Class and Commodities

Few economists in the course of Colombian economic history have matched the influence of Salomón Kalmanovitz, who has played a key role in the professionalization of the discipline since the 1970s, when he returned from the United States to teach microeconomics at the National University of Colombia before teaching Marxist political economy at the University of the Andes.

Kalmanovitz’s entry to the economic debates of the 1970s transpired alongside the boom of dependency theory in the continent, which postulated the idea that the international division of labor imposed on Latin America by the great powers was intrinsically unjust, given that the prices of raw materials were always low in relation to the prices of manufactured goods. This rationale accompanied a critique of foreign direct investment, which dependency theorists argued decapitalized subjugated nations, thus enclosing them in a shell of growing underdevelopment. The leader of dependency theory in Colombia was the self-taught economist Mario Arrubla, whom Kalmanovitz criticized early on in his career, arguing that dependency analyses ignored the social structure and institutions of the countries they examined, thereby neglecting the existence of classes and their conflicts in history. In short, Kalmanovitz’s criticism was rooted in a Marxist comprehension of class struggle. 

Later in his career, Kalmanvoitz developed a comprehensive review of Colombian economic history. Economía y Nación, his 1988 book, showcases his understanding of the social structures and factors of production behind the Colombian economy: 

Colombian history is only transparent if it is conceived as an interior history that is inserted in a universal history, which, in turn, modifies it profoundly. This starting point differentiates me from interpretations and analyses that make Colombia a product of the dependency of the great powers, a passive agent of an infamous universal history that gave us a bad place in the international division of labor, which invaded and denationalized us with its capitals and overdetermined us to misery and non-development.¹

In the following interview, Kalmanovitz discusses economic growth in Colombia over the course of the twentieth century, the Colombian economy’s dependency on oil exports, and the policies of Gustavo Petro’s left-wing government.

An interview with Salomón Kalmanovitz

CAMILO ANDRÉS GARZÓN: One of the most important debates for Latin American economists in the 1960s and 1970s was around dependency theory, in particular, the idea that economic growth was limited by the global structure of capital. In Colombia, that debate took place in Mario Arrubla’s widely circulated 1969 work, Essays on Underdevelopment. What made you object to Arrubla’s dependency argument? 

sALOMÓN KALMANOVITZ: Mario Arrubla was a precursor, in some ways, to economic historian Andre Gunder Frank or Brazilian economist Theotônio dos Santos, two scholars who developed dependency theory in Latin America. They shared a hypothesis around the impossibility of economic development under the brunt of imperialist domination, given the structural stagnation in the economy due to the relationship of subjugation between the Colombian or Latin American economy and the imperialist core.

I read Mario Arrubla’s book with great enthusiasm when I was doing my doctorate in the United States at the end of the 1960s. My critique was based on the fact that Arrubla used Marx’s simple reproduction scheme with two sectors, which assumed a stationary economy. Arrubla said that the lack of a sector producing capital goods was the axis of the dependence that condemned Colombian society to underdevelopment. Arrubla’s text was aimed at questioning economist Lauchlin Currie’s economic development proposals for the country. Arrubla said: “in our country there are no exceptional conditions that allow for a significant development of capitalism.”² He wrote, “Colombian society constitutes a substructure within a structure that comprises it: the imperialist system.”³ For the self-taught Arrubla, this meant that the agrarian sector had remained traditional, without capital or relatively mechanized agriculture in the 1950s. Given the structural conditions of dependence, the situation would eventually lead to the spontaneous collapse of Colombian capitalism and to a development of the productive forces under socialism. 

I was familiar with the schemes of expanded reproduction from Adolph Lowe at the New School of Social Research in the 1960s. In my critique, I wanted to argue that the existence of the capital goods sector was not a condition for economic development, as demonstrated by the economies of several European countries, including Denmark and the Netherlands, which specialized in certain consumer goods for exports and had high growth. My initial problem with Arrubla’s argument was that it defined the international relationship as a given and dominant.

This idea of dependency, which was very popular in the 1970s, had very poor empirical support, because Latin America, and Colombia in particular, had not remained stagnant. On the contrary, these countries had experienced periods of high growth. In fact, the Colombia economy had been developing quite rapidly, even in the 1960s, when it was perceived to be stagnant. 

It was easy for me to show that the hypothesis of secular stagnation of the Colombian economy was not true, and that the data showed that capitalism had been developing in Colombia during the twentieth century. At the time, I argued that the data did not support Arrubla’s fatalistic analysis: “the recovery of the economy and industry observed since 1968, which combined a great growth of agricultural production, an increase in exports, and a recovery of international coffee prices . . . call into question even more the author’s diagnosis of the destitution of Colombian capitalism.”⁴ My main criticism was that by insisting that international relations were intertwined with the social relations of production, dependency theory ignored the local developments of capitalism under that imperialist framework.

My critique resonated deeply because it was based on Marxist theory insofar as it used Lowe’s schemes of reproduction, and because it questioned Arrubla’s insufficient attention to the class struggle and the battle for a new mode of production. It was also empirical, as I had the advantage of having a more specialized training. Even so, I very much respected Arrubla because he was self-taught, alongside the philosopher Estanislao Zuleta. They both studied during the early days of Colombian academic life, since the Conservative Republic of the 1950s did not allow academic freedom and restricted scientific debate.

Arrubla responded to my criticism fifty years later, in 2004, in the magazine Al margen. He said that he had “abandoned those theses dictated by his revolutionary ardor: that Colombian capitalism had structurally closed the road to rebirth, that it could be promptly subverted and that revolutionaries should set as a goal the construction of socialism and the statehood of the economy by a popular government.”⁵ He replied that he never intended to argue that the subaltern countries were totally stagnant, and that they only submitted to external economic determinations, but rather that “he wanted to attack that provincial village psychology that is absorbed in its own routines until an external wave arrives that fractures those routines or sweeps away everything.”⁶ 

CG: How did dependency theory evolve in Colombia?

SK: Dependency theory was transformed because there continued to be a strong political dependence—the Colombian political system is subjugated to US interests. That was true and continues to be true, although now to a lesser extent. So dependency exists, but it does not imply economic stagnation. Within a condition of dependence, there is foreign direct investment, which helped Colombia develop certain sectors, such as oil, mining, manufacturing, and the automotive industry. Foreign direct investment has been a factor of capitalist development. 

Since the 1970s, there have also been Colombian economists who have dedicated themselves to investigating questions of trade and development within a dependency framework. One example was José Antonio Ocampo, who worked under the director of ECLAC, but avoided the “excesses” of dependency theory, perhaps because of his US training. As a result, his research on trade is very rigorous. He explains the phases of growth and collapse of trade through a complex combination of the dependency argument—Colombia as a peripheral country, subjected to the international division of labor—and another perspective stating that there is an internal social substratum, a land-owning class predatory of natural resources who can only participate in world trade when they generate high rents, and then must withdraw when normal market conditions return.⁷

CG: In 1995, you began working at the Banco de la República. How did your views from the 1970s evolve from this point?

SK: In 1995, when I started working at the Bank, I was sent a Venezuelan magazine from Cúcuta with an article by Douglass North on Latin American backwardness. North’s work led me to a new ideological balance: I could maintain what I had done and give it a new direction, leaving behind the Marxist approach of seeking a socialist social organization, but without losing sight, according to Marx himself, of the advancement of political freedom and productive forces. Thus, I continued to insist on my prior interests in agrarian reform and taxation.

Marx held that social relations, in particular class struggle, would determine the course of history. Marxists emphasized peasant struggles and above all the confrontation between capital and labor as the fundamental axes of social change. In my early work, I closely followed the historical chapters of Capital, especially the section on land rent in volume 3, as well as Vladimir Lenin’s Development of Capitalism in Russia. But another important influence in my formation was the Anglo-Saxon Marxism of Eric Hobsbawm and Paul Sweezy who absorbed the empirical tradition and applied it in their analyses. When I returned to Colombia I had problems with my militancy in a political group called the Socialist Bloc and decided to withdraw, freeing myself from the radical pressure of politics. I was forced to seek new horizons, discovering the institutionalism of Ronald Coase and Douglass North. Reading the latter was a revelation that led me to absorb what had been done in the social sciences over the last twenty years. North had been a Marxist and was able to combine that school with that of the American institutionalists such as John Commons, among others, to give rise to the so-called new institutionalism, which merged economic history with the analysis of institutions. 

CG: In your view, what are the main factors that contributed to economic growth in Colombia during the twentieth century?

SK: Measuring economic growth through GDP per capita, Colombia’s average growth rate for the twentieth century was 4.6 percent. Since the rate at which the population increased was 2.3 percent per year, per capita growth was also 2.3 percent. Unfortunately, this growth wasn’t enough to absorb the entire working age population, as evidenced by high unemployment, underemployment, and informal labor afflicting more than half of the country.

Although this growth allowed Colombia to reduce its gap with developed countries, it was not as successful as countries like Korea, Taiwan, Thailand, and Indonesia, whose rapid industrialization during the second half of the twentieth century was driven by their exports to developed countries. 

One characteristic of Colombian growth is its low relative volatility, which is lower than Argentina, Brazil and Mexico. In a 1980s paper, Miguel Urrutia attributed this quality of Colombian development to the lack of populism in the country, in contrast to the political and macroeconomic instability it produced in the rest of the continent. The growth of the Colombian economy in the twentieth century had two major blows. From 1925–1950, the Great Depression and World War II slowed the economy, leading to a 2.8 percent contraction of GDP. Real GDP growth approached 5 percent in the next quarter century, but the population also grew, so GDP per capita fell relatively. The Latin American debt crisis during the 1980s also slowed Colombia’s growth, although it was the least affected economy in the subregion. The new international crisis at the end of the century, however, did affect Colombia severely, leading to a contraction of 4.1 percent of GDP in 1999.

The period of highest economic growth in Colombia was from 1905 to 1924, with a GDP growth of 3.4 percent, followed by the period between 2000 and 2015, in which the GDP grew by 3.2 percent per year as a result of the global commodity boom, significantly lower population growth, and broad social service coverage. But given the levels of unemployment, informality, and poverty that have affected more than 60 percent of the population, it is clear that national economic growth did not provide opportunities for progress to the majority.

A fundamental determinant of growth is economic productivity. In this regard, Colombia’s performance is dismal. Colombia’s decline in productivity is due to an agricultural lag—agricultural productivity is always below the average level of the economy. While the agro-sector was Colombia’s driving economic force in 1960, it showed signs of fatigue by the 1980s and 1990s. This can be shown through migration patterns. In Colombia, the movement of labor from the countryside to the cities explains 24 percent of the growth in productivity, while rural-urban migration explains 80 percent and 53 percent of the productivity gains in Chile and Peru, respectively. 

CG: Can you speak about the effect of commodity markets on the Colombian economy?

SK: During the 1980s, deindustrialization not only reflected the increased growth of services, a common occurrence in economies that exceed a certain growth threshold, but also a decrease in competitiveness and a “Dutch Disease” around the mining and energy boom, which began in 1982 with the discovery of oilfields in Caño Limón and Cusiana. 

Foreign direct investment has also been a feature of growth. If you look at the evolution of foreign direct investment from 1947 to 2017, you’ll notice that Colombia was quite reluctant to it until the 1990s, which explains why the Colombian economy grew at a slower rate than its potential. In the twenty-first century, more than half of the foreign direct investment has been directed towards the mining and energy sectors. These trends reflect an important structural change: the dynamic sectors are now mining, hydrocarbons, and biofuels, particularly ethanol and palm oil. In 1978, mining accounted for 1 percent of the GDP, but in 2015 it reached 8 percent. Meanwhile, industry occupied 22 percent of the GDP in 1978 and only made up 11 percent in 2015.

Nevertheless, the oil boom collapsed after 2015 as prices plummeted, harming economic growth and causing an increase in the fiscal deficit that forced the then government of Juan Manuel Santos to reduce its spending. With mining-energy exports representing 60 percent of total exports within the five year period from 2010-2015, Colombia became highly dependent on foreign currency generated through the energy sector. 

CG: How do you see the relationship between foreign investment and Colombia’s dependency on the oil sector? Is this linked to domestic class structure over the last three decades? 

SK: Oil exports today account for a little more than half of the country’s total exports, generating a surplus that has an impact on the exchange rate. When the exchange rate is reevaluated, it leads to a loss of dynamism in the non-oil exporting sectors and curtails the profitability of domestic activities in favor of competition from imports. Therefore, we are faced with a case of “Dutch disease,” in which goods that obtain a higher rent in the global market contribute to the country specializing in that activity, which deteriorates the profitability of other exports, and more seriously, leads to domestic production losing ground to imports.

Foreign direct investment has not been decisive in the development of the Colombian oil sector, which is dominated by the state-owned company Ecopetrol. Foreign companies may explore and exploit their most profitable findings, but after a period of time, they return their physical assets to the state and Ecopetrol is in charge of their subsequent exploitation. 

Its impact on the class structure of the country has not been significant, because we’re talking about a capital intensive sector that generates little employment. Ecopetrol’s labor union, the Unión Sindical Obrera, has maintained a nationalist stance, but it has not been widely disseminated in a country where the percentage of the working class that is employed in large companies is relatively small. Guerrilla groups like the ELN also have nationalist agendas, but their presence is relatively marginal and does not affect production, although they frequently bomb pipelines carrying oil to the ports for export and suspend them in exchange for official subsidies.

CG: What about your study of the agrarian economy and development, where you diagnosed the “agricultural backwardness” of Colombia’s economic productivity?  

SK: In this field, together with Enrique López, I was able to show that the development of Colombian agriculture has been slow and tortuous, in part because of property rights that are extensive, inefficient, and difficult to justify.

Following “La Violencia” of the 1950s, the National Front government implemented an agrarian reform to promote market, credit, and technological approaches that would modernize peasant farms. But these approaches largely evaded land distribution. In short, agricultural development throughout the twentieth century was uneven, with strong expansion after 1930, sustained acceleration from the second postwar period until the 1980s, and thereafter relative stagnation. This resulted in mediocre agricultural growth during the twenty-first century.⁸ 

Colombia has a very unequal distribution of agricultural property, a Gini of 0.56, which has only slightly changed with the development and modernization of the sector. Coffee has been the star commodity since the 1930s, retaining its quality and presence in international markets. Aside from this central export, flowers, beef, cocoa, rice, mangoes, potatoes, milk and its derivatives, Hass avocados, and tilapia have achieved sales abroad worth more than $10 billion in 2022. 

6.3 million are employed in the countryside (39 percent) compared to 16.1 million employed in other regions, demonstrating a process of rural urbanization. According to Santiago Perry:

Colombia’s rural areas are home to 11,838,032 people, or 26 percent of the national population. Sixty-two percent of them, that is, 7,351,418 people, live in poverty, and 21 percent of the rural population–2,545,177 people–live in extreme poverty or destitution. So nearly two-thirds of rural dwellers are poor and more than one-third of the rural poor are destitute.

Gustavo Petro’s government has proposed an agrarian reform, but the constant changes in the leadership of the Agriculture Ministry have delayed the official plans to acquire three million hectares. Only 180,000 hectares have been purchased to date. 

CG: Finally, how do you evaluate Colombia’s economic growth during the past two years of the Petro administration?

The national economy grew by only 0.7 percent in the first quarter of 2024. In 2023, the economy grew by less than 1 percent because of a 13 percent drop in exports: exports that reached almost $57 billion in 2022 ended at $49.5 billion in 2023, due to the drop in the price of oil, whose exports account for more than half of all total exports. Compared to the world output growth of 2.4 percent and US growth of 2.5 percent, Colombia’s figures are not encouraging.

During the entirety of Gustavo Petro’s administration, the economy has grown by an average of 0.8 percent for six quarters. The third quarter of 2023 was a contraction of -0.6 percent. This is quite mediocre, given that Colombia’s growth has historically been above 4 percent per year. 

The foreign current account balance is negative and has worsened—it was -2.7 percent of GDP in 2023, and we are projecting that it will be -3.1 percent in 2024. This means that demand has been diverted towards foreign goods and services, contributing to low economic growth. For the remainder of Petro administration, we can predict that the Colombian economy will grow between 1 and 1.5 percent annually, which means a lost four years for the country’s development. 

But low economic growth is not just a Colombian problem—it has taken Latin America by storm. ECLAC estimates that the region will grow 1.9 percent in 2024, although Colombia will be below that threshold with only 0.6 percent growth, a third of the Latin American average. This regional slowdown has to do with commodities, though oil is a separate matter and is trading above $80 dollars a barrel. Colombia shouldn’t have international trade problems, but economic policy has not been supporting the development of the oil sector.

The 2022 tax reform affected companies more than their owners, and it’s been one of the factors behind the low economic growth. Likewise, the uncertainty arising from the administration’s policies, as well as distrust towards reforms that in themselves may not actually be harmful, has put investment decisions on hold. Although public spending has been very large, generating a fiscal deficit of 5.6 percent of GDP, it has not been enough to boost growth. Investment has not taken off, and on the contrary, it has fallen by nearly 15 percent.

Colombia, as we previously mentioned, has a high dependence on oil exports, made evident by the boom and bust cycles of oil prices that generate sharp revaluations or devaluations of the national currency, distributing the fundamental balances of the economy. When prices are booming, they prevent the development of labor-intensive exports, and when they collapse, they generate fiscal deficits that prevent the implementation of countercyclical policies. This is a favorable moment for the production and export of fuels in the country, but even so, I imagine that businessmen will be engaged given their expectations of Petro’s policies.