The History & The Transformation Of The Chilean Economy

Chile is a country that achieved independence in the Georgian era, an era known for its architectural style. People were so influenced by it around the world that they wanted to build places that have that style. But, in Chile, people were building a nation, a nation that just got independent. It was a period of revolution, freedom, and chaos and the Chileans went through everything again. The transformation of the Chilean economy was carried out by the military and an authoritarian government. Later, the Chilean people have enjoyed a democracy, but it wasn't perpetually the case.

What characterized the democratic rule in years before Allende’s reign? What was it like during Allende’s government? Why was it the case that the country was continuously drifting in the matter of politics? Why was the country not able to find stability? Why was the democratic government intervened? During this era, the country was under the influence of an authoritative government and influential people. They ruled over the illiterate citizens and gathered enough wealth. The military was used to sustain their rule and achieve their individual interests. Education was productive considering it acquainted the Chileans and they were able to amend the Law.

The dictatorship was obviously, Salvador Allende, who took power in 1970 and was the pioneer of the Socialist party. He executed radical procedures that led to the growth of inflation levels, the propagation of strikes and a communist economy. But, before Allende rule, there was the Frei government and he wanted more people to participate in the democratic culture. He believed modern democracy could not survive without a spiritual revolution of political leadership. The Chilean party system was mature and was divided into 5 main parties and 3 persuasions of the left, Right and Center.

The country was experiencing economic volatility and social disruption and that led to urbanization. Frei and his government were interested in “Uniting the whole society “under the symbol of Christian democracy and they had a deep respect for the rule of law and the constitutional order. There was Frei “revolution in liberty” which was by all means towards the democratic rule. His revolution was for acknowledgment of human dignity and the fundamental duty each person had in shaping the democratic government. He favored organizations such as block clubs, family centers and societies for craftsmen, so they could discuss their needs and approach the government. He also called for the chileanization of copper fields. This shows how he directed the path to democracy and his desire for a democratic economy. approaches brought the government and the system near democracy until Allende stepped in.

During Allende’s reign, there was Slow growth in the areas of production and employment compared to estimates intensified the political struggle. The problem was further strained by the expansion of political participation: more people wanting to share the same pie. The political discourse started to stress the “fatigue” of the prevailing system and to highlight the fact that “everything” needed to “change”. Proposals and needs for radical and global solutions started to emerge. Though, the scenario started shifting as towards "political polarization”, it led to prolonged impediment with the current political and economic system. There were “global solutions” that approached assorted aspects of social life.

Political polarization attained its peak in the period from 1970 to 1973, through Salvador Allende’s reign of government and his collapsed effort to establish a Marxist-socialist form of a system.In this period of time, Economic policies seemed to freely seize the income arising from copper mining and agriculture and direct this to the privileged groups. Thus, the main goal of the so-called “Chilean copper policy” was to enhance the State ’s involvement in the revenue derived from foreign-owned copper mining operations. The market was a prolific terrain for redistributive politic intervention. The Government was able to set the minimum wage and ruled over the salary adjustment for private sector workers that were non-unionized. Policies applied to the capital market in Chile before settling, in some sectors allowed the monopolist to intervene in its favor in the system regarding situations like working conditions and land disputes.

The government controlled the settings in a more restricted manner than was proposed; in fact, it only comprised a sector of the labor market and the urban unionized worker's employees. On the other hand, the employment opportunities and salaries of the rural workers and informal workers were affected. These decisions did not belong to the more powerful political groups.

Furthermore, they comprised the poorer strata of the population. Around 1970, that lived in extreme poverty was made up of independent workers. The rest were under-qualified workers, often employed in small companies. The reforms in 1961incorporated thousands of new voters into the system. Most of these came from rural zones where electoral participation had been low. parties had to amend their strategies and make expansive efforts to gain the preference of these new voters.

Accordingly, they directed their strategies to increase the unionization of the labor force as well as other social mobilization. During Frei’s Government, rural unionization and other methods of promoting political awareness such as the “Popular Promotion” program which to a great extent the result of conscious government policy. This basically reflects the efforts of the Christian Democrats and the left-wing parties to gain the support of the new voters incorporated into the system through the above-mentioned reforms. As has already been mentioned, greater participation was not obvious in the sense that “increased political participation favor any particular party in detriment of another”. However, the opening up of the system to new groups must have destabilized the prior sense of balance.

Previously neglected groups all of a sudden had gained the power to demand a piece of the same pie. Political parties were for adjusting their strategies and offering their services to these groups as well. The electoral reforms were most probably endogenous, the competition between political parties to capture more voters.

Why did this political process crumble? Why did polarization in Chilean society unfold? Why did the political leaders believe that offer voters “global solutions”? During the era, economic and political circumstances sustained significant change. On the one hand, relative political power was impacted by the mass increase in electoral participation that took place in the 1960s. On the other, and contrary to structuralist thought, government intervention was not unobjectionable. As the modifications introduced by the redistributive economic growth and stimulated inflation, political proposals became more radical, the economy crumbled.

The system was open to an of political competition and had low involvement. Given that political the rural areas were inferior to participation in the urban sectors, it was that the redistributive policies were biased, disfavoring the former. As we have seen, the agricultural, industrial and labor-related policies had a pro-urban bias. The government’s social expenditure tipped in favor of the mid-income urban groups.Things needed to change. Leaders and political parties perceived a clear incentive in reaching out to these less fortunate groups and in trying to gain their trust. The political parties adjusted their strategies and endorsed the legislative changes aimed at increasing political involvement.

And this is, in fact, what happened. Political involvement increased substantially in the late 1950's eliminating compulsory regular enrolment in the electoral registry together abstention being punishable by law. Later, another reform granted the illiterate segment the right to vote. Even women were allowed to vote and this is how the electorate grew. Inflation and the balance of payment crisis became the central issue in Chilean politics. The government in power attempted t apply some kind of stabilization plan. they were not able tobreak the inflationary dynamics of the redistributive struggle. In fact, frequently these plans were based on pricing and salary controls and on massive increases in public foreign debt-inflation and stabilization of power was necessary.

The main objective of these government interventions went gradually from the mere appropriation of part of the income generated by the different economic activities to the actual expropriation of the assets that produced these revenues. Throughout the beginning of the 1970 ’s, the central issue was property distribution. The fundamental economic proposition of the Allende Government was the mass expropriation of productive resources. When it became evident that the prevailing agricultural and copper policies had failed, political consensus leaned towards the need to nationalize copper deposits and farmlands. The expropriation of the copper fields was started during the Frei Presidency.

The "copper policy" was introduced in the name of progress and industrialization. The nationalization of copper remained in hands of the government due to Salvador Allende. It benefited the country as a whole and this was how copper built Chile’s economic story. Chile faces relatively moderate fluctuations of economic activity induced by boom and bust cycle on the market due to the policy and introduction of copper into the market.

In summarizing throughout three of the four decades prior to the Allende Government, Chile had developed a mixed economy system with broad and increasing state intervention. The goal was to capture certain revenues for the State and channel them to certain favored groups. These policies were deemed harmless from an efficient resource allocation viewpoint because it was felt that the people were relatively indifferent to economic incentives. However, from a political point of view, this income diversion was instrumental in political parties gaining the support of a fast-growing electorate.

When the economic cost of redistributive intervention became evident, the emphasis of public policies went from income redistribution to property expropriation. This trend started with President Frei’s “revolution with freedom”; continuing with the endorsement of the more leftist wing of his own party.The Allende government easily took hold of the copper mines, the greater part of the agricultural lands and most of the banks. The political battle in favor of nationalization of the industrial sector was an arduous military regime that followed the 1973 coup set in motion a strong social and economic reform that eventually led the way to a market economy.structural reforms that shaped the Chilean market economy were planned and implemented within a fast-growing economy framework.

Before Allende's rule, from 1932 to 1973, Chile was the only country in Latin America to sustain electoral democracy at a time when major Marxist parties led the workers. Its stable multiparty political system bore more resemblance to West European than to Latin American models. Chileans took great pride in their representative democracy. He his government's mass nationalization of private industry, alleged friendliness with more militant groups such as the Movement of the Revolutionary Left, and the supply shortages and hyperinflation that occurred during the latter years of his presidency; all these had combined to cause a strong polarization in the country and the committed opposition of the Christian Democratic Party at the time of the coup. It is said that the news that showed him as bad, were not allowed to be distributed in the country.

Allende’s closeness with Fidel Castro and Eastern bloc countries meant that he was planning to model the Chilean state along Cuban lines. Salvador destroyed democracy. Allende had not respected the "Statute of Democratic Guarantees” and violated the Laws of the Constitution. These violations included: support of armed groups, illegal arrests, torture, muzzling the press, manipulating education, not allowing people to leave the country and confiscating private property. Proved his aim of leading Chile to a totalitarian system. But that’s not enough, he came with the principle of separation of powers, violations of specified human rights and asked Armed Forces and National Police carry out key functions of the government. His government was incapable of changing Chile's strategy of development, which had generated such mediocre economic growth that it was impossible to defeat misery and to create a horizon of prosperity for all Chileans and the way for to prevent the violation of property rights, which are an essential foundation of a free society. He ruled a poorly planned expropriation of land, industries, real state, and businesses.

Many honest business owners lost everything, sometimes choosing between exile and suicide. He Ignored the rampant corruption among officers, who controlled the supply of basic goods and access to luxury items, producing scarcity a severe social crisis. His government Pushed the country to a high political polarization and left the country with post-war economy. There was no industry and there was hyperinflation. Allende’s policies, that included alliances with the Soviet Union and Cuba, resulted in economic failure, food shortages, the exodus of many business owners from the country, seizure of land and property from private owners, roving gangs of armed thugs immune from prosecution, crippling national strikes, and eventually the near collapse of the country.

Allende lead the country to an extreme state of chaos, violence and economic crisis. There was nothing to eat, the country was paralyzed, the poverty in the cities was critical and, in the countryside, there was a war between landowners and peasants. It was an extreme situation which needed extreme actions. According to Dahl, the Chilean system as one of the more competitive and complicated. He describes the Chilean government as democratic because there were opposition parties. There was popular involvement of people in the system. According to Held, politics is about power. It was about maintaining and transforming the environment, social or physical. It is about the resources that underpin the shape, capacity, and influence.

Accordingly, politics has the link between public and private life, Policies are created for resources distribution and core development are signs of democracy.I think that the breakdown was due to the disloyalty of Pinochet. Allende brought destruction to himself as well as all the citizens. It was due to political unrest and political tensions between Congress and Socialist Party. As well as economic warfare was ordered by Richard Nixon. Due to political unrest, Allende was overthrown by Armed forces and national police. The military formed a coup to overthrow the government. They later formed a Junta and suspended all political activity and repressed Left-wing movements. Allende's appointed army chief, Augusto Pinochet, rose to supreme power within a year of the coup. The United States government, which had worked to create the conditions for the coup, promptly recognized the junta government and supported it in consolidating power.

Mostly, it was the fault of Allende, because he violated the rules of democracy but also had a military backup. His own chief attacked him, which resulted in the breakdown of the political system and directed the country to turmoil. Everything came to end when Allende’s palace was bombed. In1973, Pinochet led a military coup against Allende's government. The CIA wanted Allende down because he was a socialist and none of his decisions supported them. The armed forces, led by General Pinochet, ruled the country with a hard hand for sixteen and a half years. Congress was dissolved, and the legislative powers were transferred to a Government Junta. Political parties were banned, and all opposition activity was forbidden. Civil liberties were restricted and there were numerous cases of human rights violations. On the same note, the Government drastically changed the Chilean economic geography by reducing state intervention in economic activities and broadening similarly the sphere of individual liberties. I

n any event, what is significant is that most of the more importantParadoxically, although led by its political adversaries, the emerging Chilean democracy does not appear to differ much from that foreseen by the architects of the Military Government’s transition plan. In contemporary Chile, the sphere of individual liberties has broadened hugely thanks to the free market reforms implemented in prior years. State intervention has diminished significantly and the probabilities of returning to the redistribution policies prior to 1973 look every day more distant. The country, it appears, perceives the benefits of a stable, growing economy. The self-defending capabilities the market reflects leave no room for populist trends. The new democracy appears much more efficient and secure than the former. Of course, it is too soon to pass definitive judgment, but the current signs are undoubtedly very encouraging.

03 December 2019
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