Head-on | The end of the Washington Consensus

In an article published by the global syndication agency Project Syndicate, Antara Haldar, who teaches law, economics and philosophy at Cambridge University, argued that the “Washington Consensus” continues to haunt the world.

What exactly is the Washington Consensus? According to Haldar, “The British economist John Williamson in 1989 christened what was to become the defining intellectual export of the era of globalisation as the Washington Consensus. Initially a reference to the policies adopted to tackle macroeconomic turmoil in Latin America, the term quickly morphed into a canonical ‘ten commandments’ of development.”

Those ten commandments don’t work anymore. Indeed, it’s arguable that they ever worked in the past. Globalisation, a key feature of the Washington Consensus, has allowed China to become the world’s most advanced technological power, ahead in many domains of the United States. Latin American economies continue to suffer bouts of hyper-inflation, stagnant growth and political violence despite — indeed because of — Western intervention through the IMF and World Bank.

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Europe has peaked. Countries like Britain, France, Spain and Portugal can no longer balance their books with tax revenue 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 dissatisfaction? Do some of the Global South’s core features — such as its relatively more communitarian cultures — make it better suited to a leadership role in the current era? And most importantly, what even is the goal of development?

“The Washington Consensus never had any time for such questions, and its ghost continues to impede the emergence of a new development paradigm based on cultural contexts and human cognition.”

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In 2009, British Prime Minister Gordon Brown pronounced the Washington Consensus dead. The 2008 global financial crisis had singed the world but the fires were lit in the capitals of the West: New York, London and Paris.

By 2009 too, the Western agenda to encircle Russia with new NATO member-states was almost complete.

At the Munich Security Conference in 2007, Russian President Vladimir Putin had warned a galaxy of Western military, security, diplomatic and political leaders that Washington had broken its pledge to not expand NATO into Eastern Europe. There would, he said, be consequences.

This is what Putin told his audience in Munich in 2007: “I think it is obvious that NATO expansion does not have any relation with the modernisation of the Alliance itself or with ensuring security in Europe. On the contrary it represents a serious provocation that reduces the level of mutual trust. And we have the right to ask: against whom is this expansion intended? And what happened to the assurances our western partners made after the dissolution of the Warsaw Pact? Where are those declarations today? No one even remembers them.

“But I will allow myself to remind this audience what was said. I would like to quote the speech of NATO General Secretary Mr. Woerner in Brussels on 17 May 1990. He said at the time: ‘The fact that we are ready not to place a NATO army outside of German territory gives the Soviet Union a firm security 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 too wanted to Europeanise itself and even briefly considered applying for membership of the European Union (EU).

When the eastward expansion of NATO continued unabated, however, Putin annexed Crimea in 2014 to protect Russia’s Black Sea fleet.

The West immediately expelled Russia from the G8 which reverted to the G7.

Climate of change

Haldar raises an important issue on how the West has approached the crisis of climate change even as the Washington Consensus starts falling apart: “Global climate negotiations could not be more important for the future of the planet and human civilisation. Yet whenever the question of climate finance arises, developing countries are subjected to the same kind of humiliating treatment that the Washington Consensus once prescribed.”

The unspoken narrative underpinning the Washington Consensus is that the West must remain in absolute control of the global economy and global security.

Any rising power that challenged the Washington Consensus was immediately confronted. With China, it was a ban on high-tech chips that power AI devices from EVs to semiconductors. With Russia it was economic sanctions and placing weapons in Ukraine’s hands to degrade Moscow’s military power.

What about India? It too is a rising power. But for Washington India is still too small to cause the West undue worry. But a time will come, early in the next decade, when India’s economy crosses $10 trillion and its military budget becomes the world’s third largest. Washington will then turn its full attention to New Delhi.

For the moment, India is a useful counterweight and outsourced marine gendarme against China in the Indian Ocean Region (IOR). Minor pinpricks like the Nijjar and Pannun cases are sufficient to keep India off-balance.

The India doctrine

India, however, 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 election has silenced those who harangued India for its “backsliding democracy”.

India’s unique geography and demography put it in a special category. It is the pathway between west and east. Its peninsular coastline is a geostrategic asset. The development of the Great Nicobar into a transhipment port in the direct line of east Asian trade could be a game-changer.

A space and software power, India’s developer cohort on Microsoft’s GitHub platform is set to be the largest in the world, ahead of the US and China, by 2027.

The 1989 Washington Consensus was written when the Berlin Wall fell and on the eve of the collapse of the Soviet Union.

As Antara Haldar writes: “The balance of world power is rapidly shifting. The Global South is already where most of the world’s people live; and by dint of its younger population, it is where the world’s future lies.”

The writer is an editor, author and publisher. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.