What Jumps Out: Who Are We To Argue?

James A. Robinson (Why Nations Fail) has been named the co-winner of the Nobel Economics Prize for 2024. He is a man who has spent decades studying the relationship between economic growth, wealth, and equality. He has forgotten more than most of us will ever know about the subject—but it’s hard to forget what he had to say about Colombia back in 2018, largely because little has changed since then. I am paraphrasing, but you will get the point.

Robinson stated that the ecosystem in terms of land distribution was probably worse than in 1961. Just last week, the Petro Government handed back over 3,280 hectares of land illegally seized during decades of violence, but it is a drop in the bucket, and even that is opposed by the land barons of the right. Colombia should be a breadbasket of agriculture, but of its 30+ million hectares of productive land, only 4 million are used.

Robinson also touched on tax reform during his visit, and no surprise, we are seeking another one at the moment. His hypothesis, which still holds water, was that those creating these reforms are the same ruling elite who don’t pay their share. The same remains true; the elite pay a fortune in accountancy bills to avoid paying. Last week, it was announced by DIAN (National Directorate of Taxes and Customs)  that 12,000 savings accounts would be frozen by month-end until those owning these accounts paid their outstanding tax bills. This is encouraging to a point, but it won’t be the top 0.5% who find their accounts frozen; instead, it will be the middle class who constantly get squeezed.

You don’t have to be a Nobel winner to be aware of Colombia’s most dangerous disease: corruption, but Robinson made a note of it anyway. It doesn’t exist in isolation, and the political institutions are at the very heart of the problem. That certainly hasn’t changed. Congress at the national level, as well as the governor’s and mayor’s offices, are awash with corruption—they are figuratively bleeding Colombia to an economic death.

I am paraphrasing my countryman, but he had it spot on with this: “The real problem in Colombia is that people don’t think it’s bad to be a clientelist; they don’t think it is bad to evade taxes…there is no political will to do anything about it”—his words still hold true.

As for this week, the Labor Reform will be top of the bill. Thus far, 64 of the 80 articles have been approved. Hopefully, it is passed speedily. Entities such as FENALCO (National Federation of Merchants and Entrepreneurs) (and no doubt ANDI—National Business Association of Colombia—will also comment) are complaining it will increase costs. Ex-President Uribe, who brought in many of the current rules, is also pushing back. Frankly, many of them are Dickensian by modern standards and need removing. It may not address the huge issue of informal labor (56% as of August), but at least it brings a little more dignity to those who do have a job in the formal sector.

Have a great week, and congratulations again to Dr. Robinson.

Roops