From the Washington Consensus to the Post-Washington Consensus: Retrospect and Prospect

Abstract

The past two decades have witnessed major changes in the paradigm of international development assistance. During the 1980s the import-substitution industrialization strategy (ISI) advocating for government market interventions to promote large-scale modern industries gave way to a new paradigm referred to as the Washington Consensus, which identified the market as a universally efficient mechanism to allocate scarce resources and promote economic growth. Scarcely a decade later, in the mid-1990s, the Washington Consensus was replaced by a contrasting paradigm called the Post-Washington Consensus. It emphasized the need for different institutions in different economies and recognized cases in which government market interventions can play a positive role. The post-Washington Consensus focused on poverty reduction, emphasizing the need for delivery to the poor of social services, such as education and health care, by government and civil society. Sustainability of this approach is questioned, however, because of its relative neglect on the provision of production-oriented infrastructure and services needed to supply profitable work opportunities for poor people.