Colombian economy and politics 1929–58

One of the main reasons for the development of an economic crisis is when a world power country enters in the crisis, eventually all countries get affected. Basically a crisis leads a country to debt and economic stagnation. And it's ultimately influenced by all kinds of factors such as culture, climate, previous development, political order, and internal and external social conflicts. In other words, there is a great deal of ingredients mixture needed for an economic crisis to come across.

First of all, to analyze what an economic crisis is, we need to know what the symptoms of a healthy economy are. There should be progressive increase in the sustainable growth in behalf of the government, the economy and society as a whole. Something crucial for the country is the trade balance, which should mediate the amount of imports with the exports. Also, the currency has to be revalued in order to have a controlled inflation within all the areas. The government also has to be very careful in the amount of money that runs among the pockets of the people, because that's what determines product prices and inflation. Unemployment rates also have to be no more than a digit to be considered a country with healthy economic symptoms in relation to all the population, not a few favored. Now knowing the symptoms of a healthy economy we can take into account what an economic crisis is and how does it become global.

When problems are created in different bases, the economy turns to be fragile and that's when the economy crisis occurs. This is given to other things that make development stagnates. In these time period, exports fall, affecting the trade balance like a cycle. If a country's export is not enough, it will affect the rest of the countries including its imports. There comes a point where it fails to defend currency, and when that happens, its value falls and people only think about getting rid of it to buy other. There is also the big problem of excess in the credit banking system, creating a situation in which the bank is not paying people and increases poverty.

The economic crisis is something that affects the whole world. There are clearly more developed countries and the impact is equally different. In conclusion, the crisis occurs, because panic is formed, and just then a country loses confidence. This may cause stagnation in production and investment, leading the country to a slow development. Because of the stagnation, unemployment grows increasing human poverty.[3]

From the period of 1922 to 1928 the two main factors that took over and increased Colombia's economy were the rise in external coffee prices (the main exportation product) and a huge increase in the international credits to the public and the bank system. An incredible amount of money was flowing within the country with prosperity yet to be paid. Therefore, the economic success wasn't internally based and sustained, divergently the economy was holding on the United States credits and investment. That was the mistake and that was the cause of the future crisis.

1928 was the year of a significant reduction in external credit; generating a constant decline in the domestic bank credits and a hold back of the stock markets of Bogota and Medellin. Throughout 1929 the international coffee prices continued declining abruptly in addition to the New York stock market, and eventually the first manifestations of urban unemployment boost generated an immediate internal market crisis. Deflection from that moment on till 1932 was the result of the international price reduction of Colombian exporting products. It was only until 1932 that the rise in gold production compensated the external dept as well as it created commercial balance, ultimately preventing the continuous loss in reserves.

After Colombia was able to defend its currency, it was in search of a new economic politic. This was based on three pillars; the fiscal, monetary and costumes or external commerce. The problem was that a free trade was established and the lack of government intervention in the economy was induced. International imports weren't charged as much taxes supposedly to pay off the increase of life expenses, this didn't generate any type of positive results, and by 1931 a protectionist economy reestablished with the purpose of reanimating the public investment. Anyway, Colombia found itself within the countries that had to surrender to their exchange freedom and abandon the gold reserves with the purpose of devaluing their currency against gold and dollars. In the long run it was a reaction to the collapse of international reserves.

Parallel to the causes of the economic crisis in Colombia, the presidents in charge of the time period (Abadia Mendez and Olaya Herrera) reduced hastily the public investment programs, causing a decline in the previous infrastructure privileged circumstances. This ultimately affected the public employment and finances.

It was only until 1933 that the government gave a tremendous tip to its economic matters. It focused more in recuperating and reanimating the local product market, returned to the coffee exportation as a main economic sustains and finally it emphasized the improvements of the domestic credits. The 2 main sections that found themselves favored by the new economic measures were the agricultural and the industrial. Basically because the loads of people that moved to the cities in search of work, went back to the rural areas to work on agriculture which was productively being exported again. In addition the industrial sector was favored due to the substitution of importation products by Colombian goods. These were the actions that Colombia took in order to take control over the economy once again and recuperate after 5 years of crisis.[2]

The Colombian government came from a long period of being conservative until the year 1930. This year in the elections, the liberal party started to take control. A period of social, political and economical controversy was about to begin. The growing economic crisis, and the way the conservative government was handling the country's problems made them lose many followers, therefore losing their next elections. The most noticeable and immediate change was the sudden deterioration of the public order in most of the country. Colombia also suffered a period of violence, not only with the internal conflicts but also conflicts with other countries. The violent issues and the global economic crisis was what were shouting for a new regimen.

United States wasn't only providing investment; it was also producing internal violence. One example is how United Fruit Company could manipulate the government and reach what they wanted no matter the cost. It started when the company complains to the government that the workers were refusing to do their jobs because they were on strike. The government ordered the military to go to where they were and threaten the workers that if they don't work they would shoot. The workers refused to work and there was when the military killed approximately 3000. Another violence problem in Colombia during the liberal party period was how the guerrilla groups started to form. This was created because the liberals were protecting themselves from the conservatives; this was a bipartisan violent problem.

One of the major problems Colombia had when the liberals took over the government was that they hadn't been in control almost half a century. Part of the problem was that the liberals still accused the conservatives for things that were already left in the past and weren't relevant in the present. This was a real big issue because many ideas and situations had already changed or disappeared with the conservative government. A fact worth mentioning, the loyalty of liberalism ideas weren't based in what each person believes but it was more an obligation that came from many years back, in other words, inherited hatred. Even though this problems did affect the relationship between this two parties, to make the transition easier the government included some conservative members in the cabinet. This would make the overall government ideas liberals, but would have also some conservative influences.

The first liberal president during this period was Enrique Olaya Herrera. He took measures over how to handle the economic crisis, one of the measures he took was devaluing the currency to make the international exports more competitive and stimulate the industry. Something Olaya Herrera decided it was really important to get over the crisis was making even stronger the relation between Colombia and U.S.A so there was a chance that their vast resources would help resist the depression. Olaya also sustained the external debt, not letting it get out of control. He also gave importance to the workers and women. For the workers he made a law that the working day could not be more than eight hours and the legal right to organize unions. For the women Olaya gave them the legal rights to own their own properties. In the girls´ schools, he said that they could have high school; that before was forbidden.

The second liberal government was led by the president Alfonso Lopez Pumarejo. Many situations in his presidency were influenced by the New Deal, and much idealism from Franklin D. Roosevelt. Most of the time he dedicated to solve the social bipartisan issues. Lopez called this “Revolucion en Marcha”, or revolution underway. Part of this process was helping the poor to participate in the system's benefit. This would also make the parties be more pacific and not use violence as a solution. One of the measures he took was making a new agrarian reform. This consisted in giving the peasants that were in non-legal land legal land so they could work on them. Lopez administration was recognized by being the protector of the working class. He created something very important that was the CTC or the Colombian Worker Confederation. Lopez also increased the public spending in public education and rural roads. He finished his presidency by making various changes in the constitution. He said that the started would have more power over economic issues, eliminated the article that said that public education had to be in agreement of the catholic religion; finally he eliminated the literacy requirements to vote. In conclusion, Lopez main contribution was making Colombia face for the first time its social issues.[1]

It was until 1930, that Colombia's political government was steady and managed to grow economically. Since the beginning of the century, new routes developed, especially those of coffee. The crop production was so good, that its consumption was larger each time, bringing money that was invested in new oil companies, and products consumption. In 1930, when the Liberal party was able to retake power, new reform started to come up and slowly the economy went down.

The economy in Colombia around World War II was divided in two large periods: from 1930–1939, in which the country experienced not only an outstanding increase, but also a new social transformation. 1939-1945, the economy was stagnant, and at the same time the social transformation was not progressing at all. Although some countries around the world had trouble coming back from the crisis, Colombia was one of the few that had a swift and sustainable recovery, in order to develop its agricultural sector, coffee production and oil exploitations.

If we look at the economy from 1933–1939, you will see a big duplication in the industrial production, growing by almost 11% annually; which no other country was able to accomplish. Although the increase was spectacular, we had to take into account what CEPAL organization was saying: “if we have a good growing rhythm, we need to think about the low initial level, which can cause future plans”.

The very important fact pointed out by the organization was ignored by the investor, which kept on creating new textile, shoes, and expanding food companies. By 1939 all of these developed a huge increase in the domestic demand, and nearly 2,805 manufacture companies which led to having a low import demand. Using these as a method wasn't as good as expected, since other countries could see this as a closing trade action.[4]

Previous to 1946 there was a tremendous break down in the international and national economy due to World War II. Basically the income per capita was lower than normal and export and import activities were definitely more difficult than before. Colombia reacted with an “emergency economy” by intervening the coffee industry, by coordinating and controlling transportation, by organizing the external commerce and strengthening the regulation systems of importation. It was until 1946 that Colombia didn't focused in creating more reforms but in recuperating from the War and boost up the economy.

The fastest increase in economic activity was during 1946 through 1953, were not only was the country changing its economic structure but also the international situation was healthier. Eventually the investment amplified noticeably as a result of the best conditions of external payments. The structure of the industry was diversifying due to the accelerating industry and the fast process of urbanization, which created a great internal demand in cooperation with the protectionist substitution of imports. Even though it was all the economic sectors that were increasing its production rates, the industry had the most representing statistics of development and modernization. In a period of eight years the industry duplicated its production, directly because a great amount of the rural population were moving to the cities and linking to the activities as well. By creating new companies en developing many factories the innovation was focused in the intermediary goods and from capital, creating directly the quickest absorption rates of jobs among the industry. This phenomenon was not only present in Colombia but also around the world were the most dynamic and increasing sector of the economy is the industry. It is clear that Colombia's economy is completely linked to the external financing plus the income from exportation products.

Although the industry was the sector that had most representative lift up in Colombia during 1946 to 1958, the agriculture sector had a boost as well. A modernization in production was the key to the high productivity. But in order to reach these point three main factors were involved; the increasingly high demand of industrial raw material, the government stimulus and the available international resources. To protect the agricultural sector from the external competition from imported products, the government established high taxation as a result motivating the internal production. Another way the government generated a positive stimulus was by introducing machinery and proper equipment, fertilizers, insecticides, credit, and infrastructure investment, among others. As many industrial raw material crops were taking over the fertile and plain lands, the cattle were being displaced and eventually diminished the productivity.

Despite the fact that Colombia demonstrates a healthier economy during 1946 through 1958, socially the country wasn't that well in the popular sections. Life conditions during this period are far from being considered good. More than half of the employed population lives barely above subsistence level as a result of the sudden increase of population in urban areas. The problem is that not all of the agricultural relocated individuals were properly absorbed by the main cities in Colombia (Bogota, Barranquilla, Cali and Medellin) and therefore found themselves in activities of very low productivity, unemployed or unemployed disguise. This time period is probably the beginning of an escalating amount of Colombian population that began at a greater scale with the nowadays cycle of unemployment.[5]

“A Man of Principle” is a great movie that represents the Violence in Colombia starting in the year 1948. During this time the liberals were in the power and the conservative followers were discriminated. This movie start with a man called Leon Maria; he is conservative and lives in a small town called Tulua. Leon Maria is not so well economically; he has a cheese store and worked at a library. Many people in the town were liberals and went around discriminating the conservative. The wealthiest, most powerful people there were liberals and had a lot of influence in the government and in other political issues.

In the movie there is a turning point that is the death of Jorge Eliecer Gaitan, a very influential liberal leader that was killed by some conservative. When this happens the liberals decide to show how much they cared and started burning and destroying conservative symbols like the Catholic Church. This period of anger and violence was called ‘el bogotazo’. What Leon Maria does is that he has to protect in what he believes in and decides to get a conservative group to protect their church from the liberals. The next day Leon Maria was seen like a hero for his party, he stood up for what he believed no matter the cost.

The conservatives now had the power, and the government sent money to the party and the party used the money to pay people to get rid of the liberals. Leon Maria receives a telegram informing him that he had an urgent meeting with the conservative leaders. In this reunion the conservatives tell Leon Maria that he was the man chosen to protect its party and they gave him guns and money to start right away. During the rest of the movie they show how Leon Maria kills, threaten, and torture liberals for them to leave their homes and go far away. This only lasts until the liberal party regains its power and Leon Maria is killed.

Throughout the movie we can see how the political parties affect everyday life. It shows that the Violence in Colombia was mainly because bipartisan conflicts that weren't really because of beliefs but instead inheritance. The real power in the town wasn't only wealth but also the amount of influence they had on the government and also the amount of fear that they provoked in the community. The name given to Leon Maria was the condor. This was because the people that killed liberals for the conservative party were called ‘pajaros’ or birds. A condor is a very powerful and fearful bird and this is what Leon Maria represented around the country, someone more powerful than just a simple bird.[6]

With the military board (junta military) in the year 1958, the two political parties: liberals and conservatives started the new era of peace and social development. Although everything was getting better, new problems started to come about, economically and socially. The liberals and conservatives were now sharing power equally, but it never came up to be a 50-50 percent equality throughout the country. The two-year period as president for each party, was named after: FRENTE NACIONAL, which ended up with the violence movement.

From 1958 to 1970, the industrialization became a backup for the new exportation methods, meaning the new government was more focused in developing the new ideas to improve the economy. In this time period the government was also able to enter more complex areas of importation, creating changes in their new politics to increase their marketing development. A very big change also arises in the external national product, expanding and developing the modernized economy and reducing importations in a large percent.

As we have seen throughout the class, the industrial sector ruled for a long time period leaving behind the agricultural sector. It wasn't until about 1955 that the government was starting to get focused on developing and growing this sector; in order to also create new urban jobs the violent movement had to be exterminated by the Frente Nacional. At the same time new opportunities for the peasant were given, meaning, the government was giving them the chance to work on the territorial lands and see how big a change it would make for the economy.

After spending and investing so much money in this new method, the government was undecided whether to move on with this idea or abandon it. The big problem in this sector was, that peasants did not have enough money required to productively support the new economical development. It was also better to move on with new ideas, due to the requirements presidents Lleras Restrepo proposed: 1) devalue the currency again, 2) import release, 3) free foreign exchange market.[7]