Relaciones Económicas Internacionales

Debate over the "Washington Consensus"

The so-called Washington Consensus was significant because it framed the development debate in the 1990s and continues to do so today. It lies on one side of the ideological divide between the free market model and the development state model. The 1990s, as a decade of reform, was characterized by crises and slow growth, following a wide adherenceto the Washington Consensus. Ironically, those countries that did not follow the Western policies of the top-down Washington Consensus fared better. Performance has showed that the one-size-fits-all solution did not work, and ignored individual country circumstances. In The Washington Consensus Reconsidered, Serra & Stiglitz tell us that the current debate centers on the reformation of thecontent of the Washington Consensus.[1]
The rejection of what used to be orthodoxy in economic development, which included replacing import substitution trade strategies, nationalization, state planning, and use of the inflation tax to raise savings, led Williamson to term the policy core of the 1990s as the “Washington Consensus.” Williamson wrote ten prescriptions he believed were widely agreedupon to be necessary for the recovery of Latin America from their economic and financial crises of the 1980s.[2] These reforms represented a distinct turn away from inward-oriented policies, displaced Keynesian economics of the 1970s and initiated a shift towards free-market policies. The Washington Consensus became the new answer for developing countries seeking to climb the economic ladder, andit became popular throughout the developing world. In the1990s, it was accepted as conventional wisdom on policies for economic development amongst academics, largely US-based mainstream economists, the US Treasury Department, the Federal Reserve, as well as Washington-based think-tanks and the Bretton Woods institutions: the IMF and the World Bank. The Washington Consensus was used as aprescription to identify reforms to impose on a country in crisis before development money would be given to it.
The results of the Washington Consensus policies were disappointing and did not have the desired or expected results. The Washington Consensus was blamed for the crises in the 1990s and early 2000s, and for exacerbating inequality. The contrast between the countries that followed thereforms, willingly or unwillingly, and those that did not became evident. The Washington Consensus became controversial because it was generally seen as one of the reasons for the collapse of the adherents’ countries in Latin America, Africa, and the former Soviet Union transition economies. Contrarily, the non-adherent counties, such as the East Asian countries experienced the so-called “economicmiracle” in the early 1990s. However, East Asia also experienced a crisis in 1997 when they liberalized the capital account, a tenant not included as part of the Washington Consensus, but pushed particularly by the IMF. The Washington Consensus became mistakenly associated with the IMF full account liberalization and pro-cyclical policy-based lending. As a result of these events, the WashingtonConsensus was called into question and an increasing amount of literature emerged against the consensus Williamson coined. The Washington Consensus was no longer undisputed conventional wisdom.
When referring to the Washington Consensus it is important to make the distinction between the original sense of the term, which was ten policy recommendations, and the broader misuse of the term assynonymous with neo-liberalism, and in turn with supply-side economics, Reaganism, and Tatcherism. Williamson himself is vocal about clarifying the nuances of his term and how it has been misused. In particular, he has never been an advocate of capital-account liberalization, calling it an issue “on which intellectual consensus was still incomplete.”[3]
The Washington Consensus was once...