Bush Administration Sticks to Conventional Wisdom in International Economic Policy

 
Despite years of political instability and continued low growth since the 1990s, plus the recent dangers of meltdown in many of South Americas economies, the Bush administration remains loyal to the tried and true strategies of free market economies, deregulation and privatization. This was the message presented by US Treasury Secretary Paul O'Neill in his remarks to the Americas Society Inaugural Dinner on September 13, 2002.

Two paragraphs of his speech in particular are good summaries of the conventional wisdom of the "The Washington Consensus." These comments by the Treasury Secretary, just returned from his Africa tour with Bono, are a good measure of the continuing gap between developmentalists that will manifest itself on the streets of Washington, D.C. during the IMF and World Bank meetings at the end of September.

Here are the Secretary's words:
"We know from experience that countries that have succeeded in raising living standards for their people have pursued three basic policies. First, they govern justly, by enforcing law and contracts fairly, respecting human rights and property rights, and fighting corruption. Second, they encourage economic freedom, by removing barriers to trade, opening their economies to investment and competition, pursuing sound fiscal and monetary policies, and divesting government of business operations. And, third, they have invested in their people, by providing the best possible systems for education, health care, and clean water.

"But some Latin American governments-like some governments in other parts of the world-have not committed to stable, sound, growth-oriented policies, and as a result, they have suffered more severely from recent shocks. Unsound fiscal and monetary policies have spurred inflation and burdened developing economies with overwhelming debts. Poor governance and corruption deter local entrepreneurs and foreign investors alike. No one wants to invest time and money where a corrupt official or a well-connected crony can abscond with the fruits of the enterprise. Restrictions on economic freedom, such as punitive tariffs, government-backed monopolies, rigid labor systems and tortuous regulations, stunt innovation and productivity. Inadequate investment in education prevents workers from taking on higher-value employment and growing out of subsistence and poverty."

O'Neill does not mention development in his speech, but the idea of revamping foreign assistance is there. His comments should not be a surprise, coming from an official in his position. Still, they show that the definitions of US commercial and foreign policy are being set by a very rigid set of policies. Certainly, by these measurements, the political positions of many governments, as well as some of the future leaders of Latin America, must seem out of step and contrary to United States' vision of a partnership with the Americas.