The Rise of China: Challenges to Development Orthodoxy (Dissertation)

7/31/2019 The Rise of China: Challenges to Development Orthodoxy (Dissertation)

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TheRiseofChina:

ChallengestoDevelopmentOrthodoxy

by

JamesPorterCampbell

ADissertationSubmittedinPartialFulfillmentofthe

RequirementsoftheDegreeofBA(Hons)Politicsat

ManchesterMetropolitanUniversity

AcademicYear2011/2012



ii

ForKyasha





iv

ListofAbbreviationsUsed

CAS: CountryAssistantStrategies

DFI: DirectForeignInvestment

GDP: GrossDomesticProduct

IFI: InternationalFinancialInstitutions

IMF: InternationalMonetaryFund

MDG: MillenniumDevelopmentGoals

PRSP: PovertyReductionStrategyPapers

SAP: StructuralAdjustmentPolicies

SEZ: SpecialEconomicZones

UN: UnitedNations

UNDP:UnitedNationsDevelopmentProgram

WTO:WorldTradeOrganisation



v

Acknowledgements

IwouldliketoacknowledgethehelpIhavereceivedinwritingthisDissertation

from the Politics Department, past and present, at Manchester MetropolitanUniversity, particularly Paul Cammack and Janet Mather for their continuing

patience and support.My special thanks go tomyGrandfather, JamesPorter,

whohasbeenaconstantinspirationandwithoutwhomthewritingofthiswould

nothavebeenpossible.



vi

Abstract

This studyexaminesthe Chineseapproachtodevelopmentand comparesthis

with the development orthodoxy promoted by the World Bank and IMF,

highlightingthechallengesposed.WithclosereferencetothesuccessivereformsattheIFI,itexaminesthewayinwhichthetwoglobalstrategiesarebeginningto

coalescearoundtheemergenceofa‘concert’ofleadingandemergenteconomies

andthereinvigorationoftheconceptofnationalism.



1

Introduction

In the space of just twenty years, China has propelled itself from economic

lightweighttoglobalsuperpower,overtakingtheU.K,FranceandGermanyforits

currentpositionastheworldssecondlargesteconomy.Ingettingthere,China

hasgrownatanannualrateof10.4percent,afigurethatbeliesthebeliefofwhat

economiststhoughtpossible.Atthesametime,theeconomiesofwesternnations

havebeenrockedbyrepeatedcrisesofincreasingseveritythataredestabilising

the current financial order created at BrettonWoods in the shadows ofwar.

Understandably,muchattentionisbeingpaidtothe‘RiseofChina’andwhatit

meansforthecontemporarypreconceptionsofdevelopmentorthodoxy.

It is posited that China has undertaken a unique process of economic

developmentthatstandsinsharpcontrasttothepoliciespromotedbytheWorld

Bank and IMF. As such it is hoped that themodel pursued by China can be

adoptedforotherdevelopingnationswhomaythenemulatesuchsuccess.This

has given rise to a search amongst scholars, economists and politicians for a

‘BeijingConsensus’thatishopedcanreplacethewidelydiscredited‘Washington

Consensus’.However,withintheliteraturethereisnowidelyaccepteddefinition

of either concept. For the ‘Washington Consensus’, at least two distinct

definitions are offered,1while some scholars reject the notion as an accurate

descriptionofthecontemporarydevelopmentstrategyaltogether.2Furtherthe

1SeeWilliamson,J.,(2004),“TheWashingtonConsensusasPolicyPrescriptionfor

Development”,PractitionersofDevelopment ,deliveredattheWorldBank,Washington

D.C,andRodrik,D.,(2002),“AfterNeoliberalism,What?”,NewPathsofDevelopment ,

deliveredattheBrazilianDevelopmentBank,RiodeJaneiro2SeeCammack,P.,(2009),‘AllPowertoGlobalCapital’,PapersinthePoliticsofGlobal

Competitiveness,No.10,ManchesterMetropolitanUniversity,Manchester



2

conceptofa‘BeijingConsensus’drawsjustasmuchcontroversy,withopinion

divided between whether the Chinese approach diverges enough from the

‘WashingtonModel’tojustifytheepithet,orwhetherbyitsnatureitcommandsa

consensusatall.3Thusinapproachingthequestion‘towhatextentdoesChina

challengedevelopmentorthodoxy?’,anumberofareasofcontentionhavetobe

addressed.

Togaugethenatureof‘developmentorthodoxy’,itisimportanttocriticallyre-

examinethepoliciesrecommendedbytheIFIfordevelopingnationswithregard

to the ‘second generation’ reforms during the 1990’s. This is conducted with

close reference to theWorld Development Reports of 1990 and 1991, which

reveal the new approach takenby the IFI todevelopmentunder the restated

commitmentof‘eradicatingpoverty’.4

AssessingthenatureofChina’sdevelopmentstrategyismadedifficultas little

policydocumentationismadepublic,andwhatishasnotbeentranslatedfrom

MandarintoEnglish.Thisisovercomebyreviewingthebroadanalysisavailable

in Journals and in the booksTheBeijingConsensus: HowChina’sAuthoritarian

ModelwillDominatetheTwenty-FirstCentury, 5 andChinaIntoAfrica:Trade,Aid,

3SeeRamo,J.C.,(2004),TheBeijingConsensus,TheForeignPolicyCentre,London,and

Huang,Y.,(2010),“DebatingChina’sEconomicGrowth:TheBeijingConsensusorThe

WashingtonConsensus”, AcademyofManagementPerspectives20104WorldBank,(1990),WorldDevelopmentReport1990:Poverty,(Washington:World

Bank),andWorldBank,(1991),WorldDevelopmentReport1991:TheChallengeof

Development ,(Washington:WorldBank)5Halper,S.,(2010),TheBeijingConsensus:HowChina’sAuthoritarianModelwill

DominatetheTwenty-FirstCentury ,BasicBooks,NewYork



3

andInfluence,6which illustrate thenatureofChinesedevelopmentpolicy both

domesticallyandinternationally.

This Dissertation is separated into three parts; Part One begins with a brief

description of the initialmeeting at BrettonWoods in 1944 which led to the

establishment of the strategy for financial control and development. The

approachofthetwoinstitutionsfoundedatthismeetingisconsidered,anditis

argued that the conventional understanding of the ‘Washington Consensus’

cannotbeusedasafunctionalaccountofthisapproach.InPartTwothereisa

major focus on the ‘Beijing consensus’ and the rise of China to a dominant

positioninbothit’sowneconomicgrowthandtheassociatedengagementwith

othernations.ThelatterhasemergedasadirectthreattotheBrettonWoods

orthodoxy.PartThreeindicatesthewayinwhichthetwoglobalstrategiesare

beginning to coalesce around the emergence of a ‘concert’ of leading and

emergenteconomiesintheG20groupandthereinvigorationoftheconceptof

nationalism.

6 Rotberg, R., ed., (2008) , China Into Africa: Trade, Aid, and Influence, Brookings

InstitutionPress,WashingtonD.C



4

PartOne

DevelopmentOrthodoxy:

BrettonWoods,andtheApproachoftheIFI

1.Introduction

During1944BrettonWoodsinNewHampshirehostedameetingof44countries

thatendorsedwhatcametobeknownastheBrettonWoodsSystem.Forgedat

the end of the ‘war for democracy’, its aim was to establish rules for the

commercial and financial relations between nations through an international

exchangeratetiedtotheU.Sdollar.However,theU.Sdeparturefromthegold

standardin1971andtheadoptionoffloatingrateseffectivelyendedtheroleof

theBrettonWoodsglobalfinancialcontrolmechanism.

However, the Bretton Woods meeting also created two key institutions, the

International Monetary Fund (IMF) and the International Bank For

Reconstruction and Development (World Bank). These have proved to be

essentialandflexibleworldinstitutionsthat,evenifjudgedbylongevityalone,

havebeenofcriticalimportanceinworldmarketsandtheglobaleconomy.Itis

nowimportanttocriticallyre-examinetheBrettonWoodsinstitutionswithclose

reference to the ‘second generation reforms’ of the International Financial

Institutions (IFI) during the1990’s. Such an accounthighlightsthecontinuing

significanceofthemarketapproachandtheassumptionsonwhichitisbased.



5

2.BrettonWoodsisDead,LongLivetheIFI!

For at least the past twenty years the IMF andWorld Bank (IFI), and their

partner agenciesat the United Nations, collectively referred toas the Bretton

Woods Institutions, have been the predominant actors in influencing global

economic development. The approach they have taken, often misleadingly

simplifiedasthe‘WashingtonConsensus’,hasbeentocompelnationstoadopt

the specific set of policies that are considered necessary to enable them to

benefitfromcompetitiveparticipationintheglobalmarket.Essentially,it isthe

promotionof‘capitalismonaglobalscale’.7

ThewayinwhichtheIFIachieveinfluenceoverstategovernmentisacomplex

and sophisticated system of conditionality and surveillance. The system has

proventobeeffective,asboththeIMFandWorldBankarenow‘centralactors’

in determining the economic discourse of both developed and developing

nations.Thishashappeneddespiterecurrenteconomiccrisesandanapparent

absence of legitimate authority. Furthermore the IFI have continuously

endeavoured to remain relevant in the constantly changing global economic

climate through successions of pre-emptive structural, procedural and

systematic adaptations that reflect the shifting geopolitical and economic

dynamics.ArticleIV,asratifiedbyitsmemberstates,makesclearthattheIMF

shallsetspecificprinciplesforguidanceofallmembers.8Thearrangementisan

exchangeofstatesovereigntyforaccesstolinesofcredit,fiscalexpertiseanda

7Cammack,P.,(2009),‘AllPowertoGlobalCapital’,PapersinthePoliticsofGlobal

Competitiveness,No.10,ManchesterMetropolitanUniversity,Manchester,p.158

IMF,(2011), ArticlesofAgreementoftheInternationalMonetaryFund ,ArticleIV–ObligationsRegardingExchangeArrangements,Section1:GeneralObligationsof

Members,(Washington:IMF),p.5



6

perceived ‘safety net’ that will intervene should a nations finances falter.9

However, the exchange is, between the parties, often deeply imbalanced and

conceivably involuntary. The IFI and their fellow agencies have held until

recentlythemonopolyondevelopmentfinanceandexpertise,manynationshave

hadnochoicebuttoapproachthemforassistance,thusrequiringthemtoadopt

thestrategiesprescribed.Thisimbalancechallengestheauthorityvestedwithin

the IMF,asit bestowsoverridingpowerwithin the centralorganisationofthe

fund.

To enforce commitment of nations to the IFI adjustment policies, the IMF

employs a sophisticated process of surveillance. They regularly publish

economic assessment reports under article IV protocol that outline nation-

specificrecommendationsandsetthetoneforpolicyadjustment.Surveillanceis

now‘themostcriticalpriorityofthefund’,10asthevastwealthoffinancialdata

amassed by the IFI gives them another dimension of legitimacy beyond the

authority invested by states. It is proclaimed that the IMF take a structured,

model based approach that is weighted in macroeconomic expertise derived

from decadesof economiccompetence.11Thisapproachportrays the IMF asa

meritocraticauthorityoneconomicdevelopment,andaccordinglygovernments

areheavilyinfluencedtoconsidertherecommendationsinpursuitofeconomic

success.Crucially,however,theauthoritywithwhichtheIMFisregardedisnot

9Arts,B.,Noortmann,M.,&Reinalda,B.,(2001),NonStateActorsinInternational

Relations,Ashgate,Aldershot,p.12910IMF,(2006-a),Reviewofthe1977DecisiononSurveillanceoverExchangeRatePolicies

–PreliminaryConsiderations,BackgroundInformation,andSummingUpoftheBoard

Meeting,(Washington:IMF),p.3411IMF,(2006-b), APracticalModel-BasedApproachtoMonetaryPolicyAnalysis,

(Washington:IMF)



7

based in a history of empirical evidence from outside of the IFI community

showingthatsuchapproachesareinfactmutuallyequitableorbeneficial.Onthe

contrary,theIFIleadinitiativesthroughouttheworldcorrespondwithprofound

inequalitiesanddecliningenvironmental,humanitarianandsocietalconditions.

What will perhaps be seen as a defining moment for the IFI came with the

financial crisis of 2008. The crisis was something of a ‘rare moment of

opportunity’ for the IFI to utilize their coveted position at the ‘center of the

financial system’.12 Greater powers and a central planning position were

proposedforthefundbygovernmentsacrossEurope.TheresponseoftheIMF

hasbeena renewed impetus for the role of credit asa short-term solutionto

financialdifficulty,withtheexpansionof‘flexiblecreditlines’,andanambitionto

usethecrisisasanopportunitytobecome‘centralactors’withintherecovery.

Howeverthere isnoscopewithin thisresponseforquestioning the validityof

the economic conditionswhich caused the crisis, rather a continuation of the

totalfaith inmarket logic, and arenewedcommitmentto the initialprinciples

conceivedoverhalfacenturyago.

AstheIFIhavebeenprincipallycommittedtothemost‘relevant’nationsduring

the 20h century, in the rapidly shifting 21st they have had to alter their

compositionandobjectivestoreflecttheemergingandfuture‘relevant’nations

inordertoremainatthecenteroftheworldeconomy.

12WorldBank,(2009),GlobalMonitoringReport2009:ADevelopmentEmergency,

(Washington:WorldBank)



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3.TheIFIApproachto‘ThirdWorld’Development

During the 1990’s theWorldBank initiated a shiftoffocustowards the ‘third

world’,which,underthebannerof‘povertyeradication’,puttheworldspoorest

nationsatthecenteroftheIFI’soperations–ashiftthathasbecomethezeitgeist

of21st centuryinternationaldevelopment. 13Itwasproposedinthe1990World

Development Report that the key to eradicating poverty is to ‘promote the

effectiveuseofthepoor’smostabundantasset–labour’,withpoliciesaimedat

boostingsocialservicesinthesesnationstopromoteaproductivelabourforce,

asobservedin the developedworld.14These initiatives throughout the1990’s

signified a ‘reformation of its mission’. The World Bank, increasingly in

partnershipwith the IMF, inaugurated amove away from the prevailing U.S-

Britishfocus,towardsamultilateralfinancialorderthathaswiderlegitimacy.15

The introduction of Poverty Reduction Strategy Papers (PRSP) and Country

AssistanceStrategies(CAS)resultedfromageneralconsensusthatthestrategies

pursuedbytheIFIwereisolatingemergingnationsandcalledforagreatersense

ofdevelopingworldownershipofthestrategy.16Furthermoretheysetthetone

for the future development goals the IFI were topursue: Poverty, Education,

Health, Gender and Environment. 17 PRSP became the principle Structural

AdjustmentPolicy(SAP)regimeofconditionalityonthirdworlddebtreliefand

assistance. Although they enable greater participation by including national

13WorldBank,(1990),WorldDevelopmentReport1990:Poverty,(Washington:World

Bank)14Ibid15Helleiner,E.,(2006),‘ReinventingBrettonWoods:InternationalDevelopmentandthe

neglectedoriginsofembeddedliberalism’,DevelopmentandChange,37:5,pp.943-96716

WorldBank&IMF,(2000), ANewApproachtoCountry-OwnedPovertyReductionStrategies,(Washington:WorldBank),pp.224-27817Ibid



9

governmentandagencies inpolicy creation, thePRSPretain thepro-capitalist

characterofpreviousSAP,andtheydonotofferaforumforagenciestopropose

alternativeprogramsofdevelopment.ItwouldappearthatthePRSPrepresent

an attempt to legitimise the continuation of global capitalist development

throughthetransferofperceivedleadershipoftheprojectfromthenativeglobal

northoriginstotheemergingglobalsouth.

FollowingtheMillenniumDeclarationtheIFIofficiallysteppedinlinewiththe

UNandmyriadpartnerorganisationsinadoptingtheMillenniumDevelopment

Goals (MDG’s).TheMonterreyConsensus expresses the central role of the IMF

andWorldBankin‘enhancingparticipation’ofdevelopingnationsin theglobal

developmentproject.18TheIMFfurtherdefinesthe roleof the IFI inpursuitof

theMDG’swithinthe‘capacitybuildingframework’asoutlinedbytheUNDP. 19

Theframeworkisaprogramofincreasingthecapabilityofdevelopingnationsto

take controlof their owndevelopmentthroughbuildingskills, knowledge and

experience. The roles the IFI serve in this capacity are: To finance at

organisationalorsystemiclevels,guidedomesticpolicyinpursuitofeconomic

goals,encouragetheadoptionandpreservationofsystemicstandardsandcodes,

andtocollaboratewithregionaltrainingandresearchagenciestobuildcapacity

attheindividuallevel.20TherearemanysimilaritiesbetweenthePRSPandthe

UNDPapproaches.TheMDGsandsubsequentMonterreyConsensushavebrought

togetherallpartneragenciesinsingingfromthesamesheet.Underthebannerof

18U.N,(2003),MonterreyConsensusonFinancingforDevelopment ,(TheMonterrey

Consenus),(NewYork:U.N),p.2019

IMF,(2003),TheMillenniumDevelopmentGoals,theEmergingFrameworkforCapacityBuildingandtheRoleoftheIMF ,(Washington:IMF)20Ibid,pp.6-7



10

poverty eradication and third world ‘ownership’, the objectives of the

developmentprogramretaintheinherentcommitmentto‘capitalismonaglobal

scale’.

Throughout their development, the IFI have endeavoured to remain in the

driving seatofglobal capitalist expansion. They have achievedgreat influence

overnationsthroughaneffectivesystemofconditionalityandsurveillancethat

has bestowed greater power within the organisations that goes well beyond

theirofficialmandate.InresponsetochangingglobalcircumstancestheIFIhave

goneaboutaprocessofreformthathasaimedtoplacethedevelopingworldat

thecenteroftheirprogram,thoughtheprogramitselfretainsthecommitmentto

marketleadcompetitiveness.Despiteperceivedflawsinthelogicoftheprogram,

andalackoflegitimateauthority,sincethefinancialcrisistheIFIhavebeenre-

propelled to the center of the global economic system, and are being looked

towardstoprovideguidanceonrecoveryprograms.Ithasnotbeenademocratic

orequitableprocessthathasseentheIFIcometosuchsignificance,ratherithas

beenasophisticatedandcalculatedprogressionoftheorganisationalstructure

thathasgiventhemtheglobalmonopolyonprovidingdevelopmentfinanceand

expertise.

4.Whatthe‘WashingtonConsensus’Omits

Theproblemwiththewidelyacceptednotionofthe‘WashingtonConsensus’asa

functional account of this approach is that its usage can infer two distinct

meanings,neitherofwhichadequatelyencapsulatesthetruesignificanceofthe

BrettonWoodsproject.FirstisWilliamson’soriginaldefinition,whichliststen



11

specific macro-economic reforms that he claims were ‘widely agreed in

WashingtontobedesirableinjustaboutallthecountriesofLatinAmericaasof

1989’[seeappendixI].21Thoughthisdefinition–reducedtoaformulaoffiscal

discipline, liberalisation, privatisation and deregulation – is succinct in

establishingthehistoricallyspecificideologicallyliberalcontextfromwhichthe

BrettonWoods approach emerged, asWillamson acknowledges, it was never

intendedasadefinitivepolicyprescriptionfordevelopment,andthusdoesnot

accuratelydescribethenatureofcontemporaryBrettonWoodspolicy. 22Second

is Rodriks’ ameliorated definition, which augments Williamsons’ with an

additionaltenpoliciesthatRodrikobservedasbeingadvocatedbytheBretton

Woods Institutions as of 1999 [see appendix II].23While this definition goes

furthertoincorporatethestructuralandsocialpoliciesinherentlyneglectedby

Williamsons’definition,its limitedperspectiveoverlookstheprinciplesoffiscal

policythatrelatetotheagendaoftheBrettonWoodsapproach,andmoreover

ignoresentirelytheunderlyingassumptionsonwhichtheyarebased.24

As indicated earlier, the restatedobjective of the IFI,made clear in the 1990

WorldDevelopmentReport,istoabolishpovertybypromoting‘theproductive

use of the poor’s most abundant asset – labor’.25What is significant at this

juncture,asidefromitsseeminglyprogressiveaim,isthatitrevealsarenewed

commitmenttothecompetitiveforcesofcapital,specificallytheengagementof

21Williamson,J.,(2004),“TheWashingtonConsensusasPolicyPrescriptionfor

Development”,PractitionersofDevelopment ,deliveredattheWorldBank,Washington

D.C,p.122Ibid,p.123Rodrik,D.,(2002),“AfterNeoliberalism,What?”,NewPathsofDevelopment ,delivered

attheBrazilianDevelopmentBank,RiodeJaneiro,p.124Ibid,p925WorldBank,(1990)



12

labour, as the predominant restructuring principle for developing nations. It

assumes that global corporations will be attracted to pro-capitalist domestic

policyandinvestinthedevelopingnationsthatadoptthem,unlockingabundant

labourcapitalandinturnraisinglivingstandards.Thenatureofthesepolicies,

asdefinedinthe1991WorldDevelopmentReport ,canbeexpressedas:providing

astablemacroeconomicframeworktowintheconfidenceoftheprivatesector;

creatingacompetitiveenvironmentinwhichenterprisecanflourish;integrating

economiesintotheglobalmarket;andinvestingintheareasofeducation,health,

nutrition and family planning tobettermobilise theworkforce.26Thedefining

feature that runs through these policies is not liberalisation, deregulation or

privatisation;itisthepromotionofcompetitiveness.27

Thuswhilethemacro-economicdisciplineandmarketliberalisationtraditionally

espousedbytheIMFformsthefoundationalbasisofthispolicy,byinsistingon

theneedforreformstolabourandproductmarkets,andreformsoftaxationand

welfare policies to better facilitate a productive workforce, the scope goes

beyond that offered in the traditional account given of the ‘Washington

Consensus’.Indeedtheaimoftheprojectismoreaboutfacilitatingthestructural

and behavioural changes that are judged as necessary to enable market

participationthanitisaboutensuringmacro-economicandfinancialstabilityin

arules-basedarchitecture,thoughthesearestillimportant.28

26WorldBank,(1991),WorldDevelopmentReport1991:TheChallengeofDevelopment ,

(Washington:WorldBank),pp.256-31227Cammack,(2009),p.328Cammack,(2009),p.15



13

The approach of the IFI, therefore, is one of hegemonic regime change, a

prescriptive,paternalistsetofdemandsoutliningtheconditionsthroughwhich

nations can enable competitive global market participation – the primary

restructuring principle they advocate. Rather than offering a considered,

individualistapproachtodevelopmentthataccountsfortheneedsofindividual

states, the economic mandates of the IFI merely describe what ‘advanced’

economies look like, and assumes that these conditions are both universally

admirableandreproducible.29

5.TwentyYearsOn–FailuresofthePureMarketApproach

For more than two decades of the application of market policies in the

developingworld,despiteanomaloussuccessesinsomecases,theresults,bythe

WorldBank’sownadmission,‘fallwellshortofexpectations’. 30Intermsofpure

economicgrowth,dataformuchof thedevelopingworldindicateslevelsbelow

orequaltopre-1990 levels.31In LatinAmericaand the former soviet Eastern-

Bloc, the ‘shock therapy’ rapid marketisation approach, while resulting in

immediate ‘big bang’growth,has resultedindevastatingeconomic, social and

political crises. 32 Far from the assumption that removing state control of

industrywouldallowforthemarkettoprovidejobsandraiselivingstandards,

unemploymentremainanendemicproblemfortheformersocialiststates.The

institutionalrestructuringoftheIFIhasnotresultedinlastingeconomicgrowth.

Further, an alarming trend of raising income inequality accompanies the

29Rodrik,D.,(2002),p.130WorldBank,(2005),EconomicGrowthinthe1990s–LearningfromaDecadeof

Reform,(Washington:WorldBank),p.xii31

WorldBank,(2011),WorldDevelopmentReport2011:Conflict,SecurityandDevelopment ,(Washington:WorldBank),pp.335-35432Rodrik,D.,(2002),p.1



14

adoptionofIFIpolicies,withtheGINIcoefficientindexindicatingrisinglevelsfor

much of the developing and developed world through the period 1999-2010,

withonlymodestreductionswheretheyheavebeenobserved.Againstanother

key indicator, poverty, results are equally disappointing. Despite concerted

strategiestoprioritisetheneedsoftheleastdevelopedcountries,formuchofthe

AfricanContinent,LatinAmericaandtheCaribbean,sucheffortshavefailedto

makeanimpact.

TheapproachoftheIFItowardsdevelopmentoveratleastthepasttwentyyears

hasbeentocompelnationstoadoptthepoliciesthatareregardedasallowing

them tobenefit from competitiveparticipation in the global market. This has

takentheformofpaternalistmandating,oftenenforcinganabidancetopolicy

throughconditions placedon loansor loan assistance.Throughout thisperiod

the results of this approach have been poor, with little economic benefits

demonstrated. Much of the economic and humanitarian successes that have

occurredduring thisperiod havebeen inChinaand its peripheries –a region

widelyregardedashavingnotadheredtothe‘WashingtonConsensus’principles.

The next part of this dissertation examinesChina’s approach todevelopment,

ascertaining how it differs from the approach as laid out in this section.





16

2.China’sDomesticGrowthStrategy

Forovertwentyyearsof‘WashingtonConsensus’pursuit,anddespiteconcerted

andspecificallytargetedefforts,muchoftheeconomicgrowthandhumanitarian

advancesobservedinthedevelopingworldduringthisperiodhaveoccurredin

China–34a region in which the principles of the ‘Washington Consensus’ are

regarded as having not been widely adopted.35Further, the resilience of the

Chinese economy during and after the recent global financial crisis not only

accentuateditsremarkablesuccess(forashortperiodattheheightofthecrisis

the Chinese economy accounted for half of all global growth), 36 but also

escalated interest inunderstandingwhat Chinahas done that isdifferent and

howothersmayemulateit.ForChina’s‘surge’backtodouble-digitgrowthafter

onlyabriefslow-downistheculminationofatrendoveratleasttwodecadesfor

Chinas’ economy to consistently out-perform not only those nations at

comparable stages of development, but also those most developed and

advanced.37Moreover, in contrast to the developing nations targeted by the

Washington model, China’s GDP growth has translated into substantial

humanitarianadvances,withover400millionliftedfrompovertyandsignificant

andsustainedincreasesinruralaccesstoeducationandhealthcare.38Thatisnot

tosay thatChinas’ growth iswithoutits faults,however, it is the comparative

34WorldBank,(2011),“Conflict,Security,andDevelopment”,WorldDevelopmentReport

2011,(Washington:WorldBank),pp.336-35435Gu,J.,Humphrey,J.,&Messner,D.,(2008),“GlobalGovernanceandDeveloping

Countries:TheImplicationsoftheRiseofChina”,WorldDevelopment ,36:2,Elsevier,

Brighton,p.28536OECD,(2011),PerspectivesonGlobalDevelopment2010:ShiftingWealth,(Paris:

OECD)

p.4537

China’sextraordinarygrowthiswelldocumented,andits’headline-grabbingGDPstatisticsshouldbynowbesofamiliarthattheyneednotbereproducedhere.38WorldBank,(2011),pp.336-354



17

lackofdamningsocialindicatorsandrepeatedcrisescommonlyassociatedwith

the rapidly growing early-stage capitalist economies that distinguish China’s

developmentmodel.

In charting the nature ofChina’s economic growth, the conclusionsdrawnby

observers differ in the extent towhich they proclaim it has conformed to, or

diverged from, the orthodox prescription of development. On the one hand,

Ramo, writing in 2004, argues China is ‘pioneering a new route towards

development’thatisfundamentallydistinctfromwhatcamebefore,offeringan

accountofa‘BeijingConsensus’whichheclaimsreplacesthewidely-discredited

‘WashingtonConsensus’.39Ontheother,HuangconsidersChinasgrowthasmore

befittingthe‘WashingtonConsensus’modelthanjustifyingitsown,arguingthat

while ‘Chinese reforms were experimental those experiments resulted in

financial liberalisationandprivateentrepreneurship’.40Bothoftheseaccounts,

whilst drawing opposing conclusions, share as their basis the same basic

assumptionofthe‘WashingtonConsensus’thatoverlooksthetruesignificanceof

the Bretton Woods agenda – that it is competitiveness; not privatisation,

liberalisationorderegulation, that fundamentallycharacterisestheapproach.41

With that being said,what follows is a critical re-examinationof the Chinese

experience, arguing that while the distinct manner with which it has been

implementedsignifiesadeparturefromthetraditionalapproach,itsharesasits

basisthesamerationaleoftheBrettonWoodsmandate.

39Ramo,J.C.,(2004),TheBeijingConsensus,TheForeignPolicyCentre,London,p.5540

Huang,Y.,(2010),“DebatingChina’sEconomicGrowth:TheBeijingConsensusorTheWashingtonConsensus”, AcademyofManagementPerspectives2010,pp.31-4741Cammack,(2009)



18

Insearchofa‘BeijingModel’or‘Consensus’,whenacademicslookatwhathas

characterisedtheChineseapproach,itisthedistinctlackofhavingfollowedany

specific model that makes it unique.42 Indeed as Ramo posits, the Beijing

approach‘isflexibleenoughthatitisbarelyclassifiableasadoctrine’.43Sothus

while‘findingadefinitionofexactlywhatismeantbytheBeijingConsensusisno

easytask’,44theattentiontendstobefocusedonunderstandingwhatChinahas

notdonethatothershave.45This‘negativedefinition’oftheSinoexperienceis

important in creatingwhatBreslin calls ‘a formofOccidentalismwhereby an

imageofwhattheWestisandstandsforisconstructedtoemphasizehowChina

is‘Different’’.46Alongtheselines,‘BeijingConsensus’scholarstendtorefertothe

illiberal nature, or ‘incomplete liberalisation’,of the Chinese approach that is

contrasted against the perceived Liberality of the BrettonWoods approach.47

They point to ‘the managed exchange rate, state control over key industries

including the banking system, preference for diktat rather than democratic

debate, heavy state investment in infrastructure and strong support for the

export sector’ as the differentiating marks of the Chinese ‘alternative’. 48

However,withtheexceptionofthefirstpoint,noneofthesefeaturesnecessarily

conflictwith the account of theWashingtonmodel as argued in chapter one,

indeedtheymayevenimplicitlyreflectit.

42Bresin,(2011),p.133843Ramo,(2004),p.444Williamson,J.,(2012),“Isthe“BeijingConsensus”NowDominant?”, AsiaPolicy ,No.

13,1-16,p.545Breslin,(2011).p.132946Ibid,p.132447Ernst,D.,&Naughton,B.,(2008),“ChinasEmergingIndustrialistEconomy:Insights

fromtheITIndustry”,in:China’sEmergentPoliticalEconomy:CapitalismintheDragons

Lair ,Mcnally,C.A.,ed .,39-59,Routledge,London48TheEconomist,(2012),ChinaModel ,[Online],Available:

http://economist.com/debate/overview/179,[Accessed01March2012]



19

TheapproachofChinatodevelopmenthasperhapsbeenbestsummedupbyYao

Yangas‘pragmatismpursuedbyaneutralgovernmentthatissimplyconcerned

with doing whatever works in the long term and is not driven by any plan,

blueprint, ideological commitment or societalbasis’.49This is enshrined in the

policiesofDengXiaoping–paramountleaderoftheChineseCommunistParty

during the reformative period of 1978-1992 – as ‘Mozhe Shitou Guohe’ -

‘Crossingtheriverby feelingthestones’.Thoughthepoliciesintroducedwere

undeniablyliberalinthattheyopenedChinauptoforeigntradeandinvestment,

thisapproachwastakengraduallyandexperimentally,withpilotsundertakenin

‘Special Economic Zones’ (SEZ’s) specifically chosen in regions with the least

politicalorsocialresistance.50ThepoliciesadoptedintheSEZ’sadhereentirely

tothoseadvocatedbytheIFIbutforonecriticaldistinction;whereasthepolicies

oftheIFIextendnationallytoanentirenation,thoseinChinawereadoptedfor

specificallychosenpilotregionswithinan internal-competitionmodeldesigned

tohighlight the successes,whichcan then beextrapolatedmore broadly, and

weed out the failures.51In so doing China adopted a marketisation strategy

tailored specifically to its own needs, maximising the benefits whist

simultaneouslylimitingdamage.

PerhapsthemostsignificantfeatureofChinesedevelopmenthasbeenthelifting

of 400million people from poverty. Themagnitude of this is so great that it

heavily distorts global poverty reduction statistics to the extent that much

49Yang,Y.,(2008),ShifouCunzaiYigeZhonggunMoshi[IsthereaChinamodel?],Tianyi

Network,Beijing,p.26750

Halper,S.,(2010),TheBeijingConsensus:HowChina’sAuthoritarianModelwillDominatetheTwenty-FirstCentury ,BasicBooks,NewYork51Ibid



20

analysesoftenneeds to ignore China topresent amore accurate picture (see

appendixIII).Thoughthemeansbywhichthiswasachievedaddsweighttothe

assumptionsoftheIFI–engagementinlabourhasbeenthepredominantmeans

–againtheuniquemannerinwhichChinaapproacheditdemonstratesacritical

distinction from the IFI model. While the IFI assumed job creation would

necessarilyresultfromnationalpro-marketpolicies,Chinafocusedtheirefforts

onthespecificregionsandindustriesthatwouldresultinthemostbenefit.This

took the form of early stage agricultural advancements, introducing new

technologies to farmers that enabled them with great success to move from

subsistence to profitable farming. A similar approach was adopted in the

transferal of jobs from state enterprise to private enterprise. Rather than

adopting the ‘shock therapy’ approach of almost instant state withdrawal,

China’s leaders identified the industries where the market could most

successfullyreplacethestate,investedheavilyinthesurroundinginfrastructure

and withdrew gradually, ensuring adequate job creation and consequential

politicalstability. Bymainstreamingpriority industrieswith knowledge of the

appropriatefactorendowments,Chinahasdemonstratedtheimportantroleof

the statethathadbeenoverlookedbytheneoliberalpolicies of the IFI,which

assumedalesserroleforthestateasthemarketdeveloped.

3.Chinas’ForeignAid,TradeandDevelopmentStrategy

Inmaintainingtheremarkablelevelsofgrowthobservedoverthepasttwenty

years, China has become increasingly reliant on externally sourced raw

materials.Toensurepreferentialaccessinarenownedlyvolatilemarket,Chinais

beginning to ‘invest for the long term’inthepoorcountries thatsupply them,



21

offering an alternate source of development finance and loans than the IFI.52

What the IFI offer is a purely speculative proposal of ‘what neo-classical

economistswouldliketosee’.53Thusithastakentheformoftop-down,highly

politicisedconditionalaidthathasdemonstratedverysmallnetresults.Onthe

contrary,the‘BeijingConsensus’isinformedbywhathasactuallyworkedand

proven successful forChina, demonstrating that ‘developmenthasnever been

something that the richbestowed onthe poor,but rather something the poor

achievedforthemselves’. 54Thoughultimatelymotivatedbythepursuitoftheir

ownself-interest,China’s involvementwithotherdevelopingnations canoffer

them an alternativedevelopment strategy basedon the lessons learned from

their own development experience. Though other nations may not ‘have the

sameconditions,factorendowmentsandsocialandhistoricalbackgroundstobe

abletoemulatewhatChinahasdone’,55byadoptingtheguidingprinciplesofthe

Chinesestrategy–gradualism,pragmatismandflexibility –nationscanfollow

theirownpathtodevelopmentthatsuitstheirindividualneedsandresources.

TheprimaryelementofChina’sforeigndevelopmentstrategyisthepaymentin

rawmaterialsforinvestmentin theinfrastructureneededtoprocurethem.The

levelofinvestmentgiventodevelopingnations,whichisindistinguishablefrom

Chineseaid, isbeginning tochallenge inpurenumbers the amount offeredby

52Rotberg,R.I.,ed.,(2008),ChinaIntoAfrica:Trade,Aid,andInfluence,Brookings

InstitutionPress,WashingtonD.C.,p.153Keun&Matthews(2010),‘FromWashingtonConsensustoBeSTConsensusforWorld

Development’ ,APELJournalCompilation,pp.86-103,p.10154Birdsall,N.,&Fukuyama,F.,(2011),ThePost-WashingtonConsensus:Development

aftertheCrisis–WorkingPaper244,CentreforGlobalDevelopment,WashingtonD.C,

p.155Noughton,B.,(2010),‘China’sDistinctiveSystem:Canitbeamodelforothers?’,

JournalofContemporaryChina,19:67,pp.437-60



22

advanced nations and the IFI.56Thoughwhile the investment from traditional

donorsishighlyconditionalontheadherencetopolitical,economicandsocial

principles,Chinamaintain‘respectforautonomy’inthenationswithwhichthey

invest by the conspicuous absence of any such conditionality, mindful of the

considerable political advantage that this bestows them. 57 Any political or

economicchangesthatresultwillbeasanaturalresultoftheinvestment,nota

preconditiontoit.SuchanapproachfollowsfromChinasowndomesticgrowth

strategy, which demonstrated the merits of development as an internally

administered,gradualprocessaboveadherencetoaspecificmodel.

Aside from the very self serving nature of the Chinese foreign tradestrategy,

Chinaisalsokeentoshare,particularlyinAfrica,thespecificlessonsithaslearnt

thatitfeelsareapplicabletotheregion.Thisisbeginning totakeshapein the

formofprojects,bothdomesticandinternational,aimedatbuildingpartnerships

withAfricatotackletheissuesofpoverty,theenvironmentandtrade.InBeijing,

anofficialInternationalPovertyAlleviationCentrehasbeenestablishedtotrain

Africanofficialsandintroducethemtothepovertyreductionprojectsthathave

proven successful in China’s poorest provinces. 58 Further afield, China is

championing the establishment of SEZ’s in Africa, directly linked to the

infrastructureprojectsitispursuing.Increating‘investmentcorridors’,almost

identicalintheircompositiontothoseoftheChineseSEZ’s,itisenvisionedthat

by attracting FDI aimedat specific industries, the internal competitionmodel

56Rotberg,R.,(2008)57Ibid58

Huang,C.H.,(2008),‘China’sRenewedPartnershipwithAfrica:ImplicationsfortheUnitedStates’,in:Rotberg,R., ed .,ChinaIntoAfrica:Trade,AidandInfluence,Brookings

InstitutionPress,WashingtonD.C.,p.300



23

pursued in China can be replicated, highlighting what works for Africa and

offeringameansbywhich thiscanbeadvanced.59Alongsimilarlines,Chinais

expanding partnerships in Africa with the aim of addressing climate change,

financingthecreationof100cleanenergyprojects.Whileitistooearlytogauge

thematerialsuccessofsuchprojects,what isevident isthepositivereception

from the African people of China’s involvement, contrasting to the negative

perceptionofpreviousactors[seeappendixIV].

What clearly distinguishes China’s foreign development strategy from those

pursued by the IFI, besides the absence of conditionality and the negative

perceptionsthatgowithit, isthatChinais prepared todealwithnationsona

case-by-case basis. By learning from its own growth experience, China

understandsthatdifferentfactorsdeterminetheapplicabilityofcertaingrowth

mechanisms,andtheflexibilityoftheirapproachallowsforgreaterdispensation

forthelimitingfactorsthathavemadedevelopmentinAfricaatypicallyallusive

affair.ThoughChina’sstrategysharesinprinciplethesamecommitmenttothe

forcesofcapitalof the IFI, theadded dimension of the stateasadetermining

factor means investment strategies are more likely to suit the needs of the

nationsinwhichtheyareundertaken.

59

Davies,M.J.,(2008),‘SpecialEconomicZones:China’sDevelopmentalModelComestoAfrica’,in:Rotberg,R., ed . ,ChinaIntoAfrica:Trade,AidandInfluence,Brookings

InstitutionPress,WashingtonD.C.,pp.137-154



24

4.Conclusion

ThoughChina’sgrowthexperiencedoesnotbyitsnaturecommandaparticular

model or consensus that can be replicated, it has been guided by a set of

concurrent principles that stand in contrast to what has previously been

endorsed by the IFI. While orthodoxy would have it that economic success

resultsfromreplicatingtheconditionsobservedinso-calledadvancedcountries,

by forging its own developmental path free from such dogma, China has

demonstratedthateconomicdevelopmentcanbeanaturalprocessnativetothe

developingcountrythatispursuingit.ThishasprovenverysuccessfulforChina,

who has enjoyed consistent economicgrowth un-paralleled anywhereelse on

Earth.WhileChina’s principles of development - gradualism, pragmatism and

flexibility – have resulted in the adaptation of policies consistent with those

prescribed by the IFI, by not assuming a predetermined model, the

developmentalprocesshasaccountedmoresensitivelyforChinasspecificfactor

endowments thatwould have been overlooked had the orthodoxmodel been

assumed.AspecificfactoroverlookedbytheneoliberalpolicesoftheIFIthathas

beenlegitimisedbyChinaisthemeritsofthestateasadeterminingfactorthat

hasprovenmoresuccessfulthanthemarketinidentifyingnewindustriesand

mobilisingtheresourcesandlabournecessarytoexploitthem.

As a consequence of such rapid growth, China is adopting an increasingly

assertiveforeigntradeanddevelopmentstrategywiththeobjectiveofsecuring

long-termpreferentialaccesstoresourcesthatavoidsthevolatilityoftheopen

commoditiesmarket.Thelevelofinvestmentofferedtopoornationsendowed

with abundant resources is beginning to rival the amount offered from the



25

traditional sources. Though while traditional investment has been highly

conditionalontheadherencetospecificeconomicandpoliticalprinciples,China

ismindfulofthepoliticaladvantageinnotdoingso.Byproclaiming‘respectfor

autonomy’, China positions itself as a mutual trade partner, avoiding the

criticismsofimperialismthattheIFIhavebeenvulnerableto.ThoughChinese

self-interest is the main motivation of such activity, there are a number of

development lessons that Chinawish to extend to their tradepartners. In so

doing,theascendencyoftheWashingtonModelisbeingbroughtintoquestion.

Theextenttowhichthischallengesdevelopmentorthodoxyisconsideredinthe

nextchapter.



26

PartThree

DevelopmentinanAgeofUncertainty:

RethinkingOrthodoxies

1.Introduction

Partoneoutlinedthehistoricalsignificance,subsequentdominanceandcurrent

difficulties relating to the Bretton Woods orthodoxy. It showed how the

‘Washington Consensus’ sharpened the implications of ongoing aid and

development activity and has given rise tonegative responses from recipient

countries and low levels of achievementof the global development targets. In

Parttwo,the‘BeijingConsensus’isshowntoofferadifferentandmoredynamic

framework for action through national self-interest and an approach linking

tradeandsustainedinvestmenttotradingpartners.

In this final part it is seen as timely to reflect on the global financial and

economic crisis and the decisions that need to be made in order to create a

sustained responsethatwillbesuccessful. Thehistoryof theperformanceof

theBrettonWoodsinstitutionsemphasisesthevulnerabilityofthe‘Washington

Consensus’. However, as described in Part two, such an outcome can’t be

delivered solely by the ‘Beijing Consensus’ in circumstances that rest simply

uponthe economicand tradingactivityofonlyonemajornation, evenone as

immenseasChina.Fortunately,thecontextofeconomicengagementbetween

countries has fundamentally changed. Following the Asian crisis and the

internationalupheavalcausedby9/11,therehasbeenanacceleratedinterestor



27

even a desperate striving todiscover amore effective means of dealingwith

worldproblemsthatremainstubbornlyresistanttotheoldmethodologies.

2.ImplicationsofChina’sRiseChinahasdemonstratedmoreeffectivelythananyothernationhowthetypical

shortcomings of the market approachmay be overcome. It has ‘relegitimised

state developmentalism’, which at the face of it stands in opposition to the

neoliberal assumptions of the WashingtonModel.60Its state-led approach has

proven more effective than the market in identifying new industries and

mobilising the resources and labournecessary toexploit them–undermining

the ‘invisiblehand’ doctrinethat thecapitalist systemassumes. Itsgradualism

has proven a better means for market transition than the ‘shock therapy’

typically recommended by the IFI for post-communist states. The planned,

methodicandconsideredtransitionfromstatetoprivateenterprisehasensured

adequate job creation and the broader political stability this enables, which

stands in sharp contrast to the collapse of former socialist states during the

1990’s.Insodoing,ChinaunderminestheimplicitassumptionoftheWashington

Modelthat,asFukuyamaclaims,‘liberaldemocracyremainstheonlycoherent

political ambition’.61Until recently, emerging economies had no option other

than to accept the liberal preconditions mandated of them if they were to

participateintheglobaleconomy.Forpost-Communistorauthoritarianstates,

thechoicewaseitherliberalisationandparticipation,orexclusion.Chinaoffersa

‘thirdway’fordevelopingnations,ameanstoparticipateintheglobaleconomy

60Paus.,E.,Prime.,P.,&Western,J.,(2009),‘ChinaRising:AGlobalTransformation’,in:

Paus.,E.,Prime.,P.,&Western,J.,eds.,GlobalGiant:IsChinaChangingtheRulesoftheGame? ,PalgraveMacmillan,Basingstoke61Fukuyama,F.,(1992),TheEndofHistoryandtheLastMan,Penguin,London,p.xiii



28

without major changes to governance. Though this may have the effect of

supportingrepressiveandautocraticregimesisbeyondthepoint–it isthe‘de-

ideologisedcommitment todoing whatever it takes topromote growth while

maintainingpoliticalstabilitythatisthedefininghallmarkoftheChinesemode

ofgovernance’–notdefactoautocracyordespotism.62

NecessitatedbyChina’sexponentialeconomicgrowth,andreflectingtheunique

manner in which it was achieved, China is adopting a foreign trade and

development strategy that is free from the political mandates traditionally

promoted by the IFI. In so doing, Beijing has achieved traction in engaging

developing countries that the Washington approach has failed tomaterialise.

Particularly in the case of Sub-Saharan Africa, the political acceptability of a

perceivedbenigntradepartnerasopposedtothediktatsattheIMFhasallowed

China considerable leverage within a region typically suspicious of external

intervention.Whereasthepolitical,socialandeconomicpreconditionsmandated

bytheIFIhaveleadtoaccusationsofimperialism,Chinaconsciouslyalignsitself

as a defender of national autonomy against them.63 By offering loans and

investment to developing nations in return for access to resources, crucially

without any attached conditionality, the role of Chinawithin these regions is

beginningtochallengetheascendencyof thetraditionaldevelopmentagencies.

Though while the activity pursued does not necessarily contradict the

assumptions of the ‘Washington Consensus’, by demonstrating that

‘developmenthasneverbeensomethingthattherichbestowedonthepoor,but

62Breslin,S.,(2010),p.132963Gu,J.,Humphrey,J.,&Messner,D.,(2008),p.285



29

rathersomethingthepoorachievedforthemselves’,64thealreadyquestionable

authorityandlegitimacyoftheIFIisfurtherundermined.

Further,Chinaalsodemonstrateshowanationisabletosuccessfullypursuea

national agenda within a system designed to promote inter-dependence and

economic cooperation. Contrary to the implied assertions of the ‘Beijing

Consensus’ scholars, China’s rise has happened entirely within the Bretton

Woods system of economic relations. With the exception of a manipulated

currency exchange rate, a practice that draws repeated, yet unsuccessful,

criticismsfromgloballeaders,Chinaiswillingforthemostparttoabidebythe

norms and conventions of the international system. Bretton Woods assumed

economic cooperation within a rules-based architecture would result in the

homogenisationofdevelopmentnormsandpoliticalpractices.Thisassertionis

compromised as China has pioneered an alternate yet parallel development

strategy, not defined by the terms and conditions set in Washington, that

engagesfullyinthesystemyetisdrivenbyunconventionalpoliticalprinciples.

3.TheChinaEffectandtheWorldBank

TherecommendationsmadebyJustinYifuLin,thefirstChineseChiefEconomist

of theWorld Bank, as informed by his thesis on New Structural Economics,

reveals that the lessons learned from China’s development are informing the

newWashingtonapproachtodevelopment.InaspeechgiveninMozambiqueas

partoftheannualWIDERlecture,thefirsttobeheldinAfrica,Linoutlinedanew

64Birdsall,N.,&Fukuyama,F.,(2011),p.1



30

approachfortheBank,whichsignifiesa‘decisivemove’fromthattakenbefore.65

Guiding the overall tenure of the recommendations, as expanded in the

publication Multipolarity: the New Global Economy , is a conviction that the

leadingemergingeconomies, amongst themChina, are the examples for other

developing nations to follow.66 As such the approach recommended in the

documentendorsesplannedstate-ledgrowth,recognisinghowa‘governmentof

alow-incomecountrymayacceleratestructuralchangeandincomegrowthby

facilitating the development of new industries which reflect their latent

comparativeadvantage,andtakeadvantageofnewopportunity’.67Further,the

‘WashingtonConsensus’model is rejectedon the basis that ‘it focusedon the

government failureswithout fully taking intoconsiderationthecrucialmarket

failure issues of coordination and externalities inherent to the process of

industrialupgradinganddiversification’.68

WhiletheprescriptivemodeltraditionallyendorsedbytheIFIwasastaticand

non-accommodating assumption of development, China’s flexible and non-

ideologicalprocesshasleadtoanendorsementattheBankofAkamatsu’s‘Wild-

Geese-Flying-Pattern’model.ThatisthatChinahasdemonstrateddevelopment

asa catch-upprocess,not a ‘one-size-fits-all’, all ornothing approach. China’s

successfulroleasthe‘world’sfactory’issignificantindemonstratingthatasthe

‘advancedeconomies’movedfromlabour-intensivegoodsmanufacturingtothe

65Cammack,P,(2011),‘SoutheastAsiaintheNewGlobalEconomy:Emerging

ChallengesfromAfricaandLatinAmerica’,SoutheastAsiaResearchCentreWorking

PaperSeries,No.109,CityUniversity,HongKong,p.266WorldBank(2011-b),‘Multipolarity:TheNewGlobalEconomy’,GlobalDevelopment

Horizons2011,WorldBank,WashingtonD.C,p.467Ibid,p.468Ibid,p.40



31

high-tech,low-labourserviceindustriesduringthe20 thcentury,Chinahasfilled

thedeficitbyits‘mobilisationintoindustryofthepopulationpreviouslyengaged

in subsistence agriculture’.69 Similarly, as China’s labour surplus begins to

disappear, and as wages increase, its necessary progression into more

productive high-tech industries presents a ‘uniquewindow of opportunity for

Africa’, as low-income countries can now take on the millions of low-wage,

labourintensivejobsChinawillleavebehind.70Crucially,astheBankidentifies

this process ofdevelopment, it recognises the previously undervalued role of

stateactors,bothdomesticallyandintra-nationally,infacilitatingthistransition,

a process ill-suited to the blunt and non-sensitive workings of the market.71

Overall,thenewapproachrecommendedfortheBankbyLinassumesthatChina

is the leading example for other nations to follow, and that what is good for

China,bymeritofAkamatsu’sdevelopmentmodel,isthusgoodfortherestofthe

developingworld.

Previousrearrangementsat IFI, aspart one has conveyed, haveresponded to

crises and failures with renewed commitments to the flawed logic of pure

capitalism insomeevangelistbelief that failuresweretheresult ofnothaving

followedthemodelextensivelyenough.Thiscurrentchangeismoremomentous

thananythathavecomebeforeasitforthefirsttimerevealsareconsideration

oftherationalebehindtheapproach.Asassertedearlier,Chinahasundermined

the‘invisiblehand’doctrinethattheIFIhaduntilnowaccepted.Theimplications

ofChina’srisecannotbeoverstated;itchallengestheveryassumptionsonwhich

69

Cammack,(2011),p.470WorldBank,(2011-b),p.2571Ibid,p.5



32

thepureCapitalistagendaisbased.ThoughneitherChina,theIMFortheWorld

Bank are departing entirely from a market approach to development, by

committingtoamoreplannedandmanagedstate-capitalism,anewfutureofa

marketbasedoncompetingnationalinterestsisbeingrealised,endorsedmost

comprehensivelybyChinaanditsremarkablesuccess.

4.TheChinaEffectandtheG20

ThegrowingdisillusionwiththeG8networkofglobalgovernanceclimaxedin

Genoa at the first summit of the new Millennium. There, previously

unprecedentedviolenceandfurywasheapeduponthe‘cabalofeightpowerful

nationsdictating totherestoftheworld.’72Theresultwasagreatlyincreased

bodyofsupportforanorganisationthatcouldencompassboththecontribution

ofthemajortradingnationsandacknowledgetheincreasingimportanceofthe

emergingmarketeconomies.ThishasledtothegreatstrengtheningoftheG20,

agroupmootedin1999andnowholdingcenterstage.Itisseenasabodythat

could combine the continuing concerns about the vast differences in wealth

betweenindividualcountriesandtherealismanddrivetoengageinsustained

economicdevelopment.

‘[The development] of the G20 [has been] a direct response to the

global repercussionsof the financial crisis in Asia, [anda] tangible

recognition of the marked changes to the international economic

landscapethat hasoccurredovertheprecedingdecades.Emerging

countrieshadbecomeimportanteconomicpowers.Moreover,owing

to the increasing integration of economies and markets through

globalisation, domestic developments in these countries could have

significant repercussions far beyond their borders. The effective

functioning of the international financial and economic system

72Porter,J.,(2002),‘BookReviewofGlobalizationandGovernance’,TheRoundTable,No.

363,pp.91-104,Carfax,London,p.92





34

Several Troika meetings were held both on the margins of the

deputiesandministerialmeetingsintheformofvideoconferenceto

discuss the policy and administrative issues in preparation for the

deputies and ministerial meetings. Five topics were chosen for

discussion at the ministerial meeting: Current Economic andDevelopmentIssues;60yearsofBrettonWoodsInstitutions:Strategic

Review and Reform Agenda; Achieving the MDGs: Development

Assistance and Innovative Financing Mechanism; Demographic

Challenges and Migration; and Innovation of Development

ApproachesforSustainedGrowth’ 74

Increasingly, opinion appears to be crystallizing around the idea of the G20

modelasthemostsuitableforthenextperiodofworldeconomicdevelopment.

Recently,theAsianBankheraldedanewworldorderwiththeG20astheGlobal

SteeringCommitteeforbalancedandsustainablegrowth.

5.Conclusion

By demonstrating the merits of planned, state-led marketisation, China’s rise

underminestheimplicitneoliberalassumptionsoftheBrettonWoodsapproach

to development. For other developing nations, this offers a ‘third way’ for

developmentthatavoidstheconditionalitiesoftheIFIsystem.Thisisprovingto

have significant implications forthefuturedevelopmentpoliciesadvocatedby

theBrettonWoods Institutions,whom by endorsing theChinesedevelopment

modelaresettingthegroundworkforafutureofglobaleconomicrelationsbased

onnationalself-interest.Thisisreflectedmorebroadlyintheresurgenceofthe

G20 as development practitioners. In a ‘flying dragons pattern’ of state led

development, nationalandintra-national government relations defineagendas

asmarketforcesarerestrained.

74Ibid,p.100



35

Conclusion

China’sdevelopmentstrategyhasprovenmoresuccessfulthanthepuremarket

approachrecommendedbythe IFI for the past twenty years. Though the true

nature of the challenges posed are overlooked by the simplistic accounts

traditionally offered of both the Washington and Beijing Consensuses. By

critically re-examining both approaches, it appears that the Chinese approach

bothendorsesandunderminesthoseofdevelopmentorthodoxy.Itendorsesit

bydemonstratingthatacommitmenttothecompetitiveforcesofcapitalcanbe

successful when mindfully implemented by a state with knowledge of the

appropriate factor endowments. However, it undermines the ‘invisible hand

doctrine’assumedbytheorthodoxmodelbydemonstratingthatastrongstateis

moreeffectivethanthemarketinidentifyingnewindustriesandmobilisingthe

resourcesandlabournecessarytoexploitthem.Theselessonsarebeginningto

influencethedevelopmentpoliciespromotedfortheWorldBankbyJustinLinas

part of his thesis on New Structural Economics, and are reflected in the

resurgence of the G20 as central development practitioners. The two global

strategies are beginning to coalesce around the emergence of a ‘concert’ of

leadingand emergenteconomies, andwithanendorsementof the ‘wildgeese

flying pattern’ of state lead development, a new future of amarket based on

competingnationalinterestsisbeingrealised.

Aswell as the deeply serious economic issues facing the world economy, the

images and realities of 9/11 still haunt theworld. The ‘war on terror’ has

continuingaffectonnationaleconomiesaswellasontheconsciousnessofthe



36

peoplecaughtupintheseeminglyendlessaftermath.Manyobserversholdthat

thegreatinequalitiesthatexistbetweenthenationsoftheworldprovidearich

soil for the continuing violence and uncertainty that remain without effective

redress.Thesuggestionsinthefinalpartofthisstudyrespondtotheemerging

potential for more effective and co-operative solutions to stubborn economic

problems.Whatisclearisthatinthechangeddynamicoftheglobespolitical

economy, solutions will need to go beyond even the most persuasive

consensuses emerging from Washington, Beijing or any other of the world’s

capitals.





38

AppendixIII:

NotetheheavilydistortingeffecttheanomalousriseofAsianeconomieshason

theoverallstatisticalanalysis,asshownatthebottomofthegraphic.

Source:UN,(2010),TheMillenniumDevelopmentGoalsReport,(NewYork:UN)



39

AppendixIV:

China’s

Influence

goodbadthingthing

%%

America’s

Influence

goodbadthingthing

%%

‘Good’Difference

AfricaKenya

IvoryCoast

GhanaSenegal

Mali

NigeriaTanzania

UgandaEthiopia

SouthAfrica

916

906

905866

847

79127813

75136133

4932

7416

8012

79135623

6325

58273652

65243454

5524

+17

+10

+11+30

+21

+21+42

+10+27

-6

BasedonrespondentswhosayChina/U.Shasatleastafairamountofinfluence

on the way things are going in their countries. Question asked only in Sub-SaharanAfricaandLatinAmerica,thelatterexcludedfromthistable.

Source:PewResearchCentre,(2007),‘GlobalUneasewithMajorWorldPowers’,

47-NationPewGlobalAttitudesSurvey,PewGlobalAttitudesProject,[Online],

Available:http://pewglobal.org/reports/pdf/256.pdf [Accessed01March2012]



40

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Documents

The Rise of China: Challenges to Development Orthodoxy (Dissertation)