June 19, 2003—The so-called Washington Consensus on market-oriented policy measures and macro economic balance either failed to achieve expected results in terms of growth and poverty reduction or was interpreted from an ideological point of view in many developing countries, a group of experts and analysts agreed at an international roundtable hosted by the World Bank last week in Paris.

The gathered experts sought a new approach that would include investment in social development, environmental responsibility, and a strong regulatory role for the state, as well as international cooperation through multi- and bilateral development institutions.

They also agreed that people's needs must be at the center, when formulating an economic policy.

The roundtable brought together former Costa Rican President Jose Maria Figueres, Susan George of the French non-governmental organization Attac, Dag Ehrenpreis from the Development Assistance Committee (DAC) secretariat of the Organisation for Economic Cooperation and Development (OECD), Steen Jorgensen, Director of Social Development at the World Bank, and was moderated journalist Ramesh Jaura, IPS European Coordinator. The conference also video-linked journalists, NGO activists and academics from Brussels and London.

The Washington Consensus, a term coined by U.S. economist John Williamson in 1989, centered around privatizing state-owned enterprises, reducing state deficits and taxes, liberalizing interest rates. It emphasized trade, improving conditions for foreign direct investment, and called for other forms of deregulation.

But as World Bank’s Jorgensen explained, applying the Washington Consensus to various countries "lacked ownership, adaptation to political realities and concerns about leveling the playing field in the social area."

Using Denmark as an example of a country that followed the Washington Consensus, he said that "nothing in the Consensus that says you should have a small state," adding that "I don’t think that anybody can claim that Denmark is a neo-liberal state today with its large share of GDP dedicated to social and human development expenditures."

During the last decade, this economic policy was expected to bring steady growth in Latin America. But official figures showed otherwise.

"Economic growth in Latin America in the 1990s under the Washington Consensus was considerably lower than between 1950 and 1980, when the region applied other economic policies," said George. "At the national level, the neo-liberal economic policy in the 1990s produced a huge redistribution of income, from the lower and middle classes to the richest minorities."

However, now more than 10 years after the application of the economic policy agenda, Latin America is free from "neo-liberal dogmas," according to José Maria Figueres, former Costa Rican president, and currently Managing Director of the Center for the Global Agenda at the World Economic Forum (WEF).

The continent "no longer holds on to the idea that it suffices to liberalize the economy to launch a process of sustainable economic development," he said. "Markets don't take care of everything."

Figueres, however, defended some aspects of the Washington Consensus, particularly those relating to fiscal discipline. He also reiterated the need for a "significant investment in human progress, education, environmental protection, and a strong regulatory role of the state" as necessity for long-term, sustainable economic development.

Jorgensen meanwhile called for an alternative policy and emphasized the need to "go back to basics" and mobilize resources for rural development.

"We found that land reform is needed for development because it promotes income equality, sustainable growth, and gives rural population work opportunities," Jorgensen said. He also stressed the need to protect small producers in the South against the shocks of globalization.

"Without regulatory measures, a small farmer in Zambia cannot extract value from economic globalization, but is heavily exposed to the risks inherent to it," he explained. "We have to take into account the needs of the population in those countries, when formulating an economic policy for developing countries."

Both Jorgensen and George praised the participatory budget processes put in place at the World Social Forum in Porto Alegre, Brazil.

All panelists supported the efforts by the current Brazilian government to address social inequalities.

Dag Ehrenpreis said the DAC has set several social criteria for development aid. "We see that the countries receiving aid qualify for it by putting in place policies that enhance environmental protection, reduce vulnerability of women in society, and improve income distribution," he said.

Figueres meanwhile suggested that international aid should be made conditional on abolishing military spending, as well as investing in health, education, and other human development measures. 

Moderator Ramesh Jaura, Susan George, Attac, Dag Ehrenpreis, the Organisation for Economic Cooperation and Development (OECD), Steen Jorgensen, the World Bank.

"Economic growth in Latin America in the 1990s under the Washington Consensus was considerably lower than between 1950 and 1980, when the region applied other economic policies," said Susan George, Attac.

" We see that the countries receiving aid qualify for it by putting in place policies that enhance environmental protection, reduce vulnerability of women in society, and improve income distribution," said Dag Ehrenpreis from the Development Assistance Committee (DAC) secretariat of the Organisation for Economic Cooperation and Development (OECD).

José Maria Figueres, former Costa Rican president, and currently Managing Director of the Center for the Global Agenda at the World Economic Forum (WEF).