Development Policy in the Twenty-First Century: Beyond the Post-Washington Consensus

Development Policy in the Twenty-First Century: Beyond the Post-Washington Consensus

Development Policy in the Twenty-First Century: Beyond the Post-Washington Consensus

Development Policy in the Twenty-First Century: Beyond the Post-Washington Consensus

Synopsis

Newly available in paperback, this title addresses the growing dissatisfaction with the neo-liberal post Washington consensus. The concern of the contributors in writing this collection was that this consensus has established itself as a new orthodoxy, more powerful and widespread than its predecessor.

Excerpt

For much of the 1980s and 1990s, the Washington consensus dominated development theory and policy. The term, coined in the late 1980s, denoted a series of measures that were presumed to lead developing countries to greater wealth and prosperity. The suggested measures were a natural outgrowth of the neo-liberal policy framework that already held sway in the developed world: fiscal and monetary austerity, elimination of government subsidies, moderate taxation, freeing of interest rates, lowering of exchange rates, liberalisation of foreign trade, privatisation, deregulation and encouragement of foreign direct investment. Free-market economics, with a strong US flavour, would take care of the problems of developing countries.

Two factors facilitated the global ascendancy of the Washington consensus. The first was the final demise of the development ideology and practice of the 1950s and 1960s. Import substitution, five-year plans, government ownership and control of strategic industries, regulation of the labour market and state controls over the flows of saving and investment seemed less effective at delivering growth in the 1970s and 1980s. This battery of policies - which drew inspiration, directly or indirectly, from the success of Soviet industrialisation in the inter-war years - had lost prestige and influence by the mid-1980s. The advancing crisis of the Eastern bloc, moreover, meant that resources for developing countries in Africa, Asia, the Middle East and Latin America were not going to come from ‘actually existing socialist countries’. The final collapse of the bloc, especially that of the Soviet Union, appeared to signal the complete triumph of capitalism and the free market. Washington was the undisputed political, economic and ideological centre of the world.

The second factor was active advocacy of the prescriptive recommendations of the Washington consensus by the international Washington organisations, above all the IMF and the World Bank. By the late 1980s, the fundamental ideas of the consensus had become ‘orthodox economics’ for the thousands of economists employed by, and otherwise attached to, these organisations. What other view of the world could be ‘rational’, or should be taken seriously? Here was the cream of Western (mostly USA-trained) academe developing theory and formulating policy in full command of all economic knowledge that was worth knowing. To oppose the Washington . . .

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