China offers an alternative to the "Washington Consensus"

Challenge: It is frequently postulated that Sino-African relations are burgeoning in part because China offers African leaders a more acceptable alternative economic ideology to the "Washington Consensus", aptly called the "Beijing Consensus". In many ways a host of other criticisms of China's engagements across the continent follow from this, somewhat over-simplistic, misunderstanding.

The "Washington Consensus" refers specifically to a set of policies that commands a consensus in some significant part of the US capital, Washington (Williamson2, 2004:7). The consensus originally comprised a particular policy-mix, informed by a broader neoclassical economic framework, which was formulated to assist debtor countries of the 1990s attain fiscal order. The envisioned path towards economic growth and development included ten broad principles, including fiscal discipline; the re-ordering of public expenditure priorities towards basic health, education and infrastructure; and tax reform (Williamson, 2004:3-4). However, since its inception, the Washington Consensus has detached from its original meaning and principles, incorrectly becoming a synonym for neo-liberal market fundamentalism.

Taking this overly broad interpretation, many have positioned China's centralised political system, state activism in domestic economic affairs, non-intervention in external affairs, and "socialism with Chinese characteristics", to name a few cornerstones of China's ever-shifting ideology, as a polar opposite of the Washington Consensus. As such, the "Beijing Consensus" has been defined simply in terms of contrasting isolated ideological aspects of China against the "Washington Consensus" (Lumumba-Kasongo, 2007).

The unhinged quasi-ideologies have been artificially placed on a collision course, perceived to be played out on the continent in a new, post-Cold War proxy war. Thus, according to this view, much of China's foreign policy that has gained traction in Africa is based fairly simply on its offering of an alternative to the Washington Consensus, which was particularly tarnished by the International Monetary Fund?s (IMF) structural adjustment programmes of the 1980s and 1990s (Merredith, 2005; Van der Wath et al., 2006).

As reported in previous editions in this series, China's macroeconomic success over the past few decades has indeed turned economic theory on its head. These successes are alluring for African economies. Many suggest that China's economic performance rebukes the conventional view that freedom and prosperity are interlinked (Alden, 2007). However, the face-off is superficial, misrepresenting the enormous structural internal transformation China has undertaken since Deng Xiaoping initiated reforms in the late 1970s. China's economic and social successes over the past three decades have promoted economic liberalisation.

To lance the boil of partisan perspectives, such a viewpoint is based on misconceptions of basic relationships. Take, for instance, freedom and Gross Domestic Product (GDP): high levels of freedom correlate positively with high levels of GDP per capita as opposed to rapid GDP growth. Indeed, the world's most wealthy nations have, on aggregate, the highest level of economic freedom in the world.

China's economic freedom may have been just 54 out of 100 in 2009, which is meaningfully lower than the 84 score of the US; however, before Deng's reforms in 1978, China's economic freedom was close to zero. Subsequently, China's economic freedom has improved at an average of 1.5 points each year over the past three decades. No nation has improved its level of economic freedom as much or as swiftly. As a result, China's economic growth rate has averaged around 10% each year since 1980. Evidently, GDP growth is a function of a country's rate of change in freedom, as opposed to its absolute level. China has enhanced its growth potential by enhancing economic freedom. According to Kane (2007:3), "the lesson is that more freedom leads to more growth, but stagnant freedom (even if high) leads to stagnant growth".

China's public policy has become increasingly free-market orientated over the course of the last 30 years. Marketisation has, quite undeniably, been a vital ingredient in China's own development strides in poverty alleviation and economic growth since 1978. More explicitly, China's exceptional economic growth is, in part, a result of a combination of trade liberalisation; the liberalisation of inward foreign direct investment (FDI); the use of a competitive exchange rate; its vast savings and a current account surplus; and political stability. These are cornerstones of the Washington Consensus.