The Washington Consensus and China Approach Ping Chen [email_address] http://pche.ccer.edu.cn/ China Centre for Economic Research, Peking University, Beijing, China Centre for New Political Economy, Fudan University, Shanghai, China 6º. FORUM DE ECONOMIA DA FUNDAÇÃO GETÚLIO VARGAS Sept. 22, 2009

Average GDP Growth Rate in Decades (%)

Arable Land and Population Cross Country Comparison in 1993 (Madison1998)

Cross Country Comparison in 1993 (Madison1998)

Average GDP Growth Rate in Decades (%)

World Economy in Historical Perspective (Annual average compound rate of GDP growth)

(Annual average compound rate of GDP growth)

Russia’s Economic Declines in 20 th Century (Each period started with 100%)

(Each period started with 100%)

Economic Performance during Transition (Each period started from 100%)

(Each period started from 100%)

Transition Recession in East Europe

Transition Recession in Former Soviet Union

Washington Consensus (Williamson 1990) Fiscal discipline A redirection of public expenditure priorities toward fields such as primary health care, primary education, and infrastructure Tax reform (to lower marginal rates and broaden the tax base) Interest rate liberalization A competitive exchange rate Trade liberalization Liberalization of inflows of foreign direct investment Privatization Deregulation (to abolish barriers to entry and exit) Secure property rights.

Fiscal discipline

A redirection of public expenditure priorities toward fields such as primary health care, primary education, and infrastructure

Tax reform (to lower marginal rates and broaden the tax base)

Interest rate liberalization

A competitive exchange rate

Trade liberalization

Liberalization of inflows of foreign direct investment

Privatization

Deregulation (to abolish barriers to entry and exit)

Secure property rights.

Beijing Consensus (Ramo 1997) First, the value of innovation . The development strategy should not be trailing-edge technology (copper wires), but bleeding-edge innovation (fiber optic) to create change that moves faster than the problems change creates. Second, focus is the quality-of-life and chaos management . It demands a development model with sustainability and equality. Third, a theory of self-determi­natio n.

First, the value of innovation . The development strategy should not be trailing-edge technology (copper wires), but bleeding-edge innovation (fiber optic) to create change that moves faster than the problems change creates.

Second, focus is the quality-of-life and chaos management . It demands a development model with sustainability and equality.

Third, a theory of self-determi­natio n.

China Approach (Chen 2009) (1) Finding growth opportunity first ; then take bold reform (2) The dual-track system for stability and innovation (3) A clear division of labor between central government (stability & coordination) and local governments (innovation & development) (4) Leadership in regional development (5) The mixed economies sustainable for public finance, development and reform .

(1) Finding growth opportunity first ; then take bold reform

(2) The dual-track system for stability and innovation

(3) A clear division of labor between central government (stability & coordination) and local governments (innovation & development)

(4) Leadership in regional development

(5) The mixed economies sustainable for public finance, development and reform .

China Approach (6) The Chinese discipline based on competition at all the level , not checks and balance by interest groups in western style. (7) A new coordinative partnership among governments, entrepreneurs, workers, and farmers (8) Government should create and guide market , but not be driven by the market (9) Central government should focus on China’s development trajectory without distracting from outside disturbances.

(6) The Chinese discipline based on competition at all the level , not checks and balance by interest groups in western style.

(7) A new coordinative partnership among governments, entrepreneurs, workers, and farmers

(8) Government should create and guide market , but not be driven by the market

(9) Central government should focus on China’s development trajectory without distracting from outside disturbances.

A New World Order after this Crisis From a universal (Anglo-Saxon) value system to a more diversified world China is developing new partnership with Africa and Latin America countries China’s approach of resource-saving and labor-intensive technology China’s equal approach in intennational exchange

From a universal (Anglo-Saxon) value system to a more diversified world

China is developing new partnership with Africa and Latin America countries

China’s approach of resource-saving and labor-intensive technology

China’s equal approach in intennational exchange

Teachings by Confucius (551-479 B.C.) “ What you do not want done to yourself, do not do to others.” “ To lead by setting an example, (not by lecturing).”

“ What you do not want done to yourself, do not do to others.”

“ To lead by setting an example, (not by lecturing).”

References Ping Chen, “From an Efficient to a Viable International Financial Market ,” in R. Garnaut, L. Song and W.T.Woo eds. China’s New Place in a World in Crisis: Economic, Geopolitical and the Environmental Dimensions, Australian National University E-Press and The Brookings Institution Press, Canberra (2009) Ping Chen, “Three Dimensions of Current Economic Crisis ,” in Looking for Solutions to the Crisis: The United States and the New International Financial System, Conference Proceedings, New York, Nov. 14, 2008, EPS (Economists for Peace and Security) and IRE(International Initiative for Rethinking the Economy), Published in Clamecy, France (2009) Ping Chen , “ Equilibrium Illusion, Economic Complexity, and Evolutionary Foundation of Economic Analysis,” Evolutionary and Institutional Economics Review , 5(1), 81-127 (2008). Ping Chen , “ Complexity of Transaction Costs and Evolution of Corporate Governance,” Kyoto Economic Review, 76(2), 139 － 153 (2007). Ping Chen , “Evolutionary Economic Dynamics: Persistent Business Cycles , Disruptive Technology , and the Trade-Off between Stability and Complexity ,” in Kurt Dopfer ed., Evolutionary Foundations of Economics , Chapter 15, pp.472-505, Cambridge University Press , Cambridge (2005).

Ping Chen, “From an Efficient to a Viable International Financial Market ,” in R. Garnaut, L. Song and W.T.Woo eds. China’s New Place in a World in Crisis: Economic, Geopolitical and the Environmental Dimensions, Australian National University E-Press and The Brookings Institution Press, Canberra (2009)

Ping Chen, “Three Dimensions of Current Economic Crisis ,” in Looking for Solutions to the Crisis: The United States and the New International Financial System, Conference Proceedings, New York, Nov. 14, 2008, EPS (Economists for Peace and Security) and IRE(International Initiative for Rethinking the Economy), Published in Clamecy, France (2009)

Ping Chen , “ Equilibrium Illusion, Economic Complexity, and Evolutionary Foundation of Economic Analysis,” Evolutionary and Institutional Economics Review , 5(1), 81-127 (2008).

Ping Chen , “ Complexity of Transaction Costs and Evolution of Corporate Governance,” Kyoto Economic Review, 76(2), 139 － 153 (2007).

Ping Chen , “Evolutionary Economic Dynamics: Persistent Business Cycles , Disruptive Technology , and the Trade-Off between Stability and Complexity ,” in

Kurt Dopfer ed., Evolutionary Foundations of Economics , Chapter 15, pp.472-505, Cambridge University Press , Cambridge (2005).