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.
Abstract
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.
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