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Long and narrow, Chile clings to the western edge of South America's South­ern Cone. Hugging - page 13 / 46





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Chile                                    449

bank, and the state bank) offered subsidies such as preferential credit, in­terest rates, and foreign exchange rates. Third, the government also erected high trade barriers to protect domestic industry from import competition. Thus, the Popular Front government established the basis for a mixed econ­omy, rather than a state-dominated socialist one, in which the state gave in­centives for the development of private industry. Successive governments to 1970 built on this model.

The Popular Front was a broad coalition of middle-class reformist and la­bor parties. As such, it espoused an ideological commitment to redistribu-tive policies and the strengthening of organized labor. In practice, however, only the middle class (the constituency of the Radical party) benefited from redistributionist policies such as increased income, health, education, and housing. Social policy for workers (the constituency of the Socialist and Com­munist parties) largely flowed from the government's nationalistic economic policy. The emphasis was on full employment with job creation in the state sector, manufacturing, construction, and the urban service sector. Redistri­bution for labor was not addressed until the middle of the 1960s. Although labor had to postpone immediate rewards for future benefits during the Popular Front, it did not come away empty-handed. It advanced institu­tionally. The number of legal unions almost tripled and consolidated a con­federation dominated by the Socialist party. Meanwhile, the Socialist party became an electoral rather than a revolutionary party and expanded rapidly. The Socialist party also gave CORFO its developmentalist cast.

Import substitution industrialization discriminated against agriculture. Landowners also feared the economic, social, and political consequences of unionization in the countryside. To appease this powerful conservative sec­tor of Chile's socioeconomic elite, the Popular Front adopted a dual strat­egy. Tax breaks and low import duties on imported agricultural machinery compensated for the Popular Front's low food price policy for urban work­ers. The Radical party also continued, and enforced, the hands-off policy on unionization for rural labor begun under Alessandri. This protected landowner profits, the social institution of the inquilinaje, and captive votes.

To summarize, the Popular Front established the foundations of Chile's political economy for the next twenty-five years. It cemented an enduring, albeit implicit, multiclass coalitioii of industrialists, middle classes, and ur­ban labor that supported import substitution industrialization with redis­tribution and the promotion of labor rights. Reformist centrist and left po­litical parties mediated that coalition and established policies that appeased landowners. However, redistributive measures were a constant source of tension. Making good on the promise of greater social justice in a country with high levels of social inequality proved to be extraordinarily difficult. Successive administrations struggled with the problem.

After Aguirre Cerda's death in office in 1941, successive Radical party-led administrations drifted to the Right. Under pressure from the United States and the right wing of the Radical party, the government of Gabriel Gonzalez Videla (1946-1952) outlawed the Communist party, despite the fact that he

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