Washington consensus 2.0?
The Washington consensus has for long time been the symbol of market liberalism. Now, there may be a „new Washington consensus“, writes Martin Sandbu from the Financial Times based on what the International Monetary Fund and the World Bank argue in recent publicatioins around their traditional spring meetings.
PUBLISHED12. APRIL 2021
READING TIME1 MIN
While 30 years ago both the IMF and the World Bank were prominent advocates of free-market economic policies and fiscal discipline, today the agenda of these institutions seems to have changed drastically. Martin Sandbu describes this transition as a „conversion that could put Saul of Tarsus to shame“.
Not only are the multilateral institutions‘ economists relaxed about the massive deficit spending by rich countries connected to rescue packages due to the pandemic, but they are also in favour of spending on education or redistributive measures. The International Monetary Fund, for instance, has proposed a ‘solidarity’ tax on high earners and very profitable companies in order to pay up to bolster social cohesion in light of the pandemic.
New Consensus: Spend big on public health. Fiscal probity, long the core of IMF prescriptions (the joke was that the initials stand for “it’s mostly fiscal”), is no longer about reining in public spending but about getting value for money — and spending more where the value can be found.