Eduardo Frei enacted and implemented a wide-range of equity-enhancing reforms without breaking from the instituted liberal economic model. These reforms entail the last phase of the shock therapy program. Saying that high growth rates would not cover the badly needed increases in social spending, the government introduced a direct taxation. This placed a higher personal income tax burden on the upper middle class, eliminated tax privileges for the rich, and raised corporate profit tax. The Aylwin/Frei administrations increased fiscal spending on social and welfare programs. The government raised family allowances for the poor by 50 percent and introduced subsidies to support nutritional supplements for the lowest income households. Enhancing school feeding and mother-child nutrition programs did this most successfully. Drives to improve the quality of public education and vocational training for the unemployed foreshadow the spread of enterprises and small businesses in the Chilean economy. Chiles labor movement expected and demanded much more power and economic benefits than the democratic regime could ever deliver. For example, the right to strike and an end of strike time limitation, and the right to collective bargaining were recently re-instated. Legislation has also benefited from legislation enhancing pension funds, longer periods over coverage for severance and increases in minimum wage. In the period between 1991 and 2000 the incidence of poverty has dropped by almost 40 percent while absolute poverty has dropped by more than half. By any measure these are remarkable achievements for the newly established democracy, and thereby ending the four-phase shock therapy program.Why did Chiles abrupt economic change work as opposed to that of Russia? The answer is based in Chiles democratic structure, in accord with its drive to grow on a microeconomic scale. That is, the organizational, administrative, and political skills of the la...
