Realism and Liberalism: Two Visions of the World

But which worldview is more useful for business?

As I’ve discussed in some recent articles, the return of geopolitics has an impact on business. In many respects, business and geopolitics are becoming inseparable. From global supply chain shocks to sanctions, climate diplomacy to AI regulation, businesses are increasingly navigating not just markets, but the worldviews that shape them.

There are many worldviews out there. Some are grounded in international relations theory, while others are more narrative-driven, shaped by political messaging or ideology. Among those rooted in theory, two dominate how governments—and by extension, markets—behave on the global stage: Realism and Liberalism.

You may not know them by name. You may even use a different vocabulary to describe them. But no doubt you’ve felt their effects through trade agreements, foreign policy decisions, regulatory shifts, global crises, or travel restrictions. Whether you’re exporting abroad, leading a business strategy, investing capital, or rethinking your career direction, understanding these two lenses isn’t just an academic exercise—it’s a competitive advantage.

So what are Realism and Liberalism in the global context? How do they help us understand how the world is shaped? And most importantly, which lens is most useful for business?

Let’s unscramble these two global visions—and see what they mean for you.

Two Theories, Two Worlds

Theories matter most when they are useful. Think of them as grammar. International relations theory, or IR theory, is the grammar of international relations—an academic discipline that traces its roots to the aftermath of the First World War. Just like grammar structures language, theory structures how we understand global interactions.

Grammar doesn’t tell you what to say, but it does give you the rules to make sense of how things are said. Similarly, IR theory doesn’t predict events directly, but it does help us understand why states and other international players act the way they do. Without grammar, language is just noise. Without theory, world politics can feel chaotic. We might focus on the wrong signals or fall into magical thinking. Theory helps us spot patterns, rules, motives, limits, and opportunities that actually matter.

Within IR theory, there are many “grammars”—some with their own dialects—but two stand out for their practical relevance to business: Realism and Liberalism. Historically, these have been the dominant schools of thought, offering contrasting visions of how the world works—or how it should work—especially when it comes to power, cooperation, conflict, and human nature. In broad terms, Realism tends to see the glass as half empty; Liberalism sees it as half full.

What is important to realise is that these worldviews are often baked into the foreign policies of governments. Sometimes this is driven by political leaders or their advisers, sometimes it's just the culture of the foreign office. Underneath these grammars, you will also find assumptions about how the international systems behave. So, if you can understand their logic, then you are better placed to anticipate how states may behave on trade, regulation, alliances, or crises in the future.

In fact, when you think about it, Realism and Liberalism aren’t just political theories—they’re systems theories in disguise. Each offers a model of how the international system functions: who the key actors are, how change happens, and what feedback loops shape outcomes.

Let’s look at realism first.

Realism: Power, Interests, Survival

“International politics, like all politics, is a struggle for power.”
— Hans Morgenthau, Politics Among Nations (1948)

Realists tend to be a sober, even pessimistic bunch. They see the world as an anarchic and competitive place. In their view, there is no world government to enforce order—so states must fend for themselves.

Survival is the name of the game. For Realists, sovereign states are the primary actors on the global stage, and they act in their national self-interest. Power—especially hard power like military strength and economic leverage—is the key to securing that interest. And in their zero-sum world, one state's gain is often seen as another's loss.

Realism has deep historical roots, dating back at least to the Greek historian Thucydides and his account of the Peloponnesian War. In the modern era, realist thinking has shaped Cold War deterrence, great power rivalry, and national security strategies that prioritise state sovereignty.

This worldview is skeptical of international organisations like the IMF or the UN and multilateral governance efforts such as the Paris Climate Agreement. It tends to see international cooperation as temporary and fragile—useful only when it serves national interests. Idealism is generally viewed skeptically. Through this lens, conflict between states is not a system failure but rather the system operating as expected.

From a systems thinking perspective, Realism assumes a closed system defined by competition, scarcity, and fixed constraints. States are rational actors seeking to maximize their power and reduce vulnerability. Realism is all about maintaining equilibrium through a balance of power. Feedback loops are often negative—imbalances of power trigger corrective action, like arms buildups or deterrence strategies.

But not everyone sees the world as so hostile or hopeless as realists do. Liberalism offers a different grammar for understanding global affairs.

Liberalism: Cooperation, Institutions, Progress

“A country may obtain the outcome it wants in world politics because other countries – admiring its values, emulating its example, aspiring to its level of prosperity and openness -want to follow it”
― Joseph S. Nye Jr., Soft Power: The Means To Success In World Politics (2004)

Liberalism also recognises that there is no common global government to bring order into the international system. But instead of assuming inevitable conflict, it sees the potential for cooperation, interdependence, and a rules-based international order. Power still matters—but it can be tamed and channeled for the greater good through diplomacy, institutions, and economic integration.

This worldview holds that peace is more likely when countries trade with each other, form alliances, and build shared institutions. In the liberal story, non-state actors—such as business corporations, NGOs, and international bodies—also hold influence.

The logic of liberalism is that interdependence leads to peace, and democracies are less likely to go to war with each other. It is the liberal school of thought that underpins globalisation, free trade agreements, multilateral diplomacy, and climate accords.

For business, this liberal grammar has shaped the world of global supply chains, foreign investment protections, open markets, and global standards. It’s the logic that made global expansion profitable—and arguably, predictable—for decades.

Liberalism views the international system as complex, dynamic, and interdependent. States and non-state actors are like nodes in a broader network, connected by flows of capital, information, people, and goods. The feedback loops here are positive—more trade leads to more peace, and more cooperation leads to stronger norms. It’s a virtuous cycle model tending towards the ideal, where stability and mutual benefit emerge from deeper integration.

But Liberalism, too, has limits. It often assumes that institutions and norms will hold, even when states or nationalist or populist leaders challenge them. It assumes that progress is linear, that cooperation will deepen over time, and that rules will be respected. The events of recent years have, it is fair to say, challenged these assumptions. Economic interdependence does not always guarantee peace, and the rules of the global order can and have been broken.

Business Implications: Reading the Grammar—and the System

“Just because you do not take an interest in politics doesn't mean politics won't take an interest in you. ”

―— Often attributed to Pericles, an ancient Greek statesman and general

So, which worldview is more useful for business?

The answer depends on context—your industry, the governments in power, and where you’re based. Some governments can shape the global order, while others are more exposed to its shocks. In some cases, multinational corporations may wield more influence than entire states. Lobbying—by businesses or industries—can also sway which policies get implemented or dropped.

In periods of global stability and open trade, liberal policies tend to support international business. They create tailwinds such as global expansion, freer capital flows, and thriving innovation ecosystems. In these environments, a liberal lens helps explain what’s driving policy decisions and institutional dynamics—giving business leaders sharper insight into the logic shaping international rules and cooperation. But when geopolitics begins to dominate, supply chains get fractured, and trust breaks down between states. That’s when the Realist lens becomes more useful because it helps make sense of such change and anticipate further hard turns, conflict scenarios, and national interest-driven regulation.

So in short, it really depends. Both lenses are useful. International politics is complex—some actors pursue liberal policies, others realist. Then there are states that are realist in some of their policies but liberal in others. And some have more influence than others. From a business perspective, the smart move is to understand both worldviews and know when one is becoming more dominant—or when it’s strategic to use both at once. It’s equally useful to think in systems, to better anticipate change that could impact your industry.

Understanding how assumptions, actors, and structures interact in the international system can help you unscramble the signals behind the noise. Which variables are stable? Where are the leverage points? Which feedback loops are active?

You may need a Liberal lens to navigate climate policy, digital regulation, or global standards. But you may need a Realist lens to assess geopolitical risk, plan for regulatory fragmentation, or respond to state-driven industrial policy. The mistake is relying too heavily on one dominant paradigm. Tunnel vision is one reason many IR experts were blindsided by the end of the Cold War—they didn’t see the system changing. The field had to catch up.

Political risk matters for business. So does understanding how political actors think and act. Fluency in both of these “grammars”—and in systems thinking—is a real strategic advantage for any business trying to make sense of the political world it operates in.