The Washington Consensus: Success or Failure - Essay Example

? The Washington Consensus: Success or Failure Introduction The Washington Consensus certainly was the utopia of the late capitalism in the final decade of the last century and in the first decade of the new millennium. The World Bank, International Monetary Fund and US Treasury Department promised heaven for the countries that followed their set of recommendations for economic recovery and reconstruction. In the name of fiscal discipline, Washington Consensus waged a war on the welfare state in Europe and also the welfare polices of many developing countries such as India, Russia and Brazil. The mindless pursuit of policies of Washington Consensus has badly affected the agricultural economy in many countries. Although, Washington Consensus has helped to create a business friendly environment around the world, it has contributed much to the systematic undermining of the welfare state and the weakening of labor vis-a-vis capital. The purpose of the paper is to examine the promises given by Washington Consensus and weigh it against the corresponding results. The Promised Land of Washington Consensus It was Willington (1989) who identified the 10 policy prescriptions which were at the core of the Washington Consensus paradigm and it was intended for mitigating the effects of debt crisis in Latin America. And, the policies were first put into action not in a democracy but in the vicious dictatorship of Pinochet in Chile. The original Washington Consensus was less dogmatic as it “made no attempt to demonstrate the effectiveness of trade liberalisation, privatisation, low tax rates or deregulation of labour markets in reducing debt levels or creating stable growth” (Bakavis, 2009, p.421). Later, the more the Washington Consensus became the official ideology of the global capitalist class, the more it became a market fundamentalist orthodoxy by, for and of the global rich. International finance institutions have played an active role in promoting the Washington policies of liberalization, privatization and globalization through the deregulation of market, especially in Asia, Latin America and Africa. The 1990s saw the unmitigated triumph of the Washington policies in countries such as India, Brazil, Chile, South Africa, and South Korea and so on. However, by 2004, the then World Bank president declared the death of Washington Consensus. It was the result of the increasing pressure from labor unions, indigenous groups and other marginalized sections of the population from many countries. By 2009, facing the growing opposition from organizations such as ILO, the World Bank completely abandoned the use of the deregulation indicator based on Washington Consensus. The 2008 global recession too has contributed much to the demise of Washington Consensus hegemony. Genschel has pointed out the how the Washington Consensus promised to overcome the shortcomings of the welfare state and he asserts that “the welfare state itself was the problem. It systematically encouraged attitudes and expectations that it was not in a position to satisfy. The institutional guarantee that social needs would be taken care of worked as an incentive for people to invent new needs” (2004, p. 614). However, the Washington Consensus has only become an instrument in creating a totalitarian market state. It means that Washington Consensus tried to address the two main issues bought up by the practice of welfarism; the right-sizing of the state and the artificial invention of social needs. However, the policies recommended by the Washington Consensus too encourage the shaping up of a huge security state and artificial creation of market needs such as huge bonuses and bail-outs. The Washington Consensus has given rise to a particular understanding of globalization in which the invisible hand of the unregulated market is the only vehicle of globalization. Capitalism and market strengthened themselves after the historic collapse of Soviet bloc and triumphed over the world. Genschel understands “gloablization was the Western European crisis of the 1990s. The red menace had disappeared with the implosion of the Soviet empire and public attention turned to the dangers connected with the final triumph of capitalism” (2004, p. 613). Faced with no opposition from the Soviet bloc, the Washington Consensus transformed itself into the new market fundamentalism. The Washington Consensus could not create a flat world as it promised. Although, capital mobility is strong in the present world, labor mobility is in the decline. The Washington Consensus did not see welfare state as social entity which is closely linked to the survival of social democracy. Rather, they reduced it merely into an economic institution which is not viable or feasible. Washington Consensus vs. the Welfare State But, the emergence of the far group groups in the America and the Europe was the launching pad for the neoliberal assault on the welfare state and its so-called socialist polices. As part of the praxis of Washington Consensus, the state has abdicated its responsibility to provide universal welfare provisions to the citizens in many countries from across the world. Moreover, more and more market mechanisms are devised for extracting user charges from the people who make use of welfare provisions. It is argued that “welfare pluralism was very much a core element of the Washington Consensus. Despite the talk of the Washington Consensus being ‘dead for years’, the international financial institutions have pushed for welfare pluralism in social services since the 1990s” (Mehrotra and Dellamonica, 2005, p. 141). The private sector is increasingly being a key player in the delivery of many essential services. The liberalization of the economy is often “accompanied, at least in developing countries, by greater acceptance of the role of the private sector (as well as civil society and community organizations) as elements of a formal system of welfare provision” (Mehrotra and Dellamonica, 2005, p. 142). The conception of welfare pluralism, according to Washington Consensus, indicates that state should not be the sole agency to provide welfare measures. It is argued that the failures of the governments in providing basic services, which was caused by complying with the structural adjustment polices of neoliberal capitalism, helped the corporate sector to monopolize key sectors such as education and health. The global collapse of the leftist forces was one of the major reasons behind the coming to prominence of the Washington Consensus. It means that Washington Consensus was completely controlled by the market forces which could endlessly manipulate elected governments. But, Washington Consensus never examined the positive side of the welfare state and propagated only the drawbacks of it. Whatever the drawbacks of the welfare state may be, it had a historically vital role to play. Moreover, it was the only mechanism that really ensured security by saving the nation from civil wars along class and ethnic lines. The Neoliberal God that Failed The policies of Washington Consensus derived much of their strength from the fact that financial assistance from international financial organizations such as IMF and World Bank were depended upon poor countries to abide by the deregulation and disinvestment recommendations. Reforms “such as reducing barriers to imported goods, services and investments; privatising state owned enterprises and services; and generally reducing the role of government in the economy by dismantling regulations over economic activity, including labour regulations” were imposed on financially weak nations based on the threat of withholding essential loans (Bakavis, 2009, p. 421). In other words, market fundamentalism was the philosophy of structural adjustment plan. It persuaded the countries in the global south to adopt the same free market policies championed by Thatcher in the United Kingdom and Reagan in the United States regardless of the social consequences. Needless to say, even countries such as India which marked a high growth rate were devastated by the soaring inequality. In India alone, more than 200,000 farmers committed suicide due to the volatile agrarian economy created by the neoliberal free market regime. Besides, the poverty has driven millions of poor to join the Maoist movement and one third of the territory of the country is now ruled by the Communist Party of India (Maoist). Mexico, Nigeria, Ecuador and many other countries have also faced with growing people’s discontent resulting from the relentless pursuing of the policies of Washington Consensus. If Washington Consensus sought to attack the welfare states in the developed world, it undermined the state formations themselves in the developing world, mainly through the Structural Adjustment Plan. Washington Conesus has given birth to new to technologies of governmnetality. “The ideology of neoliberalism as a new mode of political optimization’, according to Aihwa Ong, ‘is reconfiguring the relationships between governing and the governed, power and knowledge and sovereignty and territoriality’. Furthermore, Ong has shed light on ‘the active, interventionist aspect of neoliberalism in non-Western contexts, where neoliberalism as exception articulates sovereign rule and regimes of citizenship” (Ong, 2006, P.3)(Emphasis original). Especially in the third world, although the state according to the theory of Washington Consensus, in practice, the states followed active intervention by confiscating land and displacing thousands of people for industrial projects. Therefore, it is possible to argue that in the concrete context of the global south, the policies of Washington Consensus negated themselves by relying completely on the repressive state to induce economic growth. It is no exaggeration to say that the practice of the Washington Consensus policies is inherently antithetical to democracy too. Washington Consensus completely destroyed the decades-old welfare state in Europe along with the social democracies there, which were the product of the post World War II consensus and the New Deal. As the Washington Consensus seek to limit the role of the state in the provision of social services, it has radically altered the power structures both in the developed and the developing world. Close observers such as Joseph Stiglitz (1998) have forcefully argued for a Post-Washington Consensus in order to reduces income inequalities and rescue social democracy which is the only alternative to market anarchy. However, Fine (2001) is of the view that there exist no substantial differences between the policy recommendations of Washington Consensus and Post-Washington Consensus. Schwartz argues that Washington Consensus sought to re-examine the notions of property and property rights and he forcefully argues that “globalization and the erosion of the welfare state really should be understood as the erosion of politically based property rights and their related streams of income, and as reactions to that erosion” (2001, 44). In essence, the Washington Consensus effectively pushed the democracy to two centuries back and again reinvented it as based on property rights. Washington Consensus has redefined property rights that could lead to the disinvestment from public companies and the privatization of public wealth and the idea of citizenship is being increasingly detached from popular sovereignty. The Washington Consensus redefines the citizenship in terms of market relations and citizens are merely considered as economic actors and nothing more. The universalisation of Washington Consensus have contributed a lot to the rise of regional powers in the third world but it has led to the creation of mind-boggling regional disparities as well. Conclusion Washington Consensus promised a new economic reality in which countries can live without foreign aid or huge debts through the strict practice of fiscal discipline and spending cuts. However, the results were devastating for the poor people in both developed and developing countries. The Washington Consensus accelerated the concentration of wealth in the hands of the rich and it curtailed social mobility by reducing the life chances for poor and marginalized sections. Washington Consensus has caused havoc in many sectors of the economy such as education, health and agriculture and so on. The much hyped public-private partnerships have give birth to nothing more than controversies and its application in sanitation and water management have brought no successes at all. The international financial organizations apply huge pressure on national governments to open up the markets for foreign direct investment and thereby undermining the national sovereignty politically and economically. References Bakavis, P 2009, ‘The World Bank's doing business report: A last fling for the Washington Consensus?’, European Review of Labour and Research, Vol. 15, pp. 419- 438. Esping-Anderson, G 1996, Welfare States in Transition: National adaptations in global economies (ed), London: Sage publishers. Fine, B 2001, ‘Neither the Washington nor the post-Washington Consensus’, in B. Fine, C. Lapavitsas and J. Pincus (eds) Development Policy in the Twenty-First Century. London: Routledge. Geertz, C 2000, The Interpretation of cultures: Selected essays. New York: Basic Books Genschel, P 2004, ‘Globalization and the welfare state: A retrospective’, Journal of European Public Policy, Vol.11, Vol. 4, pp. 613-636. Mehrotra, S and Dellamonica, E 2005, ‘The private sector and privatization in social services : Is the Washington Consensus ‘dead’?’, Global Social Policy, Vol. 5, No. 2, pp. 141-74 Ong, A 2006, Neoliberalism as Exception; Mutations in Citizenship and Sovereignty, Durham (NC), Duke University Press. Schwartz, H 2001, ‘Round up the usual suspects!: Globalization, domestic politics, and welfare state change’, in Paul Pierson (ed.): The new politics of the welfare state, Oxford: Oxford University Press, pp. 17-44. Stiglitz, J 1998, ‘More instruments and broader goals: Moving toward the Post- Washington Consensus’, World Institute for Development Economics Research (WIDER), Helsinki, Finland. Williamson, J 1989, ‘What Washington Means by Policy Reform’, in J. Williamson (ed.) Latin American Readjustment: How Much has Happened, Washington: Institute for International Economics. Read More