New Washington Consensus

Context:

Initiatives taken by the US president Joe Biden are being dubbed as efforts to build “New Washington Consensus”.

What is Washington Consensus?

• Reduced states role: It reduced the government’s role in the economy and pushed an free-market agenda of deregulation, privatization, and trade liberalization.
• Western-style capitalism: It led to the domination of the Western-style capitalism. It was firmly promoted by the International Monetary Fund and the World Bank.
• Objective: It advocate free trade, floating exchange rates, free markets and macroeconomic stability. 

Issues with Washington Consensus

• US industrial base: The older approach that markets know best led to the hollowing out of the US industrial base. Its promise that deep liberalization would help American export goods remained unfulfilled.
• Privileging some sector: Earlier notion of “all growth was good growth” led to the privileging some sectors like finance while other sectors like semiconductors were at disadvantage.
• China Challenge: Earlier idea was that brining china into the WTO in 2001 would incentivize her to adhere to its rules. However, economic integration didn’t stop china from expanding its military ambitions in the region.