EMPLOYMENT POLICY FOR COLOMBIA:

TOWARDS FULL EMPLOYMENT AND THE FOUR STRATEGIES

Myron J. Frankman
Department of Economics
McGill University
myron.frankman@mcgill.ca

back to http://vm1/mcgill.ca/~inmf/http/frankman.html



(1977) Manpower and Unemployment Research, X (November), 33-44.
My apologies --  while list of footnotes are at the end, the footnote number are presently missing from the text and the notes themselves.


In the ministries of almost any underdeveloped country you

can find cupboards full of the reports of economists, reports

which have been talked about for a week or two, then put away

and forgotten. Scores of "missions" and individual advisers

are now overseas writing reports, many of which, it can be

safely predicted, will suffer the scone fate, and others are

making plane reservations in happy ignorance of what awaits

them.
 
 

Dudley Seers


Seven years have now passed since the completion and publication of Towards Full Employment (TFE) the International Labour Office (ILO) study of employment in Colombia, the first country to be examined under the much-heralded World Employment Programme (WEP). There would seem to be some merit in considering the influence of TFE in Colombia in view of the fact that the pattern for later ILO missions was apparently established by this study and the subsequent one of Ceylon, both of which were under the direction of Dudley Seers, whose doubts about the effectiveness of advisors appear above. Seers' 1962 observations on "Why Visiting Economists Fail" are still quite apt and will be invoked here appropriate in our discussion of the Colombia study, for which took responsibility (p.7).
 

The 1970 Seers Mission was sent to Bogota at the invitation of 10mbian President Carlos Lleras Restrepo and consisted of a team of twenty-seven experts, each of whom was described as having had considerable prior international experience (pp. 4, 5). Moreover, eight members of the team were identified as coming as coming from South America. As already noted, the chief of the mission was the well-known British economist and Director of the Institute of Development Studies at the University of Sussex, Dudley Seers. Development specialists would be likely to recognize many of the names of the mission members, such as Sidney Dell, Richard Jolly, Emmanuel de Kadt, and W. Paul Strassman.
 

The timetable imposed by President Lleras allowed only five months from the time that the team leader was chosen in November 1969 until the completed draft was to be submitted (p. 3). The mission was originally expected to complete its field work in Colombia in about four weeks, but was subsequently allowed five, although some members of the group were in Colombia for only a few days (p. 4). In the Colombian case haste was required if the report was to be concluded before the President's term of office expired. In fact, the report reached Lleras only two months before his mandate concluded. Changes of government and shortness of missions are two of the factors that Seers pinpointed as leading to the failure of missions. He was particularly outspoken on the matter of the duration of one's stay:
 

It will readily be seen that the visitor who stays for only a few weeks ... will be unable to make the necessary appraisal of the socio-economic structure and the capacity of the administration. Short-period visitors, therefore, however experienced and eminent, are very unlikely to be a success. Though longer missions are unquestionably desirable, lightning-quick reconnaissance visits have become the standard for the WEP in the seven countries that had been studied as of 1976. However, one must add that considerable perliminary work is generally completed before a mission's arrival. One suspects that financial constraints and the difficulty of retaining for an extended period a large group of specialists, who are engaged in other employments, have contributed to the more or less standard limited duration sojourn.
 

Did the Seers mission fail?, Jorge Méndez, a Colombian who assisted in the drafting of TFE and who was at the time Chief of the ILO Regional Employment Team, has observed that the fortune of the report was "relatively lamentable." Although a full study of Seers' recommendations was conducted by the new government of President Misael Pastrana Borrero, by the end of 1971 the government adopted the "Plan of the Four Strategies" (Las Cuatro Estrategias) the conception of which is generally attributed to Lauchlin Currie. Méndez speaks of the adoption of the Currie Plan as having constituted the "official burial" of the Seers Report, for in his view the Four Strategies "which did not follow in even the least measure Seers' program of action" constituted a "systematic contradiction" of the ideas of Seers. That Mendez's comments were made at a 1976 roundtable in Bogota devoted to an evaluation of the ILO study suggests that reports of the death of the ILO p roposals, as in the case of Mark Twain, have been greatly exaggerated. To the extent that TFE turned the spotlight of Colombian attention to problems of employment and unemployment and has sparked continuing debate on these issues, the Seers mission can be considered to have been highly successful.
 

In discussing the pitfalls confronting visiting economists, Seers has remarked that "a great deal of knowledge has been accumulated and the visitor is expected to be familiar with it. The group of local economists is by no means lightweight in many countries..." This is particularly true of Colombia, which counts among its first-rate economists Lauchlin Currie, Nova Scotia-born and a citizen of Colombia since 1958. Currie has been described as "one of the best-informed persons on the Colombian economy." A word or two about the professional trajectory of Currie might be appropriate, as it is likely to be less well-known to the readers of this journal than that of Dudley Seers. Currie is an advisor who came to Colombia on a four-month mission in 1949 and who, within a week of the submission of the report to the Colombian government, agreed to stay on to assist in the implementation of the proposals. That mission, which Currie headed, was also the first of a series: the first detailed country study sponsored by the World Bank. Prior to that the London School of Economics and Harvard-trained Currie had been an administrative assistant to Franklin Roosevelt from 1939 to 1945, during which time he had been sent by Roosevelt to advise Chiang Kai-shek. It is reported that' Currie was one of the strongest influences in the 1941 reforms of the Kuomintang.
 

In 1961 Currie drafted a plan known as Operación Colombia which stressed agricultural mechanization and the stimulation of the export and construction sectors and which was "designed to convert Colombia from a predominantly agricultural to an urbanized country." Currie's timing could not have been worse: the initial euphoria of the Alliance for Progress, with Colombia as one of the showcase countries, swept his proposals aside in favour of a General Development Program for 1960 to 1970. Agrarian reform and labour absorption in agriculture were the order of the day as there was already thought to have been too much migration to urban centres where jobs were ostensibly unavailable. Ironically, Colombia's five per cent rate of urban population growth in the 1960s was one of the highest in Latin America and it is difficult to imagine that it could have been any higher had Currie's plan for urbancentred investment expansion been implemented. At the end of the decade unemployme nt was perceived to be a major problem and the ILO was approached for counsel.
 

We shall not pretend to do justice to the array of proposals set out in the Seers Report. The interested reader is referred to Seers' own, readily-accessible summary statement. The major thrust of the study was that five million extra jobs would have to be created by 1985, of which 0.8 million would have to be added in agriculture (p. 56). To create the required number of jobs would necessitate "sustained pressure to encourage the use of more labour-intensive techniques." Reviewing the conclusions of his mission, Seers wrote:
 

What emerged was the need for a more balanced strategy; in particular if full employment were to be approached, agriculture would have to absorb a substantial part of the increase in the rural labour force, and migration to the cities would need to be slowed down. This in turn implied the need for a fast pace of land redistribution and settlement and for improved employment prospects, education and health services and housing in the small towns and the countryside. From the moment of its publication, TFE became a focal point of attention. As the author of the report was a renowned economist and the prestige of the ILO was behind it, there were clearly raised expectations. Unlike many international reports, publication in both English and Spanish was very prompt and copies were readily available. The target for criticism was well-defined and the broadsides were almost immediate and, in our estimation, many scored direct hits below the water-line. A report on urbanization in Colombia prepared for the Ford Foundation circumspectly noted that TFE's "suggestions on the role of urbanization are 'thin', " while Charles Frankenhoff spoke of the anti-urban bias of the study and of the absence of any effort to relate the findings to the "development aspects of the urbanization phenomena now existing in the country." Frankenhoff referred to TFE as "a classical example of the perils of short-term international technical assistance, developing a strategy of employment foreign to the Colombian reality and to its planning objectives."
 

The preceding criticisms-are quite serious when one considers that Colombia is in the midst of an extremely rapid and, barring the collapse of industrial-commercial civilization as we know it, irreversible process of urbanization. These criticisms are even more serious when one realizes that TFE itself envisions a fall in the share of agricultural employment from 50.5 per cent in 1970 to 32.7 per cent in 1985 (p.56). Moreover, in what appears to be the only explicit reference to Currie in the 471 pages of TFE, Seers states:
 

We started by posing the question: what would be involved if all the 5 million extra jobs had to be provided outside the agricultural sector--broadly the strategy proposed by Dr. Laughlin Currie. Since there are now 2.5 million fulltime jobs in the rest of the economy, employment there would have to treble, i.e. rise by some 8 per cent a year over these fifteen years (p. 52). This option is rejected as not very feasible and as posing potential foreign trade balance difficulties (p. 53), but Seers' intermediate strategy requires nothing less than a 7.0 per cent annual growth of non-agricultural employment (p. 57).
 

Seers described the recommendations for Colombia as a "new type of development strategy" and suggested:
 

The report develops in fact a framework of analysis which raises questions about the,appropriateness in the Third World where the problems are essentially structural, of the analytical frameworks (Keynesian or neo-classical) set out in textbooks imported from industrial countries. Nonetheless, at least one Colombian writer has found that neo-classical economic thinking occupied a central role in TFE, contrary to the impression conveyed in the foregoing statement, Oscar Marulanda Gómez who who coordinated Colombian collaboration with the ILO mission, has seriously questioned Seers' insistence on decreasing the price of labour relative to that of capital, a standard neo-classical recommendation for the supposedly labour-abundant and capital-scarce less-developed countries. Marulanda argues that even if these relative prices were modified, the employment effect would be minimal. He also doubts that anyone is able to establish that labour is in fact abundant relative to capital in Colombia: this requires that economists agree as to what capital is and how it is to be measured. Similarly, one cannot speak of the aggregate supply of labour without summing qualitatively distinct components: "The elemental principle that one cannot sum cows and oranges in a gi ven context, in spite of its being learned from the first grades, tends to be overlooked in the exercise of professions such as that of economist."
 

Even when explicit neo-classical formulations do not appear in the study, the world view of standard economics is ever present in the penchant for equilibrium solutions and in the discomfiture with innovation. The notion of balance as an end rather than a means, which Albert Hirschman tried to convey to development economists in 1958, has not permeated mainstream thinking. In consequence, economists, Seers included, too often convert the Ricardian dismal science in which wages inevitably will be low to a diabolic science in which wages must be held down as an object of policy and become as well modern-day Luddites rejecting toil-reducing machinery. For example, Seers speaks of "discouraging wage increases" and of the danger of an increased gap in wages between manufacturing and other sectors. As for technology, TFE recommends that the adoption of labour-saving techniques generally be discouraged (pp. 157-83). Neo-classical thinking with its insistence on a work-income link and i ts neglect of redistributive schemes for sharing the fruits of vastly more productive technologies seems to have worked its customary mischief here.
 

Lauchlin Currie's defense of his own Four Strategies approach embodies his criticism of the ILO study and can perhaps serve as a useful point on which to shift discussion to Currie's contribution to solving Colombia's employment problem:
 

The novelty of my approach is that I was explicity not concerned with labour-intensive techniques to meet existing demand--a policy strongly advocated by Fei and Ranis and others-but rather in bringing about a substantial change in the composition or pattern of demand that would change factor proportions for the economy as a whole and push back the exchange constraint by making increasedproduction of goods of mass consumption compatible with given exchange resources. Increased and better employment flows both from the redirection and increase in output, not from different techniques. Whereas in 1961 Currie's Operación Colombia was out of step with dominant Colombian sentiment, so in 1971 Seers' TFE with its stress on agrarian reform (pp. 65-77) and the smaller towns (those "left behind during the last thirty years," p. 102) was rejected by a government that viewed agrarian reform efforts in the 1960s as having made little impact on rural poverty. The new administration did not delay long in adopting Currie's Four Strategy plan: Currie's basic philosophy was contained in President Pastrana's message of 20 July 1971 to the Colombian Congress. When a conference was held in early 1972 to critically evaluate the Four Strategy plan, reference to TFE was virtually nil, only thr e or four passing citations appearing in the published proceedings.
 

Currie's approach is essentially Keynesian in its focus on demand as the motor force of development. Expansion of exports and of housing construction (the first two strategies) are to provide the impetus to a generalized expansion of the economy. The growth of exports would permit increased imports of industrial inputs, thus allowing for greater utilization of installed capacity and, hence, for increased employment. Housing construction, on the other hand, is a labourabsorbing activity with generally low import requirements. Moreover, expenditures made on housing would divert consumption from goods embodying a high proportion of imported components. As is frequent in discussion of socio-economic policy, points of disagreement tend to overshadow areas of concurrence: the Seers report in its brief discussion of construction speaks of that sector as having "a major part to play in helping Colombia to reach full employment by 1985" (p. 127). TFE also points to the high labour absorption and low import requirements of construction (p. 127) and recommends a growth rate in the volume of construction somewhat above ten per cent per year (p. 128). And both Seers and Currie stress the need for financial innovations if the desired increases in building activity are to be realized, although their approaches differ. Currie expected that with the creation of inflationindexed saving certificates that the share of personal savings in gross product would increase from 1-2 per cent to 8-10 per cent. In Currie's words:
 

The relation between savings and production is not so much that greater savings generate greater production, but that greater production, stimulated by growing demand, can induce greater savings if institutional factors permit the channelling of these resources into more productive investment and a more equal distribution of income and consumption. Increased agricultural productivity is the third strategy. Again the difference between Seers and Currie is one of stress, for in Las Cuatro Estrateqias, land redistribution is in fact described as the "most immediate and efficient means, not only of increasing the income of the poor or marginalized campesinos and the effective demand of the country, but of serving as a point of departure and of support for a development of the rural economy to higher levels of economic efficiency and of social participation in the national life." Rhetoric aside, land tenure was de-emphasized in the Currie plan, which in Roger Sandiland's words affirmed "that development and urbanization were inseparable; that the future well-being of Colombia lay in the quality of urban life; that mobility should be encouraged and that, to this end, a high growth rate was necessary."
 

In Currie's demand-centred plan, the expansion of construction, exports, and, in general, of the urban economy was to provide the expanded markets which, in turn, would stimulate agricultural growth. To endeavour to promote improvements in agricultural productivity without prior increases in the demand for jpd and agricultural raw materials was regarded as of doubtful value. In Las Cuatro Estrategias the emphasis found in Operación Colombia on increasing the capital intensity in agriculture disappears in favour of productivity increases through improved inputs (fertilizer and seeds) and efficient administration. The coincidence with Seers on this last point must again be noted.
 

The fourth strategy called for income redistribution through progressive taxes and the marked reduction of tax incentives to industry. Currie had no doubts that a country that could manage a "flexible" exchange rate could also administer a progressive income tax. The fourth strategy which required the greatest political will was largely unimplemented during the Presidency of Pastrana. However, extensive discussion of progressive taxation set the stage for it: within six weeks of taking office in August 1974 President Alfonso López Michelsen declared a forty-five day state of economic emergency in which he enacted without prior Congressional approval a reform of the fiscal system which, according to the Head of the Colombian National Planning Department, has made it "one of the most progressive in the Third World."
 

The period in which Currie's program influenced Colombia's economic policy (1971-74) was one of rapid growth and markedly reduced unemployment. To what extent this was attributable to both an "export-led boom" and a "housing-led boom" would require additional study. The Colombian Central Bank maintained that unemployment had already fallen by fifty per cent in 1971 relative to 1967 as a consequence of the increase .in imports permitted by export expansion. With the change in the residency in 1974, unbridled growth gave way to inflation-fighting and with it the inevitable renewed increases in unemployment. And with the change in government Currie's influence waned and that of TFE waxed: Miguel Urrutia, Head of Planning under Lopéz, maintained that many of the ILO reforms had been implemented under the new administration.
 

Our purpose has not been to evaluate the effectiveness of the two strategies, but rather to contrast and compare their approaches to creating employment. Suffice it to observe that inflation-fighting and wage restraints (consistent with TFE) carry greater political risk in a democratic country than measuredinflation-feeding (consistent with Currie and his indexed savings and demand stimuli). The years of López Michelsen have been far more tumultuous than those of his predecessor. It is difficult not to suppose that declines in real wages, intend in part to discourage new migration, have contributed to the turmoil.
 

Is the Seers program now being implemented in Colombia? We hesitate to answer, except to suggest that the paternity of a policy may well be in the perception of the planner. One could well argue that in implementing some of Currie's specific proposals, the Pastrana government was following the suggestions of TFE. As for the López government, we may note that at a Bogota conference in February 1976, Jorge Méndez, one of the drafters of TFE, asserted that the "central line of its [TFE's] objectives had practically disappeared from the Colombian political scene," while Urrutia, Head of Planning, maintained that Colombia had already been "one of the few countries capable of adopting in a short time a great part of the policies recommended [by the ILO]."
 

While Colombian views may differ on the merits of the TFE proposals, there is little question that the ILO study was successful in so far as it riveted Colombian attention on unemployment: both the Pastrana and López governments accorded a central role to employment policy. Much research and data-gathering has been prompted by TFE, so that Colombian policy-makers have fuller information available to them today than when the Seers mission conducted its analysis in 1970.
 

Our purpose in chronicling the post-publication fortunes of TFE in Colombia has in part been to bring to the attention of the readers of this journal the existence of an alternative to what Seers characterizes as a "new type of development strategy," an alternative which is not merely a drawing board model, but one which has already been tested in Colombia. Currie's approach was sufficiently novel to prompt a rare editorial comment in Development Digest urging consideration, of his strategy, but cautioning hat it may be appropriate only for certain classes of countries.
 

While Currie and Seers may concur on many details, their central approaches, as reflected in Las Cuatro Estrategias and TFE, are diametrically opposed. It is perhaps an oversimplification to say that the difference in approach is that of Keynesian versus neo-classical

analysis respectively or of a dynamic versus a static model, but we think such a characterization does strike at the heart of the matter, as does the distinction between the tolerance of disorder and the penchant for order in approaching socio-economic change. To the extent that Currie’s strategy accepts the imbalances occasioned by the most overwhelming trends of change and tries to turn them to societal and individual advantage, it merits more serious attention than has yet been the case. If Currie's blueprint is indeed effective and is likely as well both to have "easier political acceptability" and to require "relatively less sacrifice" then its appeal to democratic governments, in particular, should be even greater. As TFE's own data affirm that the tide of urbanization in Colombia cannot be turned aside, it seems preferable to follow a course that channels those turbulent forces to fullest benefit. In our estimation TFE, with its emphasis on small tow ns, on urban wage restraint, and on rejection of much of modern technology, is not the most apt program for Colombia to pursue.


Notes

  Dudley Seers, "Why Visiting Economists Fail," Journal of Political Economy, Vol. 70 (August 1962), p. 325.
  International Labour Office, Towards Full Employment: A Programme for Colombia, Prepared by an Inter-Agency Team Organised by the International Labour Office, Geneva: ILO, 1970. Hereafter referred to as TFE; references to this will generally be in parentheses in the text.
  Seers, p. 331.
  In addition to Colombia and Ceylon, World Employment Programme studies have been concluded for Iran, Kenya, Dominican Republic, Philippines, and the Sudan.
  Jorge Me'ndez Mun4var in Empleo y desarrollo, Bogota: Ediciones Tercer Mundo, 1976, p. 145.
  Ibid., p. 146.
  Ibid., p. 139.
  Seers, P. 327.
  John M. Hunter, "Review Article: Colombia Revisited," * Economic Development and Cultural Change, Vol. 23 (April 1975), p. 534.
  John W. Sloan, "Colombia's New Development Plan: An Example of Post-ECLA Thinking," Inter-American Economic Affairs, Vol. 27 (Autumn 1973), p. 54. Currie's report was The Basis of a Development Program for Colombia: Report of a Mission Headed by Lauchlin Currie and Sponsored by the International Bank for Reconstruction and Development in Collaboration with the Government of Colombia, Baltimore: Johns Hopkins Press, 1950.
  Maxine Block, ed., Current Biography: Who’s News and Why, 1941,  New York: H.W. Wilson Company, 1941, p. 192. This source speaks of Currie as having been the “no. 1 United States disciple of John Maynard Keynes.”
  Roger J. Sandilands, "Colombia: Another Miracle Ahead?," Bank of London and South America Review, Vol. 8 (March 1974), p. 143.
  Ibid.
  Seers, "New Approaches Suggested by the Colombia Employment Programme,” International Labour Review, Vol. 102 (October 1970), pp. 377-89. See also Miguel Urrutia M., “Income Distribution in Colombia," International Labour Review, Vol. 113 (March-April 1976), p.214, for a ten-point summary of the main reforms recommended by TFE.
  Seers, "New Approaches," p. 382.
  Ibid., p. 381.
  John P. Robin and Frederick  C. Terzo, Urbanization in Colombia, New York: Ford Foundation, n.d., p. 94.
  Cited in ibid.
  Ibid., p. 40.
  Ibid., p. 98.
  Seers, "New Approaches," p. 378.
  Ibid., p. 387, n. 3.
  Oscar Marulanda Gómez in Empleo y desarrollo, p. 161.
  Ibid., P. 160.
  Ibid.
  Albert 0. Hirschman, The Strategy of Economic Developmen , New Haven: Yale University Press, 1958.
  Seers, "New Approaches," p. 386.
  Ibid.
  Lauchlin Currie, "A Reply to Professor Ranis," Economic Journal, Vol. 83 (March 1973) pp. 207-208. Although this citation is a response to Gustav Ranis, a similar view explicitly directed at TFE is contained in Currie, "Comentario sobre el artículo del Doctor Guillermo Perry," in Corporación para el Fomento de Investigaciones Económicas (CORP), Controversia sobre el plan de desarrollo, Bogota: Editorial La Oveja Negra, 1972, p. 245.
  Sandilands, p. 144.
  Sloan, p. 54.
  CORP, Controversia.
  TFE, pp. 131-34 and Colombia, Departamento Nacional de Planeación (DNP), Las Cuatro Estrategias, Bogota: 1972, pp. 477-80.
  Cited in Sloan, p. 55.
  DNP, Las Cuatro Estrategias, p. 134.
  Sandilands, p. 144.
  Luis Eduardo Rosas, "Antecedentes del Plan de 1971," in CORP, Controversia, p. 29.
  Guillermo E. Perry R., "Consideraciones sobre el nuevo plan de desarrollo," in CORP, Controversia, pp. 219-20 and 240, n. I.
  Seers, "New Approaches," p. 385.
  Rosas in CORP, Controversia, p. 32.
  For a discussion, see Myron J. Frankman, "The South American Crawl: Exchange Rate Variation in Developing Countries," Working Paper no. 12, Montreal: McGill University, Centre for Developing Area Studies, 1975.
  Sloan, P. 57.
  Hermann J. Mohr, Estrategia de desarrollo para América Latina Bogota: Editorial America Latina, 1975, pp. 48-52.
  Urrutia, p. 216.
  Sandilands, p. 142 and Mohr, p. 52.
  Frankman, P. 7.
  Urrutia, p. 216. See also Urrutia in Empleo y aesarrollo, pp. 39-44.
  Latin American Economic Report, vol. 5 (23 September 1977), p. 152; and Latin American Political Report, vol. 11 (23 September 1977), p. 290.
  Mendez in Empleo y desarrollo, p. 139.
  Urrutia in Empleo y desarrollo, p. 40.
  Seers, "New Approaches," p. 378.
  [Gordon Donald], "Comment: An Editorial Opinion," Development Digest, Vol. 12 (July 1974), pp. 76-78. Currie's writings on development in English include Accelerating Development: The Necessity and Means, New York: McGraw-Hill, 1966; Obstacles to Development, East Lansing: Michigan State University Press, 1967, and "The Exchange Constraint on Development--A Partial Solution to the Problem," Economic Journal, Vol. 81 (December 1971), pp. 886-900. The last item is excerpted in Development Digest, Vol. 12 (July 1974), pp. 67-76.
  [Donald], p. 77.