What is “Washington Consensus? What is Cornwall Consensus?

The “Washington Consensus” is back in the headlines because we are currently witnessing its systematic dismantling. While it once defined the “rules of the game” for the global economy, the 2020s have ushered in a new era—often dubbed the “Cornwall Consensus” or the “New Washington Consensus”—that prioritizes state intervention over market-led growth.

The Rise of “Modern Industrial Policy”:

The original consensus preached that governments should get out of the way. Today, the world’s largest economies are doing the exact opposite.

• The U.S. Shift: Through massive legislation like the Inflation Reduction Act (IRA) and the CHIPS Act, the U.S. has moved toward strategic subsidies and state-led investment to secure supply chains.
• National Security over Efficiency: Trade is no longer just about the lowest price; it’s about “friend-shoring” and “de-risking” from geopolitical rivals like China.

Inequality and the “Left Behind”:

A major critique driving the news is that the original 10 commandments focused on aggregate growth but ignored distribution.

• The “liberalize and privatize” model was efficient at generating wealth but often concentrated it at the top, leading to the hollowing out of manufacturing sectors in the West and fueling populist movements.
• Current policy discussions now focus on “middle-out” economics rather than the “trickle-down” philosophy often associated with the 1989 framework.

The Climate Mandate:

The Washington Consensus had no mechanism for “green” growth.

• Market deregulation often ignores externalities (like carbon emissions).
• Global leaders now argue that the climate crisis requires more regulation and more public spending—direct violations of the original fiscal discipline and deregulation pillars.

The “Post-Pandemic” Realization:

COVID-19 exposed the fragility of lean, privatized supply chains.

• The consensus favored “Just-in-Time” efficiency.
• Modern news cycles focus on resilience, leading governments to bring essential production (medicine, tech, energy) back under state influence or domestic control.

What is Cornwall Consensus?

The Cornwall Consensus is a new economic thinking emerging after the COVID-19 pandemic, particularly discussed during the G7 Summit 2021 held in Cornwall, UK.

Core Idea:

Governments should play a stronger role in shaping markets, focusing on resilience, sustainability, and inclusive growth.

Key Features:

• Active role of the state in the economy.
• Focus on green transition and climate action.
• Supply chain resilience and economic security.
• Emphasis on social welfare and reducing inequality.
• Strategic industrial policy.