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The Washington Consensus ReconsideredTowards a New Global Governance$
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Narcís Serra and Joseph E. Stiglitz

Print publication date: 2008

Print ISBN-13: 9780199534081

Published to Oxford Scholarship Online: May 2008

DOI: 10.1093/acprof:oso/9780199534081.001.0001

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A Practical Approach to Formulating Growth Strategies

A Practical Approach to Formulating Growth Strategies

(p.356) 16 A Practical Approach to Formulating Growth Strategies
The Washington Consensus Reconsidered

Dani Rodrik

Oxford University Press

This chapter starts with a paradox: ‘development’ is working while ‘development policy’ is not. On the one hand, the last quarter century has witnessed a tremendous and historically unprecedented improvement in the material conditions of hundreds of millions of people living in some of the poorest parts of the world. On the other hand, ‘development policy’ as it is commonly understood and advocated by multilateral organizations, aid agencies, Northern academics, and Northern-trained technocrats has largely failed to live up to its promise. For evidence on the former point, we can turn to Asia. For evidence on the latter, we can look at Latin America and Africa. One conclusion one could take from this is that our ability as economists to design and recommend growth strategies is extremely limited. It is argued that we can do better than adopt this kind of nihilistic attitude towards policy advice. If the original Washington Consensus erred in being too detailed and specific, and in assuming that the same set of policies work the same everywhere, policy nihilism goes too far in undervaluing the benefit of economic reasoning. The chapter outlines a way of thinking about growth strategies that avoids these two extremes. This approach consists of three elements. First, we need to undertake a diagnostic analysis to figure out where the most significant constraints on economic growth are. Second, we need creative and imaginative policy design to target the identified constraints appropriately. Third, we need to institutionalize the process of diagnosis and policy response to ensure that the economy remains dynamic and growth does not peter out. Each of these elements is discussed.

Keywords:   economic development, economic growth, economic policy, development, development policy, policy nihilism

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