"...failed to take account of missing institutional capacity in many developing nations."

as compared to:

"2) A redirection of public expenditure priorities towards fields with high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure."

This is what I've always thought was the problem with the Washington consensus: not that it was poorly conceived (that second quote is from Williamson's paper [PDF] in 1990 coining the term), but it was poorly implemented. Privatization was easy for countries to implement, and popular with multinationals looking to get into emerging markets, but was only half the story without the benefits of privatization going to improvements in infrastructure, rather than improvements in cronies' bank accounts.

And it's only now, 15 years on, that groups like the World Bank, USAID, and other development funders are beginning to look at institutional capacity building as being part of the Washington consensus, when arguably it was there all along.

Fukuyama, being intelligent, is capable of changing his opinion when the facts change, and I like that.

I'm not sure if he's got his facts straight in one important regard, however. Afghanistan was unable to sponsor terrorism when it was a power vacuum. It is only when the Taliban had their iron grip on the country that Al Qaeda flourished there. If you think the state under the Taliban was not wide in scope and strong in execution, you should have tried being a woman under that regime.

The consensus among Afghanistan "experts" that I've talked to and read is that Osama depended upon the kind of support only strong governments can provide, and which he was willing to subsidize -- an arrangement which he couldn't find in Yemen, the Sudan, or Somalia, where governments are weak.

The Afghanistan war made sense not because it allowed for the filling of a vacuum but because it allowed the replacement of the wrong kind of government with a friendly kind -- one that is currently very much weaker than the Taliban was, BTW.

The same goes for Saddam's regime. I don't remember Bush arguing that Saddam's Iraq was a weak state and hence in need of nation-building in order to prevent it from being taken advantage over by foreign fighters. Rather, it is now, although there is a friendly government in place, that state power has waned, that foreign fighters are trying to get a foothold.

So the failed states hypothesis, then, is perhaps the wrong model to use. It's not about the weaknesses of these states, but more about the content of their ideology, which requires a more old-fashioned approach to the conflict.

Dunno, Stefan. Would the Taliban have come to power had the country not been devastated by war and chaos for so long, and then abandoned by the West once the Soviets were out? Try measuring a longer period of time.

Look at the microcosm of Fallujah, where vacuums have allowed "foreign guests" to do to the local leadership what Osama did to Afghanistan.

I'm not sure I agree with Fukuyama either. While further deregulation in the US and UK may be difficult, that doesn't argue for a return to statism. The Bush administration has grown government by a huge degree, and while some of that may be necessary, I'm not convinced that when it comes to economics and social policy, the notion of small-scale government needs repudiation. The California energy crisis, for example, was less a problem of privatization per se, for many states have privatized energy and never ran into this problem - it's more akin to badly done privatization, as one finds in emerging markets.

Having arrived in Asia six months before the financial crisis broke out and living through the entire cycle (which isn't completely finished), I can assure you that capacity-building is indeed crucial to achieving economic and social success, and that the IMF et.al. did screw up by ignoring this. But they also screwed up by administering Latin America-style austerity programs when Asia's problem was more about governance, demand and capacity utilization.

And so far the expansion of Big Government in the US has created havoc, particularly regarding the processing of visas (talk about Fukuyama's Central Asian example of incompetence!), rather than advanced the economy or society. The world may be headed toward more government but I think it's a huge loss. The marginal gain from overbearing security is dwarfed by the damage to our civil and economic society. We need Ronnie and Mags more than ever.

Mike: "And it's only now, 15 years on, that groups like the World Bank... are beginning to look at institutional capacity building..." You are sooo behind. We did institutions in the mid 90s, then social capital, then comprehensive development frameworks, then poverty reduction strategies, then the MDGs. We'll probably be back to institutions sometime in 2010. But we have to go back through investment, human capital, tractors/green revolution, and the old Washington Consensus before we get to the new Washington Consensus again.

And on 'weak states', I think there's a difference between strong as in 'I can make sure you are beaten up for not wearing a burka' and strong as in 'I can make sure you don't take a bribe or garner monopoly profits' --the second is a far rarer form of strength than the first.