Abstract

This paper argues that the central failure of the post–Cold War era was not the theoretical inadequacy of liberal institutionalism, but the policy-level overextension of its claims into a structural expectation: the belief that institutions and interdependence would progressively neutralize power politics. Reassessing liberal institutionalism alongside structural realism, the paper shows that cooperation under anarchy is possible but conditional, reversible, and persistently shaped by relative gains concerns and uncertainty. The paper develops an “institutional realism” framework as a corrective: preserving institutions as instruments of management while reintegrating structural constraints into strategy and institutional design.

I. Introduction

For much of the post–Cold War era, international politics was interpreted through a framework of institutional optimism. Economic interdependence, multilateral institutions, and normative convergence were widely assumed to constrain rivalry and progressively soften the structural pressures of anarchy. Cooperation appeared not only possible, but increasingly self-reinforcing.

The resurgence of overt great-power competition has prompted a familiar claim: geopolitics has “returned.” This framing suggests that power politics had receded, only to re-emerge due to revisionist disruption.

This paper advances a different argument.

The strategic illusion of the post–Cold War era did not arise from theoretical error within liberal institutionalism. Rather, it emerged from a policy-level overextension of its insights — the gradual transformation of conditional cooperation into structural expectation. Institutions designed to manage competition were reinterpreted as mechanisms capable of transcending it. Power politics did not disappear; it adapted.

The paper proceeds in four steps. First, it clarifies what liberal institutionalism actually claims — and what it does not. Second, it reconstructs the structural realist warning about persistent constraints under anarchy. Third, it deepens the debate through the relative gains problem and modern interdependence dynamics, illustrating how competition survives inside institutional environments. Fourth, it proposes “institutional realism” as a strategy without illusion: a disciplined approach that retains institutions as tools of management while treating power distribution and uncertainty as enduring features of international life.

II. Institutional Optimism and the Transformation of Incentives

Liberal institutionalism, most prominently articulated by Robert O. Keohane, does not deny anarchy; it seeks to manage it.¹ In After Hegemony, Keohane argues that cooperation is possible under anarchy because institutions can reduce transaction costs, facilitate information, and stabilize expectations.² Institutions help states coordinate, monitor compliance, and maintain mutually beneficial arrangements even when enforcement is decentralized.

The strongest institutionalist claim is not that power disappears. It is that complex interdependence alters incentive structures in ways that can reduce the frequency and intensity of overt conflict.³ As economic integration deepens and issue areas multiply, the costs of confrontation rise. Repeated interaction encourages predictability. Regimes create focal points and procedural routines that can make cooperation more durable than raw power logic might suggest.

This is not utopianism. It is conditional optimism: cooperation is possible when incentives align, when information improves, and when institutions help states overcome collective-action problems.

Yet over time, policy discourse blurred this distinction. Interdependence was increasingly interpreted as evidence that rivalry itself was diminishing. Institutional density became conflated with strategic convergence. Stability was mistaken for resolution. The absence of war was treated as evidence of structural peace.

This interpretive shift produced a strategic illusion: the belief that structural competition had been neutralized rather than temporarily managed.

II-A. Liberal Institutionalism’s Strongest Defense (Not a Strawman)

A serious critique must recognize what makes institutionalism persuasive. Institutions do not merely “decorate” power politics; they can reshape patterns of behavior by making cooperation cheaper, more legible, and more repeatable. When regimes lower uncertainty and standardize interaction, they can reduce the scope of misperception and enable credible commitments in specific domains.⁴

Moreover, institutionalism need not claim that states become benign; it can claim that repeated engagement creates predictable incentive gradients. Actors may still pursue advantage, but within a structured environment that penalizes some kinds of destabilizing moves and rewards some forms of restraint. In this reading, institutions do not abolish rivalry — they domesticate it.

This is precisely why the post–Cold War policy interpretation matters. The strategic illusion did not emerge because institutionalism was “wrong.” It emerged because institutionalism’s conditional logic was treated as structural destiny.

III. Structural Realism and the Persistence of Constraint

Structural realism provides a critical counterpoint. For Kenneth N. Waltz, the defining characteristic of the international system is anarchy — the absence of a central authority capable of enforcing order.⁵ Within such a structure, states must prioritize survival. Behavior is shaped less by declared intentions and more by the distribution of capabilities across the system.⁶

Because no state can be certain of others’ future intentions, competition becomes a structural outcome rather than a policy choice. Cooperation may occur, but it does not eliminate incentives for balancing and hedging. Structure endures even when institutional density increases.

John J. Mearsheimer extends this logic by emphasizing uncertainty and relative power concerns in great-power politics. Even in institutionalized environments, states remain sensitive to shifts in capability distribution and seek to avoid strategic vulnerability.⁷ Interdependence may raise the costs of conflict, but it does not eliminate strategic calculation.

Robert Jervis adds a further layer of caution through the security dilemma: defensive measures can generate unintended insecurity even in the absence of aggressive intent.⁸ Institutions can moderate escalation, but they cannot abolish the underlying uncertainty that produces spirals of suspicion.

Structural realism does not predict the impossibility of cooperation. It predicts its limits.

III-A. Relative Gains and Structural Persistence

One of the most consequential debates between realism and liberal institutionalism concerns the problem of relative gains. While institutional theory emphasizes absolute gains — the idea that states cooperate when all parties benefit — structural realism cautions that states remain attentive to how benefits are distributed.⁹

Even when cooperation produces net positive outcomes, asymmetrical distribution may generate long-term insecurity. If one state gains disproportionately from economic interdependence, technological exchange, or institutional influence, the relative balance of capabilities shifts. From a realist perspective, this shift matters more than aggregate prosperity.

This debate clarifies the limits of incentive transformation. Complex interdependence may increase the costs of overt conflict, but it does not eliminate strategic sensitivity to power distribution. Cooperation therefore operates within structural constraint rather than beyond it.

The strategic illusion of the post–Cold War era emerged in part from assuming that absolute gains logic would progressively override relative gains concerns. Interdependence deepened, yet strategic hedging persisted. Incentives evolved; structure endured.

III-B. Interdependence and Relative Gains: The U.S.–China Illustration

The contemporary U.S.–China relationship illustrates the endurance of relative gains concerns under deep economic interdependence. For decades, integration expanded dramatically: trade volumes grew, supply chains intertwined, and financial linkages intensified. From a liberal institutionalist perspective, such interdependence should have increased the opportunity costs of confrontation and reinforced cooperative incentives.

In absolute terms, both economies benefited.

Yet relative gains dynamics remained active. As China’s economic growth translated into technological advancement and military modernization, concerns in Washington shifted from aggregate prosperity to distributional impact. The question was no longer whether trade increased total wealth, but whether it altered the long-term balance of capabilities.

Interdependence did not dissolve competition. It redistributed power within it.

The resulting recalibration — including export controls, technology restrictions, and selective decoupling — reflects not the disappearance of cooperation, but the reassertion of relative gains logic under conditions of structural rivalry.¹⁰ The case reinforces this paper’s core argument: incentive transformation through interdependence is real but incomplete. Structural competition adapts rather than disappears.

IV. Technology, Speed, and the Compression of Strategy

Contemporary strategic environments intensify structural dynamics through speed. Precision strike, cyber operations, autonomous systems, and pervasive surveillance compress decision timelines. As reaction time shrinks, tolerance for uncertainty decreases. States become incentivized to act earlier, hedge more aggressively, and prioritize readiness over reassurance.

This matters because the security dilemma is worsened by rapid action–reaction cycles: when leaders perceive that delay increases vulnerability, even defensive postures drift toward preemption. The dilemma deepens not because intentions worsen, but because decision time narrows.

Institutions can help manage escalation through communication and verification, but technological acceleration frequently outpaces regulation. Regimes designed for slower eras struggle to stabilize fast-moving competition. The result is an environment where institutional management becomes harder precisely when it is most needed.

V. Case Illustration: Ukraine and the Limits of Transformation

The war in Ukraine is often framed as a rupture — a dramatic return of geopolitics after decades of institutional stabilization. Yet this interpretation obscures structural continuity.

Ukraine existed within dense institutional and economic frameworks. NATO–Russia councils functioned. Energy interdependence tied Russia and Europe. Multilateral institutions provided ongoing channels of communication.

Institutions were present.

Yet institutional density did not eliminate strategic calculation. Security architecture, regional influence concerns, and shifting power distributions interacted with long-standing structural dynamics. The conflict illustrates not the return of power politics, but its uninterrupted presence beneath institutional engagement.

Institutions managed tension. They did not dissolve its structural roots.

This does not “disprove” institutionalism. It clarifies the boundary: institutions can mediate behavior and delay escalation, but they cannot guarantee the disappearance of rivalry where underlying structural incentives remain.

VI. Institutional Realism: Strategy Without Illusion

If the strategic illusion lay in overestimating the transformative power of institutions, the corrective is not abandonment, but recalibration.

An institutional realist approach begins with structural awareness. It accepts the persistence of anarchy, the durability of relative gains concerns, and the inevitability of strategic hedging. Cooperation remains possible — but conditional and reversible.

Institutions should therefore be treated as mechanisms of management rather than instruments of transcendence. Their function is threefold:

1. Escalation management: increase communication and predictability to slow spirals of misperception.

2. Uncertainty reduction: improve information and verification where feasible, while recognizing that capabilities are more observable than intentions.

3. Channeling competition: embed rivalry within predictable procedures to reduce surprise, not to produce harmony.

Crucially, institutional realism re-reads interdependence as strategic terrain rather than moral progress. Interdependence creates both benefits and leverage. It can constrain conflict, but it can also generate vulnerability and coercive capacity. Strategic planning must therefore evaluate interdependence by its distributional effects and resilience properties, not merely by its aggregate prosperity.

Institutional realism does not reject liberal insights. It disciplines them — placing institutional utility inside systemic constraint.

The goal is not harmony. It is containment without illusion.

VII. Conclusion

The resurgence of overt strategic competition has led many to declare the return of geopolitics. This narrative misinterprets the post–Cold War order. Power politics did not disappear; it was managed within expanding institutional frameworks.

The strategic illusion emerged not from theoretical error, but from interpretive overconfidence — the conflation of cooperation with transformation. Institutional density was mistaken for systemic convergence. Relative gains concerns and uncertainty were discounted, only to reassert themselves as the distribution of capabilities shifted and competitive dynamics adapted to new domains.

The task ahead is not to abandon institutions, but to embed them within structural awareness. Institutional realism offers a disciplined middle path: preserve the managerial value of institutions while refusing the expectation that institutions can erase constraint.

Durable order does not rest on comfort.
It rests on clarity.

Notes

1. Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: Princeton University Press, 1984), 7–14.

2. Keohane, After Hegemony, 67–84.

3. Robert O. Keohane and Joseph S. Nye, Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977), 24–48.

4. Keohane, After Hegemony, 85–109.

5. Kenneth N. Waltz, Theory of International Politics (Reading, MA: Addison-Wesley, 1979), 88–93.

6. Waltz, Theory of International Politics, 97–101.

7. John J. Mearsheimer, The Tragedy of Great Power Politics (New York: W. W. Norton, 2001), 29–54.

8. Robert Jervis, “Cooperation Under the Security Dilemma,” World Politics 30, no. 2 (1978): 167–214.

9. Joseph M. Grieco, “Anarchy and the Limits of Cooperation: A Realist Critique of the Newest Liberal Institutionalism,” International Organization 42, no. 3 (1988): 485–507.

10. For an overview of the U.S. turn toward technology controls and competitive interdependence, see Henry Farrell and Abraham L. Newman, “Weaponized Interdependence,” International Security 44, no. 1 (2019): 42–79.

Bibliography

Farrell, Henry, and Abraham L. Newman. “Weaponized Interdependence: How Global Economic Networks Shape State Coercion.” International Security 44, no. 1 (2019): 42–79.

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