« Bob Geldof for Africa at the London G20 Summit: Not a bad day of work — or Is Aid Dead? | Main | Obama, EEUU y la Cumbre de las Américas »
The End of Ideology: G20 from Washington to London to New York
By Kaufmann | April 9, 2009 No Comments »
Imagine the world powers declaring the ‘Washington Consensus’ dead while at the same time mightily empowering a key institution involved in the Economic Consensus mantra, which ruled since the early 1990s) — namely the International Monetary Fund (IMF).
Imagine the same heads of state of the most powerful countries on earth being very close to reaching closure on a major Communiqué during their official deliberations last week in London, yet being held up by one contentious issue late in their proceedings, namely the crackdown and ‘naming and shaming’ of tax havens…
And imagine many of these world powers trumpeting and implementing very Keynesian expansionary fiscal policies through massive government stimulus packages, while at the same time extolling (at least in words and paper) the benefits of free trade and less protectionist intervention. Conversely, imagine these same world powers agreeing to a very interventionist policies regarding ownership and regulation in the financial sector.
All the above, simultaneously, was being played out at the G20 London Summit last Thursday. Put it all together, and it clearly signals the end of ideology, the demise of economic dogma, and the advent of a more pragmatic era in economic policy-making.
We can expect that an era of more circumspection and humility is in the offing, pragmatically recognizing that pure models or ideology –in either extreme of the spectrum– did not result in optimal policy outcomes.
Within such pragmatic approach, the expectation is that countries will tend to converge towards a ‘market-friendly’ strategies, which recognize the important role of government but instead of supplanting markets, it would complement it. The details will vary across settings, as countries will tailor their strategies and policies to their particular needs and polity. Do not expect all-mighty supranational economic or financial institutions to rule, rhetoric notwithstanding.
It was thus clear from the London Summit’s that the main economic and financial policy challenges and debates of the day are not longer a matter of economic ideology. Even a key pending challenge which the G20 has been reticent to address explicitly, namely the problems of governance, corruption and capture, are not a a question of ideology.
Instead, the reticence to explicitly acknowledge and act on this challenge, which is still largely shared around powerful countries, is related to political sensitivities and vested interests. [As an aside, the evidence suggests that the average quality and variation in governance performance and corruption control is very similar across left- and right-of-center regime...].
One of the announcements at the end of the G20 London Summit was about the next such Summit: evidently New York in the Fall. Given how prevalent these governance challenges played out in the now diminished Wall Street, it may only be fitting that finally the problems of capture, corruption and governance are explicitly tackled in time for forging a ‘New York Consensus’.
I discuss this ‘end of ideology’ theme in this brief piece that has just been posted as a Brookings commentary.
* Note: the “Washington Consensus” term was coined by John Williamson, who emphasized three ‘bid ideas’: macro-economic discipline, a market economy, and openness to the world. Specifically, the ‘Consensus’ encapsulated ten policy principles:
1. Fiscal Discipline
2. Public Expenditure Reform: from indiscriminate subsidies to basic services
3. Tax Reform: broader tax base & moderate tax rates
4. Liberalized Interest Rates
5. Competitive Exchange Rates
6. Trade Liberalization
7. Liberalized Inward Foreign Direct Investment (FDI)
8. Privatization of State-owned Enterprises
9. Deregulation
10. Property Rights Protection
Topics: Corruption, G-20, capture, financial crisis | | Read and Submit Comments