0

After Neoliberalism, What?

Two decades of applying neoliberal economic policies to the developing world have yielded disappointing results. Latin America, the region that tried hardest to implement the "Washington Consensus" recipes--free trade, price deregulation, and privatization--has experienced low and volatile growth, with widening inequalities. Among the former socialist economies of Eastern Europe and the Soviet Union, few have caught up with real output levels that prevailed before 1990. In Sub-Saharan Africa, most economies failed to respond to the adjustment programs demanded by the IMF and World Bank.

The few instances of success occurred in countries that marched to their own drummers--and that are hardly poster children for neoliberalism. China, Vietnam, India: all three violated virtually every rule in the neoliberal guidebook, even as they moved in a more market-oriented direction.

It is time to abandon neoliberalism and the Washington Consensus. But the challenge is to provide an alternative set of policy guidelines for promoting development, without falling into the trap of promulgating yet another impractical blueprint, supposedly right for all countries at all times.

The record suggests that an adequate growth program needs to be anchored in two strategies: an investment strategy designed to kick-start growth in the short term, and an institution-building strategy designed to provide an economy with resilience in the face of adverse shocks.