The G20 Summit in Seoul last week produced many agreements, including the formation of a cooperative framework to support "strong, sustainable and balanced economic development," reforms in the International Monetary Fund, a strengthened global financial safety net, a "transformation" of the global financial system and support for developing countries.
The issues that drew the most attention were the currency dispute and current account balance guidelines, where little progress was made, but more attention should be paid to the "Seoul Consensus." It presented a new vision and principle to replace the "Washington Consensus" of free-market fundamentalism that had served as the guiding vision for economic growth in developing countries for the last 30 years. A few years from now, the "Seoul Consensus" may look like the only lasting achievement of the G20 Seoul Summit.
The Seoul Consensus stresses the importance of economic development and the role of each nation to make that possible. "A solution to poverty in developing countries is impossible without sustainable growth," it says. The Washington Consensus, by contrast, called for minimal government intervention and leaving everything to market principles. "There is more than one model to successful development," the Seoul Consensus says, no longer bound by the neo-liberal imperatives of deregulation, liberalization and privatization.
It also lists infrastructure development as the first of nine core areas of economic development. Over the past decades, state-led infrastructure development was considered taboo since infrastructure investments in developing countries led to mounting debt and were seen as merely fattening the wallets of corrupt government officials. The Seoul Consensus breaks that taboo.
For some time, the Western development model that stressed free-market competition and efficiency alone has been criticized as preventing developing countries from ascending the economic ladder. Asian countries including Korea succeeded in developing their economies through infrastructure development, subsidizing exports, using money supply, exchange rates and financial regulations and state-run companies. But the West ignored these achievements.
From that perspective, the Seoul Consensus can be seen as the first step for the Korean-style or even larger concept of Asian-style development models to be presented as global standards. Methods that worked in Asia will be tested in Latin America and Africa. According to their results, the economic development models used so far may end up in the trash.
But the Seoul Consensus is still incomplete. The Financial Times has criticized it as merely "another nail in the coffin" of the long-dead Washington Consensus. Asian countries introduced a pluralistic and pragmatic model borne out of experience, but more work needs to be done in terms of logical uniformity and action plans.
That is no easy task. The Seoul Consensus faced an ideological battle even as it was being prepared. Along with controversy over the degree of government intervention and policy priorities, there were also difficulties in mediating between the interest stakes held by advanced, emerging and developing countries, as well as various international organizations such as the World Bank. Korea was able to gain valuable experience in making international rules as it hosted the G20 Summit. It must now use that experience and knowledge to upgrade the Seoul Consensus into a new global paradigm.
By Chosun Ilbo columnist Kim Ki-cheon