The Washington Consensus is a set of economic prescriptions for macroeconomic policies laid out by the English economist John Williamson in 1989. They were intended as basic guidelines for countries that needed assistance from international economic organizations such as the World Bank and the International Monetary Fund. The main emphasis was on the importance of macroeconomic stability and integration into the global economy, in other words, the neoliberal idea of ​​globalization. However, it led to limited results after being applied in countries experiencing economic crises.
Over the years, the Washington Consensus has been blamed for a number of serious destabilizations, most notably the Argentine crisis. John Williamson noted that in many cases the results of its implementation were disappointing, identified some shortcomings, but at the same time summed up that this policy brought positive results, namely economic growth, employment, poverty reduction in many countries.
The ideas for the time they were formulated by Williamson were not new. But they represented the quintessence of common themes among the recommendations that were determined by the International Monetary Fund, the World Bank, the US Department of the Treasury and other lending agencies.
The purpose of the standard reform package was to solve the real problems prevailing in Latin America. Its subsequent use in relation to other countries is criticized even by proponents of the rules. As Williamson himself pointed out, the term he introduced for ten specific recommendations regarding economic policy began to be used in a broader sense than his original intention, he began to be associated with market fundamentalism and neoliberal politics in general. And in this broad sense, the Washington Consensus has been criticized by many economists, including George Sorez, Nobel Laureate Joseph Stiglitz, and Latin American politicians.
The public around the world today is confident that this testifies to such a neoliberal policy when Washington's international financial institutions created a number of specific measures for Latin American countries that were experiencing an economic crisis, which led to even greater losses. There are even people who cannot pronounce the words “Washington Consensus” without being furious.
The ten reforms that made up Williamson's list actually represented the base level.
1. Budget discipline. This was to be carried out in all countries where there was a large deficit that led to a balance of payments crisis and high inflation, which hit the poor classes, as rich people could keep their monetary assets abroad.
2. Redistribution of government spending in those areas that offer high economic returns, and the potential to improve the distribution of income (this is medical care, primary education, infrastructure).
3. Tax reform (reduction of marginal rates, expansion of the tax base).
4. Liberalization of interest rates.
5. Competitive exchange rate.
6. Liberalization of foreign direct investment.
7. Privatization.
8. Trade liberalization.
9. Deregulation.
10. Securing property rights.
The adoption of the Washington Consensus by many governments was largely a reaction to the global economic crisis that hit most of Latin America and some other developing regions during the 1980s. The emergence of the crisis had several reasons: a sharp increase in the price of imported oil after the creation of OPEC in 1960, setting the level of external debt, growth in the USA, and, consequently, in the world of interest rates. As a result of these problems - loss of access to additional foreign loans.
I must say that many other countries tried to implement various points of the proposed package, sometimes it is used as a condition for obtaining loans from the IMF and the World Bank.
However, the results of these reforms remain the subject of much debate, and economists and politicians continue to analyze the causes and factors of economic crises, starting from the time the first world economic crisis happened in 1857, which even influenced Russia. The fact is that Karl Marx began work on Capital in the winter of 1857-1858, and this was caused by the economic crisis that erupted in the fall of 1857. And today, as you know, the theory of crises is connected with the Marxist economy.