The 1980s  turbulent for the developing world

The 1980s  turbulent for the developing world. The decade began with sovereign debt crises in several Latin American countries, and ended with the collapse of the Berlin Wall and political and market reforms in Eastern Europe. Responding to these events, economist John Williamson identified the “Washington Consensus” on the policies that developing countries must implement to ensure a return to growth. Williamson called this package the Washington Consensus because the World Bank, IMF, and U.S. Treasury Department—all based in Washington D.C.—concurred with these policy recommendations. Key to the Consensus was eliminating government involvement in the economy: “stabilize, privatize, and liberalize.”

The recent success of China and other East Asian countries as well as what some characterize as disappointing achievements from the Washington Consensus, have led some to suggest that a so-called “Beijing Consensus” is replacing or should replace the Washington Consensus. If the “Washington Consensus” espoused decentralized market fundamentalism, then the “Beijing Consensus” advocates a return to a state-led development strategy.

This new development path appeals to many governments for two reasons: first, it promises rapid results without a loss of sovereignty to Western governments that many developing country governments saw as a major part of the Washington Consensus. Second, it increases the government’s power within the country by creating a justification for state intervention and allocation. Advocates for the Beijing Consensus emphasize its potential for delivering rapid development. Critics ask why governments would be expected to have better success with a state-led strategy now than they experienced under ISI.