The “Washington Consensus” is a term coined in 1989 by economist John Williamson to describe the policies advocated by the International Monetary Fund (IMF) and the World Bank for developing countries. These policies include macroeconomic stabilization, liberalization of trade and investment, privatization, and deregulation.The “Washington Consensus” is a term coined in 1989 by economist John Williamson to describe the policies advocated by the International Monetary Fund (IMF) and the World Bank for developing countries. These policies include macroeconomic stabilization, liberalization of trade and investment, privatization, and deregulation. According to Antara Haldar, a law, economics, and philosophy professor at the University of Cambridge, the Washington Consensus has failed to deliver on its promises of growth and development. She argues that the policies have led to increased inequality, environmental degradation, and political instability. Haldar also points out that the Washington Consensus has ignored the unique circumstances of developing countries, which has led to their failure. Haldar argues that a new development paradigm is needed, one that is based on cultural contexts and human cognition. She believes that the Global South, with its relatively more communal cultures, is better suited for a leadership role in this new paradigm. The Washington Consensus has been criticized by many economists and policymakers, who argue that it is too simplistic and does not take into account the specific circumstances of developing countries. Some critics also argue that the Washington Consensus has led to increased inequality and environmental degradation. Despite its critics, the Washington Consensus remains the dominant economic policy framework for developing countries. The IMF and the World Bank continue to promote the policies advocated by the Washington Consensus, and many developing countries continue to implement these policies.
FILE PHOTO: The IMF logo is seen outside its headquarters in Washington. Image: REUTERS
In an article published by global syndication agency Project Syndicate, Antara Haldar, who teaches law, economics and philosophy at the University of Cambridge, argued that the ‘Washington Consensus’ continues to haunt the world.
What exactly is the Washington Consensus? According to Haldar, “in 1989, British economist John Williamson christened what would become the defining intellectual export of the era of globalization, the Washington Consensus. Initially a reference to the policies adopted to address macroeconomic turmoil in Latin America, the term quickly turned into a canonical ‘Ten Commandments’ of development.”
Those ten commandments no longer work. It’s even arguable that they’ve ever worked in the past. Globalization, a key feature of the Washington Consensus, has made China the world’s most advanced technological power, ahead of the United States in many areas. Latin American economies continue to suffer periods of hyperinflation, stagnant growth and political violence, despite – and even because of – Western interventions through the IMF and the World Bank.
Europe has reached its peak. Countries such as Britain, France, Spain and Portugal can no longer balance their books with tax revenues extorted from their Asian and African colonies.
Haldar adds: “Is there more than one route to growth and development? Is there a way to reinvent or restructure the global economy now that it has become a source of widespread discontent? Do some of the Global South’s core characteristics – such as its relatively more communal cultures – make it better suited for a leadership role in the current era? And most importantly: what is actually the purpose of development?
“The Washington Consensus never had time for such questions, and its spirit continues to hinder the emergence of a new development paradigm based on cultural contexts and human cognition.”
In 2009, British Prime Minister Gordon Brown declared the Washington Consensus dead. The 2008 global financial crisis had scorched the world, but the fires were lit in the capitals of the West: New York, London and Paris.
Also in 2009, the Western agenda to encircle Russia with new NATO member states was almost complete.
At the 2007 Munich Security Conference, Russian President Vladimir Putin had warned a range of Western military, security, diplomatic and political leaders that Washington had broken its promise not to expand NATO into Eastern Europe. According to him, there would be consequences.
This is what Putin told his audience in Munich in 2007: “I think it is clear that the expansion of NATO has no relationship whatsoever with the modernization of the Alliance itself or with ensuring security in Europe. On the contrary, it is a serious provocation that affects the level of mutual trust. And we have the right to ask ourselves: who is this expansion aimed at? And what happened to the guarantees given by our Western partners after the dissolution of the Warsaw Pact? Where are those statements today? No one even remembers them anymore.
“But I allow myself to remind this audience what was said. I would like to quote the speech of the Secretary General of NATO, Mr Woerner, in Brussels on 17 May 1990. He said at the time: ‘The fact that we are prepared not to deploy a NATO army outside German territory the Soviet Union a firm hold. safety guarantee.’ Where are these guarantees?”
In 2007, Russia was still a member of the G8. The G7 had admitted Moscow into the powerful group in 1997 to counter Moscow’s expansionist ambitions. Russia also wanted to Europeanize itself and even briefly considered applying for membership of the European Union (EU).
However, as NATO’s eastward expansion continued unabated, Putin annexed Crimea in 2014 to protect Russia’s Black Sea Fleet.
The West immediately expelled Russia from the G8, which turned back into the G7.
Climate of change
Haldar raises an important issue about how the West has approached the climate change crisis, even as the Washington Consensus begins to unravel: “Global climate negotiations could not be more important for the future of the planet and human civilization. But whenever the issue of climate finance comes up, developing countries are subjected to the same kind of demeaning treatment that the Washington Consensus once prescribed.”
The unspoken narrative underlying the Washington Consensus is that the West must maintain absolute control over the global economy and global security.
Any rising power that challenged the Washington Consensus was immediately confronted. With China, there was a ban on high-tech chips that power AI devices, from electric vehicles to semiconductors. With Russia, it was economic sanctions and the placing of weapons in the hands of Ukraine to degrade Moscow’s military power.
What about India? It is also a rising power. But for Washington, India is still too small to cause the West unnecessary worries. But there will come a time early in the next decade when India’s economy will cross the $10 trillion mark and its military budget will become the third largest in the world. Washington will then turn its full attention to New Delhi.
At present, India is a useful counterweight and outsourced marine gendarme against China in the Indian Ocean Region (IOR). Small pinpricks like the Nijjar and Pannun cases are enough to keep India off balance.
The India Doctrine
However, India presents Washington with a different set of problems than it faces with China and Russia. Unlike them, India is a vibrant democracy. The 2024 Lok Sabha elections have silenced those who criticized India for its ‘backsliding democracy’.
India’s unique geography and demography place it in a special category. It is the route between west and east. The peninsula’s coastline is a geostrategic asset. The development of the Greater Nicobar into a transshipment port in the direct line of East Asian trade could be a game changer.
A space and software power, India’s cohort of developers on Microsoft’s GitHub platform will be the world’s largest by 2027, ahead of the US and China.
The 1989 Washington Consensus was written as the Berlin Wall fell and on the eve of the collapse of the Soviet Union.
As Antara Haldar writes: “The balance of global power is rapidly shifting. The Global South is already the place where most people in the world live; and thanks to the younger population, the future of the world lies here.”
The writer is an editor, author and publisher. The opinions expressed in the above piece are personal and solely those of the author. They do not necessarily reflect the views of Firstpost.
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