About

Today, goals such as sustainability, equity and cohesion play a much bigger role in orienting policy design than they did in the 1980s. The urgent tasks ahead are political as well as social and economic.

About the conference

A generation ago, the so-called Washington Consensus laid out a series of do’s and don’t for policymakers around the world, and particularly in emerging and developing countries. Today that vision is recognized to have rightly emphasized the need for growth-promoting economic reforms, but also to have fallen short in a number of dimensions—particularly in its neglect of the social and institutional underpinnings that are indispensable not only for achieving sustained growth, but also for building fairer and more cohesive societies.

The world has changed a great deal since 1989, when the original Washington Consensus paper was published, and so has the collective wisdom on what sound policies look like. Successive crises and misguided policies have left behind a legacy of deepening inequality and growing citizen mistrust in many countries. Today, goals such as sustainability, equity and cohesion play a much bigger role in orienting policy design than they did in the 1980s. Global challenges, including climate change, pandemic control and public health more broadly, and the resilience of our economic arrangements have taken center stage. There is a growing sense that states should take a more proactive role in confronting all these challenges, but is also likely that many states lack the capacity to do the job well, and will need to be reformed and made fit for purpose.

The urgent tasks ahead are political as well as social and economic. After the fall of the Berlin Wall, liberal democracy was ascendant and its future seemed safe. No more. According to Freedom House, political rights and civil liberties around the world improved between the early 1970s and the early 2000s, but had been falling for fifteen years prior to 2021 in what has been called a democratic recession or even depression. And in many established democracies, populist-authoritarian leaders have eroded checks and balances and weakened protection for minorities, doing away with the liberal component in liberal democracy.

In this new world, political leaders and policymakers need guidance. Focusing on the twin goals of renewing the social contract and reimagining the state, and drawing from the research and skills of a group of high-profile scholars, all of whom have an LSE connection, we will work to build a ‘London Consensus’ around which new ideas can coalesce, and which can become a «user´s guide» for leaders and policymakers, providing practical solutions at the local, national and global levels.

Caveats, pitfalls and proposals

We are not hoping to put together a long supermarket list of reforms that a country needs to complete before it can hope to improve the lot of its citizens. To democratic leaders contemplating short terms of office, fragmented parliaments and limited financial resources, that is not particularly useful advice. An approach to reform that emphasizes everything ends up prioritising nothing and becomes a recipe for policy paralysis.

Nor are we proposing to put together a one-size-fits-all set of recipes. The binding constraints that hold back economic growth and social progress are different in different countries, which means that each nation should have different policy priorities. International «best practices», to be applied everywhere regardless of circumstance, can do more harm than good. But the fact that countries ought to have different priorities does not mean that they cannot learn from one another, or from the findings of policy-oriented research. There are at least four areas in which a London Consensus can assemble knowledge and lessons that could be of use to policymakers.

The first is to identify what does not work. We know from experience there are policy approaches that yield negative results pretty much regardless of setting or circumstance. Identifying those failed approaches and placing them on a list of policies «to-be-avoidedat-all-costs» can be extremely useful.

Second, and in order to avoid the one-size-fits-all temptation, useful advice can come in conditional propositions, of the form «if this is your set of circumstances, do this» and if «that is your set of circumstances, do something else». This approach must have a diagnostic technique for identifying the relevant set of circumstances (for identifying the binding constraints to improved performance, if you wish) and a prescriptive taxonomy that lists the policies that are appropriate for different circumstances and varying binding constraints.

The third is to identify the limits faced by policies, understanding that too much of a good thing can be very bad indeed. The recent history of fiscal and monetary policies provides an example. Over the last decade, the environment of ultra-low real interest rates changed the constraints faced by governments and central banks, and rendered ambitious monetary and fiscal expansions feasible. But, as we are learning quickly today, this does not mean that «anything goes». The fact that budget constraints might be looser does not mean that budget constraints have completely disappeared. Policies still face limits, and hard data and social science analyses are as useful as ever in identifying those limits and selecting some sets of policies over others.

Fourth and last, but certainly not least, useful advice can focus on lifting the political economy constraints that keep desirable policies from being implemented. Oftentimes, the scarce resource is not knowledge about which is the right policy, but knowledge about how to render that policy politically feasible. As one European leader said, «we know what to do, we just don´t know how to get reelected after we do it». Policies that have proven successful in some countries, from employment subsidies to smart fiscal rules, and from conditional cash transfers to export-processing zones, serve as shortcuts that lift political as well as economic constraints. Identifying more such shortcuts, applicable in different contexts and circumstances, has great potential social benefits.

Funding

This event would not have been possible without the generosity and vision of LSE Emeritus Governor, Benefactor and Alumnus Mario Francescotti. His leadership in establishing the Renewing the Social Contract research programme at the LSE launched this process of academic enquiry. Mario´s support will also be crucial for turning the papers into a conference volume, and for the follow-up dissemination opportunities.