Is the “Beijing Consensus” Now Dominant?
This essay examines the content of the “Beijing consensus” approach to development and explores whether the emerging markets and developing countries should embrace it as a model that they should adopt.
Although China has been successful in its development approach, the West should not endorse the Chinese approach as a model for development because:
- China’s advocacy of gradualism is only sometimes, not always, worth adopting.
- Though often effective, China’s emphasis on innovation can be costly not only to multinational companies but also to those who have to pay for reinvention of the wheel.
- Chinese reliance on foreign demand as a supplement to domestic demand, by accumulating foreign assets with a likely negative yield, deprives the domestic economy of resources that it could be using to much greater effect.
- While state capitalism does have the underappreciated advantage of assisting the government in achieving rapid recovery from a negative demand shock, it was the increasing role of the market in China’s economy that served as the foundation of China’s rapid growth.
- Authoritarianism may appeal to other third-world leaders, but the espousal of national sovereignty irrespective of the merits of the regime or the policies defended may not appeal to the people.
The West should modify the advice it gives regarding the proper strategies for development to accomplish the following:
- Supplement export-led growth with a reserve build-up rather than replace it by inward-looking strategies.
- Accept that the world crisis has reinforced the case for prudential inflow controls on capital.
- Support activist use of fiscal policy for contra-cyclical purposes, while acknowledging that one cannot start a contra-cyclical policy in the recession.