The Rise of the Beijing Consensus

BRUSSELS – President Barack Obama’s first appearances outside North America – in London, Strasbourg, Prague, and Istanbul – galvanized world attention. But what that trip singularly failed to do was paper over a startling fact: the “Washington Consensus” about how the global economy should be run is now a thing of the past. The question now is what is likely to replace it.

Although China is often said to lack “soft power,” many of its ideas on economics and governance are coming into ascendance. Indeed, in pursuit of national economic stability, the Obama administration is clearly moving towards the kind of government intervention that China has been promoting over the past two decades.

In this model, the government, while continuing to benefit from the international market, retains power over the economy’s “commanding heights” through strict control over the financial sector, restrictive government procurement policies, guidance for research and development in the energy sector, and selective curbs on imports of goods and services. All these factors are not only part of China’s economic rescue package, but of Obama’s stimulus plan as well.

China is clearly pleased to see that the United States is now also placing cool calculation of its national interests at the forefront of its foreign policy. “In delivering a better life for people on the ground, one should be more concerned with substance than with form,” Obama stated in an interview just before his inauguration. Rather than obsessing about elections, the US now seeks to build pragmatic alliances to buttress its economic needs. This requires, first of all, cozying up with China and the autocratic Gulf states – the main lenders to the US Treasury – as well working with Iran and Russia to limit the costs of the wars in Afghanistan and Iraq.