I did not put high saving and investment in the Washington consensus for the same reason that I omitted monetary policy: that I did not regard past erroneous beliefs about them as being at the core of Latin America’s problems in 1989. Obviously I agree that they matter too. In fact, my view is that the danger here is the opposite to that discussed above: that people will take to an extreme recent comments downplaying the importance of high investment in fueling high growth. To recognize that there are other factors involved should not entitle one to dismiss the importance of high savings and investment.

Several elements of my version of the Washington consensus were directed at providing market-oriented incentives: financial liberalization, trade liberalization (again), deregulation, and privatization. Dani Rodrik would, I think, argue that one can advocate the end without endorsing the particular means that I identified. In principle he may be right, but I find it difficult to envisage a market-oriented system in which loans are given to those endorsed by the state, imports require a quota, entry is limited to those who get approval, and the state is itself a competitor. It seems to me that once one joins him in recognizing a need for market-oriented incentives then one is pretty much committed to endorsing the means that I identified. Once again, market-oriented incentives were not a central feature of recommendations made by an earlier generation of development economists: we used to think it quaint of Peter Bauer to argue that peasants would respond to market incentives. We were wrong; Dani Rodrik is right; and the original version of the Washington consensus recognized this change in our outlook.

I confess that I did not incorporate much about the need for reasonably good governance in my 1989-vintage attempt to identify the measure of agreement on what was good for development. Maybe it should have been obvious in 1989, but it was only in the 1990s that this became a part of common discourse.

The Washington consensus sounded right wingbecause it criticize policies of inward orientation, macroeconomic sloppiness, and state intervention which had become associated with the left. These policies are ill suited to advance the interests of the underprivileged, which is in my view the abiding cause of the left, but appearances were, for better or worse, decisive. The Washington consensus was not right wing in the sense that it advocated policies that would have jeopardized the interests of the poor. If it is now regarded in the way that many people appear to do then it inevitably will be a far more political manifesto than was intended. But that is no excuse for denying that the original consensus recognized a profound change in views of what was calculated to promote development. The irony is that critics like Stiglitz and Rodrik agree with the change of views but, for whatever reason, deny any change.