It is defined as the principal view on the role that international institutions ought to have in international relations among states, both economically and politically. As Joseph M. Grieco and G. John Ikenberry suggest in State Power and World Markets, its main purpose is to serve as a mediator to find solutions to interstate problems. Globalization and innovation in technology have “connected” the world, therefore creating interdependence among states on the globe. For instance, an economic slump in Japan could have an impact on the economy of Latin American countries. In the same way, a communist revolution in Honduras could result in communist revolutions across Latin America. The point is that since countries are now so connected between each other, international watchdogs are necessary to maintain the rules fair for everyone.
It is here when institutions such as the United Nations (UN), International Monetary Fund (IMF), and World Trade Organization (WTO) step in. Their role is to be a guide for affiliated countries to promote cooperation to resolve global economical or political issues; thus, making member states better-off. If each nation had to deal with issues independently it would not only most likely result in war, but it is also more costly and certain. This is why it is better for member states to rely in international institutions to resolve problems. International institutions enhance this by providing information and advice to member countries on economic and politic matter. In the eyes of Grieco and Ikenberry, neoliberal institutional theory “sees institutions as agreements or contracts between actors that reduce uncertainty, lower transaction costs, and solve collective-action problems.”
- ↑ Grieco, Joseph M., and G. John Ikenberry. State Power and World Markets: The International Political Economy. New York: W.W. Norton &amp;amp; Co., 2003. p 116.