Washington's Unraveling Consensus

America and it’s prized post-World War II economic institutions (World Bank, International Monetary Fund) are loosing their grip over the developing world. At least thats what Harvard political economist Dani Rodrik believes. Rodrik makes the compelling argument that the cookie-cutter economic liberalization and privitization reform packages of the past are beginning to loose their supremacy. With the volatlity of global financial markets exposed, and poor nations wallowing under the continuing food crisis there is a general movement towards cynicalism.

In the past, politicians could brush off anti-globalization sentiments as blanket radicalism but today, even more prominent international development economists are looking for alternatives.

“There was a time when global elites could comfort themselves with the thought that opposition to the world trading regime consisted of violent anarchists, self-serving protectionists, trade unionists, and ignorant, if idealistic youth…What makes news nowadays is the growing list of mainstream economists who are questioning globalisation’s supposedly unmitigated virtues.”

The paradigm shift in international development isn’t limited to theories alone. Development practicioners are looking for specific policy frameworks which, emphasize pragmatism and promote governments to be more experimental in their approaches. Rodrik highlights a new report entitled the Spence Commission On Growth and Development, designed to let developing countries develop in their own ways.

“The new policy mindset starts with relative agnosticism about what works. Its hypothesis is that there is a great deal of “slack” in poor countries, so simple changes can make a big difference…Rather than comprehensive reform, it emphasizes policy experimentation and relatively narrowly targeted initiatives in order to discover local solutions, and it calls for monitoring and evaluation in order to learn which experiments work.”

While many developing countries are seeing enormous growth in the global economy, they are achieving it in ways free-marketeers in developed capitalist countries like America and Britain said they never could. If the Washington Consensus is on it’s way out, will developed countries fight to save it or let it fade into the dust-pin of history?