not assume that institutions and interdependence are the most important aspects of contemporary world politics, that they somehow contain the unique key to his- tory. Indeed, they only mal<e sense if they are fit into the larger puzzle ....

From Interdependence to Institutional Theory Over thirty years ago, astute observers of the world

.political economy began to comment on striking in- . creases in economic connections among societies · and the growing role of multinational corporations. · Meanwhile, the literature on the European Commu- :n.ity, pioneered by Ernst B. Haas, focused on how .~conomic interdependence affected arrangements for governance. Nye and I picked up on these themes, beginning with our edited special issue of liiternational Organization on transnational relations

( 1972 ), a term that we did not invent but that we did insert into the literature on world politics.

At that time the buzzword for these changes was "interdependence." In the 1970s, Nye and! built a theory elucidating the notion of"complex interde- pendence:' an ideal type for analyzing situations of multiple transnational issues and contacts in which force is not a useful instrument of policy. We defined interdependence itself more broadly, to encompass strategic issues involving force as well as economic ones. In our analysis, interdependence is frequently asymmetrical and highly political: indeed, asymme- tries in interdependence generate power resources for states, as well as for non-state actors. Power and Interdependence, published first in 1977, elaborated this theory and applied it to fifty years of history (1920-1970) in two issue-areas ( oceans and money) and two country relationships (US-Australia and US-Canada). There were a number of gaps in our analysis, some of which we acknowledged a decade later,2 but the analysis of the relationship between asymmetrical interdependence and power contin- ues to be useful. ...

Power and Interdependence contained an incipi- ent theory of institutions, in the form of what Nye and I called an international organization model of regime change (1977). But this theory was not well- developed. What preoccupied me for seven years after the publication of Power and Interdependence was the puzzle of why states establish international regimes- rule-oriented institutions that limit their Members' legal freedom of action. In After Hegemony: Coopera- tion and Discord in the World Political Economy (1984), I presented a theory of international institu- tions based on rationalist theory, in particular eco- nomic theories of the firm and of imperfect markets. I argued that institutions perform important tasks for states, enabling them to cooperate. In particular, insti- tutions reduce the costs of making, monitoring, and enforcing rules,.--transaction costs-provide informa- tion, and facilitate the making of credible commit- ments. In this theory, the principal guarantors of compliance with commitments are reciprocity (in- cluding both threats of retaliation and promises of re- ciprocal cooperation) and reputation ....

My formulation of institutional theory has of- ten been referred to as "liberal institutionalism" or "neo-liberal institutionalis111." These labels do not appeal to me, not just because they are awkward. My theory does have its roots in libetalism ... , but the

162 Ro B ER T o . KE o HAN E / From Interdependence and Institutions

connotations ofliberalism are multiple and mislead- ing. My theory has nothing to do with the view that commerce leads necessarily to peace; that-people are basically good; or that progress in human history is inevitable-all propositions sometimes associated with liberalism. Nor is it connected with the view that liberty should have priority over equality and social justice, much less with the "neoliberalism" of the past decade: the so-called "Washington Consen- sus" that dictated the dismantling of much govern- mental regulation of markets in developing countries. My liberalism is more pessimistic about human nature and more cautious about causal connections running from economics to politics than some ver- sions of classical liberalism; and I have never been a supporter of the "Washington Consensus" in its strong neo- liberal form. Since attaching a "liberal label" to my perspective generates such a need for explication, it seems better to leave it off entirely.

"Institutionalist" is descriptive of my work, since it emphasizes the significance of institutions and seeks to explain them. Using this term is not meant as a claim to intellectual hegemony. Indeed, there are many other institutionalist theories, often with quite different concepts, and implications, than my own. However, I regard my own formulation as having as good a claim to the adjective "institution- alist" as any of its competitors. When I refer below to "institutionalist theory:' I refer to my own version of institutionalism.

The theory in After Hegemony was rather styl- ized: as in Power and Interdependence, differences in domestic politics were deliberately overlooked for purposes of simplification. This is not to say that the importance of domestic politics was denied: quite the contrary. But the theory did not encompass do- mestic politics. Indeed, the theoretical gap created by the omission from the theory of domestic politics was sufficiently wide to drive many dissertations through it. Some of my former students have been leaders in this effort. They have analyzed the impact of domestic politics on world politics, in the context of a sophisticated understanding of interstate poli- tics and the roles played by international institutions and non-state actors.3

The fact that my former students have written over a dozen books linking domestic politics and in- ternational relations is not only gratifying to me personally; it illustrates a broader aspect of American graduate education that is often overlooked. The

resumes of scholars normally include only their own work. But the puzzles that they recognize but fail to address may be as important to their own students, and to their field as a whole, as their own contribu- tions. Paths that lead through open doors may beckon more strongly to aspiring scholars than imposing intellectual edifices, no matter how impressive. And the explorations of graduate students instruct their professors. Graduate education is a process of inter- change, not merely of transmission.

The theory developed in After Hegemony and closely related writings was strongly affected by my research on trade, monetary, and energy issues-all questions of material self-interest in which reciproc- ity played a substantial role. On the whole, the same framework fits environmental issues quite well. Perhaps this congruity should not be surprising, since similar questions arise of cross-border externalities and economic competition. On both sets of issues, monitoring of agreements is important and is carried out largely under the auspices of international insti- tutions, while enforcement takes place through state action, legitimated through such institutions.

Environmental issues do have a moral dimen- sion that is largely missing from the economic ques- tions emphasized in After Hegemony. Principled ideas, concerned with right and wrong, play a signif- icant role in mobilizing publics on issues such as ozone depletion, pollution of the oceans, and global warming. Such principled ideas play an even more prominent role on questions of human rights. And causal ideas, specifying connections between cause and effect, are important in policy debates in both issue-areas, as well as in other arenas of world politics.

Intrigued by the role of ideas, and their connec- tions to rationalistic frameworks of analysis, Judith Goldstein and I began to explore the role of ideas on policy in the early 1990s. The role of ideas, of course, has been a long-standing theme in the work of a number of distinguished students of international relations, including my own mentor, Stanley Hoff· mann, Hedley Bull, and Martin Wight. Goldstei11 and I, however, were particularly interested in rec- onciling theories of rational choice, with which we were sympathetic, with our view that ideas are sig0 nificant in world politics. We distinguished among three types of beliefs: worldviews, principled beliefs, and causal beliefs. Worldviews are illustrated by re: ligion, principled beliefs by doctrines of humail rights, and causal beliefs by Keynesian or monetarist

ROBERTO KEOHANE/ F · rom Interdependence and Institutions 163

theories ~f macroeconomics. All three types of belief affect policy, but they do so differently.

Goldstein and I went on to suggest that ideas exert effects along three causal pathways· ( 1)

by the reciprocity-based logic of institutionalist theory: states do not retaliate for human rights vio- lations by others by abridging human rights.them- selves. On other issues, such as the use of weapons of 1'.1ass destruction, principled · ideas and organiza- t10nal cultures seem to have played an important a role in accounting for behavior. "Constructivist" writing on world politics has emphasized, as did work drawing on psychology earlier, the importance of subjectivity: the beliefs by which our images of the _world are constructed ·in shaping world politics. MaJor work on the role of ideas has also been done by such scholars as Goldstein; Martha Finnemore, Margaret Keck, Friedrich Kratochwil, Henry R. Nau, my former student Daniel Philpott, Thomas Risse, John Gerard Ruggie, and Kathryn Sikkink.

" d " ( ) . as r~a maps,_ . 2. as focal points where there is no

umque eqmhbnum, and (3) as embedded el t f . . . emen s o mst1tut1ons. Our essay is not reprinted h b h

b . . ere ot

ecause 1t 1s well-known and easi"ly 'bl d . access1 e, an because It forms an integral part of an edited 1

h' h · vo ume to w IC It served as an introduction But th. k . . . my m - mg smce t~e ~arly 1 ~90s has been deeply affected by my appreciation, heightened by work on this proj- ect, of the role of ideas in world politics. As noted below, my recent work on international law seek t explore how t?e ideas incorporated in legal thin~n; affect persuasion and pr~ctice in world politics.

As these remarks imply, I disagree with th frequent_ly-heard critic~sm that the role of ideas i: neces_sanly de-emphasized by a view of the world that is ~~s~d on_ an individualist ontology and a neo-pos1~1v1st epistemology. It is individuals who have beliefs, although of course these beliefs are formed through social processes and a d , re perpetu- ate. thr?ug~ societies that outlive individuals. As social scientists, we can investigate the . f th b ·. impact o

ese _ehefs through theoretical and empirical work explonng how variations in ideas-between indivi/

, ~als a~d between groups-help to account for varia- tions I~ behavior. Of course we have to be alert to the

:· ·operat1?n of social norms and practices, and shared } m~m?r~es-s_o we should not adopt an unsocialized, i:.,. at~m1st1c not~on of human beings. Man, as Aristotle J\'pomted out, is a_ so:i~l animal. But in my view we kshoul~ focus on md1v1duals as the principal unit of J!'~nalys~s, as long as we keep in mind their interactions r,1P. s~c1ety,. and the historical and cultural contexts ~;!Withm which they live. This means that the anal st ~ ~oes b~ck and forth between individual and soc/ty feg~r~m~ ~oth serious_ly, but always seeking to ex: llam md1v1dual b,ehav10r, and aggregate it upward ;:t;a~her than to theorize about society without consid: rmg :vhether the resulting propositions are consis- J11.t with ~atterns of individual behavior. In this way we-can give th . . ' ; ' . our eones micro-foundations and av01d the· 'fi · ·i,, . . re1 cat10n of abstract concepts or the

Institutional and Realist Theory

It should be clear from this discussion that I do not claim that institutional theory is a comprehensive theory of world politics. I still believe it to be supec rior to a crude realism that fails to incorporate international institutions as important entities. But as Peter Katzenstein, Stephan Krasner and I have argued, a stylized competition between realism and institutionalism is not particularly. conducive to ~ew insights, now, in our field. Sophisticated ver- s10ns of realism-both of the classical and struc- tural varieties-share a great deal with my version ?f institutionalism, epistemologically and ontolog- 1cally. They are all concerned with issues of power, including state power. Indeed, it is one of the silliest criticisms of my own work that it ignores power, as the titles of my major works from the 1970s and 1980s make clear.4 Realism and institutionalism, in my formulation, hre actor-oriented, individualist theories whose practitioners follow neo-positivist standards of evidence. They are by no means in- commensurate paradigms; rather they are labels for loosely grouped interpretations that differ along a variety of dimensions. These dimensions include the intensity of competition in world politics, the role of rules and norms, the nature of information available to actors, and the linkages and separations between issue-areas.

,c·;os1tmg of a ~ollective consciousness for which there ~.~,ms to be little scientific evidence. ,1,,P.·The most important work on the role of ideas 1i:orl~ ~olitics has bee~ done not by me but others. .:' politics of human nghts are not well-explained

Realism is a useful "first cut" at understanding world politics, but its vision of the field is too lim- ited to make it a good comprehensive doctrine. Too much is left out: not only institutions, but also

164 R o s E RT o . K E o H A N E / From Interdependence and Institutions

transnational relations, domestic politics and the role of ideas. Realism is long on structure, short on process.

Due to its limitations, realism is a poor candi- date to correct the flaws in much institutionalist work that have been noted above: failure to theorize domestic politics, and an under-emphasis on the role of ideas. Realists cannot correct these flaws because it shares them, even in a more pronounced way. Waltz's Theory of International Politics (1979) abstracts away from domestic politics, just as my own book of the mid-1980s, After Hegemony(1984) does. This is not to say that either Professor Waltz or I were unaware of its importance: Waltz, for instance, wrote a whole book on the subject before developing his system-oriented theory (Waltz 1967). But it is difficult to construct a theory that simultaneously takes into account relations between states and relations within them, and that remains parsimonious. 5

Classical realism-as in the hands of Carr and Morgenthau-has discussed the role of ideas, but more recent structural realism, as notably developed by Waltz and Robert Gilpin, has omitted it. The lack of extensive and sophisticated understanding of the role of ideas in world politics-which would have to include Nazism, communism and fundamentalism as well as human rights thinking and environmental awareness-hampers us particularly now in the wake of the .September 11, 2001 attacks on the United States. These attacks illustrate the role of religion-overlooked by both of these secular approaches-in world politics. What Nye labeled "soft power" in the 1990s is not a monopoly of secu- lar society, much less of the United States ....

The implication of these remarks is that two major trends in the study of world politics during the 1990s need to be continued and extended: the analy- sis of how domestic and world politics interact, and the investigation of the role of ideas in world politics. The brand of liberalism represented by the work of Andrew Moravcsik and Anne- Marie Slaughter is a valuable way to analyze the former; constructivist theory offers promise in understanding how ideas matter.

In breaking into the theoretically complacent world of realist thinking, it was expedient to empha- size the distinctive value of institutionalist theory, even while recognizing the contributions of realism.

And in the heat of subsequent controversy, it has been all too easy to overstate differences between institutional and realist theory, and perhaps to over-emphasize the superiority of the former. No perspective has a monopoly on wisdom: realism, theories focusing on domestic politics, and theories emphasizing subjective beliefs all have a role to play. Contestation between different approaches can play a positive role in social science scholarship, pushing advocates to sharpen their theories and to test them in more convincing ways. But if the con- tending approaches become conflicting schools of warring scholars, with graduate students signed up as in one camp or another, they become what Albert Hirschman once called "paradigms as hindrances to understanding:' 6

Institutionalism and the Puzzle of Compliance The institutionalist theory that I developed in After Hegemony created only a promissory note on a major issue: that of compliance. In a world without centralized government, why should states comply with obligations that had become inconvenient? One set of problems might arise from deliberate deception, although prudence on the part of others could limit those dangers. A more pervasive set of problems could arise as a result of time: events may adversely change the cost-benefit calculus of state compliance. Why, one asks, should states guided by rational self-interest comply with obligations that have become inconvenient?

I sought in the late 1980s and 1990s to explore these questions in an historically oriented inquiry focused on United States foreign policy. I learned a great deal in the process, but failed to come up with either a comprehensive theory or satisfactory sys- tematic evidence. On the theoretical side, my initial hunch was that concerns about reputation would ensure fairly regular compliance. In the record of . United States foreign policy I did indeed find much concern with reputation, but I also found a consis- tent pattern, when commitments were inconven- ient, of ingenious attempts to design policies to avoid reputational constraints ....

Although I am naturally somewhat chagrined by my own failure to solve the puzzle of compliance with commitments, I gain considerable satisfaction

R o B E RT O . K E o H A N E / From Interdependence and Institutions 165

from the fact that at least for some issues it is being analyzed successfully within the framework of a rational-institutionalist theory. What matters for the fruitfulness of a theory is not the work of an in- dividual, but the effort of a research community that is sufficiently intrigued or inspired by the theory to develop it creatively and test its implications system- atically. There emerges a division of labor within this community among those who create the origi- nal theoretical intuitions, who specify the theory, who test it systematically, and who explore the wider implications of the findings that emerge. Since these capabilities are rarely all found in a single person, it is shortsighted to make any one of them the litmus test for productive scholarship. It is clear from my career that I am better at proposing new explana- tions, beginning to specify them as a theory, and exploring their wider implications, than at formaliz- ing or testing hypotheses systematically. In a sense, then, my contributions can only be validated by oth- ers, which makes me very grateful to them for their ecreativity, intelligence, and effort. The fact that many of the major contributors to the institutionalist research program are former students of mine, natu- rally imbues this gratitude with feelings of pride.

If pride in one's own accomplishments and those of one's colleagues increases over time, even more does humility. Humility is probably not a pos- itive attribute for a young scholar: one has to believe that one's own ideas are superior to conventional wisdom in certain areas, which requires, for an untested scholar, a certain arrogance. Certainly few colleagues who encountered me during my 30s would have listed humility as one of my virtues.

.· Over time, however, one's personal failure to solve ,. i;ertain problems or keep up with certain technical .• advances does induce humility. So does the broader .·. recognition that one's own theory-in my case, in- ' ~titutional theory-is only a partial approach to ; world politics, which needs to be combined with ••. other perspectives. • ,.,. i

\pberalism, Sovereignty and Security ,.·,.-

>'J)newayof thinking about institutions and interde- pendence is to view interdependence as the context Within which international institutions operate. ]nstitutions are, in this view, a response to interde- P:endehce. The tradition of modern thought that is )?

most conducive to this framing of the issue is that of liberalism .... Liberalism as an approach to interna- tional relations emphasizes individuals, seeks to understand collective decisions, and, in an ethical sense, promotes human rights and validates attempts to ameliorate the human condition. Sophisticated liberalism combines strands of commercialism, re- publicanism and regulatory politics. Attempts to reg- ulate transnational activity occur as a response to economic interdependence, in the context of plural- istic democracy. Liberalism reaffirms the attempt of institutionalists to seek to understand politics for the sake of designing institutions that will promote co- operation, welfare, and human rights.

As I indicated above, liberalism has many variants, not all of which are consistent with one another. Hence as a general perspective, it does not offer specific normative guidance. My own form of liberalism ... emphasizes that interdependence among human beings produces discord, which gen - erates a need for institutions. But it also stresses that institutions can be oppressive. My brand of liberal- ism is therefore hardly the naively overoptimistic doctrine caricatured by Voltaire in Candide, whose hero goes from disaster to disaster proclaiming that he is in "the best of all possible worlds:' My liberal- ism recognizes the arguments of Judith Shklar's "liberalism of fear," while still holding out hope for progress. My intellectual heroes include James Madison, for his recognition that institutions must be designed to check one another, and John Rawls, for his construction of a moral theory based on adopting a standpoint of impartiality. I believe that institutions, including. international institutions, should be accountable to those they govern. It is also desirable that they rest insofar. as possible on honest persuasior1 rather than on coercion or bar- gaining based on asymmetrical resources; and that they encourage public participation. My own liber- alism, while resolutely anti-utopian, nevertheless offers normative as well as positive guidance for public policy.

Sovereignty is important from this perspective because it illuminates a central tension in contempo- rary liberalism. Commercial liberalism emphasizes the benefits of the division of labor, hence favors greater openness and the institutions needed to assure openness. Republica:Q. liberalism, on the con- trary, stresses the importance of self-determination

1 i

166 Ro B ER T o. KE o HAN E / From lnterdepentj,ence and Institutions

and democracy wi~in well defined boundaries, so that the public can exercise effective control over self- seeking private actors. From the standpoint of com- mercial liberalism, sovereignty is a problem; from the standpoint of republican liberalism, it is an essential guarantee. It is therefore not surprising that contem- porary debates about openness often pit proponents of sovereignty against opponents of it, and divide the traditional right as well as the traditional left.

During the 1980s, theories of world politics were rather sharply subdivided into those dealing with security and those concerned with issues· of political economy. In fact, the field virtually bifur- cated into two specialties, which were often seen as having little relationship to one another. In After Hegemony I even defended "abstracting from mili- tary issues" as a way of focusing more clearly on "the economic origins of change:'

Even during the Cold War, this view was quite problematic, as the impact of Ronald Reagan's military buildup on Soviet power, and indirectly on the world economy, was soon to demonstrate. The end of the Cold War made this separation between political-military issues and political-economic ones even more untenable. In Bound to Lead, Nye devel- oped a persuasive argument about the centrality of American power, which linked security tightly to po- litical economy. Some work I did with colleagues at Harvard on international institutions after the Cold

1 War reinforced my interest in explaining how institu- tional theory could illuminate security issues ....

The transaction costs-informational theories of international institutions developed in After Hege- mony also pertain to security issues in which the par- ticipants have common or complementary interests. States that seek to cooperate on security issues also need to devise institutions that facilitate cooperation by making promises credible, providing informa- tion, and reducing other :costs of agreement. Once successful institutions have been developed, it is eas- ier to adapt them to respond to change than to create entirely new ones, particularly if the institutions have a "hybrid" quality, with practices that can be trans- ferred at relatively low cost to new situations ....

From Institutions to Law

institutionalist theory in a major law review article. Anne-Marie Slaughter, writing under her former name of Burley, e.ssentially argued that political sci- entists were speaking legal prose without recogniz- ing it: that we were theorizing about institutions that generations of legal scholars had described, though not explained. Both in the world of ideas and in the real world of international institutions, the separation between institutions and law seemed more and more tenuous.

My own aversion to international law had been forged in graduate school, when the "world peace through world law" work of Louis Sohn and Grenville Clark had seemed utterly divorced from Cold War re- ality. More influential in my own training were the critiques of legalism by the realists E.H. Carr and George F. Kennan. Perhaps as a reaction to my own tendency toward personal moralism, I have always been allergic to preaching as a substitute for analysis. But by the early 1990s I had recognized that interna- \ tional law did not have to be textual, formalistic and separated from real political problems and ethnical

dilemmas .... I think that the analysis of legalization under-

taken by my colleagues and myself is consistent with my overall framework for the analysis of world politics. I begin with actors-individuals and organizations-pursuing their interests as they see them, and guided by the values they internalize. These actors use resources at their disposal, includ- ing force, material capabilities, and persuasive .' ideas, to seek to achieve their objectives. The actors · · are located in structures of power that provide incentives for action, by affecting the payoffs of various strategies; they are also located withiri organizations, which delegate authority to various . agents. Individuals respond to incentives in a c broadly rational way; organizations may do so also; depending on how they are structured. Rationality does not mean full information, or the ability to calculate perfectly; instead, it is the "bounded ; rationality" of Herbert Simon. In contemporary , world politics, states are usually the most imporf i' tant actors, although they are by no means alone. ·. They have to contend with transnational actors\ and with structures of transnational as well as inter'[ state relationships. Both sets of actors, state and nori~

In the later i 980s and early 1990s a few innovative legal scholars began to use institutionalist theory. Kenneth Abbott systematically reviewed and commented on

state,. also deal with institutions in two important; senses: as inherited patterns of rules and rehi:) tionships that can affect beliefs and expectation~;,.

ROBERTO KEOHANE/ F . rom Interdependence and Institutions 167

an? as_ potential tools for the pursuit of their own obJectlves.

To understand politics within this framework one first lo_oks for the key bargains that create policie~ and establish coalitions. One can think of th b . ese ar- gams a~. r~flec_ting the equilibria of games, which create_ I?stituti?~s,_ which then, in turn, establish or s~lid1fy equ_il~bna so that these institutions, and particular policies, persist. The viability of th . . .

1 . ese

mstitutlona iz~d agreements, however, depends not mer~ly on the mterests, capacities, and beliefs of the pa~tic1pants, and on the nominal rules of the insti- tut10ns, b~t also on their consistency with broader sets of beliefs and expectations held by oth t

I . . er ac ors

or coa itlons that control political resources . Legalized institutions, with precise obligations interpreted by thir1 parties, often impose particu- larly ~t~ong constramts on political actors, as well as prov~dmg opportunities for innovative strategies t~at i_nvolve legal action. The success of these strate- gies. I~ frequently dependent on whether implicit coalitions can be formed and barga1'ns mad . ' e,among actors playmg well-defined legal roles . 1 d' · d . . . , mcu mg J~ ges. Strategic mt~ract10n is central both to poli- tics a~d to la~. -~eliefs and institutions, as well as ~atenal capabilities, are crucial to strategic interac- tion. Indeed, the outcomes of strategic interactions may depend as much on how rules are interpreted- a key foc~s of international legal scholarship-as on

. .. the wordmg of the ru_les themselves. World politics F and the processes of mternational law can only be :;'..' un1erstood, theref?re, from multiple perspectives, ,:· wh~ch encomp~ss issues of state power, non-state 1\ ~ction, do~estic p~l~tics, institutions, processes of :ymterpr~tation, coal1t1ons and bargaining, and the :' persuasiveness of competing sets of ideas U d • t d' h . · n er- ,;/an mg ov: mternational legal scholars work r~elps one see issues of interpretation and persuasion f:lll a more subtle way. ~;~·, :[-.

tr,om Interdependence to Globalism i'J:' r:· . ~~n a new buzzword comes to our faddish ,&eld,_ it is more effective to redefine and reinter- f{et it than to ignore it. Interdependence was the fzzword of the 1970s, but it had been used in }PPPY ways that limited thought. In Power and :lerdepen~ence, Nye and I sought to redefine and :· nterpret it as an analytically useful concept. We :~~paraged "rhetorical" uses of the phrase and

I?

defined i~terdependence as referring to situations charactenzed ~Y. reciprocal costly effects amon actors. We explicitly rejected the view that interde! pendence. v:as necessarily benign and declared ?ur skeptmsm about the nai:ve view that "rising mterdep~ndence is creating a brave new world of cooperat10n to replace the bad old world of inte - ?at10nal conflict." We therefore sought to maie 1~terdepen1ence into a useful analytical tool that did not prejudge conclusions.

When globalization became the buzzword of the_ 1~90s, my ?rst reaction was to regard it as jour- nalisti~ hype: mterdependence in flashier but less revealing garb. Indeed, Helen Milner and I entitled a book that we edited in 1996, "internationalization and domestic politics;' rather than "globalization an1 domestic politics;' since "globalization" seemed to imply an answer to the question we were asking a?out co_nvergence or divergence· of national poli- c!es. But it is_fr~strating to try to row against a strong tide, or to sail directly into the wind. To be heard, the scholar has to ~peak to the concerns of his era in the language of his era. Doing so gets people hooked· then one ~an proceed to the analysis that may in~ c:ease their un_derstanding, or at least raise ques- tions about their preconceptions.

At one level, then, "interdependence" was sim- ply overtaken by "globalization" as the fashionable language_ to des~ribe increases in economic open- ness ~nd mtegrat10n. But at a deeper level, changes in terminology_ reflect changes in reality. The most comprehensive work on globalization of which I am aware defin~s it ~s a set of processes that embody "a tran~format1on m the spatial organization of social relat10ns and transactions" generating transconti- n~nta_l flows ~nd networks, ... four aspects of glob- ~lizati?n [hem~] eit.tensity (the stretching of space), mtens1ty,_veloc1ty, and impact. Globalization moves beyond _ lm~ages between separate societies to the reorgamzat10n of social life on a transnational basis ".'s J o~n Ruggie [once] commented ... : globalizatio~ is to mterdependence as Federal Express is to the exchange of letters between separate national post offices.

We should notice, however, the semantic differ- ences between these two terms. Interdependence refers_ to a state of the world, whereas globalization desc~1bes a. trend of increasing transnational flows and mcreasmgly thick networks of interdependence .. For the terms to be comparable, we need to use a

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168 R o B E RT o . K E o H A N E / From Interdependence and Institutions

different term: "globalism;' which describes a state of the world. Both interdependence and globalism can be viewed as matters of degree; both can in- crease or decline over time. Globalization, by con- trast, implies increases in globalism. It makes more sense to speak of a "decline in globalism" (as, for in- stance, with economic globalism between 1914 and 1945) than a "decline in globalization."

Despite the differences, the complexities of in- terdependence, as Nye and I and others had worked them out in the 1970s, are crucial to a coherent and realistic understanding of globalism'and globaliza- tion. In particular, interdependence was not just economic, but also strategic, environmental, and ideational. Globalism, ... is also multidimensional. We differentiate economic, social, environmental and military globalization, each of which has politi- cal dimensions. Globalism involves thick networks of interdependence, organized on a transnational basis. Each strand of interdependence involves spe- cific actors, whereas globalism refers to the aggre- gate pattern produced by all of these strands, and by their organization on a global scale.

From Institutions to Governance

Finally, how does "governance" enter this picture? ... What explains the apparent shift in my empha- sis from institutions to governance? The answer to this question parallels my answer to the last one. As networks of interdependence intensify, they be- come more important to domestic publics. And as they thicken into globalism, the connections be- tween them also become more intense. It is less and less feasible to regard issues of trade, finance, environment, and security as separable, each with its own institution devoted to it. The world system looks more and more like a polity. Successful poli- ties have governance structures in which the insti- tutions are well-articulated with one another; but the world polity, if one can call it that, has disartic- ulated and fragmented institutions. Hence the problem arises of governance, which is defined ... as "the processes and institutions, both formal and informal, that guide and restrain the, collective ac- tivities of a group." Globally, the question of gov- ernance is one of how the various institutions and processes of global society could be meshed more effectively, in a way that would be regarded

as legitimate by attentive publics controlling access to key resources.

In this context, what Nye and I ... call the "club model" of international organizations becomes less and less tenable. In the half-century after World War II, a practice developed by which a limited set of elites from different countries came together within the confines of an international organiza- tion to bargain over a limited set of issues. These clubs were not very transparent and they kept out- siders at arms' length, but they often succeeded, as in trade or in the European Union, in negotiating important agreements that promoted openness. Yet with the growth in sophistication and activism of both developing countries and non-governmental actors, and in the context of a democratic political culture in their leading members, the club model has lost legitimacy. In particular, demands have been raised for accountability within the organizations- demands that are inconsistent with club practices, as well as with the interests of the developing countries as they perceive them. Legitimacy in terms of outputs-liberalized trade, widely beneficial to all, including the poor-may be inconsistent with legit- imacy in terms of inputs, involving transparency and accountability. It is still unclear what form of governance on issues related to trade could be devel- oped that would be sufficiently transparent and par- ticipatory to be legitimate, yet effective enough to solve pressing problems of inefficiency and the poverty that is accentuated by ineffi.ciency.

The key issues, in my view, involve governance in a partially globalized world .... A partially globalized world is a world of thick networks of interdepen- dence, in which boundaries, and states, nevertheless matter a great deal .. Even the quite open US-Canadian border has a strong impact on economic activity. And as much work has demonstrated, globalization has not produced convergence of national welfare- state policies.

To understand governance in such a world, we have to understand institutions, which arise in the first instance from demands by political actors and from bargaining. To an extent they are the product of rational egoism; but simple functional theories that derive outcomes from need or purpose over-look both a variety of perverse incentives that often stand in the way, and the potential for public-spirited action. Institutions have paradoxical effects: they are

R O B E RT O . K E O H A N E / From Interdependence and Institutions 169

essential for the good life, but they may also institu- tionalize bias in ways that make the good life impos- sible to attain for many people.

One response is to recognize that even if most people behave in self-interested ways most of the time, self-interest can be defined in more or less enlightened ways, and many people are not purely egotistical. Another response is to stress the role of prevailing expectations and beliefs in structuring even self-interested behavior. If just principles are generally accepted in a society, even self-interested people may have more incentives to act justly. Normatively, thinking about institutionalized gov- ernance raises issues of institutional design: in particular, fostering accountability, participation and persuasion by providing incentives for those practices to flourish. In the face·of globalization, the essay concludes, our challenge is similar to that of the founders of the United States: "to design work- ing institutions for a polity of unprecedented size and diversity."

Such institutions can only operate smoothly in a world free from threats of terror, just as threats of terror are only likely to be minimized in a world of well-functioning global institutions. What Nye

. and I referred to as "complex interdependence" in 1977-a world of multiple interactions i'n which re- course to force is excluded-is a condition for deep cooperation, which creates potential vulnerabilities as societies become intertwined. Relationships in which terror is employed involve interdependence, but are obviously not relationships of"complex in- terdependence." Hence, the attacks on the United States of September 11, 2001, reinforce the caution that Nye and I have consistently expressed about the

-; .·, spread of complex interdependence. As Nye likes to } · say, "security is like oxygen:' You are only aware of it \: when it is absent. Global governance during the next !(; 'decades will have to deal with threats of force as well 1f, as with economic interdependence ....

The attacks on the United States of September 11 [2001] did not focus on the world political econ- omy, nor were international institutions directly in-

,; volved. Perspectives from realism and political ;i philosophy shed light on these events, but so do j. approaches with their origins in the study of inter- ·;. dependence and institutions. I do not claim that my f Perspective~ on these issues are more important if than other perspectives, but I do believe that

theories linking asymmetrical interdependence to power, and institutional analysis, both contribute productively to the analysis of the globalization of informal violence.

We students of world politics did not choose our subject because it is aesthetically pleasing, nor because clear propositions about it can be developed and tested easily, using scientific methods. We should aspire to be scientific in the best sense; but neither the experimental nor statistical methods are easy to apply to a world of strategic interactions, by a limited number of players, that are not subject to our control. We choose our subject because it is vi- tally important: a matter of life and death, wealth and poverty. Surely the events of September 11 indi- cate anew its crucial significance. We· face a moral imperative to understand world politics better. Bet- ter understanding should enable people to design better policies and institutions, although it is no guarantee of such improvements. Better institutions would enable ordinary human beings to live lives of their own choosing, free from fear. Under such con- ditions, people could devise their own ways to love and respect other people and to value the natural world on which we all depend.

Notes

1. I am indebted to Nannerl 0. Keohane, Joseph S. Nye, and John Gerard Ruggie for comments on an ear- lier version of this introduction, and to my editor, Craig Fowlie, both for encouraging me to write this introduc- tion and for comments on an earlier draft.

2, See Keohane and Nye (1,987), reprinted in the sec- ond and third editions of Power and Interdependence, 1989 and 2001.

3. I have had so many able students'that I would hes- itate to create an e~austive list, for fear of omitting some important work by people I respect very much.

4, Power and Interdependence (1977), After Hegemony (1984), International Institutions and State Power (1989).

5. See Kenneth N. Waltz, Foreign Policy and Democra- tic Politics (Boston: Little Brown, 1967).

6. The volume that I edited in 1986a, Neorealism and Its Critics, has been widely used and is still in print, but I have mixed feelings about it. It helpfully brought to- gether Kenneth Waltz's seminal statements of neo-realist thinking, together with some of the major early critiques of his work But it probably contributed to the "us versus them" tone of the discussion•for much of the following decade.

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