In 2011, governments will be under pressure from bond markets to reduce spending and better manage their liabilities. Certain federal governments (such as the United States) will be forced into action, while others (such as the European Union) will not have any alternatives. The fundamental difference between the United States and the European Union is that many European nations consciously made the decision to reform domestic policies, while the United States – through tax cut extensions – has delayed the inevitable for one more year. Politicians have repeatedly failed the American people because their short-sighted economic policies – coupled with long-term, fiscally-utopian rhetoric – has diminished the United States’ capacity to function properly in the medium-term; it has gotten so bad that new rules need to be established before a successful plan can be discussed. The medium-term is difficult for politicians to focus on, since it would necessitate developing substantive policies rather than merely vocalizing politically expedient symbols and platitudes. Constructing a viable economic policy would mean sacrificing political clout in order to develop resolutions that would fill the gap between revenues and liabilities.
Worshipping at the altar of the stock market and bowing to pressure from shareholders has defined the manner in which the public and private sectors conduct daily activities – focusing solely on the short-term. Fiscal policy analyses barely look beyond the next quarter or national election. The short-sightedness pervasive throughout American society is reinforced by media cycles that center too much attention on daily market reports and quarterly trends. Individual’s focus on the short-term comes about when they convince themselves that the slight transformations occurring today can have a positive affect on the future. In reality, the medium- and long-term are more profoundly affected by a nation’s shifting priorities, actions, and determinism. Actions concerned with short-term success can have some affect in the future; however, a countries future security and stability depends more on its ability to cope with new technologies, population fluctuations, weather changes, fiscal strains, domestic strife and/or international conflicts.
The economic collapse, with increasing attention being paid to short-sighted policies, has reignited a discussion focused on cycles, particularly fluctuations on commodities markets. The international food crises has brought about a more in-depth analysis of commodities markets – principally agriculture – as well as rising international trends leading to a general transfer from a Washington to what is being referred to as the Beijing Consensus. The most interesting aspect of consensus shift is that it has been occurring during a period in which the economic philosophies of the Western world have dominated the arena of ideas.
The shift in the world’s perception of the international market economy began long before the 2008 collapse. For a decade prior – since the collapse of the Asian and Latin American markets, in the late-1990s, and the dot-com bubble – many developing countries positioned themselves in manner that has placed distance between them and the global North. What the market crises did for those in the global South is discredit the ideological underpinnings of the Washington Consensus, predominantly the concepts surrounding a state’s accumulation of national debt and the influence of foreign capital on national interests.
The shifting perceptions pertaining to the Washington consensus have been brought about by the developing world’s realization that increased foreign capital (read: external influence) and unfettered free markets do not necessarily make markets more efficient. These were not new concepts being developed by the global South, but the economic collapse provided global leaders the ammunition needed to defend their attacks against the policies being implemented at the IMF and World Bank; policies that pushed developing countries to dissolve exchange rate controls and forced weaker countries into heavily one-sided deals with foreign banks.
There have been benefits to many in the developing world when it comes to policies being implemented by inter-governmental organizations, and capitalistic philosophy does not necessarily have a deleterious affect on national institutions; however, large trans- and multi-national corporations can gamble against a nation’s overall interest and impose massive burdens on a population – domestic or international – that many countries do not have the ability to counteract. This concept can be seen in the movement that occurred throughout the international system prior to the end of the twentieth century. By the time the Western nation-states fell into economic chaos, most countries in the developing world had diminished their reliance on Western capital markets through the accumulation of currency reserves and instituting more strict regulations on their own financial systems.
It can be expected that many individuals involved in the market system, in any way, can easily fall into agreeing that the rhetoric used is completely accurate, which is the reason why so many fiscally-minded individuals were ;caught off guard’ by the crisis. If any of these individuals had been paying attention during the 1990s, they would have realized vast similarities between the Asian market crisis and what occurred in the West, a decade later; in that ever-expanding capital markets with limited regulations will inevitably lead to disaster.
In Beyond the Washington Consensus: A New Bandung?, Giovanni Arrighi and Lu Zhang state that “the 2008 Wall Street meltdown has sped up the collapse of the Washington Consensus”, because this transformative economic period caused the “neoliberal (sic) American-style capitalism – including limited government, minimal regulation, and the free market allocation of credit – lost credibility”. The policies that had been implemented by the global South protected them from the volatile economic environment, afforded them the opportunity to rebound from any loses suffered, and caused many members to “wonder[] whether China’s state-led capitalism could be an alternative” to the predominating Western philosophy.
The West’s reaction to the Asian market collapse – to promote the concept of sequencing – for all countries in the developing world. Sequencing – promoting liberalized market concepts only after the proper regulations were in place and certain sectors of a domestic economy are appropriately supervised – has the potential to stabilize an economy, but it was never a concept for the West, only for the countries in the developing world that failed to utilize capitalistic policies to their advantage. It is currently being discussed and utilized in further expanding the contemporary Asian market system.