Democratic Chile: The Politics and Policies of a Historic Coalition

1. Democratic Chile: The Politics and Policies of a Historic Coalition Kirsten Sehnbruch and Peter Siavelis 11th February, 2013

2. Table of Content, Part 1 Politics and Policymaking • From a Necessary to Permanent Coalition, Peter M. Siavelis • The Alianza’s Quest to Win Power Democratically Patricio Navia and Oscar Godoy • Democratizing Chile through Constitutional Reforms Claudio Fuentes • The Military and Twenty Years of the Concertación Greg Weeks • Political Reform and Gender Equality Merike Blofield and Liesl Haas • Human Rights under the Concertación Cath Collins

3. Table of Content, Part 2 Economics and Social Development • Economic Policy and the Ideology of Stability Oscar Landerretche • Fiscal Policy: Promoting Faustian Growth? Ramón López • Reducing Poverty: Real or Rhetorical Success? Silvia Borzutzky, Claudia Sanhueza and Kirsten Sehnbruch • Social Policies: From Social Debt to Welfare State? Dante Contreras and Kirsten Sehnbruch • A Precarious Labor Market Kirsten Sehnbruch • Education: Freedom of Choice or Enterprise? Gregory Elacqua and Pablo González • Conclusion: The Future of the Rainbow Coalition Peter M. Siavelis and Kirsten Sehnbruch

4. A view from futureInterpretations of History • Given political constraints, to what extent did Concertacion governments achieve what was possible? • How was Chile transformed politically, socially and economically during the four Concertación governments? • How did the coalition maintain itself in power for twenty years? • Is the Concertación indeed a political and economic "model"?

5. From authoritarian to transitional enclaves • A consensus model of politics established by the transition • But the authoritarian enclaves became transitional enclaves • In each area of government, there is a (different) transition point when this occurred • A permanent interplay of political constraints on development and vice versa

6. The Pinera Government • The transitional enclaves are no longer associated just with the Concertacion: the Alianza had to operate under them, too • The Alianza has not attempted to institute policies that it has advocated for 20 years or implemented policies it had advocated against: eg. labour reform, “asistencialismo”, increase in taxes, regulation of education, etc.  Nicknamed 5th government of the Concertacion

7. Distinguishing comparative democratic features • Authoritarian and transitional enclaves • Elite domination: more extensive power concentrated in hands of elites that are more entrenched than elsewhere • A remarkably homogeneous intellectual elite: Washington Consensus vs neoliberalism  Disillusion with politics, declining political participation, loss of “mistica” or “proyecto pais”, which makes formulating an alternative development model problematic

8. Transitional Enclaves • Binomial election system and constitutional enclaves • Informal political institutions • Cuoteo, elite control of candidate selection and electoral politics • Party dominated politics • Elitist and extra-institutional policy-making • Untouchability of the economic model

9. The Fault Lines of the Concetacion • Parties (PS & PPD vs PDC) • Technocrats vs “the Left” (which never had a strong technocratic base) • Business interests vs “the Left” • Traditional transitionists vs “latecomers” • Intra-generational differences

10. Unintended Consequences • Social security dilemma • Productivity dilemma • Inequality dilemma • Some “neoliberal” reforms have taken on a life of their own: natural resource dependency, environmental degradation, LM flexibilisation, privatisation and the business of education, etc. • A failure to shift from quantity to quality • Growth sustainability dilemma  A failure to close the development gap

11. Chapter contents • Each chapter analyses Concertacion policies on a particular subject from the perspective of a research question • We have attempted to combine political and development analysis throughout • Each chapter relates to the transitional enclaves argument and identifies its respective “transition point”

12. Myths of the Model • A neoliberal economic model • The Concertacion successfully lowered poverty rates thanks to its social spending efforts • The Concertacion invested in paying off the “social debt” inherited by the dictatorship • “flagship” social programmes of each Concertacion government illustrate their commitment to social equity (eg. Chile Joven, Chile Barrio, Chile Solididario, Chile Crece Contigo) • Labour market problems will be resolved through growth • Social programmes (later universal benefits) can compensate for labour market weaknesses

13. The Economic Model (Oscar Landerretche) • Imperative of stabilisation turned into an ideology: exhausted from utopian experiments • Economic stability was seen as redistributive • Model was not neoliberal in the macroecon sense: soft landing during 1990s, Keynesian anti-cyclical spending, financial market stability • Irony: model was more neoliberal in other policy areas, esp social policies • “Redefinition” of economic model through pressure from the Left…discolos

14. Problems with the Model • One of the world’s most open economies but unable to diversify its exports sufficiently • Chile has not closed the development gap despite being the best economic performer in LA: 1960: 23% of US GDP in PPP, 32% in 2012, 38% in 2020 • Dutch disease • Failure to close inequality gaps on all levels (income, health, employment, less so education and housing)

15. Poverty and Income Distribution

16. Reality beyond the Rhetoric • Economic growth, not social policies lowered poverty, but not as much as in other countries • Social investment has not been significant enough to redistribute • Multidimensional poverty: investment in health, housing and education has paid off. LMs are still very problematic • A focus on absolute poverty rates has led to complete neglect of income distribution, which was considered less important

17. Chilean Labour Market Problems • Informality and precarious employment conditions in the formal sector • High job rotation, sub-contracting, multiple tax IDs, Freelance contracts for salaried workers, etc. • Labour market segmentation with little mobility (esp for older workers) • Antiquated legislation that segments labour market further (esp. severance pay) • Labour reform stalled since Pres Aylwin • Weak unions, unconstructive in development process

18. Employment Duration

19. Social Security • Objective: pay “social debt” and shift towards universal entitlements ….and by implication lay foundation for a welfare state (“sistema de proteccion social”) • With low fiscal revenues • Little political will to undertake structural reform (“Fondos Solidarios”) • A tendency to institute elaborate programmes with minimal funding • Focus on coverage (quantity) not quality • Existing social benefits cannot compensate for deficiencies in employment conditions  Rhetoric has been more successful than fact

20. Transition points: Lagos presidency failed to take advantage of his statemanship • Lagos felt restricted by being the first socialist president of the Concertacion, cautious by nature: • Auge negotiation under Lagos • Lagos was a “big picture” president without a political mayority, view to future history of his presidency • Management of economic crisis missed opportunity for anti-cyclical spending • Lagos pushed back against political constraints, but probably not hard enough from hindsight • Intellectual exhaustion of Concertacion set in + alienation of PDC

21. Transition points: Bachelet presidency • First political majority • Constrained by being the first female president • An attempt to break out of politics as usual: gender parity, gobierno ciudadano, new faces, but no big push for pol. reform • Illustrates strength of status quo; by 2007 Bachelet government ressembled previous ones • Social protection rhetoric constructed after the fact, not presented as an alternative: “next step” policy • Management of crisis broke economic molds • Lack of genuinely new political ideas and “mistica” • Concertacion exhaustion and fragmentation

22. Political Conclusions • Normalization of politics typical of post-transitional societies • But entrenched elites continue to shape politics: no significant push for strengthening of democracy • Contradictory normalisation: elites vs citizens • Disenchantment of electorate with politics • Transitional enclaves became accepted as “normal” until students demonstrated

23. DevelopmentConclusions • Gradualist approach to change and development • No big ideas, no development strategy after 2000, no risky political decisions • Gradual increase in concern over sustainability of the economic model among the centre-left • Student protests put new issues on the agenda