The Washington Consensus That Was

Edward Glaeser at Harvard argues eloquently for a return to more prudent economic policy. He starts by suggesting:

“In the 1990s, American economists roamed the world preaching the virtues of fiscal restraint, the rule of law, free trade, and privatization. Today, those four policy pillars, once known as the Washington Consensus, are abandoned in the city that gave that consensus its name.”

Of critical importance, which the current Washington insiders don’t seem to realize, he suggest that:

“Few variables are as reliably correlated with economic growth as respect for private property. America’s economic strength reflects, in part, the fact that investors have historically found this a legally reliable place. That reputation is a golden goose, and destroying it would be like adding trillions to the debt.”

And he concludes:

“For our children to face this debt, they will need free trade, private ownership, and respect for private property. Eliminating fiscal restraint during a recession is understandable. Eliminating all four pillars of sound economic policy imposes too much of a cost on tomorrow for too little benefit today”.

In this age when more government seems to be seen as the answer to all questions, it is sometimes hard to remember how very recently we learned the lessons of the failed 20th century socialist experiments. And indeed, the corrupt corporate socialism of the Bush era was a primary factor causing the mess we are in today.

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Filed under Fundamental Perspectives, Politics

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