Within the systematic theory of neorealism, states in the international system are compared to firms in a capital market, seeking to survive in an anarchical system in which the most powerful actor rules. However, this raises the question, how do they relate? Furthermore, the discussion of the comparison is held as a credible analogy will be carried out with. This essay will also feature of a current example of states acting in a similar manner to capitalist firms. Inaugurated by Kenneth Waltz in his publication ‘Theory of International Politics’, the foundations of neorealism were set in order to carry out the explanation of this ideology.
According to neorealism, the state is the prime and most important actor within the international system as selfish self-interest is the means for survival. Likewise, firms are a powerful actor within capitalism as they are the direct providers to carry the movement of investment capital (Thomas, 2014), and the least altruistic firms are the ones who survive in the capitalist system. Furthermore, firms provide structure and a bureaucratic form, and most importantly, generate capital and power. The state is the measurement unit in the international system, and each state is its own selfish organism, with its own survival the only aim, and self-help is the priority of all its policies. Similar in the capitalist system, the core drive of shareholders is to contain their risk in a completely non-altruistic vehicle called a firm.
Neorealists view states in the international system to firms in a capitalist society in the aspect in which both seek to survive as a state of basic nature. Only within the means that both states and firms hold secured survival, can they further focus on alternative goals such as profit and power (Waltz, 1979). Within a state, its primary interest would typically aim to protect the state itself by security means, for example, investing in an army regardless if it holds a negative effect on the people within the state and those outside it. Likewise in a firm, security is a main goal in generating capital and maintaining the firm’s life. An example of security in a capitalist firm is the exploitation through transnational corporations in the act of selling cheap, raw materials from developing countries to capitalist firms at a low cost, to then be manufactured by people on a low to minimum wage salary, and then be sold at a higher mark-up price in order to create profit. The overall interest of security within firms and states tend to revolve around self-interest and growth, over the conditions of the people within the system.
To neorealists, both states and firms are seen as an anarchy as a result of a lack of absence of overall, centralised, power. According to Waltz, the international system, is a system of “self-help” (Waltz, 1979) as there is no hierarchical entity to solve any given disputes between them. The claim that states as an anarchy in an international system does not imply that the state is disordered and chaotic, but implies that there is no overall world government to control disputes outside organisations such as the United Nations. As a result of no overarching body governing over the world, stability and security is ensured within international relations, proving that states in the international system are, in fact, anarchic in structure in terms of the international system.
An current example to explain how neorealists liken states to firms is the power and security struggle between America and Russia in comparison to successful worldwide banks and PayPal. Both examples hold self-interest, with no respect to losses of internal or external entities. Countries such as America and Russia turn over millions into military survival (George and Sandler, 2018), regardless of the overall general risk. Banks protect themselves by taking anarchic risks in the threat of losing their raison d’etre in generating profit for their shareholders, in comparison to internet based banking firms.
Regarding polarity, states in international systems and capitalist firms relate in that both are more successful under bipolarity. Within states, the stability of bipolarity is far more efficient than a multipolarity international system as the two primary powers hold the self-interest of maintaining the system and creating fewer conflicts, because if conflict arose, it will create risks, lowering national interest and security. The key is to maintain the rationality in a bipolar system to reduce the quantity of triggers that hold the potential to arise and later cause disruption within the international system (Lechner, 2017). Multipolarity hold tendencies to operate in a more difficult manner as there are more states involved resulting in effective communication and intentions to be put at a higher potential of risk across the board. Likened in a capitalist market, bipolarity tend to be more successful when less firms are involved. A hierarchy is necessary in order to keep the top multinational corporations at the top of the ladder, rather than a universal liberal concept of all receiving the exact same benefits. An example to put bipolarity in use is Karl Marx’s theory in which there are the two majority classes, the bourgeoisie and the proletarians (Marx and Engel, 1848). In this case, the bourgeoisie were the capitalist market and the proletariats as the majority working class. Essentially it is the world’s system theory between these two classes and in order for one to survive, the alternative class must not succeed in their motives. This is likened to the concept in which states and firms are compared and similarly perceived by neorealists.
In conclusion, states within the international system resemble firms in a capitalist society with regards to their structure in anarchy, the need for self-survival in a bureaucratic manner and both holding bipolarity in its manner of being run in order to generate capital, power and longevity. A current example of states likened to firms, is the power battle between the United States of America and Russia in comparison to banks and PayPal as an online example, through the lens of neorealism.