In which Ha Joon Chang finally jumps the shark


Our attention was drawn to this quite wondrous piece by Ha Joon Chang in the Financial Times:

Bolivia isn’t the only country in Latin America that has defied the Washington Consensus and improved its economic performance. Argentina, Ecuador, Uruguay and Venezuela have all ditched Washington Consensus policies and have seen both accelerated economic growth and reduced income inequality. I am not saying everything is peachy in those Latin American countries. In particular, Venezuela has serious macroeconomic imbalances, although they have improved recently, while Argentina is haunted by its past debt crisis. More worryingly, much of their economic growth has been due to the commodity price boom — fuelled by China’s super-growth, which is coming to an end — rather than industrial development. So there is a serious question about the sustainability of their growth.

However, these countries’ experiences show how the Washington Consensus policies have failed developing countries. That most of the fastest-growing developing countries outside Latin America, such as China, Vietnam, Myanmar, Ethiopia and Uzbekistan, haven’t even adopted Washington Consensus policies in the first place corroborates this observation.

The first point to note is that there's a certain confusion there about what the Washington Consensus actually is. It is, in fact, just a list of stupid things that governments should not do. Although phrased in a positive manner, the real point is don't do the opposite:

The consensus as originally stated by Williamson included ten broad sets of relatively specific policy recommendations:[1] Fiscal policy discipline, with avoidance of large fiscal deficits relative to GDP; Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment; Tax reform, broadening the tax base and adopting moderate marginal tax rates; Interest rates that are market determined and positive (but moderate) in real terms; Competitive exchange rates; Trade liberalization: liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs; Liberalization of inward foreign direct investment; Privatization of state enterprises; Deregulation: abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions; Legal security for property rights.

The idea that China hasn't followed at least most of that is ludicrous.

As is the idea that Venezuela has been doing well quite frankly.

Yes, we know, Chang has a horror of the idea that markets undirected by the bureaucracy might actually work but really, this is too much.