Scoring Millennium Goals: Economic Growth Versus the Washington Consensus

Abstract

According to International Monetary Fund and World Bank, [based] on current trends, most Millennium Development Goals (MDGs) will not be met by most countries. (1) This assessment, issued in 2004, is widely shared and reinforced by a 2005 United Nations report. (2) The joint Bank-Fund report identifies first of the three essential urgently needed if most countries are to reach MDGs as 'Accelerating reforms to achieve stronger economic (3) The other two essential elements include increased and improved delivery of human development and related services, and support from developed countries and international agencies. These three elements have also been emphasized by UN report, which paid particular attention to case for increasing aid. There is no denying that sustained, rapid economic growth is necessary for reaching MDGs. (4) Aside from its most obvious and direct bearing on reducing income poverty and halving number of people living on less than a dollar a day by 2015, economic growth will also facilitate provision of resources vital to achieve other MDGs. There is also no disputing joint IMF-World Bank report in its emphasis on salience of economic policy reforms rather than just focusing on increased financing for improved growth. But what kinds of reforms are to be accelerated for improved growth? And what role should providers of development assistance, particularly Bretton Woods Institutions (BWIs), play in helping to bring them about? The answers to these questions in joint Bank-Fund report are more controversial, as this paper will show. There are two distinct, though overlapping strands of thinking on these questions. One pertains to development strategies or content of reforms, particularly type of policy and institutional reforms advocated by BWIs and United States Treasury in context of adjustment programs. The second theory pertains to a host of other issues, albeit often related, that bear on effectiveness of external assistance. The BWIs, along with US Treasury, are often accused of a neo-liberal or market fundamentalism bias captured in shorthand of Washington Consensus. That label has come to refer to a somewhat caricaturized version of policies that these institutions recommended, particularly in 1980s and 1990s. While recognizing that, Joseph Stiglitz observes that: [Whatever its original content and intent, term 'Washington Consensus,' in minds of most people around world, has come to refer to development strategies focusing around privatization, liberalization, and macrostability (meaning mostly price stability); a set of policies predicated upon a strong faith stronger than warranted in unfettered markets and aimed at reducing, or even minimizing, role of government. That development strategy stands in marked contrast to successful strategies pursued in East Asia, where development state took an active role. (5) ] While BWIs, especially World Bank, have been moving away from Washington Consensus, there remains question of whether they have moved far enough--especially in practice rather than research or rhetoric--and in which direction they should be moving if MDGs are to be realized. (6) Much of debate on reform of reforms revolves around role of governments, in particular raising following questions: 1. Is there a conception of nature of state or efficacy of government interventions that underlies policy recommendations of BWIs? If so, what is it and why? 2. How are these policies informed by experience of both successes and failures of public policy in promoting economic growth, especially of developmental states of East Asia? 3. How should they be so informed? How can policy advice be tailored more to country circumstances, especially type of state and its stage of development? …