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A significant alliance of the left and the hard left is openly working towards pressing for a change in Chile's economic policy. Were it to succeed — and fortunately, the voters' mood is not helpful to their views — Chile's economy, which is the best example in Latin America of a free-market economy that works, might go the way of troubled Argentina.
Alleging that "the Chilean economy doesn't recover and the social situation is worrisome", lawmakers from the Socialist Party (PS) and the Partido por la Democracia (PPD), and Communist Party (PC) leaders (which has no representation in Congress) as well as leaders of the student federation and the professors' association of the University of Chile (both Communist led), have joined with other minor hard-left groups and ecology militants in pressing for greater public spending and higher taxes.
This loose coalition is also fighting for increased credit availability and for " giving the public sectors a larger role in the economy". The main target of their criticism is the structural 1 percent surplus the government defend. This is not, however, a real surplus. Chile is now heading into a fourth year of real public deficit that will be higher than 1 percent of the gross domestic product. The leftist front proposes that repayment of the debt the government has with the Central Bank should be set aside; funds from the so-called "complementary operations" of the budget law should be put to use; carrying out planned public works should be advanced, and the credit policy of the State Bank should be made more flexible.
Additionally, the front wants a tax increase. It is looking for a 30 percent increase in public spending, pointing out this is the percentage common among developed European countries. Although advancing firmly in its development in the last decades, by no measure could Chile be seen as a developed country. Chile's public spending is now almost one quarter of GDP.
The crisis that Argentina is currently going through has deep roots, but it was accelerated in the last decade when GDP grew 40 percent while public spending increased 150 percent.
The are indeed countries with higher taxation than Chile, but they are not growing as fast-and most of them are working towards a reduction of their governments' size. Chile's marginal rate is the highest in the Americans, with the sole exception of Canada, according to a recent study by the Instituto Libertad y Desarrollo. This marginal tax of 45 percent was recently lowered to 40 percent, but taxes were increased for corporations.
Numerous studies show that an increase in public spending stunts growth because the higher taxes that come with it work against capital formation, a key requirement for development, which is the best way to eradicate poverty.
In effect, this new leftist front is pressing for a replay of the policies that three decades ago were implemented by Marxist president Salvador Allende and caused the total collapse of the Chilean economy. This led to the popularly-backed coup that brought Gen. Augusto Pinochet to power in 1973.
The democratically elected governments that since 1989 built on the sound economic framework left by Pinochet have moved Chile ahead of most other countries in Latin America. The outcome of recent elections show that it would not be easy to persuade Chileans that by going back to Allende's failed policies their country would be better off.
Nevertheless, it is a matter of some concern that, even with the current example of how similar policies have bankrupted the Argentine economy, elected politicians in Chile are pressing for a return to the past.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com