Washington Consensus
The ‘Ruling Paradigm’ of the neoliberal era emerged in the late 1980s / early 1990s (check) under the label of ‘The Washington Consensus’. The Ruling World Power (the U.S.) thread it’s preferred principles down the neck of it’s satetites and dependends. So the World was to be governed.
The Financial Crises of 2008 and it’s aftermath has made the ideology obsolete. Mohamed A. El-Erian now asks whether a replacement can be found and how a process for it’s emergence might look.
The Washington Consensus [was] – a set of ten broadly applicable policy prescriptions for individual countries – and, at the international level, in the pursuit of economic and financial globalization. The idea, simply put, was that countries would benefit from embracing market-based pricing and deregulation at home, while fostering free trade and relatively open cross-border capital flows.
Deepening the economic and financial linkages among countries was viewed as the best way to deliver durable gains, enhance efficiency and productivity, and mitigate the threat of financial instability. This approach was also deemed to yield collateral benefits, from enhancing internal social mobility to reducing the risk of violent conflict among countries. And it promised to support the positive convergence of developing and developed countries, thereby reducing both absolute and relative poverty and weakening economic incentives for illegal cross-border migration.
At a certain point, confidence in the Washington Consensus turned into something like blind faith. The resulting complacency, among policymakers and economists alike, contributed to the world economy becoming more vulnerable
Analytical failures were partly to blame for this. The economics profession did not go far enough to develop a comprehensive understanding of the connection between a rapidly growing and increasingly deregulated financial sector and the real economy. The impact of major technological innovations was poorly understood. And insights from behavioral science were inadequately regarded – if not shunned altogether – in favor of analytically elegant microeconomic underpinnings that were model-friendly, but unrealistic and overly simplistic.
As a result, behavioral norms and rules lagged far behind realities on the ground
The history of the Washington Concensus might well be seen as a study in the development a the Power Elite’s Complacency - reminding me of Voltaire’s Candide: “We live in the Best of All Possible Worlds”.
El-Erian’s request resembles a call for a new Panglossian Power Ideology. The World of 2018 does not seem to be set for such a One Power Rules reality. Capitalism is again split into fighting factions - rather competing imperialisms seems under way - bringing competing versions of capitalist doctrines.