‘The Washington Consensus has proved more of a help than a hindrance to the economic development of countries. Assess the validity of this claim.’
The Washington Consensus refers to the idea that the International Monetary Fund, the World Trade Organisation and the World Bank share common ideals. This is the idea that trade liberalisation and moving towards free trade is the best way for countries to develop. The IMF has 185 member countries; their work mainly consists of monitoring and advising countries on exchange rates, providing loans in emergencies, both long and short term and providing assistance and training. The IMF requires countries that receive loans to put in place reforms in the form of “Structural Adjustment Programs” (SAPs). Some examples of saps are; cutting government spending, focusing on exports, devaluing currencies, liberalizing trade and Privatization. SAPs are applied the same to every country, regardless of specific problems. This follows a neo-liberalist ideology. It may be wrong for the IMF to demand SAPs in exchange for a loan as it intrudes on countries sovereignty, countries have the right to set their own policies without interference. When countries get into monetary trouble, it must be due to honest mistakes or factors beyond control, for example a natural disaster. The policies implemented are not that of the government and so are likely to be followed loosely and therefore not reach their full potential. If the IMF was to hand out loans to without conditions however, the IMF would face the problem that since countries have the IMF to bail them out, they would act less responsibly. The implementation of SAPs discourages this. SAPs may be seen to harm the economy, the IMF forget that in many poor countries the economy needs to be developed first. One example of this is in Jamaica, where the SAP allowed dumping, resulting in dumping from U.S. companies which killed off local industry. SAPs do create monetary stability, which...
Please join StudyMode to read the full document