The Washington Consensus as transnational policy paradigm: Its origins, trajectory and likely successor

ABSTRACT

This paper explores the origins and trajectory of the Washington Consensus – the ideas associated with the developing countries’ move to free markets in the 1980s and 1990s. I argue that the Consensus was a transnational policy paradigm, shaped by both scholarly and political forces (Hall, 1993). At the core of the Consensus was the international financial institutions’ practice of conditionality – making loans to governments in exchange for policy reforms. The Consensus was subsequently weakened by its own unintended consequences, by political forces both within Washington and worldwide and by intellectual changes in the field of economics. However, I argue that the Consensus has yet to encounter any serious rivals.

KEYWORDS:

• Washington Consensus
• international financial institutions
• World Bank
• International Monetary Fund
• BRICS
• conditionality
• policy paradigm

ACKNOWLEDGEMENTS

Many thanks to Nancy Alexander, Cornel Ban, Mark Blyth, Marion Fourcade, Kevin Gallagher, Marjo Koivisto and two anonymous reviewers for their helpful comments on this paper.

Notes

1. Williamson's original list included 10 items, which were: fiscal discipline; reordering public expenditure priorities away from things such as indiscriminate subsidies towards basic health, education and infrastructure investment; tax reform to combine a broader tax base with moderate marginal rates; the liberalization of interest rates; a competitive exchange rate; trade liberalization; liberalization of inward foreign direct investment; privatization; deregulation; and property rights (Williamson, 1990b, 2003).

2. I am referring both to classical institutional theory (e.g., Gouldner (1954), Selznick (1949)) and the ‘new institutionalism’ (e.g., DiMaggio and Powell (1983) and Meyer and Rowan (1977)).