The Consensus of the Washington-Based Financial Institutes - Essay Example

The term itself was given by Williamson and as such it has been a part of the political and economic dictates of international monetary bodies for many years. The policies that are given as recommendations seem to be quite useable for those who defend the consensus since they call it necessary for progress. Supporters of the Washington Consensus say that following these recommendations can only lead to greater economic independence for debt-laden countries and it is a path that leads to the development of the industrial and services sector. However, those who oppose the policies say that the Washington Consensus is merely a method for America and other developed nations to enter new markets and exploit their resources (Williamson, 2000).

Both sides have been quite vocal about their feelings and each highlights the successes and the failures of the consensus. The supporters of the Washington Consensus say that many people misunderstand the recommendations since they are not universally applicable to all nations at all times. Instead of looking at the consensus as forced neo-liberal policies, the policies should be seen as recommendations coming from those who have achieved economic development to those who have yet to achieve it (Harvard University, 2003).

On the other hand, those who oppose the policies recommended by the Washington bodies say that the policies are mandated in connection to grants and aid money. Even when the policies have been implemented, they often lead to the country running into an economic crisis which brings more misery for the people than economic development (Harvard University, 2003). The difference of opinion warrants a deeper understanding of the policies themselves since they appear to be quite controversial.

The primary policies under the Washington Consensus have been outlined by Williamson (2000) as the implementation of monetary discipline in terms of free trade and public expenditure and investments in projects that give economic returns to the people. The alleviation of poverty and investments in the healthcare and education sectors are also important parts of the policies. While these may remain uncontroversial, other policies are not quite as easy to digest since they ask for the creation of a broader tax base, variable interest rates for loans, and a liberalization of trade policies. The policies also recommend the development of foreign investment, privatization of government-owned services, and deregulation of the economic system under a free-floating currency exchange system (Held, 2005).

Those who are opposed to these policies cite examples of sub-Saharan African countries where the implementation of these measures has resulted in the economies of these countries worsening rather than improving. Even in Latin America, as reported by Robinson (2005), the policies have given mixed results. However, the problem with the policies is not about their content but about their enforcement. This enforcement is lax in countries where infrastructure is lacking and the government is unable to control major things such as official corruption or even minor things such as the protection of property rights.

It seems that the Washington Consensus was created by its original thinkers about what they would do in their own countries if they were faced with the same issues as those to whom the policies are recommended. The consensus did not take cultural implications into account and that is why in some locations the policies have backfired. Held (2005) says that the Washington Consensus required changes to ensure that it did not create a cultural conflict and the policy recommendations need qualifiers before they can be handed out to every nation that seeks help from the IMF or the World Bank.

Held (2005) and Rodrik (2001) further suggest that the Washington Consensus may even create policies that are useless for a country that has no concept of corporate social responsibility, monetary standards, international trade agreements, or control of the corruption of public officials. They go as far as to say that the Washington Consensus should include these terms as a part of the package make allowances for social security concerns and try to reduce the level of poverty in a troubled country.

In this manner, the present shape of the Washington Consensus is quite different from the earlier position that had been created years ago (Akbar, 2005). It seems as if the Washington Consensus can change to be more in line with the demands of the time as well as the lessons of the past. Those who suggest that the Washington Consensus has failed as a set of policies or that the international bodies themselves are not sure about the consensus fail to see that it is the implementation of the policies that have failed rather than the measures themselves.

In conclusion, as the future demands of troubled economies or economically depressed regions change, likely, the consensus of the Washington-based financial institutes regarding what is to be done with those nations will likely change. However, that consensus may not remain what it is today and perhaps other factors such as the protection of the environment or limiting the amount of Carbon Dioxide being released into the atmosphere could become far more important than ensuring that there are ample foreign investment opportunities. Read More