Dialogus de Beijing Consensus -- Optimo on Ramo's idea of a 'Beijing Consensus' (Third theorem)

As promised, I now turn to the third theorem of Ramo, which is the following:

Finally, the Beijing Consensus contains a theory of self-determination, one that stresses using leverage to move big, hegemonic powers that may be tempted to tread on your toes. This new security doctrine is important enough that I treat it later in a separate chapter.

Pessimo had two reactions to this theorem. First, Pessimo seems to agree that self-determination is relevant but disagrees with Ramo’s assumption that such condition can be influenced by domestic policies. In other words, while Ramo perceives this a power struggle, Pessimo is more determinist: “China’s autonomy was and is pure and simply a function of its size”. Second, Pessimo argues that while Ramo is concerned with the “hegemonic powers”, markets and the private actors operating in them offer a bigger threat to a country’s self-determination.

I am guessing that the first reaction of Pessimo comes from his determinist view of development. Indeed, the idea that China’s self-determination comes from its size seems even more drastically deterministic than Pessimo’s argument that a country’s physical and cultural proximity to other countries determines its development’s prospects. As you may remember, Pessimo offered a series of clarifications to my first post, including the following:

Without belaboring the basis for and parameters of this particular determinism, I would argue that the economic development of both Taiwan and South Korea is due simply by their close geographical and cultural proximity to Japan, together with a perhaps even closer cultural proximity to the United States that emerged during and owing to the Cold War.  It was and is these various dimensions of proximity that catalyze the unique ability of their industrial parks to promote cutting-edge agglomeration.  But another way, I argue that is development that enables institutions (including Asian industrial parks), not the other way around.

Let me preface everything that I will say by indicating that there are very vague terms both in Ramo and in Pessimo’s formulations. Thus, part of my response is based on some speculation about what these terms actually mean.

Let’s assume that a good measure of self-determination is the fact that a country has not been colonized, which lends itself to a series of important consequences, such complexes and often largely domineering post-colonial relationship (with the actual colonizer of with its replacement). China has never been colonized, along with a few other nations: Liberia, Japan, Thailand, Bhutan and Iran. Just by looking at the list of countries, it would be hard to claim that countries are not colonized because of their sizes. Thus, a more complex set of facts needs to be used to explain this. Let’s assume that by size, Pessimo is referring to population and self-determination is still referring to not being colonized. It is true that China has never been a colony, but other countries with similarly large populations, such as India, have been colonized. Perhaps Pessimo is referring to territory, not population.  In this case, there are at least two other countries of comparable territorial size that were colonies: Brazil and Canada (although the colonial territory expanded overtime as opposed to being set out at the outset). In sum, these definitions seem too easily questionable for me to believe that this is what we are talking about.

Let’s assume instead that by self-determination we referring to a country’s ability to determine its domestic policies independently of the influence of other nations. Again, the size of a country seems to be of much less important than its political and economic power and, perhaps most importantly, the governance structure of international institutions. Indeed, the tension between having an international world order and maintaining a country’s ability to define its own domestic policies is beautifully explored in Dani Rodrik’s book the Globalization Paradox. As one review of the book suggests, if there are any lessons that come from Asian countries, including China, is that they have kept their ability to decide their own domestic policies in the face of the Washington Consensus formulas:

“As Rodrik sees it, globalization began to run off the rails when it got hijacked by the notion that any restrictions on the flow of goods or capital across borders would result in great sacrifice to efficiency and economic growth. Not only was this free-market ideology imposed by the United States on developing countries through the interventions of the World Bank and the International Monetary Fund, but it was also imposed on the United States itself through a succession of free-trade treaties, the deregulation of finance and the retreat from any semblance of industrial policy.

The irony, Rodrik notes, is that the countries that experienced the greatest growth during the heyday of the "Washington consensus" were Japan, China, South Korea and India, which never embraced it. For years, they had nurtured, protected and subsidized key industries before subjecting them to foreign competition. They had closely controlled the allocation of capital and the flow of capital across their borders. And they flagrantly manipulated their currency and maintained formal and informal barriers to imports. Does anyone, he asks, really think that these countries would be better off today if they had played the game, instead, by the Washington rules?”

(For the entire review, see here).

In other words, China and other Asian countries do provide a model of self-determination in light of the attempts, such as those influenced by the Washington Consensus, to imposed one single policy (a free market policy) to all countries. The high level of self-determination of these Asian countries has protected them both from the so-called “hegemonic powers” and their pressure in favour of free markets. Incidentally this self-determination also seems to have protected them from “the markets”, which is Pessimo’s second concern. If this is the correct interpretation of what Ramo mean by self-determination, it is very clear from the list of countries listed in above (Japan, China, South Korea and India) that size does not matter.

Pessimo may have still reservations regarding this point. In an excellent response to my comments to the second theorem, Pessimo raises an important question about what defines a model, arguing that it needs to provide guidance for action. If this is the case, Pessimo may have the same reservations to the third theorem that he has regarding the second theorem, i.e. the theorem does not seem to present any guidance to action. Indeed, if anything, the theorem seems to say “do what you think is best”. I would claim instead that it says "do not listen to the World Bank and the IMF", which can be interpreted as a negative guidance for action. If Pessimo wants positive guidance, this may fall a bit short. But I will leave this for Pessimo to confirm (or not) and then I may come back to this in a future post.

Let’s turn to Pessimo’s second point: “the much bigger problem is domination by market”. Pessimo not only argues that markets can offer a bigger threat than hegemonic powers, but he also argues that the solutions available are rather limited:

“The only effective response to this problem that we have found to date is for developing nations to enter into transnational regional financial arrangements like the Chiang Mai Initiative in Asia or the Prado-inspired BRICS Development Bank.  But at best, this only results in a regional autonomy, not in the kind of domestic financial autonomy that Ramo is imagining.  Moreover, they only insulate from large shocks, they do not insulate from the kind of persistent market-driven domination by private actors – as articulated, for example, in threats to relocate production, harassing litigation and lobbying, and intellectual domination of the WTO and other international financial institutions and organizations – that is a much greater threat to economic autonomy than ‘hegemonic powers’.”   

My first comment is that Prado would be a much more influential scholar if the BRICS Bank had been inspired by some of her ideas, but unfortunately that is not the case. Second, Pessimo here suggests that self-determination would be restricted to “domestic financial autonomy”. As I have argued earlier, I would rather define self-determination as the country’s ability to set up its own policies. The idea of financial autonomy seems a bit vague, not to say utopian. Does domestic financial autonomy means having enough resources in the national economy not to need foreign direct investment or foreign investment of any kind? This seems like a rather tall order. To make matters more complicated, towards the end Pessimo changes the term to “economic autonomy”, which makes the statement even more confusing.What is economic autonomy?

In any event, I think the excerpt cited earlier provides a good illustration of the fact that Asian countries, including China, have managed to protect themselves from such intrusive market forces (and the vulnerability associated with them) by creating protective policies. If this kind of limited vulnerability is what defines "financial or economic autonomy", we are back to my earlier point. such autonomy is derived from a country’s ability to determine its own policies (insulating itself from “markets” as much as it deems appropriate). So, we are back into the idea that self-determination is connected with a country’s capacity to define its own policies. And size (however defined) does not seem to have anything to do with it.

In sum, as they say: “It's not the size of the dog in the fight, it's the size of the fight in the dog.”