3B03: Week 7
Part 1 is short answers, answer 4 out of 8 questions (worth 20 marks)
Part 2 Essay: Answer 2 out of 4 essay questions (Worth 80 marks)
Upto Topic 6: Concentrate on first 5
A convergence of institutions and a convergence of policies around the world as there is
pressure on states to retreat including Asian countries that came out of the developmental
state had to be forced to converge into neoliberal policies
Often referred to the Washington Consensus, the IMF and WB are based in Washington
and have the policies that countries around the world have to adopt
Washington Consensus principles:
1. Fiscal discipline (limiting deficits, making sure that the amount that any country
brings in in taxes is not exceeding in deficits.
2. Trying to reduce subsidies: eg. Fuel or food subsidies.
3. Tax reform: lowering taxes and spreading or broadening the tax base.
4. Trade liberalization: Canada has just signed a major trade deal with EU; signed
but not ratified (2 step process: signing and ratification and it not always an easy
5. FDI: Increasing FDI and lowering any barriers to FDI. Encouraging countries to
invest overseas and reducing any barriers Some governments limit FDI with
certain countries that they may see as strategic countries. They want to know if
this will be a net gain in terms of the economy and employment for example. The
WC says FDI is always a good thing
6. Privatization: Reduce the role of the state. Privatize a whole series of ways in
which the state intervenes in the economy, for example: more toll routes?
7. Secure intellectual property rights: Important for the Americans so that the people
who have invested in development of particular products whether it be video
games or books or movies, their intellectual property should be respected and
people should pay for their property. So when Americans have a free trade
agreement, they always stick in a clause for intellectual properties, as Americans
normally release more intellectual property than any other country. Intellectual
Copyright. This is free trade and the WC principles, you open up your economy
except in terms of intellectual property. They say a flaw associated with the privatization of intellectual property as it reduces innovation. First wave of
globalization in the late 1800s, the intellectual property regime wasn’t there.
8. Deregulation: Anything that restricts competition, these should be
These principles were promoted by the US treasury, the IMF and the WB. Also
supported by the OECD.
The way in which it was pushed was that it was also pushed by the IMF and WB in a
persuasive and a coercive way. If you were a developing country that required money
and went to these institutions, the only way they would agree to help is if the country
put certain neoliberal WC policies in place. (Use conditionality)
There are two consequences of convergence