"A multipolar world necessitates a revision of the Washington consensus"
What should Europe and the US do?
Video comments
Theme Intro
Reinventing Economic and Financial Policy
Erik Jones on Economic and Financial Policy
A multipolar world necessitates a revision of the Washington consensus Go to expert page.
John C. Hulsman on Economic and Financial Policy
A multipolar world necessitates a revision of the Washington consensus Go to expert page.
Session 1 - Clip 7
Erik Jones intro " losing the power of collective action"
Session 1 - Clip 8
"Will the west continue to limp along?"
Session 1 - Clip 14
Is China more important than Europe?
Session 1 - Clip 17
Erik Jones on "leaders and followers, the role of china and global governance'
Session 1 - Clip 24
John Hulsman and Erik Jones on how economics impacts the West's shaping power + China's economic trouble
Session 2 - Clip 2
Erik Jones on difficulties to improve global governance (UN, IMF, Doha)
Session 2 - Clip 11
Erik Jones on the ECB & shifting economic blame
Background
The last 60 years have seen a convergence in global economic policies towards a US dominated “Washington Consensus”, founded on the dollar as the reserve currency. That is, up until 2008, when the financial crisis demonstrated the system’s flaws. The crisis, piles of sovereign debt in Western states, along with the success of new economic giants such as India and China, beg the question whether the Washington consensus has come to an end. Are the emerging powers offering an alternative system for development? As the industrial base and currency reserves have moved overseas, Western economies have become vulnerable. How to create a system of economic and financial security for the West?
Maarten / 30-11-2011 @ 17.56
I think Sanjeev Sanyal's is spot on with his response to those thinking the Dollar is on its way out as the world's reserve currency: "Even if China replaces the US as the world’s largest economy within a decade, an anchor currency can be more resilient than the economic and geopolitical dominance of its country of origin. That is why the dollar will most likely remain the dominant global currency long after the US has been surpassed." See his article on the twitter post of HCSS_RTW
gebladerte / 18-11-2011 @ 16.30
If the Washington Consensus fades, Europe and the US should not just acquiesce to a Beijing Consensus (see Joshua Cooper Ramo's paper with the same title and Ian Bremmer's End of the Free Market). It should direct its influence through institutional reform (IMF) and put their weigth behind compromise solutions in the Doha Round, and organise a Bretton Woods II involving the BRICs.
artur / 15-12-2011 @ 16.36
China is a way more capitalistic country than a lot of countries in the West. Stores are closing at 6pm!? Is this a market economy!? C' mon be serious. What about the freedom to shop whenever you like?
artur / 07-11-2011 @ 22.15
If one decides to look that what the Washington consensus originally meant then it will become quite obvious that it was Washington and Europe that did not follow it: its first point - fiscal policy discipline (see Wikipedia article). In these sense it was Being that followed its prescriptions. In fact China implemented most of reforms advocated by the Washington consensus.
If it is about authoritarian government and rapid economic growth then China again is not the first but the largest Asian country demonstrating that this combination works. When country is poor democracy does not help to economic growth.
What should the West do? To follow the Washington consensus! And focus on the things it can do better than the others - innovate
Ted / 04-11-2011 @ 13.35
Although this does not mean that the Washington Consensus might need revision, I'm not sure whether that is because it is being replaced by an alternative, more authoritarian model. For instance, China's economic growth, even regardless of the social and environmental disruption it causes, is not sustainable. At some point, especially if the west is economically in crisis or decline, China will have to turn to its internal market and stimulate internal demand. This means that they will have to increase wages if they want to keep on growing. However, if they do that, they will lose one of their main competitive advantages in international trade. And this move might also stimulate the rise of a middle class, which will make it increasingly difficult to keep up the authoritarian mode of governance. In other words, China is going to be in big trouble five years from now. While there are good reasons to be critical of the Washington Consensus, other models may not be much better.
Jonne / 21-11-2011 @ 14.12
As the article by Yan Xuetong (see @HCSS_RTW) states, China might be able to adapt and challenge the U.S. on soft power. Its authoritarian model might even benefit it as it allows for quicker reform. It is too early to dismiss the Middle Kingdom!
Frank / 07-11-2011 @ 21.16
As to the appeal of the 'Beijing consensus' versus the 'Washington consensus': let the people decide!
Newspaper article a couple of days ago: "One third of wealthy Chinese worth more than 10 million yuan ($1,573,000) have overseas assets and of them 50 percent have begun proceedings to emigrate, a white paper by the Bank of China (BOC) and the Hurun Research Institute said on Saturday. The United States is the most popular immigration destination for these Chinese millionaires, attracting 40% of the respondents who are interested in leaving China, followed closely by Canada (37%), Singapore, and Europe."
I am not sure about the vice versa numbers. I have heard of quite a number of people who wouldn't mind being posted in China for a couple of years (because of the opportunities, the money, the adventure), but I'd doubt that this propensity amounts to duoble digit percentages of would-be immigrants into China.
Doesn't this indicate the current state of affairs in the 'soft power' beauty contest between China and the West?
Kiona / 04-11-2011 @ 15.04
That's a good perspective. But do you think that the Washington Consensus is therefore better?? Just because the Chinese will be in trouble in a few years from now, doesn't change the fact that the West is getting into trouble right now. Any suggestions/ further comments on that?
PNR / 01-11-2011 @ 15.15
Although I whole heartedly agree that we need leaders who are honest to their people, this is so much easier said than done. Particularly in a number of countries in Europe that have extensive social welfare systems, with a rapidly aging population and declining productivity. The current Eurozone crisis shows how difficult drastic reform can be and how important it is for other countries to make changes before ending up in a similar situation to Greece. How to implement reforms and increase taxes in order to pay for the entailments, particularly for the baby boomers is something that is incredibly challenging, especially since the tax increases will likely impact those that are currently working and benefit those who aren’t or are at the end of their working lives. Reforms hitting the richest of society, including increasing taxes and closing loopholes would be likely one of the best methods and PART of a broad based solution. At the same time, there needs to be honesty with the people that there will be cuts to entitlements across the board, which will be painful but that are necessary. In the end it seems that it is obvious what needs to be done, it is more a matter of who screams the loudest and gets their voice heard, which more often than not has money behind it.
Maarten / 01-11-2011 @ 14.29
I do not think we can expect a new "consensus" to dominate the world economy in the next decades. First, the West is quickly losing its position as hegemon of the global economy. Combined with a crisis that clearly resulted from failing "home grown" economic policies, this will translate into diminished power of dictating global economic rules. In short: non-Western countries will be less likely to follow our example. Second, we no longer live in a world in which the rise of new economic powers is automatically viewed through a "win-win" prism. Instead of offering business opportunities for Western companies, the economic development of the BRICs is more often seen and experienced as damaging our economic interests. Third, rapid developing economies such as China, India, Brazil and so on, actually have widely diverging economic and political interest, making the prospect of an emerging non-Western "consensus" sound unlikely.
In such a "zero-sum world", what we can work on is to create more sustainable economic policies that deal with the problems that got us into this crisis in the first place. I believe we need to focus on reform our welfare state, our financial system, and speed up investment in innovation and education. And this will only be possible if political leaders stand up that are not afraid to explain the short term costs and long term benefits of these policies, and hammer a difficult message home.