Content area
Full text
Joseph Stiglitz served as chief economist and senior vice president for development economics at the World Bank until the end of 1999. At the World Bank, he gained notoriety by criticizing the development economics enshrined in "the Washington Consensus" and by leveling harsh attacks on the International Monetary Fund (IMF). Prior to serving at the World Bank, Stiglitz was a member and then chair of the U.S. Council of Economic advisers. He is on leave from Stanford University, where he is a professor of economics.
Multinational Monitor: What was the "Washington Consensus?"
Joseph Stiglitz: It was a consensus formulated between 15th Street and 19th Street in Washington among members of the International Monetary Fund (IMF), the U.S. Treasury Department, and the World Bank. It argued that the keys to success in developing countries were three things: macro-stability, liberalization (lowering tariff barriers and market deregulation) and privatization. It was largely formulated out of experience with Latin America.
MM: Does it still exist as a consensus?
Stiglitz: No. There is a consensus that those precepts, while important, are neither necessary nor sufficient for successful development.
If you look around the world, the most successful economic performer in recent decades has been China. Roughly 75 percent of the increase in aggregate GDP among all the low-income countries has occurred within China in the last 20 years. China followed some elements of the Washington Consensus - such as macro-stability but clearly did not follow other elements, such as privatization and liberalization.
It did liberalize in certain dimensions. For instance, it did encourage competition among the township and village enterprises (TVEs). It provided a fertile ground for a new entrepreneurship at the village level. But it didn't follow the standard precepts. Other countries in the most successful region
in the world - East Asia - by and large also did not follow all the doctrines.
At the same time, there were several countries that followed most of the precepts almost perfectly and have not grown.
There is also an emerging consensus that the Washington Consensus was not only faulty in its narrow economic strategies, but also excessively narrow in its objectives. It focused mainly on increasing GDP, not on broader concepts of increasing living standards or democratic, equitable, sustainable development.