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The political economy of financing late development: credit, capital and industrialisation; Colombia 1940–67

Brando, Carlos (2012) The political economy of financing late development: credit, capital and industrialisation; Colombia 1940–67. PhD thesis, London School of Economics and Political Science.

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Accounts of economic development during mid-twentieth century have been dominated by import-substituting industrialisation (ISI) and/or state-led industrialisation frameworks. is literature attaches considerable importance to such policy areas critical to manufacturing as: trade and tariffs, foreign exchange and the promotion of credit. According to this view, industrialisation became an official goal and in many developing economies governments committed to it seriously. Focusing on Colombia, this dissertation challenges conventional wisdom. It demonstrates that the Colombian state did not provide financial aid, or implement deliberate trade-protectionist support, for industrialists to the degree hitherto argued. A distinct political-economy configuration, in which small-scale agriculturalists, particularly coffee exporters, wielded significant power within the state, meant that the type of distortive pro-ISI macro policies pursued in other Latin American economies were eschewed. Industrialisation proceeded apace in Colombia, but this was chiefly a market- or private-led phenomenon. e methodology employed to substantiate this claim is not comparative, yet frequent references are made to other Latin American nations to serve as benchmarks and counterpoints. New archival material, both quantitative and qualitative, is combined in novel ways to substantiate the original, revisionist interpretations advanced in the thesis. Policy-makers, targeting the twin challenges of managing external-account pressures and sustaining fiscal revenue, rather than promoting inward-looking development, best explain moderate levels of tariffs and slight overvaluation of the currency observed in Colombian trade policy. e heretofore untold history of the Institute for Industrial Development, a direct supplier of venture capital, shows a government agency with major organisational weaknesses, incapable of fulfilling its legal mandate, least of conforming to the major role attached by the literature as key agent for industrialisation. Findings regarding credit demonstrate that neither ordinary nor subsidised credit flowed to manufacturing to the extent previously thought. Patterns of legislated credit, sector-targeted banking and privileged access to the Central Bank, all show that agrarian ventures, not industrialists, were the recipients of subsidised official financing. A growing incompatibility between the financial requirements of advanced industrialisation and the clientelistic nature of the domestic polity that had to cater for the needs of agrarian groups, prevented policy elites from adopting a pro-manufacturing stance in financial and credit policies, even had they so wished.

Item Type: Thesis (PhD)
Additional Information: © 2012 Carlos Brando
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
Sets: Departments > Economic History

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