Development economist Bill Easterly has posted a new paper arguing that the “Washington Consensus” and structural adjustment might have worked after all. These were the basis for the liberal market policies forced on developing countries by the IMF and the World Bank in the 80s and 90s. The argument is that although most of the measures failed to show any consistent benefits at the time, subsequent improvements in development might not have happened without it.
There are three core problems with that position. The first problem is evidential: showing that something happens over a long period of time does not show that a policy near the beginning is what started it. If structural adjustment really did work, there should be evidence of it starting to work at the time, and evidence that countries which did it more faithfully had better results. There really isn’t. Second, the ‘policy outcomes’ Easterley uses as a test – currency value, inflation rates, trade shares and so on – are not necessarily the outcomes of policy at all; they are indicators that economies have avoided some of the problems that impede growth. Third, over that length of time, there have been lots of other influences. The massive improvements in recent years might just be attributable to poverty reduction strategies, the growth of democracy, improved governance, basic health care, the internet and the cellphone, the advancement of education, cash transfers, women’s rights and many other things. The more influence we attribute to any of those – and I’d argue that they all matter – the less we attribute to structural adjustment.