Tuesday, April 21, 2009

The rise of the Beijing Consensus

April 20, 2009

By Jonathan Holslag

UNITED States President Barack Obama's first appearances outside North America - in London, Strasbourg, Prague and Istanbul - galvanised world attention. But what that trip singularly failed to do was paper over a startling fact: The 'Washington Consensus' about how the global economy should be run is now a thing of the past. The question now is what is likely to replace it.

Although China is often said to lack 'soft power', many of its ideas on economics and governance are coming into ascendance. Indeed, in pursuit of economic stability, the Obama administration is clearly moving towards the kind of government intervention that China has been promoting over the past two decades.

In this model, the government continues to benefit from the international market but retains power over the economy's 'commanding heights' through strict control over the financial sector, restrictive government procurement policies, guidance for research and development in the energy sector, and selective curbs on imports of goods and services. All these factors are not only part of China's economic rescue package, but of Mr Obama's stimulus plan as well.

China is clearly pleased to see that the US is now also placing cool calculation of its national interests at the forefront of its foreign policy. 'In delivering a better life for people on the ground, one should be more concerned with substance than with form,' Mr Obama said before his inauguration. Rather than obsessing about elections, the US now seeks to build pragmatic alliances to buttress its economic needs. This requires, first of all, cosying up with China and the autocratic Gulf states - the main lenders to the US Treasury - as well working with Iran and Russia to limit the costs of the wars in Afghanistan and Iraq.

As the US backtracks on its liberal standards, it is flirting with what can be called the 'Beijing Consensus', which makes economic development a country's paramount goal and prescribes that states should actively steer growth in a way that suits national stability. What matters in this world view is not the nature of any country's political system, but the extent to which it improves its people's well-being. At the diplomatic level, this implies that national interests, not universal norms, should drive cooperation.

[And we can see the imprint of the Singapore Way in the Beijing Consensus.]

This diplomatic and economic realism is more than a reversal of the neo-conservative muscle-flexing of the George W. Bush years. It is an attempt by a declining power to use its restrained capabilities in a more economical way.

For example, in times of crisis it is no shame for a government to be mercantilist, but by behaving in this way, the US has lost the moral high ground as a champion of free trade.

America's new pragmatism is also the consequence of a process of 'reverse socialisation'. Over the past two decades, the US and its European allies believed that they could inculcate the rest of the world with their economic and political principles. Countries like China became enmeshed in a web of multilateral organisations and subjugated to conditional engagement strategies. Nowadays, the West does not have the leverage to enforce these conditions. Moreover, the majority of developing countries now actively embrace multilateral bodies as part of their development strategies.

As we move from a unipolar international order to one with multiple regional powers, realism should allow them to vie for influence while keeping the costs as low as possible. The result will be a new concert of powers, tied together by their fixation on national economic growth and the objective of discouraging others from causing instability that risks intervention.

Instead of entrusting America with the arduous task of safeguarding international stability, the BRICs (Brazil, Russia, India and China) will assume a more prominent role in policing their own backyards. Russia can have its Caucasus, and if the generals in Myanmar should go mad, it would become China and India's problem to sort out.

America's policy shift will inevitably erode the Western liberal axis. America has the flexibility, capacity and leadership to adapt to the new rules for pursuing diplomacy, but Europe simply does not. Its strategic relevance, even in the transatlantic partnership, is destined to weaken further.

Realism will give the US more manoeuvrability in the short term, but it will have to sacrifice some of its soft power to achieve this. Whether America is able to strengthen its global influence in the future will depend not so much on its moral esteem, but on the extent to which it succeeds in revamping its economy and forging new alliances.

The rising Beijing Consensus offers no guarantee of stability. A concert of powers is only as strong as its weakest pillar, and requires a great deal of restraint. If one player slides back into economic turmoil, nationalism will reduce the scope for pragmatic bargaining. Overlapping spheres of influence could cause major conflict. And if China comes out of the crisis as the big winner and continues to boost its power, zero-sum thinking will soon replace win-win cooperation.

The writer is head of research at the Brussels Institute of Contemporary China Studies


As the US backtracks on its liberal standards, it is flirting with what can be called the 'Beijing Consensus', which makes economic development a country's paramount goal and prescribes that states should actively steer growth in a way that suits national stability.

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