From 10 Commandments of Free Market to 5 Institutional Principles: ‘London Consensus’ an Intellectual Project or Policy Prescription? / Battle of Paradigms between London and Washington

According to Khabaronline News Agency, quoting the website of the Research Institute of Cultural and Human Sciences, at the beginning of the session, Dr. Nasekhian, Secretary of the Economics Group of the Council for the Review of Texts and Books of Human Sciences, while welcoming the attendees, stated: This session and future series of sessions are dedicated to the critique and review of the newly published book “London Consensus”; a work that claims to present new economic principles for governing the global economy in the 21st century. Proposing such a claim of “global consensus” in the postmodern era — where presenting grand narratives is difficult and sometimes accused of dogmatism — is of special importance; especially since this narrative emerges from the capital of global capitalism (London) with deep historical ties between London and Washington (from Bretton Woods to the Washington Consensus).

Planning for the Publication of a Collection of Articles

Dr. Nasekhian added: It has been planned to hold a series of thematic meetings, and eventually, the resulting collection of articles will be published in English in a special issue of the “Critical Research Journal.” This session is the first in this series and is being held with the presence of Dr. Mirjalili, a faculty member of the Economics Research Institute of the Research Institute of Cultural and Human Sciences and a member of the Economics Research Group of the Council for the Review of Texts. Given his valuable experience at the International Monetary Fund and close familiarity with the Washington Consensus and the main actors of the London Consensus (International Monetary Fund and World Bank), he will present his views.

Dr. Mirjalili: Introducing the book “London Consensus” and its Main Objectives

Following this, Dr. Seyed Hossein Mirjalili presented his comprehensive analysis of the book, after which invited professors discussed and reviewed it. A detailed report of the presentations and discussions will be published in future issues of the Critical Research Journal and the English special issue on the London Consensus.

Mirjalili began by introducing the book “London Consensus,” published by the London School of Economics in October 2025. This book is the result of the collaboration of 55 contemporary economists to create a new consensus. The main question that the participating economists in the conference answered was: “After the decline of the Washington Consensus, what new framework can guide the path of global economic policymaking?” The answer to this question is compiled in the book London Consensus.

Goals and New Approach of the London Consensus: Transition from Market Economy to Institutions

The member of the Economics Group of the Council for the Review of Texts added: Among the objectives of the London Consensus project is to respond to the challenges of the 21st century due to the difference in today’s economic conditions compared to the 1980s when the Washington Consensus was introduced. It also aims to create a framework for inclusive economic growth that, while preserving the environment, enables inequality reduction, with technological innovation and constructive competition as drivers of growth. This consensus seeks to redefine the role of the state in the economy.

He added: Instead of the minimal state of the Washington Consensus, it proposes a developmental and capacity-building state. This is because it considers a strong state a prerequisite for efficient markets. Based on this, the ultimate goal of the London Consensus is to shape “a new intellectual framework for the political economy of development” that transitions from economics as merely the science of markets, to economics as the science of institutions and societies. Therefore, the London Consensus seeks to fill the theoretical and policy void after the decline of the Washington Consensus.

The main question in evaluating the book London Consensus is to what extent the policies of the London Consensus can address the challenges of development or progress?

Key Question in Evaluating the London Consensus; Introduction to the Book’s Structure and the Most Important Strengths of the London Consensus

Continuing the session, Mirjalili introduced the book’s seven sections and seventeen chapters. Then, to evaluate the book’s content, he first outlined its strengths. He considered the most important strengths of the book to be: presenting development analysis as a multidimensional and interdisciplinary phenomenon; considering the state as a complement to the market in the development process; and incorporating institutions, structures, and place-based considerations in development. Unlike the Washington Consensus, which offered a nearly identical prescription for everyone, the London Consensus emphasizes that economic policies must be compatible with national conditions, institutional structure, level of development, and economic capacities of countries.

According to Mirjalili, the London Consensus believes that sustainable development is not possible without strong institutions and good governance, which is an improvement compared to the Washington Consensus. In a nutshell, the Washington Consensus was about what the state should NOT do, while the London Consensus is about what the state SHOULD be able to do.

Challenges and Shortcomings of the London Consensus: “An Intellectual Project for Building Consensus”

The faculty member of the Economics Research Institute continued the session by discussing the challenges and shortcomings of the London Consensus and raised the following points: First, is the London Consensus truly a consensus? As emphasized in the book’s introduction, the goal was to stimulate dialogue, not to formulate a definitive set of desirable policies. The London Consensus cannot be called a “consensus” but rather “an intellectual project for building a new consensus,” a consensus that is still in formation and has more normative, institutional, and ethical aspects than policy ones.

In other words, the London Consensus is not the end of dialogue for achieving consensus, but rather its beginning. The book London Consensus is structurally very diverse, and the analytical coherence between chapters is weak. Each chapter has its own approach and rarely refers to other chapters. Therefore, the book resembles more a collection of independent articles than a cohesive approach. In fact, the “London Consensus” is an ethical and institutional framework for economic policymaking in the 21st century.

Critique on Overcoming the Middle-Income Trap: Importance of Human Capital; Critique of the Concept of “Inclusive Growth”: Lack of Operational Definition and Neglect of Development Challenges

According to Mirjalili, another critique of the book is the issue of the middle-income trap, which it sees technological innovation as the way to overcome. However, a prerequisite for innovation is the improvement of human capital. In several Asian countries, human capital and the growth of total factor productivity have played the largest role in preventing them from falling into the income trap. In the case of Iran, human capital and total factor productivity growth have had a positive and significant effect on economic growth; however, the intensity and scope of these effects have not been sufficient to pull the Iranian economy out of the middle-income trap.

The member of the Economics Group of the Council for the Review of Texts clarified: Another issue is inclusive growth, which in the London Consensus, is a cross-sectoral concept, but it does not provide an operational and measurable definition of this concept and is presented as a “normative value” rather than a “measurable policy analysis framework.” Therefore, the possibility of evaluating proposed policies is reduced; because it is unclear at what level, for which groups, and with which indicators inclusiveness of growth should be measured. The connection between the policies of the chapters and the goal of inclusive growth is also not clear. The issues of developing countries for inclusive growth (prevalence of informal employment, weak institutions, financial vulnerability, limited government capacity, and resource-based economic structure) are largely ignored.

Critique on the Operational Challenges of a Capable State and Poverty Alleviation

According to Mirjalili, the London Consensus emphasizes the role of a capable state in development in most chapters. However, it does not explain how an inefficient state can increase its capacity? How can states struggling with budget deficits implement sustainable redistributive policies?

Therefore, according to Mirjalili, the London Consensus requires an operational definition of poverty, and it is not specified whether it refers to income poverty, multidimensional poverty, or intergenerational poverty. In several developing countries, poverty is not due to a lack of education, but rather due to a rentier economy, macroeconomic instability, institutional inefficiency, and external shocks, which the London Consensus has not addressed. Also, the book does not explain where the necessary financial resources for poverty reduction should come from? How can a balance be struck between social assistance and budget deficits? Poverty alleviation in the real world requires confronting policy trade-offs, such as higher taxation and its adverse effect on investment, increased subsidies and the risk of budget deficits, increased minimum wage and its consequences for employment, industrial policies, and the risk of rent allocation. However, the London Consensus ignores these trade-offs.

Shortcomings in Analyzing External Shock Conditions and Institutional Constraints

Essentially, the London Consensus is designed for normal conditions (not under the influence of severe external shock and pressure) and lacks specific analytical tools and recommendations for resilience in conditions of external shock. Furthermore, the London Consensus does not provide appropriate policies to address economic vulnerability in countries dependent on resource exports with low economic diversification.

The London Consensus repeatedly refers to the “necessity of active industrial policy,” “government support for good employment,” and “the need for environmental investment”; however, it does not provide an analysis of the institutional limitations in developing countries for implementing them. Developing countries have repeatedly tried to pick winners and support them, but due to limited capacity, they have effectively picked losers, or the supports have become permanent, unlimited, and unconditional. This gap between recommendation and feasibility requires more specific discussions to adapt policies to the level of capacity.

Final Critique: Necessity of Theoretical Refinement and Attention to Prioritization

Mirjalili concluded his remarks by explaining: The London Consensus analyzes the challenges of public choice less. This oversight means that recommendations need to be completed to increase their implementability in real-world policymaking and for development programs to be executed, rather than merely preparing good plans. Different chapters of the London Consensus emphasize different tools but do not provide clear guidance for “prioritization under conditions of limited resources.” Therefore, the London Consensus requires further theoretical refinement, deeper empirical backing, and broader attention to structural differences among countries.

Summary of the Value of the London Consensus and Views of Other Professors

Ultimately, the value of the London Consensus lies not in providing a policy package for development, but in opening new horizons for dialogue about development, sustainability, resilience, and state capacity.

Dr. Nemati, Director of the Economics Group of the Council for the Review of Texts, stated regarding the book London Consensus: The London Consensus shows that the mainstream of economics has retreated from its claim of universality; the London Consensus reminds us that even at the center of capitalism, paradigms are dynamic, and we must break free from a closed and imitative mindset.

Dr. Seyed Aghil Hosseini, a member of the Economics Group of the Council for the Review of Texts, also stated: The London Consensus is a step forward, but it is not yet a real paradigm shift in governance; the book is more an attempt to save the same system by adding concepts like a capable state and green growth, so the fundamental problems of the Washington Consensus will remain in the long run.

Dr. Ranaei, a political economy researcher, explained: The most important achievement of the book is breaking the Washington Consensus and giving us the courage to think independently; the book does not have significant theoretical innovation, but its emphasis on specific conditions and institutional capacity tells us that the time for blind imitation of imported prescriptions is over, and we must boldly activate our indigenous capacities.