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Power and Politics: Taxation, Social and Labour Market Policies in Argentina and Chile, 1990–2010

Part of the Social Policy in a Development Context book series (SPDC)

Abstract

Delamonica, Moudud and Pérez Caldentey analyse recent attempts to construct progressive taxation, social and labour policies in the context of unequal power relations and struggles for social justice in Argentina and Chile. As elsewhere, employers tended to oppose such policies, using various formal and informal mechanisms to push back against them. The authors argue that power relations between state and business are shaped by the political cohesiveness of the latter, that is, the ability of firms to act in concert to politically promote their own policy agendas. At the same time, power struggles also include workers and social movements who exert pressures on the state for egalitarian policies. A key difference between Chile and Argentina is the high level of business cohesiveness in Chile.

Keywords

  • Social democracy
  • Power
  • Business associations
  • Taxation
  • Social policy
  • Labour market policy

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Notes

  1. 1.

    In this chapter we use “social democratic”, “egalitarian” and “progressive” interchangeably to refer to rights-based policies that attempt to create fairer, more inclusive, cohesive societies (ECLAC 2010; Kastning 2013).

  2. 2.

    More specifically, by political cohesiveness we mean the extent to which firms from within and across industrial sectors have been able to come together in what Schneider has called encompassing associations. We follow Schneider (2004) in defining business encompassing associations as cross-sectoral alliances between firms that may have little in common in terms of the nature of the market served or technology used. The degree of political cohesiveness will determine how effectively diverse firms and sectors can articulate their interests.

  3. 3.

    See for example Godley and Lavoie (2007), which has become well-established in non-neoclassical macroeconomics.

  4. 4.

    See Sen (1999) and Nussbaum (2011) with their focus on human capabilities and a rights-based approach to policy.

  5. 5.

    Hacker and Pierson (2002); Fairfield (2010); Farnsworth (2004).

  6. 6.

    From policymakers’ standpoint it may, particularly in economically turbulent times, be difficult to gauge ex ante the policy mix that may or may not trigger a fall in business confidence. Hacker and Pierson (2002) emphasize the disinvestment that follows from capital flight as a prime way by which structural power is exercised. However, one could equally argue that a relative increase in speculative activity, as opposed to long-term production-oriented investment, can also have a deleterious impact on the economy.

  7. 7.

    Paster (2012) was critical of the PRA with regard to his discussion on Bismarckian Germany. We have included Paster in the PRA because of his emphasis that left political pressure, rather than employer initiatives, is the primary impetus for social democratic (or egalitarian) reforms. See also Korpi (2006) and Paster (2013).

  8. 8.

    This political mobilization took many forms such as strikes, leftist party organizing and so on.

  9. 9.

    See chapter 1 by Hall and Soskice in Hancké (2009).

  10. 10.

    In 1982, GDP fell by 14 per cent and the unemployment rate shot up dramatically to above 30 per cent. Investment plummeted to 12.9 per cent in 1983 from 19.5 per cent of GDP in 1981. In 1980–1981, the industrial production index was 100 while it dropped precipitously to 85 in 1982 (Silva 1997).

  11. 11.

    Sandbrook et al. (2007); Illanes and Riesco (2007); Silva (1997).

  12. 12.

    There is some evidence to suggest that the UDI gets generous amounts of funding from powerful business groups (Fairfield 2010).

  13. 13.

    The most recent tax reform increased corporate income taxes to 27 per cent in 2018; however, this figure is still below the Latin American average of around 30 per cent.

  14. 14.

    Starting in 2016, students belonging to the poorest segments of society could access public and private education gratuitously in educational institutions complying with certain government requirements. The funding for free education came from the government and from the educational institutions themselves.

  15. 15.

    In 1990 and 2017 the monthly minimum wage was equivalent to Chilean peso (CLP) 116,818 and 274,271, respectively, expressed in 2018 pesos.

  16. 16.

    See Hall and Soskice (2001). The neo-Marxist critique of the VoC literature sustain that the CME/LME distinction is irrelevant under neoliberal capitalism, see Coates (2005). The authors are thankful to an anonymous referee for pointing this out.

  17. 17.

    See Código del Trabajo (2002).

  18. 18.

    According to which providing health and education by the state is supposed to raise economic growth which will lead to employment, so monetary poverty will decline due to a “trickle-down” effect.

  19. 19.

    Schneider argues that encompassing business associations were generally kept at arms’ length by governments, even by the neoliberal Menem administration, and so they lacked the institutionalized access to state power that the CPC does have in Chile. However, the business-friendly Menem government distributed most ministries to conspicuous members of major corporations, corporate lawyers, business associations and leaders of business-financed think tanks.

  20. 20.

    For example, the cash-for-work programme (“Plan Jefes y Jefas de Hogar”, which means male and female heads of households).

  21. 21.

    See Cibils et al. (2002).

  22. 22.

    On 15 July 2010, Argentina became the first Latin American country to allow same-sex marriages with equal rights and provisions as heterosexual marriages (Law 26.618). On 9 May 2012, Law 26.743 recognized equal treatment based on gender identity.

  23. 23.

    See Agosto (2017). In December 2017, the Macri government passed a law reducing the corporate tax rate from 35 per cent to 30 per cent with a view to reducing it further to 25 per cent in 2020.

  24. 24.

    They recognized the need for additional revenues and an export tax did not affect them directly. Moreover, successfully opposing this tax might have led the government to look for alternative sources of revenue which might have affected them.

  25. 25.

    Etchemendy and Garay (2011); Mesa-Lago (2009); Arza (2009, 2012); Hujo and Rulli (2014).

  26. 26.

    Available evidence by the Securities and Insurance Superintendency shows that the number of economic groups has increased significantly since the 1980s, recording 12, 86, 92 and 140 economic groups in 1988, 2002, 2004 and 2016.

  27. 27.

    See OECD (2019a).

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Delamonica, E., Moudud, J.K., Pérez Caldentey, E. (2020). Power and Politics: Taxation, Social and Labour Market Policies in Argentina and Chile, 1990–2010. In: Hujo, K. (eds) The Politics of Domestic Resource Mobilization for Social Development. Social Policy in a Development Context. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-37595-9_7

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