16 Facts About Washington Consensus

Washington Consensus is a set of ten economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, DC -based institutions such as the International Monetary Fund, World Bank and United States Department of the Treasury.

Subsequent to Williamson's use of the terminology, and despite his emphatic opposition, the phrase Washington Consensus has come to be used fairly widely in a second, broader sense, to refer to a more general orientation towards a strongly market-based approach.

Concept and name of the Washington Consensus were first presented in 1989 by John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington, DC.

Audiences the world over seem to believe that this signifies a set of neoliberal policies that have been imposed on hapless countries by the Washington Consensus-based international financial institutions and have led them to crisis and misery.

The basic ideas that I attempted to summarize in the Washington Consensus have continued to gain wider acceptance over the past decade, to the point where Lula has had to endorse most of them in order to be electable.

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Washington Consensus argues that one of the least controversial prescriptions, the redirection of spending to infrastructure, health care, and education, has often been neglected.

Widespread adoption by governments of the Washington Consensus was to a large degree a reaction to the macroeconomic crisis that hit much of Latin America, and some other developing regions, during the 1980s.

The country's adoption of an idiosyncratic fixed exchange rate regime, which became increasingly uncompetitive, together with its failure to achieve effective control over its fiscal accounts, both ran counter to central provisions of the Washington Consensus, and paved the way directly for the ultimate macroeconomic collapse.

None of the Washington Consensus' sponsors were interested in pointing out that the Argentine economic reforms had differences with its 10 recommendations.

Washington Consensus announced a technocratic cabinet and a group of economic policies to fix macroeconomic imbalances known as El Gran Viraje, called by detractors as El Paquetazo Economico.

The Washington Consensus is criticized by others such as some Latin American politicians and heterodox economists such as Erik Reinert.

Neoliberal policies associated with the Washington Consensus, including pension privatization, the imposition of a flat tax, monetarism, cutting of corporate taxes, and central bank independence, continued into the 2000s.

Washington Consensus as formulated by Williamson includes provision for the redirection of public spending from subsidies toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment.

Some critics of the Washington Consensus cite Malawi's experience with agricultural subsidies, for example, as exemplifying perceived flaws in the package's prescriptions.

In early 2008, the term "Washington Consensus" was used in a different sense as a metric for analyzing American mainstream media coverage of US foreign policy generally and Middle East policy specifically.

That is, the questions asked about foreign affairs are Washington Consensus's questions, framed in terms of domestic politics and established policy positions.