Theories of International Development

Does this vindicate the developing countries’ claims that according to Brett, the west’s interest has never been to liberate, but to conquer and exploit local communities that they regarded as barbarians? The answer could possibly be yes given the inconsistence and effects of the proposed policies on the developing countries. In my view, the arguments in Chang’s Kicking Away the Ladder are essential to the strategies of development and Chang’s critic will also by no doubt oblige the international financial institutions together with their developed countries to account for their motives given their developmental history. It is therefore paramount to objectively evaluate Chang’s views and analysis as they, from my scrutiny provoke a complete overhaul on the developmental strategies so as to eliminate deceptions by the developed countries on their attempt to kicking away the ladder by which they have climbed up - thereby depriving others the means of climbing up after them.  

If the developed countries are genuine on promoting economic development, they should support the developing countries’ initiatives without manipulating or enforcing their values and belief on their beneficiaries. While it is suggested that the neo-liberalism has been tested and worked for the rich western market democracies, according to Brett it failed to eliminate poverty, inequality, exclusion and violent conflict in many Late Developing Countries (LDCs) and are clearly intensifying the environmental and financial crisis that now dominate the international agenda.

While it is true that some of Chang’s arguments disregarded a wide range of historical events, I am baffled with his example on America’s vigorous use of protectionism after Britain had reached the top through protection and subsidies. Indeed this leaves us to wonder why these developed countries have been preaching about free trade to the developing countries. These questions are legitimate and these questions will continue to haunt as we seek to know the truth on why these countries are imposing policies and institutions that they themselves never used when they were developing?  This may sound monotonous, but it is these questions that form the debate hence it will continue to feature in this essay.

It is puzzling to understand why the developed countries have been holding the developing countries hostage by imposing policies such as Washington Consensus which are opposite to their historical success.  

I agree with Chang’s view that Washington Consensus might be an attempt to prevent the developing countries from adopting the same policies that developed countries used in their time. If this allegation is substantiated, then this constitutes a serious constrain on the developing countries’ capacity to generate economic development. However the challenge for Chang and other the critics of the Washington Consensus according to Rodrik is on providing an alternative set of policy guidelines for promoting development, without falling into the trap of having to promote yet another impractical blueprint that is supposed to be right for all countries at all times.

There is no doubt that Chang’s arguments have been controversial, but it is necessary to discuss and evaluate the Washington Consensus’ blue print which seem to have been distorted by the developing countries through strong bilateral and multilateral pressures on the developing countries.

1. Washington Consensus and its origins

The term Washington Consensus was originally coined by the economist John Williamson in 1989 and has since been either misunderstood or became a subject of debate worldwide. Some audiences according to Williamson believed that the Washington Consensus is a set of neoliberal policies that have been imposed on helpless countries by the Washington-based international financial institutions thereby leading the said countries into crisis and misery. In 2002, Williamson claimed that; “the ten reforms originally presented to and for the Washington Consensus were aimed at the Latin Americans (not all countries) and was ought to be undertaken as of 1989 not at all times”. The ten reforms that were originally presented to the Washington Consensus according to Williamson were meant for a specific geographical area as well as for a particular period. The proposal included the following:

1. Fiscal discipline

2. Reorientation of public expenditures

3. Tax reform

5. Financial liberalization

6. Unified and competitive exchange rates

7. Trade liberalization

8. Openness to DFI

9. Privatization

10. Deregulation

The adoption and use of these policies by the international financial institutions outside and beyond its intended recipients gave birth to a book entitled "Washington Consensus" is a damaged brand name by Moisés Naím in 2002. However today’s universal understanding of the “Washington Consensus” refers to the set of "good policies" and "good institutions" that were adopted, not for a specific geographical area, but for all developing countries and at all times. Given its origins, the Washington Consensus – is therefore not being criticized on its original merits, but on its interpretation and use on the developing countries. The original policy according to Williamson commanded a consensus to be motherhood and apple pie to development. If this is true then it is fair to suggest that its universal application to other countries other than Latin America as an ideology has been disastrous. On acknowledging this, Williamson stated that “for a policymaker to imagine that s/he can stop thinking and simply follow a set of policies that someone else has concocted without a set of suggestions as to how crises can be avoided is irresponsible”. However he also acknowledged that the objective that underlay the Washington Consensus was excessively narrow therefore requiring analysis on why growth, employment and poverty reduction were disappointing in countries that attempted to implement the policies.

2. Washington Consensus Policies and lessons from its application on Zimbabwe

It is generally believed that the Washington Consensus exerted great pressure on developing countries to adopt a set of good policies and good institutions to foster their economic development. The key words on this statement are “exerted great pressure to adopt” and the question to ask is; “Why pressurizing the developing countries to adopt and who are the beneficiaries of the so called good policies?” While it is beneficial for the developing countries to benefit from economic lessons and political struggle from the developed countries, not all lessons are beneficial. The debt crisis of the 1980s left many developing countries with no choice, but to follow the Washington Consensus to access the resources from the IMF and the World Bank. 

The scramble for resources by developing countries like Zimbabwe during this period gave birth to some of its economic problems today. The application of the policy as pointed out by Williamson failed to acknowledge the differences that exist from one country to another given their socio-political or colonial background.

It is paramount to note that country status matters and the economic policies should be appropriate to the said status. Certain sets of policies that were and are still being proposed to the developing countries could be unsuitable for their economic condition and dissimilar to their economic interests. For example part of the economic adjustment requires the government to reduce spending. While the cuts are aimed to address the imbalances, the reduction of public expenditure may also impact on government investment in social provisions such as health and education. This is what happened with Zimbabwe in the early 1990s when the government tried to implement the World Bank’s inspired reforms coded Economic Structural Adjustment Program (ESAP). According to the Southern African report, when Zimbabwe implemented the ESAP prescription by reducing Health and education expenditure, the impact was horrendous and many people were unable to afford the health care they needed. The ESAP program also affected the country’s social welfare system and as a result the standard of living decreased causing many people to lose their jobs and on the other hand, the inflation sky rocketed. These events were associated with emerging of diseases such as cholera, malaria and a rapid spread of HIV/AIDS and at the same time literacy rates also fell thereby impacting on the skilled labour.

Devastating failures drawn from the Zimbabwe example have seriously undermined some of the developmental policies by international financial institutions and as a result the World Bank called for greater attention to social, ecological and institutional issues in the sub-Saharan Africa. However it is also interesting to note that the same report argued for a more holistic approach to development, advocating for policies that goes beyond economic issues by including political, sociological and cultural aspects of development for sustainable growth.

3. Discussion

As discussed earlier, it is clear that history matters for development and the discourse on the Washington Consensus seem to favour Chang’s arguments that the developed countries’ are de-facto kicking away the ladder because they – (the developed countries) did not pursue policies articulated in the Washington Consensus when they were climbing the economic ladder of success. The example on Zimbabwe demonstrates that one size does not fit all and Zimbabwe’s experience with ESAP was very unfortunate because Loan agreements stretched the country's foreign and domestic debt to unmanageable proportions. The government was forced to borrow heavily from local markets to finance reforms as well as to service the deficit, yet the Washington Consensus did not rectify its policies to rescue the sinking developing country.  While others may claim that Washington Census policy is as a result of lessons learnt by the developed countries, its policies have been disastrous to some of the developing countries such as Zimbabwe. Given the Zimbabwe experience one will be tempted to suggest that developing countries should also replicate the laissez-faire policy that made Britain became the world’s first industrial superpower? 

It is this history that according to Chang the developed countries did not get where they are now through the policies and institutions that they recommend to developing countries today. Zimbabwe’s policies and institutions prior to ESAP were admirable hence it qualified and met the prerequisite of the Washington Consensus’ prescription, but the dosage from these policies reversed many of the gains in social welfare that were made since the country’s independence from colonialism.  

On the other hand China rejected the whole package of Washington Consensus, but instead borrowed few policies that magically resurrected it’s economic without complete liberalization, privatization, property rights, or democratization in the past two decades. It is interesting to note that China has never had a good record of human rights, rule of law or strong financial system yet its economic reforms have been successful and according to Qian it is an argument against simplistic and naive views on institutional reforms .

Further to this, Qian believes that one should study how feasible, imperfect institutions fit the economic, political reality and function as stepping stones in the transition process toward the goal.

I agree with Rodrik who urges that neither technology nor good institutions can be acquired without significant domestic adaptations and therefore failures could be attributed to policy compatibility and adaptations.

4. Conclusion

It is my view that the developing countries’ should be accorded the opportunity to pursue interventionist trade and industrial policies if they so wish and the big brother syndrome by developed countries or concept of one size fit all has significantly impacted on the developing countries. I agree with Chang’s suggestion that if the developed countries are allowed to adopt policies and institutions that are more suitable to their conditions, the developing countries in turn will be able to develop faster. A good example could be drawn from countries like China who have done better by experiencing and continue to experience impressive economic and development growth without using all the policies from the Washington Consensus. The China experience demonstrates that some industries may run at a loss before profits, and it is therefore necessary for the state to provide stimulus fund during the industry’s teething period. It is also paramount to note that development is not just about increasing per capita GDP or consumption levels, as in neoclassical theory, but it requires a holistic approach due to other factors such as growth in urbanization, property rights, and family structures etc. With this in mind, it therefore necessary to look at the implication of the models of development used by China as well as taking into account each country’s economy as one size does not fit all. As suggested earlier, economic analysis in making institutional choices should be accompanied by public deliberation and collective choice based on country specifics as standardized recipes are often disastrous for developments . The Washington Consensus could therefore be used as a perspective menu from which benchmarks of development are re-enforced and drawn for the developing countries. This perspective is re-enforced by Qian who assert that the needs of the developing world are better served within a “thin” set of rules for global economic governance as opposed to a “thick” set of rules aimed at maximizing trade and investment flows. I therefore think that this discussion has vindicated Chang’s arguments to re-think the Washington Consensus approach to promoting economic development in poor countries.

References:

Brett, E.A. Reconstructing Development Theory New York: Palgrave Macmillan, 2009.

Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective London: Anthem Press, 2002.

Hanna, Nagy and Picciotto, Robert, ed. Making Development Work: Development Learning in a World of Poverty and Wealth Vol. 4, World Bank Series on Evaluation and Development. London: Transaction Publishers 2002.

Nations, United. "Indicators for Monitoring the Millennium Development Goals."  (2003): 1-115.

Qian, Yingyi "How Reform Worked in China." The William Davidson Institute, no. 473 Working Paper (2002): 2-64.

Rodrik, Dani. "After Neoliberalism, What?" In New Paths of Development. BNDES Seminar: Harvard University Press, 2002.

Saunders, Richard. "Economic Structural Adjustment Programme (Esap)'S Fables Ii." Southern Africa Report Archive 11, no. 4 (1996 ): 8-30.

Williamson, John. "Did the Washington Consensus Fail?": Institute for International Economics, 2002.

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