Washington Consensus

Abstract

This paper seeks to evaluate the effects of the Washington Consensus policies on Nigeria’s economy. The consensus created by Washington-based institutions dealing in trade and policies are a set of 10 principles that guide the economy of particular countries is treated. This study strives to evaluate the effects of the Washington consensus on the Nigerian labor market.

Many scholars have evaluated the economic status of Nigeria and the common assumption, which seems to be the reality, is that the economy is in shambles. The Federal Offices of statistics in Nigeria point to the above fact and it is obvious that the rate of inflation has risen and continues to rise. The figures as measured are above 10 and this according to economic experts is not viable for progressive development. The reason for the above fact is that there are high incidents of corruption and implementation of economic policies is not well curated. For the reason of empirical factors evaluated and the non-credibility of most institutions in the country, there are reports of lack of economic improvement in the country.

This paper will evaluate the policies of the Washington consensus with a view of relating the effects they have had on the Nigerian economy. The general feeling has been that the policies have tried to improve the economic standing of the country. However, some quarters still decry this effect to claim that instead of bringing good, the consensus has had more damage. In the setup of the paper, there will be reference to different scholarly material that will help put the ideas in the discussion into perspective.

Keyword: Washington Consensus, Economy, Nigeria.

 

The Washington Consensus

Introduction

The Washington Consensus as clearly defined by the organizational institutions that came up with the idea point to the fact that there is supposed to be a free market whose broad effect should have a trickle effect to the whole economy of every country. The consensus, which is set up by different organizations such as the US, EU, the World Bank, and IMF, has ideas that sought to improve the economic standing of any country. For this reason, it is important to state that the advocacy role it plays is to make sure that there are free markets, floating exchange rates, and macroeconomic stability.

Guided by 10 principles that guide the operation of the various markets that it supports, the Washington consensus has had impacts in various countries in the world. Most of these countries like Nigeria have disturbed economies and it is for this reason that there is a need for the study of the application of the principles based on the individual countries as stated. This paper, therefore, seeks to make a study of the effects of the Washington consensus on the Nigerian market. One important aspect to note is that there are different countries that have implemented the consensus. It is, therefore, necessary to look at the effects as compared and identify the specific characteristics that have been observed in Nigeria.

Having pointed out the above, this paper sheds light on the effects of the Washington Consensus. More often than not, many have adjudged the consensus to bring more problems for the Nigerian economy that it has brought good. Looking at the evidence in the country, the paper seeks to look at the supporting literature on the above assertion and discuss the findings of the studies. After the same has been done, there will be a summary of the findings, which will be followed by the recommendations to improve the economic status of Nigeria. This will later be followed by a succinct conclusion will summarize what the entire thesis has been about.

 

Literature review

Numerous studies point to the Washington Consensus. These studies point to the fact that the Nigerian economy is in shambles. According to Hassan (2013), there are different issues that lead to the above issue. The Nigerian economy has been marred by influences from different quarters of the world economy. It all started during colonization, whereby the White masters introduced their own policies to the African setting. Obviously, the results could never have emerged as they had emerged in the developed countries for various reasons. The first reason is that the environment and the age of the countries were different. The power structures and other considerations (including political climates) were not the same; consequently, there is a disparity in the application of the principles of the Washington Consensus (Helleiner & Pauly, 2005).

Many other scholars point to the fact that there are several other measures that should be taken to improve the status of the Nigerian economy. In the past, many imperial powers have been accused of meddling with the affairs of developing countries (Stewart, 2002). This shows that much as the developing countries would want to implore their ideas on the affairs of the developing countries, the agendas are usually hidden and most border on the exploration of the various resources that the developing countries have. In the review of different scholarly dispensations, it must be understood that there are reasons for the implementation of the different policies that are advocated. In the understanding of most economists, African economies and other developing economies are usually faced with a myriad of issues that need to be addressed to the fullest. For this reason, there have been many studies that have focused on the discussion of the reasons as to why despite the intervention by world financial bodies, many countries still lag behind in terms of economic growth (Seriux, 2009). It is therefore prudent to refer to other scholarly dispensations that discuss the topic above and understand the link with the Washington Consensus.

The Washington Consensus and its 10 points

The ten principles of the Washington Consensus indicate that there should be low government borrowing. The government of Nigeria is accused of going overboard when borrowing money for the different projects that they undertake. The recommendation is that the country should avoid large fiscal deficits that are relative to the Gross domestic product. The second principle features redirection of public spending from subsidies. Some subsidies are considered indiscriminate and that is why the economy is in shambles (Lal, 2012). When the country is implementing policies, they should be pro-growth and development. They should feature issues such as the development of infrastructure and the provision of primary healthcare.

The other principle relates to the reform of taxes. The tax base should be broadened to make sure that tax rates are moderate and marginal. In real sense, the Washington Consensus advocates for positive interest rates and exchange rates that are competitive. The consensus also mentions the liberalization of trade which include imports and the elimination of quantitative restrictions. For instance, licensing should be made in a way that respects the conditions of doing business in Nigeria. Trade should be protected from all avenues of the government and other institutions that are responsible for the well being of the particular businesses. Uniform tariffs must also be implemented.

The consensus notes that privatization of state enterprises is important steps in making sure that the business achieve their objectives and profitability. Through liberalization of inward foreign direct investment, there will be more opportunity for growth (Fisher, 2012). To the authors of the consensus the above points lead to a definite conclusion that a rich scholarly review is needed. Most of the points need to be acted upon and in doing so, they must be evaluated for feasibility and implementation. The last policy is the deregulation which infers the abolishment of regulations that may curtail businesses from entry into the market. With such issues, mention should be made to pave way for consumer protection and oversight of stately obligations. Property rights in Nigeria have to be protected. The Washington consensus gives an insight in to how the same will be achieved.

Moving on, there are various factors which literature will help us to understand the subject better. According to Baylis & Smith (2001), it is important to mention that the politics of the world influence the way economic policies are crafted. Most of the crafted policies point to the fact that the third world countries will generally have an improved outlook because of trade relations and the effect of globalization. As Girigiri (2009) puts it, the issues of labor contribute a large deal to the development of any country. If a country’s labor laws are faulty, then the same will impact on how there will be a distribution of resources and other factors that have importance to the country.

The politics and the policy implementation formulae of any country usually influence the way that country relates to international bodies. In a study conducted by Igwe (2013), there are different measures of knowing if there are different benefits of implementing foreign policies in a country that has no similar economic status to that country. International organizations under the umbrella of the Washington Consensus could have a right agenda for any country in the world but the ramifications are always disastrous. For this reason, therefore, it is important to note that there are many ways in which the same apply to the country of Nigeria. Local laws and policies may also be in conflict with international policies. The above averments will be important for the discussion that is soon to follow.

 

Discussion of Findings (Effects of the Policies)

There are various effects of the policies of the Washington Consensus on the economy of Nigeria. Although some effects can be generalized to apply to other countries, many can be discussed in the Nigerian context. First, the International Monetary Fund (IMF) is of the opinion that many African countries should devise ways in which they can reduce their inflation rates to go below the double-digit number. The IMF has bluntly advised African nations to strategize on how to succeed meticulously a single-digit inflation rate on their various economies. For the sake of Nigeria, there are many incidents where the feat has been difficult to achieve. One reason is that there have been frequent increases in the prices of oils and petroleum products. There are various feats of trying to push the prices down but this has caused certain effects on the economy of the nation.

For the past 20 years that Nigeria has been under economic turmoil, the rate of inflation has been increasing largely. In the observation of other rates that inflation has been growing, it is important to mention that 800 percent is a number that cannot be maintained the Gross Domestic Product of Nigeria spurs different sectors and it is difficult to fathom the effects inflation. Whereas the effects have been known to raise the GDP, the level or the standard of living can remain the same. For the credibility of the numbers that are been added, it is important to note that the government of the Federal Republic of Nigeria is intended to make the best out of the pledge that is given to them by the people of the nation (Rogers, 2012). The government of the Federal Republic of Nigeria is notorious for the hiking of hiking prices for the common goods that have been dedicated to the benefits of the whole country.

Analysts who are included in the articulation of the issue of the Washington Consensus have mentioned how inflation of different issues has been carried out in Nigeria. The spin off effects of the Consensus has led to different issues that must be tackled for Nigeria to remain one of the more advantaged countries in the African countries. In Nigeria, there are 89 million people living on less than one dollar an hour. The translation of the above figures points to the fact that almost 70.2 percent of the economy is living substandard lives (Jakupec, n.d). The unemployment rates in Nigeria are so appalling and this is the reason many find that there is a lack of continuity in the country.

For the most part of the day, many Nigerians do not take part in the construction of the economy. Many youths are employed yet there are measures taken by the IMF and the Washington Consensus to make way for the development of the Nigerian economy. When you look at the infrastructure existing in Nigeria, the infrastructure is dilapidated (Onwuka & Eguavoen, 2007). There are many reasons why there can never be a chance for emancipation. The economy of Nigeria just like many other developing countries must be read in the same terms as the exploitative powers are doing to the many countries.

To continue with the discussion, it is important to make sure that a capitalist economy adheres to the best example of what should be created. The prices of oil are often manipulated to a large sense. Nigeria is a mono-cultural country where there should be sufficient reason to make the best of what the economy should bring to the economy. In the oil industry, a few players are in the control of the Nigerian economy for quite some time now. It is therefore very easy to make sure that the control of oil is well measured against the other producers of oil in the country. Many countries produce oil in the world; considering Nigeria’s situation, it is only fathomable that there is a way in which different imperatives can be created.

The goals of development in Nigeria are affected by different incidents of corruption. The Washington Consensus seems like they were foul play. Ever since the Bretton Woods institutions were created, there are several incidents of malpractice involving the institutionalization of policies that spur economic growth. For this reason, it is important to note that the African continent, especially Nigeria is on the path of being exploited. Primarily, it must be stated that Agriculture is one of the best economic activities that should be made one of the most sustainable endeavors in the country (Lopez, 2012). However, the Washington seems to lay importance in fiscal policies that do not support the economic growth of the country.

In the imperative calculation that the trade organizations in the African continent, which fail to deliver their mandate, it should be mentioned that the same could not be compared to the organizations like Europe, which make trade easy. The example of OPEC can be mentioned. In the discussion about the growth of different organizations, the policies must be domesticated (Ndekwu, 2003). In the similar formula that is the Washington Consensus, it is important to note that the same policies if applied in the same country that is Nigeria, then it should be mentioned that they would not work.

The situation in Nigeria is no different from what has been happening the world over. For instance, it should be said that the systematic implementation of the policies has failed. There are reasons that can explicate the averments as created. The needs of the people should be mentioned and they should reflect the different needs of the people. There are subsidies, which should be enforced in Nigeria that have been implemented. For this reason, what should be said is the fact that the constitution of Nigeria still covers the rights of individuals that should be taken care of.

The above averment should be related to what the legal processes should point to in Nigeria. There are many features in the Nigerian economy that should be taken care of. Nevertheless, the 1999 constitution unequivocally identified that the citizen’s security and well-being is the government’s primary objective. That is the reason why the Washington Consensus has been seen as a fail. There are scholars who have shown that development can be achieved for many reasons. There have also been recommendations which mean that the Washington consensus was meant for the white and developed countries. It must be pointed out that there are measures that can be used to improve the status of Nigeria.

Summary

Looking at the Nigerian economy, one may conclude that the economy is in shambles; this has been caused by an array of factors and thus shows that there are different measures to be taken to ensure that all things are feasible. According to various scholars that have been pointed out above, the Washington Consensus has not created the Nigerian economy. Most of the time, the Washington Consensus has been seen as a destructor to the economy of the Federal Republic of Nigeria. For this reason, it is important to make sure that all the policies that have created by the consensus must be looked at with a keen eye. Many factors have led to the stunted growth of developing economies. Most of the issues are political, economic, and cultural and depend on the state’s intolerance to fight the issues that have been plaguing the economy of Nigeria for quite some time now.

Recommendations

There are ten principles of the Washington Consensus that have been applied in different countries. According to John Williamson, there should be a way in which we understand the general mechanisms of operations that should be handled with care. The relativity of the matter should be carefully assessed to show the different mechanisms that should be handled. For example, the government of Nigeria should make sure that there is little government borrowing to the colonial masters who have plagued the country with loans that cannot sustain the economy. When there are large fiscal deficits, ten it means that the GDP will not be able to sustain the different forces of economic down pull.

Secondly, it must be mentioned that subsidy spending should be done away with. For this reason, it is important to mention that pro-poor services must be enhanced to make sure that everything (including social services) must be well taken of.) In this way, it is important to note that education and other services must be provided to the Nigerian people so that they can be empowered to face all the challenges that they face because of the challenges that the education sector faces.

There also needs to be a mechanism in which tax regimes in Nigeria can be handled. The broadening of the tax regime is important because the government will need more money in which they can undertake other projects that will empower the economy. Trade liberalization is also another important feature of the improvement of the economy. The Washington Consensus points to the fact that there must be proper legal mechanisms that will improve the well-being of different sectors of the economy. Economic development in other countries has been achieved through the implementation of the measures pointed out above.

Conclusion

The economy of Nigeria is closely tied to the Washington Consensus. There are several issues raised because of the implementation of different measures of policies that have led to the economy of Nigeria having the same status that it is having right now. For the benefit of scholarly discourse, the implementation of different measures means that there is a way in which the economy of Nigeria can grow. Foreign countries are also to blame because the applications of different laws also suggest that they cannot boost the economy of Nigeria. The discussion of the recommendations means that different policies and law should be followed and a localization mechanism adopted. For the above reasons, there will be a way in which Nigeria will economically prosper.

 

 

References

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Helleiner, E & Pauly, L (2005). John Ravenhill, ed. Global Political Economy. Oxford: Oxford University Press. pp. 193, 328–333

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Jakupec, V. Foreign Aid: Cultural Values and Norms.

Kanbur, R. (2009). The co-evolution of the Washington Consensus and the economic development discourse. Macalester International, 24(1), 8.

Lal, D. (2012). Is the Washington consensus dead?.

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Ndekwu, E. C. (1983). Government Borrowing. Money Supply and Monetary Policy, Ibadan: Nigerian Institute of Social & Economic Research (NISER).

Onwuka, E. C., & Eguavoen, A. (2007). Globalization and Economic Development: The Nigerian Experience. Journal of Social Sciences, 14(1), 45-51.

Rogers, P. (2012). Nigeria: The generic context of the Boko Haram violence. Monthly Global Security Briefing, 1-5.

Sen, A. (2005). How does development happen? Cato J., 25, 455.

Serieux, J. (2009). THE IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS ON THE DEVELOPMENT PROSPECTS OF THE LANDLOCKED DEVELOPING COUNTRIES.

Stewart, T. (2002). The Third World Debt Crisis: A Continuity of Imperialism. South Centre.

The Washington Consensus. Global Economics in Extraordinary Times: Essays in Honor of John Williamson. Washington, DC: Peterson Institute for International Economics, 11-23.Economic development in other countries has been achieved through the implementation of the measures pointed out above.

 

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