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[ Approach ][ Capabilities ][ Staff ][ Clients ][ Press ][ Library ][ Contact ]NEW YORK - August 20, 2007 -- Asia has reached an interesting point in its development. For a long period, behind the West in economic terms, Asia is now in the process of convergence. Although there remains considerable ground to be traversed before Asian economies are at the same average level of most European or North American economies, the gap is closely and in some cases, they have bypassed much of the West. At the heart of all of this is what strategy is the right one. This carries considerable political implications as Asian countries are hardly homogenous in their approach to mixing political and economic development. Indeed, there are stark contrasts between India's democratic-capitalism and China's soft authoritarianism. Both countries offer a certain consensus as to development that is a departure from the earlier Washington consensus.
During the 1990s the officially promoted path to better development, supportive of globalization, was the Washington Consensus. John Williamson, as a World Bank economist in 1990, initially articulated what he regarded as the virtues to which developing countries should aspire if they wanted to become developed. Although Williamson's comments were oriented to Latin America, they gained influence throughout the developing world and in the ranks of officials dealing with development issues. The key elements of the Washington Consensus were fiscal discipline, removal of tax subsidiaries, tax reform, competitive exchange rates, deregulation, measures to secure property rights, transparency and disclosure, privatization (shrink the role of the state), liberalization of trade regimes and financial systems. Equally important was the view that capital flows should be liberalized - set free of government controls.
In 1997-98 the Washington consensus suffered a major set-back as many of the countries that most opened their capital flows, such as Argentina and Indonesia, were whip-sawed by explosive volatility from short-term capital flows. The herd-like behavior of investors was blamed for the shock waves that rippled from Thailand in July 1997 to encompass ever-widening circles, engulfing Malaysia, Indonesia, South Korea, Russia and Brazil. The simplistic answer was that liberalization of capital flows (and the level of globalization that it implies) was bad. As one critic stated: "Mixed with mismanagement and corrupt governance, the Washington Consensus managed to undermine a dozen economies in a decade. Countries such as Argentina and Indonesia found that the speed and greed of modern finance was a pipeline for every sort of instability."i
One of the so-called lessons of the Asian financial crisis was that the countries that did not follow the Washington Consensus, avoided the worst aspects of the 1997-98 Asian financial crisis. Chief of these were China and India. Instead of the fulsome embrace of globalization, these nations followed (and still do to a degree) what Joshua Cooper Ramo, the former editor of Time magazine, calls the "Beijing Consensus". He argues that the main thrust of the Beijing Consensus is driven by the rush for equitable, high-quality growth. The key elements of the Beijing Consensus are:
- Ideas such as privatization and free trade must be approached with caution (both China and India still have large state-owned companies);
- There should be a ruthless willingness to innovate and experiment (i.e. China's special economic zones);
- There should a lively defense of national borders and interests (as with China vis-à-vis Taiwan and Hong Kong);
- The government should follow the increasingly thoughtful accumulation of U.S. currency reserves;
- And, policymakers should have "a focus not simply on gross domestic product growth, the sine qua non of the Washington Consensus success, but also on growth that is both environmentally friendly and corruption-free." ii
In many regards, the Beijing Consensus is an updated version of Asian Values, i.e. that Asian has a unique history and developmental path. As much as European exceptionalism in the rise of capitalism is inaccurate, so too is the view that Asia is entirely unique. Yes, cultures vary, but there are commonalities in how societies respond to globalization. Indeed, the argument emerged in the early 1990s that Asian Values were providing a different foundation for the region - one based upon a more traditional political culture, emphasizing thrift, hard work, hierarchy, the placing of the community above the individual and stability versus the freewheeling, individualistic-oriented and chaotic Western liberalism. It also reflected an authoritarian tendency. Attached to these values is another - economic development rights have a priority over political and civil rights. Ramo's Beijing Consensus certainly dovetails with the older argument about Asian values.
The idea of a Beijing consensus belies an important point - for many Asians globalization still is observed as something that is driven by the United States, functioning in both an economic and political dimension, which has clear-cut societal implications. Globalization has also resulted in scandals, which have left a bad taste associated with greed and excesses pitting global capitalism against traditional Asian work ethics. One Japanese executive stated: "Globalization in the minds of the Japanese people is associated with such phenomenon as hostile takeovers, lay-offs, widening of economic divides between the rich and the poor, surge of money-worshipping values, i.e. everything that leads to instability."
All of this points to another important question - who is steering or controlling the process of globalization? For example, do those who gather at Davos or Aspen function as the guiding forces? Certainly U.S. power has been a dominant factor in shaping globalization, taking into account the balance of population growth, competition over natural resources, pollution and climate change, but in a manner that is in American national interest. With the rise of Asia that is beginning to change. The post-Cold -War era is still not fully formed, and appears to be making a shift into a more multi-polar world, where Asia's powers increasingly matter. And China, Japan, and India are increasingly demanding more say in global affairs. Equally important, voices within their countries are also demanding more say in who benefits and who does not.
It is important to underscore the Asian desire for order in particular as to how it forms a perceptual lens through which to observe and interact with the rest of the world. As one of the strong points of Asia is the enduring strength of families and societies, providing a solid foundation for thrift, work, and educational success, Asia's public institutions have often been one of its greatest weaknesses. According to political scientist Lucian Pye, the most serious risk in Asia has not been too much government, but too little. Weak governmental institutions have often failed to stop disorder, banditry and anarchyiii. The consecutive breakdown of imperial power and the rise of anarchy is certainly a constant theme of dynastic China, but extends through the Warlord, Republican, and Communist eras. This is where the Beijing Consensus comes in - the perceived need in China's case for the political center, i.e. the Communist Party, to be in total control of the nation's political life. This includes the stifling of democratic voices in Hong Kong and threatening of Taiwan's political experiment - as both represent the view that there can be more than one political viewpoint.
The unstated part of the Ramo's Beijing Consensus is that without control over the nation's political discourse, the CCP cannot impose its economic policies. The rule of law is not to establish a level playing field for all actors, but to be used to maintain the political rule of a single party and by that, political stability. Change is allowed, but it is top-down, imposed, and directed.
Yet, the globalization and economic liberalization that have occurred stir societal unrest brought about by serious environmental problems that have eroded the CCP's legitimacy. There is a fundamental tension in sequencing economic reform ahead of political reform - or in the case of China, the absence of political reform (except at a glacial pace). The result is more as Ross Terrill observed, in contrast to Ramo's environmentally friendly and corruption-free Beijing Consensus developmental end-goal: "The essential traits of the new Chinese Empire are three: Its driving force comes from above, not below; it sees itself as the guardian of truth; and any compromises it makes with other powers are tactical in nature, not based on an acceptance of moral comparability between China and the rest of the world of sovereign states."
Despite the substantial problems facing China - both economic and political - there is an appeal on the development front. Ramo is hardly alone in being apprehensive that opening political systems (as part of the globalization process) open the door to instability. As Yale University's Amy Chua starts her book, World On Fire: "…the sobering thesis of this book is that the global spread of markets and democracy is a principal, aggravating cause of group hatred and ethnic violence throughout the non-Western world. In the numerous societies around the world that have a market-dominant minority, markets and democracy are not reinforcing. Because markets and democracy benefit different ethnic groups in such societies, the pursuit of free market democracy produces highly unstable and combustible conditions."
Yet globalization has occurred throughout Asia and the result has not been a complete breakdown in law and order. Progress has actually been made on the economic front. South Korea's and Taiwan's current open political systems and advanced economies also came from a process akin to the Beijing Consensus - with economic development ahead of political development. However, in both cases there was an evolution from hard authoritarianism to soft authoritarianism to a form of democracy, which is more open and accommodative of a changing global system.
Along the lines of a more evolutionary shift of political institutions Michael Vatikiotis observed: "The pace and manner of political change may seem at odds with Western norms, but there it would be wrong to assume that people are naturally disposed to enduring tyranny and oppression. The form of freedom and democracy they crave is not necessarily identical with that practiced in the West, but there is a growing desire to be treated as subjects and not objects of political life." In a sense, this is the core of the debate that Asia faces with its future - how to transit from closed political systems, like China's where corruption flourishes to more open political systems which have problems but are seeking to improve through better transparency and better corporate governance as well as more flexible political institutions. Flexibility is key - it allows greater accommodation of public demands in an environment of change. There is a point where change must occur, within a managed context, or the risk of political upheaval becomes overwhelming.
Is the answer the Beijing Consensus? India offers a major counterpoint to the Beijing Consensus. Indeed, a "New Delhi consensus" can serve as a counterpoint to the authoritarian bent of the Chinese model:
- A strong adherence to democratic government, based on parliamentary give and takes;
- Settling of major debates about economic policy via the ballot box and parliament (a more difficult process in the short term);
- A legal system relatively independent of the dominant political party;
- An apolitical military establishment (unlike China's PLA);
- Support of the increasing multinational nature of local companies;
- An economically expanding and political articulate middle class, supportive of globalization.
- A desire to strike more of a balance in the West between the have's and the have -not's . Copying high end Western materialistic society is not entirely a viable option in the short term, but the gap can be closed over time.
While India has enormous problems surrounding economic disparities, environmental pollution, infrastructure needs, and corruption, it may just offer a kinder and gentler approach to the thornier issues of globalization and political order, especially when compared to China's top-down authoritarianism. A New Delhi Consensus may also offer a milder form of globalization than some of the hardcore aspects of the Washington Consensus and its emphasis on totally unfettered free markets. What is often forgotten in the development and debate is that the West's success came on the back of winners and losers, socio-political upheavals, and some degree of human suffering. Additionally, a New Delhi Consensus, like a Beijing or Washington consensus, should not be adopted as an ideology, rather as a policy framework.
In many regards, Asia is in the process of economic convergence, pushed along by the relentless nature of globalization. Over time, it will make a decision between the Beijing Consensus and its New Delhi counterpart. By sheer demographic weight and the rapid takeoff of these two economies, the rest of Asia will be impacted as will the rest of the world. The alternative to finding the "right path" means political chaos and economic failure, something that Asia cannot afford in the 21st century.
i Joshua Cooper Ramo, "China Has Discovered Its Own Economic Consensus", Financial Times, May 7, 2004, p. 13. For a lengthier treatment see his The Beijing Consensus (London: The Foreign Policy Center, 2004).
ii Ibid.
iii See Lucian Pye, Asian Power and Politics (Boston: Harvard University Press, 1985).