The new "Washington Consensus"

For decades, we have been told that it is bad for the economy when the state runs businesses. This was the basis of the “Washington Consensus,” which emerged in the 1980s: “private enterprises are more efficient than state-owned enterprises,” because the threat of bankruptcy keeps managers in private companies focused on the bottom line. Originally designed for Latin American countries and then applied during the post-communist transition in Central and Eastern Europe, the “Washington Consensus” has remained the dominant paradigm for economic policy.

But what happens when businessmen come to power? How does this affect people's ability to set the rules of government? Such questions are rarely asked, because the emergence of experienced entrepreneurs in power is reflexively welcomed. They supposedly know how to run things efficiently, and they are only occasionally called into government. However, it is one thing when individual entrepreneurs find themselves in power, and quite another when all power is handed over to businessmen, which is what the Donald Trump administration clearly intends to do.

Of course, the appointment of another financial magnate, Scott Besant, as Treasury Secretary is no surprise, given the long list of his predecessors with similar experience. In addition, measures such as the abolition of antitrust control or environmental and financial regulations are well known from previous Republican administrations. However, they have led to poor long-term results - from the financial crisis of 2008 to increasingly frequent and severe fires, extreme heat and ice storms.

But the second Trump administration goes much further. If a picture is worth a thousand words, the photo of the founders and executives of America’s largest tech companies (including Amazon, Meta, and X) standing in the front row at Trump’s inauguration is a manifesto. They had an advantage even over future Cabinet members. Although representatives of big oil, gas, and financial companies were slightly behind, the shadow was huge.

These pictures speak louder and clearer than any words. The current government of the United States of America is not just "good for business" - it is business. The old adage, "America's business is business," has been taken to a new extreme: America's government is business, too. Let's call it the "New Washington Consensus."

Yes, business has always played a huge role in American history. The Virginia Company founded the first permanent settlement in North America, and the Dutch West India Company controlled much of the transatlantic slave trade, building forts and settlements in the West Indies and the Americas. These structures were more than public-private partnerships; they were essentially states. And the East India Company, which established British colonial rule over the Indian subcontinent for nearly a century, had sovereign authority over the territories it had conquered. (Although Warren Hastings, the company’s representative who was appointed Governor-General of British India, was impeached for usurping power, he was eventually acquitted of all charges.)

History suggests that the "corporation-state" model is, to put it mildly, a questionable convenience. The logic of business leaves little room for freedom, unless you are one of the few at the top. Business recognizes the existence of only two types of people: workers and consumers. The former are needed for production, the latter as buyers of products and services. In both cases, the sole purpose of people is to maximize the growth of the value of the shares.

Therefore, it is necessary to keep labor costs low and demand high, using all available methods. Loyalty, community, and individual rights have no place here. Top managers in American corporations often receive "golden parachutes" (large cash payments) when they leave, while ordinary workers can be fired without any obligations. Consumers are portrayed as lucky because their lives are "enriched" by purchasing the products they dream of - even when these products cause them disease or kill them, as in the case of tobacco or alcohol.

Today, the big digital companies have perfected a model of profit maximization by creating addiction in people. Dopamine-boosting “likes,” endless scrolling, and algorithms that make posts go viral—all of which ensure that stopping use causes a withdrawal-like experience for addicts. There are no checks and balances, no accountability mechanisms, and no privacy protections. A single click of a registration button subjects millions of people to a private autocracy. And make no mistake: autocracy is what we are dealing with. Markets may be about bargaining between free and equal parties, but companies, as Ronald Coase taught us, always operate under the principle of centralized control.

Private islands of corporate autocracy have always been at odds with the principles of democratic self-government, and judging by the fate of previous "company-states," things may not end well this time either. Rebellions against the East India Company forced British authorities to establish direct control over the subcontinent, and then to dissolve the company itself. In other parts of the world, colonial companies that ruled ruthlessly, relying on legal protections that shielded them from liability, eventually collapsed under the weight of excessive debt or mismanagement. In North America, the charters of colonial companies gradually evolved into proto-constitutions that limited executive power and gave citizens the right to vote.

It is increasingly difficult to keep business out of government - and not just in the United States. The prospect of freeing the private sector from control by taking over government is too tempting for business leaders, who have the time and money. Today, as we watch business take over in broad daylight, we have only two options - democratize business or abandon the idea of ​​democracy.

The author is a professor of comparative law at Columbia University Law School.

Copyright: Project Syndicate, 2025. (translation: NR)