Table Of ContentThe Washington Consensus Reconsidered
THE INITIATIVE FOR POLICY
DIALOGUE SERIES
TheInitiativeforPolicyDialogue(IPD)bringstogetherthetopvoicesindevel-
opment to address some of the most pressing and controversial debates in
economicpolicytoday.TheIPDbookseriesapproachestopicssuchascapital
marketliberalization,macroeconomics,environmentaleconomics,andtrade
policy from a balanced perspective, presenting alternatives and analyzing
their consequences on the basis of the best available research. Written in a
languageaccessibletopolicymakersandcivilsociety,thisserieswillrekindle
thedebateoneconomicpolicyandfacilitateamoredemocraticdiscussionof
developmentaroundtheworld.
OTHER TITLES PUBLISHED BY OXFORD UNIVERSITY PRESS
IN THIS SERIES
FairTradeforAll
JosephE.StiglitzandAndrewCharlton
StabilitywithGrowth
JosephE.Stiglitz,JoséAntonioOcampo,ShariSpiegel,
RicardoFfrench-Davis,andDeepakNayyar
EconomicDevelopmentandEnvironmentalSustainability
EditedbyRamónLópezandMichaelA.Toman
CapitalMarketLiberalizationandDevelopment
EditedbyJoséAntonioOcampoandJosephE.Stiglitz
The Washington
Consensus Reconsidered
Towards a New Global Governance
Edited by
Narcís Serra and Joseph E. Stiglitz
1
3
GreatClarendonStreet,OxfordOX26DP
OxfordUniversityPressisadepartmentoftheUniversityofOxford.
ItfurtherstheUniversity’sobjectiveofexcellenceinresearch,scholarship,
andeducationbypublishingworldwidein
Oxford NewYork
Auckland CapeTown DaresSalaam HongKong Karachi
KualaLumpur Madrid Melbourne MexicoCity Nairobi
NewDelhi Shanghai Taipei Toronto
Withofficesin
Argentina Austria Brazil Chile CzechRepublic France Greece
Guatemala Hungary Italy Japan Poland Portugal Singapore
SouthKorea Switzerland Thailand Turkey Ukraine Vietnam
OxfordisaregisteredtrademarkofOxfordUniversityPress
intheUKandincertainothercountries
PublishedintheUnitedStates
byOxfordUniversityPressInc.,NewYork
©OxfordUniversityPress2008
Themoralrightsoftheauthorshavebeenasserted
DatabaserightOxfordUniversityPress(maker)
Firstpublished2008
Allrightsreserved.Nopartofthispublicationmaybereproduced,
storedinaretrievalsystem,ortransmitted,inanyformorbyanymeans,
withoutthepriorpermissioninwritingofOxfordUniversityPress,
orasexpresslypermittedbylaw,orundertermsagreedwiththeappropriate
reprographicsrightsorganization.Enquiriesconcerningreproduction
outsidethescopeoftheaboveshouldbesenttotheRightsDepartment,
OxfordUniversityPress,attheaddressabove
Youmustnotcirculatethisbookinanyotherbindingorcover
andyoumustimposethesameconditiononanyacquirer
BritishLibraryCataloguinginPublicationData
Dataavailable
LibraryofCongressCataloginginPublicationData
Dataavailable
TypesetbySPIPublisherServices,Pondicherry,India
PrintedinGreatBritain
onacid-freepaperby
BiddlesLtd.,King’sLynn,Norfolk
ISBN 978–0–19–953408–1
ISBN 978–0–19–953409–8(Pbk)
10 9 8 7 6 5 4 3 2 1
Acknowledgements
Thisbookistheworkoftheparticipantsoftheseminarseries’FromtheWash-
ingtonConsensus,TowardsaNewGlobalGovernance’,whichculminatedat
theUniversalForumofCulturesinBarcelonain2004.
The seminars were co-hosted by the Initiative for Policy Dialogue (IPD) at
ColumbiaUniversityandtheCenterforInternationalRelationsandDevelop-
mentStudies(CIDOB)inBarcelona.IPDisaglobalnetworkofover250econo-
mists,researchersandpractitionerscommittedtofurtheringunderstandingof
the development process. The CIDOB Foundation is a research, trainingand
documentation center devoted to international relations and development
studies.Bothorganizationsaregratefultoeachotherforawonderfulintellec-
tualandworkingrelationshipandforthegreathospitalitygivenwhenvisiting
eachother’scities.
We would like to thank all seminar participants, whose contributions to
the provocative and productive dialogues and debates on global governance
alternativesinformedthecontentofthisbook.
Thanks to the members of the advisory committee for their enthusiasm
andenergeticdevotiontotheproject,despitetheirownsignificantresponsi-
bilities.
We would like to extend a special thank you to Joan Clos, the Mayor of
Barcelona,forhisencouragementandpersonalinvolvementinourendeavor.
Joanattendedtheentireconference,includingthelongdinnersandoff-table
discussions.
SpecialthankstoMireiaBelilandher dialogueteaminparticular,Lourdes
and Cristina, who worked behind the scenes to ensure that the event ran
smoothly. Also of invaluable help behind the scenes were Jorge Blázquez,
CarlosOcan˜aandRocíoMartínez-Sampere.
WewouldalsoliketothankfriendsPasqualMaragall,LionelJospin,Anto-
nio Guterres, Carlos Slim, Gerry Arsenis and Felipe González for responding
quickly to our invitation and graciously adding a necessary political dimen-
siontothediscussion.
Special thanks goes to Shari Spiegel, who served as Executive Director of
IPD over the course of this project, and to Shana Hoftsetter for organizing
meetingsandtoSylviaWuforherroleineditingthebook.
v
Acknowledgements
ThankyoualsotoIPDstaffSheilaChanani,SarahGreen,SiddharthaGupta,
ArielSchwartzandLaurenAnderson,aswellasinternsDoraBeszterczeyand
JamesGiganti,forhelpingtomanagetheprojectandcoordinateproduction
ofthebook.
We thank our editors Sarah Caro and Jennifer Wilkinson and the staff of
OxfordUniversityPressforbringingthisbookintopublication.
We are most grateful to The John D. and Catherine T. MacArthur Founda-
tionandtheFordFoundationforsupportingtheseminarseriesandthework
ofIPD.
Finally,averyspecialthankyoutothepeopleofBarcelona,whoembraced
the Universal Forum of Cultures and enriched our debates through their
attendanceandenthusiasticparticipation.
vi
Contents
ListofFigures ix
ListofTables x
ListofContributors xi
Foreword xiii
Part I The Washington Consensus: From ItsOrigins to Its Critics
1. Introduction:FromtheWashingtonConsensusTowardsaNew
GlobalGovernance 3
NarcísSerra,ShariSpiegel,andJosephE.Stiglitz
2. AShortHistoryoftheWashingtonConsensus 14
JohnWilliamson
3. InequalityandRedistribution 31
PaulKrugman
4. IsthereaPost-WashingtonConsensusConsensus? 41
JosephE.Stiglitz
5. TheBarcelonaDevelopmentAgenda 57
Part II Analyses of Central Issuesin Development
6. ABroadViewofMacroeconomicStability 63
JoséAntonioOcampo
7. TheWildOnes:IndustrialPoliciesintheDevelopingWorld 95
AliceH.Amsden
8. SuddenStop,FinancialFactors,andEconomicCollapseinLatin
America:LearningfromArgentinaandChile 119
GuillermoA.CalvoandErnestoTalvi
9. TowardsaNewModusOperandioftheInternational
FinancialSystem 150
DanielCohen
vii
Contents
10. TheWorldTradingSystemandImplicationsofExternalOpening 180
JeffreyA.Frankel
11. TheWorldTradingSystemandDevelopmentConcerns 215
MartinKhor
12. ReformingLaborMarketInstitutions:UnemploymentInsurance
andEmploymentProtection 260
OlivierBlanchard
13. InternationalMigrationandEconomicDevelopment 277
DeepakNayyar
Part III Towards a New Global Governance
14. TheFutureofGlobalGovernance 309
JosephE.Stiglitz
15. GrowthDiagnostics 324
RicardoHausmann,DaniRodrik,andAndrésVelasco
16. APracticalApproachtoFormulatingGrowthStrategies 356
DaniRodrik
Index 367
viii
List of Figures
3.1.MostCommonlyCitedDataonIncomeGrowth,US 32
3.2.PercentageIncreasesinIncomefrom1979to2001,US 33
3.3.CorrelationbetweenChangesinInequalityandProgress/Lackof
ProgressinReducingPoverty 36
7.1.GrowthinIncome:1950–80and1980–2000 101
8.1.LAC-7ExternalFinancialFlowsandEconomicGrowth 121
8.2.BoomandBustinCapitalFlowstoLAC-7,1990–2002 123
8.3.SuddenStopandMacroeconomicAdjustmentinLAC-7,1990–2002 128
8.4.SuddenStopandMacroeconomicAdjustmentinChile,1990–2002 133
8.5.SuddenStopandEconomicPerformanceinArgentinaandChile 135
8.6.SuddenStop,Dollarization,FinancialCrisis,andEconomicCollapse:
ArgentinaintheLightofChile 138
10.1. Countries’Opennessvs.theirShareofGrossWorldProduct 182
15.1. GrowthDiagnostics 326
15.2. AverageYearsofSchoolingof12-year-oldChildren 338
15.3. LendingRatesinLatinAmerica 341
15.4. DomesticSavings,NationalSavingsandInvestment 341
15.5. ReturnstoEducationandYearsofSchooling 342
15.6. RealExchangeRate,Remittances,andtheTradeBalance 345
ix
