Andres Velasco in conversation with Ann Bernstein

Ann Bernstein recently interviewed Andrés Velasco, Dean of the LSE’s School of Public Policy, to discuss how the London Consensus (a new book on economic principles for the 21 st century) differs from the earlier, influential Washington Consensus and what South Africa should learn from it. Velasco argued that the Washington Consensus was right to emphasise a reliance on the market and to promote sound fiscal principles. However, by promoting a one-size-fits-all approach, it often pushed for reforms that were inappropriate for specific developing countries. Rather than imposing ‘ten commandments’ that are always applicable, the London Consensus promotes principles that economists should use when diagnosing a country’s challenges, in the same way a doctor would diagnose a patient before prescribing treatment. For example, the London Consensus sees economic growth as critically important for improving the welfare of citizens in developing countries but also accepts that many people are concerned about high levels of inequality, and that they are concerned about the well-being of their communities and the neighbourhoods where they and their families live. Another vitally important principle is that politics matters. Policies have to be credible to succeed, which means they need to be politically legitimate. One also has to anticipate the political consequences of policies. Those who promoted free trade in the 1990s did not anticipate how those policies would influence US politics, i.e., disgruntled voters in left-behind communities became supporters of Donald Trump and created a backlash against free trade with negative consequences for the US and the world. According to Velasco, state capacity is vitally important for development. Without state capacity, Britain could not be the financial powerhouse it is today, while Chile’s decades-long investment in public health infrastructure enabled it to save thousands of lives during the Covid-19 pandemic. At one point, m