Today's Opinions, Tomorrow's Reality 

Goodbye Cruel World
The Death of the Washington Consensus

By David G. Young

Washington, DC, January 24, 2017 --  

The retreat of America and Britain from the global stage offers China new but unwelcome opportunities.

When Chinese President Xi Jinping spoke at the World Economic Forum in the Swiss resort town of Davos, it was a symbolic moment.  Since the previous year's meeting, the traditional leaders of global capitalism and free trade, the United States and Britain, have been forced to retreat by voters who installed new insular governments in an anti-globalist backlash.

That a Communist Party chief now headlines the world's premiere capitalist conference is a telling symbol of how the world has changed since the emergence of the Washington Consensus at the end of the Cold War.  Starting in the early 1990s, the pillars of democracy, open markets and free trade were embraced by almost all respectable world leaders. A few bad boy and half crazy holdouts like Slobodan Milosevic, Fidel Castro, Robert Mugabe, and later Hugo Chavez and Vladimir Putin stuck out like sore thumbs.

But for all their efforts to solidify the Washington Consensus through trade initiatives and diplomacy, Western positions were eroded from where the leaders least expected it -- their own people. 

British voters chose to exit the European Union, toppling David Cameron's government, and American voters chose an angry populist over a return of the Clinton dynasty that epitomized the Washington Consensus.  Both electorates were angry about politicians who seemed indifferent to more vulnerable citizens getting put out of work by foreign competition and immigrant labor.  The rising tide of globalization may have lifted most boats, but less sea worthy vessels simply sank to the bottom.  Those left behind found this new world to be a cruel one, and were in a big hurry to leave it behind.

New governments in America and Britain have pledged to focus on domestic interests and one-on-one trade negotiations and reject multi-lateral trade trade agreements of the kind traditionally promoted at Davos. In the past week, U.S. President Donald Trump signed an order withdrawing America from the Trans Pacific Partnership trade agreement, and British Prime Minister Theresa May announced plans for a "hard Brexit", meaning seeking one-on-one trade negotiations rather than remaining within the European trade block. Both of these moves are an abandonment of the Washington Consensus.

China was once the odd man out in Davos.  It never embraced the democracy part of the Washington Consensus, offering an alternate model for third world despots looking to emulate its economic success, often punctuated with Chinese foreign investment with no human rights strings attached.  And its rhetorical embrace of Marxism was always strange, given that it was growing an economy based on capitalist production of lots of frivolous goods for export to consumers around the world.  Given the money to be made, however,Western capitalists were happy to ignore China's Marxist rhetoric and internal repression.

Today, China is top dog of global trade discussions.   Unlike Britain and America, It's policies are immune to the pesky demands of fickle voters.  That its unelected leader holds court at a ritzy Swiss resort at the premiere capitalist forum symbolizes a tragic end for the Washington Consensus.  Abandoned by Washington itself (at the insistence of its people), the Chinese are poised to lead the very globalist institutions that once held them at arms length.

Yet these events are hardly cause for Chinese celebration -- the nation's modern prosperity was only made possible by globalization and is highly vulnerable to disruptions in the system. With Western countries abandoning a globalist outlook in favor of inward-looking nationalism, China ultimately may be forced to join America and Britain in similar behavior. There's not much point in being a globalist when you are the only one left in the club.

Related Web Columns

Pitiful Subjects, November 29, 2016

Tough Sell
The Threadbare Case for Free Trade
, April 1, 2008

The Frontline of Free Trade, November 30, 1999

Protectionism Out of Prosperity, March 23, 1999