Robin Jourdan a member of our Emerging Fellows program examines liberal economics in the light of Washington Consensus in her first installment. The views expressed are those of the author and not necessarily those of the APF or its other members.
The compatibility of the Washington Consensus with Liberal Economics invites reflection on the evolution of economic thought. The origins of classical Liberalism can be found in the American, French, and Industrial Revolutions. In its simplest form, Liberalism as the celebration of individual liberty dates back to the works of Aristotle. Conversations about politics, human rights, and free markets continue today. The Washington Consensus is about establishing a democratic framework to support the Liberal Economy. On many points they are self-reinforcing. However, the two are also counterbalancing. What remains are questions of where the balance lies and the continued relevance of either.
Such an element is inequality. Inequality, often expressed as a negative, is really the freedom from want across and within nations. It may actually clash with the ability to make unrestrained profits. Yet people want both. This issue has separated the Washington Consensus from traditional Liberal Economics. Liberal Economics recognized that there are some people who will simply not be successful in the system. As a result, they shaped a social safety net, albeit imperfect, for them.
It’s easy to say that the Washington Consensus and Liberal Economics has had a love-hate relationship with nature. From protections in the US from 1872 onwards, the natural world has been viewed contentiously with economic success. A race-to-the-bottom strategy for developing countries to provide the cheapest labor has almost always been at the expense of both the worker and the environment. It’s now known that these practices are unsustainable.
As a result, there is no escaping the realities of today’s climate crisis. With it is a series of deadlocks from those who fear accelerated job losses and few alternate paths available. These, led by access to education, must come online quickly to assuage fears of economic ruin. What’s needed is the motivation to shoulder an economic makeover that changes our relationships to both environment and workforce.
What’s past is prologue. From sci-tech to demographics, the global economy is entering a new age. Today, more people globally enjoy greater peace and prosperity than they did in the 20th century when the Liberal world order was the dominant protector. The post-2008 financial crisis has brought a mix of responses, austerity and government intervention. The world doesn’t seem to work as it did even 10 years ago.
The next 50 years could go many ways for Liberal Economics. For some, staying the course will bring a reality of hardship and blame as nationalist struggles emerge into civil wars. Anxious acts for peace may diminish as memories of WW2 fade. For others, a world of distrust might strain with advances in education and medicine. In this world, could pressures of “getting ahead” further compete with individual freedoms?
Revised rules could provide for mutually managed fair trade and green development. Ideals like full employment during the transition to an entire green economy can be prioritized.
Could six decades of uneasy integration be undone if incrementalism is inadequate? Might democracy unbundle itself from flawed and disappointing elements? Energy dynamics may create new alignments, especially with geopolitical significance. What if economic growth were enabled by open immigration policies more than property rights? The rise of service and experience economies challenge such old thinking. Could frustration about
inequality and a new authority of women correlate to more balanced economic
success across the globe?
Will the Washington Consensus or Liberal Economics have staying power in the face of any of these possibilities? Significantly, democratic politics has been called-up from its comfortable place on the sofa and is increasingly on the edge of relevance.
© Robin Jourdan 2019