The Rise and Fall of the Washington/Post Washington Consensus as a Neoclassical Paradigm and Alternative Recommendations of Post Keynesians Economics

Abstract

The Washington Consensus was accepted as common wisdom on policies for development and growth. The set of policies of the Washington Consensus was applied to structural crisis in Latin America and developing economies. Williamson identified 10 policy instruments whose proper deployment Washington could muster a reasonable degree of consensus. Williamson summarizes the content of the Washington Consensus as macroeconomic prudence, outward orientation, domestic liberalization, and free market policies consistent with neoclassical mainstream economic theory. The policy set was modified to the point that Williamson substituted the original name with a new label “Post Washington Consensus. The “Post Washington Consensus” designated a “new set of policy reforms” for Latin America and Developing Countries. The aim of this paper is to compare the two sets of controversial policies, the “Washington Consensus” and “Post Washington Consensus” and offer an alternative based on the Post Keynesian framework. The goal of Post Keynesian framework is the promotion of sensible prudent economic and social development that is equitable, stable and sustainable. The main purpose of the Post Keynesian policy framework proposed in this paper is to go beyond the Post Washington Consensus by emphasizing the importance of a possible new direction for economic policy for developing countries.