Consensus For the Common Good

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By Thomas Philippon
The Washington consensus emerged in the late 1980s in response to successive crises in Latin America. It is the English economist John Williamson who coined this expression to designate a dozen economic policy recommendations: limiting deficits, investing in education, health and infrastructure, letting the markets determine the interest rate and the exchange rate, liberalize trade (but not finance), privatize industries, guarantee property rights.

At its origin, the Washington consensus is clearly more pragmatic than neoliberal. Williamson himself will oppose the subsequent drifts which oppose consensus and the welfare state. The consensus produced positive results. Between 1990 and 2017, demographics, education levels, and political institutions partially converged and poor countries began to catch up with rich countries .

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Thomas Philippon is Max L. Heine Professor of Finance.