Chile: the balanced view : a recopilation of articles about the Allende years and after

1970-73 were concentrated primaríly on the destruction 01 the small number 01 bankers, latilundistas, industrialists and merchants. The Marxists argued that prívate capitalism was identilied, linked with and, in practice, based upon a banking system that catered heavily to Jarge corporations concentrated in the Santiago-Val paraíso region. In turn, the post-1970 opposition parties used to derive their powerfrom their links with and control over the resources and income 01 the banking sector. Elimination 01 this source 01 power became an imperative instrument in the Popular Unity's program, which intrinsically was based on the beliel that underthe old orderthe sector had been unable to perlorm efficiently and equitably its lunctions 01 promoting production, exchange and distribution and stabilizing economic Ilows. Small and medium-sized lirms could obtain only limited credit and paid interest rates higher than those 01 large lirms, sometimes exceeding the statutory maximum. The alleged monopoly -or, more properly, oligopoly- power was rellected in the lact that three banks shared 44.5 percent 01 total deposits and 55.1 percent 01 the prolits (monopoly power), that 1.3 percent 01 borrowers used 45.6 percent 01 total bank credit (monopsony power) and that 70 percent 01 the credit in September, 1970, had been extended in the provinces 01 Santiago and Valparaíso (regional concentration). By buying out private shareholders and by making the Central Bank exclusively governmental, without representation of prívate ínterests, the Allende regime hoped to establish not only a more equítable distribution 01 income bul also greater efficiency, specialized credit servíces, a regional bank, the conversíon 01 CORFO ¡nto a true ínvest– ment bank, lower interest costs, a development bank and the elimínation 01 speculative internal and external activities. CREDIT MONOPOLY BY THE GOVERNMENT LED TO FRICTION WITH SMALL INDUSTRIAUSTS The statism of the Chilean banks was not sufficient to change the heavy regional, deposit and credit concentration of banking services, which was dictated by the heavy concentration of economic activity in Santiago and the admitted benelits 01 large-scale production. As profit margins and reinvested prolits declined in the newly publicly owned oligopolies, these large enterprises actually captured, under government auspices, an even greater share 01 the total credit available than before. Thus, though the destruction of a vital pillar of prívate capitalism has had an immediate effect, credit monopoly by the state has led to Iriction with small industrialists and artisans, who claimed discriminalion against them rather than favorable treatment by the Popular Uníty. Furthermore, the promised effects on ·efficiency, concentration and savings were not observed; thus the program lell signilicantly short of expectations. Private ownership gives maximum Ilexibility to the banking sector in developed nations; ¡ts demise in Chile provides no guarantee 01 success, as long as it is not permitted to develop in consonance with Chile's idiosyncratic physiog– nomy. Allende completed the land redistribution task started by the Christian Democrats, expropriating more than 2,000 latilundios with more than 3 million hectares by April, 1972. While he was able to destroy the economic base of his past enemies in the cities and the mining sector while maintaining a degree 01 order and respecflor the law that could be loosely construed as being in the Chilean tradition, Allende permitted (or instigated) a highly unstable situation in the rural, agricultural areas. IlIegal takeovers of larms mus– hroomed, with only token efforts 'made by the government lo stem them. The 1970-73 income redistribution improved the standard 01 living of agricultural workers -the lormer losers 01 intra-sectoral clashes- at the old landowners' expense, but added practically nothing to the inadequate agricultural production incentives. The intra-agrícultural redis– tribution 01 income was not accompanied by the more importan! industry-agricullural or general inter-sectoral redístríbution 01 income which shaped terms 01 trade and incentives. 42