WASHINGTON — Is the so-called Washington consensus coming to an end?

The Washington consensus, it will be recalled, is the view of the world which rests squarely on the model of free markets, free capital flows, financial liberalization and privatization. For the last 20 years it has been the orthodox approach of all the main world financial institutions and the gospel of almost every Western economist. And it has plainly brought enormous benefits to many parts of the global economy.

But the mood is changing. Despite clear signs of Asian economic recovery, the turbulence of recent years has left the theory badly bruised and its advocates on the defensive.

To a point, the shift from the triumphant certainties of the 1980s and early ’90s to the doubts and questioning of today is welcome. If one lesson emerges from the Asian currency turmoil, it is that the one-size-fits-all approach to widely diverse societies and economies just did not work.

But there are dangers. The chief of these is that as one lot of economic doctrines comes under scrutiny and is partially abandoned, it will be replaced by a set of equally flawed ideas. For instance, total freedom of capital movements, such as that encouraged by the International Monetary Fund and World Bank officials, may have led to instability and great damage to some Asian economies. But if the new “answer” is to try to discourage all such flows and put up barriers to global investment — or worse still, to impose some new and paralyzing regulatory burden — then the new order could well be worse than the last.

This is a very real prospect. The fashionable new argument is that if free-market orthodoxy is so unstable and painful, especially to the poorest countries, then it is time to go back to capital controls, trade restrictions and more state intervention, with the whole “new order” being capped by a towering new structure of global regulation.

A parallel kind of thinking can be heard from the economic development specialists. They argue that free-market orthodoxy has done nothing for the world’s poorest and that the impoverished nations are more in debt and falling further behind. So World Bank assistance and other development aid must be massively increased and redirected, by methods so far unspecified, to the poorest people. The implication is more outside intervention, more funds and more planning inside the derelict economies of the Third World. A new kind of economics (actually old collectivism in a new garb) will come to the rescue.

There is a fundamental point that does not seem to have occurred to most proponents of these well-meaning “reforms.” This is that economics-based remedies may not be the answer to the world’s problems. Indeed, by panicking governments into wrong-headed interventions they may be the cause. Solutions in the search for stability, avoidance of more currency turmoil and increased worldwide prosperity may lie outside the economic field altogether.

A faint hint of this can be found in the increasingly frequent and controversial pronouncements of the World Bank’s own chief economist, Joseph Stiglitz, “The East Asian crisis,” he notes, “brought home the point that institutions also play a big role in development.”

Outside the hermetic world of economics, the tentative thoughts of Stiglitz seem like a return to common sense. Nations prosper or fail not because of clever economic management or planning, but because of their own history, culture, institutions and political architecture. The attempt to interfere from outside, either with the imposition of theoretical models which may work inside the United States, or with new forms of aid and capital from outside, could be missing the most central point about world economic development of all — growth and market dynamism come from within a society, and not from outside.

After all markets and economic advance are not neat mechanisms like clocks, to be finely adjusted from time to time. They are wonderfully unpredictable processes of discover and innovation, with deep roots in the culture, social structure and politics that surround them. Their health and vigor could well depend much more on such matters as regard for property, fair enforcement of laws and attitudes to women than on budget cutting or currency policy.

Such matters lie far beyond the reach of IMF adjustment programs or vast new loans and development grants, however well targeted. Ministers of Finance may call — quite sensibly — for better local-bank regulation and more transparency in financial dealings. But none of this will actually transpire inside unless there is a culture of good governance and sound laws and institutions.

So the new question for the world’s financial statesmen and economists is how these very different social goals, which can be summed up as “good governance,” are to be encouraged and supported round the globe — and what kind of international institutions are now required to help promote them.

The realization may then begin to dawn that economists and central bankers are not the masters of the earth and that the keys to growth, stability and prosperity all round the globe lie more locally and in more mundane and detailed national measures and leadership than anything available from Washington.

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