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WEEKLY NEWSLETTER
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Chile
Index
Patricio Aylwin Azócar, president 1990-94
Courtesy Presidency of the Republic, Department of
Photography
Even prior to the 1970 election of Salvador Allende,
the
Chilean state was one of the most extensively structured
in Latin
America. By the end of the 1960s, direct public investment
constituted over 50 percent of all gross investment.
Government
expenditures accounted for 14 percent of the gross
national product
(
GNP--see Glossary), and 13
percent of the economically
active
population worked in the public sector. From 1940 until
1952, the
budget deficit of the government averaged 0.5 percent of
the gross
domestic product (
GDP--see Glossary). It
grew to 2.4
percent
between 1940 and 1952 and 4.3 percent between 1959 and
1964, a
period largely conconcurrent with the administration of
the
conservative Jorge Alessandri.
With the growth of the state went the growth of a
far-flung
bureaucracy with its own dynamic and considerable
independence from
executive power. State expansion involved the creation of
an ever
larger and more bewildering array of decentralized and
semiautonomous agencies, which depended only nominally on
particular ministries for control. By the mid-1960s, 40
percent of
all public employees in Chile worked for more than fifty
such
agencies, charged with implementing most of the economic
and social
service responsibilities of the state.
Particularly important was the Production Development
Corporation (Corporación de Fomento de la
Producción--Corfo),
created in 1939 to develop Chilean industry in accord with
an
import-substitution industrialization policy. By
mid-century Corfo
owned shares in eighty of the country's most important
enterprises
and held majority shares in thirty-nine of them.
Utilities, ports,
steel production, and other enterprises were developed by
an array
of state agencies. Although public ventures, these
enterprises were
governed by their own boards and enjoyed substantial
autonomy from
ministerial and executive control. Some permitted direct
representation of interest groups in a quasi-corporatist
scheme.
Such representation was most commonly enjoyed by business
organizations, which had voting rights in agencies such as
the
Central Bank of Chile (Banco Central de Chile; hereafter,
Central Bank--see
Glossary), the State Bank of Chile (Banco del
Estado de
Chile; hereafter, State Bank), and Corfo. During the
Allende years,
a policy of nationalization of private industry brought
close to
500 firms into state hands, including the country's giant
copper
companies, which had been owned by United States
interests.
The expansion of the state sector was in response to a
development strategy that entrusted economic growth to
publicsector initiative and regulation. State expansion was also
fueled
by a presidential form of government that encouraged chief
executives to establish new programs as their historical
legacy.
Civil service laws made it difficult for incoming
presidents to
dismiss employees, a situation that led to the creation of
new
agencies to undertake new programs without dismantling old
ones. In
a sluggish economy, the state sector was also an important
source
of patronage. Political parties, particularly those that
were part
of the incumbent presidential coalition, became important
employment centers for government agencies.
The Chilean state, however, was also notable for its
general
lack of corruption and its fairly efficient operation.
Public
employees were keenly aware that their careers could be
ruined if
the powerful Office of the Comptroller General caught them
using
funds improperly. Although tax revenues often lagged,
Chile
enforced tax laws with greater success than many of its
neighbors.
A career in public service was valued, and the Chilean
state
counted on many dedicated and fairly well-educated
officers from
Chile's middle classes. The relative efficiency and
probity of the
Chilean state was the result of a long history of
competitive party
politics, in which opposition parties and Congress kept a
close
watch on the conduct of public affairs.
By the 1960s, Chile's strategy of import-substitution
industrialization had run its course. The country was
plagued by
chronic inflation as contending groups sought government
subsidies
or wage readjustments that would keep them ahead of their
competition. The scramble for favorable state action on
behalf of
sectoral interests was intensified by growing polarization
and
confrontation in the political sphere, as increasingly
mobilized
social groups sought larger shares of Chile's finite
resources. The
system came to a breaking point during the Popular Unity
government, when the authorities unabashedly used state
agencies as
a means of expanding political support. The Allende
government
swelled the rolls of government offices with regime
partisans and
made ample use of regulatory powers to freeze prices and
increase
wages, while printing unbacked money to cover an expanding
government deficit. State agencies became veritable
fiefdoms for
the different parties, each trying to pursue its own
agenda with
little regard for a coordinated national policy.
Within days of toppling the Allende government, the
military
regime began a dramatic reduction in the size of Chile's
public
sector. Between 1973 and 1980, public-sector employment
was reduced
20 percent, and by the latter year only forty-three firms
remained
in state hands. In the late 1980s, another round of
privatization
further reduced state control of productive enterprises.
Cutbacks
in state expenditures in other fields, including medical
care and
education, reduced deficits to the point that by the
mid-1980s the
state budget was in the black. Government surpluses
reached 3
percent of GNP by the end of the military regime.
The civilian government of Patricio Aylwin took great
pains to
retain a smaller but more efficient state. By 1992
government
surpluses had reached 5 percent of GNP; expansions in
state
expenditures for social services were financed by
increased
revenues generated by tax reform, rather than by deficit
spending.
By comparison with many developed countries, Chile still
retained
a powerful state sector, with utilities, railroads, and
the giant
copper mines that produced a significant percentage of
government
revenues remaining under government control. At the same
time, the
process of state decentralization begun by the military
government
continued, albeit under the aegis of democracy rather than
dictatorship.
Chile's system of government was patterned after that
of the
United States, as were those of all of the Latin American
countries. The failure of the French Revolution to produce
an
enduring republican model left the representative model of
Philadelphia as the only viable republican system of
government in
the early nineteenth century. Chile thus incorporated the
principle
of the separation of powers into its constitutional
framework, even
though the country rejected in its constitution of 1833
the federal
system pioneered by the United States.
Much of Chile's political history can be described as
an
ongoing, occasionally violent struggle for advantage among
the
executive and legislative branches of government. In the
1920s, the
Office of the Comptroller General became a virtually
coequal branch
of government with the others because of its great
oversight powers
and its virtual autonomy. With the approval of
constitutional
amendments in 1970 and the adoption of the 1980
constitution, the
Constitutional Tribunal, Cosena, and the Central Bank
became
important government organs in their own right
(see The
Autonomous Powers
, this ch.).
Data as of March 1994
The State and the System of Government
Patricio Aylwin Azócar, president 1990-94
Courtesy Presidency of the Republic, Department of
Photography
Even prior to the 1970 election of Salvador Allende,
the
Chilean state was one of the most extensively structured
in Latin
America. By the end of the 1960s, direct public investment
constituted over 50 percent of all gross investment.
Government
expenditures accounted for 14 percent of the gross
national product
(
GNP--see Glossary), and 13
percent of the economically
active
population worked in the public sector. From 1940 until
1952, the
budget deficit of the government averaged 0.5 percent of
the gross
domestic product (
GDP--see Glossary). It
grew to 2.4
percent
between 1940 and 1952 and 4.3 percent between 1959 and
1964, a
period largely conconcurrent with the administration of
the
conservative Jorge Alessandri.
With the growth of the state went the growth of a
far-flung
bureaucracy with its own dynamic and considerable
independence from
executive power. State expansion involved the creation of
an ever
larger and more bewildering array of decentralized and
semiautonomous agencies, which depended only nominally on
particular ministries for control. By the mid-1960s, 40
percent of
all public employees in Chile worked for more than fifty
such
agencies, charged with implementing most of the economic
and social
service responsibilities of the state.
Particularly important was the Production Development
Corporation (Corporación de Fomento de la
Producción--Corfo),
created in 1939 to develop Chilean industry in accord with
an
import-substitution industrialization policy. By
mid-century Corfo
owned shares in eighty of the country's most important
enterprises
and held majority shares in thirty-nine of them.
Utilities, ports,
steel production, and other enterprises were developed by
an array
of state agencies. Although public ventures, these
enterprises were
governed by their own boards and enjoyed substantial
autonomy from
ministerial and executive control. Some permitted direct
representation of interest groups in a quasi-corporatist
scheme.
Such representation was most commonly enjoyed by business
organizations, which had voting rights in agencies such as
the
Central Bank of Chile (Banco Central de Chile; hereafter,
Central Bank--see
Glossary), the State Bank of Chile (Banco del
Estado de
Chile; hereafter, State Bank), and Corfo. During the
Allende years,
a policy of nationalization of private industry brought
close to
500 firms into state hands, including the country's giant
copper
companies, which had been owned by United States
interests.
The expansion of the state sector was in response to a
development strategy that entrusted economic growth to
publicsector initiative and regulation. State expansion was also
fueled
by a presidential form of government that encouraged chief
executives to establish new programs as their historical
legacy.
Civil service laws made it difficult for incoming
presidents to
dismiss employees, a situation that led to the creation of
new
agencies to undertake new programs without dismantling old
ones. In
a sluggish economy, the state sector was also an important
source
of patronage. Political parties, particularly those that
were part
of the incumbent presidential coalition, became important
employment centers for government agencies.
The Chilean state, however, was also notable for its
general
lack of corruption and its fairly efficient operation.
Public
employees were keenly aware that their careers could be
ruined if
the powerful Office of the Comptroller General caught them
using
funds improperly. Although tax revenues often lagged,
Chile
enforced tax laws with greater success than many of its
neighbors.
A career in public service was valued, and the Chilean
state
counted on many dedicated and fairly well-educated
officers from
Chile's middle classes. The relative efficiency and
probity of the
Chilean state was the result of a long history of
competitive party
politics, in which opposition parties and Congress kept a
close
watch on the conduct of public affairs.
By the 1960s, Chile's strategy of import-substitution
industrialization had run its course. The country was
plagued by
chronic inflation as contending groups sought government
subsidies
or wage readjustments that would keep them ahead of their
competition. The scramble for favorable state action on
behalf of
sectoral interests was intensified by growing polarization
and
confrontation in the political sphere, as increasingly
mobilized
social groups sought larger shares of Chile's finite
resources. The
system came to a breaking point during the Popular Unity
government, when the authorities unabashedly used state
agencies as
a means of expanding political support. The Allende
government
swelled the rolls of government offices with regime
partisans and
made ample use of regulatory powers to freeze prices and
increase
wages, while printing unbacked money to cover an expanding
government deficit. State agencies became veritable
fiefdoms for
the different parties, each trying to pursue its own
agenda with
little regard for a coordinated national policy.
Within days of toppling the Allende government, the
military
regime began a dramatic reduction in the size of Chile's
public
sector. Between 1973 and 1980, public-sector employment
was reduced
20 percent, and by the latter year only forty-three firms
remained
in state hands. In the late 1980s, another round of
privatization
further reduced state control of productive enterprises.
Cutbacks
in state expenditures in other fields, including medical
care and
education, reduced deficits to the point that by the
mid-1980s the
state budget was in the black. Government surpluses
reached 3
percent of GNP by the end of the military regime.
The civilian government of Patricio Aylwin took great
pains to
retain a smaller but more efficient state. By 1992
government
surpluses had reached 5 percent of GNP; expansions in
state
expenditures for social services were financed by
increased
revenues generated by tax reform, rather than by deficit
spending.
By comparison with many developed countries, Chile still
retained
a powerful state sector, with utilities, railroads, and
the giant
copper mines that produced a significant percentage of
government
revenues remaining under government control. At the same
time, the
process of state decentralization begun by the military
government
continued, albeit under the aegis of democracy rather than
dictatorship.
Chile's system of government was patterned after that
of the
United States, as were those of all of the Latin American
countries. The failure of the French Revolution to produce
an
enduring republican model left the representative model of
Philadelphia as the only viable republican system of
government in
the early nineteenth century. Chile thus incorporated the
principle
of the separation of powers into its constitutional
framework, even
though the country rejected in its constitution of 1833
the federal
system pioneered by the United States.
Much of Chile's political history can be described as
an
ongoing, occasionally violent struggle for advantage among
the
executive and legislative branches of government. In the
1920s, the
Office of the Comptroller General became a virtually
coequal branch
of government with the others because of its great
oversight powers
and its virtual autonomy. With the approval of
constitutional
amendments in 1970 and the adoption of the 1980
constitution, the
Constitutional Tribunal, Cosena, and the Central Bank
became
important government organs in their own right
(see The
Autonomous Powers
, this ch.).
Data as of March 1994
|
|