From Washington Consensus to Cornwall Consensus - time to change direction

The neoliberal world economic order is not working out for most. Time for change.

From Washington Consensus to Cornwall Consensus - time to change direction

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Read more on - Polity | Economy | Schemes | S&T | Environment

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• The story: End of the Washington Consensus is near, as seen in new reports by the G7 experts group. It demands  new public-private sector relationship to build sustainable, equitable and resilient economies.
• Old is not going to work: The G20 summit in October 2021 has to realise that the problems of today - pandemic, climate change, rising inequality, and economic fragility - cannot be tackled using old models. And the biggest of those was the Washington Consensus, that held sway for five decades.
• Washington Consensus: Western capitalism consolidated its hold on entire world around late 1980s, when this term became popular.

1. It is a set of fiscal, trade and tax policies promoted by the World Bank and IMF
2. It represented neoliberal globalisation but ended up promoting inequalities and subordination of Global South to North

• Barely escaped: The global economy avoided a total collapse first in 2008 and then in 2020, and is now faced with new risks, uncertainty, turmoil and climate problems. Leaders can continue running the old system, or build a new international social contract.
• Cornwall Consensus is the alternative: What the Washington Consensus did was to minimise the role of state in economy, push free markets, deregulation and trade liberalisation. Cornwall goes opposite, and revitalises the state's economic role, pursues social goals, builds international solidarity and reforms global governance. Goal - common good.
• What changes: Any grant or aid from states and multilateral bodies will now demand decarbonisation (and not the IMF-style market liberalisation, during structural adjustment programmes). Government will do preparing, and not repairing.

1. From reactively fixing market failures, to proactively shapring markets for a green economy
2. From redistribution to pre-distribution
3. Mission oriented public private partnerships

• Why change all: The old model has failed to produce widely distributed benefits. It is not able to tackle the huge new shocks - economic, ecological and epidemiological. It cannot at all achieve the UN SDG 2030, conceived in 2015. Post the 2020-21 pandemic, it is impossible. Hence, for humanity's survival, a new Consensus is needed.
• Urgent need: The new report speaks of urgently becoming more resilient to tackle the risks and shocks - acute ones (pandemic) or chronic ones (extremel wealth and polarisation). Instead of GDP or GVA, focus should be on common goals.

1. The G7 must ensure vaccine equity globally, and invest in preparing for future pandemics
2. Entire system of IP needs to change, to ensure that equal access happens (knowledge is the result of collective value-creation process)
3. Higher state spending - to the tune of 2% of GDP ($ 1 tr per year) - is needed from today till 2030, for post-pandemic recovery
4. A "CERN for climate technology" has to be built, for technology that can remove CO2 from atmosphere, and build zero-carbon solutions for hard-to-abate industries like shipping, aviation, steel and cement

• Summary: The Washington Consensus has to be dismantled urgently. The pandemic was the wake-up call, reminding humanity of the collective-action problems confronting it.
• EXAM QUESTIONS: (1) Explain the key tenets of the so-called Washington Consensus. What damage did it do to the world? (2) Why is the new Cornwall Consensus being envisaged? Explain. (3) What global problems are arising which demand wholesome solutions from society? List and explain.

Read more on - Polity | Economy | Schemes | S&T | Environment

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