Institute of Development Studies

The Washington Consensus is Dead, Long Live the Washington Consensus?

Lawrence Haddad

So the G20 have agreed to give $1 trillion in extra resources to the International Monetary Fund and multilateral development banks – equivalent to £100 for every person in the world; to reform the global banking system to make it harder to hide corruption and irresponsible behaviour; and to kick start trade with new insurance mechanisms. A good package then, and better than hoped for, although time will tell us how substantive it really is.

But if the old Washington consensus of free-wheeling markets is dead, have we merely replaced it with a new Washington consensus? It feels like it. Most of the organisations that promoted the Washington consensus in the first place are the organisations that we are now relying on to deliver this new consensus.

And how new is this new consensus? New in terms of the scale and coordination – certainly. But the focus on trade, aid, loans, the IMF etc. makes it sound more like a deal for the twentieth century than the twenty first. Yes, it is very good that there will be a meritocratic process to appoint new leaders for the international finance institutions (IFIs). And yes, there are plans to ‘ask’ the IFIs to become more ‘responsive and adaptive’. But why not ‘instruct’ them to be more ‘credible’?

Gordon Brown rightly repeats the mantra that global problems require global solutions. But this requires global decision making processes that reflect values of economic and social justice. The financial crisis, the climate crisis, the food price crisis – all were caused primarily by the West, with the most disruptive effects to the rest. The UK Prime Minister talked about not walking away from the poorest, but global governance mechanisms should not let him and other G20 leaders do that. The world needs new global governance that inclusively sets agendas, assesses risk, devises regulation, ensures access and monitors implementation. Yes we need to ‘manage globalisation’ but we also need to ‘globalise management’.

Perhaps the next G20 summit later this year will begin to address these issues. I hope so. But remember, the original Bretton Woods negotiations which set up the current development architecture took 22 days to hammer out. The sherpas and the rest of us had better get lifting right now.

Lawrence Haddad is Director of the Institute of Development Studies

Image: Demonstrators at G8 Summit by Mark Henley/ Panos