The underperformance of median living standards, misallocation of capital, and large, persistent global economic imbalances that have been the principal shortcomings of the pre-crisis model of global economic integration have their roots in a systemic inattention to the crucial role of institutions. These include legal and regulatory frameworks as well as the institutional capacity of public agencies to administer such frameworks at both the national and global levels.
The principal lesson to be drawn from the recent financial crisis and broader legacy of globalization is that the prevailing model of economic growth and development—including the Washington Consensus— has been incomplete and unstable because it has placed almost exclusive emphasis on efficiency-enhancing measures to boost top-line growth of national income and grossly underestimated the importance of effective institutional enabling environments to the bottom-line contribution of such growth to society.
A new “deal” is needed that evokes this global, rather than the traditional national, sense of shared economic destiny. This Global Deal must proceed from a new model of global economic integration that places equal emphasis on efficiency and institution building at both the national and global levels. The narrow economic prescription of the Washington Consensus must be replaced by a more balanced economic doctrine, which history suggests might appropriately be called the Roosevelt Consensus.
A Global Deal among developed and developing country leaders is needed to repurpose and upgrade multilateral and national economic institutions so that they are better suited to enabling more inclusive, sustainable, and resilient growth.
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