The Washington Consensus revisited: a new structural economics perspective

Abstract

The Washington Consensus reform resulted in economic collapse and stagnation in many transition economies and "lost decades" in other developing countries in 1980s and 1990s. The paper provides a new structural economics perspective of such failures. The Washington Consensus reform failed to recognize that many firms in a transition economy were not viable in an open, competitive market because those industries went against the comparative advantages determined by the economy's endowment structure. Their survival relied on the government's protections and subsidies through various interventions and distortions. The Washington Consensus advised the government to focus their reforms on issues related to property rights, corporate governance, government interventions, and other issues that may obstruct a firm's normal management. Without resolving the firms' viability problem, such reforms led to the firms' collapse and an unintended decline and stagnation of the economy in the transition process. This paper suggests that the viability assumption in neoclassical economics be relaxed when analyzing development and transition issues in socialist, transition, and developing economies.

Is Poverty in the African DNA (Gene)?

“…Some causes of poverty have been social obstacles to technological change and economic prosperity (Amavilah, 2015). Others entail: (1) loss of traditional institutions (Amavilah, 2014a(Amavilah, , 2006Lewis, 1955) and/or deinstitutionalization of Africa (Nunn, 2008(Nunn, , 2009Nunn & Puga, 2012); (2) confusion between 'private use rights' and 'private property rights' (Amavilah, 2015); (3) devaluation of local knowledge and overvaluation of foreign knowledge (Brush & Stabinsky, 1996;Raseroka, 2008;Lwoga et al, 2010;Asongu, 2014a;Tchamyou, 2014;Amavilah et al, 2014;; (4) 'Ignoring art as an expression of technological knowledge' ; (5) too much natural resource idleness (Doftman, 1939;Lewis, 1955;;Amavilah, 2014a); (6) the lack of 'scarcity acknowledgment' (Lewis, 1955;Dorfman, 1939;Lucas, 1993;America, 2013;Fosu, 2013b;Drine, 2013;Looney, 2013;Asongu, 2014ab); (7) excessive consumption by the rich of luxurious commodities (Adewole & Osabuohien, 2007;Efobi et al, 2013); (8) concerns about colonialism and neocolonialism (Ndlovu-Gatsheni, 2013); (9) overly reliance on foreign aid (Moyo, 2009;Obeng-Odoom, 2013;Asongu, 2014d) or Western-led policies (Fofack, 2014); (10) lost decades from the Washington consensus (Lin, 2015) owing partly to the false economics of preconditions (Monga, 2014); (11) failure to embody qualitative measurements of development into Africa's development paradigms (Obeng-Odoom, 2013); (12) fragi...…”

Reform and development strategy

“…Furthermore, because of soft budget constraints, managers would ask for even higher subsidies. As a result, reform led first to a certain degree of chaos followed by stagnation and frequent crises (Lin 2014).…”

Unjust Enrichment from Official Corruption in Africa: Theory and Model on How Lenders Have Benefited

“…(ix) over dependence on development assistance (Asongu, 2014c;Oben-Odoom, 2013;Moyo, 2009) or Western-oriented policies (Fofack, 2014); (x) Washington consensus and lost decades (Lin, 2015), partially because of the false economics of preconditions (Monga, 2014); (xi) the evolving interest in the impacts of diversity on economic prosperity (Hjort, 2014;Parrotta et al, 2014 ) and a novel strand of literature on epigenetics, genetics and economics (Fedderke et al, 2014); (xii) corruption in international trade (Musila & Sigué, 2010) and policies on rational asymmetric development (Asongu, 2015a); (xiii) low-degree of regional integration (Kayizzi-Mugerwa, et al, 2014); (xiv) the failure to integrate qualitative measurements of progress into the development paradigms of Africa (Obeng-Odoom, 2013) and (xv) the absence of conducive local conditions, presence of fragile institutions and the incapacity to effectively negotiate foreign aid conditions (Kayizzi-Mugerwa, 2001). …”