Friday, September 09, 2011

The Chilean model: The social costs of oligopoly (II)
How the Chilean model became an structural oligopoly?. Free market economy might work with both political monopoly and political oligopoly, because of its adaptability.(in both cases, the economic institutional framework might be market oriented).Therefore, while it looked that Chilean model worked its way through to become a modern democracy, markets did not react negatively to the political trend arising from the new rules applied to the political setting, as far as it did not hurt the expectations of economic returns , given the profile of stability at the core of it.-
It is hard to assume that the military regime (1973-1990),proposed an economic model to become a failure. They set the foundations of it, and if they could not go on further, it was because politics had also something to say about it. Thus, as long as the new political setting was in place (from 1990 on),the incoming Governments, had the responsibility of making corrections along the way to make sure it was real its ability to make sure the best outcome(higher welfare ).This corrections, were done but they were more effective on the economics side, because the benefits were at sight in the short run.( More than 20 Free trade agreement with 60 countries, were signed up between 1990 and the year 2009). The social issues corrections (quality of education, public health, infrastructure availability), were effective as long as the private sector jumped further into it(infrastructure investment, education) as a supplier, although with short comings unsolved on the public side (specially education)which made the gap of opportunities allocation wider. Thus, actual center right wing Government, inherited a model in its way through to become exhausted by demands for corrections.
What are the implications of the structural oligopoly?.Let try some preliminary answers .Free markets economies are an unique way to offer opportunities for all those ready and prepared to catch them in. However, these opportunities are not evenly allocated when markets are non competitive. The structural oligopoly in the Chilean model, imply that those opportunities will be concentrated in just a few, which validates the exclusion and lack of self esteem ,leading to a failure of expectations. The third implication, deals with the demand of more protection throughout a stronger role of the state in the society and the fulfillment of its needs, with social instability arising from a variety of demands to close the gap. Free Market economy might work with political imperfection, but not with social oligopoly. All of those successful experiences are based at least on high levels of social mobility and institutional framework (monopoly or oligopoly) making the remaining requirement to improve welfare levels .The Chilean model in its current status, might end up with more and not less State .Its life span has been overstretched ,and it is the time to make deeper reforms to it. These reforms ,are widely related to improve competitiveness throughout a better quality of public services, and a more competitive political setting.