TOWARDS FULL EMPLOYMENT AND THE FOUR STRATEGIES
Myron J. Frankman
Department of Economics
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
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:
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:
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:
Seers described the recommendations
for Colombia as a "new type of development strategy" and suggested:
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:
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:
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
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.
Dudley Seers, "Why Visiting
Economists Fail," Journal of Political Economy, Vol. 70 (August 1962),
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.
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.
Albert 0. Hirschman, The Strategy of Economic Developmen , New Haven: Yale University Press, 1958.
Seers, "New Approaches," p. 386.
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.
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.