Interesting column in the Washington Post.
Consider this: Income per person in Latin America grew by 75 percent from 1960 to 1980. From 1980 to 2000 it grew by 7 percent, or hardly at all. Africa fared even worse, with a decline -- some 15 percent -- in income per person during the past two decades.
Of course, there are some important exceptions: China registered the fastest growth in world history during the past 20 years. But even including China, weighted by its enormous population of 1.3 billion, the developing economies as a group have grown at half the rate they had achieved during the previous two decades.
...
It is of course difficult to isolate the causes of such a protracted, geographically widespread economic failure, but there are some prime suspects. Higher interest rates, often enforced by the IMF, have slowed growth throughout much of the developing world. This trend was reinforced by the central banks of the developed countries, further slowing the developing economies by reducing worldwide growth.
Before the 1980s, it was common for low- and middle-income countries to pursue a country-specific development strategy. This has been replaced, in most cases, with a formulaic set of principles involving opening up to international trade and financial flows, privatization of state-owned industries and other deregulatory measures. These "Washington Consensus" policy prescriptions have not fared well in practice, and they have led to a number of economic disasters in recent years. The Asian economic crisis of 1998, for example, was brought on by reckless opening to "hot money" from abroad. Financial and economic crises in Mexico, Russia, Brazil and Argentina also have taken their toll on global economic growth.
Searching for good news, partisans of the Washington Consensus (such as the World Bank) point to countries such as China and Vietnam as successful "globalizers." But China's banking system is mostly state-owned, its domestic markets highly protected and its capital flows strictly controlled. Most of Vietnam's investment is undertaken by the state.
These Washington economists do not seem to notice the irony in their argument: "Our brand of neo-liberalism seems to have failed, but the Commies are doing great!"
The conclusion should not be that neo-liberal reforms per se are a bad idea, but the devil is of course in the details.
