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From Washington to Post-Washington Consensus: A Global Analysis

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  1. Introduction.
  2. The implementation of the Washington consensus.
    1. Structuralism: After WWII.
    2. The alternative: The Washington consensus.
    3. A second chance: The Post-Washington consensus.
  3. A global overview of the reforms.
    1. The Russian transition.
    2. India, China and Southeast Asia.
    3. The causes of failure in Latin America.
    4. The Mexican case: An example of the Washington process.
  4. Conclusion.
  5. Sources.

During the 90s the Washington Consensus was the most popular economic framework used not only by Latin America but by countries all around the world. As Naim (2000) expresses, the term Washington Consensus soon acquired a life of its own, becoming a brand name known worldwide and used independently from its original intent and even of its content. The popularity of this economic framework came with the need for new economic alternatives after the collapse of the Soviet system. This work revises the implementation and results of the Washington Consensus. The first part of this paper will explain the origins and objectives of the framework as an alternative to previous failed methods as was the case of structuralism at the end of the 80s in Latin America. We will also describe the critics and problems which led to the creation of the Post-Washington Consensus. The second part of our work will give a global economic overview mentioning cases that handled the recommendations of the Washington Consensus in different ways and also a case that shows the correlation between economic changes and political stability.The second half of the XX century starts a new plan in economics for developed and developing countries. The creation of the Bretton Woods Institutions, the newly acquired independence of several countries and the modernization of political and economic systems in developing countries were all factors that allowed new economic theories to come into place.

[...] Mexico started to implement the instruments that the Washington Consensus recommended after suffering a decade of economic stagnation and high inflation. The country liberalized the trade sector in 1985, implemented an economic stabilization plan in 1987 and introduced market-oriented institutions. The most important reforms of the ?economic stabilization plan? were made under the government of President Carlos Salinas de Gortari (December 1988- December 1994); those reforms brought economic growth with an average of per year from 1989 to 1994. The image being promoted was the prosperity of the country; after two decades, inflation was brought down to single-digit levels for the first time since 1993, large capital inflows began in 1990 as a result of foreign investment, debt was renegotiated, etc. [...]

[...] The implementation was a change from the administrative economy of structuralists to the market economy regulated by prices. The Stabilization Programs had the objective of demand contraction and deflationist measures. The instruments used were: 1. Monetary policies (credit control and higher interest rates) Budget policies (limitation of public deficit) Exchange policies (depreciation of real exchange rate and currency convertibility). The Structural Adjustment Programs (SAP) was based on the relative price system reforms and the structure of reincorporation of exterior competitivity and internal growth. [...]

[...] Russia being a net exporter of petroleum products, it greatly suffered from this fluctuation, which was on the contrary beneficial to many other oil- consuming countries. Part of the fault was also attributed to Central Bank ?technical errors? which led to the combination of capital mobility liberalization and a semi-fixed exchange rate. The exchange rate was therefore not allowed to reflect the capital movements triggered by the speculation from foreign investors. The government was also blamed for having an overly lax budgetary policy. [...]

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