In a country that adopts a CAD strategy, it is likely that, in the early stages, the economy will enjoy a period of rapid investment-driven growth. As has been observed, however, in Latin America and many other developing and socialist countries, economic growth will inevitably slow down, leading to eventual stagnation and even frequent crises due to the low economic efficiency and consequent depletion of the economic surplus, which is required for investment, arising from the misallocation of resources, suppression of incentives, soft budget constraints and rent-seeking activities.

As predicted by the hypothesis of Schultz (1977) with regard to the interaction of social thinking and situations of economic and social development, the malfunctioning of established institutions in the CAD strategy in turn alters the prevailing social thought about the role of government and of the market in economic development. Since the late 1970s a new form of social thought has arisen: Wiles (1995) has labelled it ‘capitalist triumphalism’ and its policies were encapsulated in the package of ten policy recommendations in the ‘Washington Consensus’ – a term coined by Williamson (1989).