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About this book

Looking at the years 1870-2016, this book analyses the reasons behind Colombia’s chronically slow economic growth. As a comparative economic history, it examines why Colombia has seen lower growth rates than countries with similar institutions, culture and colonial origins, such as Argentina in 1870-1914, Mexico in 1930-1980, and Chile from 1982 onwards.

While Colombia's history has shown relative macroeconomic stability, it has also shown a limited capacity for integrating into the world economy and embracing technological breakthroughs compared to the rest of the world, including steam, mass production and Information Technology. This volume thus moves away from the long-held view that institutional path dependence is the main determinant of differences in long-run economic growth across countries.

Table of Contents

Frontmatter

Chapter 1. The Particular Colombian Case in Latin America: A Singular Path with the Same Results

Abstract
Despite similarities with other countries in the Latin America, Colombia’s trajectory to development has been unique. If we need to oversimplify why the main Latin American countries do not yet have advanced economies, the short answer would be: deep and frequent economic depressions. If Colombia did not experience a depression since 1903, why did not this country do better?
Colombia’s problem is that it historically grew driven by input factors (capital and labour) accumulation rather than by productivity, which has remained stagnant for long periods. Productivity growth has depended on countries’ capacity to embrace technological progress. This book analyses how Colombia missed three technological waves of the last three centuries: steam, mass production, and Information and Communication Technology (ICT), and compares it with Argentina, Mexico, and Chile, respectively.
Ivan Luzardo-Luna

Chapter 2. The Price of the Regeneration: How Colombia Missed the Belle-Époque, 1870–1914

Abstract
The Belle-Époque (1870–1914) was a period of great prosperity for those economies which incorporated steam technology into their national economies. The main way in which steam enhanced progress at that time was through the railways, which allowed the consolidation of an export-led economic growth model.
In this period, Colombia missed a golden opportunity for its economic take-off. Unlike Argentina, Colombia’s real GDP per capita remained stagnant throughout the late nineteenth century. The former country was able to build an extensive railway network, while the latter increased its kilometres of railways very slowly, which determined its poor export growth. Colombia’s incapability to build railways was due to the fact that it could not attract foreign investors, as the government’s lack of commitment in honouring the external debt.
Ivan Luzardo-Luna

Chapter 3. The Take-off, 1914–1929: Coffee, Railways, and Regional Divergence

Abstract
After a long period of stagnation during the Belle-Époque (1870–1914), Colombia finally experienced an economic take-off early in the twentieth century. The fundamental question in this chapter is: what was the reason behind Colombia’s economic take-off late in the decade of the 1910s, and its consolidation in the 1920s?
Colombia’s economic take-off was export-driven or, more accurately, a coffee-driven one. That was a result of Colombia resuming its access to the international capital market, which allowed it to build up a precarious, but workable, transport infrastructure in the 1910s. Such an infrastructure expanded and consolidated in the 1920s, and Colombia could for the first time integrate the farming areas of the inlands with the ports on the coast in a way that incorporated steam technology.
Ivan Luzardo-Luna

Chapter 4. The Liberal Republic, 1930–1945: Overcoming the Great Depression, the Rise of Interventionism, and Economic Slowdown

Abstract
Between 1930 and 1945, Colombia initiated a process of industrialisation by import substitution, but it could not be completed as the industry did not expand enough into exporting. On the other hand, Mexico saw an accelerated industrialisation based on the textile industry, which developed by substituting imports in the 1930s, and was propelled by its exports to the United States during the Second World War.
Why did Colombia not follow the same path as Mexico? The answer lies in that, unlike the latter, Colombia was not able to absorb mass production technology on a larger scale. In this period, Colombia implemented economic reforms, which meant a mobilisation of resources towards one favoured sector: coffee. This fact led to a considerable underinvestment in the manufacturing industry and services.
Ivan Luzardo-Luna

Chapter 5. The Import Substitution Era, 1945–1980: The Consolidation of Interventionism, Financial Repression, and the Slow Way to Industrialisation

Abstract
Between 1945 and 1980, Colombia operated under the import-substitution industrialisation (ISI) framework. Protectionism against foreign trade and government intervention in the financial sector were the core of the ISI model in Colombia. In practicality, Central Bank assumed the new role of channelling resources from the financial sector to the government, state-owned companies, or favoured business.
Why did the economy not mobilise resources towards industry and trade sectors, where mass production technology could be better absorbed? The government’s interventionism in credit allocation preferentially channelled resources towards sectors of low productivity such as agriculture, which ultimately slowed down the structural change. In the early 1970s, the government finally relaxed its interventionism, allowing the full adoption of mass production technology and an economic boom boosted by the industrial sector.
Ivan Luzardo-Luna

Chapter 6. The Lost Decades, 1980–2000: External Debt, Structural Reforms, and a Deep Financial Crisis

Abstract
The golden decade of the 1970s was followed by a long-lasting stagnation that strongly affected the standards of living. Alongside a surge of violence, the structural reason behind Colombia’s economic stagnation was again the excessive government interventionism in the allocation of resources. The steps toward economic liberalisation of the early 1970s ceased in 1978.
In the early 1980s, Chile and Colombia showed a similar GDP per capita. The former underwent outstanding productivity-driven growth from the mid-1980s onwards due to a set of policy reforms, while Colombia remained stagnant. Despite the fact that Colombia implemented similar reforms in the early 1990s, the benefits of such policies could not be fully achieved in that decade due to an expansionary fiscal policy from 1994 onwards, which culminated in a financial crisis in 1999.
Ivan Luzardo-Luna

Chapter 7. Commodities-Driven Growth, 2001–2018: The Colombian Miracle

Abstract
Between 2002 and 2015, Colombia entered into a stage of accelerated economic growth. The driver behind such economic expansion was the improvement in security, which paved the way for investment. The high growth rates for that period were caused by an increase in the input factors rather than by the productivity. In fact, productivity has consistently declined throughout the twenty-first century, which is associated with the informal economy.
The high proportion of informal companies observed in Colombia is a result of the heavy tax burden, which means to take part in the formal economy. Firms’ maturity process is significantly affected in a way that they remain small, and without access to financial services, which prevents them from fully exploiting the possibilities that ICTs offer.
Ivan Luzardo-Luna

Backmatter

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