A Short History of the Washington Consensus
Paper commissioned by Fundación CIDOB for a conference "From the Washington Consensus towards a new Global Governance" Barcelona, Spain
The term "Washington Consensus" was coined in 1989. The first written usage was in my background paper for a conference that the Institute for International Economics convened in order to examine the extent to which the old ideas of development economics that had governed Latin American economic policy since the 1950s were being swept aside by the set of ideas that had long been accepted as appropriate within the OECD. In order to try and ensure that the background papers for that conference dealt with a common set of issues, I made a list of ten policies that I thought more or less everyone in Washington would agree were needed more or less everywhere in Latin America, and labeled this the "Washington Consensus." Little did it occur to me that fifteen years later I would be asked to write about the history of a term that had become the center of fierce ideological controversy.
The first section of this paper describes what I recollect about the background to my background paper for the 1989 conference. The second section retraces much more familiar ground, summarizing the ten points that I included in the Washington Consensus. This is followed by an account of the reception given to the term, and the analysis. The next section tries to account for the fact that the term became used in such different ways in different quarters and thus to be at the center of ideological controversies. The last substantive section is forward-looking and describes what I believe needs to be added to my original list in order to formulate a policy agenda for Latin America today.
The story started in the Spring of 1989 when I was testifying before a Congressional committee in favor of the Brady Plan. I argued that it would be good policy to help the debtor countries overcome their debt burden now that they were making profound changes in economic policy, along the lines advocated by Balassa, Bueno, Kuczynski, and Simonsen (1986). I encountered rank disbelief in the Congressmen before whom I was testifying that there were any significant changes in economic policies and attitudes in process in Latin America. After discussion with Fred Bergsten, the director at the Institute for International Economics, where I was (and am) professionally located, we decided to convene a conference to test the extent to which I was right and to put the change in policy attitudes on the record in Washington.
A few weeks later I gave a seminar at the Institute for Development Studies in England, where I made much the same argument. I was challenged by Hans Singer to spell out what I meant when I said that many of the countries were changing their policies for the better. This emphasized the need to be very explicit about the policy changes that I was thinking of. I decided that conference that we were planning for the autumn, which we decided to call “Latin American Adjustment: How Much Has Happened?” needed a background paper that would spell out the substance of the policy changes we were interested in. That paper was entitled “What Washington Means by Policy Reform” and was sent to the ten authors who had agreed to write country studies for our conference to try and make sure that they addressed a common set of issues in their papers.