Opinion Sur
In 1989, economist John Williamson spoke for the first time of the “Washington Consensus” to refer to the ideas or principles of economic policy that should be followed by those countries that wanted to be welcomed and supported by the institutions that have their headquarters in the US capital: International Monetary Fund, World Bank, or the United States Treasury. These principles constituted the neoliberal orthodoxy that is well known: privatizations, reduction of social expenditures and taxes, full external opening, freedom of capital movements, deregulation…
As I explained in more detail in my recent book Más difícil todavía, the crisis that was brewing in 2019 and then the impact of covid-19 have forced us to recognize, already openly, that these policies of the neoliberal Washington Consensus were literally useless to continue addressing the problems that they themselves had generated: growing financial vulnerability, hyper-globalization that generates too much insecurity and permanent blockades, uncontrolled climate change, gigantic and unsustainable debt and enormous inequality that produces very dangerous social tensions.
The political leaders of the United States have been ahead in acknowledging this failure and in recent weeks declarations have been lavished that already expressly advocate the implementation of a new Washington Consensus.
It was done recently by Secretary of the Treasury Yanet Yellen and on April 27 by National Security Advisor Jake Sullivan.
The latter gave a speech in which he pointed out the new challenges facing the United States and the strategy to face them that is a real amendment to the totality of the neoliberal policies of the last 40 years.
Sullivan points out that the United States cannot continue to defend its strategic interests by assuming principles that reality has shown do not work. Specifically, that “markets always allocate capital productively and efficiently”, that “all growth was good growth”, that “economic integration would make nations more responsible and open” or that private industry is prepared on its own “to make the necessary investments to secure our national ambitions”.
The application of those principles, Sullivan points out, has left the United States with a hollowed-out industry that prevents it from innovating in cutting-edge technologies and thriving, a dangerous economic dependence on China, a climate crisis, and a democracy damaged by inequality.
From this recognition of the situation, Sullivan poses four major challenges that define a strategic framework completely different from the neoliberal one.
The first is to put in place a national industrial policy that brings resources to sectors “critical to economic growth” and “strategic from a national security perspective” on the basis, already mentioned, that this cannot be done by either the market or private industry alone, but that a large amount of public investment will be necessary.
The second is based on “working with our partners to ensure that they are also building capacity, resilience, and inclusion” and, to do so, developing a new kind of economic integration because, Sullivan says, “the economic dependencies that had accumulated over decades of liberalization had become really dangerous” for the United States. In this regard, he quotes, very significantly, the recent words of the ambassador and Trade Representative of the United States, Katherine Tai: “We have not sworn to market liberalization.”
The third challenge it poses is to tackle climate change without sacrificing economic growth but, on the contrary, by moving towards a fair and efficient energy transition with “deliberate and practical investment to boost innovation, reduce costs, and create good jobs”.
The last challenge is that of “inequality and its damage to democracy” because “the gains from trade … they didn’t reach many workers… while the rich did better than ever.” Bearing in mind, Sullivan notes, that the drivers of great inequality have been clear: “regressive tax cuts, deep cuts to public investment, unchecked corporate concentration, and active measures to undermine the labor movement that initially built the American middle class.”
The global strategy that would try to respond to these challenges is much more than innovative in its theoretical approach and completely turns neoliberal theses on its head. This is how it is when he speaks, for example, of eliminating “corporate tax havens”; ‘improving labor and environmental protections’; ‘tackling corruption’; “strengthening labor and environmental rights”; “addressing debt distress” to see “genuine relief” and that “all official and private bilateral creditors share the burden.”
Sullivan says that the success of such a strategy is based on assuming that “the world needs an international economic system that works for our wage earners, that works for our industries, that works for our climate, that works for our national security, and that works for the poorest and most vulnerable countries in the world.” In my opinion, there are some reasons why we do not think that this will be possible.
The first is quite elementary. As long as the extraordinary degree of polarization in the United States persists, it will be impossible to carry out all the measures that would need to be implemented in a strategy of this nature. Most of the international or even national measures of that strategy need the support of the Republican Party, and that is virtually impossible to happen.
The second reason that makes it very difficult for the United States to redesign a strategy capable of becoming an international consensus is that it is based on the isolation of China and even on the declaration of a real trade war, as has almost begun to happen with the establishment of export and import controls. And it is very naïve to believe that only the two powers will be involved in this conflict. On the contrary, it will provoke the beginning of a new bloc economy (actually already initiated after the invasion of Ukraine).
In this last sense, there can be no illusions. With the economic power and political influence of China, the only possibility that the United States has to carry out an industrial strategy such as the one explained above, based on overcoming the Asian giant, is based on involving it in a military conflict, since this is the only area in which it has clear superiority. Ultimately, in a direct conflict, because of Taiwan, and if not, in other indirect ones that weaken China or its potential allies, as is now the case with Ukraine. Unfortunately, the horizon that can be expected is not that of international cooperation and integration, but that of more arms and wars.
The third reason may not be so strong. Biden’s strategy, although Sullivan tries to disguise it in his speech because these things are not publicly declared, requires the European Union to accept a position of clear subsidiarity and dependence on the industrial, technological, and geopolitical interests of the United States. Something that is perhaps more within its reach, since it has already begun to be achieved after the war in Ukraine, and because the great American power has the collaboration of Poland, whose present and future role in Europe is still not being talked about much.
Finally, there is a reason that I have laid out in detail in my book Más difícil todavía. Although the discourse of the current Democratic administration on the costs of neoliberalism and the lack of realism of its theoretical approach is accurate and pragmatic, it is by no means the one assumed by large corporations, international banks, and the all-powerful investment funds. They are making more money than ever, they have the power they never dreamed of achieving, there is no force on the planet that can alter their decisions, they dominate everything … what need do they have to do experiments?
There will be a change of strategy in Washington, but not a new international consensus. Quite the opposite.
Published in Other News May 12, 2023
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