Why Beijing Consensus Has Become an Attractive Political Economy Paradigm for Many Developing Countries in Preference to Washington Consensus.

Topics: Economy of the People's Republic of China, United States, Economics Pages: 5 (2380 words) Published: June 4, 2013
The United States (US) economy is currently in a tensed situation. Always being seen as the super power among all countries might not be the same case anymore recently. Lots of reason had piled up that causes her decline throughout the years. There is a lot of different kind of factor that is able to determine and compare which country economy is stronger than the other. Comparing at the Gross Domestic Product (GDP) gives a clearer view of the value of all final goods and services produced within a nation in a given year. By looking at the first quarter of 2012, US had grew 2 percent and in the second quarter of the year, 1.7 percent. (Larry 2012) Looking at a country unemployment rate will also be another way that reflects the economic status of a country. US has 7.9 percent unemployment rate, which is considered very high for a developed country. (The Associated Press 2012) Economist even predict that US economy will be going from bad to worst and there might be a possibility that it will fall back into recession over the next few years. (Patrick 2011) In general, the US economy is very weak. On the other side of the note, China economy is growing rapidly fast and steady. Comparing their GDP growth for the first quarter of year, it was 8.1 percent and the second quarter, 7.6 percent. (Larry 2012) With such a big difference in their GDP, China is surely growing a lot faster than the US. Adding on, looking at their unemployment rate, with 6.5 percent, it clearly shows that their economy is much more stable than the US. China economy had been improving in an unbelievable speed. Economist had also state that China will soon overtake US in the next four years which is by 2016, and becoming the largest economy player in the market. (Josephine 2012) Soon it might be time for the west to retire her position as the super power and let another rising power to have her position. Despite their current economy situation, there is another component that differentiates the West and the Chinese. It will be the Washington Consensus and the Beijing Consensus that each country had created, focusing on different aspect. The Washington Consensus was formed in 1989 by the economist John Williamson and it was promoted by the International Monetary Fund (IMF), World Bank and the US Treasury Department to improve Latin America’s economy. He argued that it would be good if there is a policy to help the debtor countries to overcome their own debt. The Washington Consensus had been seen as a guideline for countries that need help economically. (John 2004) 10 Elements of the Washington Consensus were formed. This includes; A.Fiscal discipline, by balancing government budgets.

B.Recording public expenditure- to cut down welfare expenditure and moving them away from subsides and focus on a market that was not being focus on to gain economic advantages. C.Tax reform, by moderating the tax rates and focusing more on the indirect tax rather than direct tax. D.Liberalizing interest Rate

E.Competitive exchange rate- country needs to be managed, moving from a fixed to flexible system. F.Trade liberalization
G.Liberalization of inward foreign direct investments, by allowing multinational corporations to operate freely to gain FDI. H.Privatization: selling off public assets to private company and it is seen as a neoliberal idea. I.Deregulation, by giving freedom of control to the company. J.Property rights.

Basically, the Washington Consensus had implemented all this guidelines to encourage countries to open to trade and forward direct investments. (John 2004) However, the Beijing Consensus was far different from the Washington Consensus. Unlike the Washington Consensus, they do not have specific guidelines to follow but still, their perspective is to improve economy. Adding on, the Washington Consensus’ guidelines are formed to help Latin America and countries that is in debt but for the Beijing Consensus, it tends to focus only on...

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