The Political Economy of Industrial Promotion: the Colombian Institute for Industrial Development, 1940-64
Abstract: This paper explores the politics and economics of state-led industrialisation. Focussing on Colombia, it analyses the role of the Instituto de Fomento Industrial (IFI), a government agency, to challenge assumptions in the conventional historiography. First, that the Colombian experience can be categorised as import-substituting industrialisation; secondly, that IFI promoted industrial growth effectively. The conventional literature claims that IFI fulfilled its fundamental mission of promoting industrial enterprise. The paper demonstrates that it did not do so for several reasons. In part, this was due to the funding model: the agency was inadequately funded. Further, IFI lacked institutional autonomy over its promotional ventures. Based on an examination of IFI board memoranda, balance sheets and annual reports, the paper shows how undermining the autonomy of IFI resulted in poor returns from flawed investments that consumed its capital and prevented it from generating a stream of new resources. Although minor investments were allocated according to criteria set out in the agency’s charter, large investments were subject to regional, nationalistic and sector-specific special pleading. Political interventions by state and private actors often prevailed over technical and financial considerations, compromising the overall performance of the Institute and its capacity to deliver support for industry.
