Belt and Road Initiative vs Washington Consensus
Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia: With the Washington Consensus from the 1980s being challenged, President Donald Trump withdrawing the United States from the Trans-Pacific Partnership (TPP), and China pursuing its Belt and Road Initiative (BRI), most notably with its own initiatives such as the multilateral Asian Infrastructure Investment Bank (AIIB), the political and economic landscape in East Asia continues to evolve. Professor Jomo Kwame Sundaram was interviewed about likely implications for developing countries in the region and beyond.
Over the five years since President Xi Jinping announced his grand plan to connect Asia, Africa
Belt and Road Initiative
As regards world growth prospects and China’s Belt and Road Initiative, Jomo Kwame Sundaram observes that although there are some hopeful signs here and there, there are few grounds for much optimism around the North Atlantic (
The situation is more promising in East Asia due to China’s diminished but sustained growth, and
You once said that “If President Trump lives up to his campaign rhetoric, all multilateral free trade agreements will be affected.” Now, with the US
It must be emphasized that the US, the EU
Why will the CPTPP have little impact on growth, but will strengthen the power of foreign enterprises?
Let us be clear that even with the original TPP, all projections, including the most optimistic ones by the Peterson Institute, projected very modest economic growth attributable to trade liberalization. US government projections were much more modest. About 85 percent of the Peterson Institute’s projected ‘growth gains’ were attributed to ‘non-trade measures’, mainly broadening and strengthening intellectual property rights (IPRs) and foreign corporate legal rights against host governments with its ISDS provisions, which they are promoting as features for so-called
International financial institutions
Is the Washington Consensus threatened by South-led financial institutions like the Asian Infrastructure Investment Bank and New Development Bank? Although still very influential, the Washington Consensus is acknowledged to have been superseded by new policy prescriptions. Despite recent
Now, digital globalization is supposed to have progressive effects when it has clearly accelerated concentration of power and wealth, albeit with the rapid ascendance of innovative new players able to quickly consolidate lucrative monopolies.
I wish the new multilateral development banks would be bolder, but thus far, they have largely chosen to work within the dominant framework shaped by the Washington Consensus, probably to secure market confidence.
Credit from China’s banks, usually benefiting China’s corporations, is far more important than what the AIIB and NDB offer. Of course, lending by China’s banks has undermined the BWIs’ monopolies, and this has already been reflected by new policy initiatives by the West and Japan, e.g., to more generously provide infrastructure finance.
Meanwhile, the World Bank has aligned itself more closely with the UN’s Sustainable Development Goals in order to provide its new initiatives to promote market-based private finance such as securities and derivatives besides
Is it appropriate to resume capital controls, as Malaysia did during the 1997-1998 Asian financial crisis, to counter capital outflows?
With even China reintroducing capital controls, it is important to consider such options. I have long advocated counter-cyclical ‘capital account management’ to smoothen financial cycles, rather than to only impose controls after a crisis, as effective capital account management must be pro-active, agile, and flexible.
Almost by definition, capital account management is context-specific. There are few ‘one size fits all’ rules. What I specifically called for in the early and mid-1990s is probably no longer relevant or appropriate. The challenge is not to expect the last crisis to recur, but to protect national economic progress from likely future threats.
Capital inflows to sustainably enhance the real economy should be prioritized, not portfolio flows which tend to be speculative, easily reversible, and do not enhance the real economy.
[Jomo Kwame Sundaram, a former economics professor, was United Nations Assistant Secretary-General for Economic Development. ] -IPS