Twentieth-century Chile has had an extensive system of staterun welfare programs, including those in the social security, health, and education areas. From the mid-1970s to the early 1990s, spending on all these programs ranged from as little as 19 percent to as much as 26 percent of the gross domestic product ( GDP), proportions that were similar to those spent in 1975 by countries belonging to the Organisation for Economic Co-operation and Development ( OECD). In the same period, about two-thirds of the national labor force was covered by old-age pensions and other benefits. In addition, there were universal access to curative health care and programs of preventive care for all expectant mothers, infants, and children less than six years of age who did not have recourse to alternative health care. In addition, the state-run educational system, which was open to every child at primary and secondary levels but had admissions standards for higher education, was free of charge, except for nominal matriculation fees at all levels. The state also offered low-income housing programs at heavily subsidized rates.

Spending for these various programs increasingly outpaced revenues, as the decline in the mortality rate enhanced the dependency ratio and as the programs expanded. In addition, there were numerous programs, especially in the social security area, that provided very unequal benefits. Consequently, the military government redesigned the most important welfare institutions in ways that were consistent with its market-driven ideology, and social spending was scaled down to about 17 percent of GDP by 1989.

By the end of its first year in office, the Aylwin government increased social spending by more than US$1.5 billion over the Pinochet government's budget. The revenue came from a 4 percent increase in the higher tax rate on enterprises, from 11 percent to 15 percent; a 2 percent hike in the national value-added tax ( VAT) to 18 percent; and other sources. The objective of the Aylwin government was to enhance the purchasing power of minimum pensions, to increase the quality of educational and health services and to provide greater assistance in the housing field. The new programs were intended to have a positive effect on the distribution of income. The military government's reforms had privatized or decentralized the administration of many welfare and social-assistance institutions. The Aylwin government did not reverse these privatizations, although it attempted to increase the quality and funding of the institutions that remained in the public sector. It also decided not to recentralize the administration of the public portions of welfare, educational, and social-assistance institutions that had been placed in the hands of local or regional governments. The Aylwin administration was committed to strengthening local and regional governments as part of a broad effort to enhance the decentralization of authority. However, in contrast to the military regime's decentralization projects that organized local and regional governments along lines of authoritarianism and corporatism, new constitutional and legal reforms adopted in 1992 introduced democracy to these levels of government.

Through the combination of many efforts in the social field since the 1930s, Chile has a relatively favorable overall human development index ( HDI), as measured by the United Nations Development Programme (UNDP). The UNDP's Human Development Report, 1993 shows Chile ranking thirty-sixth among the world's 160 countries for this indicator, eighth among all developing countries, and second only to Uruguay among all Spanishspeaking Latin American countries.

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Source: U.S. Library of Congress