International Journal of Business and Management Review Vol.1, No.4, pp.15-25, December 2013 Published by European Centre for Research Training and Development UK (www.ea-journals.org) LIBERALISM AND REALISM: A MATRIX FOR POLITICAL ECONOMY IKE NNIA MBA SR, PHD Department of Management, University Of Nigeria, Enugu Campus EZE UKAMAKA TERESA Inspector of Education, Ministry Of Education, Enugu State ABSTRACT: Politics and economics share an intimate relationship. To separate either in analysis is unfair, as it dismisses the interdependency between both schools of thought. Thus, in issues pertaining to the Political Economy, there is a fusion between politics and economics to obtain the most thorough and holistic understanding of both spheres. Political economy is concerned with the allocation of scarce resources in a world of infinite wants and needs. In order to allocate these resources, politics are used within a state to provide for the people. Of the different analytic frameworks there are two dominant perspectives: Liberalism and Realism. Liberalism can be attributed to a political doctrine that takes protecting and enhancing the freedom of the individual and their economic activities to be paramount in nation-states, while Realism is based on certain assumptions or premises that nation-states are the dominant actors within the political economy and the proper units of analysis. Other units of analysis are subordinated to the nation-state and therefore superfluous to integrate into evaluation. This paper is directed towards liberalism and realism paradigm; a matrix very useful in comprehending the behavior of the nation-state and in describing, explaining, and predicting political economy. The paper recommends that liberalism should operate under real-world conditions, reflecting state interest and aggrandizement, and such advancement should result in peace instead of the expected dose of conflict. KEYWORDS: liberalism, realism, matrix, political economy. INTRODUCTION Liberalism first became a distinct political movement during the Age of Enlightenment, when it became popular among philosophers and economists in the Western world. Liberalism rejected the notions, common at the time, of hereditary privilege, state religion, absolute monarchy, and the Divine Rights of a King. The 17th century philosopher John Locke is often credited with founding liberalism as a distinct philosophical tradition. Locke argued that each man has a natural right to life, liberty and property (Guzzini, 1998), and according to the social contract, governments must not violate these rights. Liberals opposed traditional conservatism and sought to replace absolutism in government with democracy and/or republicanism and the rule of law. The revolutionaries of the American Revolution, segments of the French Revolution, and other liberal revolutionaries from that time used liberal philosophy to justify the armed overthrow of what they saw as tyrannical rule. The nineteenth century saw liberal governments established in nations across Europe, Spanish America, and North America (Grigsby, 2008). In this period, the 15 International Journal of Business and Management Review Vol.1, No.4, pp.15-25, December 2013 Published by European Centre for Research Training and Development UK (www.ea-journals.org) dominant ideological opponent of liberalism was classical conservatism. During the twentieth century, liberal ideas spread even further, as liberal democracies found themselves on the winning side in both world wars. Liberalism also survived major ideological challenges from new opponents, such as fascism and communism. In Europe and North America, there was also the rise of social liberalism (Dorrien, 2001), which is commonly identified with the liberal socialism and social democracy in Europe (Manor, 1999). The meaning of the word "liberalism" also began to diverge in different parts of the world. In the United States, liberalism is associated with the welfare-state policies of the New Deal program of the Democratic administration of former Pres. Franklin D. Roosevelt, whereas in Europe it is more commonly associated with a commitment to limited government and laissez-faire economic policies, while in Africa it is regarded as a salvation from colonialism and practice of democracy (Leman, 2001). Consequently in America, the ideas of individualism and laissez-faire economics previously associated with classical liberalism became the basis for the emerging school of libertarian thought (Diamond, 2008). Today, liberal political parties remain a political force with varying degrees of power and influence on all inhabited continents unlike their realism counterparts. Realism is a view of international politics that stresses its competitive and conflictual side. It is usually contrasted with idealism or liberalism, which tends to emphasize cooperation. Realists consider the principal actors in the international arena to be states, which are concerned with their own security, act in pursuit of their own national interests, and struggle for power (Aaron, 2006). The negative side of the realists' emphasis on power and self-interest is often their skepticism regarding the relevance of ethical norms to relations among states. National politics is the realm of authority and law, whereas international politics, they sometimes claim, is a sphere without justice, characterized by active or potential conflict among states (Ashley, 2004). There are innumerable scenarios that can be evaluated with Realism. Technological and military development is an obvious corollary to a nation-state’s desire for increased national security, as well as the ability to control; hence the United States allocates huge funding into its advanced economy and military expenditures (Leman, 2001). This coincides with industrialization, which sets the stage for self sustainability and military prosperity. Moreover, growth and maintaining the agriculture sector, as in Japan, is also interpreted as a movement towards power, as it allows for self sustainability and thus political independence. Realism evidently can account for much of domestic policy, and foreign affairs are little different. In the 1860s, Japan was humiliated when the United States sent an envoy of ships into their bay, and forced Japan to open its markets at the threat of attack (Guzzini, 1998). This was beneficial for America but not Japan. Other examples of nation-states’ abuse of power for their own interests are impositions of agreements like North American Free Trade Agreement (NAFTA) and other similar agreements forced onto developing countries by the international financial institutions such as the International Monetary Fund (IMF) and World Bank, which favor the dominant, more powerful, state. The United States and Britain attacked Iraqi in 1991 having accused them of possessing weapons of mass destruction. Currently, the United States and one of her key allies; France, are threatening to attach Syria on accusation that they used chemical weapons on civilians in the ongoing war between the Syrian government and Hezbollah rebel forces. 16 International Journal of Business and Management Review Vol.1, No.4, pp.15-25, December 2013 Published by European Centre for Research Training and Development UK (www.ea-journals.org) Realism has been basic assumption of rulers for ages. Individuals are selfish by nature; selfishness makes cooperation difficult if not impossible. States are guided by national interest; always seeks to maintain or expand power and influence. Relations among nations are anarchic; there is no force capable of regulating states' actions. Peace is only obtained when states for alliances of rough equals; balance of power. Quite evidently, theories applied to human affairs are open to error and are far from perfect. Realism is no different, and due to the inherent flaw, the framework’s inability to account for the dynamics and complexities in human affairs, its application has limits and transparent shortcomings. Nevertheless, Realism has proven itself worthy as a prominent and useful analytical theory given its subsistence since Thucydides in 400 B.C., whose remarks still reverberate with accuracy today in the understandings and interpretations of nation-states’ behavior and their lust and need for power (Williams, 2007). However, realism and liberalism can be said to be the conception of political economy. Political economy is concerned with how economic theory and methods influences political ideology. Political economy is the interplay between economics, law and politics, and how institutions develop in different social and economic systems, such as capitalism, socialism and communism. Political economy analyzes how public policy is created and implemented (Groenwegen, 2008). Because various individuals and groups have different interests in how a country or economy is to develop, political economy as a discipline is a complex field, covering a broad array of potentially competing interests. Political economy also involves the use of game theory, since groups competing for finite resources and power must determine which courses of action will give the most beneficial results, and what the probability of those results being reached are (Gilpin, 2001). Political economy profits from the interdisciplinary application of approaches and concepts that originated in the study of politics, economics, sociology, philosophy, and history. It ultimately concerns itself with the relationship between individuals and the