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The Washington Consensus

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University of Toronto St. George
Political Science
Sophia Moreau

Politics of Development: Week 11 J November 22, 2010 The Washington Consensus - Neo-liberalism: The belief in the importance of individual freedom o Classical liberals believed that liberalism implied a limit on the sphere of government, individual freedom was understood to be about limiting the extent in which government could interfere in the lives of individuals Negative freedoms are concern (freedom from rather than freedom to) Freedom is a pre-existing condition, individuals automatically have, securing freedom means non-interference by the state o Modern liberals believe freedom is not pre-existing, that it needs to be produced Wealthy people have more freedom that poor people, inequality in freedom distribution Require government intervention in order to produce freedom or provide equal access to freedom Usually support pluralism and affirmative action - Adam Smith, individuals could structure moral and economic rights without intervention from the state, laissez-faire economics, market would naturally regulate itself, government should take on tasks that could not be taken care of by the profit motive, securing the rule of law and other so-called public goods o Limited role for the state - Neo-liberalism is a restatement of the economic liberal theories of Adam Smith minus some outdated principles o Term was first coined in 1938 o Market would behave rationally if left alone - Keynesianism, private sector, market decisions sometimes lead to inefficient macroeconomic outcomes o Role of government o Falls into disrepute in 1980s in favour of free market economic policies o 2008, global financial crisis, governments around the world implement Keynesian economic policies - Post-2008 economic world, Keynesianism is back, idea that governments need to intervene through tax policy, monetary policy, etc... ZWhat Washington Means by Policy Reform[ - 1940s-50s, global economic boom, Green Revolution (started in 1948), research and development in agriculture that revolutionized food production through technological change o Positive: increased production o Negative: decrease in the price of agricultural products, leads to declining terms of trade between core and periphery countries
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