I have a feeling that Richard doesn\’t in fact understand what he\’s talking about here.
Has he learned nothing as yet?
This the old paradigm of the Washington Consensus writ large. Haven’t they noticed it was this that failed? It was this that created the crisis.
So, let\’s see what the Washington Consensus actually says, shall we?
The consensus included ten broad sets of recommendations:
* Fiscal policy discipline;
* Redirection of public spending from subsidies (\”especially indiscriminate subsidies\”) toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
* Tax reform – broadening the tax base and adopting moderate marginal tax rates;
* Interest rates that are market determined and positive (but moderate) in real terms;
* Competitive exchange rates;
* Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
* Liberalization of inward foreign direct investment;
* Privatization of state enterprises;
* Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;
* Legal security for property rights.
Now I cannot see there any policy proposal that I would argue against. In fact, I cannot see any policy proposals there that Ritchie would want to argue against.
I also cannot see anything in that which led to the current \”crisis\”.
Indeed, I can see that all of the varying (and entirely different) posited explanations of the causes of the crisis violate one or more of those suggestions.
If you go for the simple credit bubble leading to an asset bubble which then bursts explanation then that was in violation of point 4. If you go for the bankers getting out of hand one then that\’s a violation of point 9. If you go for Brown (or Bush, whoever) spending like a drunken sailor when the boom, according to basic Keynesian thought, should have been leading to fiscal contraction then that\’s a violation of point 1. If it\’s all about an overvalued dollar and an undervalued renmimbi then that violates point 5.
And so on, through the various different possible explanations of what actually happened.
So no, I don\’t see that the Washington Consensus can be blamed for what went wrong.
However, I can see that same consensus taking the credit where it was actually applied, in the developing nations….for yes, do note that the preachers weren\’t in fact following (as above) their preaching at home. Quelle Surprise. Jim Bakker and Jimmy Swaggart really were role models….
And what was the result of applying that Washington Consensus?
World poverty is falling. Between 1970 and 2006, the global poverty rate has been cut by nearly three quarters. The percentage of the world population living on less than $1 a day (in PPP-adjusted 2000 dollars) went from 26.8% in 1970 to 5.4% in 2006 (Figure 1).
Although world population has increased by about 80% over this time (World Bank 2009), the number of people below the $1 a day poverty line has shrunk by nearly 64%, from 967 million in 1970 to 350 million in 2006. In the past 36 years, there has never been a moment with more than 1 billion people in poverty, and barring a catastrophe, there will never be such a moment in the future history of the world.
I think I\’d call that a win really. Wouldn\’t you? The greatest reduction in poverty in the entire history of our species?