The Slow Death of the Washington Consensus on Latin America

Abstract

In the late 1980s, the term Washington Consensus served to encapsulate the crystallization of a paradigmatic shift in economic policy making regarding Latin America. The intellectual impetus behind the consensus view clearly flowed from Washington, the locus of the U.S. Treasury, the International Monetary Fund, and the World Bank. Equally important, the consensus encompassed key Latin American business elites and functionaries of the state apparatuses. Transnational corporations, particularly in the financial realm, used their extensive influence to consolidate a policy that promised to open virtually all areas of the Latin American economies to foreign investment and unrestrained financial flows across borders, including fluid repatriation of profits. Leading orthodox economists both in the United States and throughout Latin America urged deregulation of capital markets, free exchange rates, privatization of parastate firms, and flexible labor markets. Ten years later, the neoliberal, free-trade, market-friendly policies of orthodox neoclassical economics have become the norm in virtually every Latin American nation. Increasing poverty, stagnant or falling real wages, and a further and steady widening of the distribution of income in virtually every nation has also become the omnipresent and largely ignored social context of the neoliberal era. In Chile, the one exception of any consequence, per capita income increased by 49 percent from 1986 to 1996, yet workers' wages increased by a relatively modest 19 percent (Riveros, 1997: 42). For Latin America's non-Chilean population, 97 percent of the total, whatever meager success that could be uncovered in Chile was of no consequence.