The Liberal Values of Washington Consensuses - Term Paper Example

Current Regulation of World Trade reflecting neo-liberal values of 'Washington consensuses' Introduction The word 'Washington Consensus is at present a very popular and a general term pilloried in debates of trade and development. In simple words it is a synonym of 'globalization' and 'neoliberalism'. According to John Williamson the originator of this phrase, the people world over believe that it indicates a set of neoliberal policies that are imposed on unfortunate countries by the International Financial Institutions based in Washington. This has led them to misery and crisis. Individuals are there, who without foaming at the mouth cannot utter this term. The phrase 'Washington Consensus' was initially created in the year 1990 by Williamson. It referred to least common denominator of the policy advice that was being addressed by the Institutions base in Washington to the Latin American countries of the year 1989. The policies were redirecting public expenditure priorities toward the fields that offered both economic and high returns and the prospective to enhance income distributions such as primary education, primary health care and infrastructure, fiscal discipline, competitive exchange rate, interest rate liberalization, privatization, tax reform in order to broaden the tax base and lower marginal rates, trade liberalization, secure property rights, deregulation in order to eradicate barriers to entry and exit and liberalization of foreign direct investment inflows. Ever since, this has been a term of dissatisfaction amongst the developing countries politician, anti-globalization protestors, trade negotiators, officials and others. 'Washington Consensus' is an interchangeable word with "neoliberal policies". However, Williamson has defined 'Washington Consensus' as Some of the most vociferous of today's critics of what they call the Washington Consensus, most prominently Joe Steiglitz... do not object so much to the agenda laid out above as to the neoliberalism that they interpret the term as implying. I of course never intended my term to imply policies like capital account liberalization...monetarism, supply-side economics, or a minimal state (getting the state out of welfare provision and income redistribution), which I think of as the quintessentially neoliberal ideas (Williamson, John 2002). It indicates clearly that the meaning of this term is not even in the control of other economist such as Williamson. The Editor of Foreign policy Moses Naim argues that such consensuses do not exist. The fact highlighted by Naim is that most of the economists are divided over the issues such as East Asian Crisis, effectiveness of open trade policies and need for International Financial Architecture. An argument always follows Washington Consensus, whether it is its success, its failure, or its existence. However, the policy components as defined for Washington Consensus are related to trade policy (Global Trade Negotiations Home Page 2003). Neo-liberalism It is a theory of political economic practise that recommend that the betterment of human-being can be developed by liberating the entrepreneurial freedom of individuals and skills that are characterized by strong free markets, private property rights and free trade within the institutional framework. It is the role of the state to build and protect an institutional framework pertinent to such practices. The integrity and quality of the money for instance is to be guaranteed by the state. The defence, military, police and legal functions and structures essential to protect the private property rights and to guarantee if need be by force, the appropriate functioning of markets need to be set up. Moreover, if there is inexistence of markets in areas such as water, land, education, social security, environmental pollution or health care, then they have to be created if necessary by state action. However, the intervention of the State in market as it is created should be to its minimum. According to the theory, adequate information cannot be possibly possessed by the state to the market signal that is price and as it will be distorted by powerful interest group and bias the intervention of the state, especially in democracies for their own advantages. (Harvey, David 2007). Feature of neo-liberalism, in general, is to expand the market and desire to intensify, increase the frequency, number, formalization and repeatability of transactions. The crucial goal of neo-liberalism is a universe wherein every action of every individual is a trade transaction, performed in competition with the other individual and influence every transaction, with the transactions that occur in infinitely shorter time period and reiterate at an infinitely rapid rate (Neoliberalism: Origins, Theory, Definition 2005). World Trade Organisation As a result of General Agreement on Tariffs and Trade (GATT) negotiations, the rise of World Trade Organization (WTO) was established in the year 1995. It is central to the development of global governance. The concern of WTO is to build a world trade system into a predictable and uniform arena for the world nations and businesses. Streamlining the trade policies of the nation-states, reducing barriers to trade among nation-states and resolving trading disputes are the responsibilities of WTO. It plays a significant role in preserving intellectual patents, rights and so forth. The World Bank and International Monetary Fund (IMF) also play a significant role in global governance. The IMF tries to make International economy more translucent by imposing rules and is a lender to the countries that are undergoing financial crisis. The World Bank reduces poverty to balance or diminish social division that may counterbalance the global integration of economies. Since, the commencement of Westphalian International System that is International state system established in 1648 by Peace of Westphalia treaty as a defining feature of policy with the state sovereignty, the state has played a significant role in the system. The ideological cover of neo-liberal (deemphasizing the traditional liberal doctrine to get development by practical methods is accomplished due the growth of globalization. The role of state in the International system has undergone a drastic change. The ideology of neo-liberal states that market by it is a very significant institution (Christensen, Karen & Levinson, David 2003). Most of the present arrangements of regional integration include preferential trade liberalization agreement amongst the countries participation and under GATT article 24 are exempted from the rules of World Trade Organization that the preferential agreements needs to be extended to all the trading partners. As the regional trading blocs are sanctioned under the rules of WTO concerning the protection of "global" open trading system the regional trade agreements may be regarded as a stepping stone towards globalization. Similarly many of the arrangements of regional integration around the globe have adopted neo-liberal values and polices, thus embracing the market ideology on collective scale that reflects a convergence of system of dominant ideas to be created within the World Trade Organization and other International Institutions (Farazmand, Ali & Pinkowski, Jack 2006). After "Washington Consensus" To spread democracy is a rallying cry of Washington Consensus. The phrase "Washington Consensus" claims that global neo-liberalism and economic control of periphery of core financial capital and the whole world by means of World Trade Organization and International Monetary Fund is a realistic alternative to disaster and misery. For the antiwar and anti-globalization movements this doctrine that they acknowledge to spread democracy is window dressing for global dictatorship of United States and core corporate governing privileged. Neo-liberalism has failed in its announced objectives. It has not brought rapid economic growth, made economies more stable and reduced poverty. On the other hand, poverty has increased, growth has slowed, financial and economic crisis have been epidemic. However, Neo-liberalism has succeeded as a capital class project. It has raised the dominance of International financiers, translational corporations and sectors of local elites. The acceptance that the phrase neo-liberalism has not succeeded in terms of its announced objectives has forced the proponents to strategic retreat. That is defending wide propel of neo-liberal policy agenda under the cover of "reform". The effect is an improved Washington Consensus that blame does not blame the transnational capital or International Institutions but the client states for the failure of neo-liberalism. Even though the neo-liberal policies have compressed their standard, the global economic growth rate has slowed. The financial liberalization has caused financial crisis in most of World economies instead of increasing economic stability. A study conducted by IMF indicated that of the total 188 countries 133 members went through minimum one crisis that involved significant banking sector intricacy during 1980 - 1995. Over 100 episodes of banking sector insolvency were identified by World Bank in nearly 90 developing countries including former communist nations from 1970 - 1994. These years of financial crises were when IMF has imposed financial liberalization. The "Washington Consensus" calls fro financial and trade liberalization, deregulation, privatization, lower taxes, direct investment, openness to foreign direct investment, smaller government, competitive exchange rate, none of this could lead reasonably to mass prosperity. The failure of neo-liberalism to stimulate development, generate greater economic stability or produce a decline in poverty has resulted in an augmented Washington Consensus (Tabb, William 2003). The Uruguay Round conclusion of trade negotiation observed the WTO replace the GATT with significantly broadened scope to ostensibly trade related matters and enhanced powers. The WTO has built and strengthened means and methods for disagreement settlement that support corporate interests and governments of rich country that can afford lobbying and legal resources to pursue and progress their interest. The trade agenda of WTO has widened from GATT's focus on manufactures to comprise the service giving improved consideration to agriculture (Jomo K. S. 2005). Reference Christensen, Karen & Levinson, David. Encyclopaedia of Community: From the Village to the Virtual World. Publisher Sage. 2003. 556 Pg Farazmand, Ali & Pinkowski, Jack. Handbook Of Globalization, Governance, And Public Administration. Published by CRC Press. 2006. 216 Pg Harvey, David. A Brief History of Neoliberalism. Published by Oxford University Press, 2007. 2 Pg Jomo K. S. Economic Reform for Whom Beyond The Washington Consensus. Post- Autistic Economics Review (2005). Issue no. 35. Article 2. Viewed on 15th April 2009 Neoliberalism. Neoliberalism: Origins, Theory, Definition (2005). Viewed on 15th April 2009< http://web.inter.nl.net/users/Paul.Treanor/neoliberalism.html > Tabb, William. After Neoliberalism. Montly Review. Volume 55: Number 2. Viewed on 15th April 2009< http://www.monthlyreview.org/0603tabb.htm> Williamson, John. "Did the Washington Consensus Fail" Outline of Remarks at CSIS. Washington DC: Institute for International Economics. 2002. Washington Consensus. Global Trade Negotiations Home Page (2003). Viewed on 15h April 2009 Read More