ECONOMIC THEORIES OF THE LATE 1990S AND EARLY 2000S
The breakdown of Washington Consensus policies, evidenced in the crises of the late 1990s and early 2000s, brought about a lacuna in theoretical consensus, and a strong challenge to neoliberal ideology. East Asia’s growth indicated that the government could play an important role in bringing about economic reform, and Latin America’s failure signified that full implementation of Washington Consensus policies was perhaps not entirely desirable, although there was a sense that market forces should continue to be emphasized. Growth, however, was not to be the only target of reform policies; equity and all-around well-being were increasingly emphasized (Stiglitz 2004).
Increasing emphasis was placed on improving institutions in the early 2000s. Institutions such as the rule of law, property rights, private incentives, and stable macroeconomic institutions were emphasized in place of outright liberalization. Rodrik (2004) classifies the types of reforms that fall under this category as governance reforms, and points out that such institutions are endogenous to income levels, rendering the practical study of the institution-growth nexus quite challenging. Still, a shift away from the neoliberal focus on government policy without sufficient attention to associated institutional infrastructure signified a movement toward inclusive growth rather than growth at any cost. Certainly, the fallout from the crises in Asia, Russia, Argentina, and Brazil comprised enormous economic and social costs.