Structural Adjustment Programs
How the IMF and World Bank imposed market reforms on indebted countries, and the bitter legacy of austerity, privatization, and liberalization.
The Washington Consensus
When developing countries came to the IMF for emergency loans in the 1980s, the Fund did not simply write checks. It attached conditions -- detailed policy reforms that borrowers had to implement to receive disbursements. These conditions reflected what economist John Williamson dubbed the 'Washington Consensus': fiscal discipline, tax reform, market-determined interest rates, competitive exchange rates, trade liberalization, openness to foreign investment, privatization of state enterprises, deregulation, and secure property rights.
The philosophy was straightforward: developing countries were in crisis because government intervention had distorted markets. The cure was to shrink the state, free markets, and integrate into the global economy. Between 1980 and 2000, over 100 countries underwent IMF structural adjustment programs. It was the most ambitious attempt to reshape developing economies in history.