Washington Consensus
Topic: The Making of a Global World · NCERT: Beyond NCERT
Meaning
The Washington Consensus is a set of free-market policies for developing countries. The IMF, the World Bank and the US Treasury promoted it from about 1989. All three are based in Washington, hence the name. Its main points were fiscal discipline (controlling government deficits), free trade, free movement of capital, privatisation and deregulation (removing government controls). It marked a turn away from the old belief in government-managed economies. Critics saw it as rules made by rich countries for poorer ones.
Example
The economist John Williamson coined the term in 1989 to describe policies being urged on debt-hit Latin American countries. In the 1990s, these countries opened their markets and sold state firms under these policies. Many other developing countries later followed the same path through IMF and World Bank loan conditions.
Don't confuse with
- Bretton Woods system (1944): That order used fixed exchange rates and gave governments control over flows of goods and capital. The Washington Consensus instead pushed open markets and less government control.
- New International Economic Order (NIEO): This was the G-77's demand for fairer raw-material prices and control over natural resources. It came from developing countries, not from Washington.
Related concepts
- Bretton Woods Conference
- Bretton Woods system
- International Monetary Fund
- World Bank
- Fixed exchange rate
- Marshall Plan
- General Agreement on Tariffs and Trade
- Multinational corporation
- Group of 77
- New International Economic Order