The Washington Consensus: A post-mortem

Abstract

After guiding development policies for nearly 20 years, the "Washington Consensus" lies in shambles. Although selected components remain relevant for development policies around the world, some specifics of the broader policy "package" and, more generally, the concept of a standardized package of policies applicable to all developing countries has clearly been discredited. Criticism has been directed at the assumed link from economic liberalization of international trade and financial flows to more rapid economic growth. Apart from a handful of developing countries, admittedly including some large and important ones, most of the world saw little of the promised economic benefit from widespread and on-going trade and financial liberalization, initially. Many countries actually regressed, when evaluated against broader socio-economic development goals, including income inequality. We conclude that differences in initial conditions (history, culture, geography and levels of industrial and institutional development) preclude any single development policy package from being universally effective.Trade liberalization Financial liberalization Governance institutions Income inequality Washington Consensus