The fall of the Soviet Union in the 1990’s ushered in not only a newly definite security regime (“full spectral dominance” of the United States), but also more subtly ended any alternative to the neo-liberal economic regime that had been set in motion since the end of World War II. The Washington Consensus, with its emphasis on the opening of markets to international competition and the cap on inflation as the ultimate goal of economic systems, has been heralded for the past twenty years as the triumph of the market to deliverable a sustainable, just economic system to the world.
The acceleration of debt-driven practices in the international economic system, however, illuminates that the entire regime is about more than just fair economic development and has a decisively political nature to it that reflects tradition colonial relations between the developed and the developing world. The major financial institutions of the world and the bodies that purportedly govern them (the World Bank, International Monetary Fund, and the World Trade Organization) are decidedly Western innovations with little representation of those nations whose debts they service.
The financial crisis of 2008, driven as it was by a focus on stimulating aggregate demand through debt-driven solutions rather than a focus on unemployment and income equality, highlights the severe limitations of this neo-liberal market fundamentalism and its failure to address some of the most pressing concerns of the international economy. “Development” has become a key phrase for a certain type of relationship between rent-seeking and debtor states that focuses on profits over sustainability in the long term.
Indeed, the most successful countries in today’s global economic order (specifically those of East Asia) are the ones that have rejected the policies of the Washington Consensus, much to the outrage of the Western countries who stand to benefit from it. A new “Beijing Consensus”, focused on protecting national industry and a sensible wealth and employment distribution, has emerged from the ruins of the 2008 crisis.
While there are serious concerns to be raised about the welfare state (most notably those dealing with employment issues and economic output), the United States, along with much of the Western world, has become bloated with social payments and welfare because of its refusal to address its own employment concerns. Its insistence on profiting off of the developing world through use of its control over financial institutions is rapidly backfiring as developing economies continue to strengthen by looking inward. If the neo-liberal economic order is to survive into the 21st century, it will have to undergo serious structural and political changes.