To begin this research paper
To begin this research paper, I would like to primarily delve into the significance and history behind the Washington Conesus. It is important to firstly understand its significance to, in turn, better apply and successfully analyze on why it can or cannot be applied successfully to developing countries.
To begin, the Washington Consensus is a ten-stage policy protocol developed by the American state capital Washington DC, considered as a standard to reconstitute and reform “crisis-wracked” developing countries. In this accord, the ideology argues that the development and effective operation of the “free market” is crucial in order to reduce state involvement and therefore create a prosperous environment in the development of rising economies, and as boldly stated by Mark Ortilzky, for the benefit of Latin America or as one may call it, “The Global South”. Essentially, the ideology behind this accord is to promote a neoliberal free trade agreement that will in the long run benefit both those established and rising economies. As defined by David Harvey in his excerpt from the Oxford University Press, “neoliberalism” is the reduction, deregulation and privatization of government spending in order to encourage, and therefore increase, the Private sector’s influence in a countries government/society. Essentially, it is a modified form of liberalism that tends to favor global free-market capitalism over the local, communal and traditional aspects of a rising economy. The second important term worth delving into, before exploring the targeted subject, is the ideology and motivation behind free trade. As one may know, The United States is an influential capitalist world economy that showcases a successful, or at least somewhat functional, example of a free trade agreement. This accord is called The North American Free Trade Agreement (NAFTA), which allows Canada, Mexico and the U.S to engage in unrestricted trading across borders. It is this ideology that pushes entrepreneurs, to strive and push for similar understanding, and therefore granted luxuries, in other countries. Essentially, the goal behind “Free trade” is to foster an egalitarian system of unregulated economic exchange, in which quotas, taxes, tariffs or “other forms of centralized economic interventions by the government” are virtually non-existent or extremely restricted in the daily business spectrum. Finally, in order to better conclude the terminology aspect of this research paper, it is important to acknowledge that, as explained by Ortilzky, the free market is created to perform and represent an invisible “benchmark” that distinguishes modern societies in which these economies can “approximate this ideal of efficient resource allocation” and, in the future, can begin to allocate the appropriate amounts of supervised regulation in order to ensure economic stability and its future success.
Now that the intentions and beliefs behind the Washington Conesus have been discussed and clarified, one can better learn to apply its principals to that of a developing country and appreciate its plausible outcome, whether for better or worse. In terms of trade Liberalization and the subsequent financial liberalization, I believe it to be a negative impact on those of emerging economies. As history stands to prove, and as exemplified by NAFTA, the fluidity and trade of goods and their income are not always equal and where there is an inequality in power and influence there is also an inequality in production and recourse allocation. It is obvious, that although proving beneficial and fruitful to the American economy, and it being rather based on a consistent supplied demand by more powerful countries, such as those of the U.S., there is an unequal exchange in goods and services by those in emerging or of less influential economies. Being from Mexico myself, I have had first-hand experience on the intimidating power and influence of the “global economy” or rather, in my case, that of our neighboring country. Essentially, it was evident that there was an unequal exchange in goods, as Mexico served as a raw goods and production/industrial supplier while American companies superimposed themselves in order to resale the Mexican made products back to the country in an exponentially raised and unsustainable price. Although the entailed argument that follows on behalf of free trade has proven somewhat beneficial, it has in the long run somewhat handicapped the local economy and Mexico’s influence as it now largely relies on foreign funding and investment.
Furthermore, applying this previous model, I have come to the conclusion that the Washington Consensus, although seemingly fitted as an easy economic game plan for emerging economies to improve upon; it is vulnerable to corruption and ultimate coercion from richer more influential countries. In general, it is the romanticized idea of ten step plan to solve all world economic problems that people tend to understand, but the actual execution proves to be largely ill planned, as it is created by and for the benefit of established economies on the expense of others. It is a biased system, much like others colonization initiatives created by wealthier cultures and later superimposed unto poorer ones that do not take into account the environmental, economic and cultural implications and subsequent degradation that follows.
It is the negative promotion of the above agenda that proves inefficient. For example, take into account an emerging nation like that of Kenya, Africa where an average monthly median income is $76 USD and compare that to the average German monthly median income of $1,700 USD. In this example, because of free trade, a European company, “Oetkers Pizza”, is able to establish itself in the African sector yet not accommodating its prices towards the lower economy, selling its product at an average of $7.50 USD an unsustainable 1/7th of the average Kenyan median wage while in Germany retailing only for $2.95 USD, which is less than 1/500th their median income. This imposition, as exemplified, caters toward the interests and benefits of corporations and banks abroad while creating a wage inequality in which people are incentivized to buy more expensive less nutritious frozen imported pizzas from abroad rather than their original local produce. This extreme example along with that of the Mexican import inequality exemplified in the NAFTA agreement are some examples of the Ill-advised and Inefficient Economic Model the “Washington Accord” encourages for emerging nations.
Overall, I can conclude that as the many previous economic failures in the Washington Accord ten step plans stand to prove, I believe it is an ill and ineffective undertaking for nations hoping to increase their GDP and ultimate standard of living.