The failures of the “Washington consensus”

This work brings together four articles by Dani Rodrik, written and originally published between 1999 and 2007, and linked by a common question: in our contemporary, globalized world, what economic policies recommend to developing countries to engage on the path of growth, and developed countries to stay there ?

To begin with, let us remember that Dani Rodrik is a professor of international political economy at Harvard University, and that he specializes in the fields of the international economy, economic development and political economy. The question which constitutes the main guideline of his academic work as well as his publications intended for the general public is that of what a good economic policy is, especially for developing countries. The four articles gathered in this collection therefore naturally register in this problem.

The errors of “ Washington consensus »»

The main thesis of Nations and globalizationcommon to the four proposed texts, is that, as a whole, the prescriptions and recommendations of economic policy that it is usual, since 1989, to bring together under the term of “ Washington consensus », And which have notably been conveyed by institutions such as the IMF And the World Bank are wrong. This “ Washington consensus “Can, in his general inspiration, be summed up in three main ideas:” liberalization “,” privatization ” And “ outdoor », To which came, in the late 1990s, a fourth idea, the” good governance ». The common guidelines for these four articles is therefore to argue that these policies, as applied to the instigation of Bretton Woods institutions, were errors and naturally led to failures. To demonstrate this, Dani Rodrik relies, over these four articles, on both theoretical and empirical considerations.

From a theoretical point of view, Rodrik’s thesis can be summed up in two main points. According to him, the first error of the Orthodox supporters of “ Washington consensus It was to think that the objectives of liberalization, privatization, external openness as well as good governance, conceived as the necessary conditions for development and growth, lead to univocal economic and institutional recommendations and applicable to any country. Dani Rodrik insists on the contrary on the idea that different policies and various institutions can lead to the same result, and that the choice must be made by taking into account the concrete situation of the country considered.

The second error of “ Washington consensus “Based on the fact that the recommendations of economic policy aimed at promoting liberalization, privatization and external opening are based on the postulate that the markets are effective and that it is necessary to reduce friction and distortions to increase exchanges and their beneficial efficiency, and thus, ultimately, encourage economic growth. According to Rodrik, such policies would be perfectly justified if our world was generally characterized by perfect markets, in which case it would be very effective and legitimate to reduce or remove the distortions that are subsisting at the margin. But the real world is on the contrary an imperfect world, a world of “ second row “(second bestoften translated into the work by “ second choice ), That is to say in which friction and distortions constitute the norm much more than the exception. In such a context, policies aimed at eliminating or reducing distortions on certain markets can no longer be considered to be optimal. To a second -ranking world, you also need second -class policies.

On the empirical side, Dani Rodrik seeks to show his reader, either through general studies, or by special case studies, that the countries that have most scrupulously followed the recommendations of “ Washington consensus Are not necessarily the ones who have best succeeded. On the contrary, it was often those who have followed policies considered to be heterodox who have experienced the best performances. The last two articles of the collection, which respectively concern the case of India and that of Latin America, perfectly illustrate this point. For the first case, that of India, Dani Rodrik shows that Indian economic takeoff begins in the 1980s, a good ten years before the implementation of economic policies inspired by “ Washington consensus ». According to Rodrik, this example illustrates the success of policies favorable to business (pro-business), compared to policies favorable to the market (pro-market). In this sense, the second case, that of Latin America, shows the failure of the policies of “ Washington consensus “, Dogmatically applied and uniformly in the context of” shock therapies ». In particular, the liberalization of the capital markets led, in particular in the 1990s, to a very great volatility of the macroeconomic environment, and therefore to a general feeling of insecurity for the peoples of Latin America. Through these two examples, Dani Rodrik therefore seeks to show that the economic policies recommended by the “ Washington consensus Were not successful, far from it, while alternative policies have produced better results.

A relevant but incomplete criticism

It is always refreshing to hear recalled that the simple words “ liberalization “,” privatization ” And “ outdoor “Do not constitute the alpha and the omega of a policy of economic development or growth. At the time when Rodrik began to develop these themes (the first article in the collection dates from 1999), the questioning of the “ Washington consensus Was certainly less natural and more controversial than it is today. It is also quite difficult to contradict Dani Rodrik when he calls for greater consideration of the concrete conditions of a country as well as the preferences of its citizens in the definition of an economic policy. In this sense, this collection of articles recalls and brings together a good number of relevant and effective arguments against the excesses of “ Washington consensus ».

Nevertheless, a first criticism that could be sent to these theses is that they tend to confuse, in their analysis, the foundations of the recommendations of “ Washington consensus And its concrete political forms. Indeed, even if the “ shock therapies And the policies of rapid and brutal liberalization are far from having had the expected successes, the fact remains that the takeoff of the countries which have experienced the best economic performances is always linked to reforms which made them more open, more liberal, more private. On the other hand, Rodrik’s alternative recommendations remain very vague: he suggests being attentive to the concrete situations, specific to each country, which seems obvious, but it is nonetheless necessary to have general principles to orient economic policies in specific contexts.

But this is not the main defect of this work: its main weakness is editorial. First, the translation is unsatisfactory. Some sentences are not understandable in French, and the text even includes syntax errors and spelling mistakes. Then this collection may find it difficult to find an audience. Indeed, certain passages of Rodrik articles grouped here are clearly too technical for non-specialists, while they constitute essential elements of his demonstrations. This is likely to discourage general public readership. Conversely, the articles presented, which have also been cut and lightened, may be too unclear and not convincing enough for specialists. In short, on one side as on the other, this collection may miss its audience.