The Washington Consensus is a set of ten economic policy prescriptions considered in the 1980s and 1990s to constitute the "standard" reform package promoted for crisis-wracked developing countries by the Washington, D.C.-based institutions 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 such as trade liberalization, privatization and finance liberalization. They also entailed fiscal and monetary policies intended to minimize fiscal deficits and minimize inflation.
The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations: Joseph Stiglitz has written that "the Washington Consensus policies were designed to respond to the very real problems in Latin America and made considerable sense" (though Stiglitz has at times been an outspoken critic of IMF policies as applied to developing nations). In view of the implication conveyed by the term Washington Consensus that the policies were largely external in origin, Stanislaw and Yergin report that the term's creator, John Williamson, has "regretted the term ever since", stating "it is difficult to think of a less diplomatic label." Williamson said in 2002, "The phrase "Washington Consensus" is a damaged brand name... Audiences the world over seem to believe that this signifies a set of neoliberal policies that have been imposed on hapless countries by the Washington-based international financial institutions and have led them to crisis and misery. There are people who cannot utter the term without foaming at the mouth. My own view is of course quite different. The basic ideas that I attempted to summarize in the Washington Consensus have continued to gain wider acceptance over the past decade, to the point where Lula has had to endorse most of them in order to be electable. For the most part they are motherhood and apple pie, which is why they commanded a consensus." Kate Geohegan of Harvard University's Davis Center for Russian and Eurasian Studies credited Peruvian neoliberal economist Hernando de Soto for inspiring the Washington Consensus. Williamson partly credited de Soto himself for the prescriptions, saying his work was "the outcome of the worldwide intellectual trends to which Latin America provided" and said that de Soto was directly responsible for the recommendation on legal security for property rights.
While President Néstor Kirchner's reliance on price controls and similar administrative measures (often aimed primarily at foreign-invested firms such as utilities) clearly ran counter to the spirit of the Consensus, his administration in fact ran an extremely tight fiscal ship and maintained a highly competitive floating exchange rate; Argentina's immediate bounce-back from crisis, further aided by abrogating its debts and a fortuitous boom in prices of primary commodities, leaves open issues of longer-term sustainability. The Economist has argued that the Néstor Kirchner administration will end up as one more in Argentina's long history of populist governments. In October 2008, Kirchner's wife and successor as president, Cristina Kirchner, announced her government's intention to nationalize pension funds from the privatized system implemented by Menem-Cavallo. Accusations have emerged of the manipulation of official statistics under the Kirchners (most notoriously, for inflation) to create an inaccurately positive picture of economic performance. The Economist removed Argentina's inflation measure from its official indicators, saying that they were no longer reliable.
In 2003, Argentina's and Brazil's presidents, Néstor Kirchner and Luiz Inácio Lula da Silva, signed the "Buenos Aires Consensus", a manifesto opposing the Washington Consensus' policies. Skeptical political observers note, however, that Lula's rhetoric on such public occasions should be distinguished from the policies actually implemented by his administration.
Venezuela
thumb|A group of rioters attempting to push over a bus during the [[Caracazo]]
thumb|CANTV's old logo, state telecommunications company privatized in 1991
In the 1980s, a fall in oil prices and the start of the Latin American debt crisis brought economic difficulties to Venezuela. Additionally, President Luis Herrera Campins' economic policies led to the devaluation of the Venezuelan bolívar against the US dollar in a day that would be known as Viernes Negro (). Following the oil price crisis, the Herrera Campins government declared bankruptcy to the international banking community and then enacted currency restrictions. The currency controls devalued Venezuelan purchasing power by 75% in a matter of hours; banks did not open on Viernes Negro, and even the Central Bank did not have many reserves of foreign currencies, causing the government to devalue the bolívar by 100%. and initially rejected liberalization policies. Venezuela's international reserves were only US$300 million at the time of Pérez' election into the presidency; Pérez decided to respond to the debt, public spending, economic restrictions and rentier state by liberalizing the economy The increase was supposed to be implemented on 1 March 1989, but bus drivers decided to apply the price rise on 27 February, a day before payday in Venezuela. In response, protests and rioting began on the morning of 27 February 1989 in Guarenas, a town near Caracas; a lack of timely intervention by authorities, as the was on a labor strike, led to the protests and rioting quickly spreading to the capital and other towns across the country. The most remarkable auction was CANTV's, a telecommunications company, which was sold at the price of US$1,885 million to the consortium composed of American AT&T International, General Telephone Electronic and the Venezuelan Electricidad de Caracas and Banco Mercantil. The privatization ended Venezuela's monopoly over telecommunications and surpassed even the most optimistic predictions, with over US$1,000 million above the base price and US$500 million more than the bid offered by the competition group. By the end of the year, inflation had dropped to 31%, Venezuela's international reserves were now worth US$14,000 million and there was an economic growth of 9% (called as an "Asian growth"), the largest in Latin America at the time. who in 1982 had promised to depose the bipartisanship governments. Once elected in 1998, Chávez began to revert the policies of his predecessors.
Criticism
As of the 2000s, several Latin American countries were led by socialist or other left wing governments, some of which—including Argentina and Venezuela—have campaigned for (and to some degree adopted) policies contrary to the Washington Consensus policies. Other Latin American countries with governments of the left, including Brazil, Chile and Peru, in practice adopted the bulk of the policies included in Williamson's list, even though they criticized the market fundamentalism that these are often associated with.
General criticism of the economics of the consensus is now more widely established, such as that outlined by US scholar Dani Rodrik, Professor of International Political Economy at Harvard University, in his paper Goodbye Washington Consensus, Hello Washington Confusion?.
As Williamson has pointed out, the term has come to be used in a broader sense than its original intention, as a synonym for market fundamentalism or neoliberalism. In this broader sense, Williamson states, it has been criticized by people such as George Soros and Joseph Stiglitz. The term has become associated with neoliberal policies in general and drawn into the broader debate over the expanding role of the free market, constraints upon the state, and the influence of the United States, and globalization more broadly, on countries' national sovereignty.
Some US economists, such as Joseph Stiglitz and Dani Rodrik, have challenged what are sometimes described as the 'fundamentalist' policies of the IMF and the US Treasury for what Stiglitz calls a 'one size fits all' treatment of individual economies. According to Stiglitz the treatment suggested by the IMF is too simple: one dose, and fast—stabilize, liberalize and privatize, without prioritizing or watching for side effects.
Besides the excessive belief in market fundamentalism and international economic institutions in attributing the failure of the Washington consensus, Stiglitz provided a further explanation about why it failed. In his article "The Post Washington Consensus Consensus", he claims that the Washington consensus policies failed to efficiently handle the economic structures within developing countries. The cases of East Asian states such as Korea and Taiwan are known as a success story in which their remarkable economic growth was attributed to a larger role of the government by undertaking industrial policies and increasing domestic savings within their territory. From the cases, the role for government was proven to be critical at the beginning stage of the dynamic process of development, at least until the markets by themselves can produce efficient outcomes.