The "neo" or the new kind of liberalism and realism was developed in the 1970s as a significant change in theories of International Relations. The neoliberalism is an advancement of liberalism thinking, as it believes to a cooperation and interdependence between States and non-state actors, while the neorealism's theory is focused on the idea of conflict. For the liberals or neoliberals, they have a more optimistic view of peaceful relations, but compared to liberals the neoliberals are highly focused on creating institutions to manage the international system.
The neorealists compared to realists argue that the causes of conflict are different. While realists believe that the self-interest of states create conflict, the neorealists explain that the conflict comes from the anarchy, as the lack of authority involves states to seek power and develop a system of self-help.
The development of neoliberal theory was formulated by Robert O. Keohane and Joseph S. Nye (1977) based on 'interdependence model'.
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The founder of neorealism school is Kenneth Waltz (1979), he stands out from realists about the question of the 'balance of power'. For realists the equilibrium results from the willingness of politicians, but Waltz believes that the balance of power is an attribute to the international system which is composed of selfish units, regulate themselves. Thus for him, the less major powers there are, the more stable the international system is. Therefore the number of poles is reduced to increase system rigidity and more people choose carefully.
Having in mind this above statement, the main purpose of this essay is to examine in some detail how neoliberalism is a response to neorealism and how it can challenge the realism's simplistic approach and neorealist theory of the international system.
To begin with an analysis of the rise of neoliberalism, it is important to explain the main concept of this theory as this is also the rise of institutions, of pluralism, of rationality. Then, by different ideas from authors the discussion and argument on the debate will be analysed in order to identify the key points of neoliberalism to counter neorealism.
The renewal of liberalism occurred after World War II to regulate international system for a peaceful world order. The ideas of neoliberalism are based on cooperation through international institutions and international organizations, which play an important role in the international distribution of wealth and power to maintain stability. Indeed, the major authors like Stephen Krasner (1982) and the founder of neoliberal thought, Robert O. Keohane (1984) has published a book After hegemony and both develop an hegemonic stability theory, they argue that the hegemon provides public goods through institutions (e.g. International Monetary Fund, World Trade Organization), determine the content of rules and procedures of cooperation in order to act in the interest of all. Thus the hegemon provides a necessary and sufficient function for the creation and maintenance of international regimes. The neoliberals saw institutions concentrated on international regimes defined by Krasner (1983) as "institutions possessing norms, decision rules, and procedures which facilitate a convergence of expectations".
Neoliberalism also refers to a rise of pluralism, which is viewed as "the source of liberal justification" (Robert B. Talisse, 2005, pp. 60) that relies on the assumption of rationality. This leads to an interaction between states, as the rationality involves them to focus on strategy in which actions will lead to reactions by others, then the result will depend on the interaction of other state strategies (Tim Dunne, et al., 2007). Thus the pluralism involves multiple forces in the international system. As David Armstrong, et al., (2007, pp. 85) state "neoliberals no longer looked inside states, at how they are politically organized, but rather followed neorealists in treating states as rational actors".
The rise of neoliberalism leads to an emergence of international institutions, often called 'neoliberal institutionalism' is focused on collective actors, as they provide rules and norms that support the interaction of states that will work all together. Neoliberals are much more pragmatic than liberals. The notion of international institutions (e.g. International Monetary Fund, World Bank) differs from liberals, especially after the publication of Robert O. Keohane's book After Hegemony (1984). The institutions have a huge influence on states and have provided a way to challenge neorealism. International institutionalism can explain non-security policy areas, the focus goes beyond trade and development issues, like cooperation in trade, monetary policy or environmental protection (David Armstrong, et al., 2007).
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Thus, institutions, by pushing states to work together, facilitate international cooperation in reducing inherent uncertainties in anarchy. Also one of the major difference with realism is how they see the concept of anarchy (Grieco 1988).
Both theories agree on state action and anarchy in world politics. Even if neoliberals recognise their proximity to neorealists, how they manage their similarities is different. Like neorealists, states are important but run with other entities (institutions, organizations).
The anarchy, for neorealists, is the absence of authority above states, leading to conflicts on international system. This also means that a state is "the guardian of its own security and independence" (Spanier, 1978 pp. 11), thus the guarantee of security and safety for states does not exist. The self-interest for neorealists is based on the measurement of gains and have preference on relative gains where states refer to power balances (Grieco, 1988). They believe in hegemonic cooperation, where the hegemonic state holds the position of power to arbitrate any coalition in international system with a "preponderance of economic and military power" (Hobson, J. M.,2000, pp 39). For neorealists, cooperation can be used to obtain some goals, but it is limited and risky as it introduces the possibility of attack from another state, even if the other state is an ally. According to Waltz for each state the prior research of security is achieved by relying only on itself.
However would this lack of trust and cooperation towards other states tend to a dependence of the hegemonic state ?
Neoliberals in response have demonstrated that anarchy cannot only deal with a constant threat of use of force by major powers. Miller, B. (1995, pp. 52) in his book called When Opponents Cooperation: Great Power Conflict and Collaboration in World Politics, has raised and competed theoretical perspectives to advance plausible explanations. He stated that the small number of great powers and the use of force are insufficient factors to induce cooperation in conflict resolutions. The cooperation under anarchy (Oye, K. 1986) is possible. Unlike neorealists, they argue that the concept of self-help is not the most profitable for a state because of the risk of war. The cooperation may respond to the self-interest of a state. Neoliberals' argument is actually the strongest one because they introduced idea of 'complex interdependence' (Robert O. Keohane and J. Nye, 1977) to explain how multiple actors, agencies and forces can be managed in the world system. Keohane and Nye do successfully challenge structural realists as they provide a better understanding of changing security. They explain, for example, that in post Cold War era the security changed through multiple communications in multipolar system. Moreover they argue that using force by military actions are costly and tend to negative effects on economic goals. This also leads to a risk of nuclear rise. Therefore, complex interdependence assumed that the military power is not necessarily effective in economic and political interests of states.
If issues occurred between great powers and smaller states, the great powers should dominate. However, the US experience in Vietnam (1961) shows the failure of neorealist theory on bipolar system.
Keohane (1997, pp 187) has remarkably explained that : "Failure of great powers to control smaller ones could be explained on the basis of independent evidence that in the relevant issue- areas, the states that are weaker on an overall basis have more power resources than their stronger partners, and that the use of power derived from one area of activity to affect outcomes in other areas (through 'linkages') is difficult". Thus the complex interdependence has arguably challenged the neorealist theory in security concerns.
The concept of Prisoners' Dilemma, used by neorealists, is based on idea that they have a policy of self-help by default because they could not know the behaviour of other states. How to predict the behaviour of other states ? How to reduce the uncertainty in the situation of international anarchy ?
The neoliberals responded by international institutions and international regimes creation. According to Keohane (1986) international regimes facilitate cooperation by reducing uncertainty. He argued that regimes were created to solve the Prisoner's Dilemma concept where states share a common interest in cooperation. The regimes are operated between self-interest states aware of all the benefits they can get from the coordination of their policies. In contrast to neorealists, they are concerned with absolute gains getting the best possible deal. Grieco stated that "State seeks to maximize their individual absolute gains and are indifferent to the gains achieved by others" (Baldwin, 1993, pp 117).
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By using absolute gains neoliberals seek a long-term cooperation through institutions which are considered for neoliberal institutionalists as " the mediator and the means" to prevent to cheating in the world system (Baylis and Smith, 2001).
Keohane and Nye (1977) have clearly defined the importance of institutions as powerful norms. Indeed, NGO's and networks are strongly effective in penetrating states and use domestic norms and rules to force political leaders to focus on global issues.
The most significant argument is found in neoliberalism theory because international institutions encourage the opportunity of negotiations and focus on collaboration and distributional issues. Thus the collective aim is to achieve a positive outcome (Martin, Lisa L., and Beth A. Simmons, 1998).
One of the relevant example to illustrate the importance of institutions is the World Trade Organization (the WTO agreement) created in 1995, its goal is to provide free trade agreements and settle disputes between nations. If governments are confident to other ones they would not establish barriers to trade and would not try to do so. Thus they will be more willing to cooperate. The WTO system widely contributes to strengthen that trust and the negotiations lead to agreements by consensus. Small countries can benefit from greater bargaining power. It is important to remain that without a multilateral regime such as the WTO system, the more powerful countries could further unilaterally impose their force on their smaller trading partners. Thus smaller countries would have to deal individually with each of the major economic powers and would have more difficulties in resisting to pressures.
But with the WTO system, smaller countries may be more effective if they have opportunities to create alliances and share their resources (e.g. Association of Southeast Asian Nations, 1967). Besides, major economic countries will also find their interest as they can negotiate with almost all of their trading partners at a time.
As emphasized earlier, neorealists greater focus on power and security as a core goal through military force and tangible assets, but for neoliberals the dominant goal is the welfare through institutions and organizations.
Walt's focus is based on anarchical structure of the international system, states compete each other in order to survive. Neorealists also share common ideas as defensive realism because anarchy causes a security dilemma leading states to worry about one another's future intentions. Thus leaders mistakenly believe in aggression to make their state secure. For example: in the Cold War era, the Soviet Union with their nuclear weapons threaten the safety of America. One of the other popular neorealists, John Mearsheimer (2003), leader in offensive realism, believes in status quo power and blamed security competition between great powers.
However the neoliberals' concept on international institutions is the best means to avoid conflicts and hostility as they have an independent causal impact because they oversee global tasks that states do not (T. Dunne, et al., 2009). As they represent a third party or neutral parties they have a complete autonomy to deal with states and promote values and goals on a global scale.
One of the dominant strand for liberalists and neoliberalists is the democratic peace theory, based on Kant's notions of Perpetual Peace. While neorealists completely dismiss this idea of democracy where states have no conflict among each other, neoliberals use this peaceful argument to counter neorealists on their use of force. The democratic peace theory is the argument that democracies do not tend to, or rarely go to war with each other. People are directly affected by decisions of war, the public opinion is therefore important as it affects the political behaviour.
Democratic norms emphasize on the importance of dialogue and negotiation, the same for trade relations. Besides, the main reasons that democracies do not go to wars or militarized conflicts against each other are the fact that state leaders have cultural and institutional restrictions (Doyle, 1986). Neoliberals stand as a challenge to neorealists in providing argument for peaceful and cooperative international relations through democratic peace.
Michael Doyle (1983) finds three pillars based on : first, peaceful conflict resolution between democratic states, second the common values among democratic states and third economic cooperation among democracies (R. Jackson, G. Sorensen, 2007, pp. 44).
It is argued that this theory is also used as a tool to create homogenous world and challenge states sovereignty in the era of globalisation. Whereas neorealists think that globalisation does not exist because states only have state-interests. For them the globalisation would be economically bad, with negative outcomes such as dangerous inequality, rebellion, conflicts.
In response to this negative idea, neoliberals think that globalisation can lead to community of states and new interests.
Moreover, the democratic peace theory's benefit is to identify and condemn countries for human rights violations. While neorealists dismiss cultural differences between states, neoliberals emphasize the importance of culture and morality.
For both, democracy must be 'normalized' meaning that they have normative quality in which how the world ought to be or the way the world should be ordered. Democracy remains a moving target (M. Brown, et al., 1996, pp. 268) and is used by neoliberals to challenge neorealists as a response to war and a collective solution for peace.
The American hegemony is also a debate between neoliberals and neorealists. This is, on the one hand, viewed as a "hard power" by neorealists as the USA have ability to impose their will on other political states: in terms of military force, technological growth, they have permanent seat in the UN Security Council, nuclear weapon power and economic power.
On the other hand, the concept of 'soft power' (Nye, J.) has a different view of hegemony, as emphasized earlier, it used other means, like culture, ideology, institutions.
If the power of the US, analyzed in terms of resources and influences, is obviously not what it was in the 1950s, but this decline should not be exaggerated. The "pax Americana" is more a myth than a reality, the US has never enjoyed a complete hegemony. Nye believes that they should consider sharing their leadership to face the transnational interdependence.
Robert Cox (Canadian neoliberal) thinks that hegemony and leadership terms are confused to describe the domination of one power in the international system. He stated that hegemony is a leadership by consent and is not a power struggle, but rather functions in a subtle way, by a kind of universal consent.
Nye finds that the 'power' definition has a lack of uniformity. That is why he undertook two approaches of the power definition :
The first one, is to identify the factors of power : they can be measured from natural resources, territory, population or as political factors from institutions, organisations. A clear understanding of the factors are important to then define the power.
The second approach is the goals of the power. For neorealists and realists the goals are the defense of national interests. However, Nye added that action fields of power are numerous and different.
The challenge for the US is how to keep their hegemony as long as possible. In hard power the goal is to keep superiority, the US should more take active part in foreign conflicts (they tend to do since 9/11). As they cannot intervene everywhere (due to internal expenses) they must make a selection, necessarily based on national interests. In this instance their hegemony would appear as a strong supremacy. In soft power, the US must continue to promote exchanges and keep their advanced technology.
As a response to neorealist theory, neoliberals argue that the use of force and a bilateral system are not effective. Arguments are based on peaceful world order by the creation of international institutions, organisations and regimes. Indeed, these ideas have successfully challenged neorealist thoughts, as organisations like the WTO allowed to reduce conflicts and settle disputes. They especially lead to agreed members to cooperate through negotiations, the community of states is the main successful factor in order to avoid conflicts and wars.
Finally, the notions of hegemony or power are used in both theories but have different meaning. Some similarities are also found in both, like universality, uniformity or anarchy and critics argue that instead of a debate this is more a 'neo-neo synthesis'  .