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Multinational Corporations, Rentier Capitalism, and the War System in Colombia

Multinational Corporations, Rentier Capitalism, and the War System in ColombiaThis article focuses on the role of multinational corporations in the Colombian conflict, particularly how they contributed to the escalation of land conflicts and to the violent transformation of the rural economy into one based on rentier capital. It also explores how these companies helped in fomenting and financing the war system, an element that could partly explain the protracted persistence of the Colombian conflict.

A war system is a pattern of violent interaction among different actors sustained over a period of time. War systems are thus embedded in every civil war. War systems' emergence, consolidation, and duration depend partly on the evolution of the correlation of forces among the warring actors and on the political economies that each of the belligerent forces constructs during the course of the conflict.

If the political, economic, and military assets that any actor obtains during the conflict exceed what it had before the conflict, this is considered a positive political economy. Positive political economies could translate into incentives to continue the war until the particular actor prevails. War systems are not rational constructs, nor are they perpetuated by one actor's behavior. War systems are as much products of unwanted consequences of actors' behavior or of actors' attempts to outsmart their opponents as they are products of structural constraints, such as a balance of power or limited resources at actors' disposal (government or its armed opponents), or international conditions that inhibit a rebel group from pursuing a winning strategy. Agency and structure are integral parts of the war system model. Agency is defined in terms of how an organization, such as a rebel group, the military, or segments of classes (landowners, cattle ranchers, or owners of banks) articulate their political interests.

War systems, then, are dynamic. They influence their units (and act as an independent variable), and their stability depends on the outcome of units' behaviors and changes in their regional and international environment.1


In the last decade, a strand in conflict theory emerged, arguing that the availability of natural resources increases the incentives for both "rebelling and looting." The larger the "lootable" wealth-say, oil, gold, emeralds, diamonds, cobalt, coca production-the more likely that political entrepreneurs will emerge to challenge governments, given the payoff prospects. In this scheme, as long as the expected payoff is higher than the risks, the incentives for rebelling are high. Collier and Hoeffler (1998) argue that the effects of primary commodity dependence are nonlinear and peak when such exports reach about 30 percent of the gross domestic product. Consequently, such a country has a 33 percent risk of conflict. When such primary commodity expoits are only 10 percent of GDP, in contrast, the risk falls to 11 percent (Collier et al. 2003).

The common criticism of this approach is that it does not explain whether the availability of the "lootable wealth" is the main cause of violent conflicts, or whether the causes of civil wars lie in the way these resources are distributed among social classes, regions, and ethnic or religious groups. Nor does it clarify whether civil war outbreaks depend on the magnitude of micro- or macro-socioeconomic and cultural disruptions that are associated with the discovery of natural resources and its corollary, the "Dutch disease."2 Or are civil wars simply caused and perpetuated by "low state distributive, regulative and acljudicative capacities"? Most likely the cause of civil wars is a combination of these factors, and varies with the specific cases under study (Collier and Hoffler 1998; Cilliers and Dietrich 2000; Berdal and Malone 2000).

Notwithstanding that Colombia's GDP is not even close to the 30 percent dependence on primary commodity export-that is, the "danger benchmark" set by Collier and Hoeffeler; oil, coal, gold, emeralds account for just under 5 percent of the GDP-the country suffered from a 40-year protracted civil war (Economist Intelligence Unit 2001, 28).3 This article addresses three key relevant aspects of the Colombian case, two of which are underplayed by the mentioned "resource literature" (2001, 15). One is how multinational corporations, or MCs, disrupted the subsistence peasant economy, exacerbating violent conflict particularly over the access to land, which, in turn, consolidated the country's war system. The second aspect is how these companies triggered rent predation in some of the war system's main actors: state, guerrillas, and paramilitaries, thereby helping (directly and indirectly) to finance and maintain the war system without affecting MCs' profit margins to the point of discouraging them from further investment. The third aspect is how the MCs helped to internationalize the conflict, which, in turn, exacerbated the war system condition. The conjunction of these three factors, this study argues, led to the consolidation of the war system, given that MCs not only generated violence but also financed opposing forces: guerrillas on one side, the state and paramilitaries on the other. Wittingly or unwittingly, MCs helped to maintain a balance of forces (a comfortable impasse) that allowed the perpetuation of the war system, which explains the long duration of the civil war (Richani 2002).4

Max Weber (1995) contended that war remains an activity with economic orientation. In this vein, markets of violence-like all other markets-present opportunities for the formation, accumulation, redistribution, and investment of capital. The agents of these processes can be divided into three main clusters. Private security companies, military industries, and insurance businesses are representative of those that largely depend on the markets that violence creates for capital accumulation and investment. Criminal organizations, rebel groups, and states use violence or its threat mainly to redistribute capital. Extractive multinational corporations find in markets of violence a favorable opportunity to obtain better contracts for investment when states' authority has either partly or totally collapsed.

Common wisdom suggests that an environment of violence is detrimental to capital investment, especially of foreign capital. But evidence in the Colombian and other cases challenges that common wisdom (Garment 2002). In the 1990s, foreign direct investment in Colombia actually grew at an annual average of 55 percent, well above the average growth of the 1980s. Today, four hundred multinational corporations in Colombia generate an annual income of about $15 billion, which constitutes about 15 percent of the country's GNP. These figures provide a sense of the significance of these companies and their impact on the national economy and also serve as an indicator of Colombia's integration into the global market.

Of these four hundred companies, the most important are distributed among the extractive, security, and financial and service sectors. The last two sectors are outside the scope of this article. It is worth keeping in mind that these investments were made in the 1990s, when the indexes of political and criminal violence were much higher than those recorded in the 1980s (Coinvertir 2002). In part, these higher rates of foreign investments were recorded because of the privatization of public enterprises, the sale of several financial institutions to foreign banks, and the elimination of restrictions on foreign direct investments completed between 1990 and 1991. But these foreign investments were also motivated by the potential favorable concessions they could extract from a beleaguered state badly in need of extra income to sustain its war against a growing armed insurgency.

Such prospects were realized with the success of multinational oil corporations in extracting more favorable contracts from the Colombian government, reducing the royalties they paid to the government. In 2002, for example, these companies' royalties were reduced from the 20 percent flat rate to a flexible one that depended on the volume of production and the international prices of oil and gas. The government's 50 percent profit share after deducting royalties and costs was also reduced (Garment 2002).5 This success was preceded, however, the year before by another, when the oil MCs successfully phased out the $1.50 per barrel "war tax" that they paid to the state. The MCs based their argument for cancelling the war tax on the increasing security costs they were incurring in areas of conflict, which affected their profits and inhibited future investment plans.