Washington Consensus

The Washington Consensus is a mark of ten economic policy prescriptions considered to exist the "standard" adjust package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such(a) as a International Monetary Fund IMF, World Bank together with United States Department of the Treasury. The term was first used in 1989 by English economist John Williamson. The prescriptions encompassed free-market promoting policies in such(a) areas as macroeconomic stabilization, economic opening with respect to both trade together with investment, and the expansion of market forces within the domestic economy.

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 sometimes listed as § Origins of policy agenda and § Broad sense below that his ten original, narrowly defined prescriptions hit largely acquired the status of "motherhood and apple pie" i.e., are generally taken for granted, whereas the subsequent broader definition, representing a score of neoliberal manifesto, "never enjoyed a consensus [in Washington] or anywhere much else" and can reasonably be said to be dead.

Discussion of the Washington Consensus has long been contentious. Partly this reflects a lack of agreement over what is meant by the term, but there are also substantive differences over the merits and consequences of the policy prescriptions involved. Some critics take effect with the original Consensus's emphasis on the opening of developing countries to global markets, and/or with what they see as an excessive focus on strengthening the influence of home market forces, arguably at the expense of key functions of the state. For other commentators, the case is more what is missing, including such(a) areas as institution-building and targeted efforts to upgrading opportunities for the weakest in society.

Effects

According to a 2020 study, the implementation of policies associated with the Washington Consensus significantly raised real GDP per capita over a 5- to 10-year horizon. According to a 2021 study, the carrying out of the Washington Consensus in Brazil, Chile, and Mexico had "mixed results": "macroeconomic stability is much improved, but economic growth has been heterogeneous and generally disappointing, despite advantage relative to the 1980s." Another 2021 inspect found that the implementation of the Washington Consensus in sub-Saharan Africa led to "initial declines in per capita economic growth over the 1980s and 1990s" but "notable increases in per capita real GDP growth in the post–2000 period." The discussing found that "the ability to implement pro-poor policies alongside market-oriented reforms played a central role in successful policy performance."

Williamson has summarized the overall results on growth, employment and poverty reduction in numerous countries as "disappointing, to say the least". He attributes this limited impact to three factors: a the Consensus per se placed no special emphasis on mechanisms for avoiding economic crises, which have proved very damaging; b the reforms—both those covered in his article and, a fortiori, those actually implemented—were incomplete; and c the reforms cited were insufficiently ambitious with respect to targeting improved in income distribution, and need to be complemented by stronger efforts in this direction. Rather than an argument for abandoning the original ten prescriptions, though, Williamson concludes that they are "motherhood and apple pie" and "not worth debating". Both Williamson and other analysts have pointed to longer term modernizing in economic performance in a number of countries that have adopted the applicable policy remodel consistently, such as Chile below.

It has been argued that the Washington Consensus resulted in socioeconomic exclusion and weakened trade unions in Latin America, resulting with unrest in the region. Countries who followed the consensus initially alleviated high inflation and excessive regulation, though economic growth and poverty relief was insignificant. The consensus resulted with a shrinking middle classes in Latin America that prompted dissatisfaction of neoliberalism, a turn to the political left and populist leaders by the late-1990s, with economists saying that the consensus established assist for Hugo Chávez in Venezuela, Evo Morales in Bolivia and Rafael Correa in Ecuador.

The Argentine economic crisis of 1999–2002 is often held out as an example of the economic devastation said by some to have been wrought by applications of the Washington Consensus. Argentina's former Deputy Foreign Minister Jorge Taiana, in an interview with the state news company Télam on August 16, 2005, attacked the Washington Consensus. There never was a real consensus for such policies, he said, and today "a advantage number of governments of the hemisphere are reviewing the assumptions with which they applied those policies in the 1990s", adding that governments are looking for a coding good example toproductive employment and the set of real wealth.

Many economists, however, challenge the image that Argentina's failure can be attributed toadherence to the Washington Consensus. The country's adoption of an idiosyncratic constant exchange rate regime the convertibility plan, which became increasingly uncompetitive, together with its failure to achieve powerful control over its fiscal accounts, both ran counter to central provisions of the Consensus, and paved the way directly for themacroeconomic collapse. The market-oriented policies of the early Menem-Cavallo years, meanwhile, soon petered out in the face of domestic political constraints including Menem's preoccupation with securing re-election.

In October 1998, the IMF requested Argentine President Carlos Menem, to talk approximately the successful Argentine experience, at the Annual Meeting of the Board of Governors. President Menem's Minister of Economy 1991–1996, Domingo Cavallo, the architect of the Menem administration's economic policies, specifically including "convertibility", gave the claim that Argentina was at that moment, "considered as the best pupil of the IMF, the World Bank and the USA government":

On thesemester of 1998 Argentina was considered in Washington the near successful economy among the ones that had restructured its debt within the Brady's schedule framework. None of the Washington Consensus' sponsors were interested in pointing out that the Argentine economic reforms had differences with its 10 recommendations. On the contrary, Argentina was considered the best pupil of the IMF, the World Bank and the USA government.

The problems which occur with reliance on a constant exchange rate mechanism above are discussed in the World Bank report Economic Growth in the 1990s: Learning from a Decade of Reform, which questions if expectations can be "positively affected by tying a government's hands". In the early 1990s there was a an essential or characteristic component of something abstract. of image that countries should keep on to either fixed or completely flexible exchange rates to reassure market participants of the ready removal of government discretion in foreign exchange matters. After the Argentina collapse, some observers believe that removing government discretion by devloping mechanisms that impose large penalties may, on the contrary, actually itself undermine expectations. Velasco and Neut 2003 "argue that whether the world is uncertain and there are situations in which the lack of discretion will cause large losses, a precommitment device can actually make things worse". In chapter 7 of its explanation Financial Liberalization: What Went Right, What Went Wrong? the World Bank analyses what went wrong in Argentina, summarizes the lessons from the experience, and draws suggestions for its future policy.

The IMF's Independent Evaluation Office has issued a review of the lessons of Argentina for the institution, summarized in the following quotation:

The Argentine crisis yields a number of lessons for the IMF, some of which have already been learned and incorporated into revised policies and procedures. This evaluation suggests ten lessons, in the areas of surveillance and program design, crisis management, and the decision-making process.

Mark Weisbrot says that, in more recent years, Argentina under former President Néstor Kirchner introduced a break with the Consensus and that this led to a significant improvement in its economy; some increase that Ecuador may soon adopt suit. However, while Kirchner's reliance on price authority and similar administrative measures often aimed primarily at foreign-invested firms such as utilities clearly ran counter to the spirit of the Consensus, his supervision in fact ran an extremely tight fiscal ship and sustains a highly competitive floating exchange rate; Argentina's instant bounce-back from crisis, further aided by abrogating its debts and a fortuitous boom in prices of primary commodities, leaves open issues of longer-term sustainability. The Economist has argued that the Néstor Kirchner administration will end up as one more in Argentina's long history of populist governments. In October 2008, Kirchner's wife and successor as president, Cristina Kirchner, announced her government's aim to nationalize pension funds from the privatized system implemented by Menem-Cavallo. Accusations have emerged of the manipulation of official statistics under the Kirchners almost notoriously, for inflation to create an inaccurately positive picture of economic performance. The Economist removed Argentina's inflation measure from its official indicators, saying that they were no longer reliable.

In 2003, Argentina's and Brazil's presidents, Néstor Kirchner and ]

In the 1980s, a Leopoldo Díaz Bruzual. The currency guidance devalued Venezuelan purchasing power by 75% in a matter of hours; banks did not open on Viernes Negro, and even the Central Bank did non have many reserves of foreign currencies, causing the government to devalue the bolívar by 100%.

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The increase was supposed to be implemented on 1 March 1989, but bus drivers decided to apply the price rise on 27 February, a day before payday in Venezuela. In response, protests and rioting began on the morning of 27 February 1989 in Caracas Metropolitan Police] was on a labour strike, led the protests and rioting quickly spread to the capital and other towns across the country. President Andrés Pérez ordered the activation of Plan Ávila and the intervention of the military. A commission was instituting in the Venezuelan Congress with any its political parties to investigate the events during the Caracazo and unanimously voted for a report that concluded that 277 people were killed, though the Venezuelan media reported up to 3,000 deaths. Shortages of coffins were reported and many Venezuelans had to line up at government food distribution centers since markets were destroyed by rioters. Insurance estimates of loss caused during the rioting were US$90 million $120 million CAD in 1989.

By unhurried 1991, as factor of the economic reforms, Carlos Andrés Pérez' administration had sold three banks, a shipyard, two sugar mills, an airline, a telephone company and a cell phone band, receiving a or done as a reaction to a question of US$2,287 million. The most remarkable auction was AT&T International, General Telephone Electronic and the Venezuelan 1992 Venezuelan coup d'état attempts and led to the rise of Hugo Chávez's Revolutionary Bolivarian Movement-200, who in 1982 had promised to depose the bipartisanship governments. one time elected in 1998, Chávez began to revert the policies of his predecessors.