Is the London Consensus Just Wishful Thinking?

In The London Consensus, a group of economists bring together contributions presented at an event held at the London School of Economics in 2023. Some of the contributors are affiliated with the LSE, while others come from different institutions. All share a desire to help shape a new paradigm to replace the now-obsolete Washington Consensus.

Although the contributions do not yet amount to a fully coherent paradigm, they offer a valuable set of principles and policy proposals that could form the basis of a new “consensus.” Today, however, such a consensus may seem over-ambitious, given our era of polarization and the fragmentation of public opinion. We appear far from a context in which broad majorities might embrace a shared set of economic ideas.

Still, the mainstream of the economics profession has shifted toward more egalitarian and progressive positions in recent years. The authors of The London Consensus (Aghion, Van Reenen, Rodrik, Besley, Velasco, among others) combine support for a New Industrial Policy (or “productive development policies”) with a Schumpeterian view of economic growth—one that links innovation (driven by entry and competition) with social protection.

Yet the trajectories of some of the authors illustrate the limits of the project. Many were on the intellectual front line of the failed fight against Brexit, or advised center-left politicians such as François Hollande, Michelle Bachelet, or Joe Biden, none of whom managed to build lasting coalitions. A new paradigm—like the Keynesian or neoliberal did in the past—must strive for hegemony. Today, that means having the ambition to defeat the authoritarian national-populism that seeks to dominate global politics.

Something more will be required. That includes a new vernacular, as Bowles and Carlin argue. Or a new (beyond national) dimension of the welfare state, as proposed by Morelli or Piketty. But also a strategy for forging national and international majorities and for consolidating or creating institutions for collective action—institutions that include political parties and trade unions, but also extend beyond them through think tanks and online platforms.

The London Consensus offers a reasonable set of principles and policies—a minimum standard of decency that authoritarian populism will never provide, and that may even rival well-organized authoritarian regimes (such as Xi’s China) in effectiveness. But if it is to help defeat Trumpism in the democracies we seek to preserve, it must be paired with a political strategy.