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The Washington Consensus is a set of ten economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank and United States Department of the Treasury. The term was first used in 1989 by English economist John Williamson. The prescriptions encompassed free-market promoting policies in such areas as macroeconomic stabilization, economic opening with respect to both trade and investment, and the expansion of market forces within the domestic economy.
Subsequent to Williamson's use of the terminology, and despite his emphatic opposition, the phrase Washington Consensus has come to be used fairly widely in a second, broader sense, to refer to a more general orientation towards a strongly market-based approach (sometimes described as market fundamentalism or neoliberalism).
American imperialism .
Beijing Consensus .
Bretton Woods system .
Central America Free Trade Agreement (CAFTA)
Democratic capitalism .
Economic growth .
The End of History and the Last Man .
Andre Gunder Frank .
Gross domestic product .
Hyperinflation .
Immanuel Wallerstein .
Lima Consensus .
Macroeconomics .
Mumbai Consensus .
North American Free Trade Agreement (NAFTA)
Poverty Reduction Strategy Paper .
Structural adjustment .
World Systems Theory .
Subsequent to Williamson's use of the terminology, and despite his emphatic opposition, the phrase Washington Consensus has come to be used fairly widely in a second, broader sense, to refer to a more general orientation towards a strongly market-based approach (sometimes described as market fundamentalism or neoliberalism).
The concept and name of the Washington Consensus were first presented in 1989 by John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington, D.C.
The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations:
The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations:
- Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP;
- Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
- Tax reform, broadening the tax base and adopting moderate marginal tax rates;
- Interest rates that are market determined and positive (but moderate) in real terms;
- Competitive exchange rates;
- Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
- Liberalization of inward foreign direct investment;
- Privatization of state enterprises;
- Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions;
- Legal security for property rights.
In emphasizing the magnitude of the difference between the two alternative definitions, Williamson has argued (see § Origins of policy agenda and § Broad sense below) that his ten original, narrowly defined prescriptions have largely acquired the status of "motherhood and apple pie" (i.e., are broadly taken for granted), whereas the subsequent broader definition, representing a form of neoliberal manifesto, "never enjoyed a consensus [in Washington] or anywhere much else" and can reasonably be said to be dead.
Discussion of the Washington Consensus has long been contentious. Partly this reflects a lack of agreement over what is meant by the term, but there are also substantive differences over the merits and consequences of the policy prescriptions involved. Some critics take issue with the original Consensus's emphasis on the opening of developing countries to global markets, and/or with what they see as an excessive focus on strengthening the influence of domestic market forces, arguably at the expense of key functions of the state. For other commentators, the issue is more what is missing, including such areas as institution-building and targeted efforts to improve opportunities for the weakest in society.
American imperialism .
Beijing Consensus .
Bretton Woods system .
Central America Free Trade Agreement (CAFTA)
Democratic capitalism .
Economic growth .
The End of History and the Last Man .
Andre Gunder Frank .
Gross domestic product .
Hyperinflation .
Immanuel Wallerstein .
Lima Consensus .
Macroeconomics .
Mumbai Consensus .
North American Free Trade Agreement (NAFTA)
Poverty Reduction Strategy Paper .
Structural adjustment .
World Systems Theory .
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