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EVER SINCE CHILE DECLARED INDEPENENCE from Spanish colonial rule on September 18, 1810, all of its political movements and governments have attempted to overcome what distinguished Chilean historian Francisco Encina described, in his classic Nuestra inferioridad economica: sus causas, sus consequencias, as its economic inferiority.
In his Mensaje al Congreso Pleno (Message to Congress) of May 21, 2005, President Ricardo Lagos made the claim that Chile has left behind a history, as described by Anibal Pinto, of frustrated growth (desarrollo frustrado) and, thus, has entered the path of overcoming its economic inferiority.
President Salvador Allende's 1970–73, relatively brief, strategic attempt of removing Chile's economic inferiority through a socialist-Marxist model of state sovereignty and government intervention unleashed centrifugal forces of chaotic self destruction unprecedented in Chile's history. On 11 September 1973, a military coup put an end to Allende's socialist experiment. A radically new economic policy, initially formulated and implemented by a team directed by Sergio de Castro, which was both procedurally and consequentially linked to individual sovereignty and economic freedom, became, during the 1973–80, dictatorial, Augusto Pinochet Presidency, the strategic cornerstone of a relentless effort to overcome Chile's inherited, seemingly insurmountable, debilitating, economic inferiority.
Almost all documents reviewed in this essay accept the unique, benevolent nature of the prevailing economic structure. Furthermore, almost all of them recognize that Chile's collective services market, always the central engine of growth, must become more efficient through an increased recognition and satisfaction of the seven, complementary, moral collective needs for safety, security and protection of life, for political freedom, for economic freedom(s), for equal treatment by government, for social harmony and environmental sanctity. Such an improvement in the allocative, consequentialist efficiency of the collective services output market could lead to a significant progress in overcoming the inequality, extreme poverty, gender discrimination, environmental decay and other socioeconomic pathologies associated with Encina's economic inferiority.
1. THE COLLECTIVE NEED, SERVICE AND MARKET FOR SAFETY, SECURITY AND PROTECTION OF LIFE
The most widely used indicator measuring the degree of recognition and satisfaction of the moral collective need for individual and collective wellbeing, or, for safety, security and protection of life, is the level and rate of growth of per capita income and output. Additionally, direct and indirect, indicators of wellbeing include price stability, a low rate of unemployment, and the satisfaction of other moral collective needs.
Since 1973 the Chilean government has pursued the goal of price stability through, first, a highly independent, anti-inflationary, macro, monetary economic policy. As a consequence, the average annual rate of inflation during 1990–2007 has been only 6 percent (UNICEF). Furthermore, the inflation rate, as measured by the GDP deflator (annual percent) was 4.6 in 2000, 5.6 in 2005, 12.4 in 2006 and 4.9 in 2007 (World Bank). Second, it pursued the goal of price stability through an equally disciplined, complementary to the monetary, macro, balanced budget, fiscal policy. As a consequence, the Chilean government run a cash surplus/deficit (percent of GDP) of -0.7 in 2000, 4.5 in 2005, 7.7 in 2006 and 8.8 in 2007 (The World Bank Group). As a result of extremely successful monetary and fiscal macroeconomic policies, GNI (Gross National Income) per capita, Atlas method (current US dollars) increased from 4,840.0, in 2000, to 8,190.0 in 2007 (The World Bank Group). Measured in Purchasing Power Parity (PPP), in current international dollars, Chilean GNI per capita increased from 8,910, in 2000, to 12,339, in 2007(The World Bank Group). Life expectancy at birth, total (years) was 69 in 2007 (The World Bank Group). And the mortality rate, under 5 (per thousand), had fallen to 68 in 2007 (The World Bank Group).
The following studies make significant contributions to our understanding of the degree of efficiency of the collective output submarket where the collective need for safety, security and protection of life is recognized and satisfied: the relevance of intangible assets in financial analysis (item #bi2007000008#); the inadequate nature of Chile's production structure as a basis for more complex, sustainable, economic and technological development (item #bi2008001018#); effects of government policy, freedom of trade, globalization and a new entrepreneurial climate-spirit on the Chilean wine industry (item #bi2008002095#); an excellent analysis of the specialization patterns in the Chilean economy during the period of fastest growth, taking into account its relative abundance of natural resources (item #bi2008001596#); an estimate of the economic value of reductions in mortality rates between 1980 and 1997 (item #bi2008002597#); a review of the strengths and weaknesses of the Chilean takeoff in the mid 1980s (item #bi2008001120#); the relationship between institutions and regulation of labor, the functioning of labor markets and economic growth, as well as of the need for systems of labor protection, and presentation of evidence that major improvements in growth and wellbeing would come from increases in productivity, labor participation and improvement in human capital (item #bi2008001126#); and an analysis of strengths, weaknesses and recommendations for improvement of the financial market (item #bi2008001125#).
2. THE COLLECTIVE NEED, SERVICE AND MARKET FOR POLITICAL FREEDOM(S)
The segment of the Chilean collective output market where the moral collective need for political freedom had to be recognized and satisfied was highly imperfect when socialist President Salvador Allende was elected in 1970. During the ill-fated 1970–73 Allende Presidency, the conception of how political power should be used differed radically between the Socialist—Marxist Left, the Right and all the other political groups in between. There existed no consensus, political, social, economic or otherwise, of how political groups could gain access to state power or how it could or should be used. During the1973–90 Military Dictatorship of General Augusto Pinochet Ugarte, the moral collective need for political freedom was neither recognized nor satisfied. The essence of the collective services market was controlled by the military. The decisions about which collective needs were to be recognized and satisfied also were made by the military. With the central political freedom pillar of sustainable democracy and civil society missing, collective wellbeing and welfare suffered. A spectacular increase in economic wellbeing materialized after 1990, when democracy and the "political freedom" collective market, the mother of all moral collective markets, were restored and recognition and satisfaction of the moral collective need for political freedom regained its historical centrality.
3. THE COLLECTIVE NEED, SERVICE AND MARKET FOR ECONOMIC FREEDOM(S)
The complementary goals of a high rate of growth of per capita income, price stability, low rate of unemployment and a fair distribution of income, could have never been attained in Chile without the parallel pursuit of the—complementary to macro monetary and fiscal—mesoeconomic policies satisfying the seven fundamental, moral, collective needs. Indeed, what is widely considered as a Chilean developmental success story, can be perceived to be the consequence not only of prudent monetary and fiscal macroeconomic policies, but even more important, of the unprecedented, in Chilean economic history, recognition and satisfaction of the moral (to many) collective needs of individuals (households), of private and state-owned enterprises (corporations), and nonprofit institutions, for economic freedom(s).
Ironically, the unprecedented transformation of the "political" collective services market in 1973, from democracy (recognition of the collective need for political freedom) to dictatorship (suppression of the collective need for political freedom), initiated a parallel, equally unprecedented transformation in other collective services markets. First and foremost is the globally unique recognition and satisfaction of the collective need for economic freedom in all individual (food, clothing, shelter) and semipublic (health, education and welfare) final output markets; in all intermediate value added markets; and in all labor, capital and land factor markets. The mesoeconomic determination of value largely by government fiat, of the Allende years, was completely replaced by the mesoeconomic determination of value, in free product, value added and factor markets, guided by the principles of individual, consumer and producer sovereignty.
The overall vibrancy of the "economic freedom" collective service market during 1973–2010 is unique in Chilean history. It has become a powerful, shining, beacon at the peak of an economic freedom pyramid with an ever wider and deeper base encompassing all final, intermediate output, and factor markets.
The degree of recognition and satisfaction of the composite moral collective need for economic freedom increased steadily during the Democratic Presidencies of Patricio Aylwin Azócar (1990–94), Eduardo Frei Ruiz-Tagle (1994–2000), Ricardo Lagos (2000–2006) and Michelle Bachelet (2006–2010).
The summary rating of the degree of recognition and satisfaction of the collective need for economic freedom, in Chile, increased from 5.56 (out of a maximum of 10.0) in 1980, to 6.93 in 1990, to 7.28 in 2000 and 7.98 in 2006,the most recent year for which there is information available. Furthermore, Chile's rank in the degree of satisfaction of the moral collective need for economic freedom rose from 45, in 1980, to 8, in 2005, and a truly impressive 6 in 2006 (CATO 2008 Report, p. 68). In terms of recognizing and satisfying the collective need for freedom to trade internationally, Chile is ranked 5th in the world in 2006, up from 27th in 1995 and 7th in 2005 (CATO 2008 Report, p. 68).
The reciprocal relationship between economic freedom and development is explored by outstanding studies focusing on the development, strengths and weaknesses of financial markets (item #bi2008001125#); market efficiency in electricity production (items #bi2008001124# and #bi2008001134#); institutional changes in artisan fishing of austral cod (item #bi2008001135#); political, legal, social, cultural and, especially, environmental dimensions of the globalization of salmon production (item #bi2008001172#); and the impact of freedom of trade and globalization on the wine industry (item #bi2008002095#).
4. THE COLLECTIVE NEED, SERVICE AND MARKET FOR EQUAL TREATMENT BY GOVERNMENT
Unequal treatment by government of households-individuals, enterprises and nonprofit institutions has been endemic in Chile. The collective output market where the moral collective need for equal treatment by government is satisfied has improved over time, but by no means enough. A high degree of poverty in the consumption-satisfaction of the moral collective need for equal treatment by government remains an important obstacle to attaining the goals of sustainable democracy, economic growth and civil society. In pursuit of this goal, since 1973 and , especially, since the restoration of democracy in 1990, widespread mesoeconomic government policies have been introduced to improve access of low income households to the pivotal, for upward social, economic and political mobility, semipublic services of education, health and welfare.
The following publications provide rich insights into the degree of production efficiency of the collective output market where the collective service satisfying the moral collective need for equal treatment by government is produced: labor market reform in an effort to equalize the playing field for all workers (item #bi2008001126#); improving the quality of financial markets (item #bi2008001125#); managing urbanization (item #bi2008002168#); a description of the failings of the collective output market producing the moral collective need for equal treatment by government (item #bi2008002167#) ; challenges created by the liberalization of the spot market of the electricity industry (item #bi2008001124#); the need for reforms that increase productivity (item #bi2008001123#); sources of inequality in the relative distribution of income (item #bi2008000418#); integration of smallholders into commercial structures (item #bi2008000420#); protection of natural resources under common property (item #bi2008001135#); increasing the neutrality of the tax system (item #bi2008001133#); provision of equally protected pensions to affiliates (item #bi2008001320#); elimination of gender discrimination in labor markets (item #bi2008002163#); the need for gender equity in antipoverty and antihunger programs (item #bi2008002166#); development of equalized human capabilities (item #bi2008002165#); and increased importance of satisfying human needs based on principles of solidarity and justice (item #bi2008000642#).
5. THE COLLECTIVE NEED, SERVICE AND MARKET FOR SOCIAL HARMONY
Without an efficiently functioning "social harmony" collective output market, it is impossible to achieve the goals of sustainable democracy, economic growth and civil society. The sharply declining level of social harmony during the Allende presidency unleashed the uncontrollable centrifugal forces that largely precipitated the military dictatorship of General Pinochet. The degree of efficiency of the collective social harmony market depends on the actions of all institutional units, namely, households-individuals, enterprises, nonprofit institutions and government units. Furthermore, the degree of success in satisfying the moral collective need for social harmony has been as much a function of an introduction of specific social harmony promoting mesoeconomic policies, especially after 1990, as on the, post-1973, anti-inflationary, ultimately income raising and unemployment reducing macro monetary and fiscal policies.
An inadequate level of social harmony has historically characterized Chile, as demonstrated by the extreme inequality in its relative distribution of income. During 1995–2005, the percent share of household income of the poorest (lowest) 40 percent was 11 percent, while the highest (richest) 20 percent received a 60 percent share (UNICEF). According to The World Bank Group, the relative distribution of income was even worse. The income share held by the lowest 20 percent was only 3.5 percent in 2000, and 4.1 percent in 2006 (World Bank Group).
Chile is, however, the only country in Latin America which has achieved satisfactory results in respect to poverty reduction. It has complied with the first goal, established in the Development Objectives of the Millennium, to reduce by half the persons living under conditions of absolute poverty between 1990 and 2015. Since the return to democracy in 1990, the proportion of the population which receives incomes below the poverty line, has fallen from 38.6 percent to 18.8 percent in 2003 (item #bi2008002166#). In addition, during the same period, it reduced extreme poverty to a third, from 12.9 percent in 1990, to 4.7 percent in 2003. Despite these successes, overcoming poverty and, especially, eradicating extreme poverty, remains a priority challenge. Chile still had, in 2004, 2.9 million persons with incomes below the poverty line. Of these, 728,000 were indigents.
The vital role of the "social harmony" collective services submarket is revealed by the following excellent studies exploring the need for systems of labor protection as a means of improving the functioning of labor markets, and advancing growth and wellbeing through increases in productivity, labor participation and improvement in human capital (item #bi2008001126#); inequality in the relative distribution of income (item #bi2008000418#); institutional evolution of artisan fishing of austral cod (item #bi2008001135#); fairness of taxation through a transition from an enterprise income tax towards a tax on cash flows (item #bi2008001133#); the changing morphology of the Santiago megalopolis (item #bi2008002168#); precariousness of contractual relations of temporary, agricultural female workers (item #bi2008002163#); rectitude of fiscal policy linked to concentration of policy making powers on the executive branch of government (item #bi2008002164#); and the central role of well-being of humans in both labor and development policies (item #bi2008002165#).
6. THE COLLECTIVE NEED, SERVICE AND MARKET FOR SAFETY, SECURITY AND PROTECTION OF PRIVATE PROPERTY AND PRICE STABILITY
The collective need for sanctity of private property of individuals-households, enterprises and nonprofit institutions is Siamese-in-link to their moral collective need for safety, security and protection of human cum legal life-existence. As life needs to be protected, so does also the income earned by one's labor and related factor services. An institutional unit's labor and other income, and the parallel property, can be sacrosanct, as they should be, only as long as their Siamese, inseparable, human nature-based moral collective needs for sanctity of life, and of its product, private property, are satisfied through production of the moral collective services in the corresponding collective services output markets. Much of the historically unprecedented growth of income and output in Chile since 1990 can be explained in terms of the equally unprecedented, synchronous, satisfaction of the interconnected collective needs for sanctity of natural as well as legal life-existence, and its byproduct, namely income and private property.
The Chilean post-1973 collective market of "privatization," i.e., where the moral collective need for private property, and by extension, for price stability, is recognized and satisfied, is a cause célèbre at a global level. Studies pertaining to the moral collective need for sanctity of private property analyze the following topics: the role of intangible assets in evaluating enterprises (item #bi2007000008#); globalization of the wine industry (item #bi2008002095#); specialization patterns in Chilean industry (item #bi2008001596#); the post mid 1980s economic takeoff (item #bi2008001120#); labor market efficiency (item #bi2008001126#); the phenomenal growth of Chile's financial system (item #2008001125#); the growth of Greater Santiago (item #bi2008002168#); the electricity industry (item #bi2008001124#); volatility of productivity growth (item #bi2008001123#); inequalities in the distribution of income (item #bi2008000418#); the wholesale electricity market (item #bi2008001134#); creation, destruction and rotation of employment (item #bi2007005134#); tax system reform (item #bi2008001133#); private pension system (item #bi2008001320#); salmon export industry (item #bi2008001172#); system of contractors in Chilean agriculture (item #bi2008002163#); fiscal rectitude (item #bi2008002164#); exploitation of benthic resources (item #bi2008001142#); and a critique of the Chilean privatization experiment (item #bi2008000642#).
7. THE COLLECTIVE NEED, SERVICE AND MARKET FOR ENVIRONMENTAL SANCTITY, SAFETY, SECURITY AND PROTECTION
The environment is affected by the production, consumption, investment, leisure and other activities of all institutional units and sectors. Furthermore, environmental sanctity can be endangered by the rate, as well as the nature, of economic growth. In turn, the impact of the environment on the quality of human life is indisputable. Thus, recognition and satisfaction of the moral collective need for environmental sanctity, through the "environmental" collective market, is a necessary precondition for the attainment of sustainable democracy, growth and civil society.
An efficient market satisfying the collective need for environmental sanctity has gained special importance in Chile because of its rapid economic growth, urbanization and dependence on agriculture-, mining- and sea-based exports with undeniable environmental repercussions. Fundamental mesoeconomic environmental policies have thus become an important complement to successful macro monetary and fiscal policies in determining aggregate well-being.
The "environmental collective output submarket" has had uneven results. The percentage of population with access to improved water source was 86 in 2007 (The World Bank Group).CO2 emissions (metric tons per capita) were 4.1 in 2000 and 4.5 in 2005 (The World Bank Group). Improved urban sanitation facilities (percentage of urban population with access) was 77 in 2000 and 78 in 2006 (The World Bank Group).
Studies focusing on the degree of recognition and satisfaction of the moral collective need for environmental protection cover the following topics: environmental impact of urbanization and centralization of population (item #bi2008002168#); exploitation of mobile natural resources under common property (item #bi2008001135#); the marijuana market (item #bi2008001138#); benefits and costs, including environmental ones, of the salmon export industry (item #bi2008001172#); research, development and innovation in the collective market producing the collective service of environmental sanctity (item #bi2008000419#); and extraction and cooperation rules in the management and exploitation of benthic resources (item #bi2008001142#).
What renders Chilean economic historiography, partially since 1973, but especially since 1990, unique, is not so much the determination of "value," in shaping collective wellbeing, through the division of political authority into the legislative, executive and judiciary powers , as advanced by Montesquieu, but by the use of the power of the state to largely (or rarely not) recognize and satisfy the seven, complementary, moral collective needs through their respective collective output markets. Although these "collective output market" values have unleashed the historically unprecedented centripetal forces forging Chile's current political, social and economic dynamism, and phenomenal progress, it is still far too early to claim that they have reached the strength and sustainability level needed to permanently overcome Encina's inherited, Chilean, economic inferiority.