What Was the Washington Consensus?
The Washington Consensus is a term used to describe ten policy prescriptions laid out by economist John Williamson. These prescriptions are meant as a baseline of directions for nations in need of assistance from international economic entities, such as the World Bank and the International Monetary Fund. The list was originally laid out in 1989, and has since been referenced many times, but it has become a sort of general term of disparagement to those who oppose free market fundamentalism.
The approach has seen limited results as it has been applied in various countries suffering economic crises. Over the years, the Consensus has been blamed for a number of massive destabilizations, most notably the Argentinean crisis. Williamson at one point noted that, in many cases, the results of its implementation had been disappointing, noting some flaws and how it might be improved.
The ideas in the Washington Consensus were not new or novel at the time Williamson presented them. Instead, they represented a distillation of the common threads among advice most often given by the International Monetary Fund, the World Bank, the US Treasury, and other lending bodies. The prescriptions were originally intended to address the very real problems occurring in Latin America at the time, and their use later to handle a wide array of other situations has been criticized even by original proponents of the points.
The ten points of the Consensus are themselves intentionally somewhat vague, as they were meant to represent a baseline. They include the following:
- keeping competitive exchange rates within the country,
- liberalizing foreign investment opportunities,
- privatizing enterprises run by the state,
- giving strong legal guarantees for property rights,
- letting interest rates be handled by the market and remaining positive and moderate,
- moving spending away from subsidies and towards direct investment in infrastructure, health care, and education,
- reforming the tax system to a broader tax base,
- having a policy of strong fiscal responsibility,
- liberalizing trade by removing or lessening restrictions on imports and tariffs,
- and deregulation that lessens competition, except in the cases of consumer safety, environmental health, and financial institutional stability.
The name of the Washington Consensus has often been mentioned as being somewhat unfortunate, especially by its creator. Many people feel that it gives the impression the points outlined represent a set of rules imposed on developing nations by the United States. Instead, Williamson always felt that the prescriptions represented a consensus precisely because they were so universal. Many proponents of the plan do not feel that it represents the hard-line neo-liberal agenda that anti-free-trade activists say it does, instead presenting it as a relatively conservative assessment of what policies can help bring a country to economic stability.
Opponents of the prescriptions note that they do a great deal to open developing nations to exploitation by already developed nations, sometimes with catastrophic results. A number of countries, particularly in Latin America, have pursued policies in recent years that go directly against the Consensus, sometimes with very positive results. Socialist leaders such as Hugo Chavez, Evo Morales, and Nestor Kirchner all actively spoke out against the guidelines, and guided their countries in a very different direction.
The washington consensus is only a new form of capitalism policy including laissez fair policy. we can also use term washington consensus as anti state intervention in economic policy. Liberalising economic policy is not helpful for some countries but according to the washington consensus, if a country seeks financial assistance then they have to follow the washington consensus 10 rule policy.
I wonder what will come after the Washington Consensus. The Washington Conundrum? Perhaps the Washington Cooperative, or something else that actually suggests an interest in places which function differently than the United States.
It is no wonder that in response to the Washington Consensus, Latin America and many other regions are trying to move in an opposite direction; many of its terms offer absolutely no assistance to weaker economies, and in fact do quite the opposite. If the United States will not restrict itself, then other countries will need to restrict their association with it instead.
The Washington Consensus definition in general seems like a new way to refer to laissez faire economics, or the concept of generally letting business handle itself. Liberalizing things like tariffs, imports and exports, and other regulations in general leads to the free market that, as people are learning more and more in recent years, really gives freedom to very few.
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