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September 06, 2013

Reassessing the Washington Consensuses (Consensi?) -- Views from Brazil
Posted by David Shorr


Palacio PlanaltoLast month, colleagues and I spent a week in Brazil in an effort to take the pulse of Brazil's foreign policy community. The intensive itinerary was arranged with the help of leading think tank CEBRI and included senior and very senior officials. 

Our conversations were pretty wide-ranging, trying to gauge sentiment in a key emerging power. Naturally there isn't any single collective worldview of the Brazilian establishment, so instead I'll convey some of the different strains of thought. The best way to summarize, perhaps, is to take stock of the Washington Consensuses. I use the plural consensuses because the term can be used in three different senses -- two that are familiar, and another that I'd add. 

At one level the consensus remains solidly intact. The international system operates on the tacit assumption that free market economies and democratically accountable governance work best. Think of the frequent observation that China's shown no signs of being a revolutionary power or pushing an alternative 'Beijing Consensus' paradigm. And nor were any such ideas broached by Brazilians we spoke to.

Of course this level of generalities and broad principles leaves major issues open for debate, and important new debates seem to be percolating. I will discuss those further below, but first I want to raise a second sort of Washington consensus: basic confidence in, and acceptance of, American global leadership. In this area we heard notable ambivalence. 

On the one hand, an affirmation of the United States durable influence was signaled --explicitly rejecting the notion of American decline. Contrary to media depictions, we didn't get complaints about the NSA eavesdropping revealed by the Snowden leaks. We were in Brasilia at an interesting time, shortly after a visit by Secretary of State Kerry that had focused on a prospective state visit by President Rousseff to Washington. Even though our trip preceded the current Syria controversy, the debate over intervention points toward the other side of the ambivalence in Brazilian policy circles toward US leadership. It can be seen in the contrasting US and Brazilian multilateral agendas; where the US views "rogue" nations as the greatest threat, Brazil harbors significant concerns about the sole superpower going rogue.

The third meaning of Washington Consensus is the neoliberal agenda, and it's the level at which interesting renegotiation is taking place. This Washington Consensus entails unquestioning belief in the marketplace -- just stay out of the way and let the invisible hand work its magic. Many of the issues currently on the multilateral agenda represent departures from neoliberal laissez faire fundamentalism. 

Let's start with the story of Brazil's success as a major emerging economy. While Brazil stabilized its economy initially by taming inflation in the 1990s, its achievements in poverty reduction and economic equality came through state intervention -- classic social safety net. Some of the biggest issues here at the G-20 summit (I'm in St. Petersburg this week) reinforce the point: regulation of financial markets and capital flows and clamping down on corporate tax-avoidance. All run counter to the dictates of liberalization.

The food security agenda of protecting the world's poorest against sharp commodity price spikes is also part of the trend. Where liberalization calls for all the commodities produced to be on the market, the 2008 food crisis brought renewed interest in the usefulness of government-held "buffer stocks" to dampen any panic buying or speculation. And one of the rationales for regulation of derivatives is to prevent investor profiteering during a crisis.

One question after the financial meltdown was whether it would totally discredit the US economic model and prompt a wholesale abandonment of the Washington Consensus at this level. That didn't happen, and acceptance of market principles is still the accepted wisdom for many issues. Even so, other that policy approaches that used to be dominant orthodoxy are now interesting debates.

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