“The need for radical re-thinking on development strategy is imperative for African countries to be relevant in the global economy. This is further reinforced by the stark reality of extreme poverty in Africa.
Over the years, the share of Africa in global trade remained insignificant despite the implementation of the policies that were recommended by international financial and development institutions, such as the International Monetary Fund (IMF) and the World Bank (WB).
The dismal performance of African economies calls to question, the effectiveness of the economic ideologies being prescribed by international institutions, and points to the need for a paradigm shift in order to achieve sustainable development.
Over the last quarter of a century, Africa has been at the receiving end of liberal orthodoxy from these institutions that have persistently advocated, amongst others things, privatization of state-owned enterprises, free trade, intellectual property rights protection and deregulation of foreign direct investment (FDI) as requirements for developing countries to grow and develop. This policy prescription was what John Williamson coined the “Washington Consensus”.
This neo-liberal ideology is reflected in the policies of the Bretton Woods Institutions: the IMF, the World Bank and the World Trade Organization (WTO). Specifically, both the IMF and the World Bank condition their offer of assistance to developing countries on the strict adherence to the Washington Consensus policies. The Consensus had continued to be under severe criticism because the performances of countries that adopted its doctrine, especially in Sub-Saharan Africa, Latin America and the former Soviet bloc showed that it had failed to deliver sustained growth as promised by its promoters.
The remarkable economic growth of China in the past 30 years, with the country having declined to adopt the original and extended framework of the Washington Consensus, has raised further doubt on the unassailability of its capabilities. The significant economic miracle of China which has been described as the “Beijing Consensus” (by Joshua Cooper Ramo) represents a symbol of China’s success and a challenge to the Washington consensus normative power. The Beijing consensus is enshrined in three principles of innovation, Chaos management promotion and theory of self-determination. These tenets are embedded in the policies of China that features incremental reform, innovation and experimentation, export-led growth, state capitalism and authoritarianism. Though the Beijing consensus had recorded remarkable success, it has, however, been argued, that it might not be sustainable in the long-run because it maintains large state-owned sectors and authoritarianism, which runs contrary to people’s aspirations, as the series of revolutions in the North African countries have shown——-(Williamson,2012).
In addition, a historical review of how the advanced countries developed show that they did not adopt policies that they are recommending for the developing countries. As pointed out by Ha-Joon Chang (2003), some of the policies that the Bretton Wood institutions kick against today, were the very policies they adopted for their development. For example, the WTO currently opposes the use of export subsidy and protection of infant industry, whereas the United Kingdom and the United States embraced these policies in their early stages of development. There is therefore, the need for pragmatic policies and institutions that best suit the developmental stages and realities of developing countries in order to achieve sustainable and fast growth, and for the benefits of developed countries in the long-run.
Against the apparent failure of the Washington Consensus as applied in developing countries, and the possibility of the un-sustainability of the Beijing consensus in the long-run, there must be a paradigm shift in Africa’s development strategy for sustainable economic development. The new approach should identify development paths that focus on a pragmatic commitment to progressive change as a possible alternative to the current development strategy. The question remains whether Africa can leverage on its potentials of huge natural resources, regional market size and human resources to formulate a radical development strategy that fit its realities and cultures without adopting the tenets of the
Washington and the Beijing consensus.
The objective of this paper is to present my views on this contentious issue. Following this introduction, section 2 explains the Washington and the Beijing Consensus’ developmental ideologies and some related trade theories. Section 3 reviews the consensus’ and development in African economies; Section 4 discusses the lessons from the growth strategies by China and India. Section 5 highlights a new development strategy for Africa while section 6 reviews Nigeria’s recent developmental approach. Section 7 addresses some likely challenges to the new paradigm.
The Washington and Beijing Consensus’: Developmental Ideologies
The Washington Consensus
The phrase Washington Consensus was first coined by John Williamson in 1989 in his work where he showed the inadequacy of Latin American reforms and identified areas that needed further improvement. It simply expressed the widely held view in Washington and by international development institutions that there is a path that developing countries’ economic reforms should follow to absorb aid efficiently.
The Washington consensus contains ten rules namely, fiscal discipline, tax reform, re-ordering public expenditure priorities, competitive exchange rate, privatization, trade liberalization, liberalizing interest rates, deregulation, liberalizing of inward FDI and property rights. These rules mirrored the tenets of liberal market-oriented capitalism and policies of the then Ronald Reagan and Margaret Thatcher governments which were strong promoters of capitalism and neo-liberal ideology. Neo-liberal ideology derived its tenets from the work of 18th century Economist, Adam Smith, who advocated free trade among nations as a way of promoting global growth. The policy prescriptions of conditioning aid and compelling developing countries to open their capital accounts and promote unhindered movement of portfolio investment across international borders by the IMF and World Bank have close similarities to the tenets of the Washington consensus.
The Beijing consensus emanated from the published work of Joshua Cooper Ramo in 2004, where he described the social and economic transformation of China as the new physics of power and development. Transformation under the consensus was embedded in three principles namely Innovation, promoting works through Chaos management and self-determination (Kennedy, 2008). By the first component, China’s economic success was rooted in constant innovations that improved its total factor productivity, while the second represents China’s quest for economic development which was not limited to growth but equitable distribution of wealth.
The third component symbolizes the ability of China to chart and maintain her developmental polices as a model for other countries to follow and emulate (Kennedy, 2008). Therefore, the term Beijing consensus was the sum of the five pillars of the economic policies of China over the years which included incremental reform, innovation and experimentation, export-led growth, state capitalism and authoritarianism (Williamson, 2010). The next sub-section briefly examines some related theories of trade from which neo-liberal ideology derived its tenets”.