rights, opening the economy to trade, privatizing state-owned enterprises and establishing broadly free markets through deregulation. In brief, the focus shifted from trying to copy industries to trying to copy the idealized market institutions of the high-income countries.<sup>31</sup> The results of the policies presented as alternatives to the failed old structuralism were at best controversial (see Easterly 2001, 2005; and World Bank 2005). The Washington Consensus quickly came to be perceived as ―a set of neoliberal policies that have been imposed on hapless countries by the Washington-based international financial institutions and have led them to crisis and misery‖ (Williamson 2002).

Later, development thinking would incorporate other trends from the broader economics profession, and in particular, growth theory. A focus on human capital dates back to the 1970s (see Table 6); however, new growth theory highlighted the role of ―endogenous‖ innovation that leads to sustained economic growth in the most advanced economies, as well as opportunities for technological catch-up in developing countries. In recent decades, the emphasis has also been placed on country specificity as policy makers moved away from generalized policy prescriptions. New techniques were developed – such as randomized control trials and other forms of impact evaluation—in order to understand better what works at the micro level of service delivery and policy reform. As part of a more pragmatic approach, some economists spent more time trying to understand the structure of domestic economies and domestic institutions in order to deepen their understanding of why some countries succeeded, while others failed.

The countries that successfully accelerated their growth and closed the gap with developed countries did not follow the approaches proposed by the dominant development thinking of that time. Japan and the East Asian ―tigers‖ followed export-oriented growth strategies instead of the old structuralist import substitution model that was popular during the 1950s and 1960s. The strategy led to much faster export growth. For example, since 1960, Latin American and Caribbean exports grew at an average of 5.4 percent per year, while they grew by 17.8, 10.5 and 8.6 percent in Korea, Thailand and Malaysia, respectively. China‘s export growth has averaged about 13 percent since 1979.<sup>32</sup> Similarly, China, Vietnam and Mauritius followed the dual-track approach for gradually moving toward a more market-based economy—sometimes referred to as an ̳Asian approach‘ (Rana and Hamid, 1995; Chang and Noland, 1995).<sup>33</sup> This contrasts with the sharp economic contractions experienced in Eastern European countries following the ―shock therapy‖ approach that had become popular in the economics profession in the early 1990s.<sup>34</sup> China is a prime example. Instead of wholesale privatization of state-owned enterprises, the government continued its ownership of many enterprises and gave them preferential access to subsidized credit. Figure 16 below displays the gradual, but substantial, transition in firm ownership in China. Simultaneously, in many sectors, the government also allowed private

> 31 In fact, not all those policies recommended by the Washington Consensus were rigorously followed in the highincome countries. In the 1990s during the heydays of the Washington Consensus, many policy advisors for the highincome countries advised the developing countries to ―do as what we say but not as we do.‖

> 32 Data are from _World Development Indicators_ , simple average growth rates.

> 33 See Lin (2009).

> 34 See, for example, Sachs (1993).

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