18 June 2022, NIICE Commentary 8097
Dr. Ajay Kumar Mishra & Dr. Shraddha Rishi
World order or disorder depends on the perspective-specificity. The North Atlantic Powers assume restructuring world order on the premise of the ‘Beijing Consensus’ will cause world disorder. China perceives the Washington Consensus as the basis of world disorder. The Russia-Ukraine conflict and COVID-induced pandemic have contributed significantly to economic recession and caused disarray in the global economy and politics. South Asia is also untouched by it. The current economic and political situation in Sri Lanka and Pakistan have prompted the region to reconsider its strategic priorities and coalitions. South Asia’s fragile growth, rising commodity prices, weakening fiscal capacity, bottlenecks to supply and financial sector vulnerabilities have caused a slower growth rate in the region. The growth rate of the region is expected to be slower than projected, by 1 percentage point, at 6.6 percent in 2022 and 6.3 percent in 2023. In addition, Afghanistan faces a humanitarian crisis, Pakistan a political crisis, and Sri Lanka and Nepal are in economic crisis, which collectively made South Asia an unstable region.
The relatively poor democracy in South Asia has been reflected in democracy reports released by the Economic Intelligence Unit. Moreover, two different sets of norms are poised to rule the world order. For decades North Atlantic powers have had assumed the role of norm-setters, massively influencing other countries’ policies through the “Washington Consensus”, “the Brussels Effect”, and other channels. Over the past decade, the liberal world order of the Washington Consensus has been challenged by the “Beijing Consensus” and “Beijing Effect”. This article explores the effectiveness of these two consensuses in the case of South Asia and investigates South Asia’s negotiation angle with both the consensuses.
Washington Consensus
A term coined by economist John Williamson in 1989, Washington Consensus has become the champion of a free-market-based liberal world order with a limited role for the state. It relies upon economic interdependence, democratic peace, and international institutions. For decades, it has underpinned the behaviour and decision-making of the world institutions like the World Bank, the IMF, and the WTO because it was seen as the universal norm-setter for good governance and the promotion of democracy. It argued that the unfettered flow of finance, trade and democracy across national borders will put countries on the radar of global governance and will weaken the need and role of the government. In short, Washington Consensus prescribes globalisation, democracy, and less government size for establishing a world order.
Washington Consensus supports cuts in corporate taxes and social spending for public goods and services. It does not recognise lopsided development and glaring inequalities in access to resources, income generation, and wealth. Moreover, it focuses on removing supply-side constraints while ignoring demand management. Additionally, it envisages debt default and debt restructuring; inflation targeting; a market-determined and flexible exchange rate; developing a wide-ranging and coherent investment promotion strategy; and reforming price controls and state-owned enterprises.
The advanced industrial countries and the champion of the Washington Consensus contradict the golden straitjacket created by high globalisation and lesser government size as they have larger government sizes in a much-integrated global economy. The average government size and trade openness, respectively, in some of the advanced industrial countries, are as follows, respectively, France (56 percent and 44 percent), Germany (44 percent and 56 percent), the UK (41 percent and 53 percent), and the US (38 percent and 22 percent) along with higher ranks in democracy.
Beijing Consensus
The Beijing Consensus refers to managed globalisation, industrial policy, and state capitalism. The concept of the Beijing consensus was developed to characterize the Chinese development model. The Beijing Consensus, a term coined by Joshua Cooper Ramo, created the Chinese economic miracle, the second-largest economy in the world and moving over 700 million people out of poverty within less than 40 years. Contrary to some pundits in the West predicting an imminent economic collapse, the Chinese economy continues to grow at an annual average of 6.5 percent and has contributed to over 30 percent of global economic growth since 2008. Unlike the Washington consensus, the Beijing consensus does not offer any values and principles that it promotes as universal. China stresses that each country has to find its methods, policies, and institutions that fit its local requirements instead of copying what has been successful in for any other. As an alternative to Anglo-American liberal institutions, Beijing Consensus promotes regional institutions such as BRICS, RIC, SCO, AIIB, etc.
China has high government expenditure and trade to GDP, i.e., 17 percent and 36 percent, respectively. However, it is classified as an “authoritarian regime” in the Democracy Index released by the Economic Intelligence Unit. It has a total score of 2.21 (on a 0 to 10 scale), down from 2.97 in 2006 when the index began, and sits in 148th position (out of 167), close to the bottom of the global rankings.
South Asia and Two Consensuses
South Asia is characterised by high globalisation, measured in trade to GDP ratio, with lower government size and democracy. Economies in the South Asian region have substantially been linked with globalisation as trade to GDP ratio varies in Bangladesh (40-45 percent), India (40-45 percent), Nepal (45-50 percent), Pakistan (30-35 percent), and Sri Lanka (50-55 percent). Government size is measured as the share of government expenditure to GDP which is around 5 percent to 12 percent in the region. Moreover, the poor democracy record of South Asia is reflected in democracy reports released by the Economic Intelligence Unit. The index is based on electoral process and pluralism, government functioning, political participation, political culture, and civil liberties. Neither country operates as a full democracy; they vary from hybrid to flawed categories of democracy.
The one-size-fits-all model of the Washington consensus leaves no procedural flexibility whereas the Beijing consensus supports greater flexibility in dealing with countries across the political and economic spectrum which primarily is the reason behind the emergence of the Beijing consensus as an alternative to the Washington consensus. Before embarking on South Asia’s negotiation strategy, we must consider China’s role in South Asia by taking the example of two countries in the region that are faced with some kind of crisis, Pakistan and Sri Lanka. China unveiled the CPEC project in 2015, and the cost of the project rocketed from USD 46 billion to USD 62 billion for no stated reasons. Meanwhile, in turn, Pakistan would gradually become China’s gateway to the Islamic world and the Indian Ocean and help mitigate the criticism of its brutal Uyghur genocide. The second is about China’s dealing with Sri Lanka. China had built the Hambantota port and Sri Lanka was unable to repay its debt. Thus, Sri Lanka gave China a controlling equity stake and a 99-year lease for Hambantota port. Today, China holds huge amount of Sri Lanka’s debt as the latter is grappling with a severe economic crisis.
South Asia’s Negotiation Angle
The Washington consensus’ universalist appeal and the Beijing consensus’s authoritarian orientation create a conflicting world order from South Asia’s angle. Hegel’s theory of international relations, echoing an offensive realist tone, asserts that great powers always seek to dominate the world. A world order dominated by either one will not be conducive to South Asia’s multi-ethnicity and diversity. The region cannot ignore democracy, neither nor fit the one-size-fits-all model nor can it present an alternative to the two consensuses to reorder the ‘world’. It has to evolve its strategy considering the conflict of dominating consensuses for a certain premise. Beginning with, the debate of position and interest; a position is a surface statement of ‘what’ a party wants, whereas, interests are the underlying reasons behind those positions. It emphasises ‘why’ excessive adherence to principles and positions, rather than interests, will make it difficult to reach an agreement. In addition, the preference of interest leads to balancing rather than bandwagon. The non-alignment and strategic autonomy are the offshoots of the ‘balancing’ as a strategy of negotiation.
Dr. Ajay Kumar Mishra is an Assistant Professor at Lalit Narayan Mithila University, India and Dr. Shraddha Rishi is an Assistant Professor at Magadh University, India.
