Dead Men Left

Monday, June 13, 2005

Brown, Bono and the Washington Consensus

Despite Lenin, Gordon Brown is pleased with himself:

The chancellor said the significance of the package agreed by the finance ministers of the G7 - G8 countries minus Russia - in London on Saturday went far beyond the $1-2bn (£552m-£1.1bn) of debt relief offered to the world's poorest countries, and included promises of $25bn of extra aid, a timetable for dismantling protectionism and treatment for all HIV/Aids sufferers by 2010.

Emphasis added. "Dismantling protectionism" will do precisely nothing for the less developed world: first, because outside of a limited range of primary commodity exports - agricultural and mined goods - most less-developed countries (LDCs) simply cannot compete with the North on equal terms; second, this being the case, sheer market forces will push LDCs into concentration on those exports; third, these markets are notoriously volatile, and - for the last few decades - have seen terms of their trade swing heavily against them.

Countries attempting to develop infant industries, and develop economically in any meaningful sense, need "protectionism". That's how, almost without exception, the developed world got where it is today. That's how South Korea, Thailand and Taiwan developed; that's how China and India, currently heralded as models for the rest of the world, maintain their consistent economic growth. If we're also concerned about the environmental effects of economic activity - and we very much should be - the case for maintaining protectionism and controls over those activity is overwhelming.

New Labour, however, is maintaining a line on development it established very early on. The former Development Secretary, the unlamented Clare Short, put it very explicitly when speaking to business leaders in the City of London's Guildhall, back in 1999:

The assumption that our moral duties and business interests are in conflict is now demonstrably false… I am very keen that we maximise the impact of our shared interest in business and development by working together in partnership… We being access to other governments and influence in the multilateral system – such as the World Bank and IMF… You are well aware of the constraints business faces in the regulatory environment for investment in any country… Your ideas on overcoming these constraints can be invaluable when we develop our country strategies. We can use this understanding to inform our dialogue with governments and the multilateral institutions on the reform agenda.

Similarly, Blair told the World Economic Forum in January 2000 that:

The right conclusion is that we have an enormous job to do to convince the sincere and well-motivated opponents of the WTO agenda that the WTO can be, indeed is, a friend of development, and that far from impoverishing the world's poorer countries, trade liberalisation is the only sure route to the kind of economic growth needed to bring their prosperity closer to that of the major developed economies.

There has been no change in that philosophy in the last five years. When I suggested previously that Brown was offering us only "happy-face neoliberalism", Jim, who runs the excellent blog, Our Word is Our Weapon, was quite irate:

Labour's development policy is not 'neoliberalism', happy-face or not. They have advocated much higher aid and debt relief, argued against imposing liberalisation on poor countries (either through the WTO or through bilateral treaties), and recently announced an end to conditionality on aid.

This, I think, misses the shift that has taken place in recent years in the regulation of the global economy. Joe Stiglitz was amongst the early "insider" voices condemning the Washington Consensus: a one-size-fits-all prescription for free trade, deregulation and privatisation as the route to economic success, importantly overseen by transnational institutions like the IMF and its notorious "structural adjustment programmes". It is to the global justice movement's great credit that this form of neoliberalism has received a hammering. It does not mean, however, that neoliberalism has been abandoned in toto by either the New Labour government or any other Northern ruling class.

What seems to be emerging is a new neoliberal consensus; the Seattle WTO demonstrations in 1999 opened up what had been previously somewhat hidden tensions amongst WTO member states, most especially between the North and sections of the global South. The WTO has been beset by problems since, whilst the formation of functioning blocs of middle-income nations has presented an awkward problem for the richer economies' assumed global leadership. The G8, representatives of the ruling classes of the leading economies, are faced with the task of healing the wounds opened up by the lashes of the Washington Consensus, and of reasserting themselves politically - within, of course, a basic framework of liberalisation that works to principally to their advantage. (If not, equally obviously, to ours.) Brown and Blair's current jet-setting is a critical part of that; with Washington itself ill-placed to promote a new consensus, the task has fallen to its most loyal servant.

It would be a mistake, then, to see Brown's grandstanding on Africa as simply part of a future leadership bid. This is an important element, but we cannot explain the frenetic efforts by that alone. Brown has a far more pressing task. The "new consensus" requires a less abrasive management. Certain sacrifices, through aid and debt relief, have to be made to re-establish the damaged legitimacy of the G8 nations and the global institutional framework. But the kind of far-reaching reforms to that framework an abandonment of neoliberalism would require are lacking.