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

became most evident during 1970-73 in fishing. copper. transportation. agriculture. enter– tainment and culture. THE COPPER WORKERS SOON GAINED AN UNPRECEDENTED PRIVILE– GED POSITION Under the 1970-73 coal ition pattern. the state-owned segment of mining -in particular, copper- retained a much higher share of the copper-resource surplus than in the past. Thus the copper workers gained an unprecedented privileged position consistent with the theory of sectoral clashes but alien to socialist or communist theory. Furthermore, under the dominant coalition between government and the export sector, quasi rents sharply decli– ned through inefficiency; and the copper quasi rents previously received by the foreign capitalists and not dissipated now accrued to the privileged copper workers, rather than being invested in human and physical capital. Most of the reduced copper quasi rents available for general government expenditures were expended in the" urban areas under Marxist guidance. and virtually nothing trickled down to the perennially neglected rural areas. . Contrary to official pronouncements. credit was channeled through the state banks to the state-owned segments of the economy. This procedure had been slowly but inexorably strangulating the minority private sector. However. this overl clash between state-owned and privately owned segments concealed the equallY' if not more. important internal coalitions and clashes within the state-owned segments. Some patterns can be clearly discerned; others can only be conjectured. Copper mining and the monopolistic or oligo– polistic state-owned industrial enterprises involved in the mass production of consumer goods. the metals-machinery complex and, to a lesser extent. fishing emerged as dominan! subsectors with privileged status. and were heavily favored in the sectoral income redistri– bution. Neglected or discriminated against were'agriculture. slale commerce. slate ban– king. some parts of education and, very strongly, health .. Construction. now heavily state– owned or controlled. held a neutral position in between the more-privileged and discriminated-against seclors or segments thereof. Public health was ignored and neglected not only during the Allende years but from as far back as the 1930s because of íts low priority and severe budget constrainls. Lacking the strong feedbacks and linkages of construction. ít aroused no political support from other sectors. Even though it faced unlimited demand, the fact that it was a nonmarket service, offered free as a public good, deprived it of the political glamour characteristic of industry, airports and other public works. More visible sectors and budget items. such as higher wages and family allowances, persistently edged it out in the selection process. The 1970-73 Marxist-inspired coalitions and clashes led to balance-of-payments convulsions reminiscent of the Great Depression. The elimination of copper factor pay-' ments abroad was more than offset by a sharp decline of private capital inflows. With the cutoff of western credits because of the exorbitant rise in risks. the Chilean government accepted any credit or trade deal, however uneconomical. from export-driving socialist countries. Cuba's sugar was imported. penalizing national sugar-beet producers that were on strike. Australian and Argentine foods were imported at artificially low escudo prices but high dollar prices. which furlher penalized agriculture. artificially augmented food con– sumption and raised foreign indirect ownership in Chile by raising foreign debt. Those wi lIing to export to Chile on credit emerged as a privileged class offoreigners who enjoyed returns tar beyond those deserved realistically under competitive market condilions. The seetoral clashes of 1970-73 illustrated once more tha! Chile's problems were related lo supply, no! demand, and in particular to incentives and capital formation.' 45