In Response to Mr. McElhone’s Demurrer Over Colombia

This is COHA Research Fellow Rachel Godfrey Wood’s response to Bernard McElhone’s critique, “A Rant From the Dyspeptic Right” of her piece, “Ghost Economics Spook Uribe’s Colombia“. Any additional comments that speak to the argument are welcome.

Dear Bernard,

I´m sorry you did not like the writing style of the piece, and even sorrier that you used it as an excuse to avoid dealing with the contact directly.

You appear to be advocating absolute deregulation, even to the extent of allowing pyramid and money laundering schemes (which are illegal under Colombian law), many of which are intent on defrauding people of their hard-earned savings. Given recent events world-wide, I can only ascribe this to an ideological tendency which is rapidly becoming moribund. In the case of Colombia, you clearly oppose even the Colombian Government´s belated resort to intervention in the pyramid and money-laundering schemes. In the last few months, the Government has intervened in many such schemes, often even before they had collapsed or defrauded their clients, because the Government finally came round to the view that illegal captation of money is not only illegal, it is also a threat to the well-being of numerous sections of the population. The collapse of pyramid schemes are not “nits”, they have plunged thousands of people into poverty, particularly in the south of the country, and even pushed people to commit suicide in some instances. Arguing that this is simply an inevitable outcome of human nature, and that the Government has no responsibility for preventing such situations from occurring, is in my view an example of economic extremism.

That the Government should have intervened earlier is to me obvious. As early as February, the pyramid scheme “People Winner” defrauded thousands of people in Villavicencio, leaving investors with nothing. This was well known by the Government, yet it did nothing except for issuing further warnings to other potential investors. I am not arguing that pyramid schemes could only function in a “neo-liberal” economy, but I am arguing that they do benefit from the atmosphere of economic impunity that often comes about after years of de-regulation. In the Colombian case, this means the weakness of the Superintendency, the body that should have intervened in such schemes, but was too weak to do so. I did not argue at any point in the argue that such pyramids could not work elsewhere, neither did use the case as an excuse to claim that the “21st century socialism” in Venezuela was inherently a better system (in fact, DMG had already expanded to Ecuador and Venezuela). I agree with you in that human beings in all societies are susceptible to the offer of making money quickly, and for this reason I am not jumping on the bandwagon of blaming it all on “stupid” or “lazy” people, as do many of the Colombian right. The only point I made was that extreme deregulation creates an atmosphere of impunity, and pyramids are but one manifestation of this.

I´m also sad that you seem to have missed the main point of the article, which was not about deregulation, rather it was about the link between the drug trafficking, money laundering, and DMG, the main scheme involved. If you read the article carefully, I am not actually proposing extreme levels of de-regulation, on the contrary I am suggesting that the drug prohibitions enforced by self proclaimed free market ideologues have failed, and only allowed for ever greater economic and social distortions in Colombia´s society, of which DMG is only one. The presence of DMG and its reputation for consistently “paying out” allowed the other pyramids schemes to take advantage of its reputation. The heavily de-regulated environment helped them to do that, but the main reason this happened in Colombia rather than other countries in the continent was the effect of the drugs economy, as I think I made perfectly clear towards the end of the piece. Regards.