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Washington Rules Change, Again

Friday, February 17, 2017 0:56
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(Before It's News)

href=
"http://human-wrongs-watch.net//feed/atom/https://human-wrongs-watch.net/"
target="_blank">Human Wrongs Watch

By "Posts by Jomo Kwame Sundaram" href=
"http://www.ipsnews.net/author/jomo-kwame-sundaram/" target=
"_blank">Jomo Kwame Sundaram
*

KUALA LAMPUR, Feb 16
2017 ( "_blank">IPS)
– Over the last four decades, the
Washington Consensus, promoting economic liberalization,
globalization and privatization, reversed four decades of an
earlier period of active state intervention to accelerate and
stabilize more inclusive economic growth, associated with Franklin
Delano Roosevelt and John Maynard Keynes.

"https://i0.wp.com/cdn.ipsnews.net/Library/2017/02/south-south-629x420.jpg"
alt=
"South-south cooperation represents a progressive alternative to the Washington Consensus. Credit: IPS"
width="365" height="244" />

South-south
cooperation represents a progressive alternative to the Washington
Consensus. Credit: IPS

The Golden Age
The US Wall Street Crash of 1929 led to the Great Depression, which
in turn engendered two important policy responses in 1933 with
lasting consequences for generations to come: US President
Roosevelt’s New Deal and the 1933 Glass-Steagal Act. "more-91139">

While massive spending following American entry into the Second
World War was clearly decisive in ending the Depression and for the
wartime boom, the New Deal clearly showed the way forward and
suggested what could be achieved if more public money had been
deployed consistently to revive economic growth.

Michal Kalecki and Keynes provided robust analytical
justification for counter-cyclical fiscal and other policies to
maintain aggregate demand, very much contravening earlier received
wisdom. Post-war decolonization gave birth to the academic field of
development economics from the 1950s, initially pioneered by
Central Europeans striving not to be left behind by the earlier
ascendance of Western Europe and then the United States of America
after its Civil War.

For about a quarter of a century after the end of the Second
World War, the post-war ‘Golden Age’ saw rapid post-war
reconstruction in Western Europe. This was crucially supported by
the generous Marshall Plan, arguably the first, largest and most
successful development cooperation program, triggered by the
beginning of the Cold War.

Similar economic development policies and assistance were
introduced in Japan, Taiwan and South Korea, following the Korean
War and the establishment of the People’s Republic of China.

US Secretary of State General George Marshall understood that
inclusive economic development would help ensure a cordon sanitaire
against the Soviet-led camp.

Thus, thanks to the Cold War, Western Europe and Northeast Asia
recovered quickly, industrialized rapidly and achieved sustained,
rapid growth with interventionist policies which would be widely
condemned by today’s conventional wisdom.

While national economic capacities and capabilities had to be
nurtured to ensure sustainable development, Marshall also
recognized that aid should be truly developmental, not piecemeal or
palliative.

Washington Consensus

The ‘Washington Consensus’ – uniting the American government and
the Bretton Woods institutions located in the US capital city –
emerged from the early 1980s to prescribe neo-liberal economic
policies for developing countries for the ‘counter-revolutions’
against development economics, Keynesian economics and progressive
state interventions.

Macroeconomic policies became narrowly focused on balancing
annual budgets and attaining predictably low inflation – instead of
the earlier post-colonial emphasis on achieving and sustaining
rapid growth and full employment without runaway inflation.

A ‘neo-liberal’ wave of deregulation, privatization and economic
globalization followed, supposedly to boost economic growth.
Economic growth was expected to trickle down to reduce poverty,
with broader sustainable development and inequality concerns
consigned to the garbage bin.

But the Washington Consensus policies not only failed to sustain
economic growth, largely due to the greater instability and
volatility associated with financial liberalization, especially
across borders. But premature trade liberalization also undermined
existing production and export capacities and capabilities without
enabling the development of new ones.

For the poorest countries, the loss of tariff revenue also
undermined government revenues, expenditure and hence, the capacity
to provide badly needed infrastructure, social protection and
support for developmental initiatives.

Globalization’s Contradictory
Discontents

Instead, those developing countries which achieved rapid growth and
structural transformation were typically those which defied
conventional wisdom by adopting pragmatic ‘heterodox’ developmental
economic policies appropriate to their respective circumstances.
Meanwhile, financial and other economic crises of various types
became more frequent and disruptive, undermining sustained
growth.

In the meantime, the more liberal developed economies
experienced spurts of rapid growth as well as greater volatility
and instability while most developed economies became more
vulnerable to institutional stasis as they abandoned Keynesian
policies for neo-liberal policies demanded by markets and their
champions.

With European social democrats turning their backs on Keynes in
favour of neoliberal economics, and often barely distinguishable
from the centre-right in this regard, dissent against economic
liberalization and its discontents moved to the ‘extremes’.

With the left often on the backfoot in most developed economies
for more than a quarter century, it has been the right which has
successfully mobilized against cultural ‘others’ often divided
among themselves.

While the rhetoric of the national chauvinist ‘new right’
rejects globalization and multiculturalism, it also rejects
international solidarity, cooperation and multilateralism. Its
rejection of the neoliberal Washington Consensus does not imply
opposition to contemporary imperialism, but rather threatens a
return to old — and new — forms of domination, economic and
otherwise.

More than ever, it will be crucial for developing countries to
work together, not only to ensure that South-South and ‘triangular’
(with the North) cooperation represents a progressive alternative
to the Washington Consensus and its national chauvinist
successors.

Such solidarity will determine how well the South — and the
world as a whole — will fare during the coming eclipse.

"text-decoration:underline;">
*Author:
  title="Posts by Jomo Kwame Sundaram" href=
"http://www.ipsnews.net/author/jomo-kwame-sundaram/" target=
"_blank">Jomo Kwame Sundaram
, a former economics
professor, was United Nations Assistant Secretary-General for
Economic Development, and received the Wassily Leontief Prize for
Advancing the Frontiers of Economic Thought in
2007.

"text-decoration:underline;"> style="text-decoration:underline;" title=
"Posts by Jomo Kwame Sundaram" href=
"http://www.ipsnews.net/author/jomo-kwame-sundaram/" target=
"_blank">Jomo Kwame Sundaram
‘s article was published in "nofollow" style="text-decoration:underline;" href=
"http://www.ipsnews.net" target="_blank">IPS
. Go to "nofollow" style="text-decoration:underline;" href=
"http://www.ipsnews.net/2017/02/washington-rules-change-again/"
target=
"_blank">Original

2017  "Human Wrongs Watch" href=
"http://human-wrongs-watch.net//feed/atom/https://human-wrongs-watch.net/"
target="_blank">Human Wrongs
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Source: https://human-wrongs-watch.net/2017/02/17/washington-rules-change-again/

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