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MA International Relations: Global Governance and Social Theory

Spring Term 2020
Course: International Political Economy
Instructor: Dr. Michael Schwan

Reading Report 3
Text: Sarah Babb The Washington Consensus as transnational policy
paradigm:Its origins, trajectory and likely successor

1. What is the main argument of the text and how is it developed? Summarize briefly!
In the article, Babs says the Washington Consensus was a transnational policy paradigm, shaped

by both scholarly and political forces (Hall, 1993). She also talks about the practice of

conditionality being at the core of the Washington Consensus. This conditionality led to the

downfall of the Consensus, as unintended consequences, by political forces both within

Washington and worldwide and by intellectual changes in the field of economics arise. Babb starts

by talking about how the Washington Consensus was a highly influential US government plan for

managing the Third World debt crisis in the middle of the 1980s. The main idea was to give

conditional IFI loans as a vehicle to promote ‘growth-enhancing’ policy reforms, including ‘the

privatization of burdensome and inefficient public enterprises, the liberalization of domestic capital

markets, tax reform, the creation of more favorable environments for foreign investment, and trade

Liberalization. The IFI conditionality led to certain consequences. The first was increased criticism

of their ‘boilerplate’ approach to the problems of developing countries, in which the same recipe

was prescribed for all, irrespective of particular circumstances. Secondly, it created enormous

possibilities for disconfirmation. Under the Washington Consensus, the IFIs were tasked with

persuading governments to make politically difficult and painful structural reforms with the

promise that the short-term pain would be justified ultimately by ‘sustained growth’. This created
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the appearance of an unprecedented, global natural experiment on the effectiveness of liberal

policies in developing countries. Finally, the Washington Consensus paid insufficient attention to

the institutional and legal frameworks such as bankruptcy law and independent judiciaries that

markets needed to function correctly.

In conclusion, Babb argues that it seems likely that no transnational policy paradigm will replace

the Washington Consensus in the near future. This is because the policy has certain obstacles to

overcome to overcome: the division between the wealthy governments accustomed to controlling

them and powerful new emerging market countries; the division among wealthy shareholders, who

are more likely than ever to disagree about IFI policies; and the deep political divisions within

Washington and lastly the current fragmented intellectual environment around issues of economic

development.

2. Name three core concepts/definitions the author uses/develops in the text.

 Conditionality: I believe this is very important because it was the main plan

behind the Consensus. “at its core was the practice of ‘conditionality’ – making

loans to governments in exchange for policy reforms. The author says the term,

‘Washington Consensus’, was originally coined to help make sense of the IFIs’

practice of conditionality – lending in exchange for changes in policy.

Conditionality according to the author was used to promote ‘growth-enhancing’

policy reforms, including ‘the privatization of burdensome and inefficient public

enterprises, the liberalization of domestic capital markets, tax reform, the creation

of more favorable environments for foreign investment, and trade liberalization.

However, at the end the IFI conditionality was a fundamental cause of the

weakening of the Washington Consensus.

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 Washington Consensus: The Washington Consensus has been called so many

things by different authors and that makes it interesting. The economists who

commented on it shared the assumption that it was primarily an intellectual

product, created mainly by economic experts interpreting empirical evidence.

Babbs says that the Washington Consensus was a transnational policy paradigm

produced by both intellectual and political forces (Hall, 1993).

 Policy paradigms: For Hall, a policy paradigm is a powerful and enduring

framework of related ideas and standards about policy, a model that specifies both

the instruments that should be used in a policy area and the goals that the policy

should be addressing (Hall, 1993: 279). Babb goes on to talk about transnational

policy paradigm which she describes as a policy model specifying both a set of

instruments and a set of goals to be pursued using these instruments, which is

legitimated through expert knowledge and which is adopted by two or more

governments.

3. Quote at least two passages that you think are essential/interesting.

 At its core was the practice of ‘conditionality’ – making loans to governments in

exchange for policy reforms. This practice helped diffuse the Washington Consensus

around the world, but also unintentionally hastened the weakening of the paradigm.

I believe this quote talks about the whole essence of conditionality, how it was at the core

of the consensus and how it it ultimately led to its weakening.

However, it has not yet been overthrown by a competing paradigm, either at the national or

transnational level
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This statement tells us that the Washington Consensus as a transnational policy paradigm was

still reigning even currently despite many shortcomings and even though its core idea of

“conditionality” was problemtic and led to the weakening of the consensus.

Which questions for further discussion come to your mind after reading the text?

 Using the Brazilian crisis as an example can the Washington Consensus be blamed for the

crisis as it tried to create a laissez-faire global economy? In general, to what extent have

the conditions given by the IFIs led to the success or development of the intended

receipients or main focus of the washington Consensus?

 With no singly accepted defintion of the Washington Consensus how can we measure its

success or failure. Eg If my colleague should ask if the consensus leads to reduction of

poverty this will ultimately depend on my intepretation of the Washington Consensus.

 With the Washington Consensus partly tied to the strength of the US economy, and with

the US predicted to decline in relative terms perhaps could the reign of the paradigm be

cut short? In particular, Chinese investment is playing a considerable role in enabling

economic development within developing economies, maybe we could see the Chinese

consensus in a few decades

 Since the Post Washington Consensus provides a significant improvement over the

Washington Consensus, draws attention to its failure to provide a sufficiently broad

framework for dealing with key and pressing development issues such as income

distribution, poverty and self-sustained growth. Can it be said that the PWC is now the

reigning paradigm not the Washington Consensus? I ask this since the PWC can be

termed as a new paradigm in the development debate.

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 One can argue the Tokyo Consensus is more productive than the Washington Consensus

and also the rapidly increase economic potential of China might lead to the Tokyo

Consensus overtaking the Washington Consensus. Can this lead the main tenets of the

Washington Consensus to adopt to the Shimomuran economic policy model?