Putting Round Pegs in Square Holes

Economía Neoinstitucional: Prueba Falsable a las Hipótesis de Douglass North en Colombia
(Neoinstitutional Economics: The Falsification of Douglas North Hypothesis in Colombia)

by Fernando Estrada (Universidad Externado de Colombia)

Abstract: This article aims to propose a reading of political (dis) order in Colombia, using as a theoretical source Douglass North’s reflections on the economic formation of political institutions. The contributions of this letter are very preliminary in nature and can better be understood taking into account two objectives of the research project: (1) explain why, in Colombia there are very limited conditions for coordinating collective action, (2) what direct and indirect effects has the armed conflict and civil war had on the political (dis) order.

URL: http://econpapers.repec.org/paper/pramprapa/58515.htm

Revised by Stefano Tijerina

This paper was distributed by NEP-HIS on 2014-11-17. In it Fernando Estrada argues that a historically weak state, the prolonged civil war, political corruption, institutional failure, the lack of political accountability, a culture of dishonesty, and the numerous armed conflicts currently succumbing Colombia have led to citizen’s loss of credibility on its institutions, thus today’s “political (dis) order.” He uses the case of Colombia to test the falsifiability of the theory on political order developed by Douglass North, William Summerhill, and Barry R. Weingast in Order, Disorder, and Economic Change, concluding that there is an urgent need for political and institutional structural change, accountability, and an effective and firm implementation of the rule of law, in order to achieve the political and economic stability necessary for the effective implementation of a market economy. If these positive initiatives are achieved, says Estrada, then it will be possible for Colombians to construct a long-term political order that will “foment credible commitments” between citizens and their political institutions.

Throughout the paper Estrada focuses on current issues that illustrate why Colombia is suffering from a systemic political (dis) order. Through the use of commentaries from Colombian public and academic figures, he points out that private-public relations within the market system have failed due to political corruption and institutional failure, and that there is an urgent need for social, political, and institutional reform that sets the course for what North, Summerhill, and Weingast refer to as consensus based political order that provides the necessary conditions for the advancement of a market economy.

Fernando Estrada

Fernando Estrada

Implicitly, Estrada reveals that the theory of political order withstood the falsifiability test since his conclusions on citizenship rights, the absence of economic, political and judicial guarantees, the predominance of political corruption and dishonesty, and the lack of “productive and entrepreneurial” incentives, have resulted in a complete loss of credibility on the political system. Colombia, according to the theory on political order, is not democratic or able to effectively function within a market economy, it is a country with an “authoritarian” political order where “political officials cannot sustain a set of universal rights, and instead abuse the rights of a major portion, if not all of the citizenry.”

Estrada however does not question the reasons why the nation’s economic, social, and political development has followed the “authoritarian” path for the construction of political order. His disregard for historical evidence impedes him from better understanding and explaining the realities of the development of Colombia’s political order. An analysis on Path Dependency would have allowed Estrada to center on the historic constrains imposed on the definition of citizenship, why economic, political and judicial status quo has prevailed over time, why political corruption and dishonesty has been perpetuated over time, and why economic and political regional elites have opposed the expansion of the market economy. The historical analysis would have provided a local explanation to a local reality and would have allowed Estrada to move away from the generalizations of imported models and theories that only partially explain the outer layers of the nation’s realities.

Douglass North

Douglass North

A historical analysis would have provided clarity that seems to be missing in Estrada’s argument. This would have provided empirical evidence that showed that Colombian citizens distrust their institutions because they were never part of the process of creating them in the first place. It was the case of democracy, policy, and the majority of the key institutions that have shaped the national distributive, financial, and security policies, including the Departamento Nacional de Planeación (DNP), Banco de la República, and the Departamento Administrativo de Seguridad (now known as Agencia Nacional de Inteligencia Colombiana – ANIC); all the result of foreign mandates to fit the needs of both domestic “power individuals” and the international system.

Walter Kemmerer and President Pedro Nel Ospina during the Kemmerer Mission 1923

Walter Kemmerer and President Pedro Nel Ospina during the Kemmerer Mission 1923

It is important to look at theoretical models but it is more important to contextualize the theory and situate it within its local reality. There is a need to develop local theoretical models and explanations based on a self-evaluation of the nation’s particular historical trajectory and experiences. The solution lies in analyzing the uniqueness of Colombia’s institutional and programmatic development and the historical implementation of the idiosyncratic definition of democracy and capitalism.

Political (dis) order has been one of the pillars of nation building since independence. It has been the political and economic elite’s way of securing their own personal sources of livelihood, and it has been the formula used by foreign capitalist interests to secure resources and influence in Colombia. Their preservation over the control of the political order has relied on the state, its institutions, and policies that throughout the twentieth century achieved a high level of sophistication and arte now capable of disenfranchising sectors of society and limiting the rights of citizenship and personal security vis-à-vis one of the most progressive and pluralist constitutions in the international system.

Contrary to North, Summerhill, and Weingast fundamental requirements for the creation of political order within a market economy, Colombia’s historical trajectory shows that political order may also be achieved by constricting and limiting citizen’s access to institutions that guarantee their personal security, economic security, and that of their families, yet capable of guaranteeing institutional security to local elites and foreign interests. For example the land use policies of the 1920s that guaranteed access of the Colombian subsoil to Tropical Oil or the current mining policies and the supportive institutions and programs that provide access to foreign transnational corporations while at the same time limiting the rights of local artisan miners; past and present realities that allow the effective operation of the market system while at the same time limiting the actions of citizens within the political order.

Colombia’s founding fathers, the leaders that carried the nation into modernity, and those of the present time have never had as their central objective the construction of an open society or political order based on consensus. Citizen’s credibility on the political system and its institutions never impeded economic and political elites from insisting on the implementation of their own and unique political order, even after the emergence of guerrilla movements in the 1950s, the escalating pressure of labor unions throughout the Cold War, the indigenous movements, the emergence of narcotics trafficking as a parallel economy, the emergence of highly sophisticated criminal organizations, and the current array of armed conflicts that are asphyxiating Colombia’s society. Surprisingly, what seems to have mounted pressure on Colombia’s elites to consider moving toward a political order based on consensus has been the international system and their demand for a change in the political order that will allow Colombia to effectively integrate itself into the market system.

Foreign investors, transnational corporations, global resource extraction companies, and the powers of the global market system require new nurturing grounds for the expansion of capitalism, narrowing in on nations such as Colombia. It is these forces that are pushing for changes in the structural nature of the nation’s political order. Aware or unaware, Estrada advocates for changes that could transform Colombia’s political and institutional system into North, Summerhill, and Weingast’s consensual based political order.

Following a neoliberal line of thought, Estrada concludes that Colombia needs to move toward the consensus model in order to effectively navigate the international system and fully immerse in the complexities of a market economy, and that it must bring to an end the civil war and the numerous other armed conflicts that impede the nation from moving forward. What is ultimately recommended is that Colombia finds its own unique ways of establishing and securing political order, even it if means constructing a reality that projects institutional and programmatic order, and that generates civil credibility under a system that favors the interests of the international system.

The problem of constructing realities that project institutional and programmatic order.

The problem of constructing realities that project institutional and programmatic order.

Estrada uses the falsifiability test on North, Summerhill, and Weingast’s theory on political order to justify the promotion of neoliberal institutional change in Colombia. He suggests changes that apply to the particular idiosyncrasies of Colombia, including greater accountability, eliminating clientelism from political relations, the establishment of a system that fosters political and economic competition, consensus among elite groups, society’s unquestionable trust on the consensus based political order, a decreasing role of the state in economic and social matters, cultural change toward a model of meritocracy and self-discipline, and judicial, programmatic, and institutional adjustments aimed at improving investor’s confidence. These changes however do not guarantee the “creation of credible commitments” that, according to North, Summerhill, and Weingast, are necessary for the transition from an authoritarian political order to a consensus based political order.

The theorists suggest that in order to achieve this transition, citizens’ own belief systems must “translate into the institutions that shape performance.” Legitimacy and credibility may only be achieved if constructed by the majority; in other words, if Colombian’s collectively decide to move forward with a market economy. However this is impossible to achieve under current distributive realities. Politicians, representatives, and the bureaucracy must “honor” the rights and norms that regulate the consensus based political order, leading to the “self-enforcement” of the model. This, in the Colombian context, is impossible based on current realities and it would require a revision of the status quo, something that has historically lead to armed conflict. According to the theory, credibility on political and economic policies and institutions may only be achieved if the system guarantees citizens the rights and freedoms to prosper economically; security of income and investment become the crucial drivers of national economic growth. This again would require political and economic elites to accept a change in the status quo as well as the international system’s acceptance of a non-commodity supply role for Colombia, changes that seem utopic at this time.

The implementation of consensus based political order in Colombia seems unrealistic today. The foreign model does not fit with the nation’s current reality. Estrada’s approach forces us to question how effective is the implementation of foreign models and theories to explain local phenomena, knowing well that theorists like North are developing ideas and solution to complex problems that depart from their own cultural and social biases? Why rely on foreign solutions and explanations to resolve and transform local realities when it is clear that they are not a perfect fit? As in the case of Colombian political institutions, the dependency on foreign models at the end result in a frustrating experience of “putting round pegs in square holes.” The falsifiability test fails when one does not compare apples with apples; when one tries to force external realities into local contexts. The consensus-based model of political order fits well with the realities of the United States but not in Colombia. This is a country in the early stages of nation building, in the one hand closing the long chapter of a civil war while on the other juggling the complex realities of the market system.

The problems of importing foreign models to solve local problems of economic development.

The impact of importing foreign models to solve local economic development problems.

Further Readings

North, Douglass C.; William Summerhill, and Barry R. Weingast. (2000) ‘Order, Disorder, and Economic Change: Latin America Versus North America’. In Bruce Bueno de Mesquita and Hilton L. Root (eds) Governing for Prosperity. New Haven: Yale University Press, pp. 17-59.

North, Douglass C.; John Joseph Wallis, and Barry R. Weingast. (2012) Violence and Social Order: A Conceptual Framework for Interpreting Recorded Human History. Cambridge: Cambridge University Press.

Page, Scott E. (2006) ‘Path Dependence’ Quarterly Journal of Political Science, 1: 87-115.

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