Beyond US neoliberalism and the Washington Consensus: the challenge of development ethics for the United States

Abstract

Introduction The challenge for the US federal government policies and strategies since the economic crisis of 2007 and 2008 has been to reverse financial instabilities and to revive the US economy. Republican president George W. Bush failed to establish a road out of the economic crisis. For many scholars, Republican policies and strategies during the Bush presidency actually stimulated the financial economic crisis of 2007. Two years later, in these difficult times, US citizens elected a Democrat, Barack Obama, as president. However, as it appears up to 2011, the administration has failed to drive the economy toward recovery. Hence, the question arises: “What is wrong with the US economy?” To answer this question we need to investigate the functions of the US market-driven capitalism in the era of neoliberalism. During the 1980s, as a result of the economic policies and strat egies applied by the Reagan Administration, the US economy evolved to a neoliberal form of capitalism. The US economy has always been a market-oriented economy in which production and distribution of goods and services are regulated by the market mechanism. Nevertheless, along with the market functions, a safety net attempted to correct market failures. In the era of neoliberalism, private market functions substituted almost all economic and social activities and penetrated into the sphere of every human action. On the other hand, the US domestic neoliberal policies have been imposed on the developing world in the form of the “Washington Consensus”. The Washington Consensus was named, in 1989, by John Williamson (1990) to describe the consensus between the United States Executive Branch of government, International Monetary Fund (IMF ), and the World Bank, the main financiers of development in the world. Initially, the term was associated with the set of policies and conditionalities that international financiers imposed upon development strategies in Latin America. In time, the term became associated with the policies and conditionalities by “Washington” to fund development around the world. In fact, the Washington Consensus represents the set of neoliberal policies imposed in a global context. Hence, there isno reason to distinguish between the domestic neoliberal policies voluntarily adopted in the United States and the neoliberal policies imposed throughout the world in the form of the Washington Consensus. Neoliberalism and the Washington Consensus actually represent the same thing and the terms can be used interchangeably. In this chapter, we will use the term Washington Consensus, as it is assigned within global context, to denote the set of neoliberal policies that either were adopted voluntarily, as for example in the United States, or imposed through conditionalities on the developing world by “Washington”. In this context, a critique of the neoliberal policies adopted in the United States also serves as a critique of the Washington Consensus imposed on the developing world. The purpose of this chapter is to explore the US neoliberalism and the Washington Consensus in ethical terms and to offer the development ethics alternative. More specifically, a social ethical model is proposed to discover the meta-ethical, normative, and applied ethical orientation of neoliberalism. To our knowledge no such exploration of US neoliberalism and the Washington Consensus has been attempted before. The advantage of this ethical approach is that it precisely codifies the means and ends of neoliberalism, of the Washington Consensus, and of neoclassical economic analysis. Students and scholars of economics can benefit from this novel ethical exploration. Additionally, the study contributes to the discussion of understanding contemporary neoliberalism and the Washington Consensus and offers an ethical pattern for future economic policies and strategies based on the “good life” of people and societies, social justice, and environmental balance via the development ethics human and social paradigm. The chapter is structured as follows. In the next section, we analyze aspects of neoliberalism adopted in the United States. In the third section, we refer to the Washington Consensus as the neoliberal strategy imposed around the world. In the section following, we suggest an ethical model of evaluating US neoliberalism and provide the development ethics alternative. The final section concludes by presenting the final remarks of the chapter.