Mr. Stiglitz pointed out that poor health indicators and environmental problems indicated unsustainable growth, which would not benefit the country in the medium and long term. He emphasized the importance of "sustainable, equitable and democratic development" that would be accessible to the society as a whole.
Moving on to the Latin American region, Mr. Stiglitz stated that the Washington Consensus "was neither necessary nor sufficient for growth", and went on to list important areas linked to development success that the consensus had ignored, including the role of equity and high interest rates in the economy and the importance of democratic participation and the environment to ensure sustainable growth. He described Bolivia as an example of a country that implemented the Washington Consensus suggestions without success and Argentina as the model student whose rapid growth was followed by an equally rapid economic collapse.
The reason, he claimed, lay in the Washington Consensus' ignorance of modern economics and the exclusion of important social and economic indicators in its analysis. The consensus ignored land reform and industrial policies that were being successfully implemented in Asia and didn't focus on the importance of governance and competitiveness in the marketplace. Too much focus on infrastructure and not enough on closing the knowledge gap through open access to education and government promoted research in science and technology caused the LAC region to fall behind while Asia surged forward with impressive growth and greatly improved poverty indicators.
Mr. Stiglitz examined a number of key areas where the Asian response had been quite different than the policies being implemented in Latin America and argued that in every successful economy, government plays an important role. Government expenditures in education, social safety nets, research and development in science and technology and the adequate regulation of markets to prevent fraud were only some of the many areas where Mr. Stiglitz saw a need for a strong government presence. He also noted that the Washington Consensus and other agreements failed to address the importance of the social and environmental and regulatory aspects of development that governments should promote.
Mr. Stiglitz went on to review several key pillars of the Washington Consensus and globalization policy in general and noted that while trade was important, trade liberalization had not been linked with increased growth, not without addressing other important social and environmental factors. He also noted that short term capital flows associated with foreign investment could be harmful and did not lead to sustainable growth, so that foreign investment must be managed carefully. With respect to privatization, he listed several examples of state run enterprises that were equally or more efficient than their privatized counterparts and noted that corruption and failure to properly regulate private sector companies often leads to monopolies and increased exploitation of the consumer.
As an example he pointed out that even Malaysia, a resource rich country, was investing in its people via education programs and higher level science and technology research and development instead of focusing solely on infrastructure, and suggested that Latin America and the Caribbean could learn from the Asian example.
In closing Mr. Stiglitz stated that the problems facing the developing world would only get worse in the future, and that globalization has been linked to heightened inequality across the globe, where not only the poor but also middle class sectors see a drop in real wages and access to services. He warned against the danger of simply adding extra elements to the Washington Consensus in an attempt to fix the problem without critically examining its basic assumptions. Mr. Stiglitz then closed with a vision of an alternative; "post Washington Consensus" that recognized the important role of government and the social sectors in sustainable economic growth and development. Some of the key requirements for this new approach were:
1. Strong Anti-Trust and Anti-Monopoly laws.
2. Strong government, transparent with an effective and accessible judicial system.
3. The active promotion of the idea that people are the key to economic success but are also the product of that success via the following:
4. Strong social safety nets (such as those in Nordic Countries) that support individuals and allow for entrepreneurial risk taking.
5. Investments in both primary and higher level education and research and development.
6. Access to credit at all levels and to all sectors of society, and redistribution of funds to combat inequality.
