China has proved to be an enviable economy in recent times. The journey that has gotten it to the status it now holds in the world of economics began about thirty years ago. The aggressive nature of the implementation of its economic policies plus the soundness of these policies played the trick. The Beijing consensus is the document written in 2004 that suggests the path that developing countries may take in order to spur their own economic growth in a manner similar to China. The document uses China as the yardstick to measure the soundness of the economic policy-making guidelines and it outlines possible ways in which the economies of developing countries can be streamlined into sustainable gains. The Washington consensus, a 1990 document that has widely been considered to be the predecessor of the Beijing consensus, holds different guidelines for the economic growth of developing countries. Many developing countries, however, have come to regard the Beijing consensus as the more attractive political economy paradigm. This article explores the reasons why the Beijing consensus is favored by most developing countries as the better political economy paradigm contrasting key issues of both documents.
China has witnessed phenomenal growth in its economy over the past three decades. Its per-capita GDP has almost tripled and its economy has been growing at a rate of about ten percent per year. The trick of the economic bloom witnessed in China was summarized in the Beijing consensus as a model for other countries wishing to go down the same road. The emphasis of the Washington Consensus on the conditionality for lending by the world-acclaimed financial institutions and neo-liberalism has lost its taste among developing countries (Mensah 2010, p.76).
The document that was developed by Joshua Cooper Ramo in 2004 and titled The Beijing Consensus was a blueprint of policies that favor markets to foster economic growth in developing nations. The document set forth a number of policies on how to go about making the market more conducive for the economic growth. Since the document was published in May 2004, the Beijing Consensus has widely gained acceptance as the better alternative than the Washington Consensus of 1989 for the economic development of countries.
While many have viewed the Beijing Consensus as an authoritarian model of economic development, it is very different from the truth. The Chinese have simply adopted systematic policy reform and institutional change. It has made the tremendous economic progress a possibility. Regulated government involvement in the market is indeed one of the principles of the Beijing Consensus, but the fundamental policies of the Beijing Consensus are innovation, sustainable development, and self-determination.
One of the principles of the Beijing consensus is the application of constant innovation in the market. Ramo insists that no single method is best suited for the rapid economic growth that most countries crave. He insists that the uniqueness of the challenges faced in various countries necessitates the formulation of innovative measures suited for various economies and countries. The Beijing consensus also appreciates the dynamic nature of the needs of various economies in relation to the political and social environments and therefore the need to remain dynamic in order to keep up with these changing environments. The Washington consensus, on the other hand, is somewhat rigid in terms of the measures it sets out. For instance, one of the policies of the Washington consensus is the strict regulation of budget deficits (Fiscal discipline). These measures have largely been viewed as tools used by the international lending institutions to control the third world countries much to the benefit of the institutions and with little positive impact on the developing countries. Indeed, research conducted by a number of Chinese Universities and business institutes in September 2011 concluded that innovation was one of the leading success factors in business in China, only second to leadership (Huang, Bruzga & Wang 2011, p.12).
An appropriate demonstration of the Beijing consensus’ archetype for innovation-led growth is the creation of high-growth economic hubs in Africa. Examples of such areas are: the metals hub in the copper belt of Zambia; the trading hub in Mauritius aimed at enhancing the market access to COMESA; and the trans-shipment hub in Tanzania for serving as a port for products of mining in the copper belt (Mensah 2010, p.23). The innovation-led growth has indeed proved to be a formidable means of achieving economic growth and it has especially been attractive to developing nations whose innovative capacity is still largely unexplored.
The general feeling is that the Washington consensus is a straitjacket that turned a deaf ear on the legitimate concern of developing nations for sovereignty and genuine economic growth. Economic analysts have castigated the model for the neo-liberal policies that have guided the economies of developing countries into an ever-deepening abyss of economic indebtedness to the United States-based economic institutions. The Washington model places immense emphasis on privatization and economic liberalization. Pursuant to this emphasis, international lending institutions have been keen on imposing privatization policies on developing countries as a pre-condition to financial aid. It has proved to be a failure in many cases. In contrast, the state of China has financed mega projects such as water transfer projects, gas and power transfers, majestic dams and bridges, and other mind-blowing projects. As such, China can hardly be regarded as neo-liberal.
The Washington consensus paid little attention to self-determination as a vital policy for the economic development. The Beijing consensus roots for the independence of individual countries to make prudent economic decisions according to their particular needs. It stresses that territorial integrity remains a fundamental aspect of economic progress. The economic progress of China has heavily hinged on its ability to make independent decisions and resist attempts from some quarters to make it an outcast in the global family. Many scholars have argued that the West, particularly the United States, has been churning out policies for the developing nations to follow, but the reason they seem not to make any reasonable progress is that the policy makers have a lot to gain from the policies they form for other countries to implement (Joseph 2012, p.188).
Countries that adopted the Washington consensus wholesale became examples of miserable failures that the economic model spawned. Studies have concluded that part of the reason the Washington consensus failed was its misconstruction of the success of neoliberal economic policies of the East Asian countries (Hsu, Wu & Zhao 2012, p.77). The Beijing consensus offers a more evidence-based approach to solving the economic woes of developing nations. The Washington consensus was a theoretical model based on projections while the Beijing model was a better-tried model for a country that had wallowed in the murky waters of underdevelopment for a while.
The Beijing consensus roots for sustainable development, distribution of wealth, and a wide range of criteria for determining the economic growth. It has been the subject of criticism concerning the Beijing consensus. Critics argue that as far as the distribution of wealth is concerned, China should be regarded as the worst example because of the large wealth gap that exists between Chinese urban and rural dwellers. The income gap between the urban and rural dwellers in China is the highest in the world (Sun & Sun 2012, p.78). However, the income gap has not overshadowed the fact that the rapid growth of the economy may not have come without this disparity emerging. Some schools of thought, such as that which Deng Xiaoping supported in the seventies, hold that economic growth comes in a larger package. Disparity in the level of income may be one of the elements of this package. However, the Beijing consensus insists that distribution of wealth is a necessary component of economic growth. It is for this reason that it is so popular among developing countries.
The Beijing consensus advocates for the sustainability of economic growth. It is a pertinent need for consistent results as far as the economic growth is concerned. The Chinese economy has epitomized this concept through self-reliance and minimization of debt. China ranks second only to the US as the recipient of foreign investments and the Communist Party has turned to performance-based legitimacy in contrast to the democracy-based legitimacy. A combination of these elements has consistently put China at the zenith of economic development and the returns have been evident. Avoiding indebtedness has been the heartbeat of the sustainable economic growth in China. The Beijing consensus frowns upon the idea of grappling with debt while at the same time pursuing economic growth. The Washington consensus, on the other hand, ignores the idea of sustainable economic growth. In fact, a number of its critics have proposed that the reason it is so unpopular with developing countries is that it encourages indebtedness to lending institutions, which reduces the ability of nations to pursue their own interests. The Washington consensus has been touted as a document meant to further the economic interests of the United States. Although it was not originally meant for this purpose, its policies are inclined towards that exact purpose.
Practicality and Government Involvement
The Beijing consensus also has an edge over the Washington consensus as far as its workability is concerned. While the Washington consensus is viewed as a rigid framework for the excitement of economic development, the Beijing consensus allows for a wider range of malleability and flexibility in the economic policy formation. The Beijing consensus suggests that countries need to exercise their sovereign will to choose the policies that will work best for them. The Chinese government, for instance, has poured tremendous amounts of money into research, innovation, and protection of the intellectual property. The logic behind this is that China seeks ways to make it earn the most value from the goods that its industries spew into the global market (Innovation in China 2012, p.122). The Beijing consensus urges nations to pursue their freedom to choose from a wide range of options and come up with workable solutions to their problems.
Governmental involvement in the affairs of commerce is an issue to which both the Beijing consensus and the Washington consensus have paid much attention. While the Washington consensus advocates for a hands-off approach to commerce and business, the Beijing consensus views regulated governmental involvement as an asset to the cause of the economic growth. The failure of the proposal of the Washington consensus that governments should maintain a hands-off position has laid back an approach to trade and let the natural forces of the market shape things became apparent with the economic crisis of 2008. Critics blamed the US government for failing to step in to save a desperate situation. The Beijing consensus has proposed that geo-economics and geo-politics are inexorably linked. While it condemns the strict grip of the government in economic and commercial affairs, the document encourages commercial activities that attempt to fit in the context of governmental needs (Ramo 2004, p.34). It is particularly attractive for developing nations that oppose dictatorial mannerisms but appreciate the need for governmental control in economic spheres.
The Beijing consensus has obviously proved to be a practical framework for the pursuit of economic development in developing countries. Its three pillars like innovation, sustainable development, and self-determination have proved to be a better option as compared to ten principles outlined in the Washington consensus. The Beijing Consensus has independently outlined possible ways in which the developing economies of the world can maximize the issues in which they have to compete on the world level with other notable economies and with China as the template for copying. The Washington consensus, on the other hand, attempts to solve the problems of developing countries from an American perspective. It inevitably makes it a tool for the exploitation of developing countries by America. This is why, compared to the Beijing consensus, the Washington consensus is generally considered to be detestable by the growing economies.