Free Papers

Washington Consensus and Lieo

Developing countries have been targeted as being powerless in the current globalizing (micro) world of political domination by authoritarian approaches. The dependency/world system theories appears to be at work, where the developing countries are powerless or vulnerable allowing them to be dependent on advanced technologies, policies and ideas from their hegemony for economic growth and development as well as political survival. According to Amartya Sen, development is the process of economic, technological and social change by which human welfare is improved. The Liberal International Economic Order, (L.

Hire a custom writer who has experience.
It's time for you to submit amazing papers!


order now

I. E. O) Washington Consensus (W. C) and Structural Adjustment Programs (SAP’s) were policies formulated by the economically developed countries (core) for the impoverished developing countries (semi-periphery/periphery) to carry out more reforms with loans and grants so as to maintain, economic and political stability (WIARDA,1990). These structures have created an anarchical divided world with so many uncertainties (Rourke, 2004) showing poor results among developing countries such as economic deprivation, political domination ecological degradation, cultural regression and technological dependence.

LIEO is a supranational institution, reflecting free market thinking as regulations are removed, global trade becomes efficient and people needs are better met,(globalization). Whereas as the W. C is described as a relatively specific set of ten economic policy prescriptions that constitute a “standard” reform package promoted to or for crisis wrecked countries by Washington DC, United States (US) (Williamson ,1989). It is based on international lending institutions (Bretton Woods) such as the International Monetary Fund (IMF) and World Bank (WB). (SAPs) is equivalent to W.

C. where developing countries are given conditionalities stipulated by the Bretton Woods Institutions in order to qualify for new loans to assist in debt repayment on existing loans owed to commercial banks , governments and the World Bank. One of the most important developments over the past years has been the spread of liberal economic ideas and policies throughout the world from the LIEO, WC and SAPs, such as trade liberalization initiatives (globalization) to prevent major international financial crisis such as (1960’s great global financial depression).

The growing willingness of governments (developing countries) for economic growth and development was the main “source” of them being in agreement to open up their national economy to global market forces. The use of dependency/world system theories is evident, where the dependency syndrome is being adopted by some developing countries and has contributed to their powerless nature, such as economic deprivation. This act of dependency is in their quest for some level of development “from the inequities in the global trading system” (Stiglitz, 2002).

In the 1980’s, the economic crisis or the Third World Debt Crisis affected both developed and developing countries. As a consequence, the developing countries were adversely affected due to negative balance of payments (the main constraint to growth), decrease in the value of goods and services, deficits chronic budgets and increased external borrowing as the basis of revenue for the government. The prescriptions of trade liberalization and deregulation within an open global market by the IMF and WB to raise revenue and protect domestic industries from competition have shown inequity in global trade by weakening small economies further.

Developing countries are exploited by the ‘core’ for low cost primary products, (i. e. cocoa pods, sugar, textiles and bauxite) and prices where these commodities are slowly increased compared to the manufactured products from the “core”. For example, the cocoa pods of Trinidad and Tobago are sold at cheap prices, (exports) to the United Kingdom, who in turn sold (the manufactured product – chocolate (Cardbury) at high prices (imports) to developing countries.

The application of dependency/world systems theories have shown the continuity of industrial countries keeping their own market protected with policies that make the rich, richer and the poor more impoverished (Stiglitz, 2002). The application of dependency/world system theories can be seen in the level of political domination among major powers (core) within an evolving world political system that has, changed from unipolar, bipolar, multipolar. In the 1980’s, some developing countries were rescued by IMF and WB with a thrust of SAP’s to reduce their expenditure.

However, the programs were initiated to integrate developing countries by allowing them to earn revenue to service their debts and rely on foreign trade rather than aspiring to be self-sufficient this has had an adverse effect in some countries. For example, the open trade market (deregulation) has affected the Dominican and St Lucian banana industry, where the US used its hegemony through the World Trade Organisation (WTO- creates and implements free trade agreements), to remove preferential treatments on Caribbean banana (mono-crop), to even trade with that of Mexico and other Latin American countries.

This act has pushed some countries below the poverty line causing a decline in (economic growth), an increase in unemployment which has generated social and political unrest; increase in the drug trade, increase in illicit emigration, increase rates of HIV/AIDS, decrease in the tourism industry and investment, reduction in remittances (significant in Haiti, Jamaica and Barbados) increase in corruption and the inability to repay international loans.

The influx of multinational corporations (MNC’s) due to privatization in developing countries has increased foreign direct investment and capital inflows, but is faced with challenges such as ecological degradation. The industralised countries often move the polluted industries multinational corporation (MNC’s) to developing/underdevelopment countries where they are less stringent environmental and social standards. For example, the lack of enforcement policies by Environment Management Authority (EMA) to construct a smelter plant in Trinidad and Tobago as a means to attain quicker development at the expense of gains.

Also, Dominica continues to be threatened by ecological vulnerabilities where the banana industry is suffering of global warming, beside the removal of preferential treatment by the WTO. Those developing countries that have similar fate, depend on more financing from International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA- for grants in areas of agriculture and education (Muchhala) making them dependent on financial aid from the core.

The phenomenon of globalization for greater efficiency and productivity on a level playing field has a parallel effect on people’s culture through regression. The open market has created the emergence of MNC’s such as KFC, Nestle, Mcdonald’s and Nike in an attempt to increase productivity (and assist to eradicate unemployment). The core tends to exploit the semi-periphery/ periphery in an attempt to repatriate money to their home countries, which contributes to underdevelopment of the host country.

Also, citizens have acquired the taste for consumption of foreign goods and services. In conclusion, developing countries need to learn that being powerless is not a factor for disunity the simple fact is that no one country, whether larger or small, rich or poor, weak or strong could deal with the challenges from endogenous and exogenous factors in pursuit of development.

Therefore, the applications of strategies should tailor to fit the requirements of a particular country by governments that are proactive and possessed the political will. Also, all world players need to move away from the self interest, conflicts and competiveness to arrive at a consensus for true survival… we need true liberalism/neo-liberalism not a disguise of realism seeping through.

Leave a Reply

Your email address will not be published. Required fields are marked *