The Washington Consensus refers to a series of economic policies and rationalizations intended to help modernize the economies of developing countries. The British economist John Williamson came up with the term in 1989 specifically as a way to advocate for interventionist polices by developed countries—particularly the United States ...
The Washington Consensus refers to a series of economic policies and rationalizations intended to help modernize the economies of developing countries. The British economist John Williamson came up with the term in 1989 specifically as a way to advocate for interventionist polices by developed countries—particularly the United States—into the political and economic affairs of the developing world. The Washington Consensus promotes the intervention of large, international institutions, such as the International Monetary Fund or the World Bank, in order to accelerate economic growth and the development of business in poorer countries. Some of the strategies for accomplishing this include: lowering barriers to the growth of fledgling domestic industry, such as tariffs and trade restrictions; reducing borrowing at the government level in order to balance the national deficit with the GDP; encouraging free trade internationally; implementing broad and modern tax reforms; and much else.
According to this philosophy (i.e., in accordance with the proposals set forth by the Washington Consensus itself), yes, developed countries such as the United States should intervene in foreign economies. Advocates of the Washington Consensus point to the long-term benefits that foreign investment can have for underdeveloped countries: the stabilization of national currencies, the development of businesses and industry because of foreign investment, improvements in public, primary education, and so on. Furthermore, these advocates argue that it is simply impossible for small, underdeveloped countries to survive under the circumstances of a globalized economy. Economic fidelity no longer depends solely on improvements within one’s own country, but also by the country’s ability to engage in long-term trade outside of it. Thus, interventionism is an organic extension of this idea.
Many political-economists and academics harshly critique the ideas of the Washington Consensus. The scholar Arturo Escobar, for example, in his monograph Encountering Development, has argued that these kinds of interventionist policies serve no other purpose than undermining economic autonomy and national independence. Escobar, and others like him, argue that the rigid restrictions that the IMF and World Bank put on how underdeveloped countries can and cannot use their money actually serves the interests of business in the developed world, not the other way around. Thus, interventionism actually serves to keep these countries poor, producing the concept of “under-development” in the first place, and therein justifying the need for foreign intervention in the first place. It is a circular logic that only benefits the captains of industry and business in places like the US.