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foundation , these policies could be leading to the same weaknesses that were seen under the earlier “ consensus .”
To argue these points we will first briefly review the development of the over-prescriptive and rigid bias in mainstream Western development thinking and the subsequent “ Washington consensus ,” then chart the development of Islamic development thinking before evaluating to what degree Islamic financial thinking is mimicking the earlier Western thinking . Subsequently , we will take a brief look at the variety of and tensions with two national Islamic financial systems ( Malaysia and Iran ) and then look at recent initiatives to create a more unified Islamic finance system . Finally , we will conclude with a brief discussion of the core tensions that inhibit the development of an Islamic finance system and argue that if Islamic development and financial thinkers are to avoid repeating the mistakes of the past “ consensus ” they need to fully recognize these tensions and that they will be a part of the creation of some form of international Islamic financial system for the foreseeable future .
Order and the Washington Consensus
As is well known , the core of post- WWII development thinking was based on a deterministic and positivistic vision of linear development epitomized by the work of Walter Rostow . For Rostow ( 1990 ), despite various caveats and a recognition of the complicated nature of economic development , the development process had an underlying clear orderly progression with an identifiable endpoint ( mass consumption society ), “ the process of development now going forward in Asia , the Middle East , Africa and Latin America as analogous to the stages of preconditions and take-offs in other societies ” ( p . 139 ). The key to development was to analyze where a particular country was on the development ladder , apply appropriate policies and technology ( borrowed from the successful development of advanced countries ) and implement them with the help of the advanced societies . With these tools development could be controlled and even accelerated . In all of this , the role of the developing society , and local actors , was fundamentally passive .
Despite substantial debate and academic criticism ( Rostow , 1963 ), Rostow ’ s vision distils the core thinking behind the dominant post-WWII approach to international development and the subsequent “ Washington consensus .” The consensus itself , emerging in the 1970s and 1980s during the global debt crisis merely took Rostow ’ s basic ideas and applied them to the current context . At that time , heavily indebted developing countries needed to be “ structurally adjusted ” in order to accelerate their development rate . This recipe , including reduced state expenditure , balanced state budgets , privatized state industries , and opening up to international trade ( George , 1991 ; Kosak , Ranis , & Vreeland , 2005 ), was applied to a wide range of countries and was justly criticized for its poor outcomes , inflexibility , and hypocrisy ( Easterly , 2006 ). As pointed out by Ha-Joon Chang ( 2007 ), this free market goal / vision upheld by the IMF / World Bank and backed by major Western powers reflected neither the reality of advanced industrial states ( who maintained extensive state sectors , used Keynesian economic strategies and had large state supported social services ), nor the means which the advanced countries attained their wealth and position .
Moreover , as argued by Easterly ( 2007 ) despite changing circumstances and a great deal of criticism , the core strategies of the main development agencies had hardly changed since the 1950s . In this regard ,
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