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Discuss the main components of development policy promoted by the Washington Consensus. On what grounds has it been criticised? Illustrate your essay with specific examples.

This essay aims first to elucidate the key components of the Washington Consensus with regards to development policy and second to present an overview of the various critiques made of it. The term Washington Consensus was made famous by the economist John Williamson who formulated a model reform program that encompassed a set of policy proposals designed to 'save' failing economies in developing countries, to be implemented by transnational organisations such as the International Monetary Fund and the World Bank. Williamson's package of reforms was sparked by the macroeconomic crises faced by many Latin American states during the 1980s and the Washington Consensus came from the attempt to provide a framework by which ailing governments could seek to prevent economic meltdown and collapse. Williamson (2002) has stressed that he originally intended the policy prescriptions promoted by the Washington Consensus as specific to the problems faced by Latin American during the late 1980s and not as some sort of universal panacea to all the difficulties faced by developing nations regardless of their historical, political and socio-economic context.

Let us then examine the central tenets of development policy as envisaged by the Washington Consensus. Williamson (1990) originally formulated a set of ten key recommendations:
Strict Fiscal Discipline: Governments must not allow large budgetary deficits to accrue as doing so would inevitably lead to a balance of payments crisis and thus high inflation, which would have a disproportionately negative effect upon the poorest members of society. This theory held that "large and sustained fiscal deficits are a primary source of macroeconomic dislocation in the forms of inflation, payments deficits, and capital flight" (Williamson, 1990). Such thinking represents an overt dismissal of the Keynesian argument that economic stimulation by increased government spending financed by budget deficits will stimulate the economy and kick-start growth.

Williamson (2000, 2002) has responded to such criticism by claiming that his critics have misunderstood - either willfully or otherwise - the Washington Consensus. He contends that the term has been stretched to encompass a plurality of meanings that he did not originally intend. The Washington Consensus that his critics refer to is one synonymous with neoliberalism and market fundamentalism and this, he claims, is a bastardisation of its original meaning. As such, it is neoliberalism that his critics object to, not his ten specific (non-neoliberal) policy proposals. Williamson (2002) goes on to explain that in fact many of his critics actually endorse the policies laid out by the Washington Consensus, citing the example of Stiglitz, who has declared himself to be in favour of gradual trade liberalisation as well as evolutionary privatisation. Despite this argument over semantics, the man who designed the reforms of the Washington Consensus has admitted that the results of their practical application have been disappointing, something which he attributes to the Consensus lacking measures to avoid economic crisis in the first place, as well as a lack of attention regarding financial supervision, the incomplete nature of the reforms, and also the reluctance of policy makers in the developing nations to take appropriate steps towards greater income distribution (Williamson, 2002).

In conclusion, we have detailed the main components of development policy promoted by the Washington Consensus and outlined the ten key policy proposals as advocated by Williamson, namely fiscal discipline, restructuring of government expenditure, tax reform, a competitive exchange rate, trade liberalisation, the liberalisation of inward foreign direct investment, the privatisation of state enterprises, deregulation and property rights. The Washington Consensus has clearly been influenced by classical economic thinking, as evidenced by the importance placed upon free trade and fiscal prudence. We have also outlined the main criticisms of the Consensus. The anti-globalisation critique focuses upon the matter of trade liberalisation, claiming that such a policy leads to the exploitation of developing economies by more powerful outside forces. Writers such as Klein and George argue that the Washington Consensus primarily benefits multinational corporations and the wealthy elites at the expense of the native poor. They also point to the relative lack of success that the Consensus policies have had in Latin America. The Keynesian critique has highlighted the inflexibility of the Consensus and its alleged inability to adequately adapt to the particular social, cultural and political situation of each individual nation. Others reject the philosophical assumptions that underlie the Consensus polices whilst Naim openly rejects the idea of any consensus actually even existing. Williamson, in his defence, has countered that the meaning of the Washington Consensus has been misinterpreted by his opponents, whilst also admitting to some of the shortcomings of his original proposals.

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