The Washington Consensus also runs the danger of denying the limitations of self-help in the case of sub-Saharan Africa by overlooking the possibility of poverty traps. While central planning went overboard in suppressing the private market economy, the Washington Consensus runs the danger of denying the state its rightful role in providing an important range of public goods. The new mantra from the Washington Consensus Mark 2 is “get the institutions right.” The danger is that an elastic definition of the term “institutions” will render the current mantra intellectually vacuous. The mantra of the first phase (Washington Consensus Mark 1) is “get your prices right”, and the falsification of this first mantra led to the emergence of the second phase of the Washington Consensus doctrine. There have been two phases to the Washington Consensus doctrine. This explains why some observers have called the trade regimes of Korea and Taiwan in the 1965- 1980 period “free trade regimes” even though they featured extensive import tariffs and export subsidies. The Washington Consensus was based on a wrong reading of the East Asian growth experience. The following five propositions summarise the set of interrelated arguments made in this paper: 1. The Washington Consensus suffers from fundamental inadequacies, and that a more comprehensive framework of the economic process is needed to guide the formulation of country-specific development strategies.
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