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Politics of neo-liberal development: Washington consensus and post-Washington consensus

Neoliberal Development and Its Critics
Ben Fine and Alfredo Saad-Filho1
In: H. Webber (ed.) The Politics of Development. London, Routledge, 2014.
Keywords: Neoliberalism, development, neoclassical economic theory, Washington
consensus, post-Washington consensus, financialisation, development policy, macroeconomic
This chapter examines the emergence of neoliberalism in development economics and
development studies, and the implications of the neoliberal transition across both scholarship
and policy-making. It argues that the meaning and significance of neoliberal theory and its
policy implications have shifted over time, place and issue, and that there can be
inconsistencies across its component parts. These are, often, due to tensions between the
rhetorical and policy worlds built by the advocates of neoliberalism and the realities of social
and economic reproduction in the so-called “developing” countries. Examination of these
tensions can help to illuminate the weaknesses of the Washington consensus, the reasons for
its displacement by the post-Washington consensus led by Joseph Stiglitz, and the ensuing
disputes between the post-Washington consensus and its predecessor around the shortcomings
of “deregulation”, and the desirability and optimal extent of state intervention in the economy.
The chapter concludes that the differences between the Washington consensus and the post-
Washington consensus have been overblown and, in particular, that they share much the same
conception of development and attachment to neoliberalism, and the same limited
commitment to democracy. However, because of its greater plasticity the post-Washington
consensus is better positioned to weather the criticisms levelled against the Washington
consensus, especially after the impact of the economic crisis starting in 2007.
Neoliberalism and Its Critics
Over the last few years, doubts have been expressed over whether neoliberalism is a concept
that can be deployed either validly or even usefully across the social sciences (see, for
example, Castree, 2006, and Ferguson, 2007). This may reflect the continuing throes of
discursive critique of concepts in general and would apply equally to other commonly used
terms, most notably, globalisation. But, for neoliberalism in particular, there are genuine
doubts sewn about its diversity in both policy and impact and, consequently, over its capacity
either to define a distinctive ideology or set of policies, or to specify the nature of
contemporary capitalism.
These conundrums are no less pronounced in the case of neoliberalism and development. For
the sake of convenience, and as is common across both scholarship and popular discourse,
neoliberalism in this context is heavily associated with the Washington consensus (WC) and
the practices of the World Bank, the IMF and other international organisations, including the
WTO, the European Commission and the European Central Bank. But, in the last years of the
millennium, the WC gave birth, if not way, to the so-called post-Washington consensus
(PWC; see Fine et al, 2001). The PWC has emphasised that markets (and institutions) work
imperfectly and so provides the rationale for state intervention. For some, this shift from WC
1 Department of Economics and Department of Development Studies, SOAS, University of London.
to PWC represents a distinct break between the two, at least to the extent that the PWC is
implemented in practice. This is certainly how proponents of the PWC see matters (for
example, Stiglitz, 1998), as they associate neoliberalism narrowly with the WC and the
dogmatic belief in the virtues of the free market by way of their own critical point of
departure. For others, though, the PWC is essentially the WC (and the continuation of
neoliberalism itself) by other means. Adding to the confusion is the stance of John
Williamson, who first coined the phrase, WC, in the late 1980s. He both disassociates it from
neoliberalism as such and considers that differences between the WC and PWC are minor and
exaggerated for polemical purposes by proponents of the PWC relative to core principles that
it shares in common with the WC around the virtues of ‘sound’ macroeconomic policy (that
is, restrictive fiscal and monetary policy, ‘flexible’ labour markets, ‘free’ trade and capital
flows, privatisations, the absence of government intervention on prices, and so on), and
maximal, though not exclusive, reliance upon (global) market forces (see below, and
Marangos, 2007, 2008, and Williamson, 2007).
This chapter argues that neoliberalism is a valid and useful concept, both in general and in the
context of development, but it has to be reconstructed carefully across three dimensions (see
Fine, 2009a). The first is conceptual. Neoliberal thought incorporates a complex construct of
rhetorical (ideological), intellectual (scholarly) and policy elements. There is a shifting
combination of these across time, place and issue, and the notion of neoliberalism is not
always deployed consistently in distinct contexts or over time. There is also a tension across
these elements and the material reality that they purport to represent and project: a virtual
world made up of more or less thwarted market forces, and one which should be remade as far
as possible to conform to the image conjured by neoclassical economic theory (Carrier and
Miller, 1998).
There can be inconsistencies within each of these elements. The scholarly justification for the
virtues of the market has been supported both by the neo-Austrianism closely associated with
Friedrich von Hayek and the general equilibrium theory of mainstream economics, which is
based on neoclassical orthodoxy and is absolutely intolerant of alternatives (see Denis, 2004,
2006, and Mirowski, 2007). But these are at odds with one another, with the former
emphasising the inventive and transformative subjectivity of the individual and the
spontaneous emergence of an increasingly efficient order through market processes, whereas
the other is preoccupied with the efficiency properties of a static equilibrium achieved entirely
in the logical domain, on the basis of unchanging individuals, resources and technologies.
Despite their claims to the contrary, neither captures the political economy and moral
philosophy that underpins the invisible hand associated with Adam Smith (see Milonakis and
Fine, 2009).
Moreover, in the rhetorical and policy worlds, even the most ardent supporter of freedom of
the individual in general, and through the market in particular, concedes that those freedoms
can only be guaranteed through state provision of, and coercion for, a core set of functions
and institutions, ranging over fiscal and monetary policy to law and order and property rights,
through to military intervention to secure the “market economy” when this becomes
necessary. In practice, then, neoliberalism is often heavily associated with authoritarianism,
while its attachment to classical liberalism and political democracy is hedged and heavily
conditional in practice (see below, and Chile serves as a classic illustration in view of its
dependence after the overthrow of Allende on the monetarist Chicago boys – as it were, we
have ways of making markets to be free!; see, for example Barber, 1995, Bresnahan, 2003,
and Saad-Filho, 2007). The foregoing begins to explain why the term neoliberalism should
prove especially elusive across rhetoric, scholarship, policy and realism. As such, it is
possibly no harder to pin down than such concepts as globalisation or social capital but, as for
these as well as other examples pervasive across the social sciences, this requires that it be
critically reconstructed and assessed.
In this respect, the second key dimension for the reconstruction of neoliberalism concerns
what is distinctive about it over and above its rhetorical emphasis on the freedom of both
market and individuals. This is to be found in the distinguishing characteristic of capitalism
over the last forty years or so, which has set it apart from what has gone before, and
increasingly so over time. This is the role of finance in general and of financialisation in
particular (Fine, 2008). These processes include not only the extraordinary proliferation and
expansion of financial markets and instruments as such, both within and between countries,
but also the penetration of financial processes and imperatives into ever more aspects of
economic and social reproduction. The result has been, both directly and indirectly, precisely
the economic phenomena that are commonly associated with neoliberalism, and which go far
beyond the traditional contrast, within macroeconomics, between monetarism and
Keynesianism, or between the new orthodoxy in development economics of relying upon the
market as opposed to the old developmentalism based upon modernisation, welfarism and
industrialisation. Typically, there has been deregulation of the financial sector itself,
accompanied by commercialisation, commodification, privatisation, imposition of user
charges, liberalisation of the capital account of the balance of payments, and so on. These
were component parts of state strategies to transfer capacity to allocate resources
intertemporally (the balance between investment and consumption), intersectorally (the
composition of output and employment) and internationally towards an increasingly globally
integrated financial sector. This is not simply to reduce such systemic developments to the
power or imperatives of finance, but to recognise how the promotion of markets in general
has underpinned the promotion of financial markets in particular as a key feature of
Third, apart from reconstructing neoliberalism across its multiple dimensions and highlighting
its inextricable connections with financialisation, there is a significant distinction between two
phases of neoliberalism. The earlier might be dubbed the transition or shock phase. In the
wake of Reaganism/Thatcherism, states intervened heavily and forcefully to promote the
globalised expansion of capital in general and of finance in particular, through contractionary
fiscal and monetary policies, privatisation, deregulation, social security cutbacks, the
introduction of stiffer rules constraining social protests, and so on. These policies have
represented a severe assault on the poor and progressive values, but they also represented a
redefinition rather than a withdrawal of the state in which, either by accident or design, the
weight and influence of finance in national and international economies have grown by leaps
and bounds (see Gowan, 1999, Panitch and Konings, 2009, and Saad-Filho and Johnston,
By contrast, the later phase of neoliberalism, leading to the financial crisis starting in 2007,
was more muted and comprised two aspects. On the one hand, it accommodated the reactions
against the extreme inequity and iniquity of outcomes across economic and social provision
which were enforced in the transition phase. On the other hand, and of greater weight, is the
use of the state to sustain the newly established framework for capital accumulation,
especially the prominence of finance, with its most regressive consequences being targeted for
regulation or amelioration at the margin. This arrangement was stress-tested most
dramatically in the recent financial crisis, when developed countries rapidly committed
unprecedented resources to sustaining their collapsing financial systems. Such heavy state
intervention was unmistakably neoliberal in substance, not least being introduced by erstwhile
President Bush and Prime Minister Gordon Brown in order to shore up failing banks and
insurance companies, including the formal nationalisation of key institutions and the
absorption of failing banks by their healthier competitors. Despite these occasionally
audacious initiatives, no significant structural change has taken place in Western financial
systems in the aftermath of the crisis.
Neoliberalism and Development
Against this background, our focus can shift to neoliberalism and development more
generally. Attention to this can be placed upon the shift between the WC and the PWC. But,
before doing so, reference should be made to what might be termed the pre-WC. This is most
closely associated with Robert McNamara’s Presidency at the World Bank (1968-81). At the
level of rhetoric, this period is attached to anti-communism in a context where the Soviet
model offered an alternative to the “developing” countries in the wake of widespread
decolonisation and intense left activity in most countries, including armed mass movements in
three continents. The notion of development within this orthodoxy was linked to
modernisation, and underpinned by Keynesianism and a rudimentary version of welfarism.
Methodologically, development economics was both highly inductive and historical in
content, grasping the idea that development involved a transition through modernisation to the
ideal-type of advanced capitalism, most notably represented by the five stages of economic
growth popularised by Rostow (1960) in his appropriately entitled The Stages of Economic
Growth: A Non-Communist Manifesto.
By the same token, policy was perceived to involve significant state intervention and the
provision of social and economic infrastructure for industrialisation, including public
ownership of key industries if necessary. These developmental policies and perspectives were
posited without reference to the Cold War, the brazen allocation of aid and development
finance according to Western policy imperatives and commercial interests, the systemically
biased workings of the global economy and the constraints that this imposed on the
development strategies of the poor countries. Of course, the pre-WC was also heavily
contested. Indicative was the strength of radical alternatives in scholarship, against an
orthodoxy that now seems disconcertingly progressive by comparison to that of today. This
confrontation was especially prominent in the various forms of dependency theory, which
promoted the view that development and underdevelopment constitute two sides of the same
coin (see Cardoso and Faletto, 1979, Kay, 1989, ch.5, Palma, 1981 and Saad-Filho, 2005).
The WC emerged in the late 1970s and early 1980s as a dramatic right-wing reaction against
the perceived weaknesses of the pre-WC developmentalist consensus. Rhetorically, the WC
involved a heavy attachment to a universalist neoliberal ideology, with absolute commitment
to the free market and the presumption of the state as a source of both inefficiency and
corruption, not least through rent-seeking. At the level of scholarship, the WC suppressed the
old development economics as a separate and respected field within the discipline, even
denying the scope for its existence, and imposed, instead, a rigid adherence to the deductive
and formal methods of mainstream, neoclassical economics which, supposedly, only needed
to be applied to specific fields, among them economic development. This process provides a
striking example of “economics imperialism” in the form of the so-called new development
economics in which not only the economy itself but also social aspects of development should
be seen as reducible to the principles of the dismal science of pursuit of self-interest (see Fine
and Milonakis, 2009, Jomo and Fine, 2006, and Fine 2009b).
While the WC claimed to be leaving as much as possible to the market, the previous section
has shown that this is better seen as rebuilding the state to intervene on a discretionary basis
systematically to promote the expansion of a globalising and heavily financialised capitalism.
In effect, the WC comprised three elements: the hegemony of mainstream economics within
development theory; the predominance of the World Bank in setting the agenda for the study
of development, with the Bank and the IMF imposing the standards of orthodoxy within
development economics itself; and the redefinition of development from systemic
transformation to a set of policies to achieve development, with limited specification of what
this would be. Strikingly, the WC discarded the previous consensus around (domestically
financed) capital accumulation as the key to development and, instead, focused almost
exclusively on the need for “appropriate” incentives and the “correct” economic policies,
especially fiscal restraint, privatisation, the abolition of subsidies and government intervention
on the prices of goods and services, flexibilisation of the labour market, trade liberalisation,
export-led growth and an open capital account of the balance of payments.
Not surprisingly, the WC did not go unchallenged both from within economics and from
development studies. But each of these has also experienced a sharp decline in political
economy approaches since the early 1980s, under the sustained assault of mainstream
economics and right-wing ideology and politics that had become wedded to neoliberalism and
wholly intolerant of alternatives. Despite these profound difficulties, by the late 1980s there
was considerable momentum behind the critique of the WC both within academia and in the
emerging social movements, with two complementary approaches to the fore.
The first of these was inspired by the notion of the developmental state (see Fine, 2006, for an
overview). With particular emphasis upon industrial policy, the notion of a developmental
state was perceived to apply to the successful industrialisations in the East Asian newly
industrialising countries (NICs), with Japan as the classic precursor, followed by the four
‘tigers’ (South Korea, Taiwan, Singapore and Hong Kong) in the 1960s and 1970s. These
were followed, in turn, by Malaysia, Thailand, Indonesia, China and Vietnam. In all these
cases, it was found that the state had violated the main tenets of the WC, not least through
protectionism, directed finance, and other major departures from the free market. The second
criticism of the WC focused upon adjustment with a human face. Irrespective of the
questionable merits of the WC in bringing stability and growth, the adverse impact of WC
policies on those in, or on the borders of, poverty was highlighted. The WC stood accused of
being at least oblivious to the issue of who bore the burden of adjustment and stabilisation. It
was also criticised for tolerating, and even promoting, rising inequality as a way of reducing
the fiscal burden on the state and of enhancing the scope for introduction of market incentives
in everything from health and education to agriculture and to the workings of urban labour
markets (see Chang, 2003 and Chang and Grabel, 2004).
The mounting opposition to the WC on these fronts dovetailed with the growing evidence of
the 1980s as a “lost decade” for development across the portfolio of policies and countries
that were subject to adjustment through conditionalities imposed by the World Bank and the
IMF. As a result, the World Bank in particular sought to defend itself through questionable
appeals to the empirical evidence, selective reference to the occasional if invariably temporary
(and always carefully promoted) star performers, and the argument that the problem was not
with the policies but with lack of their implementation (opening the way to subsequent
discourses around corruption, good governance, and the like). This effort culminated in the
publication of a major report on the East Asian NICs (World Bank, 1993), arguing that
government intervention had been extensive but had only succeeded because it had been
along the lines of what the market would have done had it been working perfectly – and, in
any case, the East Asian experience was not replicable in other countries.
These attempts to defend the WC soon proved to be futile, and the PWC was launched from
within the World Bank in the second half of the 1990s. In terms of scholarship, both in
intrinsic quality and external recognition, the PWC has been far more powerful than its
predecessor, with its pioneer, Joseph Stiglitz, receiving the Nobel Prize for economics in 2001
having just been removed from his position as Chief Economist at the World Bank for reasons
that will become apparent below. Substantively, the intellectual thrust of the PWC has been to
emphasise the significance of market and institutional imperfections, as opposed to the virtues
of the (perfect) market promoted by the WC. Consequently, the PWC rejects the WC for its
antipathy to state intervention, and it also questions the conventional macroeconomic
stabilisation policies for their severely adverse short- and long-term impacts. Policy-wise, the
rhetoric of the PWC was comparatively state-friendly but in a limited and piecemeal way,
with intervention only justified on a case-by-case basis, should it be demonstrable that narrow
economic benefits would most likely accrue. Despite its obvious limitations, the PWC
provided a rationale for discretionary intervention across a much wider range of economic and
social policy than the WC. However, it remained fundamentally pro-market, favouring a
poorly examined deepening of the process of “globalisation” but, presumably, with a human
face and guiding hand.
Rhetorically, the PWC tended to exaggerate the contrast with the traditional WC concerns
(van Waeyenberge, 2007), allowing Stiglitz stridently to protest policies imposed by the IMF
on Russia and South Korea, in particular, which triggered his enforced departure from office
at the World Bank. Significantly, like the WC, the PWC also has no notion of development
beyond growth and efficiency, as opposed to an exaggerated emphasis on the means of
achieving it. The PWC focuses on the correction of market and institutional imperfections on
a piecemeal basis, rather than simply relying upon the market as for the WC, but also
presuming that the “correct” institutional and policy framework is sufficient to secure long-
term economic success, understood as a higher growth rate. Further, policy in practice under
the PWC has, if anything and despite flagship Poverty Reduction Strategy Papers, promoted
by the World Bank and the IMF as part of their external debt relief initiative, tightened on the
traditional measures associated with the WC conditionalities in the application of criteria for
assessing eligibility for aid or debt forgiveness (van Waeyenberge, 2007). The one exception,
apparently, is in liberalising the controls on international capital flows, but this is explained
by the extent to which this had already been achieved, and is no longer necessary as an
imposed policy.
The emergence of the PWC is best seen as deriving from economic orthodoxy or, at least,
from trends within it. The market imperfection economics on which it is based, especially the
appeal to the notion that individual agents are imperfectly coordinated by the market alone,
did not evolve in the context of development, but was applied to it after the event, at an
opportune moment. This was as replacement for the discredited WC view that had pioneered
the new in place of the old development economics in the context of the rise of neoliberalism,
monetarism and supply-side economics, and which also emerged without a thought for
development, as was shown above. Further, the PWC itself is indicative of a more general and
aggressive phase of economic imperialism, in which the economic and the social are
perceived to be reducible to market imperfections and the institutional responses to them
(Fine 2009b). Everything from corruption through to civil war and aid-effectiveness is to be
explained by reference to imperfectly coordinated pursuit of self-interest, defined by reference
either to narrow economic motives or to arbitrary addition of other motives and factors (such
as degree of linguistic diversity, tropical climate, and so on).
Thus, despite what appears to be a radical shift from the WC to the PWC, upon closer
analysis the PWC only represents a limited break from it. This can be highlighted in two
ways. First, despite its rejection in principle of the neoliberal free market ideology and one-
model-fits-all WC policies, the PWC remains wholly committed to mainstream economics.
This is strikingly brought out by one of the leading proponents of the new (market
imperfections) development economics. In his book, appropriately entitled One Economics,
Many Recipes, Dani Rodrik (2007, p.3) pronounces:
This book is strictly grounded in neoclassical economic analysis. At the core of
neoclassical economics lies the following methodological predisposition: social
phenomena can best be understood by considering them to be an aggregation of
purposeful behaviour by individuals – in their roles as consumer, producer, investor,
politician, and so on – interacting with each other and acting under the constraints that
their environment imposes. This I find to be not just a powerful discipline for
organizing our thoughts on economic affairs, but the only sensible way of thinking
about them. If I often depart from the consensus that “mainstream” economists have
reached in matters of development policy, this has less to do with different modes of
analysis than with different readings of the evidence and with different evaluations of
the “political economy” of developing nations … [T]he tendency of many economists
to offer advice based on simple rules of thumb regardless of context (privatize this,
liberalize that), is a derogation rather than a proper application of neoclassical
economic principles.
Second, although the developmental state literature played a major role in discrediting the
WC since the 1980s, the PWC has proceeded as if this concept, and its more systemic
approach to development, does not exist. In part, this reflects the peculiar relationship
between mainstream (WC or PWC) development economics and development studies. The
latter has always been at least multidisciplinary if not interdisciplinary, was borne out of
support for decolonisation and antipathy to modernisation as a unifying framework for
addressing (under)development. Significantly, the discipline was housed in newly formed
dedicated departments in the UK and several Western European countries, but in non-
economics disciplinary departments in the United States. While these arrangements have
allowed its radicalism to persist, it was gradually outflanked as well as encroached upon by
the rise of the new development economics within and around economics departments, and
the increasing influence of the Washington institutions over the entire development agenda
since the early 1980s (Fine, 2009b).
Neoliberalism, Politics and Development
Such considerations are crucial in broaching the politics of the WC and its critics. The IMF
and, later, the WC, were notoriously equivocal in their commitment to political democracy.
Their casual attachment to political liberalism was driven by an overwhelming commitment to
the geopolitical interests of the United States and, later, to the shock therapy associated with
the first stage of the neoliberal reforms. If these reforms could be imposed only by an
undemocratic state, as was the case in Chile and elsewhere (see above), the Washington
institutions would turn a blind eye to human rights and other abuses.
However, as the 1980s progressed the simultaneous spread of democracy and neoliberalism
demonstrated that political openness was not inimical to economic “responsibility”. Further
evidence supported an even stronger case for democracy within neoliberalism. Mainstream
academics and the Washington institutions gradually realised that democratic regimes can
more reliably deliver the jurisdictional certainty required for the smooth functioning of the
(financial) markets than most dictatorships. This is largely because of the constitutional
attachment of the democratic regimes to due process and the rule of law (see, for example,
Gill, 2002). When neoliberalism achieved worldwide hegemony, after the fall of the Berlin
Wall and the implosion of the international left, and in the light of the controlled transitions to
democracy in Latin America and South Africa, the dangers of “rogue” (undependable)
dictatorships trumped the Western fears of political openness in the South. These fears were,
traditionally, grounded on the supposed propensity of democratic regimes in poor countries to
accommodate populist electoral majorities and their inability to contain leftist agitation. These
concerns remained in the background, but they were tempered by the realisation that, once the
neoliberal reforms had been introduced, it would be harder to reverse them in a democracy to
the extent that the logic of financial and financialised policy discipline imposed its apparently
sacrosanct logic upon the constitutional process and the institutional fabric of the country (see
below). The crisis starting in 2007 has exploded the associated myth of TINA (there is no
alternative) not least as, in the midst of economic crisis, developed countries with the USA in
the lead, have dedicated vast resources to shore up a dysfunctional financial system having
previously denied such resources and corresponding interventionist policies to their own
populations and to developing countries for health, education, welfare and aid in far more
favourable circumstances. In fact, Oxfam has estimated that the financial rescue packages
would suffice to eliminate world poverty for the next fifty years.2
Retrospectively, it is clear that the WC had stumbled, casually, upon the best of all possible
worlds. The neoliberal reforms transferred to the financial markets the responsibility for
allocating social resources, while political democracy supported these reforms through the
institutionalisation of a legitimate state which was, simultaneously, permanently hamstrung
by some combination of insufficient administrative capacity (after the “roll-back” of the state
through the neoliberal reforms), fractious multiparty legislatures and bitterly competing
sectional interests, which inevitably flourish in a democracy. In these fragmented and
structurally weakened states, the balance of power is preserved by an “independent” judiciary
that locks in the neoliberal reforms under the guise of the “rule of law”, an independent
central bank, or conditionalities imposed in return for aid.3
In contrast, the PWC has always been more sensitive to the non-economic domain than its
heavily blinkered predecessor, and it proved to be better adapted to the new circumstances. In
the 1990s and 2000s, Stiglitz and his associates rationalised the emerging synthesis between
2 Oxfam press release, 1 April 2009, (accessed
13 July 2009).
3 Typically, the limited achievements of the Lula administration in Brazil, despite the high
expectations elicited by his presidential election, were mirrored by similar lame
improvements in social policies and economic outcomes in most countries caught in the ‘pink
tide’ across Latin America (Argentina, Chile, Nicaragua, Paraguay and Uruguay). Only in
those countries where the Constitution was rewritten (Bolivia, Ecuador and Venezuela) were
more significant achievements possible. See, for example, ECLAC (2008).
political democracy and neoliberal economic policies under the guise of institution-building
and the imperative to limit corruption (which is, presumably, better achieved in a democracy),
in order to support long-term economic growth. The emerging commitment of the
Washington institutions with political democracy was supported by the expanded
conditionality promoted by the World Bank, which included not only the narrow menu of
policy reforms identified by John Williamson as the Washington Consensus,4 but also a whole
raft of, at times, less tangible reforms aiming to consolidate “good governance”.5
These mutually reinforcing reasons to promote democracy in the South were enthusiastically
supported by the development industry which preyed upon, and thrived in and around, the
aid-dependent countries. The Washington institutions could finally establish a constructive
dialogue with the aid agencies and NGOs which, in the not-too-distant past, had criticised
heavily the human cost of the WC policies (see, for example, Bracking, 2009 and Green,
The accretion of conditionalities and policy reforms by the PWC reveals its attachment to the
same conception of development previously espoused by the Washington Consensus. That is,
development as the natural (financial market-led) outcome of a set of more or less narrow,
and sometimes shifting but unambiguously “correct” policies imposed from above, and under
external guidance. Paradoxically, this has been compatible with a significant increase in the
degree of legitimacy of the policies associated with the Washington institutions, as they have
been embraced, within limits, by some of its erstwhile critics.
This emerging accommodation suffered a grievous blow with the onset of the 2007 financial
crisis. As the crisis unfolds, and the mainstream seeks shelter under heavy state intervention
while, simultaneously, seeking to blame poor financial sector regulation for the debacle, the
rationale for untrammelled liberalisation has lost its residual credibility. It is unlikely to
disappear completely while capitalism remains, but it may become marginalised for a
relatively long period of time. In contrast, the PWC, with its boundless capacity to incorporate
policy novelties and refinements while remaining faithful to the tenets of the mainstream, is
likely to prosper and to become the hegemonic player in the development field, including the
Washington institutions, academia, and many aid agencies.
Although the PWC can more readily accommodate different institutional arrangements, state
intervention and pro-poor policies, which is commendable from the point of view of the
critics of the WC, the greater plasticity of the PWC could make it extremely difficult to
dislodge, although this is not impossible. The need and prospects for alternative development
strategies, and for heterodox understandings of the development process, to supplement and
4 These included fiscal discipline; redirection of public expenditure priorities toward fields
offering both high economic returns and the potential to improve income distribution, such as
primary health care, primary education, and infrastructure; tax reform (to lower marginal rates
and broaden the tax base); interest rate liberalization; competitive exchange rates; trade
liberalisation; liberalization of inflows of foreign direct investment; privatisation;
deregulation (to abolish barriers to entry and exit), and secure property rights.
5 The augmented WC includes improvements to corporate governance; anti-corruption;
flexible labor markets; WTO agreements; financial codes and standards; “prudent” capital-
account opening; non-intermediate exchange rate regimes; independent central banks/inflation
targeting; social safety nets, and targeted poverty reduction.
support the social movements challenging neoliberalism and regressive economic policies,
remain as urgent as they are uncertain in scope, content and appeal.
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... The current energy transition occurs under the influence of Neoliberalism (Harvey, 2006;Fine and Saad-Filho, 2014;Konstantinidis and Vlachou, 2017). The latter shapes the energy and climate policies instituted by EU and its member-states, one of which is Greece. ...
... While it was initiated first in the United Kingdom and the United States, Neoliberalism spread globally through competition and the increased internationalization of capital. Financial markets and, in particular, Washington institutions (the World Bank and IMF) played a major role in this process, by enforcing neoliberal policies as conditionalities for aid or debt relief to countries close to default (Harvey, 2006;Fine and Saad-Filho, 2014;Konstantinidis and Vlachou, 2017). Since the eruption of the Greek crisis, public debt and austerity programs have been used as a vehicle for furthering the neoliberal transformation of Greek society through harsh 'internal devaluation', and privatizations and deregulation of the energy sector (Vlachou and Maniatis, 1999;IEA, 2014;Verde, 2008;Konstantinidis and Vlachou, 2017). ...
Major energy transitions are associated not only with fundamental transformations of the energy sector but also with multidimensional changes in societies. Existing energy systems are heavily implicated for climate change. This paper investigates the prevalent high-carbon energy systems in capitalism and their ongoing transformations, with a special focus on Greece. Furthermore, it explores whether the EU ETS created considerable incentives for effective and socially fair transitions to low-carbon systems. Empirical data reveals the enduring high-carbon composition of gross inland energy consumption in Greece while evidence on gross electricity generation by fuel discloses the limited penetration of renewable energy sources (RES) since 1990. The neoliberal design of ETS at the EU level and its poor workings did not really induce investments in low carbon technologies. RES support policies have been more significant. However, both have adverse distributional effects, especially on working people since the latter bear the cost of transition for the most part. Effective and fair low-carbon energy transitions need radical social transformation.
... Launched first in the UK and the United States, neoliberalism spread globally. Financial markets and, in particular, Washington institutions (the World Bank and International Monetary Fund [IMF]) played a major role in this process, by imposing neoliberal policies as conditionalities for aid or debt relief to countries close to default (Fine and Saad-Filho 2014;Harvey 2006;Konstantinidis and Vlachou 2017). ...
... Neoliberalism also involves the increased internationalization of capital, exemplified by the increased abolition of obstacles to the free movement of capital across national borders. Its most pronounced new characteristic is the increased role of finance ("financialization") (Fine 2006;Fine and Saad-Filho 2014;Konstantinidis and Vlachou 2017;Vlachou and Christou 1999). Neoliberal rudiments, as described above, were inscribed in the formation of new European institutions, such as the EU and the Economic and Monetary Union (EMU), and came to shape EU energy and climate policy and EU ETS, in particular. ...
Neoliberal capitalism has extended the use of markets to address climate and energy issues. Carbon trading characteristically exemplifies the neoliberalization of climate policy. This paper discusses the workings of the European Union’s Emissions Trading System (EU ETS) in the European Union (EU) with a focus on its application in crisis-ridden Greece. Beyond environmental effectiveness and distributional effects, the paper explores the interactions of the EU ETS with crisis, austerity programs, energy poverty, and uneven development. Despite adjustments and changes, the EU ETS continues to indicate limited environmental effectiveness and unjust distributional effects. Moreover, by forging a centralized neoliberal transition to a low-carbon economy without consideration of the issues faced by unevenly developed and crisis-stricken EU members such as Greece, the EU ETS leads to additional disturbances and problems for the Greek economy as a whole, its pauperized working people, and its energy and climate options to reduce emissions on its own potential, needs, and priorities.
... Broadly, financialization is perhaps most commonly defined as the 'increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies' (Epstein, 2005, p. 3). 1 Importantly, this expansion of finance is reflected not only in the size and scope of the financial sector, but also in the behaviour of nonfinancial actors and in nonfinancial outcomes (see Krippner (2005) for an early elaboration of this point). Thus, while precise definitions vary across analyses, the shared premise underlying accounts of financialization is that this expansion of finance is a critical feature of the post-1980 USA economy, with substantive implications for foundational economic relationships (Palley, 2007;Sawyer, 2013;Fine and Saad-Filho, 2014;Epstein, 2015). ...
An expanding literature analyses the implications of the post‐1980 expansion of finance in advanced economies – a process summarized as ‘financialization’ – for capital accumulation. This paper surveys the empirical literature on financialization and investment to take stock of where we are and to identify questions for further research. Because ‘financialization’ is widely recognized to be ambiguously defined, I first introduce empirical indicators of financialization in this literature. This categorization elucidates three approaches to measuring financialization in the context of investment. The first two approaches emphasize rising income flows between nonfinancial corporations (NFCs) and finance: first, growth in NFCs’ financial incomes and, second, growth in NFCs’ payments to creditors and shareholders. Rising financial profits are, notably, widely used to suggest financial assets and incomes ‘crowd out’ physical investment. I contend that these flow‐based indicators of financialization capture important relationships between changes in firm financial behaviour and investment, but also raise questions about determinants underlying NFCs’ changing portfolio and financing decisions. The third approach to defining financialization emphasizes the best‐developed behavioural explanation linking financialization to reduced investment: shareholder value orientation. In future research, scope remains for further attention to behavioural drivers of the empirical trends summarizing financialization.
... Broadly, financialization is perhaps most commonly defined as the 'increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies' (Epstein, 2005, p. 3). 1 Importantly, this expansion of finance is reflected not only in the size and scope of the financial sector, but also in the behaviour of nonfinancial actors and in nonfinancial outcomes (see Krippner (2005) for an early elaboration of this point). Thus, while precise definitions vary across analyses, the shared premise underlying accounts of financialization is that this expansion of finance is a critical feature of the post-1980 USA economy, with substantive implications for foundational economic relationships (Palley, 2007;Sawyer, 2013;Fine and Saad-Filho, 2014;Epstein, 2015). ...
An expanding literature analyses the implications of the post-1980 expansion of finance in advanced economies – a process summarized as ‘financialization’ – for capital accumulation. This paper surveys the empirical literature on financialization and investment to take stock of where we are and to identify questions for further research. Because ‘financialization’ is widely recognized to be ambiguously defined, I first introduce empirical indicators of financialization in this literature. This categorization elucidates three approaches to measuring financialization in the context of investment. The first two approaches emphasize rising income flows between nonfinancial corporations (NFCs) and finance: first, growth in NFCs’ financial incomes and, second, growth in NFCs’ payments to creditors and shareholders. Rising financial profits are, notably, widely used to suggest financial assets and incomes ‘crowd out’ physical investment. I contend that these flow-based indicators of financialization capture important relationships between changes in firm financial behaviour and investment, but also raise questions about determinants underlying NFCs’ changing portfolio and financing decisions. The third approach to defining financialization emphasizes the best-developed behavioural explanation linking financialization to reduced investment: shareholder value orientation. In future research, scope remains for further attention to behavioural drivers of the empirical trends summarizing financialization.
... This institutional turn dictated that markets were the best way to organise economies and government intervention was only required to provide a minimal regulatory framework to improve social ties, information flows and poor-performing institutions (World Bank, 1991; for a critique, see Fine and Saad Filho, 2014; on the experience of more developed economies, see Morgan, 2016). This had profound effects on how state-society relations evolved concerning financial markets and global capital whereby states and private capital joined up address persistent market imperfections (Bayliss et al. , 2011). ...
Through a state-society analysis, this paper examines late industrialisation in resource-rich Trinidad and Tobago. This paper employs a multilevel political economy perspective drawing upon in-depth historical insights from the colonial period to early 2000s to examine the evolution of state capacity and economic outcomes. Data originate from archival sources, organisational reports and 47 semi-structured interviews with state, industry, multilateral and scientific representatives. Results demonstrate the important role of social mobilisations to drive public investments, coordinate external actors and coalitions during the 1970s to create science and technology institutions to advance industrialisation. Towards the neoliberal period, case studies of once state-owned steel and telecommunications sectors show a return to social relations reminiscent of colonial times with predominant influence of external actors and clientelistic politics. Closer examination of the distribution of power among heterogeneous actors and historical evidence shows a causal link between state capacity, industrial performance and the international economic conditions.
... This paper, together with its predecessor (Konstantinidis and Vlachou 2016), examines the neoliberal restructuring of the Greek economy in austerityplagued Greece and its implications for the appropriation of nature. We follow a class-based, value-theoretic approach informed by Marxist political economy (Semmler 1982;Resnick and Wolff 1987;Harvey 1999Harvey , 2003Vlachou 2002;Fine 1999;Fine and Saad-Filho 2014) to show how three structural adjustment programs implemented in Greece in 2010, 2012, and 2015, known in Greece as "Memoranda," accelerated the neoliberal restructuring of the Greek economy. The Memoranda tend to restructure surplus value extraction by changing capital-labor relations and access to nature. ...
This is the second paper in a two-paper series in which we present how the ongoing crisis in Greece has been used to accelerate the neoliberal restructuring of Greece with serious implications for the appropriation of nature. In this paper we focus specifically on particular aspects of the austerity programs that relate to natural resources and natural conditions. We examine changes to the business environment and ongoing privatization schemes to show how the Greek austerity programs benefited private capital with significant concessions of natural resources. By discussing relevant specific cases, we concretely show how austerity programs have had far-reaching adverse consequences for the living conditions of working people and their access to natural resources.
This book provides a robust theoretical and empirical exploration of the interrelationship between economic neoliberalism and international development. Putting the experiences of developing and transitional economies centre stage, the book investigates how their economic policies compare with the nature of economic liberalism during and after the significant economic reforms which took place from the mid-1980s. Beginning with two chapters which provide an introduction to the concept of economic neoliberalism, the second section focuses on its application to ‘practice’, and the book moves on to country/regional case studies, taken from Sub-Saharan Africa, South Asia, Latin America, China, and Eastern Europe. The book closes with some concluding remarks summarising some of the principal findings. Bringing together a wealth of expertise, this book clarifies controversial economic and political issues which have been significantly misunderstood in public discourse, and as such, it will be of interest to a range of researchers interested in the economic, social and political dynamics of developing and transitional countries.
The ongoing crisis in Greece constitutes an emblematic case of repressive capitalist restructuring. In this first part of a two-paper series, we argue that public debt is used as a vehicle for furthering the neoliberal transformation of Greek society with serious implications for the appropriation of nature. We present theoretical considerations about nature in capitalism, the rationale of neoliberal capitalist restructuring, as well as the relation between nature and neoliberalism. We finally present the timeline of the Greek crisis, as well as how the three structural adjustment programs wrought a severe capitalist restructuring upon Greece.
This chapter examines the pro-poor (democratic) macroeconomic policy framework, and the scope for its deployment as a progressive alternative to Washington Consensus-type (mainstream, or neoliberal) policies. Despite their regressive outcomes, these mainstream economic policies have been implemented consistently in most Arab and developing countries during the last 30 years; alarmingly, their hegemony has escaped virtually unscathed even the ravages of the ongoing global economic crisis. The chapter also contributes to the development of the literature on pro-poor policies through the integration of recent heterodox works in the areas of industrial and social policy and democratic economic policymaking.
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