Neoliberal Institutionalism

Neoliberal institutionalism (NLI) is an umbrella term for liberal research programs in the study of international relations (IR) that focus on the cooperative role of institutions. At its core, NLI argues that international cooperation is possible and most readily achievable, with the creation and [Page 1674]maintenance of international institutions broadly defined. Both formal and informal institutional arrangements are the subjects of NLI analysis. Formal institutions include multilateral organizations such as the United Nations (UN), the World Trade Organization (WTO), and the European Union (EU). States create and voluntarily submit to such institutions, which possess collective goals and establish mechanisms to achieve them. Informal institutional arrangements, or regimes, are also voluntarily created by states and constitute sets of implicit and explicit principles, norms, rules, and procedures around which actor's expectations converge in a particular issue area. A well-established regime exists in the issue area of capitalist free trade, for example, since both formal institutions and implicit, collectively shared principles, norms, rules, and procedures are foundational to such activity.

NLI argues that both formal institutions and regimes have the potential to create lasting bonds between nation-states. They do so by facilitating iterated interaction, diffusing information, heightening transparency, and lessening the ability of actors to defect from institutional agreements. By normalizing rules and regulations in this way, institutions promote an environment of trust in which nation-states can obtain a variety of collective gains that they would otherwise eschew. Thus, institutions aid in efficiently solving collective action dilemmas, particularly in areas that do not involve security issues.

As the term indicates, NLI is part of the larger theoretical category of IR liberalism, and it is premised on basic liberal assumptions about the importance of rationality, information, iteration, and institutional arrangements to cooperative outcomes in IR. NLI also constitutes a renewed confrontation with realism—hence its “neo” status. It emerged in the late 1970s as a theoretical competitor to neorealism, which argues that there are debilitating constraints on the efficacy of international cooperation in an anarchic world of self-interested, egocentric nation-states. In neorealist analyses, the anarchic international environment fosters uncertainty and suspicion, which then produce frequent security dilemmas, volatile alliances, and ongoing trade and military competition. In such an environment, international cooperation is difficult to obtain, even when both parties would gain from the effort, due to fear that any relatively greater gains will be employed for competitive purposes. Thus, NLI's theoretical competitor tends to underscore the dangers of defection by highlighting the distrust between actors engaged in potential agreements with one another.

NLI challenges the pessimistic conclusions of neorealist analysis, but it does so by adopting many of the same analytical assumptions. It is for this reason that neorealism and NLI are sometimes categorized together epistemologically and why NLI can be distinguished from earlier liberal variants such as pluralism. Both NLI and neorealist scholars agree that the international system is anarchic, which means that there is no international authority or government to force states to comply with demands or cooperate with one another. As a result, states must help themselves and look out for their own individual survival. NLI concurs that international cooperation will be difficult to obtain in an anarchic international environment that induces fear and uncertainty. Both theories focus on the state as the main actor in international affairs. While NLI and neorealist scholars recognize that other international actors do exist and can influence international affairs, each theoretical lens views the state as the primary mover of international politics. And both perspectives view the state as a rational, utility-maximizing, and self-interested governing entity. In doing so, both are heavily indebted to the study of economics, and NLI is sometimes referred to as rational-choice institutionalism as a result.

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