It was argued recently that as neoliberalism struggles on in its death throes, there are new ways of going forward economically. It has been said that the so-called London Consensus is a “timely attempt to wrest back the economic agenda from the current chaos because many middle-income households in almost every country, from Mexico and South Africa to Britain and the US, are questioning whether to follow a more individualistic path for the sake of their family or join with their neighbours in a collective effort to improve their lives.”
It was further argued that as there are fewer and fewer good jobs, a spike in the costs of food and energy and a significant rise in property prices, then families who aspire to better themselves are increasingly feeling under pressure.
One of the messages from the London Consensus is that increasing inequality, by bettering oneself at the expense of others, is not going to help young people to thrive. “Not even the children of middle-income parents who have benefited from extensive support – whether from private health, private education, or a deposit for a home (surrounded by high walls) – will in the end be happier, if high rates of corruption and crime stalk the streets just beyond the garden gate.” Indeed, it is argued that proven levels of inequality hold back economic progress.
The London Consensus also challenges how we normally judge progress. It states that simply putting more money in people’s pockets should not be the main aim for a politician. It is argued that “a higher income is relatively easy to measure using gross domestic product. It is a single number that everyone knows is bad when it goes down.”
The London Consensus
It has also been noted that about 30 years ago, a series of ‘dos and don’ts’ for policymakers around the world was set out in the so-called Washington Consensus. This was developed in the 1980s and typically was an arrangement between the US Treasury and the International Monetary Fund, that saw developing countries essentially forced down the neoliberal route of government spending cuts and free markets.
It has been argued that many people now feel that that particular vision has fallen short in a number of ways, “particularly in its neglect of the social and institutional factors that are indispensable for achieving sustained growth and for building fairer and more cohesive societies.”
It is further argued that it is easy to list the immense challenges humanity faces, including pandemics, the effects of AI and the tech revolution, climate change, social inequalities, a wave of populism and a fragmenting world economy. It is particularly concerning that the wave of political polarisation and populism has undermined support for liberal democracy in many countries. All this made it harder and yet the same time more vital to find solutions that will solve these difficult global problems.
It is in reaction to the failure of neoliberalism and the need for new economic and social ideas that the London Consensus came together. It has been stated:
“In this new world, political leaders and policymakers need guidance and principles that can assist when choosing among policy alternatives. To this end, the editors of this volume convened over 50 of the world’s leading economists and policy experts at the London School of Economics and Political Science (LSE). The London Consensus: Economic Principles for the 21st Century is the result of these exchanges. It is not intended as a one-size-fits-all set of economic remedies, but an exercise in assembling the best available evidence and ideas to foster dialogue, and ultimately to develop a set of principles that can address the urgent political, social, and economic tasks ahead.”
Starting at the right places
It has been argued by many commentators for quite a number of years now, that we are at the crossroads in global economic terms. The neoliberal experiment that succeeded post-war Keynesian economics in the 1980s has clearly failed, especially since the crash of 2008, though without there being a clear way forward to replace it.
The concern for many is that far right nationalist and populist policies will end up being the successor to neoliberal globalisation. The London Consensus seems to give us some alternatives.
Right-wing populist policies will do nothing to solve the real underlying problem in both our global economy and society. That problem of course is the huge inequalities between a tiny minority of people who are extremely wealthy, and the vast majority of people across the world who are relatively poor; or in the case of at least half the world’s population in continents like Asia and Africa, very poor. When we consider this, it does appear that the London Consensus is at least starting from the right places.
Firstly, it is concerned with tackling the huge inequalities that exist both within countries and across the world. It really makes no sense to have a tiny minority owning 30%, 40% or more of the world’s wealth. Firstly, they don’t need that much wealth to live happy, fulfilled lives. Secondly, other people particularly in developing world countries; but also to some extent in countries like our own; need a bigger share of the wealth so that they can lead happy, fulfilled lives.
That brings us on to the next point, which is that government economic and social policy does not always have to be around economic growth, which often just leads to wealthy people getting wealthier at the expense of other people and the planet. Economic and social policies which can also be aimed at improving the well-being of people over a range of indicators is surely also something that can help to lead to more people having fulfilled worthwhile lives. It would make sense if that was a goal for all governments across the world today.
Tim Besley, Irene Bucelli, Andrés Velasco; Eds; (2025); ‘The London Consensus: Economic Principles for the 21st Century;’ London School of Economics.
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