THE BIG PICTURE
The 1980s
argued that the neoliberal emphasis – the Washington Consensus – neglected state capacity and structural constraints, leading to weak institutions, poor infrastructure and low human capital – all barriers to sustainable growth. The 1990s
Rise of structural adjustment and neoliberalism
As the 1980s progressed, the limitations of the neoliberal approach became more and more apparent: in many countries, growth remained weak, debt burdens persisted and inequality rose.
The 1980s marked a major shift in the dominant policy paradigm in international development from structural change emphasizing state and infrastructure to market-based liberalization and reform. Faced with debt crises in Latin America and Africa, and a global macroeconomic environment marked by higher interest rates and weaker growth, major institutions such as the International Monetary Fund (IMF) and the World Bank promoted Structural Adjustment Programs (SAPs). These emphasized fiscal discipline, liberalization of trade and finance, privatization, deregulation and an opening up to foreign investment much the same as the current policy prescriptions. In policy thinking the mantra of “get the market working” became dominant: import substitution gave way to export- oriented growth and state-led planning ceded ground to liberal frameworks. Alongside came the Washington Consensus (although the term was coined later) summarizing this approach: macro stability, market liberalization, trade openness, privatization and minimal state intervention. At the same time, new voices – such as Richard Jolly, a British development economist who served as UN Assistant Secretary-General – began to argue for “adjustment with a human face,” emphasizing social protection alongside macroeconomic reforms. Meanwhile, Rolph van der Hoeven, professor of employment and development economics at the International Institute of Social Studies in The Hague, emphasized employment and social concerns in adjustment programs. As the 1980s progressed, the limitations of SAPs became more and more apparent: in many countries, growth remained weak, debt burdens persisted, inequality rose and some critics
Millennium Development Goals, globalization and the “Asian Tigers”
With the end of the Cold War and the rapid advance of globalization and banking sector deregulation, the 1990s brought a new wave of optimism about global development. Trade liberalization, regional integration, foreign direct investment and cross-border supply chains expanded markedly.
Policy thinking shifted again. Growth was now seen to be driven by openness, integration, investment in human capital (education and health) and the quality of institutions (governance and rule of law). The rise of the East Asian miracle economies reinforced this view, with countries such as Singapore, South Korea and others demonstrating
how investment, trade and human capital could drive rapid growth. Around the same time the Millennium Development Goals (MDGs) were adopted in 2000 at the UN, setting specific targets for poverty reduction, health, education, gender equality and other social indicators. This approach introduced stronger measurable outcomes into the development agenda. Institutions responded: the World Bank, IMF and UN agencies now emphasized poverty reduction, governance and social inclusion, alongside growth, in their work. Development financing began to diversify, including private sector development, microfinance and public–private partnerships.
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