Policy Shifts between State and Market: The Politics of Administrative and Financial Reform in Chile

For 17 years starting in 1973, Chile was ruled by a military dictatorship under Augusto Pinochet— after 143 years of almost uninterrupted liberal democracy. In 1981, a large-scale reform of the social sectors—including health, education, and pensions—was prepared by the so-called “Chicago Boys”—following Milton Friedman’s neoliberal teachings.1 The financial and administrative reforms for education included competition, decentralization, and privatization, transferring public education to municipalities, and introducing a voucher system so that private subsidized schools and municipal schools could compete.2 Catholic schools and private charities had received state subsidies through vouchers, “Subvenciones educacionales,” at least since the beginning of the 20th Century.3 They were intended not to cover the full costs of provision, but to complement private donations. The voucher system was revamped to provide the same per student subsidy to municipal and private subsidized schools. For the transfers of schools to the municipalities, a new legal entity was created to administer a school and named “Sostenedor,” which might be a municipality or a private individual owning one or more schools. This entity diversified state provision, and increased competition as teachers lost their civil servant status and the Ministry was no longer obliged to pay their salaries. Each municipality was responsible for hiring and firing teachers and for determining their salaries. Since the return to democracy in 1990, Chile has built a consensus on the objective of educational quality and pursued it systematically, if incrementally. The Concertación, a center-left coalition of parties, privileged education and health, opposed by a right wing and its agenda favoring lower taxes and direct cash transfers to the poor. The key problem at the time was the lack of resources. Along with an increase in resources and programs, the technical capacities in the Ministry of Education gradually improved, thanks to faster economic growth. Key turning points in educational budget, 1994–96 and 2008–09, were associated with technical arguments advanced by the Ministry of Education that made economic sense to the Ministry of Finance. The center- left “Concertación” coalition won four consecutive presidential elections before losing to the right-wing coalition in 2010.