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Neoliberal Globalization and the Washington Consensus

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0866-Huque-ch05_R1_210605

Chapter 5

Neoliberal Globalization
and the Washington
Consensus

Jan Nederveen Pieterse

CONTENTS

I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
II. Dixie Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
III. The Cold War and Neoliberalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
IV. The Washington Consensus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

I. Introduction
During the past two decades, neoliberal globalization has been the domi-
nant approach, not in the sense that it is all there is to globalization but in
the sense that it became a global regime. Most protest against globalization
concerns neoliberal globalization and this is the actual problem, rather than

91
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92 B International Development and Governance

globalization per se. Contemporary globalization can be described as a

package deal that includes informatization (applications of information
technology), flexibilization (de-standardization in the organization of pro-
duction and labor), and various changes such as regionalization and the
reconfiguration of states. Since the 1980s, the growing impact of neoliberal
policies adds to the globalization package, deregulation (liberalization and
privatization), marketization (unleashing market forces), financialization
and securitization (conversion of assets into tradable financial instruments),
and the ideology of lean government. This chapter considers how this has
come about and focuses on the economic and political shift within the
United States to the South, the connection between the cold war and
neoliberalism, and the “Washington Consensus.”
Studies generally explain the onset of neoliberalism as the confluence of
the economic ideas of the Chicago school and the policies of Ronald Reagan
and Margaret Thatcher. A further step is the Washington Consensus, the
economic orthodoxy that guided the IMF and World Bank in their policies
through the 1990s and turned neoliberalism into global policy.
Tickell and Peck (2003) discuss the development of neoliberalism in
detail in three phases:

1. An early phase of proto-neoliberalism from the 1940s to the 1970s in

which the main ideas took shape.
2. A phase of rollback neoliberalism in the 1980s when it became
government policy in the United States and the United Kingdom.
3. A phase of roll-out neoliberalism in the 1990s when it became
hegemonic in multilateral institutions.

Like many accounts, this focuses on economic ideas (of the Mont Pèlerin
Society, Friedrich von Hayek, and Milton Friedman) and the policies of
Reagan and Thatcher. However, by locating the origins of neoliberalism in
the realm of ideas and the theories of the Chicago school, this overlooks
the actual economic policies that shaped “real neoliberalism” already
before the Reagan era. The low-taxes, low-services regime envisioned by
free market advocates already existed one in the American South. Real neo- Q1
liberalism in the United States in the 1970s and 1980s meant the implemen-
tation of the low-wage, low-tax model of Southern economics. The political
power of the Southern conservatives and the welcome mat of the anti-union
South for corporations fleeing the Northeast are what gave the “Reagan
revolution” its depth and punch. Eventually, this led to the rollback of the
regulatory and social functions of the state as a national trend.
This is worth considering for several reasons. As we do not analyze Soviet
society by reading the texts of Marx but by examining “real existing social-
ism,” we should look at the material political economy of neoliberalism
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Neoliberal Globalization and the Washington Consensus B 93

and not just its theoretical claims. Had the American South with its low wages,
high exploitation, and reactionary culture been upheld as the model of
economic growth, it would never have exercised the glossy appeal that the
“free market” did in theory. The Chicago school provided an economic
rationale and intellectual gloss to what was and remains a backward and
impoverished economic condition. Revisiting Chicago economics to under-
stand neoliberalism is largely revisiting smoke and mirrors. A further omis-
sion in most accounts of neoliberalism is that it ignores the setting of the
cold war and glosses over the affinities between neoliberalism and the cold
war. Both these elements are fundamental to understand the actual character
of neoliberal globalization and its subsequent metamorphoses.

II. Dixie Capitalism

American politics has undergone a long conservative trend that has recently
taken an aggressive turn; to understand this trend, we must go back several
decades in American history. When, in response to stagflation in the 1970s,
the U.S. Federal Reserve raised interest rates, it prompted the onset of the
debt crisis in the global South, which led to the IMF imposing its financial
discipline and eventually the regime of structural reform. Meanwhile in
the United States, corporations sought to retain their profitability by
moving to low-wage areas of operation, which they found first in the
American South.
The economic strategy of the American South was based on low-wage,
labor-intensive, high-exploitation production, and hostility to unions, and
has its roots in the period following Reconstruction. During the New Deal
in the 1930s, the agricultural South and West had been modernized
through vast state-capitalist projects of which the Tennessee Valley Auth-
ority is best known. But its tax structures, labor laws, and institutions did
not change and remained as conservative and illiberal as during the days
of post-Reconstruction. In the 1970s, its industrial policy consisted of pro-
viding “a safe haven for ‘footloose’ capital seeking refuge from the regulat-
ory and industrial relations regime and tax structures of the Northeast and
Midwest.” The South was committed to low taxes on capital and limited
social services and had “a long tradition of using the law as a tool to build
and protect a racialized political and economic order” (Wood, 2003: 24).
This was the land of Jim Crow law.
During the liberal period of 1960s, the expectation was that Fordism
would spread southward and this would result in the “Americanization of
Dixie.” What happened instead was the “Dixiefication of America.” The
Southern model not only survived but also became the way out of
the 1970’s economic crisis and the template for the Reagan revolution: “the
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94 B International Development and Governance

economic development policies that we have implemented in the United

States over the past three decades have taken on the characteristics of an
up-to-date, modified version of those that have been in effect in the American
South for decades” (Cummings, 1998: x). Southern economics has its roots in Q2
plantation economics with rural oligarchies and a low-cost workforce that
performs manual labor — slaves, segregated blacks, right-less migrant
workers from Mexico under the Bracero program, and after 1964, many
illegal immigrants. According to Cummings (1998: 6), it is “the export of
Southern and Republican conservative economic values to the nation that
replaced the northern liberal values of the New Deal and the Great Society
programs that set the country on the path to economic insecurity.”
The Reagan reforms came with an antidemocratic cultural and racial
backlash that had its beginnings in the 1960s with George Wallace in the
South: “it was no accident that the groups Wallace attacked were the least
powerful in society, such as welfare mothers and aliens — easy targets to
scapegoat” (Cummings, 1998: 10). In 1971, the prison population in the Q3
South was 220% higher than that in the Northeast; now nationwide incar-
ceration rates began to approximate those that had long prevailed in the
South. Within corporations, management became punitive — all elements
that feed into a low-wage, high-exploitation accumulation strategy.
If the American South provided the material matrix, Chicago school
economics provided the intellectual sheen. At a time of rapid technological
change, a return to neoclassical economics offered a gloss of modernist
minimalism. Hayek added a cybernetic twist by claiming that market
forces, in contrast to state planning, provide superior circulation of infor-
mation. Friedman’s monetarism attacked Fordism and New Deal capitalism.
The Laffer curve (tax cuts stimulate the economy and will yield more tax
revenue) provided a rationale for rolling back government. Deregulation
and tax cuts became bywords for achieving “competitiveness” and “flexi-
bility,” whereas in effect they converged on creating a low-wage, high-
exploitation regime. As Hutton points out, the origin of what became the
“Washington Consensus” lies in a Southern conservative campaign.
By 1979, when the Business Roundtable published its manifesto,
essentially arguing for what was later to be dubbed the “Washington
Consensus” (balanced budgets, tax cuts, tight money, deregulation, and
antiunion laws), with the Moral Majority and the NRA campaigning hard
on conservative social issues, the conservatives were on the move. The
center of political and economic gravity was moving to the south and
west (Hutton, 2002: 106).
Another variable is Wall Street, which had played a destructive role in the
1920s, leading to the 1929 crash. The Reagan administration dismantled the
New Deal regulatory structure that had been put in place precisely to coun-
teract the speculative financial practices of the 1920s and unleashed the
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Neoliberal Globalization and the Washington Consensus B 95

financial sector. With the institutional restraints gone, the Wall Street-driven
preoccupation with short-term stock value gradually transformed the char-
acter of American corporations. As corporations needed to show profits at
the end of each quarter, the organizational weight within firms shifted to
the financial department and elevated the status of financial over productive
operations. The institutionalized obsession with earnings led to fraud and
eventually culminated in Enron and the cascade of related scandals. Both
forms of capitalism, the high-exploitation capitalism of the South and Wall
Street financial engineering, are essentially predatory and profoundly differ-
ent from the productive capitalism that had originally been the basis of
American economic success.
The Bush II administration adds a Texan chapter to the magnolia model
and reflects an ethos unlike any previous administration, which Lind
describes thus: “Although Bush’s ancestors were Northeastern, the culture
that shaped him was made in Texas — a culture that combines Protestant
fundamentalism and Southern militarism with an approach to economics
that favors primitive commodity capitalist enterprises like cotton and oil pro-
duction over high-tech manufacturing and scientific R&D” (Lind, 2003: 80).
While this sheds light on the Bush II administration, Lind easily lapses
into schematic judgments, at times capitalizes the South, assumes sweeping Q4
continuities over time, and dichotomizes Texas elites into modern and pre-
modern factions. Applebome notes that “the South’s stock in trade has been
the myth and reality of its distinctiveness: the only part of the nation with
institutionalized apartheid; the only part of the nation to know the crushing
burden of losing a war” (Applebome, 1996: 10).
There is an American “Dixie industry” that produces a “Southern mys-
tique,” which operates as an “internal orientalism” within the United
States (Zinn, 1964; Jansson, 2003). This comes with the usual North–
South dichotomies of modern–traditional, rational– irrational, secular–
fundamentalist, urban–rural, tolerant –racist that are familiar from other
regions of the world. So while tucked within American exceptionalism,
there is a “Southern exceptionalism,” but this is not a simple matter. The
South is internally differentiated and quite dynamic; for decades it has led
the United States in population growth and economic growth. Traditional
Southern elites represent a different political economy, but to classify it as
“premodern” is too easy; it may well be considered an alternative modernity.
This means to acknowledge that it has dynamics of its own and is not simply
locked in a premodern pattern. So assessing the significance of the
American South is not simply a matter of adding up stereotypes and indi-
cators of regional uneven development, but of navigating representations
and deciding what kernels to keep.
While avoiding the trap of “internal orientalism,” a few points stand out
when we seek to understand the ongoing changes in American policies.
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96 B International Development and Governance

The first is the empirical circumstance of the American South as a low-tax

zone. The second is the leadership of Southern conservatives in American
politics virtually since the 1970s. While Republicans also lead in the West
and Northwest, the demographic center of the GOP is the much more
densely populated South. The third circumstance is that over a long
period Southern conservatives have consistently resisted the politics of
the New Deal. “The Bush II administration was also the culmination of
seventy years of a counter-revolution against the New Deal, in both dom-
estic policy and foreign policy” (Lind, 2003: 81 –82). Today the American Q5
South “has the largest concentration of low-wage jobs, its economy is
dominated by externally owned branch plants . . . and is still dependent
on natural resources, particularly oil and gas, just as it was a century ago”
(Cummings, 1998: 117).
The United States has been subject to three decades of nonstop con-
servative onslaught coming from multiple sources. Southern conservatives
pushed for dismantling the New Deal, bringing the country to the low-
taxes, low-wages, and low-productivity level of the South. Chicago econ-
omics advocated the virtues of free markets and deregulation. Both agree
on the conservative equation that “less regulation ¼ more growth ¼ more
employment” (Cummings, 1998: 75). These socially reactionary changes
were pushed through at a time of rapid technological change and presented
as progressive measures, in keeping with the information society. New tech-
nologies were harnessed to achieve a fundamental change in the balance of
forces between capital and labor, duly amplified by the spin of business
media.
In Britain during the Thatcher era, the neoliberal package was welcomed
as an attack on trade union power and New Labour continued this realign-
ment. New Democrats in the United States accepted the tenets of the post-
industrial society, flexibility and the new economy, abandoned the
commitment to Fordism and the New Deal and went post-Fordist. The
Democratic Party moved to the center right and, albeit for different
reasons than the Southern conservatives, accepted major parts of Reaga-
nomics. The Clinton administration institutionalized strands of Reaganomics
as a bipartisan agenda — business deregulation, welfare reform, the “three
strikes and out” regime — and exported it on an international scale. Instead
of a democratic approach of stakeholder capitalism, New Democrats and
New Labour adopted an authoritarian version of “flexibility.”
How does Southern economics travel? The low-wage model increased
the number of American families with two wage earners and lengthened
working hours without a proportional increase of incomes. The single-
minded pursuit of short-term profits and shareholder revenue eroded econ-
omic capacities to the extent that the main product of leading American
enterprises has become financial engineering or paper entrepreneurialism,
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Neoliberal Globalization and the Washington Consensus B 97

making sure that the books show higher numbers at the end of each quarter.
The conservatives have been so busy dismantling government and the New
Deal that they have paid little attention to the actual American economy,
which has experienced a 30-yr decline. Long-term trends include massive
deindustrialization, shrinking or inadequate investments in plants and
equipment in many sectors, decline in research and development, and the
growth of service jobs with low productivity, low wages, low job security
and long working hours. Downsizing corporations has resulted in employee
alienation and low morale. Income inequality has grown steadily.
The result of trying to be competitive on the cheap is that American
industries have lost international competitiveness in several sectors (cf.
Porter, 1990). This is reflected in the U.S. trade deficit and growing indebt-
edness at every level of the American economy, in households, corpor-
ations, cities, states, and the federal government. The bottom line is a
current account deficit that has grown to unsustainable levels.
From time to time, various circumstances have boosted the numbers,
such as financial crisis in other parts of the world (in part as an effect of
American-induced liberalization of capital markets) and the new economy
bubble of the Clinton years. What keeps the American economy going in
a structural fashion is a combination of expansion, government deficit
spending, and the influx of foreign funds. Expansion takes the form of
corporations branching into other areas of business (as in conglomerates,
frequently leading to business failure), waves of mergers and acquisitions
(spinning fortunes in Wall Street while usually leading to less productive
combinations), and opening up other markets by means of free trade
agreements that liberalize capital markets and export American financial
engineering overseas. The main form of government funding is the mili-
tary– industrial complex. The inflow of foreign funds is a major cornerstone
of the American economy. The influx of low-priced goods from China and
Asia (and increasingly also services) keeps prices low as American incomes
stagnate; also significant is the steady inflow of cheap migrant and immi-
grant labor, in particular from Mexico.

III. The Cold War and Neoliberalism

The postwar period of “proto-neoliberalism” coincides with the cold-war
era. During these years, the infrastructure of neoliberalism was built in
economic thinking and ideology (free market), think tanks and economic
policy (the “Chicago boys” in Chile and Indonesia). In fact, could we
consider neoliberalism as the sequel to the cold war?
Founding texts such as Friedrich von Hayek’s From Serfdom to Slavery
and Walt Rostow’s Take-off to Economic Growth (subtitled An
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98 B International Development and Governance

Anti-Communist Manifesto) were originally anticommunist tracts. Over time

anticommunist critique became “Free World” policy, cold-war geopolitics
was converted into a global financial regime, and the erstwhile anticommu-
nist alliance morphed into a free-market hegemonic compromise. Since the
spoils come to the victor, the kind of capitalism that triumphed was Anglo-
American “free enterprise” capitalism. As part of anticommunism, the United
States actively undermined socialist forces throughout the world, pressured
international labor unions, and blocked global alternatives such as a new
international economic order. European social democracy and Asian state-
assisted capitalism were similarly disparaged.
The affinities between the cold war and neoliberalism take several
forms. The postwar modernization of Dixie capitalism in the nonunion
Sunbelt was made possible by military tax dollars, so Dixiefication and
the cold war were tandem projects. The American Sunbelt is now the
most dependent on military contracts. The overseas network of security
alliances built during the cold war was reproduced under the neoliberal dis-
pensation with a new inflection. From the “Washington connection,” it was a
small step to the Washington Consensus. Now IMF conditionalities and
World Bank structural adjustment programs disciplined unruly states.
Applied to the USSR, Halliday (1986) refers to this process as the “second
cold war.” By undermining trade unions and nationalist governments in
much of the global South, U.S. foreign policy helped create a favorable
investment climate for American capital. American capital flight in turn
weakened the hold of the New Deal within the United States, thus establish-
ing an elective affinity between a domestic and transnational hegemony of
similar inclination.
During the cold war, economic and security interests mingled in the
military – industrial complex. If the Soviet Union had been economically
exhausted by the arms race, so arguably was the United States, though
this was masked by economic achievements. For the United States, the
real burden of the superpower arms race was its growing path depending
on the military – industrial complex. American economics, politics, and insti-
tutions have been huddled around the military – industrial complex for so
long that it has become a functionally autonomous logic. American militar-
ism has become entrenched in policy; as Johnson (2002) notes, this entails
the formation of a professional military class, the preponderance of the
military and the arms industry in administration policy, and military prepa-
redness as the main priority of government policy. The end of the cold
war, then, created an “enemy deficit” for how to sustain this gargantuan
apparatus in the absence of a threat?
With the waning of the cold war, security interests slipped into the back-
ground and the Treasury and Commerce became the most salient govern-
ment agencies, in cooperation with Wall Street and with the international
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Neoliberal Globalization and the Washington Consensus B 99

Table 5.1 Continuities/Discontinuities Between Cold War and Neoliberal

Globalization

Dimensions Cold War Neoliberalism

Ideology Free world Free market

Open door Free trade
Anti-communism Pro-American capitalism
Key state agencies Pentagon, CIA Treasury, Commerce
Economic center Military–industrial MNCs, banks, Silicon Valley,
complex, MNCs telecommunications, media
Pressure on Join Free World Structural adjustment
developing
countries
Means of pressure National security and Financial discipline and
economic incentives economic incentives
Agents of pressure U.S. government, IMF, World Bank, WTO
Pentagon
Investments Sunbelt Third World made safe
Security Strong U.S. military Strong U.S. military
Politics of Military intervention, Humanitarian intervention,
containment covert operations nation building
Allies NATO, Israel, etc. NATO, Israel, etc.
Religious movements “Clash of civilizations”:
(Mujahideen, Islam as opponent
Hamas, etc.)

financial institutions based in Washington. So in the shift from the cold war
to neoliberalism some elements remained constant — such as a strong U.S.
military and support for strategic allies such as Israel — while in other
respects there were marked shifts of emphasis (see Table 5.1). T1

IV. The Washington Consensus

Postwar American development policies in the global South favored
nation building, “betting on the strong,” Community Development that
matched the American voluntary sector, and instilling achievement orien-
tation — all strands of modernization theory in which modernization
equals westernization equals Americanization. Policies such as the Alliance
for Progress interacted with cold-war strategies and the “Washington
connection.”
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100 B International Development and Governance

The Washington Consensus that took shape in the late 1980s as a set of
economic prescriptions for developing countries echoes the core claim of
cold-war ideology: the free market and democracy go together. The main
tenets of the Washington Consensus are monetarism, reduction of
government spending and regulation, privatization, liberalization of trade
and financial markets, and the promotion of export-led growth. A difference
is that postwar modernization was a rival project, a contender in the cold
war, while the Washington Consensus no longer looks to national security
states to withstand communist pressure. Hence, if modernization theory
was state-centered and part of the postwar governmental Keynesian consen-
sus in development thinking, the Washington Consensus turns another leaf,
to government rollback and deregulation, now elevated from domestic
policy to international program. In this sense, the Reagan era was a foretaste
and then consummation of American cold-war victory, acknowledging no
rival, no competition. This imprint shows in the policies of the international
financial institutions: “the end of the Cold War has been associated with the
increasing politicization of the IMF by the United States. There is evidence
that the United States has been willing to reward friends and punish
enemies only since 1990” (Thacker, 1999: 70).
The 1990s has been described as a time of contestation between
American and Asian capitalism, and American capitalism won (Hutton
and Giddens, 2000). Speculative capital and hedge funds unleashed by
Reagan deregulation played a major part in the Asian crisis of 1997 and
subsequent financial crises. In the United States, the Asian crisis was
hailed as an opportunity for the further Americanization of Asian economies
(Bello, 2003).
The Washington institutions have been governed by the Wall Street-
Treasury –IMF complex in accordance with American economic orthodoxy,
so a shorthand account of neoliberal globalization is American economic
unilateralism. These policies resulted in a rollback of developing
country government spending and the growth and mushrooming of
non-governmental organizations (NGOs).
Amid all the criticism of neoliberalism, little attention is given to the
counter-revolution in the United States that prefigured the “counterrevolu-
tion in development.” Changes in the United States prefigure those
undertaken in the global South in the name of structural reform; in both,
there is an attempt to dismantle the regulatory state. In the United States,
government cutbacks were implemented through Reaganism; on a world
scale the drive to liberalize and privatize economies was implemented by
means of IMF stability lending and World Bank structural adjustment.
Through structural reform, the combination of Dixie capitalism and Wall
Street financial engineering has been extrapolated on a global scale.
Southern economics and its depth structure of plantation economics shed
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Neoliberal Globalization and the Washington Consensus B 101

light on the realities of structural adjustment in the global South. Real neo-
liberalism, on display in the American South, is also known as “the
Haitian road of development.” So it is no wonder that during neoliberal glo-
balization, development policies were a paradox, which is politely referred
to as “policy incoherence”: institutions matter, but governments are rolled
back; capacity building is key, but existing public capacities are defunded;
accountability is essential, but privatization eliminates accountability; the
aim is “building democracy by strengthening civil society,” but NGOs are
professionalized and depoliticized (cf. Nederveen Pieterse, 2001).
Neoliberalism sought to do away with “development economics” and
instead presented the free market as the answer to all economic questions.
If we would consider only the economic theories of the free market advo-
cates, there might be a rationale to this, even if at best half true; enough
of a rationale to serve for a while as the basis of a transnational hegemonic
compromise. During the Clinton years, the WTO became the overarching
framework of neoliberal globalization. However, neither structural reform
nor multilateral trade would conceal the actual character of neoliberalism
as a high-exploitation regime. Stepping in as a debt collector for western
lenders and investors, the IMF weakened states in the South. This is frontier
capitalism that thrives on low wages and high exploitation.
Commenting on 9/11, Beck (2001) observes that “The terrorist attacks on
America were the Chernobyl of globalization. Suddenly, the seemingly irre-
futable tenets of neoliberalism — that economics will supersede politics,
that the role of the state will diminish — lose their force in a world of
global risks . . . . America’s vulnerability is indeed much related to its political
philosophy . . . . Neoliberalism has always been a fair-weather philosophy,
one that works only when there are no serious conflicts and crises.”
9/11 has shaken the “animal spirits” of late capitalism. An economy
driven by replacement demand and consumer spending on status goods,
kept going by marketing mood making, comes tumbling down like a
house of cards once consumer confidence fades. Aviation, tourism, retail,
stocks, banks, insurance, advertising, Hollywood, fashion, media — all
sectors have been trembling and repositioning under the impact of 9/11.
Global capitalism turns out to be as interconnected as network analysis
has suggested and as vulnerable. With the exception of insurance rates,
the economic impact of 9/11 has been temporary; the impact of the
Enron episode is probably far more significant.
The fact that neoliberalism is crisis-prone rather than crisis-proof is no
news to most of the world but a novel experience for the United States.
There is a glaring inconsistency between federal government support
for sectors hit by the 9/11 crisis — especially airlines and insurance —
and the Washington Consensus which has been urging all governments,
crisis or no, to liberalize economies and cutback spending. If the insurance
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102 B International Development and Governance

industry would not receive government support, rates would increase,

delaying economic recovery. Countries that have been lectured by Washing-
ton and the IMF on economic sanity may be surprised to learn that the
United States does not follow its own counsel. This raises the wider question
whether the Washington Consensus applies to Washington.
Williamson (1990) originally formulated the Washington orthodoxy in
ten points. The first is fiscal discipline. In Washington, this applied during
the 1990s, but not before or after. The second point is reordering public
expenditure priorities in a pro-poor way. This has not been a Washington
priority since the New Deal. Like the Reagan administration, the Bush II gov-
ernment uses deficit spending as a political instrument to cutback social
spending (eventually heading for the privatization of social security). The
third point is tax reform toward a system that combines a broad tax base
with moderate marginal tax rates. The Bush II administration scrapped
estate and dividend taxes and gives tax cuts disproportionally to the very
affluent. States and cities are in financial crisis, cut support for education
and services and will raise taxes, and so forth. Thus, of the ten points of
Washington orthodoxy, it is practically only in privatization and deregula-
tion that Washington follows the Washington Consensus.
For some time, the neoliberal project has been unraveling and the
Washington Consensus faces mounting problems. The IMF handling of
financial crises has lost credibility even in Washington and on Wall Street
(e.g., Soros, 1998). Its reputation is now that of a “Master of Disaster”
(Cassidy, 2002) and in Argentina it is the International Misery Fund. Con-
gress has pressed the IMF for reforms of its operations since its recurrent
failures in crisis management. In 2000, the Meltzer Commission examined
the World Bank on behalf of the U.S. Congress and found that most of its
projects have been unsuccessful and the bulk of its lending has gone to
higher-income developing countries (which ensure a higher return on
investment), so its impact on global poverty has been close to nil (Bello,
2003). Subsequently the World Bank made combating poverty its priority,
but this does not sit well with the neoclassical orthodoxies of the Treasury,
which has pressured the World Bank to the point of weakening its
credibility.
The WTO is stalled by mounting public criticism and zigzagging
American policies. It is no longer merely a tool of American power but
also monitors the United States (on tax breaks, steel tariffs, and farm subsi-
dies). Growing worldwide mobilization against the WTO, from the battle of
Seattle to the World Social Forum, has made this an increasingly difficult
and high-risk option. Earlier international NGOs blocked the Multilateral
Agreement on Investments.
Arguably, there is no more Washington Consensus; what remains is a
disparate set of ad hoc Washington agendas. In view of the disarray of the
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Neoliberal Globalization and the Washington Consensus B 103

international financial institutions, the idea of a “post-Washington

Consensus” papers over incoherence and improvisation (Stiglitz, 2002). In Q6
economics, the neoliberal orthodoxies are no longer broadly accepted;
attention has long shifted from state failure to market failure, the importance
of institutions and themes such as social capital. After decades of structural
adjustment, most developing countries are worse off. As a development
policy, neoliberalism has been an utter failure — not surprisingly because
it is a regime of financial discipline.
As the Washington Consensus followed the compass of American neoli-
beralism, its status rises and falls with the success or failure of the American
economy, which has been losing points in its own right. Signals of failure are
the collapse of the new economy followed by the Enron series of corporate
scandals, Wall Street decline, and recession. A reorientation of U.S. policies
would be in the cards at any rate. The decomposition of the neoliberal order
sheds light on the subsequent American turn to “permanent war.”
Twenty years of rampant neoliberalism created a culture and habitus of
neoliberalism. An anthropological study of the “meanings of the market” in
western culture finds as the basic assumptions of the market model that the
world consists of free individuals who are instrumentally rational and
operate in a world that consists only of buyers and sellers (Carrier, 1997).
The peculiar ethos of casino capitalism that neoliberal globalization
unleashed on the world is ultimately an occidental cargo cult. Its secret
rituals include Dixie capitalism, Wall Street wizardry, and cold-war strategy.

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