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article imageOp-Ed: The Washington Consensus: Sharks Feasting

By Bill Jencks     Feb 5, 2009 in World
We all know the IMF, WTO and the World Bank institutions well. Or do we? What are their rules, policies and covenants and who is their real Master? And how good is their record? This article might surprise you...
Real evidence is hard to come-by on The Washington Consensus. This economic and political muscle game is not so visible, the US media are so aptly controlled here too, always successfully steering their reader's course away from the truth effortlessly, so meager and one-sided in its incomplete "opinions"(which are no adequate default for complete facts) projecting this bias into presumed bright and shiny economic days, and into the heady, refreshing wash and spray of free market fundamentalism belief and fair economic treatment for all countries - but all these media transmitters steering well away from the actual reportage concerning the economic carnage and ruthless suppression of the poorer under-developed economies - and all this purely for economic as well as political advantage. Is it any wonder then, that the likes of leaders such as Cuba's ex President Castro, Venezuelan President Chavez, Evo Morales of Bolivia, Rafael Correa of Ecuador and Nestor Kirchner of Argentina all repudiate the Washington Consensus in their policies now ? Under advice from the World Bank(according to its rules) Malawi's government attempted to remove its fertilizer subsidies and grow cash crops instead. For the next thirteen years Malawi suffered on the verge of famine until their leader - Bingu wa Mutharika - decided to reverse World Bank Policy and re-implement fertilizer subsidies and Malawi's agriculture recovered quickly.
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Most of my facts and references are gleaned from several sources - Wikipedia, Harvard Centre for International Resources, Paul Krugman, Stigliz in Defiance of the Washington Consensus are amongst them. So, that's one well respected encyclopedic resource together with the opinions of two Nobel Prize winning economic commentators one of whom was Chief Economist and Vice President of the World Bank. But perhaps my biggest reference(Having just read it) is a great book called Super Imperialism: The Economic Strategy of American Empire - a wonderful book by Michael Hudson, who is an an applied as well as an academic US economist of some repute and who is also the author of Global Fracture: The New International Economic Order and The Fictitious Economy.
So what is the Washington Consensus then? The Washington Consensus was invented in the depths of his garage on a dreary, wet Sunday in 1989 by John Williamson, and is a list of ten economic policy prescriptions that constitute standard reform packages that were meant to "stabilize, privatize and liberalize" economically crisis-wracked under-developed countries. It still applies today. Here are the tenets of the Washington Consensus():
1. Fiscal discipline
2. A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure
3. Tax reform (to lower marginal rates and broaden the tax base)
4. Interest rate liberalization
5. A competitive exchange rate
6. Trade liberalization
7. Liberalization of inflows of foreign direct investment
8. Privatization
9. Deregulation (to abolish barriers to entry and exit)
10.Secure property rights
On inspection, there appears nothing wrong with these wonderful tenets.However, this is just on the surface, but if you take a peek under the hood and ask questions and investigate - you will realize that it very much depends on how these tenets are interpreted and applied. These so-called tenets were incorporated very quickly - much to the glee of the US Treasury and without any voting or "consensus" at all - into other US economic agency tentacles such as the WTO, IMF and World Bank. And these tenets were not just simple mission statements - suddenly they had become the rules.
Here is Michael Hudson's assessment from his book:
"World Commerce has been directed by an unprecedented intrusion in government planning, coordinated by the World Bank and the IMF and what has come to be called The Washington Consensus. It's objective is to supply the United States with enough oil, copper and other raw materials to produce chronic oversupply sufficient to hold down their world price. The exception to this rule is grain and other agricultural products that are exported from the United States, in which case relatively high world prices are desired. If foreign governments are still able to run payment surpluses under these conditions, as have the oil exporting countries[...and recently China, Russia], their governments are to use these proceeds[..Read forced to use their Dollar reserves] to buy US arms or invest in ill-liquid investments such as non-marketable US Treasury obligations. All initiative is to remain with Washington Consensus planners."
What's being said here - in a logical and well-reasoned explanation - is all fairly clear and obvious now. Forget the original, stirring, heart-thumping tenets of the Washington Consensus - it's just cover for media use. Here - plainly - is the real interpretation of these rules in a prime example of The Economic Advantage Play on a massive World scale by the US government. And I think we can now safely dump all this noble and high-falutin' free market fundamentalism drivel and throw it out with the rest of the trash, don't you think?
And here is a another simple example which might be interpreted as "One economic rule for you, but we can do what we like in the markets...and, hey, don't copy us or else." from Michael Hudson's book.
"But today's [US] government policies abroad ultimately are controlled by US Government planners and the Washington Consensus they impose via the international organizations they dominate[WTO, IMF and World Bank]. The demand for free trade and dollarization of foreign debts is essentially a demand by the US Government that other governments remain passive rather than adopting US-style market regulation."
To keep this article shorter - here are some further reasons to despise the Washington Consensus(all referenced from Michael Hudson's book):
Gross political interference via the rules of the WTO, IMF and World Bank organizations, in the politics of under-developed countries - by only encouraging and only allowing anti-Socialist government policies. What business is it for the US government to determine any other country's form of politics or government ? Is this an exercise in True Democracy and Political Freedoms ?
Compulsory banishment of all free-trade barriers and tariffs within these under-developed countries. Ah, here we have that wonderful whiff and stench of so-called free market fundamentalism again. Trouble is, America has lots of tariffs and trade barriers - especially on its agricultural products.
Promotion of the privatization of essential utilities and resources within these under-developed countries - such as the Water, Electric, Telephone, Food Commodities, Oil and the Medical sectors. This allows American companies to slither in, take over and make some dosh. Needless to say, the poor local population can't afford any of these utilities or resources now because they're all foreign controlled and way too expensive. Can this policy really been defined as helping the country or their local population ?
Big US business is allowed to move in and operate on cheap foreign soil, with the advantages of less environmental restrictions, of low taxes, no interfering unions to speak of and dirt cheap slave labour. All this, to get an unfair competitive edge. And all part of the not so honourable Washington Consensus. Examples - Intel, Texas Instruments, Pepsi, Coca Cola etc - the list would fill a book.
Forcing these poor under-developed countries to follow the rest of the world's passive Boy Scout economies - encouraging the formation of a National dollar reserve - and thereby, with this new fiscal dependency, being forced to purchase US Treasuries - in order to help promote and pay for America's massive Fiscal Debt of $65 trillion dollars. Forcing a poor under-developed country to help pay for America's Fiscal Debt? What is that ?
I've done my best here to highlight and set straight some views that I've found to be somewhat peculiar in the US media. Where the US government is always painted as the good guy economically or politically. Much fluff and outrage has been broadcast and written about in the recent Chinese undervalued Yuan squabble with the US government, with the American Media angrily screeching "Unfair Economic Advantage"!! - This outrage pales somewhat into insignificance in light of the way the US government has long been sucking the fiscal lifeblood out of all dollar-reserve holding countries - including China, who holds truckloads of Treasury Debt in her dollar reserve(thus helping America to fund her own $65 trillion Fiscal Debt), since the late 80s, wouldn't you say ?
Any more doubters to these views on the Washington Consensus? Well OK, here is more evidence - a piece of reverse logic if you will. If you scan the current Asian economies today, which economies are doing the worst ? Countries like Indonesia, The Philippines, Thailand, Vietnam, Cambodia, Malaysia etc. aren't doing so well, very slow and troubled economic and political development some would say. Now turn it around and ask - Which countries are doing well in Asia economically now ? Two certainly come to mind - China and India. Both these economies are simply rocketing up that greasy economic pole to riches aren't they ? Now the final question - Which of these two groups are are only junior or partial members of the WTO? The answer is China and India(Russia is also not a member of the WTO - and look how well they've been doing). But wait a minute, what about all those other Asian countries who are all members of these agencies?...I thought these US agencies were meant to help under-developed countries? So how come China and India have done so well and so quickly virtually on their own?
There is only one answer to this.
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This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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