Brics and the Washington Consensus, Coursework Example

The strong economic development of the BRICS countries is not due to any disregard of the Washington Consensus. Although the BRICS countries are not fully governed by every component of the Washington Consensus, they have integrated a great deal of it into their economic structure. In the past couple of decades, concepts and policies related with the Washington Consensus have gained attention from political economists. The systematic effects following the 2008 recession stimulated concern about the convergence of the on-going economic development throughout the BRICS countries and their presumed accord with the Washington Consensus paradigm of policies. Now, we believe that such concern from political economists has brought forth the question of whether the BRICS countries have branched off from both the concepts and the policies proposed for them by the Washington Consensus. However this does not suggest that the BRICS countries have completely disregarded it. (Elizondo, 2014)

The following information presents a point of view arguing that the BRICS countries and their continuing success in economic development are not associated with them disregarding the Washington Consensus. This point of view also does not believe that the BRICS countries have even disregarded the Washington Consensus in the first place. As a matter of fact, the BRICS countries have integrated the Washington Consensus concepts and policies into their own economic structure. The BRICS countries have opted to balance their own adaptation of selected aspects of the Washington Consensus paradigm. At the same time, BRICS has taken into consideration their own state-enacted developmental policies while actually remaining compliant with the Washington Consensus itself. Because of this, the BRICS countries have neither founded a neo-liberal transformation in economic policy nor have they acted as a force driving the continuity of the Washington Consensus. Rather, they have modified their economic policies from both ends of the spectrum. With arguing analysis defending our views, we will go into further detail of why we maintain our position. (Myles, 2014)

In an article by Oliver Stuenkel, he analyzes the trends that lead to questioning if the BRICS countries were standing against, or disregarding, the Washington Consensus. Pointing out information from an economic journal—Review of International Political Economy— that the BRICS countries underwent dramatic “growth spurts” by surpassing the expectations of the Washington Consensus paradigm in an international situation where conditions were dictated by the neo-liberal economic concepts and fabrications about how to approach development. The BRICS countries demonstrated their ability to act independently under an internationally transverse policy. Stuenkel suggests that this was partly due to political pressure being imposed by domestic governments on the BRICS countries to perform differently from how they were expected. Although the BRICS countries presented swift innovation by spawning a hybrid system of the Washington Consensus into their economies that would make it compatible with their domestic policies, they do not consider such modifications as an attempt to disregard any of the original context from the Washington Consensus.  (Stenkel, 2013)

An example that Stuenkel presents is a situation with BRICS countries Brazil and India, where they have institutionalized a combination of economic policy that consists of parts from both the Washington Consensus and their own domestic obligations. Although China has imposed various forms of state arbitration within their economy that leans more towards Chinese capitalism, such domestic adoptions of economic policy does not fully separate them from the paradigm of the Washington Consensus. Stuenkel stands that despite China’s modifications in their economic policy, their government does not challenge against the concepts and policies of the Washington Consensus. Even though Stuenkel emphasizes that China has not disregarded the Washington Consensus, he points out that policy makers from developing countries should follow Chinas model of economic policy if they desire to completely break away from the Washington Consensus. He concludes that the BRICS countries have actually transformed the Washington Consensus to conform to their own domestic economy, as opposed to simply disregarding it.  (Stenkel, 2013)

Now Stuenkel’s arguments are parallel with our own arguments of where the BRICS countries stand with the Washington Consensus in regard to their economic development.  It is well noted that the BRICS countries have not complied with the Washington Consensus thoroughly and entirely, but they sure have not disregarded it either. (Stenkel, 2013)

Now in an analysis of a contrasting article from Pepe Escobar about how BRICS stands against the Washington Consensus, we will evaluate their perspective while maintain our position in the argument. Escobar uses a situation about the BRICS Development Bank to support his position. The Brazilian economy use utilizing a financial model in which they are making investment across Latin America. It is predicted that in the next few years, their capital will amount to about 350 billion USD. They are receiving extra funding from China and Russia and this new institutionalized bank may far surpass the World Bank. Additionally, the Contingents Arrangement Agreement establishes a pool of reserve currencies amounting to 100 billion USD. To generate the currencies pool the BRICS countries will all contribute to it. 18 billion USD will be contributed from Brazil, Russia, and India. Russia will contribute 41 billion USD and South Africa will contribute 5 billion USD. Escobar argues that this BRICS Development Bank situation is considered “non-Washington Consensus” and is a circuit to counter-act with it. (Escobar, 2014)

Now with this information presented, it is easy to see why any political economist would concur with the argument that the BRICS countries have completely disregarded the Washington Consensus. Even further research shows in another situation where from 2004 through 2007—before South Africa joined the stable in 2010—the BRIC countries Brazil, Russia, India and China, had 117 public companies owned by state that made it on the FORBES Global 2000 List for the first time. The rankings on this list are measured by sales revenue, financial standing, and market value. At the same time, 239 other public companies from the US, Great Britain, Japan, and Germany were removed from the list. This all happened before the financial crisis of 2008 while the BRIC countries were making their modifications to the Washington Consensus. (Lewis, 2013) Then after the 2008 financial crisis, political economists started to question if the BRICS countries’ success in economic development has anything to do with them showing disregard for the Washington Consensus. It seems like a compelling argument to say that the BRICS countries’ success is based on their disregard for the Washington Consensus.

However, our position is not black or white. As we made clear before, the BRICS countries have modified the Washington Consensus to suit their own domestic economies. We agree that the BRICS Development Bank is a counter-action against International Monetary Fund as well as World Bank and may even act as an alternative. However, our position fails to support the prospect that the BRICS countries success in continuing economic development is due to complete disregard of the Washington Consensus. We cannot concur with such an argument because the BRICS countries have already imposed concepts and policies from the Washington Consensus itself into their own economic policies. However, this information regarding the BRICS Development Bank now brings us to the other aspects of our position.  (Escobar, 2014)

In another article by Kevin Gallagher of The Globalist, he speculates the BRICS countries actions in regard to what he refers to as “The Legacy of the Washington Consensus”. The BRICS Development Bank may act as a pressure mechanism to get World Bank and the International Monetary Fund back in a position of financial and economic sound. Initially, the World Bank and IMF were established in Washington with objectives to stimulate employment growth, as well as financial and economic security. Gallagher points out however that this initial objective was disrupted in in the 1980’s throughout the 1990’s when they launched the ploy of the Washington Consensus. He states that the Washington Consensus disrupted global economic stability because while it provided financial resources, it was done under the condition of deregulation. The times of the Washington Consensus are frowned upon due to their imposed financial costs throughout developing countries. The World Bank and IMF are viewed as if the institutions were fabricated specifically against the emerging markets as well as developing nations. Gallagher supports such a speculative claim on the grounds of an unwritten rule. That unwritten rule he believes is that the IMF head has always been a European citizen while the World Bank head has always been American. He also supports his claims by stating that the voting network of both IMF and World Bank are bias and rule in favor of better industrialized countries. While this is just his speculation, he does point out that the voting network of these institutions does allocate veto power for the United States should they disagree on an economic policy. Furthermore, IMF and World Bank failed to predict the recession of 2008 while the BRICS countries continued their economic development. (Gallagher, 2014)

Because of this, the BRICS countries are continuing efforts to act as a modified structure independent from the Washington Consensus. What Gallagher calls a “Rio Consensus” is the ploy of the BRICS countries new Development Bank and the pool of reserve currencies. In order to provide financial resources for the BRICS countries as well as other emerging markets and developing nations, the Development Bank will be utilized for purposes of innovation throughout these nations. Should there be any unexpected threats posing against their currencies, the pool of reserves currencies serves as a safe guard for the BRICS countries to provide financial stability in the event of such a crisis. If the Development Bank and the BRICS countries’ pool of reserve currencies prove to be successful, then it may serve as a new innovative bench mark for economies across the globe to follow, including the US. Such a scenario may render the original concepts and Policies of the Washington Censuses obsolete. The proclaimed Rio Consensus so far, is showing to have the power to do just that. (Gallagher, 2014)

Now like the Washington Consensus, the BRICS countries are establishing their policies and ideas for the purpose of financial stability and economic growth in developing nations. Our argument stands that the economic success in development among the BRICS countries is not solely due to their disregard for the enactment of the Washington Consensus. However, the subject of how their economic success is related to whether or not they disregarded the Washington Consensus is impossible to answer directly with an “agree” or “disagree”. The subject is complex and can carry components of arguments from both sides.

Our position however, attributes to the initial ploy of the Washington Consensus into the BRICS countries for the sake of financial stability in their economies. The BRICS countries may very well have completely broken away from the Washington Consensus to date. However, this does not necessarily mean that they initially disregarded it. Remember, the BRICS countries took selected parts of the Washington Consensus to conform to their domestic economic policies. So, stating that the BRICS countries disregarded the Washington Consensus is literally inaccurate. Disregarding the Washington Consensus would indicated that they ignored it completely, but that is not the case. They could not have possibly integrated select components of the Washington Consensus into their own economies if they had disregarded it. Considering adoptions or modifications to the Washington Consensus means that the BRICS countries failed to disregard it. So, the reasoning for our argument is based on reform and not disregard. We will present our final argument in stating that while the BRICS countries’ success may be due to not fully complying with the Washington Consensus, they did not disregard it but instead reformed it into a hybrid policy that fitted their economic imperatives.

References

Elizondo, G., 2014. BRICS bank rattles the ‘Washington Consensus’. [Online]
Available at: http://blogs.aljazeera.com/blog/americas/brics-bank-rattles-washington-consensus

Escobar, P., 2014. BRICS against Washington consensus. [Online]
Available at: http://www.atimes.com/atimes/World/WOR-01-150714.html

Gallagher, K., 2014. BRICS: Toward a Rio Consensus. [Online]
Available at: http://www.theglobalist.com/brics-toward-a-rio-consensus/

Lewis, R. I. a. M., 2013. Global Finance After the Crisis. In: s.l.:Edward Elgar Publishing, pp. 174-177.

Myles, R., 2014. BRICS New Development Bank Will Offer Alternative to IMF, World Bank. [Online]
Available at: http://www.latinpost.com/articles/17390/20140717/brics-new-development-bank-real-ruble-rupee-renminbi-rand.htm

Stenkel, O., 2013. BRICS vs. Washington Consensus?. [Online]
Available at: http://www.postwesternworld.com/2013/06/29/the-brics-and-the-washington-consensus/