Fall of Russia and Washington Consensus

In the global economy early 90's Russia Collapsed so the one alternative which existed to Capitalism collapsed and as a result the Washington consensus was born in IMF and World Bank, in this consensus it was said that this is the policy which will work everywhere. According to these policies what one need to do is to private, liberalize, deregulate and automatically the economies will progress. It means that if you come to Pakistan, and you want to improve the economy of Pakistan you don't need to know anything about Pakistan but sell all of the government factories, you will back down the customs duties and taxes and that's it. So there is no need to know what is grown in Pakistan, what kind of industries are there, what kind of people are there, what is the rural sector life, who are the landlord, who are the serfs, who are the bounded labor, so nothing of them. So it's one size fits all this is what Stiglitz called. As a normal human being one would think that if I want to make an economic positive in Pakistan, I should study Pakistan but according to IMF and World Bank it's not needed at all as they have already got the magic bullet.

The second question is, obviously they're wrong, but why do they want to have these ten policies which are part of the Washington consensus?

Now if you follow the money and came to know that who will get benefit. If you think of it from the point of view of multinationals as it wants to come in, it wants to sell its products, they want to have exchange rate which is flexible, and they want to have cheap rupees so they can buy out the country's assets cheaply. There is another puzzle that the IMF recommends that we should always devalue which is surely strange as there is need to look at economic conditions to decide the optimal currency level, changing exchange even you know from economic theory there is the Lerner condition where elasticity is needed to be studied, but none of it is needed according to IMF. IMF says that just less devalue the currency it will help which is completely wrong. The policies of IMF will help out only the multinationals as if a big multinational comes in then it cannot easily compete with government as the government has a lot of resources so multinationals can easily destroy all local industry and they do. We had our ice cream factories and we had our local telephones and we had many industries that have been completely destroyed by horrible competition. It is because the foreigners are very big and very powerful and they use very nasty tactics as they run their prices very low which are below their cost and nobody else's who has a small pocket can compete, but they can afford large amounts of losses.

When all of the competition is destroyed then they go back to their standard methods, so that's why you want liberalization and let everybody do whatever they want, don't interfere, don't have any laws to control and then according to the theory this will bring about a miracle. But actually these theories these policies were tried out in different places and in all places they have been right they have led to disaster. In fact in 2003 World Bank published a book in which basically they admitted that for 10 years we have right this Washington consensus policies all over the world and they have not brought any success. The person who invented the policy, Williamson, he has admitted that the experience has not been successful, but then they have come up with a new Washington Consensus now this is 20 policies. According to Williamson there is a problem of sequencing in government sector, corrupt governments and due to many other excuses it didn't work. But basically the key has been lost in a different place, and they are searching for it in a different place.