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Liberal Theories of International Relations

Summary: What is Theory?

Theory is necessary for explaining, and creating intellectual order out of, the complex world

Theories make sense of the world by finding causal relationships

This is done through the ‘abstraction’ of concepts and propositions (hypotheses)

If empirical reality consistently proves the propositions, then the latter can be said to be ‘laws’ of social, economic or political development

Summary: Neo-Realism

States are the key actors of global politics

Anarchy defines the structure of the state system – and institutions do not supplant the structure of anarchy

States must rely upon themselves – self-help!

Cooperation is limited, and competition reigns – zero sum gainst!

World politics and history, including hegemonic wars, are the outcome of the balance of power and security dilemma

Offensive realism: States seek hegemony

Defensive realism: States seek security

Summary: Neo-Realism

Final take away points:

The conditions of war and peace in the world are determined by the logic of anarchy and the shifting balance of power in the state system

States respond to objective laws of world politics and pursue national interests, understood in terms of power (military, economic, political)

For realists, the term security refers to the security of the state understood as a territorial unit in which military power is monopolized by the sovereign polity

Today’s Objectives

Review the origins and key ideas of liberal theory

Learn the key concepts and propositions:

individualism, markets, equal exchange, supply and demand, equilibrium, and comparative advantage, and notions of multilateralism, collective security, institutionalism, democratic peace theory, and the responsibility to protect

Now:

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*****Notes for Live Lecture*****

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*****Preparation Notes*****

Liberalism: Markets, Democracy and Peace

Liberalism is the dominant theory of international political economy

It offers a systemic set of concepts and propositions, and makes political prescriptions for government policy makers

It revolves around an economic and political understanding of capitalist markets and democratic procedures, and their connection to peace and conflict and thus to human welfare in global political economy

Liberalism centers around the actions of individuals – individuals are the key agents – an individualist methodology

Liberalism

Emerges as a theory in the 1700s and 1800s as feudalism gives way to capitalism in England and Western Europe

Feudalism was based on the Lord-Serf relationship and the direct transfer of peasant labor and products to landlords.

The transition to capitalism involved…

Privatization of peasant land by landlords; the enclosure of common lands; dispossession of the peasants and their loss of self-subsistence; market dependence and wage labor; urbanization; monetization; state formation; and so on.

Feudalism: the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, while the peasants or serfs were obliged to live on their lord's land and give him labor or a share of the produce, notionally in exchange for military protection

Liberalism

Political Economy emerges as the study of the emerging capitalist economy and society

It is the study of the rules, laws or logic of capitalism

The first wave of political economy is called the classical school, which included Adam Smith and David Ricardo

The classical school lays the foundation for all liberal thought

There is no straight line between the classical school and modern liberal economics, but the former is foundational to the latter

Liberalism: Adam Smith

The Wealth of Nations, 1776, is concerned with uncovering the logic of market society – the ‘invisible hand’ of capitalism

Starts with human nature, the selfish, trading instinct

“propensity in human nature…to truck, barter and exchange one thing for another”

Individual pursuit of self-interest has social benefits and productive outcomes:

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner but from their regard to their self-interest.”

Liberalism: Adam Smith

Economic Growth – the wealth of nations – is a function of the division of labor and specialization, which are defining features of capitalism

The ‘invisible hand’ of competition impels firms to increase efficiency through internal divisions of labor based on specialization.

Divisions of labor based on specialization, both within and between firms, increase output in more efficient ways, and expand the scope of the market and the wealth of society

Real wealth, then, is not just an augmentation of gold or currency, but is based on expanding productive assets and capacity through specialization and the division of labor

Liberalism: Adam Smith

Smith developed different theories of value (price):

labor theory

“Labor was the first price, the original purchase money that was paid for all things. It was not by gold or by silver but by labor, that all the wealth of the world was originally purchased.”

additive theory (wages, profits, rent)

supply and demand determine market prices

Liberalism: Adam Smith

Supports Free Trade between nations

critique of state-managed trade and the role of state-monopoly corporations in world trade

These limit and supplant the market and create distorting political interferences

Favored free trade in cases of complimentary interests

Against ‘protectionism’ or limits on imports, like the British Corn Laws, which blocked grain imports from abroad – this supported landlords, not industrial capitalists, who needed cheap imported food for the working class if wages were to be kept low and profits kept high

Liberalism: Adam Smith

Optimistic about market expansion and development

However, Smith is not a one-sided ideologue of capitalism

Concerned with issues of poverty and inequality too:

“No society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable.”

Also concerned with collusion and price fixing by monopolistic corporations:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Liberalism: Adam Smith

Smith is critical of the division of labor’s affect on workers’ intelligence:

“In the progress of the division of labor, the employment of the far greater part of those who live by labor, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life.”

Adam Smith Summary

Initiates political economy with The Wealth of Nations (1776), seeks to uncover the invisible hand of capitalism

Starts with the selfish, commodity-exchanging individual as the foundation of liberty and freedom – “natural liberty”

Growth = function of division of labor, specialization

Develops various theories of value (price), but settles on Supply & Demand

Supports free trade, against protectionism

Concerned with inequality, education, and monopolistic corporate power but optimistic about the market

Adam Smith Summary

THUS: Specialization, division of labor, competitive markets, and trade, supported by rational individual acquisitiveness, are the bases of modern economic growth

David Ricardo

British MP and banker

Principles of Political Economy, 1817

Accepts Smith’s theory of labor value

Adds concern with how wealth is distributed and how economic crises occur

Liberalism: David Ricardo

Capitalism is inherently expansionary, and growth oriented, and this leads to a rising population

But: with expanding population and increase demand for food, the margins of agricultural production expand, bringing into cultivation land of lesser fertility, requiring more labor and thus increasing the cost of grain, yet increasing returns to landlords who own more fertile lands and employing less labor, earning them extra profits

Liberalism: David Ricardo

Landlords thus gain riches even though they don’t contribute to any wealth-creating process in urban industry

As a result, industrial capitalists have to increase workers’ wages for buying more expensive food – and this limits industrial production and markets, division of labor and specialization

As workers’ wages increase, capitalists’ profits and investment decrease, causing capitalists to lay off workers (unemployment) and potential economic and political crises

Liberalism: David Ricardo

With this in mind, he opposed the Corn Laws, which limited food imports and protected artificially-high landlord incomes

Argued that free trade would lower food costs and that that would benefit industrial capitalists who could pay lower wages to workers, and thus save their profits for productive investments in new plant and machinery

Spells out mathematical defense of free trade – called the comparative advantage model

Turn to the exercise

Liberalism: Comparative Advantage Exercise

This is a two country (England, Portugal), two sector (cloth, wine) model

The first table shows how many hours of labor it takes each country to produce both commodities (wine, cloth)

The second box shows the labor productivity (output per labor hour) of both countries for both commodities. So, for example, in one hour of cloth production, England produces 1 yard of cloth

The third table looks at total output in both sectors in both countries, for the given amount of labor time in both countries

Liberalism: Comparative Advantage Exercise

The fourth table is the key test of comparative advantage theory based on specialization.

To fill out this table, let each country focus all of its labor hours on the good in which it is most efficient (i.e. has a higher labor productivity). So, England should focus all of its labor hours on cloth; Portugal on wine. They both should dedicate 0 labor hours to the commodity they are less efficient at producing.

Fill out the boxes of the fourth table. What are the results in terms of total output?

Liberalism: Comparative Advantage Exercise

What is England’s opportunity cost (what does it give up) to produce one yard of cloth?

What is Portugal’s opportunity cost (what does it give up) to produce 1.25 barrels of wine?

Which country has absolute advantage in both products?

In what should England specialize? Why?

In what should Portugal specialize? Why?

Calculate the total output with trade?

What are the gains from trade?

Liberalism: Comparative Advantage Exercise

In sum, specialization in each country based on comparative advantage leads to higher total output, i.e. a greater wealth of nations

Specifically, if both countries put all their labor hours into producing the commodity in which they have a higher productivity (i.e. specialization based on comparative advantage), more output is produced and the wealth of nations increases

In particular, there will be more output for the same amount of total labor

This is the basis of all liberal arguments for free trade between nations based on specialization

Liberalism: Neoclassical Economics

Historical Context

Before World War 1, the world economy had been liberalized in many important ways – transportation, trade, foreign portfolio investment, and migration, in addition to activities of the European colonial empires

World War 1 destroys the liberal world economy, and after the war the capitalist world-system is rocked by workers’ revolutions, growing calls for colonial independence, the Great Depression, and the rise of fascism

World War II caps off the Thirty Years Crisis

The liberal defense of capitalism thus needed refurbishing!

Liberalism: Neoclassical Economics

Synthesized by Cambridge Professor Alfred Marshall before WW2, and by MIT Professor Paul Samuelson after WW2, entailing:

The bedrock assumption of rational, utility-seeking individuals

A subjective theory of value replaces the objective, labor theory of value

Value is determined by Supply and Demand, with demand determined by consumer preferences

Liberalism: Neoclassical Economics

Capitalism is theorized as exchange relations between individual buyers and sellers of commodities in the market, depicted by the formulas: C-C and C-M-C.

Market exchanges are equal

Commodities exchange as equal equivalents

Thus the market is fair and transparent

Wages are also equal to the value of labor exerted, and thus are fair and just

Inequality is the product of different individual efforts

J.B. Clarke’s theory of the marginal productivity of labor

Liberalism: Neoclassical Economics

The market tends towards equilibrium if state interference is absent and supply and demand operate

Limited State

“the scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets.” Milton Friedman, Capitalism and Freedom

Liberalism: Neoclassical Economics

Free Trade or Comparative Cost Theory

Any deficit in a nation’s trade provokes a fall in its export prices relative to its import prices (‘terms of trade’ decline)

The supply of that nation’s commodities are too high, external demand is too low, and prices drop

Such a fall in prices increases foreign demand, stimulates exports, and thus improves the trade balance

Free trade thus tends towards Equilibrium, a balance of supply and demand for exports

Hence, no nation suffers overall job losses

And nations only gain from free trade as Ricardo’s model implies

Liberalism: Neoclassical Economics

Heckscher-Ohlin-Samuelson Synthesis

Extends the theory of free trade by emphasizing the comparative factor advantage of countries

Countries with an abundance of labor should specialize in labor-intensive production and exports

Countries with an abundance of capital should specialize in capital- or technology-intensive production and exports

Countries with an abundance of land should specialize in land-intensive production and exports

Liberal Political Economy in Summary

Individuals are the key actors of market economies and democratic states

Capitalism is theorized as equal, commodity exchange relations between self-seeking individuals, all of whom benefit

Value is determined by supply and demand

Markets tend towards equilibrium if unfettered by political direction

Comparative cost or factor advantage in world trade

Limited State

Liberalism: World Politics

On this economic foundation, liberal thinkers develop a political theory of international relations

The essential idea is that world politics are determined primarily by the domestic character of states; liberal states are prosperous and peaceful, non-liberal states are not

Note that this is different than realist theory, which says that the internal character of a state has no bearing on world politics – and that starting analytically from the internal nature of a state is reductionist, not systemic

Lineages of Liberal IR Theory

Jeremy Bentham (1747-1832)

A major founder of liberal philosophies of individual rights

A critic of natural law, the notion that society, politics and law are based on laws of nature – instead, we construct our own modes of governance and law

A founder of utilitarianism, the axiom that “it is the greatest happiness of the greatest number that is the measure of right and wrong.”

https://dash.harvard.edu/bitstream/handle/1/11211544/Armitage_GlobalizingJeremy.pdf?sequence=1

Lineages of Liberal IR Theory

Jeremy Bentham (1747-1832)

Bentham’s international legal writings applied the principle of utility not only to the relations between states but also to the relations of states with the rest of humanity – he thus goes beyond the state-centricity of realism

This extension of the greatest happiness principle to encompass all nations and peoples was essential if the legislator’s duty to promote the welfare of his own people was not to be prosecuted at the expense of the well-being of all others:

“Expressed in the most general manner, the end that a disinterested legislator upon international law would propose to himself, would therefore be the greatest happiness of all nations taken together.”

Thus, the ‘self-help’ imperative of realism is problematic and unnecessary

Lineages of Liberal IR Theory

Jeremy Bentham (1747-1832)

War is not inevitable and state leaders can construct “laws of peace” on the basis of the utility principle.

The subjects of international law would be states, rather than individuals, but all were considered as equals and their relations would be founded on mutual recognition of their forms of government, their religion and their customs

Lineages of Liberal IR Theory

Jeremy Bentham (1747-1832)

Note his understandings that:

world politics are not simply about military balances amongst states and their executive institutions;

society and human populations matter to international relations;

normative values – the greater good – matter to conditions of war and peace;

conflict is not inevitable and in fact can be mitigated by international laws of peace.

All of this differs drastically from realist thinking

Lineages of Liberal IR Theory

Immanuel Kant (1724-1804)

German philosopher

Argued that perpetual peace could be obtained through republican governments, markets and international cooperation

Liberal republics engage in profitable trade and commerce with each other and thus develop vested interests in cooperation rather than war

Warfare would increasingly be seen as injurious to “all trades and industries, and especially to commerce.”

Kant suggested that the “spirit of commerce . . . [could] not exist side by side with war” and that states must realize that their own “financial power” depended upon preventing war with other commercial states.

https://journals-sagepub-com.ezproxy.lib.umb.edu/doi/pdf/10.1177/030437540202700401

Lineages of Liberal IR Theory

Immanuel Kant (1724-1804)

An international civil society was conceived as a “kind of league” or “pacific federation” that, unlike a world government, did not possess coercive powers, and unlike a mere treaty that “terminate[d] one war,” the pacific federation sought “to end all wars for good.”

The pacific federation would gradually expand “to encompass all states” through a process of mutual alliance, and it was in this vein that he denounced the “inhospitable” conquest of weak states by the strong.

Lineages of Liberal Theory

Immanuel Kant (1724-1804)

Notice the differences with realist theory:

Peace is possible

An interdependence of interests and mutual gains can be created

International federations, rules, norms, alliances, etc. can be established

Power imbalances can be contained or mitigated without domination, conflict, etc.

Liberalism: Democratic Peace Theory

Michael Doyle. 1986. “Liberalism and World Politics.” American Political Science Review:

There are two types of states

Liberal democracies have market economies, share the benefits of free trade, hold elections and rule of law, and thus hold their leaders accountable for decisions of war and peace.

State-centric regimes have politically-directed economies, reject free trade in favor of protectionism and expansionism, and are run by unaccountable autocrats.

Liberalism: Democratic Peace Theory

Liberal states tend to form a “zone of peace”

“liberal states do exercise peaceful restraint, and a separate peace exists among them. This separate peace provides a solid foundation for the United States' crucial alliances with the liberal powers, e.g., the North Atlantic Treaty Organization and our Japanese alliance. This foundation appears to be impervious…as the number of liberal states increases, it announces the possibility of global peace this side of the grave or world conquest.”

Liberal “republics are capable of achieving peace among themselves because they exercise democratic caution and are capable of appreciating the international rights of foreign republics.”

Liberalism: Democratic Peace Theory

But…

They “remain in a state of war with nonrepublics. Liberal republics see themselves as threatened by aggression from nonrepublics that are not constrained by representation.”

Indeed…

“Even though wars often cost more than the economic return they generate, liberal republics also are prepared to protect and promote – sometimes forcibly – democracy, private property, and the rights of individuals overseas against nonrepublics, which, because they do not authentically represent the rights of individuals, have no rights to noninterference.”

Liberalism: Multilateral Institutions

After the Cold War, Western liberals argued that great power politics were finished, and that global institutions could serve as forums for effective diplomacy and conflict resolution.

President Clinton, 1992:

“in a world where freedom, not tyranny, is on the march, the cynical calculus of pure power politics simply does not compute.

Liberalism: Multilateral Institutions

For liberal theory, there are several factors that underpin cooperation:

Free trade and other forms of economic interdependence create mutual gains and thus vested interests in cooperation and compromise

Liberal democracies share a culture of rules-based governance – and this transfers to international institutions, which set rules for individual member states

Liberalism: Multilateral Institutions

For liberal theory, there are several factors that underpin cooperation:

The benefits of cooperation create disincentives to cheat and seek private gains

The norms and procedures of global institutions, in addition to the benefits, come to change the calculus of states’ interests

Thus, collective forms of security and conflict resolution are possible through liberal institutionalism

Collective security is the notion that one’s own security depends simultaneously on the security of others and thus can’t be obtained through zero sum politics

Liberalism: Responsibility to Protect

The doctrine of the Responsibility to Protect was a major initiative of liberal thinking after the Cold War

For liberals, as the ‘balance of power’ rivalry with the Communist bloc winded down, the principle contradiction in world politics became that between authoritarian governments and their own people(s)

The new security concerns became human rights, civil wars, genocide, ethnic cleansing, and failed states – for example, in Rwanda and the Former Yugoslavia in the 1990s

Liberalism: Responsibility to Protect

In academia and at the United Nations, a liberal doctrine emerged called The Responsibility to Protect

It said that the international community had a duty to respond to human rights violations in failed states or in civil wars

To do this, the international community would have to cast aside the right of state sovereignty

R2P is not codified in international law, but it is based on the norms and principles of international human rights law, and is a political commitment unanimously adopted by the UN General Assembly in its 2005 World Assembly

Liberalism: Responsibility to Protect

Thus, R2P is an updated version of Liberalism’s Democratic Peace Theory, particularly its defense of intervention in sovereign states

Various Western powers have invoked the R2P doctrine to legitimatize their military interventions in countries like Serbia or Libya

But critics have said R2P has no standing in international law, and has been used as a legitimation discourse by Western powers to advance their own geopolitical or geo-economic interests in strategic countries or regions – in other words, that it is a false pretext for imperialism or great power militarism

Optional Reading: Moravcsik

“Liberal IR theory elaborates the insight that state-society relations – the relationship of states to the domestic and transnational social context in which they are embedded – have a fundamental impact on state behavior in world politics. Societal ideas, interests, and institutions influence state behavior by shaping state preferences, that is, the fundamental social purposes underlying the strategic calculations of governments. For liberals, the configuration of state preferences matters most in world politics.”

Optional Reading: Moravcsik

“Liberal IR theory's fundamental premise – that the relationship between states and the surrounding domestic and transnational society in which they are embedded critically shapes state behavior by influencing the social purposes underlying state preference”

Optional Reading: Moravcsik

Assumption 1

The fundamental actors in international politics are individuals and private groups, who are on the average rational and risk-averse and who organize exchange and collective action

Optional Reading: Moravcsik

Assumption 2

In the liberal conception of domestic politics, the state is not an actor but a representative institution constantly subject to capture and recapture, construction and reconstruction by coalitions of social actors. Representative institutions and practices constitute the critical "transmission belt" by which the preferences and social power of individuals and groups are translated into state policy

Liberal theory focuses on the consequences for state behavior of shifts in fundamental preferences, not shifts in the strategic circumstances under which states pursue them

Liberal theory rests on a "bottom-up" view of politics in which the demands of individuals and societal groups are treated as analytically prior to politics

Optional Reading: Moravcsik

Assumption 3

State behavior reflects varying patterns of state preferences. States require a "purpose," a perceived underlying stake in the matter at hand, in order to provoke conflict, propose cooperation, or take any other significant foreign policy action

Thus, liberals causally privilege variation in the configuration of state preferences

In essence, "what states want is the primary determinant of what they do"

Optional Reading: Moravcsik

Variants of Liberalism

Ideational liberalism views the configuration of domestic social identities and values as a basic determinant of state preferences and, therefore, of interstate conflict and cooperation

Commercial liberalism explains the individual and collective behavior of states based on the patterns of market incentives facing domestic and transnational economic actor

Republican liberal theory emphasizes the ways in which domestic institutions and practices aggregate those demands, transforming them into state policy. The key variable in republican liberalism is the mode of domestic political representation, which determines whose social preferences are institutionally privileged

Optional Reading: Moravcsik

Democratic Peace?

“With respect to extreme but historically common policies like war, famine, and radical autarky, fair representation tends to inhibit international conflict. In this way, republican liberal theory has helped to explain phenomena as diverse as the "democratic peace,” modern anti-imperialism, and international trade and monetary cooperation. Given the prima facie plausibility of the assumption that major war imposes net costs on society as a whole, it is not surprising that the prominent republican liberal argument concerns the "democratic peace," which one scholar has termed "as close as anything we have to a law in international relations” – one that applies to tribal societies as well as to modern states. Liberal democratic institutions tend not to provoke such wars because influence is placed in the hands of those who must expend blood and treasure and the leaders they choose”

Optional Reading: Moravcsik

“The more precise liberal prediction is thus that despotic power, bounded by neither law nor representative institutions, tends be wielded in a more arbitrary manner by a wider range of individuals, leading both to a wider range of expected outcomes and a more conflictual average. Nonetheless liberal theory predicts that democratic states may provoke preventive wars in response to direct or indirect threats, against very weak states with no great power allies, or in peripheral areas where the legal and political preconditions for trade and other forms of profitable transnational relations are not yet in place.”

Optional Reading: Moravcsik

Uniqueness of liberal theory:

Provides a plausible theoretical explanation for variation in the substantive content of foreign policy

Offers a plausible explanation for historical change in the international system

Offers a plausible explanation for the distinctiveness of modern international politics

Liberalism Summary

Capitalism is a fair and self-adjusting system of market exchange relations between self-seeking individuals, buying and selling commodities for personal consumption.

The conditions of war and peace in the world order are determined by the domestic or internal character of states; Democratic Peace Theory explains the fault lines and conflicts of world politics.

Global institutions can reinforce the liberal zone of peace, and the benefits of these institutions can supersede the ‘self-help’ calculus of individual states.

For liberals, security refers to the security of individuals to own private property, exchange commodities in the market, vote for political leadership, and hold rights against the state.