CONVERGENCE AND CONSENSUS:
THE POLITICAL ECONOMY OF STABILISATION, POVERTY AND GROWTH

Ben FINE (SOAS, London University, UK)
Degol HAILU (SOAS, London University, UK)

The purpose of this paper is primarily to provide a critical overview of the macroeconomic theory that has informed the financial programming, FP, of the IMF. It does so against a background of increasing rhetoric of "consensus", not least between the IMF and the World Bank. The consensus is marked by the shift from Washington to post Washington consensus, PWC. Clearly, however, there is dissonance between the theory and practice of consensus. The forced resignation of Joe Stiglitz, Chief Economist at the World Bank, followed from his public criticism of the IMF. Within a couple of years, he was awarded the Nobel Prize in economics, in part for his contribution in founding the new development economics, Nobel (2001). In retrospect, the more progressive PWC in principle has been used to justify even more austere interventions in practice rather than to challenge them. For the Washington consensus (and neo-liberalism) is highly interventionist under the veil of being committed to the market, whilst the PWC intervenes on the basis of the presence and potential correction of market and institutional imperfections.

In short, three broad conclusions can be drawn from this account. First, both in absolute terms and relative to concomitant best mainstream practice, the macroeconomic theory and rationale underlying FP models have been sorely inadequate, especially in the context of development. Second, more specifically, even on their own terms, such models have failed to interrogate the relationship between short and long runs, and are totally inappropriate for addressing issues of transformation, growth and poverty. Third, despite mountains of legitimate criticism levelled against FP, the weaknesses presented here have rarely been exposed and highlighted. This is not to suggest that "stabilisation" is bad, only that FP does not offer an appropriate framework for it. This reflects the overcommitment of FP to financial austerity and a corresponding undercommitment to understanding development itself and the specificities attached to individual countries. The concluding remarks briefly point to alternatives to the dictum that "one (or other) model fits all".