Definition: The Washington Consensus refers to a set of broadly free market economic ideas, supported by prominent economists and international organizations, such as the IMF, the World Bank, the EU and the US. It was drawn from the advice of John Williamson.
It minimized the state’s role in the economy and pushed an aggressive free-market agenda of deregulation, privatization, and trade liberalization
It paved the way for the domination of the Western-style capitalism. It was aggressively promoted by the International Monetary Fund and the World Bank.
Aim: To advocate free trade, floating exchange rates, free markets and macroeconomic stability.
Importance: To determine policy towards economic development in Latin America, South East Asia and other countries.
Ten principles of Washington Consensus
- Low government borrowing
- Redirection of public spending from subsidies toward broad-based provision of key pro-growth
- Tax reform
- Positive Interest rates
- Competitive exchange rates;
- Trade liberalization
- Liberalization of inward foreign direct investment;
- Privatization of state enterprises;
- Legal security for property rights.
It defined the rules of the game for the global economy for almost a half-century. But Currently, this system is under fire for exacerbating inequalities and perpetuating the Global South’s subordination to the North.