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