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A brief history of the Uruguayan Social State
i. The model country: 1900-1930
The first welfare state of Latin America (Pendle,
1952), the social
laboratory of the world and a utopian country (Hanson
1938) were terms
used to describe Uruguay by outsiders who looked at our systems
of social rights and social programs. Such titles, if somewhat
exaggerated, had a base in reality.
Between 1904 and 1933 the country witnessed one of the most ambitious
peaceful transformational projects any country has ever had.
The final product was of course much more modest. Yet, in historical
perspective, these changes still have to be considered monumental.
These changes refer among other things to the emergence a consolidation
of a complex system of social policies which in time would constitute
a welfare regime. Between 1904 and 1931, social expenditure almost
tripled, social security coverage expanded significantly, primary
education, free and obligatory, also grew in coverage alongside
secondary education (Vanger,
1980). Health protection
received major impulses. Charity and private forms of health
care, gave way to an important development of public health institutions.
The individual and collective rights of workers were also part
of the achievement of this period. The English week, the eight
hour day, working conditions, regulation of child and female
labor, and a very tolerant stance on union organization and rights
of strike, contributed to shape a country in which labor-capital
relations looked more like Europe than Latin America. A major
shortcoming of this first impulse was the absolute absence of
rights and of a regulatory role of the state regarding the countryside.
Rural workers did not receive most of the benefits described
above, and not until the fifties were they granted -and only
to a limited extent- some of the individual and collective rights
that urban workers -and especially workers in Montevideo- enjoyed
formally or de-facto since the early 20th century.
Yet it is also true, that Uruguay urbanized early, with a strong
emphasis in Montevideo, so the benefits of social state development
actually reached a majority of Uruguayans. An additional fact
that attempted against the egalitarian dimension of the social
state, was the stratification of the social security system.
In this system the most powerful groups had earlier access to
benefits, a wider range of coverage and a better quality than
less powerful groups (Mesa
Lago, 1985; Papadópulos, 1990).
Maybe, even more important than how much was done in these thirty
years, is how it was done. The political fabric of modern Uruguay
is inextricably linked to the expansion of the state apparatus
in general and to the emergence and development of the modern
social state.
A political urban elite was the main responsible for the development
of the social state. By gaining control over the state and the
monopoly of coercion that comes with it, these elites crafted
a tense pact with the agrarian elites by which property rights
were untouched, but resources were extracted to finance the booming
state. The process of state building and society crafting that
these political elites carried out, shaped a socio-political
system that made Uruguay rather unique in the Latin American
scenario.
On the one hand these years saw the emergence and expansion of
mass electoral politics, in which the urban elites grouped in
the Colorado party engaged in very close competitive elections
with the rural based conservative-popular party, the nationalists.
Secondly, the trade union movement and the workers capacity to
organize which was encouraged or at least highly tolerated by
the colorados, never came under the corporatist control of the
state or of the Colorado party. Batllismo, the modernizing hegemonic
and leading elites of the Colorado party, purposefully avoided
the emergence of corporatists structures of control.
The trade union movement was thus born with the foundational
blueprint of an autonomous corporation, with a leftist ideology
and a strong sense of class identity. Thirdly, the political
elites consolidated themselves while the state was being built.
A process of partisan political colonization of the state took
place, and a form of extended clientelism, became a third avenue,
through which citizens could and did demand state protection
and benefits.
A competitive political system, an autonomous trade union movement,
and extended forms of clientelism crafted a system that allowed
for "voice" from the people to form and express itself
strongly regarding the definition and administration of public
goods and collective and individual rights. This basic political
matrix, with some relevant variations we shall discuss ahead,
is still present today, and will, as we shall also see, become
a critical element to understand the recent process of structural
reform and social state reform.
ii. A joint venture: 1930s-1940s.
By the late 1920s the
same industrial elites that had been shaped by batllismo felt
that the social program of this political group was going to
far and negativeley affected its interest. Allied with the landed
upper class they an anti-batllista option both within the colorado
party and in the blanco party. They were defeated electorally,
but the succeded politically in dividing batllismo and gaining
its more moderate leaders to its political program.
In 1933, following the economic world crises, Terra, an elected
man of Batllismo, performed a coup d´etat and brought in
as a partner in the deal the majority of the Blanco party. Maybe
this is the most important fact of this period: the institutionalization
of a bipartisan system of coparticipation, and the fact that
coparticipation allowed from there on for the blancos to share
the state resources as means of political exchange with the citizenship.
The end result, especially once democracy was regained, was to
increase the competitiveness of the political system, even if
the origin of the coup has been interpreted as a reactionary
move away from social rights and democratic competition.
While the terrista dictatorship lasted, though, many aspects
of the social state came to a halt. In effect, policies sought
to limit its expansion in services and quality, and to refrain
from expanding social expenditure -at least at the rate it had
done in the past. Furthermore, additional labor laws targeting
the rights of the workers went back to its files, and attempts
at corporatist control of the citizenship were undertaken though
without success. Repressive measures towards the labor movement
were also an important part of the new political package.
Yet it is also true, that a number of changes introduced in the
constitution of 1933, actually, in the letter, expanded the recognition
of social rights as universal, and explicitly recognized workers
right to strike and organize. Also health care showed -through
important reforms to the private and public system and a number
of remedial social policies for times of crises (subsidized foodstuff, public kitchens,
infant and maternal preventive care and services)-, an important development.
Furthermore, anticiclical policies, especially early retirement
policies for women were created to ease pressure on the labor
market. Yet these retirement policies did not disappear after
the crises was over, rather they expanded allowing for early
retirement of many categories of workers.
This mix of corporatism, falangism, and liberal residuals, were
probably meant at shaping some form of regulated social and political
citizenship (Dos Santos,
1979). In the end,
and with the return to democracy, they contributed to the expansion
of rights and entitlements. The stage was ready for the "Uruguay
feliz".
iii. A time of plenty: 1940s-1960s
In 1942 Uruguay returned
to democracy. Electoral politics, renewed trade union vigor,
and the continuation of clientelistic practices, allied with
and excellent economic situation, pushed the Uruguayan social
state to maturity. The state following a trend that had never
really stopped since the 1930s, granted more pensions, absorbed
more workers, defined more and larger labor rights and expanded
public health coverage. Health care also increased notoriously
led by the growth and expansion of mutual aid societies, originally
linked to early immigration colonies during the twenties and
thirties, but geared towards the middle and urban working classes
as these groups became predominant in the social structure.
TABLE 3
Evolution of State Employees
and Retired Persons (in thousands)
| |
Civil Servants |
Retired
and pensioned persons |
| 1936 |
80 |
70 |
| 1955 |
180 |
200 |
| 1961 |
220 |
280 |
| 1969 |
260 |
430 |
| 1977 |
275 |
610 |
Source: Filgueira, F. from
various sources.
Two other important
reforms have to be mentioned. On the one hand, the program of
child benefits for all families known as "asignaciones familiares"
(family allowance) was created. On the other legal
status was given to the trade union movement as the legitimate
representative of all workers in the tripartite arena of labor
capital relation called the "consejos de salarios"
(wage councils).
Finally unemployment insurance, while already in place, increased
significantly in those years and in years to come, both in coverage,
and to a more limited extent in quality. These two reforms and
the expansion of unemployment coverage, moved Uruguay closer
to mature welfare regimes of the fifties and sixties in Europe.
While, the social state, remained a highly stratified system
of services and benefits, coverage had in effect become almost
universal, and the range of protection, indeed, large.
iv. Denial: 1960s-1970s.
Uruguay's international
economic position suffered gravely with the end of the Korean
war affecting the demand for meat and wool. Imports, in the form
of capital goods and intermediate goods, steadily increased costs.
Uruguay sold less and cheaper, and bought more and dearer. The
landed elites, critical, but usually tolerant, of this project
of model country, financed to a large extent with their resources,
moved to defend their interests.
The Blanco party, in 1958, won a national election for the first
time in this century. Rural elites could not just veto radical
reform, they could undo the mode of development and the urban
pumping machine that Batllismo had created. Reality proved more
stubborn. The national party that came to power was, after 30
years of coparticipation with the colorados in the state, a cadre
of professional politicians, not the delivery boy of the rural
elites. The political class, both Colorados and Blancos, did
not want to accept the new limits to redistribution and state
expansion.
The social state continued to grow, and new benefits continued
to be granted (see table
3). One important
difference was who shouldered the cost of these further expansion
without resources. While between 1940 and 1960 genuine resources
from revenue (or savings) financed the social state
-not without some deficit, after 1960- money printing, international
debt and devaluation were the major forms of social currency
that covered the increasing gap between revenues and expenditure.
This was further complicated by the strategy of the Blanco administration
to ease the tax burden on exporters and cattle ranchers by suppressing
some of the taxes and by tinkering with the exchange rate. The
end result, was steady process of inflationary growth, that destroyed
the real value of incomes, pensions and other monetary benefits,
and transformed the monetary resources of social sector administration
into half or less of their value.
TABLE 4
Evolution of wages (1957:
100) and Average Retirement Benefits (1955: 100)
| |
Index
of Wages |
Index
of Retirement Benefits |
| 1963 |
81 |
95 |
| 1965 |
76
(a) |
83 |
| 1967 |
-- |
54 |
| 1969 |
52 |
52 |
| 1971 |
60
(b) |
67 |
| 1973 |
51
(c) |
49 |
Source: Filgueira F (1995)
for wages; Papadópulos (1992) for pensions. (a) 1966;
(b) 1972; (c) 1975
Let us be clear, services
continued to be provided and monetary benefits given, coverage
continued to expand, but quality suffered. The overall institutional
design of the social state was left untouched, and while politicians
hoped for economic recovery, the landed elite, the trade unions
and the urban entrepreneurs handed the blame to each other or
to the political system.
At the same time, they all played the game of denial which assumed
the form of the inflationary game (differential
indexation criteria for the prices of labor, financial and commodity
markets and social benefits for different pressure groups) in which those with the least
structural power suffered the most.
v. Shock: closing communication: 1973-1985.
In 1973 another Colorado
president carried out a coup d´etat. In 1976, the military
as an institution took over and governed until march of 1985.
The military dictatorship was a radical response to the political
system incapacity to restructure the developmental model and
the state in order to cope with a new context of scarcity. The
social state was also one of the unsolved problems of the denial
period that the military had to confront.
The most important reform concerning the social state was the
centralization and rationalization of the social security system.
Increasing the age of retirement, unifying different categories
of retired workers and limiting duplication of benefits, constituted
the main instruments to recover some of the equilibrium lost
in the previous fifteen years. Furthermore, pensions continued
to loose quality, as indexation criteria allowed for inflation
to lower its real value.
Education was also affected. The previously autonomous university
was taken over by the military government, and the semi autonomous
structures of primary and secondary public education were dismantled
and reorganized under the control of the executive.
Regarding health, while quality decreased because of financial
problems in mutual aid societies, and because state expenditure
also decreased, coverage did not. Also important preventive mass
vaccination campaigns had a positive effect on infant mortality
and children's basic health.
Overall we can say that social expenditure declined, services
and benefits deteriorated in terms of quality, yet coverage remained
high, and in some cases even increased.
TABLE 5
Social Expenditure as
Percentage of GDP
| |
1972
(a) |
1975 |
1980
(a) |
1984 |
| Total
Expenditure |
15.7 |
14.1 |
14.0 |
13.6 |
| Education |
2.3 |
2.6 |
1.9 |
1.4 |
| Health |
1.1 |
0.9 |
1.1 |
0.8 |
| Social
Security |
12.8 |
10.4 |
10.6 |
11.2 |
| Other |
0.2 |
0.2 |
0.2 |
0.2 |
Source: Davrieux, 1987.
(a) These years do not add up exactly. In some cases for sectors
the average between two contiguous years were considered.
Most importantly the basic statist, universal and redistributional
design of the social state was not altered. As the country returned
to democracy, the old Uruguayan social state, was in its basic
form untouched, though harshly deteriorated.
Uruguay returned to democracy, and this restoration, brought
with it the hopes of a return to the Uruguay Feliz. Soon the
country would understand that such an option was neither possible
nor desirable. Among the tasks ahead laid the huge challenge
of reforming the Uruguayan social state.
The menu included a recycled version of the denial period we
have depicted and the liberal oriented model that was forming
in the wings of the MLA´s and neoliberal minded reformers.
Uruguay, with no small sacrifice, chose neither of these options.
What model seems to take shape in the horizon, and why and how
that was done is the topic of the following pages.
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