Economic growth is an increase in the amount of goods and services produced per head of the population over a period of time. The impact of government investment on growth and inequality are shown to contrast sharply in the two approaches, thus illustrating the complexity of the growth-inequality relationship.
La Historia Del Consenso De Washington Por John Williamsonneiracar
The document provides a history of the term "Washington Consensus" which was coined by the author in 1989 to describe 10 specific economic policies that were widely accepted as necessary reforms for Latin American countries. The term became controversial as it was seen as implying reforms were being imposed by Washington rather than adopted voluntarily. While the policies aimed to achieve goals like fiscal discipline, the term downplayed remaining disagreements and failed to capture the broader convergence of views beyond Washington. It also overstated the consensus on some issues like exchange rates.
The document discusses different models of national economic systems and capitalism. It describes market oriented capitalism, which is based on private property, individual freedom, and competitive markets. Developmental capitalism is characterized by a strong state role in guiding development, while social market capitalism blends market forces with social policies. National economies also differ in the role of the state, purposes of economic activity, and structure of private business. Understanding these differences is important for studying the global economy.
International political economy (IPE) analyzes the interplay between politics and economics in world affairs. IPE provides benefits in understanding issues that cannot be analyzed solely through international politics or economics, such as international trade, finance, development issues, and the role of multinational corporations. However, IPE also encounters problems, as states and markets approach issues differently using different frameworks. The rise of IPE in international relations was driven by increasing economic interdependence and issues between states in the postwar period.
This document discusses the relationship between economics and international relations through the lens of International Political Economy (IPE). IPE attempts to connect political actions and the global economy. The document outlines three main theoretical approaches in IPE - realism, liberalism, and constructivism. It then discusses the history leading to the current international political economy system, from mercantilism to modern institutions like the IMF, World Bank, and WTO. The document focuses on the realist perspective, which prioritizes state power and sees the global system as anarchic. Realists are skeptical of free trade and intergovernmental organizations that open borders.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This document discusses the relationship between political and economic factors. It defines political economy as the grafting of politics and economics, and notes they are mutually dependent. It explores how governments can use political power to influence economic resources at domestic and international levels. It also outlines three major ideologies in political economy: liberalism, nationalism, and Marxism. The document examines different structures that comprise the global political economy, such as production, security, financial, and knowledge structures. It analyzes how political events like the OPEC oil crisis influenced economics. Multinational corporations and regional economic organizations are also discussed in relation to world political economy.
The document provides an analysis of the constraints of the Bretton Woods system and lessons that can be learned from it. It discusses how the system was set up for failure because it paid little attention to governance issues and failed to instill collective action among members. While the Bretton Woods system delivered low inflation and growth during its existence, it ultimately collapsed due to internal imbalances and a lack of accountability. The document examines what aspects of Bretton Woods still resonate today and implications for designing future international financial systems.
Noam Chomsky was interviewed by Amy Goodman about the global economic crisis, US foreign policy, and resistance to American empire. He made three main points:
1) The G20 meeting presented a facade of unity and agreement, but there were actually sharp divisions. They agreed to recapitalize the IMF, but the IMF has historically had a destructive role imposing austerity on developing nations.
2) The US response to the economic crisis, such as bailouts and lowering interest rates, directly contradict the policies like austerity the IMF imposes on other nations.
3) President Obama's economic advisors like Larry Summers and Tim Geithner were directly involved in policies like deregulating derivatives that led to the crisis,
La Historia Del Consenso De Washington Por John Williamsonneiracar
The document provides a history of the term "Washington Consensus" which was coined by the author in 1989 to describe 10 specific economic policies that were widely accepted as necessary reforms for Latin American countries. The term became controversial as it was seen as implying reforms were being imposed by Washington rather than adopted voluntarily. While the policies aimed to achieve goals like fiscal discipline, the term downplayed remaining disagreements and failed to capture the broader convergence of views beyond Washington. It also overstated the consensus on some issues like exchange rates.
The document discusses different models of national economic systems and capitalism. It describes market oriented capitalism, which is based on private property, individual freedom, and competitive markets. Developmental capitalism is characterized by a strong state role in guiding development, while social market capitalism blends market forces with social policies. National economies also differ in the role of the state, purposes of economic activity, and structure of private business. Understanding these differences is important for studying the global economy.
International political economy (IPE) analyzes the interplay between politics and economics in world affairs. IPE provides benefits in understanding issues that cannot be analyzed solely through international politics or economics, such as international trade, finance, development issues, and the role of multinational corporations. However, IPE also encounters problems, as states and markets approach issues differently using different frameworks. The rise of IPE in international relations was driven by increasing economic interdependence and issues between states in the postwar period.
This document discusses the relationship between economics and international relations through the lens of International Political Economy (IPE). IPE attempts to connect political actions and the global economy. The document outlines three main theoretical approaches in IPE - realism, liberalism, and constructivism. It then discusses the history leading to the current international political economy system, from mercantilism to modern institutions like the IMF, World Bank, and WTO. The document focuses on the realist perspective, which prioritizes state power and sees the global system as anarchic. Realists are skeptical of free trade and intergovernmental organizations that open borders.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This document discusses the relationship between political and economic factors. It defines political economy as the grafting of politics and economics, and notes they are mutually dependent. It explores how governments can use political power to influence economic resources at domestic and international levels. It also outlines three major ideologies in political economy: liberalism, nationalism, and Marxism. The document examines different structures that comprise the global political economy, such as production, security, financial, and knowledge structures. It analyzes how political events like the OPEC oil crisis influenced economics. Multinational corporations and regional economic organizations are also discussed in relation to world political economy.
The document provides an analysis of the constraints of the Bretton Woods system and lessons that can be learned from it. It discusses how the system was set up for failure because it paid little attention to governance issues and failed to instill collective action among members. While the Bretton Woods system delivered low inflation and growth during its existence, it ultimately collapsed due to internal imbalances and a lack of accountability. The document examines what aspects of Bretton Woods still resonate today and implications for designing future international financial systems.
Noam Chomsky was interviewed by Amy Goodman about the global economic crisis, US foreign policy, and resistance to American empire. He made three main points:
1) The G20 meeting presented a facade of unity and agreement, but there were actually sharp divisions. They agreed to recapitalize the IMF, but the IMF has historically had a destructive role imposing austerity on developing nations.
2) The US response to the economic crisis, such as bailouts and lowering interest rates, directly contradict the policies like austerity the IMF imposes on other nations.
3) President Obama's economic advisors like Larry Summers and Tim Geithner were directly involved in policies like deregulating derivatives that led to the crisis,
The document analyzes the causes of the subprime crisis. Three key causes are identified: 1) A public-private partnership beginning in the 1990s that promoted affordable housing and increased homeownership through creative financing techniques like subprime mortgages. 2) Encouragement by regulators of over-the-counter derivatives and securities which reduced safety standards. 3) Embrace of "fair value accounting" standards which exacerbated the crisis. The crisis is seen as rooted in these three factors that destabilized the housing and financial markets.
This document discusses different political and economic systems including liberal political economy, regulated capitalism, mercantilism, Marxism, communism, and socialist democracies. It provides definitions and explanations of key concepts such as how political systems interact with economic systems in the study of political economy, and different views on trade, private ownership, and the role of government in economic planning.
Global Political Economy: How The World Works?Jeffrey Harrod
These are the slides which are displayed by the lecturer Jeffrey Harrod in the on-line Lecture Course "Global Political Economy: How the World Works" which is available free on his website http://www.jeffreyharrod.eu/avcourse.html.
The purpose it to make the slides available to download which at the moment cannot be done from the on-line lecture. Many of the slides provide data which may be useful in presentations and research papers. Other slides are the points addressed in the lecture.
The course covers all the material conventionally found in courses on international political economy. The approach is critical and realist and seeks to understand or explain
power rather than functions which surround the world economy.
The lectures and slides cover investment, trade, finance , migration and labour paying special attention to the multinational corporation and the agencies of states as the central power players in the global economy.
Rana Hendy - Doha Institute
Mahmoud Mohieldin - World Bank
ERF 25th Annual Conference
Knowledge, Research Networks & Development Policy
10-12 March, 2019
Kuwait City, Kuwait
https://www.delhipolicygroup.org/publication/policy-reports/dj-vu-in-myanmar.html - Over the past two months, Myanmar has plunged into a political crisis. Myanmar’s tentative political transition towards democracy, which started in 2010 and gained momentum after the 2015 elections, has been reversed. The military (Tatmadaw) has staged a coup d’état and arrested democratically elected leaders, including President Win Myint and State Counsellor Daw Aung San Suu Kyi.
The third” united nationsc thomas g. weiss, tatiana caraojas18
This document introduces the concept of a "third United Nations" composed of non-state actors that closely engage with the UN but are not formally part of the organization. This third UN includes NGOs, academics, experts, commissions, and other individuals and groups. They help shape UN ideas, policies, priorities and practices through advocacy, research, and policy analysis. While the UN is traditionally viewed as composed of member states and the secretariat, recognizing this third sphere provides a more comprehensive understanding of the actors that influence the UN.
What is Political Economy?
Different types of Economic Systems and its influence on planning process
Capitalism and Capitalist Planning Model
Communism and Communist Planning Model
Socialism and Socialist Planning Model
This document compares and analyzes the evolution of economic thought during the Great Depression and Great Recession. It discusses key events of each period like the stock market crashes, as well as government and economic policy responses. During the Great Depression, policies focused on ensuring employment through programs like the New Deal. During the Great Recession, policies addressed concerns about income inequality through stimulus packages and debates around minimum wage. The document also analyzes how economic models like the quantity theory of money influenced policy approaches during each period.
How to balance the tension between the state and the market. Develop three strategies which developing countries can adopt to balance state/market relations in the context of globalisation. draw on three contending theoretical perspectives of international
Unrealised ideals the other side of global governance from 1942 to 1950Democracy Club
This is an essay about a narrative not told. About great moments in history that never were. In all the revolutionary idealism of creating a new post-war order, three institutions were proposed that never came into existence.
Featuring a cast of beloved characters including John Maynard Keynes, Harry Dexter White, Cordell Hull, Franklin D. Roosevelt, and introducing a Great Scot, Sir John Boyd Orr, who was way ahead of his time.
The euro crisis has been extensively discussed in terms of economics, finance, political intrigues, and European Institutions, but a key aspect—the political economy of the crisis—has received little attention. Politicians and social scientists from emerging economies, especially Eastern Europe, look with amazement at this oversight.
Authored by: Anders Aslund
Published in 2011
This document provides an overview and critique of the International Monetary Fund's (IMF) policy involvement in developing countries over the last few decades. It argues that IMF lending has led to mismanaged debt and debt crises in developing nations. Additionally, it asserts that the IMF lacks transparency and democratic representation in its administration, with developing countries having little influence over decision-making. The document explores these deficiencies and argues that IMF policies have failed to adequately consider their negative impacts on developing world economies and populations.
Politics of Corporate Investment, Trade and Global GovernanceJeffrey Harrod
Forty-eight slides used in the presentation of a 16 session course of the same name. Begins with and introduction to the global political economy as the setting for corporate foreign investment and trade. The slides enable to course to be followed and provide examples, critical analysis and new information..
This document summarizes and compares approaches to addressing global macroeconomic imbalances, specifically the Plaza Accord of 1985 and the current Geithner/Summers strategy.
The Plaza Accord negotiated coordinated exchange rate movements and accompanying macroeconomic policy adjustments between countries. The Geithner/Summers strategy also combines these elements, but differs in focusing on China's exchange rate and domestic reforms rather than the dollar. Key similarities include negotiating exchange rates and policies simultaneously, but details of current macro policy coordination are lacking compared to Plaza.
LIFE CYCLE, INDIVIDUAL THRIFT AND THE WEALTH OF NATIONS
by:FRANCO MODIGLIANI
Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA
This book provides a summary of David Wessel's 2009 book "In Fed We Trust" which details the Federal Reserve's response to the 2008 financial crisis. It examines how the Fed took unprecedented emergency actions, invoking powers under Section 13(3) of the Federal Reserve Act. The summary explores how the Fed learned from past crises like the Great Depression, with Chairman Bernanke determined to expand the money supply. It analyzes the Fed's expansion of its powers but also improvements in its communication and coordination with other government bodies. Overall, the summary argues that under Bernanke's leadership, the Fed successfully avoided past mistakes and did whatever necessary to prevent economic catastrophe during the crisis.
Books To Understand The Financial Crisisgemiska322
The document summarizes 15 books related to the 2008 financial crisis and its causes. It provides a brief description of each book, including explanations of the financial meltdown, perspectives on the global imbalances and deregulation that contributed to the crisis, analyses of the housing and mortgage markets, and recommendations for reforms to avoid future crises. The books cover topics such as the risky lending and investment practices that led to the crash, the role of greed and corruption on Wall Street, and the impact of the crisis on taxpayers.
Warfare is the quintessential government activity. As a rule, a national government that is unprepared to defend itself against armed attackers cannot expect to retain control of its territory, resident population, and other resources.
Juego & Schmidt (28may10) The Global Crisis and the Assault on DemocracyBonn Juego
Paper presented at the Conference ‘After the Gold Rush: Economic Crisis and Consequences’, University of Iceland, Reykjavik, 27-28 May 2010.
ABSTRACT. The paper argues that the current global capitalist crisis entails an assault on democracy. Since crisis connotes danger and opportunity, the recent crisis appears to be a danger to democracy but an opportunity to its antithetical ideals. At the international level, multilateral institutions have seized the moment to reaffirm the perpetuation of the discursive and structural hegemony of neoliberalism. In East and Southeast Asia, states and regional organisations have revived arguments for the institutional justification of authoritarian liberalism in the region. And in the US and Europe, attempts at restoring nationalism are gaining ground. The global crisis provides the momentum for—but not the sole cause of—the intensification of these counter-democratisation movements and tendencies.
This document discusses financial restructuring in the Organization of Eastern Caribbean States countries. It notes that as economies develop, non-bank financial institutions have begun competing with banks by offering similar retail and wholesale services. This has led to a shift away from bank dominance in financial intermediation to non-banks. The document examines this process of financial restructuring and discusses some associated policy issues regarding the development of financial systems in these countries.
The Rise and Fall of the Washington Consensus as aParadigm.docxkathleen23456789
The Rise and Fall of the Washington Consensus as a
Paradigm for Developing Countries
CHARLES GORE *
United Nations Conference on Trade and Development, Geneva, Switzerland
Summary. Ð The introduction of the Washington Consensus involved not simply a swing from
state-led to market-oriented policies, but also a shift in the ways in which development problems
were framed and in the types of explanation through which policies were justi®ed. Key changes
were the partial globalization of development policy analysis, and a shift from historicism to
ahistorical performance assessment. The main challenge to this approach is a latent Southern
Consensus, which is apparent in the convergence between East Asian developmentalism and Latin
American neostructuralism. The demise of the Washington Consensus is inevitable because its
methodology and ideology are in contradiction. Ó 2000 Elsevier Science Ltd. All rights reserved.
Key words Ð development theory, development policies, World Bank/IMF policies
1. INTRODUCTION
Developing countries is an international
practice. The essence of this practice is the
mobilization and allocation of resources, and
the design of institutions, to transform national
economies and societies, in an orderly way,
from a state and status of being less developed
to one of being more developed. The agencies
engaged in this practice include national
governments of less-developed countries, which
have adopted ``development'' as a purpose to
which State power is put, and governments of
richer countries, which disburse o�cial devel-
opment aid to support and in¯uence this
process; a variety of non-governmental orga-
nizations concerned to animate and channel
popular concerns; and international intergov-
ernmental organizations, such as the organs of
the United Nations and the World Bank, many
of which have been expressly set up to resolve
various development problems. Often it is the
last group who have acted as the avant-garde of
development practice. It is because of their
activities, as well as the widespread tendency of
governments to copy successful practice else-
where, that it is appropriate to describe devel-
oping countries as an international practice.
But it is by no means global in scope. Indeed
the practice of developing countries is only
done in a particular set of countriesÐthose
which in the 1950s and 1960s were generally
called ``underdeveloped'' or ``less developed''
countries, but which now generally identify
themselves, and are identi®ed by others, as
``developing countries.''
This paper discusses trends in the body of
knowledge which guides and justi®es the prac-
tice of development. It examines, in particular,
the ideas propagated by international develop-
ment agencies, and focuses on the shift in
thinking which occurred in the 1980s with the
introduction and widespread adoption of an
approach to the practice of developing coun-
tries known as the ``Washington Consensus.''
In broad terms, this approach reco.
The document analyzes the causes of the subprime crisis. Three key causes are identified: 1) A public-private partnership beginning in the 1990s that promoted affordable housing and increased homeownership through creative financing techniques like subprime mortgages. 2) Encouragement by regulators of over-the-counter derivatives and securities which reduced safety standards. 3) Embrace of "fair value accounting" standards which exacerbated the crisis. The crisis is seen as rooted in these three factors that destabilized the housing and financial markets.
This document discusses different political and economic systems including liberal political economy, regulated capitalism, mercantilism, Marxism, communism, and socialist democracies. It provides definitions and explanations of key concepts such as how political systems interact with economic systems in the study of political economy, and different views on trade, private ownership, and the role of government in economic planning.
Global Political Economy: How The World Works?Jeffrey Harrod
These are the slides which are displayed by the lecturer Jeffrey Harrod in the on-line Lecture Course "Global Political Economy: How the World Works" which is available free on his website http://www.jeffreyharrod.eu/avcourse.html.
The purpose it to make the slides available to download which at the moment cannot be done from the on-line lecture. Many of the slides provide data which may be useful in presentations and research papers. Other slides are the points addressed in the lecture.
The course covers all the material conventionally found in courses on international political economy. The approach is critical and realist and seeks to understand or explain
power rather than functions which surround the world economy.
The lectures and slides cover investment, trade, finance , migration and labour paying special attention to the multinational corporation and the agencies of states as the central power players in the global economy.
Rana Hendy - Doha Institute
Mahmoud Mohieldin - World Bank
ERF 25th Annual Conference
Knowledge, Research Networks & Development Policy
10-12 March, 2019
Kuwait City, Kuwait
https://www.delhipolicygroup.org/publication/policy-reports/dj-vu-in-myanmar.html - Over the past two months, Myanmar has plunged into a political crisis. Myanmar’s tentative political transition towards democracy, which started in 2010 and gained momentum after the 2015 elections, has been reversed. The military (Tatmadaw) has staged a coup d’état and arrested democratically elected leaders, including President Win Myint and State Counsellor Daw Aung San Suu Kyi.
The third” united nationsc thomas g. weiss, tatiana caraojas18
This document introduces the concept of a "third United Nations" composed of non-state actors that closely engage with the UN but are not formally part of the organization. This third UN includes NGOs, academics, experts, commissions, and other individuals and groups. They help shape UN ideas, policies, priorities and practices through advocacy, research, and policy analysis. While the UN is traditionally viewed as composed of member states and the secretariat, recognizing this third sphere provides a more comprehensive understanding of the actors that influence the UN.
What is Political Economy?
Different types of Economic Systems and its influence on planning process
Capitalism and Capitalist Planning Model
Communism and Communist Planning Model
Socialism and Socialist Planning Model
This document compares and analyzes the evolution of economic thought during the Great Depression and Great Recession. It discusses key events of each period like the stock market crashes, as well as government and economic policy responses. During the Great Depression, policies focused on ensuring employment through programs like the New Deal. During the Great Recession, policies addressed concerns about income inequality through stimulus packages and debates around minimum wage. The document also analyzes how economic models like the quantity theory of money influenced policy approaches during each period.
How to balance the tension between the state and the market. Develop three strategies which developing countries can adopt to balance state/market relations in the context of globalisation. draw on three contending theoretical perspectives of international
Unrealised ideals the other side of global governance from 1942 to 1950Democracy Club
This is an essay about a narrative not told. About great moments in history that never were. In all the revolutionary idealism of creating a new post-war order, three institutions were proposed that never came into existence.
Featuring a cast of beloved characters including John Maynard Keynes, Harry Dexter White, Cordell Hull, Franklin D. Roosevelt, and introducing a Great Scot, Sir John Boyd Orr, who was way ahead of his time.
The euro crisis has been extensively discussed in terms of economics, finance, political intrigues, and European Institutions, but a key aspect—the political economy of the crisis—has received little attention. Politicians and social scientists from emerging economies, especially Eastern Europe, look with amazement at this oversight.
Authored by: Anders Aslund
Published in 2011
This document provides an overview and critique of the International Monetary Fund's (IMF) policy involvement in developing countries over the last few decades. It argues that IMF lending has led to mismanaged debt and debt crises in developing nations. Additionally, it asserts that the IMF lacks transparency and democratic representation in its administration, with developing countries having little influence over decision-making. The document explores these deficiencies and argues that IMF policies have failed to adequately consider their negative impacts on developing world economies and populations.
Politics of Corporate Investment, Trade and Global GovernanceJeffrey Harrod
Forty-eight slides used in the presentation of a 16 session course of the same name. Begins with and introduction to the global political economy as the setting for corporate foreign investment and trade. The slides enable to course to be followed and provide examples, critical analysis and new information..
This document summarizes and compares approaches to addressing global macroeconomic imbalances, specifically the Plaza Accord of 1985 and the current Geithner/Summers strategy.
The Plaza Accord negotiated coordinated exchange rate movements and accompanying macroeconomic policy adjustments between countries. The Geithner/Summers strategy also combines these elements, but differs in focusing on China's exchange rate and domestic reforms rather than the dollar. Key similarities include negotiating exchange rates and policies simultaneously, but details of current macro policy coordination are lacking compared to Plaza.
LIFE CYCLE, INDIVIDUAL THRIFT AND THE WEALTH OF NATIONS
by:FRANCO MODIGLIANI
Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA
This book provides a summary of David Wessel's 2009 book "In Fed We Trust" which details the Federal Reserve's response to the 2008 financial crisis. It examines how the Fed took unprecedented emergency actions, invoking powers under Section 13(3) of the Federal Reserve Act. The summary explores how the Fed learned from past crises like the Great Depression, with Chairman Bernanke determined to expand the money supply. It analyzes the Fed's expansion of its powers but also improvements in its communication and coordination with other government bodies. Overall, the summary argues that under Bernanke's leadership, the Fed successfully avoided past mistakes and did whatever necessary to prevent economic catastrophe during the crisis.
Books To Understand The Financial Crisisgemiska322
The document summarizes 15 books related to the 2008 financial crisis and its causes. It provides a brief description of each book, including explanations of the financial meltdown, perspectives on the global imbalances and deregulation that contributed to the crisis, analyses of the housing and mortgage markets, and recommendations for reforms to avoid future crises. The books cover topics such as the risky lending and investment practices that led to the crash, the role of greed and corruption on Wall Street, and the impact of the crisis on taxpayers.
Warfare is the quintessential government activity. As a rule, a national government that is unprepared to defend itself against armed attackers cannot expect to retain control of its territory, resident population, and other resources.
Juego & Schmidt (28may10) The Global Crisis and the Assault on DemocracyBonn Juego
Paper presented at the Conference ‘After the Gold Rush: Economic Crisis and Consequences’, University of Iceland, Reykjavik, 27-28 May 2010.
ABSTRACT. The paper argues that the current global capitalist crisis entails an assault on democracy. Since crisis connotes danger and opportunity, the recent crisis appears to be a danger to democracy but an opportunity to its antithetical ideals. At the international level, multilateral institutions have seized the moment to reaffirm the perpetuation of the discursive and structural hegemony of neoliberalism. In East and Southeast Asia, states and regional organisations have revived arguments for the institutional justification of authoritarian liberalism in the region. And in the US and Europe, attempts at restoring nationalism are gaining ground. The global crisis provides the momentum for—but not the sole cause of—the intensification of these counter-democratisation movements and tendencies.
This document discusses financial restructuring in the Organization of Eastern Caribbean States countries. It notes that as economies develop, non-bank financial institutions have begun competing with banks by offering similar retail and wholesale services. This has led to a shift away from bank dominance in financial intermediation to non-banks. The document examines this process of financial restructuring and discusses some associated policy issues regarding the development of financial systems in these countries.
The Rise and Fall of the Washington Consensus as aParadigm.docxkathleen23456789
The Rise and Fall of the Washington Consensus as a
Paradigm for Developing Countries
CHARLES GORE *
United Nations Conference on Trade and Development, Geneva, Switzerland
Summary. Ð The introduction of the Washington Consensus involved not simply a swing from
state-led to market-oriented policies, but also a shift in the ways in which development problems
were framed and in the types of explanation through which policies were justi®ed. Key changes
were the partial globalization of development policy analysis, and a shift from historicism to
ahistorical performance assessment. The main challenge to this approach is a latent Southern
Consensus, which is apparent in the convergence between East Asian developmentalism and Latin
American neostructuralism. The demise of the Washington Consensus is inevitable because its
methodology and ideology are in contradiction. Ó 2000 Elsevier Science Ltd. All rights reserved.
Key words Ð development theory, development policies, World Bank/IMF policies
1. INTRODUCTION
Developing countries is an international
practice. The essence of this practice is the
mobilization and allocation of resources, and
the design of institutions, to transform national
economies and societies, in an orderly way,
from a state and status of being less developed
to one of being more developed. The agencies
engaged in this practice include national
governments of less-developed countries, which
have adopted ``development'' as a purpose to
which State power is put, and governments of
richer countries, which disburse o�cial devel-
opment aid to support and in¯uence this
process; a variety of non-governmental orga-
nizations concerned to animate and channel
popular concerns; and international intergov-
ernmental organizations, such as the organs of
the United Nations and the World Bank, many
of which have been expressly set up to resolve
various development problems. Often it is the
last group who have acted as the avant-garde of
development practice. It is because of their
activities, as well as the widespread tendency of
governments to copy successful practice else-
where, that it is appropriate to describe devel-
oping countries as an international practice.
But it is by no means global in scope. Indeed
the practice of developing countries is only
done in a particular set of countriesÐthose
which in the 1950s and 1960s were generally
called ``underdeveloped'' or ``less developed''
countries, but which now generally identify
themselves, and are identi®ed by others, as
``developing countries.''
This paper discusses trends in the body of
knowledge which guides and justi®es the prac-
tice of development. It examines, in particular,
the ideas propagated by international develop-
ment agencies, and focuses on the shift in
thinking which occurred in the 1980s with the
introduction and widespread adoption of an
approach to the practice of developing coun-
tries known as the ``Washington Consensus.''
In broad terms, this approach reco.
The Global Finance Crisis Case StudyIntroductionThe inside job was a.docxcherry686017
The Global Finance Crisis Case StudyIntroductionThe inside job was a 2010 documentary film by Charles Ferguson that clearly demonstrated the 2008 crisis. On the other hand, it comprehensively narrated and revealed its causes, key players as well as its consequences. It goes ahead to explain the systemic corruption by key financial players in the finance industry and effects of such corruption in United States of America. Furthermore it reveals that changes in financial as well as other policies and banking practices contributed to the growth of the crisis casing most Americans to lose their savings, their jobs and hard earned homes.Answer One: The Unintended Consequences of Financial InnovationIt has been ascertained that changes in the policy framework governing the financial industry and the banking practices heavily contributed to the financial crisis. The development of complex trade policies such as the derivatives market allowed for large increases in risk taking that circumvented older regulations that were intended to control systemic risk. These derivatives increased instability since their adoption is resulted in large losses because of the use of borrowing. Investors suffered the risk of losing large amounts of investments or savings if the price of the underlying moved against them significantly. Secondly the collapse of the house boom in 2004 caused by the application of collateralized debt obligations and the global economic meltdown resulted in unimaginable imbalance of the ratio of money borrowed by investment banks and its own assets. This caused the value of securities related to real estate to crash down and damage financial institutions internationally as the market for collateralized debt obligations collapsed.. It is these financial innovations such as securitization that prioritize short-term over long-term value creation that triggered the 2008 financial crisis.Answer two: The unintended consequences of regulationThe deliberate shift from a system of regulation to deregulation of the financial industry encouraged unusual business practices which had adverse effects. Great pressure was exerted by the financial industry on the government to thwart efforts of regulating the industry. The government and central bank which have the responsibility of upholding financial stability through proper regulation of the financial markets and its institutions were split which led to insufficient responsibility. This exposed the industry to greater and more complicated risks since the supervisory and regulatory structure failed to keep up with the evolution of the financial markets. Answer three: Explain how the financial crisis of 2008 occurred—who is to blame?The global financial crisis began in the early 2000s and finally climaxed in 2008 and since then its devastating impact still lingers, worldwide. It began when; the financial sector which had consolidated into a few giant firms introduced the use of high risk derivatives. It i ...
A close look into the financial crisis and financial market volatilityAlexander Decker
This document discusses the causes and history of the global financial crisis that began in 2007. It provides definitions of financial crisis and reviews related literature on previous crises and the current one. The causes of the 2007 crisis included easy credit conditions, the US subprime mortgage crisis, global imbalances, inadequate exchange rate flexibility, loose monetary policy, complex derivatives, regulatory weaknesses, and Basel I capital requirements. The crisis originated from the US subprime sector in 2007 and spread globally after the 2008 collapse of Lehman Brothers. It compares the current crisis to the Great Depression but finds it has different characteristics and wider impact across economic factors.
A small airline recently sold to a private equity group for $145 m.docxannetnash8266
A small airline recently sold to a private equity group for $145 million. The airline has earned profits of $9 million last year. The new managers believe they can grow profits at 5% per year. The private equity group borrows money from wealthy individuals to invest in acquisitions. Because of the significant risk involved, lenders are promised a 12% return on their loans to the equity group. Is the purchase price of the new airline reasonable? Explain
ISSN 0143-6597 print/ISSN 1360-2241 online/02/040607-1 4 q 2002 Third World Quarterly
DOI: 10.1080 /014365902200000529 2 607
Third World Quarterly, Vol 23, No 4, pp 607–620, 2002
Eager to defend the feasibilit y, indeed desirability, of continued mobility of cross-
border financial flows, especially after the advent of the Asian crisis (1997–98),
the G-7 countries established a series of institutions and networks, encompassin g
both state and non-state actors, in the hope of strengthening the internationa l
financial system. This strategy has been referred to as the New Internationa l
Financial Architecture (NIFA). While there are many dimensions to the NIFA, we
can identify at least three important features: the Group of Twenty (G-20), the
Financial Stability Forum (FSF), and 11 standards and codes which are collec-
tively known as the Reports on Observances of Standards and Codes (ROSCs).
Briefly, the G-20 brings together, for the first time, finance ministers and central
bank governors not only of the G-7 and the European Union, but also their
counterparts of ‘systematically important’ emerging market economies. The FSF,
on the other hand, seeks to provide regular scheduled meetings involvi ng
important national authorities from G-7 countries in order to enhance discussion s
On the contradictions of the New
International Financial Architecture:
another procrustean bed for
emerging markets?
SUSANNE SOEDERBERG
ABSTRACT The New International Financial Architecture (NIFA) was created by
powerful G-7 countries in response to the growing volatility in the developing
world. Some key components of the NIFA include: the G-20, the Financial Stabilit y
Forum and the Reports on Observance of Standards and Codes, the latte r
involving areas such as corporate governanc e. The aim of this article is to
address some important yet largely neglected questions. Why the new building ?
Who benefits from this construct ion? Unlike most accounts of the NIFA, the
following analysis does not remain focused on its institutio nal terrain; but
instead draws linkages between these structures and the paradoxes inherent in
global capitalism. One such contradiction is the constant promotion of financia l
liberalisation in emerging markets by US-led international financial institution s
(IFIs), on the one hand, and the frequency of financial crises in the developing
world, on the other. The article suggests that the NIFA is an attempt to strengthe n
(stabilise and legitimate) the scaffolding of the existing imper.
Latin America has been strongly affected by the international crisis and recession since late 2008. In comparison to historical experience, how has Latin America coped with the global crisis, which has been the role of different transmission mechanisms, and how have the region's structural and policy conditions affected its sensitivity to foreign shocks? Moreover, what policies can protect the region better from world crises and shocks, and to which extent should it rely on a strategy of close trade and financial integration into a world economy punctuated by shocks and crises? This paper addresses the latter questions in three steps. First, by assessing empirically the sensitivity of growth in the region's seven major economies during 1990-2009 to large number of structural and cyclical factors, based on high-frequency panel-data estimations. Second, by using the latter results to decompose the amplitude of GDP reductions in both recessions according to the individual and combined contribution of the different growth factors. Third, to derive the main implications of the results for the choice of macroeconomic regimes and development strategies.
Authored by: Vittorio Corbo and Klaus Schmidt-Hebbel
Published in 2011
Concepts of structural change Lecture Universidad Computense Madrid 2019Stavros Mavroudeas
“Concepts of Structural Change: Mainstream, Heterodox and Marxist conceptions and the Greek crisis’ – S.Mavroudeas 24-4-2019 Universidad Computense de Madrid
World crisis of 2008 and its economic, social and geopolitical consequencesFernando Alcoforado
The global economic and financial crisis of 2008 had wide-ranging economic, social, and geopolitical consequences according to experts. The crisis originated from risky lending practices and over-complex financial innovations in the US that spread worldwide. It resulted in massive losses, a collapse in credit markets, and a severe global recession. Experts argue this could lead to prolonged fiscal deficits, protectionism, and a shift away from US dominance on the global stage. The crisis also hit developing economies hard through falling trade and commodity prices, with serious social impacts. It marked the end of the era of financial liberalization and globalization as governments intervened extensively to stabilize markets.
This document is a student essay analyzing the concept of neoliberalism and how it has failed to facilitate development. It defines neoliberalism and traces its origins to post-World War II institutions like the IMF and World Bank. It then examines how structural adjustment programs imposed conditions of privatization, austerity, and deregulation on developing countries, eroding national sovereignty. As an example, it discusses how a World Bank loan for a nuclear power plant in the Philippines failed to generate benefits and saddled the country with long-term debt. In conclusion, the essay argues neoliberalism has aggregated wealth for elites rather than facilitating broad-based development as originally intended.
The failure of neoliberal globalization is demonstrated by the outbreak of the 2008 global crisis that erupted in the United States in the mortgage lending sector, which immediately spread to other parts of the world financial system, by the increase of the global imbalance in trade, savings and Investment and by social inequality materialized in the excessive concentration of wealth around the world.
This document summarizes a research paper that examines trends in rentier incomes and financial crises in some OECD countries between 1960 and 2000. The paper finds that rentier income shares, which include profits from financial firms and interest income, increased significantly in most countries starting in the early 1980s, coinciding with the rise of neoliberal monetary policies. However, rentier shares declined in some developing countries that experienced financial crises. The paper also finds little evidence that increases in rentier incomes came at the expense of non-financial corporate profits, suggesting no conflict between these groups.
The document analyzes economic performance during the 2008-2009 global financial crisis across different regions and countries. It finds that while growth rates declined worldwide, output actually declined and turned negative on average only in advanced economies and Central and Eastern European countries. Other regions like Asia, Latin America and Africa saw similar or higher growth rates compared to pre-crisis periods. The crisis most severely impacted advanced nations, decreasing their share of global GDP, while Asia increased its share. The document emphasizes looking at changes in income levels rather than just growth rates to better assess crisis impacts on welfare.
Political economy of asian financial crisisguitarefolle
1) The 1997-98 Asian financial crisis was a major shock to the region and economists, as countries like Thailand, Indonesia, South Korea and Malaysia experienced currency crashes and deep recessions.
2) There were debates around the causes, with some arguing it was due to macroeconomic issues like overvalued currencies, while others emphasized speculative attacks and contagion from country to country. A third view cited weaknesses in Asian financial systems and corporate sectors.
3) The crisis raised questions about the political economy factors in the region, including close business-government relations, levels of transparency, and how countries managed the adjustment processes and their consequences.
This document introduces the concept of financialization and its implications. It defines financialization as the increasing role of financial motives, markets, actors and institutions in domestic and international economies. Some key points:
1) Since the 1970s/1980s, structural shifts have led to increases in financial transactions, real interest rates, and the profitability and shares of national income going to financial firms and asset holders in countries like the US and France.
2) These trends reflect the phenomenon of financialization in world economies. Financialization has implications for economic stability, growth, income distribution, and political/economic policy.
3) While financialization has detrimental effects, the financial sector benefits from economic crises that hurt many
Economics Honors Paper - Tu Nguyen - 2015Tu Nguyen
This document is a thesis presented by Tu Nguyen to the Department of Economics at Randolph College in partial fulfillment of a Bachelor of Arts degree with Honors. The thesis attempts to explain the causes of the recent housing bubble in the United States using both economic and psychological theories. Through a literature review and empirical analysis using a housing bubble index and regression models, the study finds that government housing subsidies and media coverage were significant determinants of the housing bubble.
Chapter 7 The Global Financial CrisisTHE GLOBAL FINANCIAL CRIS.docxbissacr
Chapter 7 The Global Financial Crisis
THE GLOBAL FINANCIAL CRISIS HAD WIDESPREAD EFFECTS. In its early days in September 2008, a trader reacted to the numbers on the floor of the New York Stock Exchange as the Dow plummeted.
Learning Objectives
1. 7.1Evaluate the causes that contributed to creating the financial crisis
2. 7.2Review the impact of the global financial crisis on different world economies, business, employment, and global power shifts
3. 7.3Evaluate the concerns that made different countries respond in different ways to the financial crisis
Financial crises and accompanying economic recessions have occurred throughout history. Periodic crises appear to be part of financial systems of dominant or global powers. The United States was at the epicenter of the financial crisis of 2008–2009. Enjoying a unipolar moment following the collapse of the Soviet Union and the failure of Communism, the United States was confident that economic liberalization and the proliferation of computer and communications technologies would contribute to ever-increasing global economic growth and prosperity. Globalization contributed to the extraordinary accumulation of wealth by a relatively few individuals and created greater inequality. In an effort to reduce inequality in the United States, the government implemented policies that engendered the financial crisis.
As we discussed in Chapter1, is usually the leading force in the growth of globalization. The rise of great powers is inextricably linked to access to investments and their ability to function as leading financial centers, as we saw in Chapter2. Their decline is also closely linked to financial problems. Finance enables entrepreneurs to start various enterprises and to become competitors of established companies. It is also essential to innovation and scientific discoveries. Finance also facilitates risk sharing and provides insurance for risk takers. Countries that have large financial sectors tend to grow faster, their inhabitants are generally richer, and there are more opportunities. Financial globalization contributed to unprecedented growth and prosperity around the world. China and India became significant economic powers, and the industrialized countries grew even richer. Closely integrated into the financial system are banks and investment firms. When the financial system is in crisis, banks reduce lending, companies often face bankruptcy, and unemployment rises. Ultimately, as we saw in the financial crisis of 2008–2009, many banks fail.
The financial crisis triggered a global economic recession that resulted in more than $4.1 trillion in losses, saw unemployment rates that climbed to more than 10 percent in the United States and higher elsewhere, and increased poverty. Stock markets around the world crashed. American investors lost roughly 40 percent of the value of their savings. Housing prices plummeted from their record highs in 2006. Consumers reduced their spending, manufactu.
The document discusses the impact of the recent global financial crisis on financial institutions in developing countries. It provides context on the causes of the crisis originating from the US subprime mortgage market collapse. It then discusses how the crisis spread globally and impacted developing country financial institutions through contractions in credit lines and reduced financial flows from tightened foreign banks. The document also examines specific impacts in Pakistan, including tightened domestic money markets, a sharp decline in the Karachi stock exchange, and high inflation exacerbated by currency depreciation and central bank financing of fiscal deficits.
Similar to Economic Growth and Inequality: The New Post-Washington Consensus, September 2011 (20)
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Enhancing Asset Quality: Strategies for Financial Institutionsshruti1menon2
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Enhancing Asset Quality: Strategies for Financial Institutions
Economic Growth and Inequality: The New Post-Washington Consensus, September 2011
1. 1
COIMBRA RCCS 94
September 2011
Economic Growth and Inequality: The New Post‐Washington
Consensus*
Carlos Lopes
United Nations Institute for Training and Research (UNITAR)
The debate on economic policy has developed significantly in the past decade. The so‐called
Washington Consensus, which dictated most of the solutions proposed by international
financial organizations, began to be questioned when a large number of emerging economies
reduced their reliance on multilateral debt. The crisis of 2008 and 2009 accelerated the
process of reflection on the prescriptive nature of the policy proposals advocated by
monetarists, with their insistence on a uniform view as if all situations were alike. This has
been termed ideology, and the ideology associated with the Washington Consensus has failed
even in its methodological principles, as clearly demonstrated by the internal debate within
organizations such as the International Monetary Fund and the World Bank. This article
reviews the various internal arguments of the international financial organizations, and
provides a critique of preconstructed models involving a return to Keynesian economics. It
ends with an optimistic view of the broadening and democratization of the debate on
economic policies, termed the new post‐Washington Consensus.
Keywords: Washington Consensus; financial crisis; economic development; financial system;
globalization.
The prefix “post” has now become a common currency spreading from philosophy to the
political scene of globalization. It signals the overthrow of West‐originated certainties that
have long been used to explain and govern the world.
With the devastating crisis that hit most of the wealthy countries1
and the failure of the
financial systems, we entered a new era, characterized by both conjunctural and structural
changes. It entails a profound transformation that affects the perception and the
distribution of power. Could this mean the end of the so‐called Washington Consensus?
What is the Washington Consensus?
* Article published in RCCS 94 (September 2011). Thanks are due to Elena Proden and Adriana Jacinto for their
help in preparing this text.
A different version of this article was published in English in Géopolitique Africaine, 43 (2012), with the title “Is
There a post‐Washington Consensus?”
1
In this text, the term wealthy countries refers essentially to G7 members and the European Union. Other
methods of measuring economic wealth would undoubtedly produce a different list, but in common speech
the term is still associated with the abovementioned group of countries.
2. RCCS Annual Review, 4, October 2012 Economic Growth and Inequality: The New Post‐Washington Consensus
2
The term “Washington Consensus” comes from a simple set of ten recommendations
identified by economist John Williamson in 1989: 1) fiscal discipline; 2) redirecting public
expenditure; 3) tax reform; 4) financial liberalization; 5) adoption of a single, competitive
exchange rate; 6) trade liberalization; 7) elimination of barriers to foreign direct
investment; 8) privatization of state owned enterprises; 9) deregulation of market entry
and competition; and 10) secure property rights. The reference to “consensus” meant that
this list was premised on the ideas shared at the time by power circles in Washington,
including the US Congress and Administration, on the one hand, and international
institutions such as the Washington‐based IMF and the World Bank, on the other,
supported by a range of think tanks and influential economists.
It is important to note here that the theoretical foundations underlying these policy
recommendations were nothing else but neoclassical economics espousing a firm belief in
the market’s “invisible hand,” the rationality of economic actors’ choice, and a minimalistic
vision of the states’ regulation of economies. The advent of this new paradigm has also
marked the retreat of development economics as a distinct field, which had been long
dominated by the “Dependency School” and other theories (Naim, 1999), often in sharp
contrast with neoclassical economics and methodological individualism. It was
development economics that had often guided policies experimented in developing
countries before the Washington Consensus era. Most independent African governments,
for example, sought to promote industrialization, in an effort to develop local production
and reduce imports, promote employment, raise the standard of living, and break out of
the vicious circle of trade patterns epitomized in the Prebisch‐Singer hypothesis
(unfavourable terms of trade for commodity‐exporting and manufacturer‐importing
countries). The Washington Consensus’ recipes, by contrast, were presented as universal,
similarly applicable in the context of developed and developing countries, even if they
ended up being implemented in a discriminatory and uneven fashion.
Washington Consensus policies were applied for more than two decades in such diverse
contexts as Africa, Latin America and Asia, as well as in countries emerging from real
socialism in Eastern Europe and Central Asia. There were usually two major stages of
intervention: the first focused on macroeconomic stability and structural adjustment
programs, and the second included such objectives as improving institutions, reducing
corruption or dealing with infrastructure inefficiency (Naim, 1999). The conditionality
3. RCCS Annual Review, 4, October 2012 Economic Growth and Inequality: The New Post‐Washington Consensus
3
exercised by the Bretton Woods institutions and wealthy countries played a crucial role in
indebted countries’ decisions to push through macroeconomic stabilization reforms and
structural adjustment programs. The debt crisis that first affected a number of Latin
American countries and then African and Asian countries, in the 1970s and 1980s, further
increased their dependence on external loans, leaving them no other option than to follow
the prescriptions that enabled them to access financing.
What Exactly Went Wrong?
Washington Consensus policies have been criticized since the 1990s by a significant
number of leading economists. Most notably, Joseph Stiglitz, chief economist at the World
Bank from 1997 to 2000, criticized the policies prescribed by the IMF in response to the
financial crises in Russia and Asia (Stiglitz, 2003); Paul Krugman was in favor of Asian
governments imposing controls on capital flows in 1997‐98. The debate generated over
the response to the crisis provided a good illustration of the deep divide between leading
economists, who either supported or opposed the IMF. The Washington Consensus purists
insisted on the importance of stabilizing exchange rates in times of crisis through public
budget cuts, higher taxes and interest rates and other recessive measures. Their
opponents criticized such policies, arguing that they would lead to recession (Naim, 1999).
Stiglitz called attention to the fact that sharp increases in interest rates would contribute
towards the deepening of the crisis (Stiglitz, 2003).
It is now commonplace to say that structural adjustment (SAP) and macroeconomic
stabilization programs had a disastrous impact on social policies and poverty levels in
many countries. Following the first wave of reforms undertaken by debt‐affected African
and Latin American countries – which included public expenditure cuts, introduction of
charges for health and education, and reductions in industrial protection, leading to high
unemployment, poverty rise and unequal income distribution – UNICEF published the
report Adjustment with a Human Face (1987), which called for “meso‐policies” to be
redirected towards protecting social and economic sectors that were essential to the
survival of the poor, through the introduction of social protection programs.
The period of structural adjustment programs in sub‐Saharan Africa in the 1980s was
characterized by poor economic performance. The GDP rose by less than 1% in Africa
between 1979 and 1992, whereas East Asia and the Pacific, where the state played an
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active role in promoting industrial and social policies as well as in poverty alleviation,
registered an average growth of 5% between 1986 and 1992. African investments
declined, and the continent’s share in world exports also fell by more than one‐half
between 1975 and 1990. The share of Africa in agricultural and food exports dropped from
21 to 8.1% of developing countries’ exports, and in manufactured goods exports from
7.8% in 1980 to 1.1% in 1990. Some critics pointed out that liberalization policies, and such
policies as the elimination of subsidies for fertilizers, had a negative impact on agricultural
productivity and output. Price reform promoted export crops over traditional food crops.
Others argued that export crops contributed to indebtedness, or that adjustment
programs exacerbated unequal land distribution, promising that “efficient” land markets
would replace traditional tenure systems, while encouraging deindustrialization through
“wholesale privatization and unfettered markets” (Sahn, Dorosh & Younger, 1997: 1‐6).
One of the major drawbacks of the policies imposed by the IMF and the World Bank
was the lack of technical expertise and strategic capability on the part of the implementing
countries. A structurally unequal donor–recipient relationship was established, in part due
to the weakening of the public sector induced by the drastic reduction of the
administrative machine. The fast and uncontrolled liberalization of small African
economies presented additional dangers, such as the high volatility of capital flows, but
a larger problem for African economies is that their growth potential is directly affected by
their ability to export and use export revenue to diversify production. Their ability to do so is
constrained by a global trade regime inimical to the full development of African countries’
comparative advantage. Limited market access for low‐cost textiles, cotton, and agricultural
products and competition from heavily subsidized industrial economy exports effectively
prevent growth. (Manuel, 2003: 18)
The social impact of these reforms was devastating for Sub‐Saharan Africa. Many
economists recognized that the difficulties associated with the promotion of economic
stability and liberalization had a disproportionate impact on the poor, leading to greater
poverty and unequal income distribution. International financial institutions, particularly
the World Bank, displayed great intelectual arrogance in failing to acknowledge for a long
time the vastly negative impact of such policies, denying the criticisms levelled at them,
and limiting their response to launching compensatory programs (Sahn, Dorosh &
Younger, 1997: 6).
It is thus not surprising that macroeconomic stabilization and structural adjustment
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policies prompted a wave of popular unrest that contributed to the recrudescence of
many civil wars in the 1990s. The 1997 Asian crisis also raised some important questions
about the consequences of the deregulation of financial markets and demonstrated the
limits of Washington‐based policy thought.
The Structural Consequences of the Washington Consensus
The rapid economic growth registered in many regions of the South in the first decade of
the 21st
century, accompanied by expanding trade and investment, offset the worries of
the financial markets, which ignored the signs of the impending storm. In 2008, however,
the crème de la crème of the economist profession, as well as the governments of rich
countries, finally had to face the inconvenient truth about the imperfection of markets.
Massive and uncontrolled financial speculation has produced the worst global economic
crisis since the Great Depression, suddenly revealing a number of structural “diseases”
that the Washington Consensus had been hiding under the rug.
The global downturn was revealing in two major respects. First, the domination of the
financial sector over the real economy had led to the creation of bubbles, to
unpredictability for the future of economies, and increased vulnerability of populations,
simultaneously increasing unequal income distribution and the gap between rich and
poor. Second, it called into question the prevailing economic theories that served as a
basis for formulating and prescribing policies, including those formulated by Bretton‐
Woods institutions at global level, in particular structural adjustment programs.
In reality, after three decades of Washington Consensus, we have been witnessing a
confluence of crises including spikes in food and energy prices as well as financial and
economic downturn, further aggravated by the impact of global climate change and growing
demography. A recent article that I co‐authored with Ignacy Sachs and Ladislau Dowbor
stresses the striking convergence of critical tendencies, “the synergy of behaviors that [...]
are destroying our fragile spaceship,” referring to the interdependence of trends in areas
traditionally considered separately, such as demography, climate, industrial and agricultural
production and consumption, pollution, etc. (Lopes, Sachs & Dowbor, 2010: 1, 3).
There is now more awareness of growing inequalities and the scandalous concentration
of income – with the richest 20% getting 82.7% of the global income (Lopes, Sachs &
Dowbor, 2010: 5). The dramatic rise in the share of poor people living in so‐called
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emerging countries reveals how unequal income distribution is becoming, even in rapidly
growing economies: 72% of the poor worldwide currently live in middle income countries,
whereas two decades ago 93% lived in low income countries (Sumner, 2011). In the
current structure of power, economic growth, even when generated by technological
innovation, benefits the financial intermediaries that pursue short term maximization of
profits rather than the engineers of the process (Lopes, Sachs & Dowbor, 2010: 5).
Productive inclusion as reflected in the formal sector is the exception rather than the
rule. Production and consumption patterns reveal an abnormal deformation of priorities,
where military budgets and luxury consumer goods dominate over access to basic services,
education and health:
The planet produces almost a kilo of grain per day per inhabitant and we have more than
one billion people going hungry. The ten million children who die of hunger, no access to
clean water and other absurd causes constitutes an unbearable scandal. But from the
private investment point of view, solving essential problems generates no profits, and the
orientation of our production capacity is radically deformed. (Lopes, Sachs & Dowbor, 2010:
7)
These systemic failures are principally due to a skewed configuration of production
processes, false structures of incentives, and an economic framework that externalizes
social and environmental costs, relying exclusively on the “rational choice” of actors and
the “natural” balance of the market – to say nothing of the way the global economy is
currently run. The power imbalance within the global structures of financial and economic
governance, namely the IMF and the World Bank, is evident on three levels:
• First, the prevailing ideology, entirely dominated by monetarist thought, imposed on
the countries of the South and transition economies for more than 20 years, despite
blatant failures and disastrous social impact;
• Second, the power structure established by voting shares within the IMF and the
World Bank, which still does not reflect the size of economies, not to mention the
representation of the interests of the poorest;
• Third, the strong belief that wealthy countries would never be affected by crises,
something that justified discriminatory practices in terms of surveillance before 2008
(IEO, 2011) and the application of double standards during the crisis. Thus, the
financial crisis that resulted from spiraling deregulation did not come as a complete
surprise.
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Concerning the last point, we need only compare the IMF response to the current
European crisis with the policies it implemented in the 1980s and 1990s to have an idea of
those double standards. Although there has been a laudable change of attitude, favoring
the social dimension instead of creditors’ interests, the fact is that these policies are only
being promoted now, in Europe, hypocritically erasing the past. What is there to say of
facts such as these: the total African external debt was $324.7 billion USD in 2010,
meaning 20.7% of GDP, while the public debt of the United States was $14.5 trillion USD in
the same year, or 98.6% of GDP?
How Did Science Become Ideology?
The ostensible belief in recipes that don’t work and yet continue to be used is somewhat
of a paradox. When theoretical tools designed to help comprehend reality are used
without regard to their limitations, or when findings are selectively adjusted to endorse
one single view premised on wishful thinking, then science becomes ideology.
Globalization as it emerged and was perceived over the last decade of the 20th
century
prompted a wave of opposition. The most radical and vocal opponents of the Washington
Consensus accused Bretton Woods institutions and wealthy countries of spreading a new
ideology – neoliberalism. Leading economists got blinded by the myth of perfect markets,
either by choice or circumstance. As Paul Krugman sarcastically put it, “the economics
profession went astray because economists, as a group, mistook beauty, clad in
impressive‐looking mathematics, for truth” (Krugman, 2009: MM36).
The neoclassical notion of market efficiency, challenged by John Maynard Keynes, who
called for active government intervention in the marketplace by printing more money and
increasing public spending to boost demand during the Great Depression, is now again the
focus of attention. The truth is that the blind belief in markets has enjoyed great
popularity in the last two decades. Led by Milton Friedman, monetarism invaded
economic thought in the 1970s, seeking to reconcile macroeconomics with neoclassical
microeconomic postulates in order to bring back to center stage the idea of market
efficiency. Monetarists admitted only limited forms of government intervention, linked to
a very modest regulation of money supply. Famously, Milton Friedman called for the
dissolution of the IMF since it interfered with the workings of the free market. Many
macroeconomists completely rejected Keynesian theory regarding economic crises, and
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others “returned to the view of Schumpeter and other apologists for the Great
Depression, viewing recessions as a good thing, part of the economy’s adjustment to
change” (Krugman, 2009: 36MM).
This debate had a strong influence on IMF postulates in particular. Without adopting
monetarism wholesale, the major concepts of the Washington Consensus provided
responses to the IMF’s concerns with minimizing regulation and letting markets do their
work. It was this approach that led the IMF to believe that its main job was to liberalize the
market in the countries of the South, and later in so‐called transition economies since
these represented the major obstacle to an open economy.
The report recently produced by the IMF’s Independent Evaluation Office on the failure
of the IMF’s surveillance role, vehemently criticized its performance on one of its main
functions — warn member countries of the risks building up in the world economy, as well
as in their national contexts. Among the major impediments identified by the Evaluation
Office were “a high degree of groupthink, intellectual capture, a general mindset that a
major financial crisis in large advanced economies was unlikely, and inadequate analytical
approaches” (IEO, 2011: 17).
A careful reading of the report’s findings reveals additional inconvenient truths. First,
intellectual narrow‐mindedness creates situations where the line between what we see
and what we want to see is too easy to cross. Another important reason for the IMF’s
failure to report accurately and produce honest analysis was the influence of the largest
shareholders on surveillance and policies (IEO, 2011: 20).
The IEO drew an unflattering picture of the IMF staff, pointing to “cognitive biases,”
including a homogeneous mindset (groupthink) and an “insular culture” that rarely
referred to external research; the belief that economists in advanced countries were
better aware of what was happening in their own countries, overlooking the importance
of financial issues and the analysis of macroeconomic linkages; overreliance on models
and similar tools, such as macro modeling, which practically did not include the analysis of
money and asset markets; overreliance on simplistic and first‐round examination
techniques, such as stress testing, to determine the soundness of banking systems; and
worst still, misinterpretation or dismissal of certain data for the sake of theoretical
coherence (IEO, 2011: 17‐19).
Intelectual honesty was further injured by the lack of reference to the limitations of
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data or to the existence of different analyses. The IMF epitomized the major drawbacks of
modern knowledge production and applied research, characterized by sectoral approaches
and lack of holistic analysis. More specifically, it opted for economic theories, quantitative
and data selection methods that sustained the coherence of its neoclassical assumptions.
Dissenting views were silenced given the power chain reaction between the largest
shareholder countries and senior management. The authors of the evaluation report also
noted the complaints about lack of even‐handedness in the treatment of different
countries (IEO, 2011: 20). To put it in a nutshell, the main institution in charge of
macroeconomic policy recommendations produced an analysis that was heavily influenced
by its most powerful members, and promoted conformity, self‐censorship, data selectivity,
and one set of analytical approaches implemented in a discriminatory manner.
It is essential to engage in an honest academic dialogue and to promote intelligent
systems of governance that are open to a plurality of approaches and lead to fruitful
synergies between different contributions. Regrettably, however, there are too many
cases of bias in the collection and interpretation of statistical data. We have a growing
awareness of the multifaceted and diverse nature of our world, and of the interconnection
between the various challenges that we face. This opens up new perspectives on how we
can see and interpret the world around us, helping us to think outside the box. Besides the
GDP, the Human Development Index (HDI), the Gini coefficient, and the Happiness Index
represented important breakthroughs. The number of economic, social, and statistical
indicators that can help us understand the importance of demography is growing at a fast
pace. For instance, the way in which we currently measure international trade does not
reflect the complexity of global production chains (Lamy, 2011).
Bearing this in mind, Robert Zoellick, the president of the World Bank, sent an
important signal when he initiated the liberalization of the Bank’s information policy,
granting public access to about 7000 data sets that were previously available only to
subscribers, mostly governments and researchers. During the first month alone, 4.5 million
individual visitors accessed the site. Since these data are used to define social and
economic policies, their importance as a bargaining tool is fundamental. The data and
methodology underlying the analysis and political recommendations of the World Bank
are thus open to public scrutiny. Robert Zoellick described his decision as a
“democratization of development economics” (Strom, 2011). Maybe this is an
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exaggeration, but the truth is that after the failure of the Washington Consensus in what
concerns the transparency of its methods of analysis, any progress is welcome.
Significant Changes in Africa and Its Role
The sets of indicators we select for our analysis and the way we collect, define and
interpret data are important. The divergence between the Washington‐based institutions,
on the one hand, and United Nations, on the other, in the 1990s with regard to the impact
of structural adjustment reforms provides a compelling example of different
recommendations based on different approaches.
The growing influence of the South, including African countries, is a factor that is going
to contribute to change on many levels. At present, we cannot afford to ignore
divergences, since the major players and power relations are rapidly changing dominant
ideas. When Goldman Sachs coined the term BRIC (acronym for Brazil, Russia, India, China)
in 2001, many did not take it seriously. The 2008‐09 crisis accelerated the shift in the
global balance of power, and the G20 took over the leading role from the G8. In 2010,
BRICS, now including South Africa, already accounted for 25.6% of the world’s GDP, 15.5%
of trade, and 42.6% of the world’s population (2,940 million).
In terms of economic relevance, African countries are still relatively marginal. However, the
continent’s average growth rate increased by 5 to 6% during the last decade, and the OECD
reported that the rate of return on investment there has been the world’s highest in recent
years. A new study by Ernst & Young indicates that foreign direct investment (FDI) in Africa
grew 87% in the last decade, and that FDI flows continued even during the crisis and may
even accelerate in 2012, reaching 150 billion dollars by 2015 (Ernst & Young, 2011: 7). The
Boston Consulting Group has recently arrived at a similar conclusion based on somewhat
different data, namely an annual growth in exports of 18% since 2000, similar to BRICS, and
an annual increase of over 8% in the revenues of the 500 largest African companies since
1998. This report (produced before the Arab revolutions) points to the emergence of the so‐
called “African Lions” (by analogy to the “Asian Tigers”), which include Algeria, Botswana,
Egypt, Lybia, Mauritius, Morocco, South Africa and Tunisia (with a collective GDP per capita
of 10,000 USD, exceeding that of BRICS), soon to be joined by Ghana and Nigeria (BCG, 2010:
1‐2).
The population of Africa has exceeded the 1 billion mark. Demographic growth is
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businesses, whose activities are market based but geared towards generating social benefits
by involving beneficiaries as suppliers and customers. A recent study by the Monitor Group
identified at least 439 enterprises of this kind in nine countries in Sub‐Saharan Africa
(Monitor Group, 2010: 3‐4).
Even the World Bank has shifted from a pessimistic stance to a generalized euphoria
over the future of the continent:
Sub‐Saharan Africa […] in 2011 has an unprecedented opportunity for transformation and
sustained growth. […] Putting these factors together, the Bank concludes that Africa could be
on the brink of an economic take‐off, much like China was 30 years ago, and India 20 years
ago. (The World Bank, 2011: 3‐4)
The Impact of the Financial Crisis on the Washington Consensus
The reconfiguration of economic geography started exerting pressure on the old and
inadequate governance structures of the IMF and World Bank established after the Second
World War. As a result, they began a slow process of reform that included the
redistribution of voting shares. First, the voting share of Sub‐Saharan Africa rose by 3%,
but continues to represent only 1.4% of the total. After a second round of revisions,
China’s calculated quota share rose from 6,38 to 7.47%, which placed it ahead of Japan
(whose calculated quota declined to 6,99%), but still behind the United States, with 17.8%.
The total share of the European Union is estimated to fall from 25% in 2000 to 18% in
2015. Similarly, as a result of the reform of the World Bank governance, only 3.3% of votes
have been transferred from OECD to developing countries. China’s share rose from 2.77 to
4.42%, thus turning it into the third largest shareholder after the US and Japan. However,
the US continues to be the leading player, holding 16,85% of voting shares, while more
than one‐third of African countries saw their shares actually decrease.
The financial downturn signaled the need for more radical transformations within the
IMF. In early 2011, the IMF’s leadership suggested that SDRs (IMF’s Special Drawing Rights
currently composed of the dollar, pound, euro and yen) could help stabilize the global
financial system. For this to happen, their current role as a reserve currency with the
Fund’s loans denominated in SDRs would need to be substantially expanded to areas such
as “a potential new class of reserve assets: tradable SDR denominated securities issued by
the Fund,” or “a unit of account which could be used to price internationally traded assets
(e.g., sovereign bonds) or goods (e.g., commodities).” These suggestions were presented
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and analyzed in a report published by the IMF in January 2011, which argues that “In order
to make a difference in any of these areas, the role played by the SDR would need to be
enhanced considerably from its current insignificant level. Very significant practical,
political, and legal hurdles would need to be overcome in the process” (IMF, 2011: 1).
Moreover, it was argued that the inclusion of currencies of emerging economies in the
current SDR basket would help promote such objectives as increasing the supply of safe
global assets and “reducing negative impacts of exchange rate volatility among major
currencies” (ibidem). Such proposals obviously come close, if anything else, to developing
an alternative to the US dollar as the global reserve currency.
The proposals for an alternative reserve currency also reflect the growing influence of
emerging economies, whose central banks, particularly in China, are diversifying their
foreign currency basket and moving away from the US dollar, which devalued significantly
against stronger currencies in the first half of 2011. It should be noted, however, that
emerging countries have a high percentage of their reserves in US treasury bonds, and thus
want a stronger dollar (Addison, 2011).
The major world creditors are now countries of the South, many of which achieved
success through policies that challenged the orthodoxy of the Washington Consensus. The
IMF’s Chief Economist, Olivier Blanchard, recognized that “in the age‐old discussion of the
relative roles of markets and the state, the pendulum has swung — at least a bit — toward
the state,” and that “distortions within finance are macro‐relevant” (Blanchard, 2011). This
implies a humble stance but not necessarily a fundamental change.
Indeed, the IMF’s recent stance on the European debt crisis was at times surprising for
those used to the old style Washington Consensus. In Ireland, the IMF first appeared as
defending the interests of the Irish taxpayers in the face of the European Central Bank and
Ireland’s creditors by putting forward a plan to reduce “€30 billion of unguaranteed bonds
by two‐thirds on average” (Whitney, 2011). It later changed to a more traditional role as
the Euro area crisis deepened and creditors began to exert pressure. In any case, the
macroeconomic policies promoted by some Southeast Asian countries as well as Latin
America’s fiscal conservatism coupled with aggressive social policies (through income
transfer programs) have placed the Washington Consensus on the defensive.
The Post‐Washington Consensus Era: New Hope for Economists?
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Finally, Olivier Blanchard himself acknowledges the relevance of behavioral economics
and behavioral finance, as well as agency theory, when he discusses the workings and
incentives of the financial sector (Blanchard, 2011).
After a long period of Washington Consensus orthodoxy, the blossoming of alternatives
and the variety of approaches are refreshing, all the more so since many of their
proponents are part of “the system,” so to speak. It means that even the dominant schools
of economic thought are ready to start revising their views. Alternative currents, including
evolutionary, institutional, and neostructuralist economics, have resurfaced. We are living
in exciting times marked by the demise of the ideology that has guided Western policy‐
makers and was imposed on the rest of the world for nearly three decades. In truth, the
confluence of the rise of the South and the decline of the political and ideological
supremacy of the West is not accidental. In our current globalized world, the critiques of a
prevailing ideology in particular – derived from post‐colonial theories – may be finally
expected to emerge from the theoretical isolation of philosophical cultural studies into the
open field of political economy.
The unlocking of economic theory and the questioning of disciplinary divisions
represent a window of opportunity for reinvigorating an integrated and ambitious
sustainable development agenda. The concept of development should be reconsidered
through a holistic approach, encapsulating intrinsically linked economic, social and
environmental dimensions, instead of breaking them up into separate compartments. A
stronger and more democratic state, supported by efficient governance mechanisms,
should assume this role. This is particularly important if public policies are to provide
better social protection.
Knowledge should become public in order to promote collective and global creation.
The potential of emerging urban centers could also be used for fostering integrated
regional development and planning, as well as endogenous participatory decision‐making
processes (Lopes, Sachs & Dowbor, 2010).
The first practical steps for the actual replacement of the Washington Consensus should
focus on recovering the regulatory capacity of the state, aligning national accounting
systems to value intangibles, including the incorporation of externalities and the
introduction of innovative indicators, guaranteeing basic income, rationalizing financial
systems of intermediation, redesigning tax systems, adopting budgets that aim at
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improving the redistribution of resources according to economic, social and environmental
results, and taxing and registering speculative transactions (Lopes, Sachs & Dowbor, 2010).
A brave new world is unfolding before us.
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