The Washington consensus is a model of neoliberal economic order proposed by the United States to the world and endorsed by the G-7 economies, the International Monetary Fund (IMF), the World Bank, the Organisation for Economic Cooperation and Development (OECD) in the ‘80s and the World Trade Organization (WTO) in the second half of the ‘90s.
It has been widely adopted by many developing countries since the 1980s, as it offers a standard package of economic aid to every country that has knocked on the door of the IMF and the World Bank.
The model advocates for independent central banks that keep interest rates high, causing leading developing economies' currencies to appreciate in value and import more from G-7 countries with high-interest rates. Additionally, it promotes completely free trade rules, encouraging developing economies to import large quantities and creating a dependency mechanism between developed and developing countries.
Naturally, the other pillar of the Washington consensus is completely free trade rules that aim to establish a dependency connecting developed and developing countries through the global trade chain by removing the barriers to international trade through the WTO and encouraging developing economies to import without fear.
Well, what if such a model causes a current account deficit for leading developed and developing economies? This is exactly where the third pillar of the aforementioned neo-liberal model comes into play, the point of the message: “After financing, the current account is not a problem.” That is, convincing advanced and leading emerging economies to become fully open to international capital movements. This model, which the IMF, the World Bank and OECD have embossed, has drawn all developed and leading developing economies into the “external debt vortex” in the last 40 years.
Just as the Washington consensus could not prevent the global inflation risk, as if the excessive dependency risk caused by the current global supply chain and the concerns caused by the global debt vortex were not enough, due to the extremely liberal financial reforms and the deregulated, that is, excessively deregulated banking and capital market environment it proposed, it caused the 2008 global financial crisis and a banking system where we are still witnessing bankruptcies all of a sudden today. The summary of 40 years is essentially a complete fiasco.
Now, 40 leading countries of the world economy, especially the founder of the system, the U.S., are questioning the extremely liberal global financial system and the extremely liberal global trade system from top to bottom. The problems in the monetary and fiscal policy approaches imposed by this model have not yet been fully discussed. However, their turn will come, especially when it is seriously questioned whether the central banks in the world economy are as effective as before in the money markets.
Now, the global economic system is faced with the search and construction of a new Washington consensus; so much so that in an extremely free global trade system, seeing the damage caused by import-dependent growth, we now focus on a healthier growth model based on domestic and national production and exports. For this purpose and a development move based on sustainable infrastructure investments, we encourage the investment appetite of the private sector of the country. We are talking about a new global economic order understanding and a search in this direction that will encourage countries toward a “responsible” production approach based on zero waste and net-zero carbon to protect the environment, toward a self-sufficient economic understanding that will raise "domestic and national" opportunities.
The search is for a new model in which countries question a global supply chain system where they are dependent on raw materials, intermediates, minerals, rare minerals, metals, final products and for the redesign of the supply-production-export added value chain; building a new global model where they prioritize "self-sufficiency" in areas such as energy, agriculture-food, health and defense. Whether this ambitious plan can become a reality remains to be seen, but we will witness the journey together.
