The Washington Consensus is no longer the standard of international development, and China is to blame. China’s meteoric rise casts doubts on traditional Western development theory. Moreover, the developing world believes that China is on track to unseat the United States as the world’s leading superpower. How can the United States counteract China’s growing influence, while ensuring that U.S. policies remain relevant and appealing to developing countries?
After over half a century of expensive, ineffective, and largely unpopular U.S. development policies, it is time to reevaluate and consider a new approach. The best way for the United States to reestablish itself as a leader in the development sector is to find space to work with China. Policymakers need to create a hybrid model that incorporates the gradual approach to reform from the Chinese model with the economic liberalization groundwork of the U.S. model. This new model will facilitate robust and sustainable development.
Developing nations consistently express frustration with the complexity of the Washington Consensus. The Washington Consensus label was coined in 1989 by economist John Williamson in, Latin American Adjustment: How Much Has Happened? In this book, Williamson lays out ten policy prescriptions to address Latin American development following the financial crises of the 1980s. This term evolved to encompass the much broader history of neoliberalism that serves as the ideological basis of the modern Western aid regime, and these policies are what explain modern-day frustrations with U.S. development strategies
Western development theory is too slow and inflexible to be practical, and countries feel that each step threatens to trip them up and prevent them from crossing the finish line towards a stable economy. By contrast, the Chinese aid model allows for gradual reform through a constant process of trial and error. It was not the laissez-faire approach of the West but meticulous management by the state that brought China consistent growth and allowed the Chinese economy to blossom into one of the most influential in the world.
Limiting the role of the state in the functioning of the economy is a major component of Western development theory. While this limitation is meant to prevent any extreme protectionism or other actions that can artificially distort market performance, for nations with a limited history of development, it often has the adverse effect of creating undiversified economies that are even more subject to financial collapse. Allowing the state to intervene in the economy, particularly in the early stages of development, can provide developing nations with the stability needed to explore the economic, political, and social factors that will allow them to be the most competitive in the global market. India’s dramatic turnaround in recent years can be attributed to the government’s painstaking monitoring and involvement in major sectors of the economy.
It is true that, despite two decades of impressive growth, many fear that China’s recent economic distress highlights the danger of a development strategy that pursues aggressive growth without institutional development. However, China’s problems only serve to strengthen the logic of adopting a new, hybrid model: its slowdown is directly linked to policies around deregulation and privatization that constrain the state. Thus, a combination of the Western and Chinese models has the potential to be revolutionary for sustained development. So, how does the U.S. development community begin to bridge the gap?
First, the United States needs to admit that the Washington Consensus is based on an outdated set of policies with few examples of successful implementation. In fact, many countries that exhibited impressive growth – India, China, and Ethiopia – did so by pursuing policies in direct contrast to those of the Consensus.
Second, the United States should express the need for collaboration with China in the creation of new development policies, allowing China the opportunity to say that it got something right. Such a formal acknowledgement would go a long way towards convincing the Chinese to meet the United States somewhere in the middle, and China would also get to play a central role in bringing the world closer to achieving the 2030 Sustainable Development Goals.
Undoubtedly, the biggest challenge to this approach will be convincing policymakers on both sides to look past some of their political differences. The U.S. development community frequently levels claims of a “new era of colonialism” when speaking of China’s growing influence in many resource-rich countries throughout Africa and Latin America. Chinese officials, on the other hand, have been able to cultivate strong relationships in the developing world by capitalizing on growing impatience with the Western aid programs.
Indeed finding a way for development policymakers to play nice will be no small feat, but it must be done – particularly if it is in the name of making the world a more stable place. The past few years have exhibited a new era of opportunity in Sino-U.S. relations. Just a few years ago, it seemed impossible that China and the United States would agree on environmental preservation, yet these countries stand together on the verge of creating some of the most forward-thinking climate change policy in the world. Both sides stand to achieve significant gains by working with, and not against, each other.
After policymakers come to terms with the necessity of collaboration, it will be time to find creative ways to combine the successful elements of both development models. The key aspects of each model complement each other almost perfectly. The flexibility of (limited) state intervention coupled with a strong framework for economic liberalization provides a solution for both a short-term desire for growth and the framework for long-term sustainability. Such a blend encompasses the balancing act of development.
For the United States, working with China will allow development work to be more appealing to the developing world, and for China, working with the United States will lead to the creation of innovative development policies that can restore dynamic and sustainable domestic growth. By working together perhaps the two countries can achieve something else that was also thought impossible – creating a more holistic and sustainable approach to global development.
Hyacinth McKinley is a second year graduate student at the Elliott School of International Affairs, pursuing a degree in International Affairs with a regional concentration on Asia. She currently works at a membership association for some of the world’s most prominent non-profit organizations. She can be reached at firstname.lastname@example.org