Mon | Sep 23, 2019

Walter Molano | Realists vs institutionalists: More than angels dancing on pinheads

Published:Friday | February 8, 2019 | 11:55 AM

OP-ED CONTRIBUTION: EMERGING MARKET ADVISER

Academic departments are typically divided into silos. For example, economic departments are subdivided into macroeconomics, microeconomics and econometrics.

The silos are then partitioned into smaller areas of research, such as economic history, game theory and labour economics.

However, competing areas are also established, such as Keynesians versus monetarists. These are arenas of fierce intellectual battle. They are where tenures are established.

The fights focus on minutiae, which are akin to the medieval debates about how many angels can dance on a pinhead. Each academic subject has its own colosseum, complete with gladiators, lions and victims.

One of the areas of debate occurs between realists and institutionalists within international relations departments. At issue is the simple question, do nation-states act solely in their interest or do they cooperate? The answer, for the uninterested, is “who cares?” Sometimes they cooperate and sometimes they don’t.

Unfortunately, that is not an acceptable answer. Academics are always trying to tease arguments to their most parsimonious elements, and they need a yes or no answer. The debate often divides academic departments along partisan lines, bringing some professors to the brink of fisticuffs. Yet, the realism-institutionalism perspective may be very relevant today.

Presently, most political commentators focus on the rise of nationalism to explain the emergence of authoritarian leaders, such as Trump, Putin, Erdogan, Bolsonaro and Duterte. But perhaps a better explanation could be the return to a more realistic form of international arrangement.

Realists argue that the nation-state is the basic unit of international relations. Nation states are constantly competing for power and resources. According to medieval thinkers, such as Machiavelli and Hobbes, the process consists of ruthless manoeuvring in a zero-sum game. In a way, that is the essence of realism.

Realists believe that one country’s gain has to result in another country’s loss. The institutionalists take the opposite view. They believe that human preferences for common goals, such as peace and prosperity, transcend the nation-state, and this leads to international cooperation and interdependence. They point to age-old incidents of cooperation, such as those illustrated by Thucydides’ Peloponnesian War.

In the end, the competing schools of thought are correct. However, they oscillate in and out of phase. Like a pendulum that swings from one extreme to another, international relations move between a more realist arrangement to more cooperation, and then back again.

A century ago, realism reigned as the world ripped itself apart on the fields of Flanders. In the aftermath of World War I, American President Woodrow Wilson tried to introduce a new level of international cooperation, in the form of the League of Nations. Several important treaties were also established to foster peace, such as the Washington Naval Treaty in 1922.

However, institutionalism broke down during the 1930s, as the severity of the Great Depression diminished the desire for cooperation, and fostered the return to the winner take all approach that led to World War II. After another decade of gruesome fighting, the world re-embraced cooperation, creating a bevy of institutions, from the United Nations to the International Monetary Fund to the European Union.

For more than half a century, cooperation was considered a win-win situation. Unfortunately, the onset of the 2007 financial crisis, the rise of China, globalisation and new technologies reduced the perceived gains of cooperation, and the nation-state perspective came back into vogue.

Many commentators hear the intonations of nationalism when they listen to Boris Johnson, Donald Trump and Matteo Salvini. There is no doubt that they employ nationalist rhetoric. Yet, the common thread to all of them is the realist mindset. Their basic argument is that cooperation has resulted in a situation where their country has lost out, while other countries have gained. In other words, the IR pendulum reached its zenith and is now moving in the opposite direction.

One could argue that there is no difference between a nationalist and a realist. It is true that they share many ideals. However, there are subtle, but important, variances. The nationalist is a domestic perspective, while a realist is an international point of view.

Debating these differences is best left to academic conferences. The point is that the form of international arrangement has important implications for trade and capital flows. Obviously, during times of international cooperation, institutions are established that facilitate both. The opposite happens when realism comes back into vogue.

That does not mean that the two disappear, it only means that they become more difficult and expensive. Moreover, a devastating event must occur before interdependence comes back into fashion.

Arcane topics can sometimes provide insights that go beyond obscure academic debates.

Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.

wmolano@bcpsecurities.com