Abandon the Washington Consensus, forge the Istanbul Consensus

16 May 2011
Article

The world has had more than enough of the Washington Consensus. It’s time to impose an Istanbul Consensus based on common sense, low-cost solutions, public honesty and simple justice and give the people of the LDCs, at last, a chance.

When the last UN “Least Developed Countries” [LDCs] Conference took place a decade ago, the “Washington Consensus” reigned. The World Bank and the International Monetary Fund were its principle architects; they developed its rules and components.

The main ones can be quickly listed: Private is always better than public, so privatise public services and prevent the government from doing anything the private sector can conceivably do in its place. Integrate the country into the global economy, no matter what that country’s level of development may be. Enforce “free”, that is, unrestricted and deregulated trade. Welcome foreign investment in every sector, by any company, even if that company is vastly more powerful than the country’s own. Make sure the work force is “flexible” and grateful for any job that comes along, thus forestalling demands from labour for better wages and working conditions.

Above all, recognise that the market knows best. It cannot be wrong and for that reason it must not be regulated from outside but allowed to get on with organising the economy and society for their own good. The Consensus is similar in many respects to religious doctrine.

For some thirty years, the Bank/Fund have liberally dispensed this advice to all the indebted countries in the southern hemisphere, including the LDCs. The weaker the country, the less it can argue or resist. Each one receives an obligatory “structural adjustment” programme, a one-size-fits-all programme requiring that they “export their way out of debt”. Each country must earn hard currency through exports, usually raw materials and cash crops, in order to repay its loans. Free access to services—health care or education, for example—must be abolished and “cost recovery”, i.e. fees, imposed.

Such programmes might be fine except for one detail: they don’t work, if by “working” one means that people become economically better off, inequalities both within and between countries are reduced, dire poverty and hunger are greatly diminished or eliminated; opportunities for “decent work” multiply and change that can honestly be called “development” takes place.

Washington Consensus policies induce no such results. Indeed, the only successful former “third world” societies, from South Korea to China, that have emerged from underdevelopment made the transition using policies exactly opposite to those insisted upon by neoliberal Bank/Fund economists. They interfered with markets as a matter of course, using subsidies, wage and price controls, high tariff barriers, massive public investment in education and so on.

In contrast, the LDCs have, at best, remained where they were a decade ago. More often their situation has become worse and their number has doubled to 48.

In contrast, the LDCs have, at best, remained where they were a decade ago. More often their situation has become worse and their number has doubled to 48. The Millennium Development Goals will not be met by the 2015 deadline; on present trends we would need 100 years to reduce hunger by half. Nor have these countries “grown out of debt” as the Consensus promised they would. The LDCs as a group have not emerged from crippling debt: they are still paying their creditors, public and private, $11.400 every minute in debt service.

We know what these countries need and the Istanbul Conference should serve to hammer this message home. Like everyone else on earth, LDC citizens need nourishing food and clean water, a dwelling, education for their children; health, including reproductive health care and a decent physical environment. They desperately need debt cancellation as well. The World Bank now stresses the role of conflict in “fragile states” which perpetuates their underdevelopment. It fails to note, however, the clear statistical correlation between conflict and high levels of debt. Some of the fragile, like Somalia, have gone over the brink.

We also know, on the whole, how to provide what people need, or rather how to help people provide these things for themselves. For example, a great many programmes, some now in place over large areas in Africa, have proved that yields of food crops can be doubled or tripled using scientifically improved but entirely organic, labour-intensive agricultural methods. Earthen architecture is coming back into its own. Far from being “primitive”, earthen buildings are durable, adapted to local environmental conditions and often beautiful as well. Inexpensive water harvesting, purification and conservation methods exist.

As soon as a part of the debt was cancelled in Tanzania and the government let the people decide what to do with the savings, one region saw girls’ school enrolment shoot up by two-thirds, simply by eliminating school fees.

As soon as a part of the debt was cancelled in Tanzania and the government let the people decide what to do with the savings, one region saw girls’ school enrolment shoot up by two-thirds, simply by eliminating school fees. Statistical evidence also shows that an extra three years of schooling for a girl equals one less baby when she reaches maturity. And so on.

But all these solutions to peoples’ most basic problems have one huge drawback: they are low-cost and they don’t make any money for corporations, banks and expensive consultants. They are “solidarity-based” rather than “market-based” and on those grounds they are unacceptable by Washington Consensus standards.

We know too, alas, that sometimes people need honest governments most of all. The NGO Global Financial Integrity (which employs ex-IMF staff) estimates the wealth leaving the southern hemisphere as a whole at almost a trillion dollars yearly. Two University of Massachusetts economists have measured transfers from public to private accounts in 48 sub-Saharan African countries over a thirty year period. They place them at over $720 billion, noting that up to 60 percent of a given loan often fled the country in the same year that it arrived. The people must continue to sacrifice so that the interest on those debts is paid as if the loans had actually been invested.

Are the Bank and the Fund, so vigilant in overseeing their Washington Consensus adjustment programmes, unaware of these thefts? Did they know they were occurring but do nothing? In the first case, it seems fair to say, they proved incompetent; in the second, guilty of complicity. The world has had more than enough of the Washington Consensus. It’s time to impose an Istanbul Consensus based on common sense, low-cost solutions, public honesty and simple justice and give the people of the LDCs, at last, a chance.