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Introduction || 2: The State of the Literature >>


The Study

Laws and institutions are the binding force for governance of a state. A state's reluctance or inability to enforce its own laws undermines its legitimacy, erodes the authority of its institutions, and destabilizes its society. This case study of Colombia focuses on the period from the mid-1970s until the present. The study's purpose is to examine the nature of the deinstitutionalizing impact of illegal narcotics trafficking upon Colombian economic and legal institutions. Deinstitutionalization means that erosion of characteristic behavioral norms and the capacity to serve the political and social needs of the polity has begun. Deinstitutionalization and its effect upon the autonomy of the Colombian state are conceived as having two dimensions. The first dimension of deinstitutionalization concerns formal and informal rules as mechanisms which weaken institutions. The second dimension involves enforcement of these mechanisms both in terms of transaction costs and transformation costs.

Douglass North notes that formal and informal rules, derived from self-interest, exist to facilitate political and economic exchange. As such economic rules (property rights) and individual contracts (political rules) are "specified and enforced by political decision-making, but the structures of economic interests also influence the political structure."(1) While solving the problem of human cooperation is the underlying role of institutions(2), a major and overt role of institutions is to "reduce uncertainty by establishing a stable . . . structure to human interaction."(3)

Establishment of National Front regimes to end"la violencia" required high levels of institutionalization and national autonomy. High levels of autonomy are not limited to the relationship between sovereign and citizen and "reciprocities of power and exchanges as mediated by leadership."(4) It also refers to the activities of an interventionist state including, but not limited to fiscal and monetary policy, taxation, labor distribution, and social security.(5) Within an interventionist state the reciprocal relationship between sovereign and citizen are more limited than in a non-interventionist state characterized more consistently by reciprocal exchanges. The period of institutionalization provided by the National Front had a predetermined legal end by virtue of legally limiting its existence to sixteen years. Legally delimiting the activities of an interventionist state allowed a gradual apertura or opening along economic and political dimensions as institutionalization deepened.

Domination of the underground economy by narco-entrepreneurs coincided with the period when the Colombian state began transforming itself from an interventionist state to a more representative democratic state. Moving to a more representative democratic state meant that more political parties would be permitted and previously appointed governmental positions would become competitively elective. Initially, the Colombian state's effort to deal with the challenge of the narco-entrepreneur involved little beyond established informal conventions for managing revenue from the underground economy. Opening a side window at the Banco de la Republica (BdeR) and subornation of customs officials was part of the reglas del juego (rules of the game) constituting informal conventions for managing illegal windfall profits. Unanticipated by either the Colombian state or others concerned with this example of "unproductive"(6) entrepreneurial activity was the magnitude of revenues generated and the rapid organizational growth of the INT.

Dramatic increases in the money supply and violence affected the Colombian state's capacity to build its economic and political institutions. State governance increasingly occurred under states of siege. The proliferation of executive decrees suggests a model of reactive, stopgap policy making rather than the carefully thought out responsive policy-making decisions conducive to maintaining and strengthening institutions. Policy decisions or new rules changed frequently in response to each major power challenge from the INT. New rules were subordinated to older informal conventions for dealing with illegal activities. This resulted in the continuation of antiquated, collapsing institutions not yet replaced with more modern and durable institutions.

The second dimension of deinstitutionalization refers to enforcement issues. David Apter notes that different kinds of "risks are entailed in the transition from predominantly coercion(ive) to information system."(7) Coercive systems will collectivize economic and social risk and individualize political risk. Individualized political risk is less tolerated than collective risk in economic and social spheres. Moves toward privatization and democratization increase social and economic risks within a context of uncertainty. The state's inability to meet its obligation during the transition can produce public anger resulting in unconstructive opposition in the midst of growing uncertainty.(8)

While considered successful in ending `la violencia', during the National Front regimes much of the state's responsibility remained managed and controlled by the traditional political parties. However, as the polity became increasingly depoliticized and party hegemony declined, a serious question remained. Had institutionalization deepened sufficiently to allow the type of political risk taking involved in Colombia's transition from a coercive to an information system? Douglass North suggests "the key problems of institutional change, of contracting and of performance, turn on the degree to which contracts can be enforced between arties at low cost."(9) Contracts (laws) are a means of reducing social, economic and political risk. They can ameliorate or lower the privatization of risk through the administration of sanctions and exhortation, diminishing the probability of random violence. Contracts, however, are only as binding as the institutions which support not only the issuance of the contract, but also the enforcement of the contract.

In the everyday world there exists a myriad of ways by which to assure contract compliance. These range from informal kinship ties to more formal laws, including constitutions. Enforcement is often placed in the hands of third party agents who exist as part of state institutions and include the judiciary, police, military, and private security firms. Ideally third party agents are neutral with the ability to costlessly measure the attributes and enforce the contract. Realistically, however, there are considerable costs attached to developing and enforcing contracts. The agent's utility function, or position, dictates her own perceptions about contract costs. These, in turn, are affected by the agent's own interests.(10) This study will show that narco-terrorism raised the costs of developing and enforcing contracts as judges and magistrates were routinely threatened and killed. The study will also explain that every organization requires some form of legitimate institution through which to issue and compel contract compliance. The fact that an enterprise is illegal is not enough to discount such need. If the enterprise is to continue to grow, it must either generate such a legitimate institution or, as we shall see with the INT, appropriate as many institutions as required to meet its needs.

The use of third parties to enforce a state's coercive capacity is required. Thus, the formal structure of rights defined within a hierarchy of rules, such as constitutional, state, or common law, may be incomplete as we shall see when we examine the role of producer associations and paramilitary squads in Colombia. Colombia's constitution remained unchanged from 1886 until rewritten and passed into law December 1990. Its justice system has remained archaic and rigid with little technological innovation. Increasingly informal conventions and constraints have dominated third party enforcement in the form of state civil society relations such as those between the government and producer associations and paramilitary squads.

Informal constraints such as reputation, standards of conduct and conventions related to associational groups, networks, and voluntary organizations often converge with incomplete formal constraints and conventions to form part of the enforcement milieu. The question then becomes one concerning the degree of balance between formal and informal constraints. What affects or tilts that balance in either direction of increased institutionalization or deinstitutionalization?

North notes that organizations are purposive entities and seek to maximize their stated objectives as provided by a society's institutional structure.(11) As such organizations have the capacity to alter the institutional structure(s). The institutional weakness of the Colombian state derived from the period of "la violencia." Efforts by the interventionist state of the National Front regimes met with limited success because of resistance to significantly alter the formal structure of enforcement.(12) Conceptualizing the INT in Colombia as an evolving "firm" with changing organizational patterns enables us to identify ways in which it has altered the formal enforcement institutions of the state. The decline in state autonomy is shown by the dominance of informal constraints in contract (law) enforcement and examined through two specific hypotheses concerning the economic and judicial institutions of the state.

Specifically, the goal of the study is to identify the processes in economic and legal institutions that have contributed to the emergence of the illegal narcotics trade (INT). Identification of structural processes allows a clearer vision of what British political economist, Susan Strange, calls structural power or "the power to shape and mould the structures of production, knowledge, security, and credit within which others have no choice but to live if they are to participate in the world market."(13) Strange additionally observes that the creation of wealth bestows power upon the creator. Such power includes the power to alter the structure of institutions through monopolization of channels of political inclusion or more circumventive behavior including bribery.

The study also examines the efficacy of policies to contain or combat the illegal narcotics trade. What is the impact of institutionalized violence upon a country attempting to move from a predominantly politically exclusive system to a more politically inclusive system through expansion of democratic principles, values, and institutions? Accordingly, the study will focus upon Colombian financial institutions, principally banking, gremios de la produccíon (producer associations), and the Colombian judiciary.

Peter Lupsha notes that a chief characteristic of organized crime is its need to interact with the body politic, its agents, and institutions. That is to say "Without the protection and risk minimization of the political system, the organized criminal cannot operate."(14) He points out the subservient position of "organized crime to the politician and political machine" changes proportionately to the amount of capital and influence generated by the criminal activity and has "often served to reverse the balance."(15) The greater the influence and capital generated by criminal activity, the more autonomous and less subservient organized crime becomes to the political structure and the body politic.

This study is time bound between 1974, when the National Front regime in Colombia legally ended, to the present, 1995. Bounding the study in this way allows us to track the evolution of the INT in Colombia and the response of the Colombian state. Examination of deinstitutionalizing processes taking place and responses, if any, of the Colombian government (GOC) can be better situated within the historical context and changing organization of the INT.


Although narcotics trafficking existed in Colombia before 1974, it was essentially a regional phenomenon confined to trafficking within the Colombian state and only later expanded to the contiguous Andean states. Transnationalization of the INT became part of a confluence of events. Consumer preferences changed from marijuana to cocaine and the bulk of the drug trade shifted from Asia to Colombia. Policies pursued by the National Front regimes incorporated the INT into what Tokatlían calls a "socioeconomic rationale."(16) The INT was not perceived as a challenge to state power. As we shall see, the state saw no reason to not recover revenues generated from the drug trade. Control of the INT, as I have argued elsewhere(17), never became a driving force for the Front governments. Rather, it was considered, when necessary to respond to pressure by the United States, as only one of several issues with which the government had to deal. The end of the National Front in 1974 marked the emergence of the INT as the dominant smuggling activity when Colombia gained prominence as a processing and transhipment state for cocaine. Few anticipated the incredible growth of cocaine capitalism whereby the INT would present a challenge to the existing Colombian power structure.

Why Colombia?

Colombia is the country chosen for the area focus of the study. Its development as a powerful producer and transhipper of illegal drugs, principally cocaine, permits the study of the evolution of the drug cartels. Colombia, unlike other producer/transhipper nations of illegal narcotics, developed a center of power with resources that rival the State's. The long tradition of export smuggling in Colombia developed an informal economy that incorporated the INT into the national economy. Smuggling and its traditions are part of Colombia's historical cultural process. Its impact on the interactive relationships between values and behavior has received little attention by scholars. Nor has its effect upon the state's ability to govern received systematic study. The INT, as part of the informal economy, provides resources for citizens that the state cannot provide.

Colombia is considered a middle-range South American nation, representing a median in most respects of its national development. Colombia has experienced few of the extreme phenomena that beset other Latin American nations. With two brief exceptions, it has experienced primarily civilian rule founded upon liberal democratic ideology and culture. Its economic growth, recessions, and debt, have been moderate when compared with other nations. It is comparable in size to the two states of Texas and California. Geographically, it possesses similar topographical problems of other middle range Andean countries. Areas of the country have, in the past, been inaccessible due to mountainous and jungle enclosed terrain. This has produced enclaves of population that remain quite distant from the control of the national state and has resulted in an intense regionalization. Demographically, the population is about 33.0 million, of which 88% are considered literate. Despite occasional border skirmishes since its independence from Spain, Colombia enjoys essentially good relations with its proximate neighbors. Colombia has not been involved in any external war and has long been considered a staunch ally of the United States. This allows the analyst to examine resource development and allocation without having to deal with extraordinary exceptions such as invasions from other countries or mass migrations into Colombia.

Violence, however, is the one area in which Colombia cannot be considered within median range. The civil strife that was a constant, although regionalized, presence in Colombia from the early 1920s until the mid-1940 was considered an unfortunate side-effect of a modernizing nation striving to consolidate its power.

Beginning with the assassination of populist presidential candidate, Jorge Eliécer Gaitan, on April 9, 1948, Colombia entered a period known as `la violencia'. Between 1946-1966 the deaths of an estimated 150,000 to 200,000 people or approximately 2 percent of the total population, have been attributed to `la violencia'. Averaging approximately 10,000 deaths annually over twenty years, this figure is lower than the current figures for homicide deaths in Colombia that currently average approximately 15,000 deaths annually.(18) While difficult to detect with a high degree of accuracy how many of these deaths are drug-related or political deaths, the numbers suggest a decreasing capacity of Colombian institutions to protect and/or serve as redress for its citizens.


The illegal narcotics trade (INT), as it pertains to Colombia, is defined as that activity which involves the cultivation, production and/or processing, and transshipment of marijuana or coca. Following Hartlyn, I exclude the cultivation of opium and production of heroin, which has greater significance in other countries such as those of East Asia and Mexico.

In contradistinction to Hartlyn, however, I do include peasant growers of marijuana, the laborers and service personnel required for processing coca into cocaine in the larger context of the INT.(19) Inclusion of this group is important for the light it sheds on the evolution of the drug cartels and the power that continues to be exercised through production factors and domestic use.

Although the concept drug cartel is not used in the strict economic sense of the term, it shares the characteristic of a cartel as an "agreement amongst producers to restrict output or coordinate policies to increase profits of the current producers."(20) Such agreements became possible following the "turf wars" among drug traffickers that dominated the late 1970s and early 1980s. The dominance of the Medéllin, Cali, and Bogotá organizations featured a centralized distribution network providing greater guarantees for product and revenue than the smaller traffickers could obtain. Such centralization provided the organizational framework that formulated and implemented(21) policies to restrict output or increase profits.

In this study, drug cartel is defined as a loose coalition of criminal organizations specializing in drug trafficking (narcotraficantes). These criminal organizations are called "crime families" to identify their organizational structure. A form of organized crime, drug cartels exhibit many attributes identified with Peter Lupsha's definition of organized crime as a process as well as an organization. These include the following: 1) interaction by a group of individuals that is ongoing over time; 2) interactive patterns that consist of role, status, and specialization; 3) the existence of corruption of public officials; 4) participants who have a lifetime occupation orientation toward their activity; 5) participants who view criminal activity as an instrument, not an end; 6) the long term accumulation of capital, influence, power, and untaxed wealth is the goal orientation of this group; 7) long term planning and multiple levels of execution and organization comprise the patterns of complex criminal activity 8) interjurisdictional, often international patterns of operation are the norm; 9) the existence of fronts, buffers, and "legitimate" associates; 10) ongoing activity that attempts to insulate key members from the risks of identification, involvement, arrest, and prosecution; 11) attempts to maximize profits through cartelization or monopolization of markets, enterprises, and crime matrices.(22) This definition and its accompanying attributes facilitates analysis of the INT in Colombia generally and specifically. Defining organized crime as an ongoing process precludes any identifiable and specific temporal starting point and enables tracing the evolution of the INT within its historical and cultural context.

The State

Currently the field of political science is experiencing considerable activity and "contestation" regarding the meaning of the concept, the state. Broadly speaking this contestation is divided between two general approaches. One approach is the `society centered' approach where the state is perceived as a manipulated, constrained, dependent entity, "little more than an arena in which . . . contending societal interests come together to hammer out their interests."(23)

The contending approach treats the state as independent, both as an actor and a variable. This approach looks to the internal characteristics of the state, such as its officials and the way they are recruited and socialized, as explanations for varying degrees of state autonomy.(24) Nordlinger suggests that the importance of the state as an independent variable is understood by exploring its `institutional weight'; that is "the impact of its recurring activities, decision rules and processes, organizational arrangements, and structural features upon both public and private actors."(25) Although Nordlinger accepts the need to include societal factors in an explanation of state autonomy, he suggests this occur only after exhausting the statist focus. Nordlinger contends that it is the intersection of the variables included in both approaches wherein "State autonomy will be fully explicated."(26) He conceives state autonomy as having four subjective properties whose variations are explained by four structural features. Variations in the malleability, insulation, resilience, and vulnerability of state autonomy are explained by the structural context of its boundedness, differentiation, cohesiveness, and policy capacities.(27)

Kalman Silvert appears to agree with Nordlinger when he observes that the most desirable paradigm would be one where elements of a system [or state] would be "directly relevant to the creation and aggregation of public power and political efficacy."(28) Silvert de-emphasizes autonomy as a discreet state characterization and focuses on the roles of institutional specialization and differentiation for explaining the autonomy of a state.

These elements constitute what Joel Migdal calls the context of the state. An important part of this context is the existing power relationship among social organizations the state is attempting to supplant. "The major struggles in many societies . . . are struggles over who has the right and ability to make the countless rules that guide people's social behavior."(29) Migdal unconvincingly attempts to separate state autonomy to make the rules from the power relationships exhibited in social organizations. Unable to establish some method of measurement, he returns to Nordlinger's subjective and structural variables of the state to measure autonomy. There remains the question of how does one reconcile these two approaches to understanding the degree of autonomy of the Colombian state. Gaitan, during his presidential campaign in 1947 in Colombia, noted that Colombia had two states or two nations, un pais nacional and un pais politica; a country of nationhood and a country of politics.(30)

This study suggests that a dialectical approach based on political economy will best serve to reconcile the two approaches. To this end, and for the purposes of this study, the Colombian state is defined as a dependent or peripheral industrializing state. This definition allows us to place the Colombian state into a context which enables recognition and treatment of the "fundamental differences concern (ing) basic organizing principles . . . or basic dynamic structural underpinnings" of the Colombian state.(31) Benjamin and Duvall's conceptualization of the state within a twofold typology, peripheral and industrializing, permits a firmer grasp of the political dichotomy existing in Colombia and that has defied explanation by any social science model of either modernization or development.

State 1 is a continually operating, relatively permanent institutional aggregate of public bureaucracy and administrative apparatus as an organized whole.(32) Its functional scope and orientation are limited to the provision of "pure" public goods and intervention on behalf of the production side producing some variant of state capitalism. The social composition of State 1 is distinguished by its technobureaucratic elite with a Western orientation, rather than the socially indistinct sector of an advanced-industrial capitalist state.(33) Structural relations between government and legal order are constrained by government that defines legal order. This definition is particularly salient for Colombia that, until approval of the new constitution in 1990, often operated by executive decree under either an economic or political state of siege.

The above defined characteristics accord with Hartlyn's characterization of the contemporary Colombian government as a "limited democratic consociational regime."(34) He considers Colombia consociational because of the mutual and extensive guarantees the two major political parties, the Liberals and Conservatives, devised with the establishment of the National Front. Guarantees of parity and alternation of office integrated into the National Front were an effort to end `la violencia' and effect a return to civilian rule.(35) These consociational regimes had, however, limited democratic practices such as competitiveness and increased participation. Despite the legal end to the power-sharing arrangement of the National Front, direct elections of mayors did not occur until 1988. In part this was due to the reluctance of the Liberal and Conservative parties to relinquish the perks provided by the National Front.

Silvert suggests that if social scientists really want to diagnose and predict the political human, they need to learn about humans' institutional locations: "the types of relations individuals and groups have to social institutions; also the patterns of institutional orders, their real and ideal interlocking."(36) State 2 is a more encompassing institutional legal order. As such, it is the enduring structure of governance and rule in a society. Concern for property rights is paramount in the dependent-industrial state where they do not infringe upon "quality of life" rights emphasized in the advanced-industrialist state. A clearly demarcated distinction between the public domain and the private domain exists with the public domain being quite limited in the dependent-industrializing capitalist state. Thus among the tensions between freedom, equality, order and justice, State 2 is committed to economic freedom and the maintenance of social order is of paramount legal concern.(37) Benjamin and Duvall's model of the differing emphasis of the state depends upon within which capitalist context the state is situated. This provides a means to identify what Silvert calls humans' institutional locations. State 2's commitment to social order regards social inequality as a necessary, even an acceptable, by-product of development.

Benjamin and Duvall note that State 1, containing the organizing principles of the administrative apparatus, is the more paramount conception of the state in a dependent industrializing state. The distinguishing dimension is found in ways that the public bureaucracy contributes to the " . . . making and shaping of the legal order."(38) I suggest that State 1 best describes the Colombian state with the establishment of the National Front. During this period, the Colombian state moved from being a collection of regional fiefdoms ruled by caudillos (military strongmen) to a centralized, hierarchical state with a burgeoning bureaucracy. The legally mandated bipartisanship of the National Front, however, retained much of the fragmented nature of Colombian politics. As practices of official bipartisanship relaxed after 1974 and remain in the process of being dismantled, the issue, Hartlyn argues, is whether the state can "(re)gain the coherence and capacity to act."(39)

While Colombia has not faced a debt crisis of the proportion of other Latin American countries, its economy remains fragile and dependent. Opening the economy to expand economic growth has dominated the concerns of the Post-Front regimes. Coincident with increased economic freedom has been concern with maintaining social order, especially as the I

Introduction || 2: The State of the Literature >>