New Delhi and the New Washington Consensus

Context:

In a major speech late last month, US National Security Adviser Jake Sullivan outlined a set of policy initiatives to pursue the geoeconomic contestation with China. 

The US is seeking wider international consensus on the new economic approach from its allies and partners, including India.

India’s Engagement:

• The Indian Prime Minister steps up engagement with the US and its allies at the G7 summit, the Quad summit and bilateral visits to Washington and Paris, the restructuring of the global economic order will figure high on India’s bilateral and multilateral agenda.

Challenges that have arisen from the old Washington Consensus:

• It inflicted much damage on the US economy and society.
• The “markets know best” approach led to the hollowing out of the US industrial base. 
• In the name of oversimplified market efficiency, entire supply chains of strategic goods along with the industries and jobs that made them moved overseas. 
• The notion that “all growth was good growth” led to the privileging of some sectors like finance while other essential sectors, like semiconductors and infrastructure, atrophied.
• There is a problem triggered by the integration of a “large non-market economy” like China into the WTO and “economic integration didn’t stop China from expanding its military ambitions in the region” unlike earlier notion that economic integration is a way to achieve peace and responsibility.
• There is the urgent need for a “just and efficient transition” to green economic growth and the political imperative of reducing economic inequality at home that has undermined American democracy.

Solutions:

• Sullivan offers a five-fold policy framework. 
• To return to industrial policy but dismissed by economic neoliberalism. 
• The ultimate goal of the US is a “strong, resilient, and leading-edge techno-industrial base that the United States and its like-minded partners, established and emerging economies alike, can invest in and rely upon together.”
• In today’s world, trade policy needs to be about more than tariff reduction. The focus should be on developing diversified and resilient supply chains, promoting clean energy transition, and ensuring trust in the massive infrastructure that supports the rapidly expanding global digital economy.
• Need to invest into emerging economies with local solutions but with capital enabled by a different brand of US economic diplomacy.

• • This involves offering an alternative to China’s Belt and Road Initiative, addressing the global debt crisis, and reforming multilateral development banks.
• Made efforts to develop a new set of export controls on sensitive technology that will limit national security threats from China and other rivals. 

The common themes in the economic strategies:

• These include China’s geoeconomic challenge, the dangers of dogmatic commitment to globalisation, the need for industrial policy to develop national manufacturing, technological cooperation among like-minded partners, building resilient supply chains, addressing the economic concerns of the Global South, and reforming the global financial institutions.

Disagreements:

• There will be many disagreements on the identification of priorities as well as on the details of the specific outcomes in rearranging the global economic order.
• Building on new opportunities and resolving new problems must be viewed as a historic opportunity for India’s economic statecraft.

Conclusion:

At the dawn of the reform era in the early 1990s, India struggled to cope with the old Washington Consensus. Today as one of the world’s leading economies, it can and should actively reshape the global economic order.

News Source: The Indian Express