Last Saturday, May 7, the Constitutional Convention (CC) approved the norms that configure a new type of State in the economic-productive sphere, which opens the way to the construction of a development model that could put an end to neoliberalism. Previously, the CC had approved norms that guaranteed fundamental social rights, putting an end to the commercialisation of health, education and welfare, as well as to the shameful welfare of extreme poverty.
Now, the CC tells us that “the state shall have public initiative in economic activity” and therefore may engage in entrepreneurial activities. The rules explicitly add the objective of productive diversification and the promotion of innovation and, along with these, give priority to environmental issues. To this is added that the state “must prevent and condemn market abuses”.
The constitutional installation of this new type of state is a substantive change for our country. Diversifying the economy, the deployment of public sector entrepreneurship, the promotion of innovation and the protection of the environment will change the way we live because the country’s current productive base, founded on natural resources, is immensely fragile. It is the material foundation of inequalities, precarious employment and growing informality, depletion of growth and falling productivity.
Indeed, the country’s current productive and export base, based on natural resources, is extremely fragile. Not only because raw materials are subject to sudden price fluctuations on the international market, but also because this type of production does not harness all the productive forces and its territorial focus prevents it from spreading to the rest of society. In reality, it is a high-profit business for a minority of big businessmen, but the low added value it generates narrows the productive frontier and does not help to create solid sources of employment.
While raw materials are overexploited, and their profits are concentrated in the hands of a business minority, who produce and export them, the environment has been increasingly affected. In addition, this has affected the availability of water, because it is taken away from human consumption to be used abundantly in agriculture and mining.
Copper mining is exported without any added value, while the overexploitation of industrial fishing has led to the collapse of the main marine resources. At the same time, the razing of native forests has been accompanied by an increase in exotic forestry plantations, especially pine and eucalyptus, with irreversible damage to the land.
As things stand, with an unsophisticated productive structure, the private sector is not interested in investing in science and technology. And neither is the state. Evidence of this is the meagre investment in science and technology of barely 0.35% of GDP for science and technology, while in the OECD it is 2.5%.
With a production matrix based on natural resources and little research in science and technology, the economy has suffered a drop in economic activity and productivity in recent years, leading to precarious employment and a growth in informality.
As Ricardo Hausmann of Harvard University has said, the Chilean economy, based on the price of unrefined copper, closes the doors to development. This is confirmed by the economist Ha-Joon Chang, of Cambridge University, when he points out that development is only enhanced when people’s productive skills increase; when their capacity to organise themselves in industrial activities and innovative enterprises improves and they manage to transform the productive system. In other words, productive diversification together with technical progress and the education of workers are fundamental for the growth and development of countries.
Economic growth based on natural resources and their export to the world has not paved the way for Chile’s development. Even this type of growth has reached its limit, it has run out of steam. This productive and exporting matrix is the limitation to development and is also the material basis of inequalities: in income, between territories, in health, education and pensions.
Why have no substantive changes been implemented to modify the productive and natural resource exporting matrix? Because in the neoliberal logic, the market must be the exclusive guide for economic operators. And it is less costly for rentier businessmen to produce natural resources, and the immobile state does not make public policies for their reorientation. But, above all, because this is established in the 1980 Constitution. The state is not allowed to intervene in markets, nor can it engage in entrepreneurial activities.
The Constituent Assembly has come to change this situation. Its rules for the new Constitution herald a new economic model, the diversification of which will deploy new productive forces. We will no longer be limited to producing natural resources. It will now be possible to promote processing industries, unhindered by markets. It will be this material base that will make it possible to increase productivity, restore growth and improve the country’s tax base, so that the social rights guaranteed in the new Constitution can be financed. And the state will be able to become an active agent of productive transformation.
This, by the way, is not to the liking of the rentier business minority and their employees, the establishment economists. That is why they reject the new constitution. They find it painful, not only to have a state that guarantees social rights to all Chilean families, but they also find it unacceptable that the state carries out business activities and even intervenes in the market, through public policy, to redirect investors in favour of productive processes that add value to natural resources.
The Constituent Convention paves the way for a new development model. Productive activities will be deployed in all territories and not only where there is copper, fishing and forestry production. Diversification will be the new material basis of the development model, with effective support from modern science and technology, promoted by the State. In this way, it will be possible to relaunch growth and productivity in the different branches of the economy, in response to the already exhausted rentier model. This will allow a positive confluence of workers, SMEs, big business and the state, without avoiding environmental protection and at the same time guaranteeing the effective functioning of competition.
