Trans- Government Failure in Chile

Following a short visit to Chile after more than 6 months elapsed as from the inauguration of the new master plan for public transportation denominated Transantiago, significant service malfunctions evidence a chain of structural errors committed by government officers in the decision taking process. At present, a special parliamentary commission has been set in order to investigate the main procedures followed, which have resulted in one of the most paradigmatic cases that can be presently studied in Latin-America concerning the concept of “ government failure” with vast economic, political and social externalities caused in the capital city of Santiago. The problems caused by the wrong implementation of this new transportation scheme have negatively affected the image of the country, the micro and macroeconomic output, the life standard of the population and is supposed to have an increasing impact in the public perception of government coalition officers pertaining to the last two periods, namely: the Lagos era (first socialist government after the dictatorship to attain presidency); and the actual Bachelet era (first socialist women leader to attain the presidency). In an interesting study government intervention is depicted in the following decision schema.



According to a consented economic standpoint, governmental policies designed in a rather technical fashion by the Lagos administration and the present Bachelet administration have been targeted to improve the efficiency of determined sectors i.e. transportation, health or education by correcting the market failures generated by the economic system adopted by the Chicago boys during the Pinochet era. In theory a market failure can be conceptualized as an allocation of resources that does not conform to the Pareto optimal, based on different causes such as market power, monopoly, imperfect information, negative externalities, public goods or spill over effects. In the case of the Chilean transportation master plan, the basis of intervention policy was to improve the market performance, reducing the inefficiencies caused by a extremely unsafe, chaotic, highly polluting, unequal and politically risky combination that included buses, metro and trains in the city of Santiago. In fact the proposed targets of the new plan as posted by the government were to encourage the use of public transport; to enhace the the quality of public transportation by eliminating the on-the-street competition and replacing the existing bus fleet; diminish air pollution and sound pollution levels by reducing the number of buses from over 7,000 to about 4,600; and reducing travel times. Unfortunately, the effect of a deficiently conceived transportation master plan did not produce the objective of maximizing social welfare. Conversely, the policies adopted have forced the Chilean economy to incur in costs starting from an ex ante transportation situation, where market failures did exist, but could have ex post been improved with a much more efficient resource allocation. As a result, it caused an increase in government expenses, a sacrifice of resources that could have been otherwise effectively used and has actually reduced social welfare.

The case of Transantiago may empirically demonstrate one of the arguments to explain government failure which is based on politicians or regulators pursuing their private goals which in some circumstances do not coincide with the public goals. In this case the precious virtue of the representative democracy model tempted politicians from the former administration to position themselves for a potential re-election and presumably made them take wrong choices in the transportation policies, which derived in decreasing social welfare. Further, the fact that the transportation plan produced huge social externalities has raised the issue of commitment problems of the government, forcing some politicians to demonstrate against the results of the plan approved by the last government and the lack of transparency of the present administration, causing political instability in the coalition. Besides the parliamentary battle originated in the need to inject 290 million U$ to maintain the public transportation system, substantial inefficiencies were triggered by the necessity of the present administration to renegotiate contracts agreed upon by predecessors. Further, the problem of equality in the allocation of resources forced the actual government to promise an equal quantity of resources to be distributed on a regional basis. However the last major issue arising today deals with accountability of the government at different levels that may cause unprecedented economical, legal and political effects in Chile.

The question of government failure in the implementation of a plan is entailing a huge expense for the public budget leads into the question of accountability in its three main forms, namely: a) political accountability; b) public accountability and c) legal accountability. Political accountability derives from institutional methods in order to review governmental activities via questioning, forming parliamentary commissions, forcing government to remove Ministers or high rank officers and at the end public elections, which could derive in a radical change of government. Public accountability concerns other methods of control pertaining to the public service function, such as those exerted in Chile by the Contraloria General de la Republica, which may derive in a revision and control of public accounts including direct spending programs and fiscal expenditures. Finally, most interesting, legal accountability means the actions given to citizens in order to hold liable the State via Civil suits if decisions are taken causing civil damage or even Criminal responsibility if implemented with contravention to penal laws (abuse, corruption, fraud).

The case of governmental failure produced by Transantiago is particularly interesting since it will now lead to the intervention of the jurisdictional power in the protection of the rights of persons in their civil dimension. Thus, the civil jurisdiction has been activated by a massive sue targeting indemnification of damages caused by the failures arising from the transportation system, which could have unprecedented effects in the assumption of the administrative and civil responsibility of the State before its citizens.



In parallel, as from the failure committed by implementing an efficient transportation system, other master plans have come into public scrutiny targeting the Auge Health Plan and the acute discomfort in the Public Education system. These issues are increasing the social despair and triggering unexpected social reactions that could derive in accumulation of anger and violence between social layers. The former, since the last two socialist governments had made promises in order to increase the welfare of Chilean people by efficiently applying the huge fiscal surpluses accumulated in the State’s treasury to enhance education, health, minimum wages, pensions, transportation, environment and culture bringing increased social comfort. It must be acknowledged that information shows that the promises of the last two governments are on their way to be accomplished, since statistics show decay in the line of poverty. However, huge social differences persist among those who have notoriously turned very rich in the last decades and those who maintain a poor or middle class life standard and cannot avoid to use the public transportation system in the capital city; are bound to use the a defective public health system; or must conform to the public education system which has been qualified as highly inequitable as compared to the private education system. These and other differential problems have been recently characterized as ethically intolerable by relevant actors of the Chilean society, including religious, political and social organizations.

Nonetheless, a probable source of the aforementioned ethical problem faced by Chileans relies not only in economical disparities between the population, but also in the lack of cohesion attained by the society as a whole. In this sense it results interesting to understand the theoretical concepts entailed in light of Articles 2 and 3 of the Treaty establishing the European Community which state that one of its tasks is to ‘promote throughout the Community a harmonious, balanced and sustainable development of economic activities, a high level of employment and of social protection, (and) the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States. From this theoretical definition two main ideas can be synthesized. The first refers to the dimension of reduction of disparities, discriminations, inequalities and social exclusions. The second idea refers to the strengthening of social bonds, solidarity and social relations.

In fact, in order to reach social cohesion in Chile which could derive in a harmonious and balanced patterns of human conduct, it would be necessary to encourage the possibility of social interactions which at present are not fluid, since the country has been historically constructed with stratified social layers that function as a virtual Caste system. This social order is determined by numerous crass and delicate parameters that are handled by Chilean people in order to produce direct and reverse discriminations that in general impede social mobility. Some of the underlying factors are based on: skin colour, physical traits, family name, country of origin, use of language, clothing, place of residence, transportation method, school and university education, political, religious or sexual orientation and the like features which determine the position of the individual in the Chilean society. Although the Chilean Constitution abolishes all types of discrimination and conforms to the international standard of equality of treatment, persistent conducts of direct and reverse discrimination are recognizable as underlying rules to determine stratified social layer. In this sense, the efforts of the coalition government in the last decades have been positively directed to implement the so called “Growth with Equity Agenda”. However, more efforts are needed in order to focus the discussion into the problem of social cohesion in Chile, which could embrace both the rethinking of quantitative aspects together with qualitative aspects in the design of long term policies affecting successive coalition governments independent of their political colour.