Fads and fashion in economic reforms: Washington Consensus or Washington Confusion?

Third World Quarterly

Volumn 21, Issue 3, 2000, Pages 505-528

  Naim, Moises ^a  

^a Foreign Policy   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC POLICY; ECONOMIC REFORM;

EID: 0033925024     PISSN: 01436597     EISSN: None     Source Type: Journal    
DOI: 10.1080/01436590050057753     Document Type: Article

References (56)

1. Williamson's 10 prescriptions reflecting his interpretation of the Washington consensus in the early 1990s were: 1) fiscal discipline; 2] redirection of public expenditure: 3) Tax reform; 4) Financial liberalisation, 5) Adopting a single, competitive exchange rate; 6) Trade liberalisation 7) Eliminating barriers to foreign direct investment; 8) Privatising state-owned enterprises; 9) Deregulating market entry and competition; 10) Ensuring secure property rights. See John Williamson (ed), Latin American Adjustment: How much has Happened Washington DC: Institute for international Economics, 1990.
2. John Williamson, 'Democracy and the Washington Consensus', World Development, 21(8), 1993, p 1331.
3. Sec David Lipton & Jeffrey Sachs, 'Creating a market economy: the case of Poland', Brookings Papers on Economic Activity, 1, 1990, pp 75-147; Abel Istvan & John Bonin, 'The "Big Bang" versus "slow but steady", a comparison of the Hungarian and Polish transformations', CEPR Discussion Paper No 626, London, 1992; and Richard Portes, 'Transformation traps', Economic Journal, 104 (426) pp 1178-1189.
4. Sec David Lipton & Jeffrey Sachs, 'Creating a market economy: the case of Poland', Brookings Papers on Economic Activity, 1, 1990, pp 75-147; Abel Istvan & John Bonin, 'The "Big Bang" versus "slow but steady", a comparison of the Hungarian and Polish transformations', CEPR Discussion Paper No 626, London, 1992; and Richard Portes, 'Transformation traps', Economic Journal, 104 (426) pp 1178-1189.
5. Sec David Lipton & Jeffrey Sachs, 'Creating a market economy: the case of Poland', Brookings Papers on Economic Activity, 1, 1990, pp 75-147; Abel Istvan & John Bonin, 'The "Big Bang" versus "slow but steady", a comparison of the Hungarian and Polish transformations', CEPR Discussion Paper No 626, London, 1992; and Richard Portes, 'Transformation traps', Economic Journal, 104 (426) pp 1178-1189.
6. Recent examples of the two contrasting arguments are Charles Wyplosz, 'Ten years of transformation: macroeconomic lessons' and Joseph Stiglitz 'Whither reform: ten years of transition', both papers presented at the Annual World Bank Conference on Development Economics, Washington, DC, April 28-30 1999. For a journalistic interpretation of the debate, see John Lloyd, 'Who lost Russia?', The New York Times Magazine, 15 August 1999.
7. Recent examples of the two contrasting arguments are Charles Wyplosz, 'Ten years of transformation: macroeconomic lessons' and Joseph Stiglitz 'Whither reform: ten years of transition', both papers presented at the Annual World Bank Conference on Development Economics, Washington, DC, April 28-30 1999. For a journalistic interpretation of the debate, see John Lloyd, 'Who lost Russia?', The New York Times Magazine, 15 August 1999.
8. 18 September 1999, p 81.
9. Foreign Policy Magazine, Fall 1999
10. Financial Times, 22, 27, 28 September, 1999.
11. Williamson 'Democracy and the Washington Consensus', pp 1332-1333.
12. John Williamson, 'What should the Bank think about the Washington Consensus', paper presented at the World Bank's PREM meetings, July 1999 (mimeo), p 3.
13. Ibid.
14. In 1995 President Ernesto Zedillo said in a press conference; 'What we say is very simple: Mexico's economic crisis is a product of our country's domestic savings crisis' (FBIS-LAT-95-158, 16 August 1995). This was a conclusion echoed by the post-mortem reports on the crisis issued by the IMF, The World Bank, the IDB and most academic writers and journalists who reported on the issue. See Sebastian Edwards & Moises Naim (eds), Mexico 1994: Anatomy of an Emerging-Market Crash, Washington, DC: The Carnegie Endowment, 1997.
15. A classic statement of this view is Celso Furtado, Development and Stagnation in Latin America: A Structural Approach, New Haven, CT: Yale University Press, 1963. For one of the early summaries of 'structuralist' analysis, see Osvaldo Sunkel, 'El transfondo estructural de los problemas del subdesarrollo Latinoamcricano', El Trimestre Economico, 34, 1967, pp 11-58. Sec also Raul Prebish, 'Five stages in my thinking on development', in G Meier & D. Seers (eds), Pioneers in Development, Washington, DC: World Bank, 1984.
16. A classic statement of this view is Celso Furtado, Development and Stagnation in Latin America: A Structural Approach, New Haven, CT: Yale University Press, 1963. For one of the early summaries of 'structuralist' analysis, see Osvaldo Sunkel, 'El transfondo estructural de los problemas del subdesarrollo Latinoamcricano', El Trimestre Economico, 34, 1967, pp 11-58. Sec also Raul Prebish, 'Five stages in my thinking on development', in G Meier & D. Seers (eds), Pioneers in Development, Washington, DC: World Bank, 1984.
17. A classic statement of this view is Celso Furtado, Development and Stagnation in Latin America: A Structural Approach, New Haven, CT: Yale University Press, 1963. For one of the early summaries of 'structuralist' analysis, see Osvaldo Sunkel, 'El transfondo estructural de los problemas del subdesarrollo Latinoamcricano', El Trimestre Economico, 34, 1967, pp 11-58. Sec also Raul Prebish, 'Five stages in my thinking on development', in G Meier & D. Seers (eds), Pioneers in Development, Washington, DC: World Bank, 1984.
18. See Miles Kahler, 'Orthodoxy and its alternatives: explaining approaches to stabilization and adjustment', in Joan M. Nelson (ed), Economic Crisis and Policy Choice, Princeton, NJ: Princeton University Press, 1990, pp 33-61.
19. 'Dependencia', which originated in Latin America, held that rich countries at the 'centre' of the international system became and stayed rich thanks to the unequal trade and investment relations they imposed on the poorer countries of the 'periphery'. The most extreme formulations of dependency theory saw almost no room for manoeuvre for any developing country's government. Effective government action required both a drastic 'restructuring' of international power relations and of the domestic politics of the country. A less paralysing policy stance was taken by those who, while subscribing to the idea that the impact of domestic policies was curtailed by an international economic system that put poorer countries at a disadvantage, still saw a role for domestic economic policy. This approach led to the widespread adoption of import-substituting industrialisation policies that sought to create an indigenous industrial infrastructure which could produce locally the equivalent of the imported goods. This resulted in high import barriers, restrictions on the entry of foreign firms and the selection of specific industrial sectors as 'national champions' to which massive subsidies and trade protection was accorded. The establishment of state-owned enterprises that, in theory, would have the size and resources to compete successfully with the large multinational corporations that boomed during the post-world war period was also a common feature of this approach, as were government controls on prices, interest rates, credit allocation and exchange rates.
20. Cited in P T Bauer, Reality and Rhetoric: Studies in the Economics of Development Cambridge, MA. Harvard University Press, 1984, pp 19-20.
21. See Moises Naim, 'Latin America: the second stage of reform', Journal of Democracy, 5(4), 1994 pp 32-48.
22. World Bank, Global Economic Prospects 1988-1999, Washington, DC: World Bank, 1999.
23. Moises Naim, Paper Tigers and Minotaurs: The Politics of Venezuela's Economic Reforms, Washington, DC: The Carnegie Endowment, 1993, p 119.
24. Douglass C North, Institutions. Institutional Change and Economic Performance, Cambridge: Cambridge University Press, 1990; Oliver Williamson, Markets and Hierarchies, New York: The Free Press, 1975; and Williamson, The Economic Institutions of Capitalism, New York: The Free Press, 1985.
25. Douglass C North, Institutions. Institutional Change and Economic Performance, Cambridge: Cambridge University Press, 1990; Oliver Williamson, Markets and Hierarchies, New York: The Free Press, 1975; and Williamson, The Economic Institutions of Capitalism, New York: The Free Press, 1985.
26. Douglass C North, Institutions. Institutional Change and Economic Performance, Cambridge: Cambridge University Press, 1990; Oliver Williamson, Markets and Hierarchies, New York: The Free Press, 1975; and Williamson, The Economic Institutions of Capitalism, New York: The Free Press, 1985.
27. Albert O Hirschman, Essays in Trespassing, Cambridge: Cambridge University Press, 1981; and Peter Evans, 'The state as problem and solution: predation, embedded autonomy and structural change', in S Haggard & R Kaufmann (eds), The Politics of Economic Adjustment, Princeton, NJ: Princeton University Press, 1992.
28. Albert O Hirschman, Essays in Trespassing, Cambridge: Cambridge University Press, 1981; and Peter Evans, 'The state as problem and solution: predation, embedded autonomy and structural change', in S Haggard & R Kaufmann (eds), The Politics of Economic Adjustment, Princeton, NJ: Princeton University Press, 1992.
29. I First called attention to these two stages of market reforms in my 1993 book Paper Tigers and Minotaurs, p 142ff and then extended the analysis in a 1994 article in the Journal of Democracy, 5(4), pp 32-48 and in Latin America's Journey to the Market: From Economic Shocks to Institutional Therapy, San Francisco, CA: International Center for Economic Growth, 1995. See Table 1 for charts comparing the content, characteristics and the politics of the two stages. Reforms in the second stage are also often referred to as 'second generation reforms'.
30. I First called attention to these two stages of market reforms in my 1993 book Paper Tigers and Minotaurs, p 142ff and then extended the analysis in a 1994 article in the Journal of Democracy, 5(4), pp 32-48 and in Latin America's Journey to the Market: From Economic Shocks to Institutional Therapy, San Francisco, CA: International Center for Economic Growth, 1995. See Table 1 for charts comparing the content, characteristics and the politics of the two stages. Reforms in the second stage are also often referred to as 'second generation reforms'.
31. I First called attention to these two stages of market reforms in my 1993 book Paper Tigers and Minotaurs, p 142ff and then extended the analysis in a 1994 article in the Journal of Democracy, 5(4), pp 32-48 and in Latin America's Journey to the Market: From Economic Shocks to Institutional Therapy, San Francisco, CA: International Center for Economic Growth, 1995. See Table 1 for charts comparing the content, characteristics and the politics of the two stages. Reforms in the second stage are also often referred to as 'second generation reforms'.
32. Carol Graham & Moises Naim, 'The political economy of institutional reform in Latin America', in Nancy Birdsall, Carol Graham & Richard Sabot (eds), Beyond Trade-Offs: Market Reforms and Equitable Growth in Latin America, Washington, DC: The Brookings Institution, 1998.
33. In some instances the advice about institutional reform may have even been counterproductive. During the early and mid-1990s it became fashionable to prescribe the decentralisation of public services as a remedy for poor performance. Some of the experiences with this approach show that decentralisation has lowered even more the quality and availability of public services while also creating grave fiscal distortions. In some countries, raising the admittedly low public salaries as a means to increase the quality of the public sector has backfired, as the higher salaries made it harder and more costly to dismiss poorly performing employees, while not being high enough to attract the needed talent or curb corruption. See Carlos Acuna & Mariano Tomassi, 'Some reflections on the institutional reforms required from Latin America', mimeo, CEDI, Buenos Aires, 1999.
34. Turkey, Venezuela, Argentina, Mexico, Indonesia, South Korea, Malaysia, Philippines, Thailand, Russia and Brazil. See Jeffrey Sachs 'Creditor panics: causes and remedies.' Cato Journal, 18(3), 1999, pp 377-390.
35. For a typical example of the strikingly different advice leading experts offered Asian countries, see 'Asia and the dollar', The International Economy, January-February 1999, pp 18-23. Ricardo Hausmann offers an overview of the different positions of a group of respected academic economists in 'Should there be five currencies or one hundred and five?. Foreign Policy, Fall 1999, 116, pp 65-79.
36. For a typical example of the strikingly different advice leading experts offered Asian countries, see 'Asia and the dollar', The International Economy, January-February 1999, pp 18-23. Ricardo Hausmann offers an overview of the different positions of a group of respected academic economists in 'Should there be five currencies or one hundred and five?. Foreign Policy, Fall 1999, 116, pp 65-79.
37. Alan Blinder, 'Eight steps to a new financial order'. Foreign Affairs, September-October 1999, p 57.
38. See Paul Krugman, 'Saving Asia: it's time to get RADICAL', Fortune, 7 September 1998; and Krugman, The Return of Depression Economics, New York: W W Norton, 1999, pp 145-146.
39. See Paul Krugman, 'Saving Asia: it's time to get RADICAL', Fortune, 7 September 1998; and Krugman, The Return of Depression Economics, New York: W W Norton, 1999, pp 145-146.
40. Council on Foreign Relations, Safeguarding Prosperity in a Global Financial System: The Future International Financial Architecture, New York: CFR, 1999.
41. Sebastian Edwards, 'Barking up the wrong tree'. Financial Times, 7 October 1998.
42. Barry Eichcngreen & Michael Mussa Capital Account Liberalization Washington, DC: IMF, 1998.
43. Quoted in Krugman Saving Asia, p 79.
44. World Bank News, 6 November 1997, p 5; and Financial Times, 3 December 1998.
45. World Bank News, 6 November 1997, p 5; and Financial Times, 3 December 1998.
46. The Economist 12 September 1998, p 24.
47. 'The confidence game'. New Republic, 5 October 1998.
48. 'Meltdown post-mortem: rude surprises, valuable lessons and dumb ideas in the aftermath of the Asian crisis', The International Economy, November-December, 1998, p 70.
49. IMF, International Capital Markets: Development, Prospects and Policy Issues, Washington, DC: 1999.
50. These categories are from Robert A Blecker, Taming Global Finance, Washington, DC: Economic Policy Institute, forthcoming 1999. ch. 3.
51. Nancy Birdsall, 'Life is unfair: inequality in the world', Foreign Policy, 111, 1998.
52. 'A proposal for a comprehensive development framework', 21 January 1999, www.worldbank.org.
53. Albert O Hirschman, 'The rise and decline of development economics', in Hirschman. Essays in Trespassing, Cambridge: Cambridge University Press, 1981; and D Kapur, J Lewis & R Webb, The World Bank: Its First Half Century, Washington, DC: The Brookings Institution, 1997, esp Vol 2, pp 523-610.
54. Albert O Hirschman, 'The rise and decline of development economics', in Hirschman. Essays in Trespassing, Cambridge: Cambridge University Press, 1981; and D Kapur, J Lewis & R Webb, The World Bank: Its First Half Century, Washington, DC: The Brookings Institution, 1997, esp Vol 2, pp 523-610.
55. Amartya Sen & James D Wolfensohn. 'Let's respect both sides of the development coin', International Herald Tribune, 5 May 1999.
56. 42 I owe this idea to Ramon Pinango.