Washington Consensus: A Damaged Brand

Op-Ed Carnegie
In many countries, tenets of the Washington Consensus -- privatization, trade liberalization and fiscal austerity -- have become politically noxious ideas. That is too bad. The consensus may be an impaired brand, but some of the ideas remain sound. The blanket repudiations of the Washington consensus in the early 2000s tend to be as superficial as their blanket acceptance a decade ago.
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The Washington Consensus: A Damaged Brand

by Moisés Naím

Originally published in the Financial Times, on October 28th, 2002

What a difference a decade makes. During the first half of the 1990s, it seemed as if all economy ministers from emerging markets were using the same PowerPoint presentation. When they gave a talk, in Washington or London, they appeared to use the same slides with the same messages and, at times, the same graphs. The similarities were eerie, considering one minister might be from, say, Russia and the other from Ghana or Mexico.

Privatisation, trade liberalisation and deregulation were the common building-blocks of the economic reforms that seemed to be sweeping the world. Many called these policies the "Washington consensus".

From these presentations and from the marketing pitches used by bond salesmen to lure investors, one could have safely concluded that all reforming countries had embraced the same economic policies. And one would have been wrong.

Developing countries embraced generic slogans that made their economic reforms sound similar. In fact they were very different.

What these countries embraced was a set of generic slogans that made their economic reforms sound similar. In practice, they implemented a huge variety of policies. Governments everywhere did indeed profess to share remarkably similar goals; many adopted a market-oriented stance in their economic policies. But what they in fact did was often at odds with the policies they had announced or even the promises they had made to the International Monetary Fund. As a result, the rhetoric of the time was far more homogeneous than the actions carried out by governments.

For most casual observers and media commentators, the diversity in the policies' implementation was almost invisible. This blindness resulted from the surprising mutation of the Washington consensus from a rather technical list of 10 recommended policies into a generic brand.

As with all brands, the label and the product's brief description were all that most people knew, or cared to know. As with all brands, the subjective reaction that the product provokes in the consumer is as important as its objective attributes. To its early-1990s consumers, the Washington consensus carried a whiff of imminent prosperity and the promise of a flood of foreign money and goods. Over time, the living standards associated with American capitalism and globalisation became important parts of this brand's allure.

Naturally, the politicians and multilateral institutions that were "selling" the product had no interest in curbing these illusions or in nurturing more realistic expectations about how quick, painless and widespread the benefits of these reforms would be. High expectations often lead to disappointment and this case is no exception. As befits a global brand, frustrations with the consensus are now global and the brand is irreparably damaged.

Instead of prosperity, the consensus now emits the poisonous odours of a recipe concocted in Washington by a cabal of inept technocrats who are out of touch with the realities of poor countries or, even worse, are in the pockets of Wall Street. Widely derided as "market fundamentalism" or "savage neo-liberalism", the concoction is accused of making the poor poorer and the world unacceptably inequitable and dangerously unstable. In many countries, privatisation, trade liberalisation and fiscal austerity have become politically noxious ideas.

That is too bad. The consensus may be an impaired brand, but some of the ideas remain sound. A recent study, for example, has found that infant mortality fell 6 per cent in the Argentine municipalities that privatised their water services and that this positive effect was larger in the poorest municipalities, where infant mortality fell 24 per cent. But the foul political mood is immune to such findings. Bolivia was recently rocked by violent street protests that in effect halted government plans to privatise water services. Tragically for the poor of the world, the blanket repudiations of the Washington consensus in the early 2000s tend to be as superficial as their blanket acceptance a decade ago.

The Washington consensus was never meant to be used as a development programme, a national project, a doctrine or a political platform, much less as an ideology. Alas, at one time or another and in different countries it was called on to perform all of these functions. Naturally, it failed miserably.

Also, the consensus was often badly or partially implemented and some of its policies are in urgent need of revision. It also ignores important areas where better government intervention is needed. But its core ideas are far better than the damaged brand that now leads most clients to repudiate the product. The hope, of course, is that government rhetoric and practice will diverge once again and that many governments will in fact be implementing policies inspired in the consensus while publicly denouncing them.

The writer is editor of Foreign Policy magazine. This column appears monthly

End of document
Source http://carnegieendowment.org/2002/10/28/washington-consensus-damaged-brand/3ayq

In Fact



of the Chinese general public

believe their country should share a global leadership role.


of Indian parliamentarians

have criminal cases pending against them.


charter schools in the United States

are linked to Turkey’s Gülen movement.


thousand tons of chemical weapons

are in North Korea’s possession.


of import tariffs

among Chile, Colombia, Mexico, and Peru have been eliminated.


trillion a year

is unaccounted for in official Chinese income statistics.


of GDP in oil-exporting Arab countries

comes from the mining sector.


of Europeans and Turks

are opposed to intervention in Syria.


of Russian exports to China

are hydrocarbons; machinery accounts for less than 1%.


of undiscovered oil

is in the Arctic.


U.S. government shutdowns

occurred between 1976 and 1996.


of Ukrainians

want an “international economic union” with the EU.


million electric bicycles

are used in Chinese cities.


of the world’s energy supply

is consumed by cities.


of today’s oils

require unconventional extraction techniques.


of the world's population

will reside in cities by 2050.


of Syria’s population

is expected to be displaced by the end of 2013.


of the U.S. economy

is consumed by healthcare.


of Brazilian protesters

learned about a massive rally via Facebook or Twitter.


million cases pending

in India’s judicial system.

1 in 3


now needs urgent assistance.


political parties

contested India’s last national elections.


of Egypt's labor force

works in the private sector.


of oil consumed in the United States

is for the transportation sector.


of Chechnya’s pre-1994 population

has fled to different parts of the world.


of oil consumed in China

was from foreign sources in 2012.


billion in goods and services

traded between the United States and China in 2012.


billion in foreign investment and oil revenue

have been lost by Iran because of its nuclear program.


increase in China’s GDP per capita

between 1972 and today.


billion have been spent

to complete the Bushehr nuclear reactor in Iran.


of Iran’s electricity needs

is all the Bushehr nuclear reactor provides.



were imprisoned in Turkey as of August 2012 according to the OSCE.

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