Ensayo

Effects of institutional crises on political philosophy about the role of the state: The
case of industrial policy in Chile 1929 - 2000
1. Introduction
This essay is an attempt to review how profound changes in both political
philosophy about the role of state in the economy shaped industrial policy and its
implementation in Chile during 20th Century.
The plan of the essay is the following:in section 2, I present a framework to
analyze industrial policy regarding the political and economic context, the justification of
different degrees of governmental intervention–expressed by responsibilities assigned to
the state–, and characteristics of main policy instruments to implement industrial policy.
Under such framework, I analyze in subsequent sections two periods in Chileanhistory
whereby we can identify substantial differences in industrial policy: Import Substitution
Industrialization (ISI) Strategy between 1929 and 1973 (section 3) and liberalization,
privatization and commercial openness since 1973 to 2000 (section 4). Finally, in the
discussion section, I expose some challenges for Chile’s industrial policy in 21st Century
regarding earlier experience and newchallenges for philosophy on role of the estate and
institutions.
2. A framework for analyzing changes in industrial policy in Chile
We can conceptualize industrial policy as “any type of selective intervention or
government policy that attempts to alter the structure of production toward sectors that
are expected to offer better prospects for economic growth than would occur in the
absenceof such intervention” (Pack & Saggi, 2006). Like all public policies, industrial
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policy is shaped by institutional arrangements, which in turn are the result of cultural and
political context that assigns the state a specific role in promoting economic
development.
In order to analyze the influence of political philosophy and institutional
arrangements on industrial policy in Chile between1929 and 2000, I considered three
aspects: the historical context and its effects on institutional disruptions; the dominant
political philosophies at different times within the period in study; and, industrial policy
instruments implemented in each period, as an expression of the dominant philosophy.
Political philosophy analysis implies a revision on state’s decisions on production,allocation and distribution, as well the role, strength and scope of government’s activities.
Implementation analysis implies understanding differences between vertical and
horizontal interventions, which differ in fairness of intervention –what sectors have
access to governmental support.
3. Import substitution as an answer to the Great Depression
Since the conquest and colony by Spain until thesecond decade of 1900s, a
mono-exporting model based on natural resources exploitation by foreign capital
practically dominated Chilean economy. The most dynamic period during this era was
the saltpeter exploitation boom between the late nineteenth century and the Great
Depression in 1929. Within this model, the scope for the state’s action was narrowed and
its boundaries went not beyond toprotect private property and public order. Public
spending was financed by taxiing foreign companies and exploding saltpeter mining, and
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social policies such as public health and shelter were addressed by charity institutions –
i.e. Catholic Church (Larrañaga, 2010).
The most important economic sector was obviously saltpeter mining, which was
dominated by foreign businessmen who shared someinfluence with a small elite
dedicated to trade. No major manufacturer industry had developed towards early 20th
Century.
In the context described above, the Great Depression was the turning point that
led the state towards a major engagement in social policy problems and economic
development. The 1929 Crisis struggled not only the small trade sector, but
also coincided with the development...