The Washington Consensus refers to a development strategy focused on liberalization, privatization, and price-stability. Often associated with neo-classical economics, the spirit of the Washington Consensus was the belief that the expansion of market forces would help developing countries attain macroeconomic stability, economic growth, and indirectly, social development. Central and South America heartily adopted this approach during 1980s and 1990s, and the weak growth rates and increasing inequality these countries have since suffered now forms the basis for scrutiny of Washington Consensus policies. When rapid privatization, capital market liberalization, and inflation targeting programs failed to bring about sustained growth, supporters advocated reform. Second and third generation policies included measures to improve competition as well as equity, education, and social safety nets.
Such efforts to reform the Washington Consensus however, have been met with deep skepticism, mainly because opponents to the strategy believe it is so deeply flawed that effective reform is not possible. Instead, many advocate an entirely new approach to development; one that reflects answers to important questions overlooked in the Washington Consensus. These include: What is the appropriate balance between government and market forces and how can government help markets operate more efficiently? How are equity and efficiency linked together, and what trade-offs must be made to attain both goals? What steps can be taken to ensure that social policy and institutional development does not take a backseat to macroeconomic policy?
To address these and many other questions critical to the formulation of better development policy in Latin America, IPD, in partnership with the Universidad de Buenos Aires, organized an August 2005 forum entitled, "The Buenos Aires Consensus: A New Agenda for Latin America Fifteen Years after the Washington Consensus." Through a series of meetings and a public dialogue, an IPD team headed by Joseph Stiglitz and Jose Antonio Ocampo leveraged lessons learned from Argentina's recent experiences to explore alternative approaches to industrial policy, debt management, macroeconomics and trade.