The consensus of Washington

The economic thought relating to developing countries has faced a major change at the end of the 70’s. The occurrence of the debt crisis and inflation has forced the southern countries to accept structural adjustment programs under the policies of the IMF and the World Bank. In December 1991, the disintegration of the Soviet Union lead to the rejection of centralized planed economies has given the opportunity to the advocates of liberalism to brandish the ultimate piece of evidence of superiority of capitalism over socialism.

Now the soviets were out of the game, the sword of Damocles of liberalism was hanging over the head of the developing countries and emerging economies. Williamson suggested that the third world was not doomed to poverty and with some reforms it was possible to pull them out of the crisis. But according to him, this change would be possible only if growth and development were promoted through liberal reforms. 

Under the supervision of the United Stated, a set of policies was designed to enhance structural adjustments in areas such as fiscal policy, tax reforms, ect… Those reforms have given rise to what John Williamson in 1989 called the “Washington Consensus”. He referred to the Washington consensus as “the lowest common denominator of policy advice being addressed by the Washington-based institutions ''

After decades of reforms in sub-Saharan Africa, the Caribbean and Latina America, it was clear that the implementation of those policies turn out to be a disaster. There were no sustaining growth and macro economical stability in the countries that had implemented those set of policies. Contrarily, it has generated more poverty and political instability.

Yet the debate triggered the question whether the neo liberal policies failed?

Clearly on that point, a lot of ink has been spilled. On the one hand, the opponents of the Washington consensus argued that the neo liberal set of policies imposed by the Washington-based institutions on the under developing countries was an economic helter skelter. On the other hand, the advocates of the Washington consensus noted that there is less inflation and the international exchanges have increased, so far the set of policies have potentially succeeded. 

It is fair to say notwithstanding the fact that East Asian countries have benefited from the implementation of the neo liberal rules and increased exponentially their commercial exchanges, the consensus of Washington has failed in Latina America, Africa and the Caribbean.

Par Karl.H.Louis