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Against the Current: Privatization, Water Markets, and the State in Chile pp 11–31Cite as

Blueprint for the Neoliberal Model: Law, Economics, and Politics in the 1980 Constitution

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Part of the book series: Natural Resource Management and Policy ((NRMP,volume 14))

Abstract

In recent years Chile has become internationally famous for the success of its neoliberal economic model and for its smooth political transition from a military regime to a democratic government. As summarized in the previous chapter, the military government was in power for nearly 17 years, from 1973 to 1990. During that time the government sought to radically transform Chilean political, economic, and social systems, in order to prevent a repeat of the crises of the 1960s and 1970s. The military aimed to cement the changes with a “new institutional order” (nueva institucionalidad) established in a new Constitution, which was approved in 1980 and is still in effect today. What is surprising, in view of the fame of the economic model, is that outside of Chile there has been little attention given to the model’s legal and institutional underpinnings. Analysts of the 1980 Constitution have concentrated on its political aspects, especially its authoritarian and anti-democratic features. They have largely ignored its economic significance, beyond noting the importance of political stability and secure private property rights. Nor do they mention the increased power of the courts in economic and regulatory affairs.1

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Notes to Chapter Two

  1. An earlier version of this chapter appeared as Bauer (1995A). For the text of the Constitution see Republica de Chile (1991). Useful Chilean references and commentary are Blanc et al (1990); Bulnes (1981); Cea (1988); Fontaine (1991); Instituto Chileno de Estudios Humamísticos (1985); Nogueira (1988A); and “La Constitucibn de 1980,” special issue of Revista de Derecho Público, Nos.29-30 (1981). For foreign commentary see Angell (1993A); Ensalaco (1994); Loveman (1991); O’Malley (1990); A. Valenzuela (1991). Corbo et al (1995) is an economists’ look at the institutional framework, which includes some debatable legal and political analysis.

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  2. Cumplido (1984); Instituto Chileno de Estudios Humanísticos (1985); L. Ríos (1989); Zaldívar (1995).

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  3. This argument was first articulated in 1984 by Patricio Aylwin, the Christian Democratic politician and constitutional scholar who was elected President in 1989. See Instituto Chileno de Estudios Humanísticos (1985).

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  4. Bertelsen (1989); Verdugo (1989). Chile’s foremost political journalist put the 1989 reforms at the heart of his analysis of the transition from military to civilian government (Cavallo 1992). See also the foreign commentary cited in Note 1.

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  5. Chile’s Constitution is very similar to the reforms advocated by rightwing and libertarian lawyers in the United States during the Reagan era. See Dorn (1991); Dorn and Manne (1987); McKenzie (1984); Siegan (1980). See also Chapter One, Note 1.

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  6. Barros (1996).

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  7. In this section I rely on several excellent accounts of the evolution and internal politics of the military government: Cavallo et al (1989); Constable and Valenzuela (1991); Fontaine (1988); A. Valenzuela (1991); Vergara (1985). For historical background on twentieth century Chilean conservative thought, divided into the three currents of nationalism, corporatism, and neoliberalism, see Cristi and Ruiz (1990) and (1992).

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  8. Silva(1991).

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  9. Andrade (1984) and Carrasco (1980) have complete descriptions of the steps in the drafting and approval of the new Constitution. The Constitutional Commission first sent its draft to the Council of State, an advisory group of notables appointed by the Junta. The Council, led by former President Jorge Alessandri, objected to and rewrote many sections of the draft, but the objections were later overruled by the Junta. Bulnes (1981) includes the text of the key documents. The Commission was also known as the Comisión del Estudio de la Nueva Constitutión and as the Comisión Ortúzar, after its president Enrique Ortúzar. Its proceedings have been published as Gobiemo de Chile (1983), and its draft has also been published as Comisión del Estudio de la Nueva Constitución (1978). For criticism of the Constitution’s legitimacy, see Note 2.

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  10. Guzman’s thought and arguments about the Constitution and other matters are collected in Fontaine (1991). Guzmán went on to help found Chile’s most neoliberal and rightwing political party, the UDI (Unión Demócrata Independiente). He was elected Senator in 1989 and assassinated by leftwing guerrillas in 1991, giving him somewhat mythic status in Chile today.

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  11. See Note 1.

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  12. The National Security Council is composed of the heads of the four Armed Forces and four civilians (the President, the President of the Supreme Court, the President of the Senate, and the Controller General) (Art. 95). Supreme Court justices are named by the President from a shortlist prepared by the Court, and are invariably appellate court judges. Of the designated senators, two are named by the President, three by the Supreme Court, and four by the National Security Council (Art. 45). Of the seven members of the Constitutional Tribunal, three are named by the Supreme Court and two by the National Security Council (Art. 81).

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  13. See Malloy (1977) and Stepan (1978) on corporatism and the “organic-statist” view of the state in Latin America.

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  14. On the gremialistas see Clerc (1991); Fontaine (1991); Rozas and O’Shea (1983); Salazar and Modiano (1984). On the subsidiary state see also Aimone (1979); Quiroz (1987); Vial and Couso (1988). See also the citations in Note 7.

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  15. See Caldera (1990); Soto (1988); and the citations in Note 1.

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  16. See Fontaine (1991) and the citations in Note 13.

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  17. In Chapter III of the Constitution, entitled “Constitutional Rights and Duties,” Art. 19, No. 15 states that “Political parties shall not intervene in activities which are foreign to their own activities, nor shall they have any privilege or monopoly over citizen participation.” Art. 23 declares: “The community’s intermediate groups and their leaders who misuse the autonomy that the Constitution recognizes, by intervening improperly in activities which are foreign to their specific ends, will be punished in conformity with the law. The higher directive posts of social organizations (organlzaciones gremiales) are incompatible with the higher directive posts, national or regional, of political parties. The law will establish the sanctions to be applied to those leaders of social organizations who intervene in political party activities and to those political party leaders who intervene in the functioning of the social organizations and other intermediate groups indicated by law.” Art. 23 was modified by the 1989 Constitutional reforms (see Note 4): formerly any simultaneous membership in social and political organizations was prohibited, rather than only the higher posts.

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  18. See Note 7 above, and also Chapter One, Note 6.

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  19. For historical background on the Chilean state’s economic role, see Loveman (1988); Muñoz (1992); Vergara(1986).

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  20. See Centra de Estudios Públicos (1992); Valdés (1989); and Note 7.

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  21. See Centra de Estudios Públicos (1992); Friedman (1962); Hayek (1960); Montt (1978). The distinction between general and specific rules was Hayek’s. While he conceded a significant role for the state in structuring the economy, Hayek argued that the “rule of law” did not allow redistributive social policies because they were inherently based on political discretion and “specific rules.”

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  22. The terms are from Vergara (1985). See also Note 7.

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  23. See Note 7.

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  24. See Note 14, especially Clerc (1991).

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  25. See citations in Chapter One, Note 6.

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  26. The Transitory Dispositions were written by neoliberal/gremialista Sergio Fernández, then Minister of Interior (Fernández 1994). See also Note 7.

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  27. On the “economic Constitution” see Cea (1988) and (1991); Departamento de Derecho Económico (1979); Evans (1986); Guerrero (1979); Montt (1978) and (1983); Yrarrázaval (1987).

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  28. On the constitutional autonomy of the private economic sector, see Soto (1988), particularly his discussion of a landmark 1985 Supreme Court decision about the Chilean stock market.

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  29. Art. 19, No. 24. On the social function of property, see Evans (1967) and (1986); Karst and Rosenn (1975); Ríos (1987). Art. 19, No. 23 is “the freedom to acquire ownership of all classes of goods, except those which Nature has made common to all men or which must belong to the Nation as a whole as established by law.” It can be limited only by special legislation and when required by the “national interest.” No. 24 also contains several paragraphs about mining property declaring the state’s “absolute, exclusive, inalienable” ownership of all mineral resources, though allowing “concessions” or permits through which private parties can develop that public property. The clauses on mineral property were a hard-fought victory within the regime of the nationalists over the neoliberals (Cavallo et al 1989). Mining rights are discussed briefly in Chapter Three.

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  30. Other rights protected as “property” have included the right to one’s status as a university student, the right to one’s job as a public employee, etc. These doctrinal tendencies are deeply entrenched: for a recent critique and defense, see Vergara (1991C) and Soto (1992).

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  31. Evans (1986); Gobierno de Chile (1983).

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  32. Guerrero (1979); Gobierno de Chile (1983); Vial and Couso (1988). Vial and Couso argue that the neoliberals were partly “frustrated” because they ended up having to compromise on some of their original wishlist.

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  33. arros(1996).

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  34. On the judiciary’s more powerful role, see E. Correa (1983); J.I. Correa (1991), (1992); Del Valle (1988); Gaceta Juridica (1988); Institute Chileno de Estudios Humanísticos (1985) (especially papers by F. Cumplido and S. Diez). The Supreme Court’s political influence includes the power to choose three of the seven members of the Constitutional Tribunal and two of the “designated” senators, as well as having a seat on the National Security Council (see Note 12).

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  35. On the civil law tradition in comparative perspective see Merryman (1985); Shapiro (1981); Zweigert and Kbtz (1987). On law and judicial systems in Latin America, see Brumm (1992); Karst and Rosenn (1975); Rosenn (1987); Stotzky (1993); Verner (1984).

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  36. This situation has been much discussed and criticized by Chilean legal scholars. See Hamma (1985), (1986), and (1992); Pantoja (1987); Pieny (1981); Rios (1981); Soto (1977), (1980), and (1982). In this chapter I do not discuss the Controller General, a government agency which scrutinizes the details of the legal and financial actions of other state administrative bodies. As a watchdog the Controller General’s powers are more limited than judicial review (even before the 1980 Constitution), but their exercise keeps public officials higly aware of the letter of the law. Thus the Controller General reinforces state agencies’ tendencies to legalistic behavior.

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  37. See Garrido et al (1990); Jarvis (1985), (1988).

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  38. The most notorious example of a resquicio legal was the government’s resurrection of a dormant statute from a short-lived socialist government in the Depression era, which allowed state intervention into private firms to prevent them from shutting down production. The Allende government used the statute to effectively take over private firms without actually expropriating them, i.e. without paying compensation. On the general constitutional crisis, see “Documentos: El derecho chileno y el Presidente Allende,” Revista Chilena de Derecho Vol.1 (1974), pp.414-16,707-32; Novoa (1976), (1993); Velasco (1976); Viera-Gallo (1972).

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  39. Gobierno de Chile (1974), pp.9-10.

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  40. See Blumenwitz and Gaete (1981); “Conclusiones de las Primeras Jomadas Chilenas de Derecho Natural,” Revista Chilena de Derecho Vol.1 (1974), pp.281-285; and “Documentos” cited in Note 38.

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  41. The recurso de protectión was first established in 1976 in Constitutional Act No. 3, and then included in the 1980 Constitution (Art. 20). It was patterned after the existing recurso de amparo (now Art. 21), which allowed immediate judicial review of state deprivations of individual freedom (similar to habeus corpus in other legal systems). The classic text on the recurso is Soto (1982). See also Cea (1988); Evans (1986); Ramma (1978); Junta de Gobiemo (1981); Soto (1986). On jurisprudence see Diaz (1989); Verdugcr(1988). The recurso covers most of the rights listed in Art. 19, including the economic rights discussed in the preceding section, but not the rights to health, education, or social security (Art. 20). Personal liberty is covered by the recurso de amparo. The right to live in a clean environment can be defended only by a weaker and more restricted recurso de protectión. To win a normal recurso the plaintiff must show the defendant’s “act or omission” to be “arbitrary or illegal”; to win an environmental recurso, the defendant’s “act” (not omission) must be “arbitrary and illegal.” See Cea (1988); Evans (1986); Soto (1982).

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  42. Cavallo et al (1989), p.313.

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  43. Constitution, Art. 20.

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  44. like the 1925 Constitution, the 1980 Constitution originally said that special administrative courts would be established, although this time located within the judicial branch (see Note 36). The Constitutional Commission had dropped the idea in favor of review by the ordinary courts, but the Junta put the special courts back in the final version. However, the military government never got around to creating the administrative courts, and they were finally abandoned in the 1989 Constitutional reforms (see Note 4). Additional background on these issues is collected in Junta de Gobiemo (1981).

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  45. Interview with José Bidart, Professor of Law, University of Conceptión, 17 December 1992.

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  46. The leading expert is Soto (1986). For arguments that the recurso is a useful device but not an adequate substitute for administrative law, see Aylwin (1984); Gaceta Juridica (1993); Pierry (1981), (1991); Vergara (1991C).

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  47. Comisión Nacional de Verdad y Reconciliación (1991), also known as the Rettig Report after the Commission’s chairman. See also Americas Watch (1991); Constable and Valenzuela (1991).

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  48. J. Correa (1989), (1993); J.I. Correa (1992); Corte Suprema (1991); Hss (1993).

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  49. Cavallo et al (1989). On the Seven Modernizations, see text at Notes 22 and 23.

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  50. For diagnoses and critical evaluations of the judicial system, see Comisión de Estudios del Sistema Judicial (1991), which is the more remarkable for having been organized by Chile’s most prominent neoliberal thinktank, the Centro de Estudios Piiblicos; Nogueira (1988B); Peña (1994); Vargas and Correa (1995).

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  51. There are many criticisms of judicial formalism in Chile. See the preceding note and also Barros (1981), (1991); Comisión Nacional de Verdad y Reconciliación (1991); Grupo de Estudios Constitucionales (1979); Hilbink (1997); Ruíz-Tagle (1990); Squella (1992). The criticisms are not new: in the 1960s the Chile Jaw Program was a major U.S.-Chilean effort to reform the same aspects of legal education and the legal profession: see Gardner (1980); Lowenstein (1970).

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  52. Gómez (1987); E.Valenzuela (1991).

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  53. The Constitution allows but does not require the judiciary to include such outsiders in the shortlists prepared to fill vacancies (Art. 75), and it has rarely happened.

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  54. Comisión de Estudios del Sistema Judicial (1991); J.I. Correa (1992); J. Correa (1993); Fiss (1993).

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  55. See Beyer (1992) for a rare example of Chilean law-and-economics.

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  56. See Note 49. For arguments favoring more limited judicial reforms, see Del Valle (1988); Eyzaguirre (1992); Institute Libertad y Desarrollo (1991), (1992); and cf. Ruíz-Tagle (1990). The views of a former President of the Supreme Court can be found in Aburto (1995) and in his 1993 annual address, reported in María Isabel de Martini, “Aburto Rechazd Todas las Reformas,” La Nación, 2 March 1993, pp.2-3; “La Semana Política,” p.A3, and Soledad Miranda, “Reforma Judicial: Esperando la Sentencia,” pp.D9-10, El Mercurio, 7 March 1993.

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  57. Hilbink (1997).

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  58. By 1995 the Concertación had managed to pass laws approving the creation of a Judicial Academy and some reorganization of the Supreme Court’s functions (particularly what kinds of cases it hears). “Publicada Segunda Reforma al Poder Judicial,” El Mercurio, 19 February 1995, p.Cl. In mid-1997 the Supreme Court was rocked by a corruption scandal as its President was accused of involvement with drug traffickers. The scandal widened to include other members of the Court. Although the accusations were eventually voted down by Congress, they dramatically changed the political climate. The government took the opportunity to reaffirm the need for deeper judicial reforms, and this time was supported by the principal rightwing party, Renovatión Nacional. The outcome is still uncertain. See Marcela Miranda Cabezas, “ ‘Corte’ por lo Sano: Tarea Dificil: Cambiar el Poder Judicial,” El Mercurio, 6 July 1997, p.DIO; “Jarpa y Romero Respaldan Reforma Judicial,” El Mercurio, 13 July 1997, p.C3.

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  59. The World Bank has recently recognized the importance of judicial reform. See Buscaglia and Dakolias (1996); Dakolias (1996); Rowat et al (1995).

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  60. Hayek (1960). Richard Posner, a prominent Chicago law-and-economics scholar, takes such a judiciary for granted, able to resolve property conflicts when transactions costs are too high for private bargaining (1986, pp.49-50). Rare Chilean exceptions include A. Fontaine (1993); Guerrero (1979), a former lawyer for the Central Bank who argued that judicial procedures to resolve private conflicts had to be simple and fast or they would force more state intervention. Some U.S. neoconservatives have emphasized the need for a stronger judiciary in order to control government regulation, see Note 5.

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  61. See Note 35. See also Mattei and Bussani (1995) for a critique of extending law-and-economics from First World to Third World contexts; Brumm (1992) for a comparative analysis of Latin American and Anglo-American public law.

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    Carl J. Bauer

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Bauer, C.J. (1998). Blueprint for the Neoliberal Model: Law, Economics, and Politics in the 1980 Constitution. In: Against the Current: Privatization, Water Markets, and the State in Chile. Natural Resource Management and Policy, vol 14. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6403-4_2

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