Edited by L. Randall Wray
9. The Washington Consensus and (non-)development Hansjörg Herr and Jan Priewe Introduction In this chapter we deal with some principal issues of strategies for development. First, we focus on the role of macroeconomic policies in what has been coined as the ‘Washington Consensus’. The term was invented by John Williamson (1990) to express what he thought would be the lowest common denominator of policy advice to Latin American countries by Washington-based institutions. Here, we detect some shortcomings and lack of clarity which reflect that there perhaps never really has existed a more or less clear Washington Consensus, especially concerning macroeconomic strategies. We conclude that macroeconomic policies have to play a much more important and comprehensive role especially in the area of monetary and exchange rate policy, and the balance of payment equilibrium. After interpreting the Washington Consensus in the first section, we discuss some of its macroeconomic key shortcomings in section two. Section three gives a short overview of a positive and a negative development scenario, the latter leading to repressed growth in a broadly liberalized market economy. In the final section an alternative policy package is sketched briefly. The chapter attempts to give a comprehensive and summarizing critique and cannot go into details of the argumentation. Interpreting the Washington Consensus Whether it was or still is a consensus or not, there is probably a broad assent among many in the IMF and the World Bank that developing and transition countries need a mix of macroeconomic stabilization and...
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