US President Barack Obama’s first appearances outside North America —– in London, Strasbourg, Prague and Istanbul — galvanized world attention. But what the trip singularly failed to do was paper over a startling fact: The “Washington Consensus” about how the global economy should be run is now a thing of the past. The question now is what is likely to replace it.
Although China is often said to lack “soft power,” many of its ideas on economics and governance are coming into ascendance. Indeed, in pursuit of national economic stability, the Obama administration is clearly moving toward the kind of government intervention that China has been promoting over the past two decades.
In this model, the government, while continuing to benefit from the international market, retains power over the economy’s “commanding heights” through strict control over the financial sector, restrictive government procurement policies, guidance for research and development in the energy sector and selective curbs on imports of goods and services. All these factors are not only part of China’s economic rescue package, but of Obama’s stimulus plan as well.
China is clearly pleased to see that the US is now also placing cool calculation of its national interests at the forefront of its foreign policy.
“In delivering a better life for people on the ground, one should be more concerned with substance than with form,” Obama stated in an interview just before his inauguration.
Rather than obsessing about elections, the US now seeks to build pragmatic alliances to buttress its economic needs. This requires, first of all, cozying up with China and the autocratic Gulf states — the main lenders to the US Treasury — as well as working with Iran and Russia to limit the costs of the wars in Afghanistan and Iraq.
As the US backtracks on its liberal standards, it is flirting with what can be called the “Beijing Consensus,” which makes economic development a country’s paramount goal and prescribes that states should actively steer growth in a way that suits national stability. What matters in this world view is not the nature of any country’s political system, but the extent to which it improves its people’s well-being. At the diplomatic level, this implies that national interests, not universal norms, should drive cooperation.
This diplomatic and economic realism is more than a reversal of the neo-conservative muscle-flexing of the administration of former US president George W. Bush. It is an attempt by a declining power to use its restrained capabilities in a more economical way.
For example, in times of crisis it is no shame for a government to be mercantilist, but by behaving in this way, the US has lost the moral high ground as a champion of free trade.
The US’ new pragmatism is also the consequence of a process of “reverse socialization.” Over the past two decades, the US and its European allies believed that they could inculcate the rest of the world with their economic and political principles. Countries like China became enmeshed in a web of multilateral organizations and subjugated to conditional engagement strategies. Nowadays, the West does not have the leverage to enforce these conditions. Moreover, the majority of developing countries now actively embrace multilateral bodies as part of their development strategies.