Washington consensus – definition and criticism - Politici Economice

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The Washington Consensus refers to a set of broadly free market economic ideas, supported by prominent economists and international organisations, such as the IMF, the World Bank, the EU and the US.Essentially, the Washington consensus advocates, free trade, floating exchange rates, free markets and macroeconomic stability. The ten principles originally stated by John Williamson in 1989, includes ten sets of relatively specific policy recommendations. 1. Low government borrowing. Avoidance of large fiscal deficits relative to GDP; 2. 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; 3. Tax reform, broadening the tax base and adopting moderate marginal tax rates; 4. Interest rates that are market determined and positive (but moderate) in real terms; 5. Competitive exchange rates; 6. 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; 7. Liberalization of inward foreign direct investment; 8. Privatization of state enterprises; 9. Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions; 10. Legal security for property rights. ...