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Towards a New Consensus. Analyzing Bolivian Poverty Reduction Strategies. “It is fair to say that nobody really believes in the Washington Consensus anymore.” From: “Goodbye Washington Consensus, Hello Washington Confusion?” Dani Rodrik Harvard University January 2006.

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Towards a New Consensus

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Towards a new consensus

Towards a New Consensus

Analyzing Bolivian Poverty Reduction Strategies

Towards a new consensus

“It is fair to say that nobody really believes in the Washington Consensus anymore.”

From: “Goodbye Washington Consensus,

Hello Washington Confusion?”

Dani Rodrik

Harvard University

January 2006

Long wave depressive phase

Long wave: depressive phase

  • Lower growth

  • Increased unemployment

  • Regressive redistribution

  • Decaying “techno-economic paradigm,” or “mode of regulation” (“Fordism”)

  • Laissez-faire, Washington Consensus policies

  • “Real business cycles” types of economic theory

Long wave expansive phase

Long wave: expansive phase

  • Higher growth

  • Increased employment

  • Progressive redistribution

  • Consolidated techno-economic paradigm

  • Policy optimism, New Consensus

  • (Post-)Keynesian, (post-)structuralist theory

Changed focus

Changed focus

From policy deconstructionism:

  • Deregulation

  • Decontrol

  • Denationalization

Changed focus1

Changed focus

To policy constructivism:

  • Policy sovereignty

  • Structural change

  • Social justice (economic ethics, distributive justice)

New focus new instruments

New focusNew instruments

Policy sovereignty

Indebtedness policy

Structural change

Investment policy

Social justice

Income distribution policy

Indebtedness policy regulation of financial flows

Indebtedness policy:regulation of financial flows

From :

Cycles of massive inflows and euphoria

followed by

capital flight and debt crises


Desendeudamiento and

regulation of international capital flows

Foreign saving = trade deficit = a knowable variable

Investment policy output structure matters

Investment policy:output structure matters

Structure matters

  • Natural resource exports = low growth

  • Primary specialization = high inequality

  • Employment intensity = poverty reduction elasticity of growth

    Investment policy

Income distribution policy tax and expenditure reform

Income distribution policy:tax and expenditure reform

  • Increasing inequality in most countries during the low growth phase

  • Latin America: Most unequal income distribution, low tax/GDP ratio, regressive tax reforms

    Income distribution policy

New consensus model

New Consensus model










Towards a new consensus

Base scenario: Estrategia Boliviana de Reducción de la Pobreza(Poverty reduction 200-2015: 5.7 points, from 50.3 percent to 44.6)

Towards a new consensus

Poverty minimizing structural change(Poverty reduction 2000-2015: 10 points, from 50.3 to 40.3 percent)

Redistribution policies

Redistribution policies

  • Millennium tax [and expenditure] reform: Tax rate 8.1 percent (4.6 percent of GDP)

  • Rawlsian tax reform: Tax rate 16.7 percent (9.5 percent of GDP)

  • Undercollection: 3.6 percent of GDP

Millennium employment strategy

Millennium employment strategy

Employment maximizing investment strategy

  • Strong similarity with poverty minimization

    Similar GDP and poverty reduction

    Similar changes in output structure

    Stronger focus on Food staples agriculture (weaker on Small industry)

  • Confirmed cross-country by World Bank study (Perry et al. 2006)

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