Friday 3 April 2009

Gee-Whizz on the G20

So, the G20 has concluded its intricate deliberations and has issued a communique or two to tell us all what we should believe has been achieved. I'm deeply, deeply moved...

Gordon Brown celebrated the end of the Washington Consensus, hailing a "new world order" (I know, I know - another one). The Washington Consensus was a term coined by economist John Williamson in 1989 to describe what the international institutions based in Washington thought would be good economic policies for Latin America! It has ten strands:
Fiscal discipline.
A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure.
Tax reform (to lower marginal rates and broaden the tax base).
Interest rate liberalisation.
A competitive exchange rate.
Trade liberalisation.
Liberalisation of FDI inflows.
Secure property rights.

Leaving aside the fact that the Consensus was about Latin America, let's look at what Gordon Brown would be pleased to see the end of:

Fiscal discipline
In essence, fiscal discipline comes down to running the country's finances properly - not having too much debt, that kind of thing. Should the Prime Minister really be celebrating the end of that?

Redirection of public expenditure
Gordon, apparently, doesn't think we should be spending money on healthcare, education, building infrastructure, income redistribution, and so on...

Tax reform
He doesn't believe in reducing marginal tax rates (there are arguments on both sides for that one) and doesn't believe in widening the tax base - he must think that the tax system is fine and doesn't need changed at all.

Interest rates
Not in favour of interest rate liberalisation? I don't think I am either - there's some argument that financial liberalisation has been partly to blame for some of the financial crises.

Exchange rate
Against a competitive exchange rate? Oor Goggsy? What happened to the neoclassical non-endogenous growth theory?

Trade liberalisation
Here's Brown calling for an end to trade liberalisation at the same time as he argued that we must shy away from protectionism.

Liberalisation of FDI inflows
Gordon Brown now opposes inward investment?

Well... I'll leave it to the economist John Williamson:
My own view is that privatization can be very constructive where it results in increased competition, and useful where it eases fiscal pressures, but I am not persuaded that public service is always inferior to private acquisitiveness as a motivating force. Under certain circumstances, such as where marginal costs are less than average costs (for example, in public transport) or in the presence of environmental spillovers too complex to be easily compensated by regulation (for example, in the case of water supply), I continue to believe public ownership to be preferable to private enterprise. But this view is not typical of Washington.


Secure property rights
Surely Gordon Brown doesn't oppose secure property rights? Well, except for Scottish building societies, that is...

So, who thinks that Brown really seeks the end of the Washington Consensus - which was, after all, nothing more than a point of view, an opinion? He couldn't be talking about the end of neoliberalism, could he?

Mind how you go!

1 comment:

Vancouver realtor said...

Ahem is right! What was wrong with the Washington consensus in the first place? Maybe I'm missing something. But maybe I'm not?

I keep reading the Washington consensus point over and over and still nothing. I guess when politicians get into trouble, they need to act as if they were able to impose changes - virtually ANY changes, so that they look as if they are doing SOMETHING. Maybe this time it'd be much more effective for the system to correct itself instead of trying to cure it from the outside? I surely can't be the only one thinking this...