Is the Washington Consensus good or bad

The Washington consensus is a couple of policies often advised to and pushed on growing countries by traditional western government authorities and organizations. Among these organizations is the IMF, which often imposes or "heavily recommends" these regulations to developing countries in crisis who are looking to get an IMF loan to be able to pay back loans taken from international financial market segments, which they are often in danger of defaulting on. While many of the coverage recommendations will in no doubt produce a positive economic end result for the developing country, some of the insurance policies can be negative financially, environmentally, and socially.

There are ten different pieces of policy recommendations in the Washington Consensus. The first one is fiscal self-control, which to me seems enjoy it could only be considered a positive thing for a developing country. A well-balanced budget with all money accounted for is essential for a developing country. With out a healthy budget a country's arrears will continue to increase, laying the groundwork for future crises. It might be possible to fix the short-term problems without balancing the budget, in the permanent your debt will catch up to you and make the problem worse. The sole negative facet of this recommendation is the fact that a few of the budget slices which may be necessary for a balanced budget will need away money from programs that may help people and therefore create a negative social end result on the civilian population.

Public Expenditure Priorities is the second policy recommendation by the Washington Consensus. This implies redirecting "misspent" government cash to areas with more prospect of higher economic results. It is suggested to adopt money away from areas such as administration, protection, indiscriminate subsidies, and white elephants, and instead spend that money on areas such as major health insurance and education, and infrastructure, which will definitely produce excellent results for the overall economy. This seems such as a policy that might be a good one for a producing country in an emergency to adopt, as long as it doesn't take it to the extreme. By that I mean that any country can only just afford to eliminate a certain amount of money from areas such as protection and administration. So, therefore, this plan will only help countries that are already overspending in these areas.

The third plan recommendation is Taxes Reform, which is intended to increase government revenues, also to ensure that the right part of the people gets taxed. John Williamson, the writer of Democracy and the "Washington Consensus", says, "The aim is to sharpen incentives and improve horizontal collateral without lowering realized progressivity. " He also says that taxing interest on resources held overseas, known as "flight capital", is an essential aspect for a producing country. This is practical because the financial elites in producing countries often take their money and invest it abroad because it is safer and generally can produce better results. The governments of developing countries cannot find the money for to lose out on this revenue and therefore taxing this "flight capital" is essential.

Financial Liberalization is the fourth plan suggestion. John Williamson says that the best goal should be market-determined interest levels, but that is often next to impossible in an economy where there is extreme lack of confidence on the market. In this case it is recommended that the interim solution ought to be the "abolition of preferential interest levels for privileged borrowers and achievement of any moderately positive interest rate. " Market driven interest levels in growing countries tend to be not possible and at least Williamson acknowledges this and advises the reduction of preferential interest rates in the short term.

The fifth suggestion handles Exchange Rates. Williamson says that producing countries have to have a unified and accepted exchange rate that is competitive in order to induce a rapid progress in non-traditional exports. He says that because ELG has been proven to so successful, and that a competitive exchange rate is so important to this success, growing countries should place an extra emphasis on accomplishing this. A couple of disagreements over how to accomplish a competitive exchange rate among economists. Some say that floating the exchange rate is the ideal solution, while some say that this will lead to extremely high inflation rates and that a government controlled exchange rate is a much better way to follow this.

Trade Liberalization is one insurance plan of the Washington Consensus that is disagreed on by many economists and analysts. Williamson says that quotas should be "rapidly replaced" by tariffs. Economists disagree on enough time limit a expanding country should set for phasing out tariffs as well as what countries that are in recession must do to accomplish trade liberalization. The condition with this policy is usually that the markets of growing countries often become susceptible to foreign influence once they lose the capability to protect their home sectors through quotas and tariffs. This often inhibits domestic establishments from growing to their potential and instead results in foreign influence over your home market.

The seventh policy recommendation deals with Foreign Direct Investment which is nearly the same as Trade Liberalization. Williamson says that any barriers impeding the stream in overseas capital and companies should be abolished and that all foreign firms be permitted to compete similarly with the same rights and privileges expanded to domestic businesses. Again, this often leads to international domination of the marketplace. This can also lead to a situation where even though the companies in a growing country is quite profitable, these revenue do not generally stay in the developing country where these were made, and instead turn into "flight capital. "

Privatization is another highly debated aspect of the Washington Consensus. While it is generally arranged upon that government authorities are not good at running effective and profitable sectors, the simplest way for governments to sell off industries and to privatize is often debated. Privatization can either be a good or bad thing for a developing country. It all depends on how the process is done and whom the industries can be purchased to. If they are all sold to foreign interests and individuals, this can lead to the same problems listed in the previous paragraphs on Trade Liberalization and FDI.

Deregulation is very similar to trade liberalization and FDI because its goal is abolish limitations impeding the entry of foreign organizations or that restrict competition also to "ensure that laws are justified by such conditions as basic safety, environmental safety, or prudential guidance of finance institutions. Again, this can lead to the same problems mentioned in the previous few paragraphs in conditions of foreign influence and control.

The tenth, and previous, suggestion of the Washington Consensus can be an essential element for any country that intends to work at learning to be a developed country. Property Privileges need to guaranteed through a well-established and consistent legal system so that people are confident in the market and federal government making them excited and willing to get without concern with losing their investments.

After some considered whether I believe the Washington Consensus, and its own policy referrals, to be the positive or negative way to go for producing countries in a crisis, I decided that it depends on exactly how a country and federal interprets and implements many of the policies. Although some of the insurance policies are obviously going to be beneficial immediately for a producing country's economy, many other insurance policies, if not integrated in a way specific to a country and their specific situation, will only make the situation worse and damage them over time.

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