Second part

China’s incredible success in posting an annual gross domestic product growth rate of nearly 10% in four decades (1980-2019) has sparked a debate among Western economists over the superiority of the so-called “Beijing Consensus”. “
on the “Washington Consensus” in Promoting Growth in Developing Countries.

The term Washington Consensus refers to the ideology of economic neoliberalism, which in essence means pure or pure worship on the altar of free trade. Neoliberalism became the dominant economic guide in Washington’s twin loan program (World Bank and IMF) in the 1980s until the turn of the millennium. As pointed out by Dani Rodrik of the Harvard Kennedy School and John Williamson of the Institute for International Economics, the main political elements of the Washington Consensus are:

Trade liberalization,

Openness to foreign investment,

Privatization,

Deregulation,

Financial liberalization,

Competitive exchange rate,

Fiscal discipline (austerity),

Tax reform (broadening of the tax base as evidenced by VAT and e-VAT),

Reorientation of public spending (excluding subsidies), and

Property rights.

The above policies have been incorporated into all of the political conditionalities attached to “structural adjustment loans” (SAL) granted by the World Bank and the IMF to borrowing countries in the years 1980-1990. These policies have been dubbed “structural adjustment programs” (SAP) because the idea was to reshape the orientations, if not the structure, of the entire economy, from an introverted economy to a lean economy. ‘export. As the World Bank explained during the negotiation of the first SAP for the Philippines in 1979-1980, the SAP would trigger a “Complete turnaround” a turnaround that depends on “reducing import protection and expanding export promotion” (World Bank, Industrial development strategy and policies in the Philippines, Report 2513-PH, October 1979).

In short, the goal of the architects of SAP was to further open up the Philippine economy, assuming that SAP would transform the economy into a vibrant and tiger economy. And yet, the opposite has happened.

The SAP software package in the early 1980s was debilitating for the economy. The devaluation of the peso and the tightening measures adopted by the economic team of then Prime Minister Cesar Virata further weakened the economy and accelerated the country’s slide towards recession (1981-1982) and depression (1983-1985 ). The PAS program of agricultural deregulation, which meant the removal of agricultural subsidies, killed the Masagana 99 and the Marcosian dream of a sustainable rice surplus. And the Filipino business community has been deeply hurt by the SAP. Fred Elizalde, president of the Philippine Chamber of Commerce and Industry, openly attacked SAP’s import liberalization program, interest rate deregulation (which made the anti-usury law meaningless) and the restrictive monetary policy. He wrote that the aforementioned SAP conditions were “more than what Philippine industries can withstand under difficult global economic conditions” (Fred Elizalde, “The Commerce and Industry Sector”, Dialogue on the financial situation, Central Bank, 1982).

The series of SAP packages supported by SAL and their implementation under the Aquino, Ramos, Estrada and Arroyo administrations have done little to improve the economic situation of the country. The growth-limiting impact of the SAP (i.e. fiscal austerity, withdrawal of agricultural subsidies, taxation, devaluation of the peso and deregulation of interest rates) has been accompanied by a Another growth killer: the political conditionality imposed by the Washington twins and members of the Philippines Creditor Country Advisory Group (which has been renamed the Philippine Aid Plan group) for the Philippines to honor all debt bequeathed by the Marcos regime and that they faithfully honor this debt, as provided for in the Marcosian presidential decree 1177 against thick and thin. Thus, the SAP decades of the 1980s and 1990s were literally decades lost for the country.

Now back to the Beijing Consensus (BC) versus the Washington Consensus (WC), how do they differ? Is it not a fact that the objectives of the “open door policy” of Deng Xiaoping’s team were twofold: one, to make China outward-facing or export-oriented, and two, to integrate China in the world economic order?

Further analysis of what China did in the 1980s-1990s and continues to do so far shows that the similarity between WC and BC is only related to the dual purpose of orientation towards export and global integration. To achieve these goals, China has not relied on WC ‘market fundamentalisms’, that is, the obsessive belief that the free play of market forces at national and global levels will bring results. desired economic outcomes: more investment, more jobs, more exports and higher growth. WC is trying to cut off the state’s “visible hand” in the market. In contrast, China firmly believed in the role of the state, with the Communist Party at the center, in guiding development. As left-wing commentators around the world say, China’s economic development over the past four decades can be called a “CPP-led capitalist transformation,” although official Chinese propaganda continues to use the phrase “Socialism with Chinese characteristics”.

In the WC vs BC debate, some WC supporters argue that the debate is meaningless because China has simply incorporated part of the WC economic liberalization package and is looking out of BC following it. Deng Xiaoping’s rule: “feel the stones when crossing the river”, that is to say gradually adapt to the market while constantly innovating. However, as more facts and figures about British Columbia pile up, it becomes quite clear that China’s economic model is an expansion of the developmental East Asian state. , an interventionist state which is actively involved not only in the regulation of the market but also, and more especially, by strengthening industrial capacity in a targeted manner, even in areas where the country does not have a “comparative advantage”. Example: Japan did not have CAs in automobile manufacturing in the 1950s, and yet it succeeded in becoming the world leader in automobile manufacturing in the 1970s. Another example: South Korea did not have no CA in the steel industry in the 1960s, yet it became the most efficient steel producer in the 1990s. Development economists call this CA-defying process “Industrial policy,” with an I and a capital P.

More on BC and IP in the next issue.

Dr Rene E. Ofreneo is Professor Emeritus at the University of the Philippines.

For comments, write to [email protected]


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