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

The interclass and intraclass redistribution did not solve the basic problem 01 guaranteeing a fair income share to agriculture for performing the food-producing lunction and commit– ting its labor and capital. The incentives to agriculture were restored, however, through the positive price policies 01 the military junta. The dominant place in the Allende government's scheme to redistribute income, wealth and power was reserved lor the industrial sector. The vital segments to be nationali– zed included monopolies, semimonopolies, oligopolies, monopsoniers or oligopsonies, the metal-manulacturing segment and all lirms that produced goods lor popular consump– tion. The criteria used to deline these categories were vague enough to permit the take-over 01 almost any industrial lirm. ALL FIRMS WITH CAPITAL IN EXCESS OF $500,009 WERE DEFINED AS MONOPOLIES As in all other instances, the immediate political aim was to destroy the financial base 01 the opposition parties in the large industrial firms. Monopolistic or oligopolistic enterpri– ses were delined by the Planning Office, in its Analysis ofthe Chilean Econorny in 1971, as those "characterized by the use 01 largely mechanized thecnologies, underutilization 01 installed capacity, by a high concentration 01 income generated, control 01 prices and supplies, and the use 01 policies discriminating quality and types 01 products". To eliminate any doubt and expeaite nationalization, all lirms with capital in excess 01 $500,000 were delined as monopolies. Because they lell into either the monopoly or the popular consumption category (or both), 14 major textile enterprises, which collectively produced more than 50 percent 01 the country's texti les, were promptly expropriated. Under the same guidelines, and in order to insure normal, continuous supplies from manulactu– ring lirms threatened with abandonment by their owners, bankruptcy and the like, govern– ment take-overs took place in the beer industry and in coal, lishing, poultry, smoked pork or beel and 90 other small enterprises. The most rapid and immediate statism involved the instrumental goods segment ofthe iron, steel and peripheral products lndustries. In March, 1971, the Pacific Steel Company passed over to social ownership, and participation was guaranteed to this complex by ARMCO, INDAC, INDESA, PRODINSA, SOCOMETAL, INCHALAM, COMPAC, MADECO, NIBSA, SGM, Er,jITEM, AZA, as well as intervention 01 two major cement lirms and numerous construction materials enterpríses. Either d irectly or indirectly, the government assumed almost total ownership olor control over national machinery production and those lirms producing material or equipment necessary to lullíll the Popular Unity's ámbitious construction plans. Some 01 the effects 01 these moves appeared ín 1972 and 1973. As prices remained rigid and real wage increased spectacularly, protil margins shrank to the point where reinvestment was minimal, lirms were abandoned by Irightened owners, or wage shares were so high that lirms could not buy the raw materials they needed to increase production. Supply botllenecks began to arise everywhere. Furthermore -as the Popular Unity govern– ment deliberately reduced royalties, license lees and other payments to loreign companies that had directly or indirectly lent know-how, new products and technology to Chile– numerous basic pharmaceutical, health and personal-care prod.ucts disappeared Irom the market or declined in quality. Industrial supply suffered most from the balance-ol-payments effect 01 rising lood consumption because 01 income redistribution. The crunch was lelt on the imports 01 raw materials, and,there was increased discrimination against agriculture, intermediate products and capital goods. Allende's government had to choose between more butter, mílk, meat and sugar Irom New Zealand, Australia, Argentina and Cuba or more imports lor industrial expansion; it could not have both. When the choice was made to continue discriminating against agriculture and subsidize and increase the amount 01 competitive imports, the industrial supply shortage became a reality. Universal shortages developed during the lirst hall 01 1973, and black markets prolilerated. 43