’ only debtor country that continued to pay its debt until the end – and this is why finland got its reputation as an uniquely reliable debtor. but why did finland continue to serve its debt? it was not a mistake, but a conscious means to improve finland ’ s reputation. in the 1920s, finland had, indeed, the reputation of a bad debt payer. that was the result of a law issued in 1921 providing for the loan taken from france at the beginning of the 1920s to be paid back in finnish markka. since the markka was suffering from a strong inflation at the time, france ended up losing a significant amount of money – at least in terms of gold. this pleased neither france nor the international financial markets. officers in our foreign ministry were aware of the problems regarding reputation, and tried to find a way to mend it. their hopes were fully satisfied when the us press paid a great deal of attention to finland ’ s being one of only a few nations ( and finally the only one ) to continue its repayments. between 1933 and 1936, almost 3, 000 stories were published in american newspapers on finland and the debt. finland was portrayed as a small northern country that gives the shirt off its back, while its richer neighbors leave their debts unpaid. the governor of the bank of finland, mr risto ryti, visited the us in december 1934 and gave a widely quoted interview to the associated press, in which he said that finland could do nothing less : “ it is only natural that we should. we signed the contract. we promised to pay. it is the only honest thing to do. ” indeed paying back the debt was maybe the best promotion campaign ever for finland – and furthermore it was not expensive. the size of the debt as a percentage of finland ’ s gdp was small, and its share of the us total receivables from europe was actually negligible. the huge attention paid to the matter in the american media was perhaps a bit out of proportion. but there was a principle at stake. the reason for the us media ’ s strong reaction was the great depression and the rage felt by american taxpayers against countries not paying their debts. bis central bankers ’ speeches finland continued to meet regular instalments until the 1940s, when a few years ’ moratorium was called because of world war ii. at that time, finnish and us authorities also discussed whether it would be possible to invest the money repaid by finland into something that would benefit

his recommendations. examples of critiques of the washington consensus include burki and perry ( 1998 ), rodrik ( 2006 ), and birdsall and others ( 2010 ). bis central bankers ’ speeches a nice summary of the prevailing views of 20 years ago, a time when the most dramatic growth in emerging markets still lay several years in the future. by comparing current views with those described by williamson in 1990, and accepted by many, we may learn something about which ideas have held up and which have been modified or refuted by recent events. i will take in turn the three groups of policies that make up the washington consensus. the first group of recommendations, as i noted, comprised policies aimed at increasing macroeconomic stability. in this case there is little controversy. abundant evidence has linked fiscal discipline, low inflation, and a stable macroeconomic policy environment to stronger, longer - term growth in both emerging and advanced economies. 6 in particular, many emerging market economies in the 1990s emulated the success of the advanced economies in the 1980s in controlling inflation. over the years, the emerging market economies have also improved their fiscal management to the point that their fiscal positions are now often more favorable than those of some advanced economies. improvements in macroeconomic management have been particularly striking in latin america, where large budget deficits and high inflation rates had produced costly swings in economic activity in previous decades. brazil, for example, suffered hyperinflation from 1986 to 1994, with several years of inflation well in excess of 500 percent, but has maintained an average annual inflation rate of about 5 percent since 2006, while ( not coincidentally ) reducing the ratio of its budget deficit to its gross domestic product. disciplined macroeconomic policies have also supported growth in emerging markets by fostering domestic savings, stimulating capital investment ( including foreign direct investment ), and reducing the risk of financial instability. the second group of recommendations listed by williamson emphasized the need for greater reliance on markets : the freeing up of the economy through privatization, deregulation, and liberalization. the basic idea here has held up pretty well ; most observers today would agree that carefully managed liberalization – the substitution of markets for bureaucratic control of the economy – is necessary for sustained growth. for example, trade liberalization measures, such as the reduction of tariffs and the removal of other controls on exports and imports, have been a key element of the growth strategies of a number of fast - growing emerging market economies, including china. 7 openness to inflows