Neo-liberalism, old slogan

The Supreme Court order on black money makes some strong observations about the macro-economic policies followed by successive governments in recent decades. It characterises the economic policies of various regimes as "neo-liberal", promoting a form of capitalism that is predatory in nature. The court also chose to dwell on India's economic policy regime, describing it as "neo-liberal" and guided by the "Washington Consensus".

In fairness, the descriptions used by the learned judges have long been rejected as unworkable even by the institutions that gave birth to these ideas! The Washington Consensus was an idea propounded in the late 1980s by John Williamson, who later became chief economist for South Asia at the World Bank. The United States, then still economically strong and somewhat arrogant, had sought to impose on the developing world the idea that they must contribute robustly to global growth by accepting unfettered liberalisation, privatisation and globalisation as the fundamental tenets of economic policy.

This was aimed at furthering the neo-liberal agenda of the West, which had realised that growth was saturating in that part of the world and that new markets will necessarily have to open up rapidly in Asia, Africa and Latin America. However, the World Bank itself realised the sheer fallacy of the Washington Consensus as the political economy of various developing countries rejected such prescriptions.

In the past decade, many Asian and African economies have come into their own, and have started following home-grown prescriptions that are perhaps more palatable in the context of domestic politics.

The world has changed quite dramatically since Williamson coined the term Washington Consensus. If anything, America and other crisis-ridden European economies probably need to follow various prescriptions relating to structural adjustments that the Washington Consensus had originally proposed for the debt-ridden developing world.

A key principle of neo-liberal economics which the Washington Consensus had proposed was the near-total opening up of trade in goods and services to maximise global output. However, when India proposed a comprehensive free trade agreement in goods and services during President Barack Obama's visit last year, US officials were not responsive because they were not sure how the American public would respond, given the persistent stagnation in their economy, with the unemployment rate failing to come down in any significant way.

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