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Long and narrow, Chile clings to the western edge of South America's South­ern Cone. Hugging - page 12 / 46

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448                          Politics of Latin America

Arturo Alessandri/s second administration (1932-1938) followed the logic of this political system. He took office determined to restore political order, to generate economic recovery from the Great Depression, and to implement mild labor reforms based on the Labor Code passed during his first admin­istration. No longer the firebrand reformer of the early 1920s, Alessandri al­lied with the forces of the Right, the socioeconomic elites in particular, to establish a governing coalition. Minister of Finance Gustavo Ross, a promi­nent financier, was the most visible symbol of the alliance. Austere fiscal and monetary policies, recovery of copper and nitrate prices in world mar­kets, mild support for commerce and industry, and generous tax concessions to builders revived the economy and cut unemployment to virtually noth­ing.

Alessandri's administration also undertook modest social programs. He vigorously implemented the Labor Code of 1925 to channel class conflict and supported the formation and recognition of legal unions in a framework that carefully controlled them, especially their strike activity. However, in an enduring implicit pact with socioeconomic elites, Alessandri did not sup­port unionization of agricultural workers and allowed landowners to resist all attempts to do so by the workers themselves. In a further break from or­thodoxy, Alessandri controlled prices for food in response to the growing strength of the Socialist and Communist parties. In return, he compensated landowners with subsidies for their lost income. Alessandri's government, however, did not address the nagging questions of economic nationalism and income distribution. International companies controlled most of Chile's mineral export sectors (copper and nitrates), as well as much of the finan­cial and commercial sectors. The concentration of wealth limited opportu­nities for the middle class and virtually eliminated them for the lower class.

The Radical party saw these circumstances as impediments to industrial­ization, the key to economic modernization. Therefore, Alessandria right-ward shift induced the Radical party to seek support from the Left. This was the birth of the Popular Front, an electoral and governing coalition domi­nated by the Centrist Radical party that included the Socialist and Com­munist parties, among others. This electoral strategy ushered in three Rad­ical party administrations between 1938 and 1952 that progressively drifted to the Right.

Pedro Aguirre Cerda's Popular Front government (1938-1941) broke with economic orthodoxy and laid the foundation for the nation's economic and social policy for the next twenty-five years. His administration's economic policy focused on the industrialization of Chile. To achieve that goal, it ini­tiated an industrial policy that increased the role of the state in the economy significantly. First, it created a state development corporation, the Corpo-racion de Fomento (Development Corporation, CORFO), which targeted eco­nomic sectors for development. In sectors that required large investments, such as utilities, basic industry, and transportation, the state created public enterprises or joint ventures with the private sector. Second, in other sec­tors, such as light manufacturing, the state (through CORFO, the central

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