chile: the great transformation

title: Chile,theGreatTransformation

author: MartÃ¢inezBengoa,Javier.;DÃ¢iazPÃ¢erez,AlvaroH.

publisher: BrookingsInstitutionPressisbn10|asin: 0815754787printisbn13: 9780815754787ebookisbn13: 9780585175690

language: English

subjectChile--Economicconditions--1973-1988,Chile--Economicconditions--1988-,Chile--Politicsandgovernment--1973-

publicationdate: 1996lcc: HC192.M341996ebddc: 338.983

subject:Chile--Economicconditions--1973-1988,Chile--Economicconditions--1988-,Chile-

-Politicsandgovernment--1973-

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ChileTheGreatTransformation

JavierMartínezandAlvaroDíaz

TheBrookingsInstitutionWashington,D.C.and

TheUnitedNationsResearchInstituteforSocialDevelopmentGeneva

Pageiv

Copyright(c)1996byTheUnitedNationsResearchInstituteForSocialDevelopment(UNRISD)PalaisdesNationsCH-1211Geneva10,Switzerland

Allrightsreserved

LibraryofCongressCataloging-in-Publicationdata:

MartínezBengoa,Javier.Chile,thegreattransformation/JavierMartínez,AlvaroDíaz.p.cm.ISBN0-8157-5478-7(cl:alk.paper).-ISBN0-8157-5477-9(pa:alk.paper)1.Chile-Economicconditions-1973-1988.2.Chile-Economicconditions-1988-3.Chile-Politicsandgovernment-1973-I.DíazPérez,AlvaroH.II.Title.HC192.M341996338.983-dc20 95-52628CIP

987654321

ThepaperusedinthispublicationmeetstheminimumrequirementsoftheAmericanNationalStandardforInformationSciences-PermanenceofPaperforPrintedLibraryMaterials,ANSIZ39.48-1984

SetinGaramondBook

CompositionbyHarloweTypographyInc.,CottageCity,Maryland

PrintedbyR.R.Donnelley&SonsCo.Harrisonburg,Virginia

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THEBROOKINGSINSTITUTION

TheBrookingsInstitutionisanindependent,nonprofitorganizationdevotedtononpartisanresearch,education,andpublicationineconomics,government,foreignpolicy,andthesocialsciencesgenerally.Itsprincipalpurposesaretoaidinthedevelopmentofsoundpublicpoliciesandtopromotepublicunderstandingofissuesofnationalimportance.TheInstitutionwasfoundedonDecember8,1927,tomergetheactivitiesoftheInstituteforGovernmentResearch,foundedin1916,theInstituteofEconomics,foundedin1922,andtheRobertBrookingsGraduateSchoolofEconomics,foundedin1924.

TheInstitutionmaintainsapositionofneutralityonissuesofpublicpolicytosafeguardtheintellectualfreedomofthestaff.InterpretationsorconclusionsinBrookingspublicationsshouldbeunderstoodtobesolelythoseoftheauthors.

THEUNITEDNATIONSRESEARCHINSTITUTEFORSOCIALDEVELOPMENT(UNRISD)

TheUnitedNationsResearchInstituteforSocialDevelopment(UNRISD)isanautonomousagencyengaginginmulti-disciplinaryresearchonthesocialdimensionsofcontemporarydevelopmentproblems.Itsworkisguidedbytheconvictionthat,foreffectivedevelopmentpoliciestobeformulated,anunderstandingofthesocialandpoliticalcontextiscrucial.TheInstituteattemptstoprovidegovernments,developingagencies,grassrootsorganisationsandscholarswithabetterunderstandingofhowdevelopmentpoliciesandprocessesofeconomic,socialandenvironmentalchangeaffectdifferentsocialgroups.Workingthroughanextensivenetworkofnationalresearchcentres,UNRISDaimstopromoteoriginalresearchandstrengthenresearchcapacityindevelopingcountries.

ItsresearchthemesincludeTheChallengingofRebuildingWar-Torn

Societies;IntegratingGenderintoDevelopmentPolicy;Environment,SustainableDevelopmentandSocialChange;Crisis,AdjustmentandSocialChange;ParticipationandChangesinPropertyRelationsinCommunistandPost-CommunistSocieties;EthnicConflictandDevelopment;PoliticalViolenceandSocialMovements;andSocio-EconomicandPoliticalConsequencesoftheInternationalTradeinIllicitDrugs.UNRISDresearchprojectsfocusedonthe1995WorldSummitforSocialDevelopmentincludedRethinkingSocialDevelopmentinthe1990s;EconomicRestructuringandSocialPolicy;EthnicDiversityandPublicPolicies;andSocialIntegrationattheGrassroots:TheUrbanDimension.AlistoftheInstitute'sfreeandpricedpublicationscanbeobtainedbywriting:UNRISD,ReferenceCentre,PalaisdesNations,CH-1211,Geneva10,Switzerland.

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TothememoryofFernandoFajnzylber

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PrefaceTheinternationaldevelopmentcommunityisoftentooquicktogeneralize.Whenonecountryorregionadaptsrelativelysuccessfullytoeconomiccrisis,forexample,othersareimmediatelyurgedtoemulateitspolicies,withoutnecessarilygivingsufficientattentiontothespecificnatureoflocalsocietyortothehistoricalfoundationsoflocalinstitutions.

ThiscouldcertainlybesaidoftheChilean"successstory"inthefieldofstructuraladjustmentandmarketreform.GovernmentsfromRussiaandMexicotoBangladeshhavefrequentlybeenurgedtofollowtheChileanexample.Butsincetheresourceendowments,cultures,demographics,andeconomicandpoliticalsystemsofthesecountriesmaydiffermarkedlyfromthoseofChile,thereisnoreasontoexpectthattransplantedpolicieswillproduceastandardresult.

Chileisasmall,highlyurbanizedcountrywitharelativelystrongtraditionofparliamentarydemocracyandjudicialindependence,aswellasasystemofpublicserviceswellknowninLatinAmericaforitsefficiencyandlackofcorruption.Itspopulationdensityandbirthratearelow,and(whencomparedwithmanyothersocieties)itscultureishomogeneous.Nevertheless,likemanyotherLatinAmericancountries,Chilelongsufferedtheeconomicdifficultiesassociatedwithdependenceupontheexportofprimaryproductsandtheunresolvedtensionsofindustrializationwithinsmall,protectedmarkets.Bytheearly1970s,thecountrywasinvolvedinahighlycontentioustransitiontosocialism,underademocraticallyelectedgovernment,whichendedinoneofthebloodiestmilitarycoupsofrecentLatinAmericanhistory.Free-marketrestructuringwassubsequentlycarriedoutwithinastronglyauthoritariancontextbyagovernmentthatcouldseriouslyaffecttheinterestsofallies,aswellas

opponents,withimpunity.

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InChile:TheGreatTransformation,twodistinguishedChileansocialscientistsattempttoexplaintheircountry'sexperiencewithneoliberalreformtoaninternationalaudience.Thisisnotatechnicaleconomicstudy,butapoliticalandinstitutionalanalysisofasingularprocessofsocioeconomictransformation.Itchallengesthereadertounderstandlonger-termprocesses,aswellastheimmediatetacticalmeasures,thatconditionedthereformeffortanddetermineditsoutcome.AnditdescribesChileansocietytoday,asthecountryattemptstoconsolidateareturntodemocracyandtoattacktheextremeinequality,jobinsecurity,andexternalvulnerabilitythatarethelegacyofthepasttwentyyears.

ThestudywascommissionedbytheUnitedNationsResearchInstituteforSocialDevelopment(UNRISD)aspartofitscomparativeresearchprogramonCrisis,AdjustmentandSocialChangeinLatinAmerica,directedbyCynthiaHewittdeAlcántara.ThecollaboratingChileaninstitutionwasSURProfesionalesConsultores,Ltd.,ofSantiago.UNRISDwouldliketothankBenjaminRichardsforhisabletranslationoftheoriginalSpanishmanuscriptandIreneRuízdeBudavariandAnitaTombezfortheirexcellentsecretarialsupport.NancyDavidson,oftheBrookingsInstitution,servedasacarefulandcommittededitor.FundingfortheprojectwasprovidedthroughagenerousgrantfromtheGovernmentoftheNetherlands.

CHARAMGHAIDIRECTOR,UNRISD

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Contents

Introduction 1

Chapter1Politics:FromDictatorshiptoDemocracy

8

Instability 9

TheTerror 12

TheUprising 18

Democratization 33

Chapter2TheEconomy:FromtheStatetotheMarket

41

TheStateandElites 42

RuptureandContinuity,1964-90 44

TheBackgroundofFree-MarketReforminChile 45

TheMainPhasesofPoliticalEconomy,1973-90 47

PrincipalNeoliberalReforms,1973-90 49

TheLiberationandExpansionofMarketForces 56

TheMythofthe"Subsidiary"State 65

InstitutionalTransformations 67

TheConcentrationofPowerandIncome 73

Chapter3TheActors:FromClassestoElites

75

TheBusinessGremios 76

ACivilianTechnocracy:The"ChicagoBoys" 81

TheNewFinancial-EconomicGroups 87

ACorporateInterlude 94

TheDeclineoftheElite 98

Chapter4RestructuringandtheNewWorkingClasses

101

TheNewWagedEmployment 102

TheNewInformality 110

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PatternsofChangeintheServicesSector 115

TheNewSocialCharacterofPoverty 124

Chapter5ACapitalistRevolution

130

TheNeoliberalReorientationofPreviousReforms 131

TheRoleoftheElites:FromRevolutiontoModeration 136

Structures,Movements,andSocialActors 138

The1990s:WaitingfortheNewActors 141

Notes 143

Index 153

Tables

2-1.BasicEconomicIndicators,SelectedYears,1974-95 46

2-2.PhasesofNeoliberalEconomicPolicy,1973-90 50

2-3.IntegrationintotheWorldEconomy,SelectedYears,1974-95

52

4-1.PopulationinWagedEmployment,bySector,SelectedPeriods,1976-92

106

4-2.UrbanandRuralWagedWork,SelectedPeriods,1976-92

107

4-3.AverageAnnualRatesofGrowthintheUrbanInformalSector,SelectedPeriods,1960-90

112

4-4.EstimationofSpuriousService-SectorEmployment, 120

SelectedYears,1970-90

4-5.EmploymentintheNonfinancialPublicAdministrativeSector,SelectedYears,1976-90

121

4-6.EmploymentinFinancialServices,SelectedYears,1976-90

122

Figures

2-1.PerCapitaGDP,1970-95 43

4-1.WagedWorkers,asPercentageofEmployedPopulation,1976-94

103

4-2.EmployersandWagedWorkers,1976-94 109

4-3.UrbanInformalSector,1976-94 112

4-4.EmploymentintheServicesSector,1970-94 116

IntroductionSituatedintheextremesouthoftheAmericancontinent,isolatedbythemassiveAndeanmountainrangeandthevastPacificOcean,andendowedwithageographyalmostimplausibleinitslengthandnarrowness,Chileisconsideredbymanyanalyststobeoneofthegreatmodernlaboratoriesofpoliticalexperimentation.AsifChileansneedtoremindtheoutsideworldoftheirpresence,thecountryhasovercomeitsphysicalisolationtoembracegreatinternationalcurrentsofthought.Morethanonce,especiallyduringthiscentury,Chile'spositionatthecenterofpoliticaleventshashadfar-reachingconsequences.

RecentChileanhistoryhasbeennoexception:twosubstantialachievementshavebroughtChileintotheworldspotlight.First,morethanadecadeofsustainedeconomicgrowth,averaging7percentannually,hasmadeChilethemostdynamiceconomyinLatinAmerica.Second,afteraperiodofacutepoliticalconflict,culminatinginoneofthemostinfamousdictatorshipsinhistory,Chilehasreestablisheditsdemocraticsystemthroughatransitionexemplaryforitsefficientandpeacefulnature.The"Chileanmodel"hasbecomeacommonlyheardphrase,althoughitisfullofcontradictions.Itisusedbyproponentsof"structuraladjustment,"bythosecallingfordictatorship,bythosepromotinggranddemocratictransformations,andbythoseseekingtoreducesocialinequalities,aswellasthosewhoseeinsuchinequalitiesaninvaluablesourceofsocialdynamism.

ThisdiversityofopiniontestifiestothecomplexityofthegreattransformationthathastakenplaceinChile,aprocessthatconsequentlyrequirescarefulanddetailedanalysis.TheunderlyingthesisofthisbookisthatChilehasexperiencedanauthenticcapitalistrevolutionandnotjustaprocessofstructuraladjustment.Likeall

revolutions,itisaprocesswithmanycontradictions,andthereisnoroomforsim-

plisticinterpretations.Itistheproductofuniquehistoricalcircumstancesandcannotbereducedtoyetanothercasewithintheso-calledgenerallawsofhistory.Likeallrevolutionsworthyofthename,however,thisgreatChileantransformationisfullofglobalimplications.

TheChileanexperiencehasbeenthesourceofintenseideologicaldebates.Thesehaveoftenbeenexcessivelypartisanandasaconsequencehavegivenrisetodistortedinterpretationsthatneverthelessenjoyconsiderablecurrency.ThisbookpurportstoshowthatmanyoftheideologicalexplanationscurrentlyassociatedwiththeChileanexperience,bothwithinthecountryandabroad,havelittlehistoricalfoundation.Thiswillbeshowninsomedetailinthechaptersthatfollow,butitisnecessarytodrawattentiontofourideasthat,inspiteofthepoliticallessonsoftendrawnfromthemandtheirwidespreadacceptance,arecompletelyfalse.

FirstFallacy

ThefirstfallacyisthatthesuccessoftheeconomictransformationinChilewasduetothedictatorialnatureofthePinochetregime,whichwasresponsibleforcarryingitout.

Theright-wingversionofthisargumentattemptstodemonstratethatdictatorshipsarenecessaryinothercountries.Theleft-wingversion,usingthesamefalselogic,attemptstoargueagainsteconomicliberalizationinothercountries.

CertainlythemostfundamentalstageofeconomictransformationinChiletookplaceduringthemilitarydictatorshipheadedbyGeneralAugustoPinochetandwaspromotedandimposedbytheeconomicteamchosenandsupportedbythemilitary.YetthemilitarydictatorshipemergedinChileasareactiontotheunmanageablesituationbroughtonbythesocialstrugglesthataccompaniedthe

reformsofthegovernmentofSalvadorAllende.Thejunta'sclaimtolegitimacywasbasedontherestorationofpoliticalorder,noteconomictransformation.Onlylater,asaresultoftheradicalnatureofthemilitaryintervention-andfollowingthehistoricalpatternofthefewmilitaryinterventionsinChileanpolitics-didthenecessityemergeforanequallyradicaleconomicprogram.

ItisnecessarytogobeyondthestrictlyepisodicaspectsoftheChileanexperience,however,andasktowhatextentthedictatorialnatureofthepoliticalregimewasessentialtothetransformationofthe

economy,and,furthermore,tothesuccessofthistransformation.Thisstudyarguesthatitwasnotsomuchtheregime'suseofforce,butratheritsautonomyfromtheimmediateinterestsofthesocialgroupsthathadbroughtittopower,thatpermittedthePinochetgovernmenttocarryoutacompleterestructuringofChileancapitalism.Thetwoarenotequivalent:notalldictatorshipshavesuchrelativeautonomy,especiallyintermsofexecutivepower,nordoothertypesofregimesnecessarilylackit.

ItissufficienttopointoutthatLatinAmericanhistoryhasbeenplaguedwithmilitarydictatorships-manyofapersonalizednature,butothersasinstitutionalizedasthatofPinochet,ifnotmoreso-thathavedonenothingtocreateanewtypeofeconomicorder.Equally,therecentexperiencesoffree-markettransformationsincountriessuchasMexico,Bolivia,andevenArgentinashowthatautonomyismorecloselylinkedtothemagnitudeoftheeconomiccrisisthantothenatureofthepoliticalregime.

Tothismustbeaddedafactorthatisrarelymentionedandthatconstitutesareverseargument.OneofthebiggestthreatstothesuccessoftheChileaneconomictransformation,shownclearlybyanexaminationoftheeconomicpolicyimplementedbetween1978and1983,wastherigidityofthedecisionmakingprocess,whicharoseoutofthedictatorialnatureoftheregimeatthetime.

SecondFallacy

ThesecondfallacyisthatthereturntodemocracyinChilewastheresultofthesuccessoftheeconomictransformation.Thisfallacyiscloselyassociatedwiththekindofcrudematerialismofboththefree-marketideology,currentlyinvogue,andtheMarxistconceptof''bourgeoisdemocracy."Ifdemocracyhaseveremergedoutofacapitalistrevolution,thiswascertainlynotthecaseinChile.

DemocracyhasalongtraditioninChile,andthepersistentsymbolicimportanceofthistraditionwasthebiggestobstacletoPinochet'sattemptstoremaininpower.Evenmoreimportant,itisabsolutelyclearthattherecoveryofdemocracyinChilearosefromaprofoundmassrebellionagainstthePinochetdictatorship.Thiswasultimatelytoexpressitselfthroughtheoldpartyelites,whotriumphedthroughtheuseoftheveryinstitutionalmechanismsdesignedbytheauthoritarianregimetoperpetuateitspower.

Forthisreason,studentsoftherelationshipbetweenpoliticsandeconomicsmustaskthemselvesquestionsthatturncrudematerialismonitshead:whydidtheconsolidationofdemocracyinChilerequirethedefeatofthepoliticalregimethathadbeenfundamentalinsecuringthefutureofcapitalismthere?Therelativeautonomyofthepoliticalsystem,andthewaythisproducedtheconditionsthatwouldpermitthereturntodemocracy,areissuesthatrequirecarefulattentionandfindparticularresonanceintheChileancase.

ThirdFallacy

Thethirdfallacyisthattheprocessofnationalizationandstateintervention,duringtheperiodbeforetheimplementationofthefree-marketmodel,representedanimportantobstacletotherealizationandsuccessofthismodel.

ThisfallacyistheChileanversionofthewell-knownPolishjoke:"Whatissocialism?"asksthefirstPole."Thelongestroutetocapitalism,"answersthesecond.Nevertheless,atleastinthiscase,thejokehasnohistoricalgrounding,notonlybecauseofthebrevityofthesocialistexperienceandthelengthinessofthedictatorshipthatledtothecapitalistrevolution,butalsobecausethedictatorshipwasabletobuilditssuccessontheeffectsofthesocialistexperience.

UpontakingpowerinChile,themilitarydictatorshipfoundthatmanyofthesocialrelationsformerlycementingtheChileaneconomicstructurewereinastateofflux.Largelandownershadbeendestroyedbythemassiveexpropriationsassociatedwithagrarianreform,theentirebankingsystemhadbeennationalized,alargepartofindustrywasownedorcontrolledbythestate,andthecopperindustry-whichproducedthebasicChileanexport-hadbeennationalized.Themodernizing,andnotsimplyreactionary,natureofthePinochetdictatorshipwasmostclearlydemonstratedinthewayitmanagedto

redirectratherthanreversetheseearliertransformations.

Thisissueisexaminedingreaterdetailinthefollowingchapters.Itissufficientheretoconsiderthetransformationofagriculture-thebasisforthenewexportmodel-asanexample.DuringthePinochetperiod,onlyathirdofthelandexpropriatedundertheagrarianreformprogramsofpreviousgovernmentswasreturnedtoitsoriginalowners.Moreover,thiswasnotthelandthathadpreviouslyformedpartofthelatifundiosystem.Therestwasdistributedinsmallholdingstopeasants-asprovidedforbytheagrarianreformprogram-butwithout

thetechnicalassistanceandcredittheprogramhadenvisaged.Theresultwasthemassivesaleofthisland,appropriateforcapitalistdevelopment,andtheestablishmentofalandmarket.Thiswasparticularlyimportantbecauseforcenturiesinheritanceofexcessivelylargeholdingshadprovedamajorobstacletodynamismandproductivityinthecountryside.

ThesocialbasethatsupportedPinochetwouldcertainlynothaveallowedamassiveexpropriationprogramsuchasthatwhichhadbeencarriedoutbyearliergovernmentsagainstapowerfullandowningoligarchy.Buttheweaknessofthisclassafterthereform,andtherelativeautonomythisgavetotheregime,encouragedthedevelopmentofcapitalistrelationsinthecountryside.Thiswasdonewithoutlosingthesupportoftheoligarchy,whobenefitedfromthebondspaidbytheexchequer.Furthermore,thesepaymentsswelledthefundsthatcouldbeutilizedbyanewandhungryfinancialsector.

Similarprocessescanbeobservedinindustry,banking,andmining.Farfromrepresentingobstacles,theprevioussocializingreformsprovidedopportunitiesfortherestructuringofanunderdevelopedcapitalism,whichatthetimewasburdenednotonlybya"crisisofthewelfarestate,"asthefree-marketideologuesclaimed,butalsobythecontinuedexistenceoffeudalandpaternalisticrelations.ThereformsofthePinochetperiodwerebasedonprivatizingstateassets,butnotuponarestorationofthetraditionalsocialorderinChile,becausethesocialforcesthatcouldhavesupportedsucharestorationweretooweak.Thiswasafundamentalelementinthesuccessofthetransformationcarriedoutbetween1973and1990.

FourthFallacy

ThefourthfallacyisthattheChileanexperiencerepresentsyetanotherexampleofthedevelopmentofcapitalismthroughthemeans

ofacivicrebellionagainstthestate,limitingitssphereofactionandthusextendingindividualliberties.

Toputitabsolutelybluntly,thereisnosimilaritybetweenPinochetandCromwell,apartfromthefactthattheybothclosedtheirrespectiveparliaments.TheChileantransformationcanbedescribedasacapitalistrevolutionbutnotabourgeoisrevolution.

Itisatexactlythispointthatthe"mystery"oftherelationshipbetweencapitalismanddemocracyistobefoundintheChileancase.IncontrasttotheAnglo-Saxonmodel,civilsocietyinChileisthechildof

thestate,broughtintoexistenceprematurelybythenecessitiesofthelongandferociousAraucanianwarwagedagainstanindigenousresistancethatlastedforthenotinconsiderableperiodof300years.Awell-knownhistoriancharacterizesthebirthofChileansocietyinthefollowingway:"ThefundamentalnatureofChileundertheSpanishempireisthatofabattlefrontier,alandofwar."

1

Totheseorigins,whichleftadeepmarkontheconquestandcolonialperiods,canbeaddedthefirstcenturyoftheindependentrepublicthatemergedin1810:theAraucanianwar,whichlasteduntil1883,thenineteenth-centurywarsofindependencethatcontinuedinthesouth,thecampaignforliberationfromPeru,thewaragainstthePeruvian-Bolivianconfederationbetween1836and1839,thenavalwaragainstSpain(1864-66),thewarofthePacific(1879-83),andthecivilwarof1891.Forthisreason,accordingtothesamehistorian,"theChileannationwasformedbyastatewhichprecededit.ThiswasaprocesssimilartothatofArgentina,butdifferentfromthatofMexicoandPeru,wheregreatindigenousculturesprecededtheViceroysandtheRepublics."

ThestateinChilenotonlyprecededcivilsociety,but,moreimportant,itwasalsoitscreator,theartistwhoshapedeveryoneofitsfeatures.ThemaintenanceofanarmyconstantlyatwarimpliedsignificantexpenseforboththeSpanishcrownandtheRepublicangovernmentthatfolloweditduringthenineteenthcentury.Buttheprivateeconomywasalsoabletodevelopincloseassociationwiththesuccessofthemilitarycampaigns.Evenmoreimportant,theexpansionofthestateinChilefromthebeginningofthetwentiethcenturynotonlyimposedagrowingburdenonthedomesticprivatesectorbutalsoassisteditsdevelopment.Thetwogreatsourcesofstate

revenueswerenitratesandcopper.Thenegotiationswithforeigninvestorsallowedthestateacertainautonomyintermsofdevelopment,whichavoidedconflictwithdomesticcapitalists.Incomefromcopper,administeredbyamiddle-classbureaucracythatexpandedgreatlyoncethecycleofwarsended(andwasforalongtimemoremodernizinganddynamicthantheprivatesector),waslaterusedtosubsidizeindustrializationandcreateanationalbourgeoisie.Thisbourgeoisiewasthechildofthemodernstate,notitsparent.

ThisstudyarguesthatthegreateconomictransformationthathastakenplaceinChileisinlinewiththisgeneralhistoricalprocess.Itwasthedevelopmentofastateelite,ratherthantheexistenceofpreviouslyconstitutedsocialclasses,thatpermittedthecapitalistrevolu-

tionofrecentdecades.Andifthiswasarevolution,ratherthananeweraofreforms,itwaspreciselybecauseitfinallymanagedtochangethehistoricalrelationshipbetweenstateandsocietythathadcharacterizedthecountrysinceitsbirth.

Howlastingwilltheeffectsofthistransformationbe?Thestageissetfortheappearanceofnewactors.Theeconomictransformationcarriedoutfromthestatebyatechnocraticelitehaspavedthewayforanewandinnovativebusinessclass.Meanwhile,thepoliticaltransformationcausedbymassrebellionhaspermittedtheemergenceofanewcivilianpoliticalclass,distancedfromtheoldideologicalconfrontationsandclearlyorientedtowardtheconstructionofanewconsensus.ThekeytotheChileantransitionliesinthepossibilityofformingaworkingallianceamongthesenewactors.Butthisrequirestheemancipationofallgroupsfromthespecificcircumstancesthatgavebirthtothem-andthisisaprocessthatisonlyjustbeginning.

1Politics:FromDictatorshiptoDemocracyThefinalrecourseofthestateisforce,andthereforethefundamentalinstinctofpoliticsisfear.SuccessivetheoristsfromMacchiavelli,Hobbes,andMarxtoMaxWeberhavedrawnattentiontothisfact:theefficiencyofthestateisderivedfromitsbrutalnature,althoughtoachievelegitimacyitmustalsopresentitshuman,rational,orbeatificface.

ForatimeinthetwentiethcenturyitappearedthatChileanshadbeensparedthisbasicprincipleofpolitics.Aprolongedperiodofstabilityofdemocratic-republicaninstitutions,exceptionalintheLatinAmericancontext,generatedtheillusionthatanytypeofchangewaspossibleinthecountrythroughlegal,peaceful,andrationalmeans.Thegreatslogansofsocialtransformationduringthe1960swereevidenceofthis:the"revolutioninliberty"andthe"peacefulroadtosocialism."

Thisperceptionwasnotcompletelyunfounded,althoughitmightbeconsideredalittlenaive.ReformsfarlessradicalthanthosethattookplaceinChilebetween1964and1970provokedrevolutionsandseriousconflictsinothercountries.And,atleastfromthe1930son,generalrespectforthelawinChilewasstrongenoughtoweakensignificantlythepowerofthosewhowishedtofloutit.

Theexplanationforthisrelativeinstitutionalstabilityissimple.From1925on,thepartysystemandthepermanentapparatusofthestatewereruledbyamodernizingmiddleclass,whichestablishedasolidcenterofgravityaroundwhichpowerstrugglesanddecisionscirculated.By1973,however,thiscenterhadbeguntoloseallofitscapacitytoperformsucharole.

Instability

ThecollapseofthepoliticalcenteriscloselyrelatedtodevelopmentswithintheChileanpartysystematthebeginningofthe1950s.Abasicallypragmaticandcoalition-seekinggroup(theRadicalparty)wasreplacedbyareformingcurrentwithastrongideologicalordoctrinairecontent(ChristianDemocracy)whoseleadershiphabituallyrejectedcoalitionandaffirmedtheideaofanindependentpoliticalforce.

ThisdisplacementoftheRadicalpartyfromthecenterwastheresultofarecompositionofthepartysysteminresponsetotheeruptionofanational-populistalternative,headedbyGeneralCarlosIbáñezdelCampo,in1952.Sincetheendofthefirstquarterofthecentury,thegroupoftraditionalpoliticalparties(composedofconservativesandothersocial-Christian,liberal,radical,socialist,andcommunistforces)hadnormallymanagedtorepresentmorethan80percentoftheelectorate.Theagreementsformedwithinthepartyestablishment-whoseaxiswasthesocialdemocrat-leaningRadicalparty-meantthatithadacquiredastrongnationallegitimacy.In1952,however,GeneralIbáñez,supportedbyadiverseextrapartybasethatexpressedabitterrejectionofpoliticalnegotiation,andfindingwidesympathyamongthepoliticallymarginalizedmasses,achievedanalmostoutrightmajorityinhiscandidacyforthepresidencyoftherepublic.ThiswasevidenceofacrisisofrepresentationintheformalpartysystemandtheonsetofarupturebetweenthepermanentbodiesoftheChileanstateanditsrepresentativebodies.

1

IncontrasttootherLatinAmericanexperiences,however,national-populismasmanifestedintheibañistaphenomenondidnotsucceed

inconsolidatingitselfasapoliticalmovementthattranscendeditsexperienceingovernment.Reluctancetousethestatetoorganizethemassesoriginallygivingitsupport-inthestyleoftypicalpopulistexperiences-contributedtothisoutcome.Inaddition,withinthecontextofanewoutbreakofinflation,Ibáñezwasforcedtoseekthesupportofarivalsectionofthepartysystem(theliberal-conservativeright)inordertostrengthenhisstabilizationpolicies.

Inspiteofthefactthattheibañistaperioddidnotleadtofull-fledgedincorporationofthemarginalsectors,themassesbecame,fromthattimeon,afundamentalfactorinChileanpolitics.Furthermore,therecompositionofthepartysystemcouldnolongerignorethem.Thecoalitionarrangementsthattookplaceonapurelypartylevel,and

allowedfortherepresentationofthealreadyintegratedor"historic"segmentsofthepopulation,losttheirrelativeimportanceinthefaceofthecompetitiontorepresentnewsectors,recentlyincorporatedintopoliticalcitizenship.Politicalpartiesconsequentlyturnedtheirattentiontowomen,marginalurbansectors,peasants,andyouth.

Thefailureofibañismo,andthedifficultadaptationofthepartymachineryinthefaceofthenewimportanceofthemasses,favoredtheappearanceofcaudillismoandtheconvergenceofthepartiesbehindcharismaticnationalleaders.Aboveall,therealignmentproducedashiftinthepoliticalcenter,alreadymentioned,infavoroftheChristianDemocrats,apartywhosedoctrinairestanceandunwillingnesstoentercoalitionsallowedtherepresentationofdemandsagainsttheofficialpoliticalestablishment.In1949theChristianDemocratparty(thenknownasFalangeNacional)representedonly3.9percentoftheelectoratecomparedwith21.7percentfortheRadicalparty,whiletwentyyearslatertheChristianDemocrats'sharehadgrownto31.1percentcomparedwith13.6percentfortheRadicalparty.

DuringtheadministrationofEduardoFrei(1964-70),theChristianDemocratsattemptedtoincorporatetheirsupportersamongthemarginalmasses.Thiswasdonethroughawiderangeofreformsthatconsolidatedtheparty'selectoralpositionbutincreaseditspoliticalisolation.Whiletheleftgrewsystematicallythroughitsdemandsforaradicalizationofthereforms,therightregroupedthroughapolicyofaggressiveopposition.

2Incontrasttothesituationatthebeginningofthe1950s,therewerenownopossibilitiesforanexpansionofthefrontiersofthepartysystem.Themasseswhohadpreviouslybeenmarginalizednolongerlackedleadership.Onthecontrary,theywerefullymobilizedwithinthecontextofthepartystruggle.Thishadthreeimportant

consequences.First,theChristianDemocratparty-facedwithanimportantinternaldivisioninvolvingitsleftwing-becameincapableofformingacoalitionwitheitherofthetwopolesoftheelectoralspectrum(whichpermittedthevictoryin1970ofSalvadorAllendeandPopularUnitywithalittleoverathirdofthevote).Second,thepartysystemfounditselffacingasituationofextremerigiditythatpreventeditfromproducingconsensualsolutionswhenconfrontedbycrisissituations(ascanbeseentowardtheendoftheFreigovernment,whenitwasfacedwithanabortedmilitaryuprising).Third,therighthadthebestchanceofleadingtheextra-institutionalmobilizationagainstthereformpoliciesofPopularUnity,thebasisforwhichhadbeenlaidduringtheChristianDemocraticgovernment.

Inthefieldofcivilpolitics,thecollapseofapossibleagreementwiththecenterwasalreadyevidentastheendofthePopularUnitygovernmentapproachedin1973.AlthoughtheChristianDemocratscontinuedtobethebiggestsinglepartyintermsofelectoralstrength-afactthatwasmadeclearintheparliamentaryelectionsofMarch1973-thepotentialforrepresentativepoliticstoprovideasolutiontotheimpassehadbeendrasticallyreducedinthefaceofthedailyeruptionofmassconfrontation.Parliamenthadsimplybecomeasoundingboardforapoliticalstrugglethatwastakingplaceinthestreets,factories,andeducationalinstitutions.Underthesecircumstances,theformsofmobilizationinoppositiontoAllende'sgovernmentwereimposedbytheChristianDemocrats'alliesontheextremeright.

3

Afterthefact,someanalysts,particularlymanyoftheparticipantsinthemilitaryrebellionof1973,havetriedtopresenttherebellionagainstAllendeashavingbeenmotivatedbyadecisiontogivethecountrynewpoliticalinstitutions.Thisisveryfarfromthetruth.Incontrasttowhatmightbesaidabouttheeconomy,themilitaryjuntaseizingpowerin1973didnotarrivebearinganynewmodelofpoliticalinstitutionalityforthecountry.ThemilitarytookpowernotinfavorofaprojectofsocialrecompositionbutratheragainstwhatthePopularUnitygovernmentwastryingtobringabout.Themilitarycoupwas,inthestrictestsenseoftheword,reactionary.Moreover,itisprobablethatwithinthearmedforces,aswasclearlythecaseamongcivilians,manyofficerssawtheiractionasadrasticmeasuredirectedtowardtherestorationofasocial,economic,andpoliticalorderbrokenbytheturbulentyearsofPopularUnity,andnotasanattempttoreplaceitwithanewtypeoforder.

IftheradicalizationofthestruggleofthemassesduringthePopularUnityperiod(1970-73)leftthecenterwithnocapacityfortakingthepoliticalinitiativeinthecivilsphere,thentheincorporationofthecommanders-in-chiefofthearmedforcesintotheministerialcabinetinthelastmonthsoftheAllendegovernment,aswellastheextremeviolenceofthe1973coup,hadasimilareffectinsidethearmedforces.TheincorporationofthemilitarychiefsintoAllende'scabinetled,ineffect,toarapiddeteriorationofhisauthoritybeforethebodyofseniorofficers.Atthesametime,thefirstweeksofmassivedetentions,firingsquads,andsummaryexecutionsthatfollowedthemilitarycoup,and,aboveall,thebombardmentofthepresidentialpalace,leadingtothedeathoftheconstitutionalpresident,ruledoutanypossibilityofaspeedyreturntoinstitutionalnormality.Instead,itnecessitatedthe

searchforanewinstitutionalmodelthatwouldjustifyalongstayinpowerforthearmedforces.

4

Thedisproportionateviolenceofthecoupburnedthebridgeswiththepreviouspoliticalsystemandgaverisetotheneedforanewinstitutionalorder.Forthisreason,anumberofcontradictorysignalsweregivenimmediatelyafterthecoupastothenatureofthepoliticalmodelthatthemilitarywasultimatelyseekingtoimpose.Clearlyindicativeofthiswerethedeclarationsoftwomembersofthejuntainthetwoweeksfollowingthecoup.OnSeptember17,1973,inaninterviewwiththeNewYorkTimes,GeneralPinochetstatedthattherewouldbeelections"whenthecountryreturnstonormalityandtheunityofallChileans,andofChileasaNationandasaState,issufficientlystrongtoguaranteeareturntoitstraditionalandexemplarydemocraticrepublicanpath."Nevertheless,anothermemberofthejunta,AirForceGeneralGustavoLeigh,announcedfourdayslaterthatanewconstitutionwasbeingpreparedthatwouldreflectthe"entirenation,"givingrepresentationtothearmedforces,thepolice,theprofessionalorganizations,women,andyouth.Thisconstitutionwouldnot,however,besubjecttoapopularvoteforitsratification.

Thesecontradictorymodels-republicanandcorporatist-hadcommonreactionaryelements.Thefirstwastheneedto"struggletothedeathagainstMarxism"-understandingthistobethepartiesthathadconstitutedtheAllendegovernment,aswellasitsintellectualandtradeunionsupporters.Thesecondwasthedecisionnottonegotiateorgivegroundtothepoliticalcenter,representedbytheChristianDemocrats.Thethirdwasthedecisiontostayinpowerwithoutcallingelections,giventhatthosetwopoliticalblocstogether

representedthree-quartersoftheelectorate.Finally,butnolessimportant,thepoliticalleadershipofthemilitarycametogetherinacommondisdainforthecivilianpoliticalclass,whichwastranslatedintoadesiretogivethearmedforcesapermanentpoliticalroleinthelifeofthenation.Itisthisentirelyreactivecharacterofthemilitaryconsensus,towhichafoundingspiritwascompletelyforeign,thatexplainsthedominantmoodbetween1973and1983.

TheTerror

Theleadershipcontestwithinthenewregimewasmarkedbyattemptstogivethegreatestdemonstrationofcommitmenttothisreactionaryconsensus,andthisbecameacompetitionastowhocould

bestrepresentauthoritarianextremism.ForChileansociety,theconsequenceofthiswasyearsofterror.

OnSeptember13,1973,theNationalCongresswasofficiallydissolved,whichledtothefinaldisappearanceofthehopesofthepoliticalcenter.Thenextday,thepoliticalpartiesformingthePopularUnitycoalitionthathadsupportedex-PresidentAllendeweredeclaredillegal.OnSeptember26,theCentralUnionofWorkers(CUT)wasalsooutlawed''forhavingassumedthecharacterofapoliticalorganization."Thatsameday,allthejailedmembersofthearmedultrarightmovementFatherlandandFreedom(PatriayLibertad)werereleased.OnSeptember27,thejuntadeclaredallpoliticalparties"inrecess,"includingthosethathadheadedthestruggleagainsttheAllenderegime.(Monthslater,inJanuary1974,thejuntaannouncedthat"non-Marxist"partiescouldcarryoutadministrativeactivities,withanypoliticalactionstillprohibited.Thisprohibitionincludeddistributingpropaganda,holdingmeetings,orparticipatinginorganizationssuchasunionsorstudentfederations.)ThepartieswereorderedtosubmittotheMinistryoftheInterioralistofalltheirmilitantsbeforeOctober11,1973.TheelectoralregisterwascancelledinNovember1973anddestroyedbyorderofthejuntainJuly1974.Fromthedayofthecoup,thecountrywasdeclaredin"astateofinternalwar"andthestatesofsiegeandemergencywererenewedatonetimeoranotherforoveradecade.Intermsofthejudiciary,althoughthenewregimehadalreadybeenrecognizedbytheSupremeCourtonSeptember13,aroundthemiddleofNovemberofthatyearthejuntaannouncedthatthedecisionsofmilitarytribunalscouldnotbethesubjectofappealstotheSupremeCourt.

Evennow,theestimatesofthenumberofdead,disappeared,injured,prisoners,andexilesinthefirstmonthsofthecoupandundermartiallawremainthesubjectofconjecture.Intermsofthenumberkilled,areportfromtheU.S.StateDepartmentcitedbySenatorEdward

KennedyonFebruary3,1974,confirmedthattherewere"severalthousand,"althoughthespecificestimateswereclassifiedasconfidential.Amonthafterthecoup,onOctober10,1973,thejuntastatedofficiallythat513civiliansand37soldiershadbeenkilledsinceSeptember11.Sincethemilitarytookpower,5,400peoplehadbeendetained."Only94summaryexecutions"wererecognizedashavingbeencarriedoutbythebeginningofNovember.AmnestyInternational,onJanuary20,1974,statedinalettertoGeneralAugustoPinochetthatacommissionoftheorganizationhadbeenabletoprove"widespreadtorture"ofpoliticaldetainees.Thejunta,nevertheless,didnotacceptthisversion

ofeventsandsystematicallydeniedanytypeofhumanrightsviolationsinChile.

Intermsofexiles,theofficialstatisticsprovidedbythejuntainthemiddleofFebruary1974indicatedthatbetweenSeptember11,1973,andFebruary12,1974,theexitof7,317peopleclassifiedasrefugeeshadbeenpermitted.Ofthese,4,000hadsoughtasyluminembassies,where243stillremainedasrefugees.Thefiguresgivenbyopponentsofthejuntawerefargreater.InNovember1973,forexample,ex-SenatorCarlosAltamirano(onwhoseheadthenewgovernmenthadplacedanofficialprice)declaredinapressconferenceinHavanaafterhisclandestineflightfromthecountrythat"morethan15,000peoplehadbeenkilled,"thattherewere"morethan30,000politicaldetainees,"that''tensofthousands"hadbeentortured,morethanamillionpeoplehadlosttheirjobs,and25,000studentshadbeenexpelledfromtheuniversities.

Itisdifficulttoarriveatanexactquantitativeestimateoftheviolationofhumanrightsduringthefirstmonthsofmilitarygovernment,notonlybecausetherespectiveinformationwasalwayskeptstrictlysecret,butbecausetherepressionwascarriedoutinthosedaysbyavarietyoforganizationswithlittlereciprocalcoordination.Whatiscertain,however,isthatterrorhadtakenitsgriponChileanpolitics,andtheveryuncertaintyofinformationwaspartofthisprocess.

Itwasnot,ofcourse,tobeanisolatedsituationinLatinAmerica.FollowingthemilitarycoupinChile,sevenoftheelevenindependentSouthAmericancountrieswereundermilitarygovernments(Bolivia,Brazil,Ecuador,Paraguay,Peru,andUruguay,joinedbyArgentinain1976).Thismeansthat68percentofthepopulationand74percentoftheterritoryofSouthAmericawere,atthistime,governedbythistypeofregime.

Theterrorcontinuedtoincreaseintheyearsfollowingthecoup.To

thehundredsofdenunciationsofarbitrarydetention,torture,anddisappearanceofprisonerswereaddedmurkycasesofinternationalstateterrorism.ThemostprominentcasesweretheassassinationinBuenosAiresofthepreviouscommander-in-chiefofthearmyandformerministeroftheinterioranddefense,GeneralCarlosPrats,andhiswifeonSeptember30,1974;theattemptonthelifeoftheformervicepresidentoftherepublicandformerministeroftheinteriorduringtheChristianDemocratgovernmentofEduardoFrei,BernardoLeighton,andhiswifeinRomeonOctober6,1975;andtheassassinationofOrlandoLetelier,formervicepresidentoftherepublicandformerforeignminister,in-

teriorminister,anddefenseminister,togetherwithhissecretary,RonnieMoffit,inWashington,D.C.,onSeptember21,1976.

Theconcentrationofpowerinthehandsofthechiefofthemilitaryjuntaalsocontinuedtoincrease.InFebruary1974theretirementoftwoarmygenerals,OrlandoUrbinaHerreraandManuelTorresdelaCruz,whowereimmediatelybeneaththecommander-in-chiefinthelineofsuccession,wasannounced.Followingtheseretirements,inMarch1975thedefenseministerandoneofthecoupleadersinthearmy,GeneralOscarBonilla,werekilledwhenthehelicopterinwhichtheyweretravelingcrashed.

OnJune26,1974,inafirstmovetowardtheinstitutionalizationofmilitaryrule,thecommander-in-chiefofthearmy(GeneralAugustoPinochet)wasdesignated"supremeheadofthenation"bydecreeofthemilitaryjunta.Thejuntaofficiallytookoverlegislativeandexecutivepowers,anditwasestablishedthatGeneralPinochetwouldcontinuetoheadthejuntainchargeoftheadministrationandgovernmentofthecountry.Intheeventofhisdeathorresignationhewouldbereplacedbythemostseniorremainingmemberofthecollegiatebody.Notlongafterward,byvirtueofasecretdecree,apowerfulpoliticalpoliceorganization(theNationalIntelligenceDirective,orDINA)wascreated,whichwasresponsibleonlytotheheadofstate.OnDecember17,1974,GeneralPinochetwasofficiallydesignated"presidentoftherepublic"throughadecreesignedbyhimselfandthethreeothermembersofthejunta.ThisestablishedthatfromthenonPinochetwouldretainexecutivepowerwhilethemilitaryjuntawouldassumelegislativepower.

TheconcentrationofpowerinthehandsofGeneralPinochetwouldbemarkedbytwootherespeciallyimportantmilestones,bothlinkedtoplebiscitaryformsoflegitimization.Thesebrokewiththeprevailinglogicoftakingdecisionsthroughanagreementbetweenthe

chiefsofthedifferentbranchesofthearmedforces.

Thefirstinstanceinwhichcitizenswerecalledtoexpressthemselvestookplaceatthebeginningof1978.Thishaditsorigin,accordingtotheofficialexplanation,inaresolutionoftheGeneralAssemblyoftheUnitedNations(Resolution32/118),whichreiteratedthe"profoundindignation"oftheGeneralAssemblyatthefactthat"theChileanpeoplecontinuestobetheobjectofconstantandflagrantviolationsofhumanrightsandfundamentalliberties,theabsenceofadequateconstitutionalandjudicialsafeguardstotheirrightsandliberties,attemptsagainstthelibertyandintegrityoftheindividual,inparticularthrough

methodsofsystematicintimidation,includingtorture,disappearanceofpeopleforpoliticalreasons,arbitraryarrests,detentions,exileanddeprivationofChileannationality."

Theresponseoftheheadofthemilitarygovernmentwastocalla"nationalconsultation"onDecember21,1977.AllChileansovertheageof18werecalledupontovote,withintwoweeks,fororagainstthefollowingaffirmation:"Inthefaceofinternationalaggressionagainstourcountry,IsupportPresidentPinochetinhisdefenseofthedignityofChileandreaffirmthelegitimacyofthegovernmentoftherepublicassovereignleaderintheprocessofinstitutionalizationofthecountry."

Thecallingofthissingular"consultation"provokedoppositionfromwithinthemilitaryjuntaitself,twoofwhosememberssentletterstothiseffecttoGeneralPinochet.Ofthese,thecontentsofthelettersignedbyCommander-in-ChiefoftheAirForceGustavoLeighweremadepublic.Leighprotested,inthenameofhisinstitution,thatthe"honorandprestige"ofthearmedforceswouldbecompromisedbyhavingtosuperviseaplebiscitethat''byitsverynaturewillgiverisetosuspicionandmisinterpretation."Headdedthatthecallingoftheplebiscitewascontrarytothestatutesestablishedbythemilitarygovernmentitselfandthatithadbeencommunicatedtotheothermembersofthemilitaryjuntaonlyonedaybeforeitspublicannouncement,withoutspecifyingitsactualcontent.ThecomptrollergeneraloftherepublicresignedhispostonDecember28afterhavingrejectedtheprocedureforthecallingoftheconsultation.Hewasreplacedthesamedaybyaministerofthemilitarygovernment.

ThereferendumtookplaceonJanuary4,1978,and,accordingtoofficialresults,75percentofChileansvotedinfavoroftheonlyalternativegiven.GeneralGustavoLeighwassackedfromhispostascommander-in-chiefoftheairforce,togetherwithtwelvegenerals

whofollowedhiminthelineofsuccession.TheleadershipofPinochetwithinthearmy,andthepredominanceofthatinstitutionovertheotherbodiesofthearmedforces,wasabsolutelyclear.Aboveall,aformofCaesaristlegitimizationofpresidentialpowerhadbeentestedthatwouldsooncometobeusedastheprincipalmechanismforpoliticalinstitutionalization.

Themostaudaciousstepinthisdirectionwouldtakeplacetwoyearslater.OnAugust10,1979,GeneralPinochetannouncedanewplebiscite,thistimewiththepurposeofapprovingapoliticalconstitutiontoreplacetheoldoneof1925.Thedefinitivetextofthisnewdocument

correspondedbroadlytotherecommendationsputforwardbytheCouncilofState,anadvisoryorgantothemilitaryjuntaheadedbytheconstitutionalex-president(1958-64),JorgeAlessandriRodríguez.Nevertheless,thetextalsoincludeda"transitoryarticle"thatsetoutanitineraryfor"slowandgradualtransitiontofulldemocracy."GeneralPinochetwouldruleforeightmoreyears,attheendofwhichthemilitaryjuntawouldproposeasinglecandidateforthepresidencyforanothereightyears(whichcouldbeGeneralPinochetagain).Thiswouldthenbevotedonbythepeopleinanewplebiscitedesignedtoapproveorrejecttheproposal.Duringtheeight-yeartransitionperiod,thepermanentaspectsofthenewconstitutionwouldnotbeputintoforcecompletely,exceptforthosethatdidnotcontradictthetransitoryarticles.

Aswiththeearlierplebiscite,thevotetookplaceafewweeksafterbeingcalled,withoutapublicelectoralregisterandwithcontinuedprohibitionofexpressiononthepartofpoliticalparties.Accordingtoofficialfigures,67percentvotedfortheconstitutionand30.2percentagainst.Spoiledvotesamountedto2.8percent(blankballotpaperswerecountedasapproval).Thiswasthedecisivestepintheconsolidationofthepowerofthecommander-in-chiefofthearmyandhisautonomyfromtheotherheadsofthearmedforces.

Theabsenceofcounterweightswithinthenewpowerstructurewasexacerbatedbytheextremeweaknessofsocialmovements,owingtofiercerepressionandthepersistenceofpoliticaldivisionsfromtheimmediatepast,and-nolessimportant-theeconomicsituationandveryhighratesofunemployment.Ineffect,apartfromsomeskirmisheswithunionsandstudents-whichwereimportantonlytotheextentthattheyincreasedfrictionwithinthepowerbloc-thejuntadidnotencountersignificantsocialresistancetoitspoliticaldominance.Whatdidstandinthewayofmilitarypower,atleastduringthefirstdecadeofthedictatorship,wasnotreallyapoliticalalternative,but

rathera"zoneofrefuge"intheformoftheCatholicChurch.

TheinstitutionalcommitmentoftheCatholicChurchtothedefenseofhumanrightsbegantowardtheendof1973when,togetherwithotherchurches,itjoinedtheCommitteeofCooperationforPeaceinChile.Thecommitteewastogivehelptopoliticaldetaineesandassisttheirrelativesinthesearchforinformation.ThiscommitmentwassoondeepenedwiththecreationoftheVicariateofSolidarity.DependentonthearchbishopofSantiago,thisbecamethemostactiveagentofpro-

tection,denunciation,andpromotioninthefieldofhumanrights,oncestatepoliticalrepressionhadbecomeinstitutionallycentralized(firstintheDINAandthenintheNationalIntelligenceCenter,orCNI).

Intheabsenceofanyinstitutionallyrecognizedformsofsocialparticipation,thepoliticalsystem,inthefirsttenyearsofthemilitaryregime,tookonthecharacteristicsoftheolddaysoftheconquest.Politicalpartiesweredeclaredillegalorforbiddenfromorganizing,andsocialorganizationsindependentoftheregimewerepersecuted.Inthissituationtherewereonlytworelevantactors:a"captain-general"inchargeofpoliticalpower,sustainedbyforceofarmsandemergencylegislationgivinghimunlimitedpowers,

5andtheCatholicChurchasanopenrefugeforpersecutedcivilians.Thisclearlyindicatesthat,farfromadvancingtowardanewformoflegalinstitutionalization,thestateofexceptionwasbecomingapermanentfeature.

TheUprising

Asthebeginningofthedemocratizationprocess,1983and1984markedanimportantturningpointintheChileanpoliticalsituation.Aftertenyearsoffiercemilitarygovernment,duringwhichtheonlyimportantoppositionagainstpersistenthumanrightsviolationswasthedefensiveshieldoftheCatholicChurch,aperiodofcivilrebellionbegan.Thiswasmostclearlyseeninthe"daysofprotest"againstthedictatorship.

Thecatalystforthisunexpectedmovementwasacall,madeinApril1983bythepowerfulConfederationofCopperWorkers(CTC),foranationalstrikeagainstthepoliciesoftheregime.Thiswaslatermodifiedtoacallforallsectorstoprotest,activelyandpeacefully,on

May11.Thecallmetwithwidesupport,andthousandsofpeopletooktothestreetsinimprovisedmeetings.Theresponseincludedanunusualabsencefromschools,colleges,anduniversities,noisyprotestsbycardrivers,anddisruptionoftrafficduringthenight,asburningbarricadeswerethrownupinmanypartsofthecapitalbyscoresofprotesters.Thesoundofemptypots,whichadecadeearlierhadbeenthesymbolofrebellionbymiddle-andhigh-incomegroupsagainstthesocialistgovernmentofSalvadorAllende,washeardagaininalltheneighborhoodsofSantiago.

Thebroadnessofthisexpressionofdiscontentandthenatureofthedisturbancesincertainareasofthecity,despiteviolentcrackdowns,wereaclearindicationthatthepopulationhadlostitsfear.Fromthis

timeon,somethingmorethancoercionwouldbenecessarytomaintainthesubmissionthemilitarydesired.

Thedaysofprotestwererepeatedoneaftertheotherinthefirstweeksofeachremainingmonthin1983andonatleastfourmoreoccasionsduring1984.Theintensityofthepoliticalconflictgrewrapidly,andthepoliticalstabilityofthePinochetregimewasseriouslythreatenedtosuchanextentthathundredsofforeigncorrespondentsgatheredonamonthlybasisinSantiagotoreportthefinaldownfallofadictatorshipthatforadecadehadbeentragicnewsacrosstheworld.Theincreasinglywidespreadcharacterofthecivilprotestandlackofcontrolofgovernmentactionappearedasunequivocalsignsthatsuchanoutcomecouldcomeabout,bringingChileinlinewiththedemocratictidesweepingtherestofLatinAmerica.

Andyetthehoped-forendingdidnotoccur.Onthecontrary,aftereighteenmonthsofintensemobilizationandrepression,whichledtoofficialfiguresof160deadand500withbulletwounds,Chileended1984underastateofsiege,withanoppositionmovementasbroadasitwasperplexedandincreasinglydistantfromthesocialforcesthatsupportedit.Andtocomplicatethepicturefurther,somesurveyscarriedoutatthetimeshowedthatamajorityofthepopulation-althoughcontinuingtoholdanoutrightpreferenceforanimmediatechangeofgovernmentandareturntodemocracy-alsosupportedthedeclarationofthestateofsiege.

TwoquestionsmustbeaskedaboutthissingularperiodinChileanpoliticalhistory.First,howcanthemassive,suddendemonstrationsthatbeganinMay1983beexplainedwhen,foranentiredecade,theoppositiontothemilitaryregimehadbeensoweakanddiffuse?Wasittheresultofafalsestepbythemilitary,unforeseeableuntilthatmoment?Orwasitduetoarealignmentofthesocialactorsthemselves?Andsecond,whydidtheprotestmovementnotcontinue

togrow,asmanyobserversexpected,butrather,havingreachedacertainpoint,begintodecline?Wasthistheresultofthecunningbehaviorofitsantagonist(themilitarydictatorship),orwasitattributabletofactorsintrinsicinthemovementitself?IntheanalysisofthispointliesoneofthekeystounderstandingthesubsequentreconstructionoftheChileanpartysystemandthepeculiartransitiontodemocracyinthecountry.

Withthebenefitofacertainhistoricalhindsight,onethingseemscertain:theprotestshadtheabilitytotransformresistanceintoanonheroicactbutdidnotmanagetoarticulateasocialmovementthatcouldserveasanalternativetotheauthoritarianorderandpermita

progressiveincreaseinthechallengetothepowerofthestate.Civilsocietywascaughtbetweenfearofthestateandfearofitsownselfdestructivetendencies.Thedepthofnationaldivisioninthepreviousera,evengiventheclearintegrativefailureofthemilitary'smodernizingproject,tiltedthebalanceinfavorofthestatusquo.Fromthatpoint,however,thegovernmentofthegeneralslostallitspersuasivecapacityoverthepopulation:the"no"voteof1988againstPinochet'scontinuingingovernmentwasdecidedin1983.

AFormofNonheroicResistance

DuringalmosttheentirefirstdecadeofmilitarygovernmentinChile,manifestationsofdiscontentwererare.Theywereprincipallycarriedoutbysmall,politicallyactivenucleiandmetalimitedreceptionwithinthepopulation.TheendofthefirstperiodofconsolidationofthenewgovernmentsawaradicalpolicyofrepressiondirectedagainstthepoliticalandsocialorganizationsthathadsupportedAllende'sgovernmentoreventhosethat,intheopinionofthenewregime,hadbeentoosoftonit.Theseorganizationswerereplacedbyclandestinegroupsthatcontinuallycalledforanuprisingagainstthenewregimeandbysectorsofthecivilpopulationwhosoughtopenformsofpoliticalresponseandopposition.Tenyearsisalongtime,andyetneitherdemonstrationsnorsympathyforthesegroupsappearedtogrowsignificantly.Giventhis,howdoesoneexplainthesuddenoutbreakofmassivedemonstrationsstartinginMay1983?

ThephenomenoncouldcertainlybeexplainedawaybyreferringtothedrasticcontractionintheChileaneconomybeginninginthesecondhalfof1981,followingthedramaticbutfalseexpansionthattookplacefromtheendof1976totheendof1980.Thesetwoabruptcycles,ofexplosivegrowthfollowedbyaviolentfallinoutput,couldbethebasisforaninterpretationthatamassivefrustrationoftheexpectationsproducedbytheboomyearsgaverisetoarebellionin

society.

Thisexplanationmaybeadequateinmanyrespects,butitdoesnotsufficientlydistinguishthesituationwithinwhichtheprotestscameabout.Noteverysituationofmassivefrustrationleadstothesameresults,andinfactarecessivecycleofsimilarintensitytookplaceduring1974and1975(immediatelyafterastrongexpansioninpurchasingpowerofwagedworkers,insocialandpoliticalparticipation,andinalongseriesofindicatorsofsocialmodernizationduring1964-73),butwithoppositeresults.Thewaygeneralfrustrationmanifests

itselfinprotestandrebellionandthewayactorsandscriptcoincideonthestagerequireasociopoliticalratherthanpurelyeconomicexplanation.Iftheindividualdissatisfactionsorfrustrationsweretransformedin1983intocollectiveactionfollowedbyprotestandrebellion,thiswasbecause,aboveandbeyondstructuralconditions,therehadbeenachangeamongtheactors.Thiscanbebestdescribedastheovercomingofa"heroicsyndrome"inrelationtopower.

Politicalrepression,combinedwithpoliceactionthatextendsbeyondthepublicdomainandleadstodisproportionatepunishment,contributestoaviciouscircleoffear.Thisisespeciallysowhenrepressivemeasuresarecarriedoutinasustainedmannerbythestateandwhentheymanagetoovercomethefirstlineofresistanceofferedbyexistingsocialorganizations.Fromthismoment,fearreproducesitselfwithaprogressivegrowthintheisolationofthegroupsandindividualswhomostactivelyofferresistancetotheauthoritarianorder.ThisviciouscirclewaswelldescribedsomecenturiesagobyNiccoloMachiavelliinhisformulationof"howcitiesorstatesshouldbegovernedwhich,beforebeingoccupied,operatedaccordingtotheirownrules."

6

Theprincipalconditionforovercomingthisviciouscircleoffearliesintheruptureofwhatcanbecalledthe"heroicsyndrome":ageneralizedperceptiononthepartofthedominatedthattheyareallequalwithregardtotheirrelationtoacentralandsuperiorpower,andthattheyareallequallydefenselessinthefaceofsuchpower.Resistancetothissuperiorpowerthereforecannotbesuggestedintermsofrationalinstrumentalstrategies;itmusttaketheformofanaffirmationofabodyofsuperiorethicalvaluesthatcanbedemonstratedonlybyexpressiveactionofanextraordinarytype.

Giventhesocialequalityofweakpowerresources,suchresistanceissubjecttotheunequalinterindividualdistributionofcourage.Inthissituationthemajorityofthepopulationadoptsthestanceofspectatorandanindividualorsmallgroupbecomesthehero.Sinceheroismcanonlybematchedbyactsofasimilarmagnitudeofrisk,thistendstoreinforcethedifferencebetweentheindividualorsmallgroupandthemasses(whoadoptpositionsofindifference,rejection,orworship).

TheChileanprotestsof1983didovercometheheroicsyndromeintermsofatleastthreefactors,whichmustbeexaminedinordertounderstandthesubsequentdeclineoftheprotestmovement.Thesefactorsarethenatureofthosewhocalledtheprotest,thewiderangeofactivitiesundertaken,andthecollectivesupportfortheseactions.

Thosecallingtheprotest.

Thefirst"nationalprotest"ofMay11,1983,wascalledbytheCopperWorkersConfederation.Thisisfarfrombeingatrivialdetail,asitwaspeople'sconfidenceinthestrategicimportanceofthisgroupthat,toalargeextent,determinedthesuccessoftheprotestcall.Therehadbeennumerouspreviouscallstoprotest,toresist,tostrike,andtorebel.Thiscallmetadifferentresponsebecausediversesocialsectorssharedtheperception,basedonhistoricalexperience,thatthecopperindustrywasthekeytotheeconomyofthecountry.Ahaltinitsactivitiescouldcreateunmanageableeconomicproblems,whichinthepasthadtraditionallyforcedgovernmentstonegotiate.

Fromastrictlyeconomicpointofview,large-scalecoppermining,intermsofformalandinformaldemand,affectedapproximately11percentoftheproductionanddistributionchainsintheChileaneconomy.

7Infinancialterms,itsimportancewasmuchgreatersinceitoffered,inthefinalanalysis,theprincipalsecurityforallpublic-sector-andindirectlyprivate-sector-loansinthecountry.Thepolitical-professionalstrikeofOctober1972againsttheAllenderegime-which,inthewordsofthenU.S.presidentRichardNixon,madetheChileaneconomyscream-wascarriedoutbyacombinationofeconomicsectorswhosestoppageaffected15percentofproductionanddistributionwithout,atthesametime,affectingfinancialflows.ThisgivesanindicationastowhythecopperworkersareconsideredsopowerfulinChile.

TheimportanceofacallforprotestfromtheCTCcannot,however,simplybereducedtotheperceptionofitsstrategicimportanceintheChileaneconomy.Fromthepointofviewoftheveryconfigurationof

socialactors,itrepresentedadecisiveturnaround.

IncontrasttoideologicalinterpretationsofrecentChileanhistory(particularlytheideologicalvisionsofhistoryemergingduringthe1960sand1970s),whichoftenreducethetradeunionstoasinglehomogeneousmovement,politicallyradicalandclass-oriented,wecanclearlydistinguishbetweenatleasttwobroadcurrentsintheunionmovement.ThesehaddifferentorientationsfromaroundtheendofWorldWarII.Onewasamovementbasedprincipallyingreatindustrialenterprisesandtraditionalmining,protectedfromexternalcompetitionbythestateandtraditionallyinprivatehands.Giventhelimitedstrategicimportanceofthissectorinthenationaleconomyandtheweaknessofthebossesinthefaceoflabordemandsatthemicroeconomiclevel,thisunionmovementtendedtooperateprincipallyasapoliticalactor,combiningaradicalclassdiscoursewiththeownersand

anemphasisonnegotiationwiththestatehierarchy.Thebattleagainsttheeffectsofinflationonwagepurchasingpowerledtoalong-termallianceofthissectorwiththeworkersfrompublicandprivatebureaucracies,givingrisein1952totheCentralUnionofWorkers(CUT).Therewasanothermovement,however,thatnevermergedwiththisoneexceptinafewlimitedstruggles.Theotherunionmovementwasevenmorepowerful,andithadamoreprofessionalthanpoliticalorientation.Itwasbasedinthelargestrategicstateenterprisesorforeignownedindustries(copper,electricity,petroleum,ports,andsteel).Givenitsprivilegedlocationandtheeconomicstrengthoftheemployers,itdidnotrequirebroadalliancestogiveweighttoitsdemandsbutcouldnegotiatedirectlyatthefirmlevel.

Acallfromthecopperworkersthushadtheresultofunitingthesetwogreatcurrentsoftheunionmovement.Thistookplaceatatimewhentraditionalunionismwasinastateofsomedeclineduetotheliquidationofitsoperatingbase(broughtaboutbytheremovalofprotectionfortraditionalindustryandthereductioninpublicbureaucracysince1974)anditsextremecommitmenttothepreviousregime,whichsegmentedandreduceditspersuasivecapacity.Incontrast,theactivistbaseoftheunionismrepresentedbythecopperworkershadremainedlargelyunaffectedbyeconomicpolicyduringthedecadeandalsoretaineditscapacitytolinkupwithmiddle-classprofessionalorganizations.

Theseeconomicandsocialfactorsweretranslated,fromtheverymomentofcallingtheprotest,intoaruptureoftheheroicsyndromethathaddominatedantiauthoritarianresistancebefore1983.Ineffect,theybroketheperceptionoftheequalityofimpotenceofindividualsbeforethestate,settingupastronglineofprotectionthatprovidedprotestsupporterswithsecurity.

Thescopeoftheactions.

Settingupthislineofprotectioninthecallforthefirstprotestallowedasecondfeatureoftheheroicsyndrometobeovercome.Thisconcernedthesituationofequalityinthefaceofpower,wherebyanethicaldemandforexpressiveactioncompelsindividualsorsmallgroupstoactinawaythatisbeyondtheirordinarycapacity.Theexistenceofalineofprotectionallowsthemtoactastheyreallyare:individualsorsmallgroupswithordinarycapacities.Inchess,apawncanthreatenlikeabishopbutitdiesasapawn.Apawnprotectedbyabishopcanreachtheextremesofdaringandthreatenakingthroughthesmallmovesitispermitted,onesquareforwardatatime.Itisdifficultforaheroicpawntobefollowedbyothersunlessit

isprotected.Expressiveemotionisdisplacedbytheinstrumentalrationalityofaction.

Therewasnothingheroicinwhatwasbeingaskedintheactionsthatmadeuptheprotestsof1983-84:nottosendchildrentoschool,nottobuyanythingorcarryoutroutinebusinessorpaperwork,nottousepublictransport,tostayathome,andtosoundcarhornsatthesametime.Thepeoplewentbeyondtheseactionsinvariouswaysduringthefirstprotest.Butitisinterestingtonotethatthisstillfollowedalineofconductpropertoindividualsandsmallgroupswithordinarycapacities.

Seenintheirentirety,thesetofprotestactionsgenerallyadvancedthefrontiersthatseparatedprivatefrompublicspaceandtendedtowardaprogressivedomesticationofthelatter.Itisforthisreasonthattheprotestscanbeanalyzedfromaterritorialperspective.

Takingaspatialperspectiveontheprotests,onecanseethatthemobilizationsweremadeupofanumberofactionsthatrejectedthecentralspaceoftheboard(propertospectacularorheroicaction)andattemptedtoadvancefromthemarginsoftheprivateanddailyspaceofeachindividual.Thisstretchedtheforcesofrepression,leadingtotheirmaximumdispersionandconsiderablyreducingthedisequilibriumbetweendefenselessindividualsorgroupsandcentralpower.Evenwhen-insomesituations-theywentbeyondthepassiveformsofresistancecalledfor,theproteststhereforemanagedtoovercometheheroicsyndrome.

Collectivesupport.

Incontrasttoextraordinaryformsofbehavior,ordinaryconductrequiressomethingdifferentifitistoovercomefear.Thisisthestrengththatarisesfromtheawarenessthatmanyaredoingthesameorevenmoreandthatthisconductisnotparticularlysusceptibleto

punishment(oratleastitdoesnotfigureamongthemainpunishableactivities).Thereforewhatisneededisnottobeseparatedfromthemasses,butrathertobeinextricablyintertwinedwiththem.

Thefirsttypeofsupportnecessaryforacollectivedemonstrationsuchastheprotestswasthecertaintythatthelineofprotectioncontinuedtobestrong.Thesecondwasthecontinuedperceptionthattherewasabodyofpeopledoingmorethanthataskedofthemajority.Thethirdwasthecertaintythatthemajoritywereactuallydoingwhatwasexpectedofthem.

Withregardtotheprotestsof1983and1984,adistinctioncanbedrawnbetweenthedaysbeforeeachprotest,theactualdayoftheprotest,andthenightoftheprotest.Inthedaysbefore,thecallwas

repeatedandattentiondrawntonewparticipants.Sometimesthesuccessfuloutcomeofcertaintestcaseswouldalsostrengthenthatline(forexample,averdictinthecourtsagainstthoseresponsibleforrepressiveviolenceonpreviousprotests,thefreeingofthosecallingtheprotestonthebasisoflackofaprosecutioncase,theappearanceofaslightrelaxationonthepartoftheregime,orthedefensebythechurchofthosewhohadsufferedthemostfiercerepression).Duringtheactualdayoftheprotest,thecombinationofthechallengetofearandfearoftheprotestproducedthefirstvisibleresults:lowschoolattendance,littlepublictransport,littlemovementinthecity,closedshops.Ontheotherhand,theactivesocialandpoliticalsector,includingstudents,intellectuals,politicalmilitants,andleaders,begandemonstrationsinvariouspartsofthecity(particularlyinthecenter),makingitclearthatthiswasnoordinarydayandinitiatingtheprotestwithactsthatrequiredmorecouragethanthoseaskedoftherestofthepopulation.Duringthenightthesoundofemptypotsandhorns,neighborhoodactivity,andnewsfromotherpartsofthecityandcountrystrengthenedtheperceptionthattheprotestersconstitutedamajority.

Thesesupportmechanismsobviouslyrequiredafluidnetworkofsocialcommunication.Theireffectivenessdependeduponanup-to-dateknowledgeoftheoverallsituationwithrespecttothedemonstrations,especiallysincethegreatmajoritytookplaceoutsidethecentralareas.Thustheradiostationsoftheoppositionplayedacrucialrole,andthegovernmenthabituallyrespondedbybanningtheirnewsservice.

GrowthandStagnationoftheChallenge

Ifovercomingfearofthestatewasthefirstconditionforthesuccessoftheprotests,thesecondwasthepersistenceandgrowthoftheirchallengetothepowerofthestate.Theexistenceofalineof

protectionhad,asmentionedabove,theeffectofreplacingexpressiveemotionalitywithacertaindegreeofinstrumentalrationality.Thislatterrequired,however,someevidenceoftheeffectivenessoftheactions:thathistorywasnotablackholebutatleastatunnel,withprogressbeingmadetowardthelightattheendofit.Growingoptimisminrelationtothefuturewasafactorofasmuchimportanceasthelineofprotection;andoncethefirststepshadbeentakeninthechallengetopower,itsimportancebecameevengreater.

ThedevelopmentoftheChileanprotestsshowedatleasttwostagesinrelationtothisfactor.Thefirst,whichlastedfromthefirsttothefourthprotest,seemedtoshowagrowingchallengetopowereven

whentherewasnoparallelgrowthinthescopeoftheactionsofthecivilpopulation.Duringthesecondphase,whichbeganwiththefifthprotest(September1983),themovementseemedtobesettlingintoaroutine,itssocialscopebecomingmorelimited,andtheactionsundertakensubjecttoasegmentedgrowthintheircharacteranddaring.

Theperiodofgrowingchallenge.

ItiscurioustonotethatalthoughbetweenMayandAugust1983themagnitudeoftheactionsundertakenbythecivilpopulationduringthedaysofprotestdidnotreallychange,theperceptionofbothinternalandexternalobserverswasthatthechallengetotheauthoritarianregimewasbecomingevergreater.Furthermore,therewasafeelingthatthemilitarygovernmentwasincreasinglylosingcontroloverthesocialandpoliticalsituationinthecountry.Althoughitistruethatbetweenthefirstandseconddaysofprotests(May11andJune11,1983)therewasanotableincreaseinthescopeofthemovement(anditcontinuedgrowing,albeitatalessspectacularrateinthetwofollowingmonths),therealreasonforsuchaperceptiondidnotrestwiththoseparticipatingintheprotestsbutwiththeirantagonist.

Thelackofcontrolofthemilitarygovernmentwas,morethananything,alackofcontroloveritsownresponses.PolicebehaviorinSantiagohadbeenrelativelyefficientduringthedayofthefirstprotestbutbecamemorerecklessduringthenight,withtheproliferationofprotestactivitiesandtheirmoreaggressivenature.Thefearthisprovokedingovernmentranksmeantthat,beginningthedayafterthefirstprotest,whiletheoppositionmajoritywerecelebratingtheirnewfoundunityandthepossibilitiesforthefuture,thegovernmentrespondedwithmeasuresthatwerefartoodrastic.Thisleftthemfewnewmethodstofacetheprotestsoverthefollowingmonths,astheyshutdownradiostations,announcedcriminalcharges

againstthosewhohadcalledtheprotest,andmademassiveraidsonlow-incomeneighborhoods.Theperceptionthatthegovernmenthadrespondedinsuchadisproportionatewaycouldhaverenewedfear,butthenatureofthefirstgreatdemonstrationofcollectivediscontentintenyearsstoppedthisfromhappening.Indeed,thesecurityfeltondiscoveringthissenseofbeinganactivemajorityallowedanotherreadingofthegovernment'sreaction:''Ifthegovernmentrespondswithhighcardsthenwemustholdaverygoodhand."

Ontopofthis,therepressiveresponseofthegovernmenttothefirstprotestwasineffectiveandvacillating.Despitethegovernment'sexpectations,nothingsignificantemergedfromthemassiveraidsonlow-incomeneighborhoodsintermsofarms,urbanguerrillas,oractivistswhomighthaveinstigatedthemovement.Nearlyallthedetaineeshadtobequicklyreturnedtotheirhomes,andthereactionagainstmediacensorship(includingthatoftheofficialmedia)wasofsuchalevelthatthegovernmenthadtoliftthedecreebanningnewsbroadcastsfromoppositionradiostations.ThedetentionoftheleaderoftheCopperWorkersConfederationwasresolvedwhenhewasfreedonbailthenextday.Themeasurestakenseemedtoreinforcetheperceptionthattheprotesthadtriumphedandtoreducefearofparticipatinginafurtherdemonstrationofdiscontent.

Thistypeofdisproportionateandclumsygovernmentresponsecontinuedinthefollowingthreemonths,everyoneofwhichwasmarkedbyabroaderprotest.Aftertheseconddayofprotest(June11),theleaderoftheCTCwasviolentlydetainedandheldprisonerdaysbeforethedateannouncedforthethirdprotest(July12).Daysbeforethefourthprotest,thehighestleadersoftheChristianDemocratparty,thebiggestcenterpartyinthecountry,weredetainedandheldincommunicado.Duringthethirdandfourthprotests,acurfewwasdeclaredfrommidday.Forthefourthprotest(August11),thecapitalcityawoketofinditselfoccupiedby18,000troopswhopatrolledthestreetsinamenacingfashion.Thenumberofvictimsanddetaineesgrew(especiallyinthefourthprotest).Inthisway,eventhoughtheactionscarriedoutbythepopulationcontinuedtobethesame,therepressionunleashedbythegovernmentexpandedatsucharate-evenreachingthelevelofhysteriainAugust-thatitwaspossibletomaintaintheperceptionthatthechallengetostatepowerwasgrowing.

Suchaperceptionwassustainedinturnbytwoimmediatesuccesses

ofthemovement.Certainpoliticalopeningsdeveloped:therewasanincreaseinauthorizationforthereturnofexiles,censorshiponbookswaslifted,andspacewascreatedfortheappearanceofnewoppositionmedia.Atthesametime,thelineofprotectionwasdefended:thecourtsorderedtheunconditionallibertyoftheChristianDemocratleaders,arguingthatcallingforpeacefulprotestsdidnotconstituteacrime.Alsoreleasedweretheleadersoftheunioncoordinatingcommitteewhohadbeendetainedand,afewdayslater,theleaderoftheCTC.Thesefactsservedtoaffirmthatthegovernment'sinconsistentand

inefficientresponsewasoneofdesperation.Thistendedtoreducefearandledtoagrowingconfidencethattheroadchosenwasagoodone.

Togetherwiththegovernmentresponse,asecondfactorreducingfearandreinforcingtheperceptionthatgainswerebeingmadewastheincreasingbreadthofthelineofprotection.Thefirstprotest(May1983)wascalledbytheCTC.Thesecondprotest(June1983)wascalledbythenascentNationalWorkersCommand(whichgroupedtogethertheCTCandotherunionleaderships);theDemocraticWorkersUnion(whichgroupedthedockworkers,white-collarworkers,andunionistsfromstrategicsectorssuchassteelandpetroleum);thetraditionallymoderateConfederationofChileanEmployees;andtheunionheirsoftheCUTandradicalworkers'tradition,theNationalUnionCoordinatorandUnitedWorkersFront.TheprotestappealwasalsosupportedbyorganizationsthatbroughttogetheroldpoliticalandbusinessleaderswhohadbeeninthefirstlineofstruggleagainsttheAllenderegime.TheseincludedtheProjectforNationalDevelopment,professionalorganizations,andtheSupremeCouncilofRoadTransport.Itevenreceivedsupportfromanex-memberofthemilitaryjunta(AirForceGeneralGustavoLeigh,whohadbeensackedbyPinochet).Variousbusinessorganizations,whilenotexplicitlysupportingtheprotest,increasedtheircriticismsoftheeconomicpoliciesoftheregimeandmadecleartheirsympathiesfortheiropponents.Thethirdprotest(July1983),whichtookplacewiththeleaderoftheCTCinprison,allowedforthebatontobepassedfromthecorporativeorganizations(unionsandbusinessassociations,orgremios)tothepoliticalparties:therecentlyformedDemocraticManifesto(amultipartygroupingmadeupoftheChristianDemocrat,Socialist,Radical,Social-DemocratandRepublicanrightparties)wasinchargeofconvokingtheprotest,andthiswassupportedbythosewhohadpreviouslycalledforsuchactions.

ByJune1983,therefore,anewsociopoliticalmajorityhadformedinthecountry,overcomingforthefirsttimeintenyearsthelinesofdivisionofthePopularUnityperiod,whichhadseparatedthecenterfromtheleft,theunionismofthelargecompanyfrommoretraditionalunions,andthelatterfromsmallbusinessgremios.Theperceptionwasofanewalignmentthatwouldfinallyleavebehindthetraumaofpolarizationatthebeginningofthe1970sandclosetheentrancewaytothetunnelofdictatorship.Perhapsthiswasthemomentinwhichthecivilpopulationfelttheleastfear,asitobservedtheclearimpotenceofauthoritariancontrolandthefactthatthephantomofungovernability

wasreceding.Forthisreason,thedemonstrationsofJuly12andAugust11-12representedthehighestpointofantiauthoritarianmobilization.

Routineanddisenchantment.

Thetwodimensionsthatcametogethertoproduceachangeinthelimitoffear(overcomingtheheroicsyndromeandencouragingtheperceptionofachievement)dependedonfactorsthatwereneverthelesschangingduringthefirstfourmonthsofantiauthoritarianmobilization.TheeffectsofthesechangesmadethemselvesfeltattheturningpointofAugust1983.Reachingthepointofmaximumpressure,thepoliticalandsocialactorsfounditnecessarytomoveanotherpieceinordertoplacetheregime"incheck"andopentheroadtodemocratization.Itwasamomentofcalculationandtacticsnowthatcertainpsychosocialfactorsimpedingtheprotestshadbeenremoved.

Theforcethatinitiallysetupthelineofprotectioninthefaceoffearwasthethreatofastrikeinthecoppermines.ThefirstcalloftheCTCinApril1983hadbeenforanationalstrikeandnotaprotestmovement.Theprotestwasdecidedonasareplacementforthestrikeonlytwodaysbeforethedateset,owingtotheproblemsotherunioncentershadinmobilizingtheirrankandfilearoundanobjectiveasmomentousasstoppingwork.Despitethis,thespecterofapoliticalnationalstrikeremained,duringthefirsttwoprotests,asaprobablenextstep.Thereforeitretaineditsimmediacyintheexpectationsofthemajoritywhosupportedthedemonstrations-givingthemthenatureofashowofforcewithapossiblerecoursetotheoriginalplan.Ontheotherhand,theeventualmovefromastriketoaprotestallowedtheconvergenceofthemostpowerfulsegmentoftradeunionismwiththetwobiggestsocialcategoriesinthecountry:themiddleclassesandthemarginalizedorexcludedgroups.

OnMay26,1983,thepresidentoftheCTCwasdetainedontheordersofthePinochetgovernment.Complyingwithapreviousagreementtoescalatetostrikeactionifreprisalsweretakenagainstitsleaders,theCTCmettostudythiscourseofaction.Theirleaderwas,however,quicklyfreedonbailbythecourtsandastrikedidnotcomeabout.

OnJune15,thesameleaderwasviolentlyarrestedandthistimetheconfederationrespondedwithanimmediatestrikecall,whichcameintoeffectthefollowingday.Incontrasttotheprotests,thiscallwasdirectedonlyatthecopperworkers,andtheCTCfacedanimportant

testofitsstrength.Thestrikecallmetawideresponseamongworkersinthreeoutoffiveareas(largemines)butmetobstaclesinthetworemainingareasandamongadministrativeworkers.ThestatecompanyCODELCOdecreedtheimmediatedismissalof1,800workersandinvitedinterestedpeopletoapplyforthevacantposts.Largequeuesofunemployedworkersformedatthecompany,andthisharmedthestrikeinareasthathadnotyetvoted.SevendaysaftertheCTCstrikecall,whenthisstrikehadalreadybeenbrokenbythecompany,thetransportworkerscalledforastrikeoftruckowners,whichtookplacebetweenJune23and24withouthavingaprofoundimpactonpublicopinionduetotheprevailingcensorship.Thepossibilityofunitingbothforceshadceasedtoexist,andthetransportworkersendedtheirstrikeonJune25afterachievinganacceptablenegotiatedsettlementtotheirsectoralgrievanceswiththegovernment.

Fromthispointon,theentropictendencyinsidetheCTC,whichinthepasthadkeptitapartfromtherestoftheunionmovement,begantoreestablishitself.Muchthesamehappenedwiththeassociationsoftransportworkers.TheroleofthepoliticalpartiesincallingtheprotestinJunereestablishedthepotencyofthenationalmovementfordemocracyandmaintainedintactthelineofprotectionagainstfearforthepopulation.Nevertheless,theprincipalmaterialforceofthemovementhadbeendented.

Thestrengthofthepoliticalpartieslayintheirbroadcapacityfornationalmobilization,butthiswasmuchmoresymbolicthanmaterial.ThiswasalsotrueformostoftheunioncentersapartfromtheCTC.Theclearimpotenceofthemilitary'smodernizingprojectatthetimemeantthat,unlikethesituationinothercountriessuchasBrazil,therewerenonewsocialgroupsstrategicallyinsertedintheoccupationalstructure.Onthecontrary,therewasagrowingweakeninganddecompositionofexistinggroups.Theinorganicnatureofthe

structureofemployment(seechapters2and4)conspiredagainstthecapacityoftheactorstomobilizetacticallyinadisciplinedwayatcrucialmoments.Between1971and1982,theshareofwagedworkersintheactivepopulationhadfallenfrom53percentto38percent.Duringthesameperiod,thoseexcludedfromformalemploymentrosefrom14percentofthelaborforceto36percent.Amongyouth,theprincipalbaseformobilizationintheprotests,exclusionreached70percent.

8

Amongtheassociationsofthemiddleclasses,ontheotherhand,thewithdrawalofthetransportorganizations(alreadyannouncedforthe

Augustprotest)leftprofessionalandcommercialsectorsisolatedfromafundamentalally.

Thetacticaloptionsavailabletotheprincipalactorsofthepolitical,union,andgremioworldafterthepeakofAugust1983couldhavebeentheincorporationofthemovementintosemi-institutionalchannels,increasingroutinizationoftheprotests(thatis,theircontinuationwithoutthepossibilityofextendingthechallengetopower),oraninsurrectionalmovementoftheurbanmasses.FromSeptember1983,theprotestsweresystematicallyreducedinscopeuntilthebeginningofnewandbriefcyclesinMarch-AprilandSeptember-October1984.Importantadvanceshadbeenmadeandfearofthestatehadbeenreduced.Ithadbeenreplaced,however,withgrowingdisenchantment.

DisintegratingTendenciesandFearofSociety

TherealignmentofJune1983wasshort-lived.Infact,theconditionsforitsextinctionweregrowingevenasitwasborn.Duringthefirstprotest,inMay,ithadbeenpossibletoobserveadifferenceinthecharacterandmagnitudeofthemobilizationsamongdifferentsocialsectorsofthecity.Betweenthesecondandfourthprotests,therewasgrowingsocialsegmentationoftheactivities,withtheeruptionofviolence,principallyinthelow-incomeneighborhoods.Theseshowdownswiththepolicetookonconsiderabledimensionsandweresometimesaccompaniedbypillageandvandalisminsidetheliberatedzones,actionsseizeduponbytheofficialpress.Thelinebetweenpoliticalprotestandcriminalactivitywasoftendifficulttodraw,particularlyamongtheyoung.Itwouldbebettertosaythatbothweremanifestationsofaradicalrejectionofasocialorderthatexcludedandoppressedthem.Violentconductoftenwentmuchfurtherthanbattlingthepoliceandextendedtolootingshops,burningbuses,andextortingmoneyfromdriversandpedestrians.Thefreespaceopened

bytheprotestsallowedfortheliberationofawidebodyofenergyandfrustrations.Itwasdifficulttosubjectthesetothesimplelogicoftheaccumulationofpoliticalstrength.

Ontheotherhand,therewasalsoasharpsocialdivideintermsofthelevelofrepression.Inthepopularneighborhoodsthiswasverybrutal,whilefewerresourcesandpersonnelwerededicatedtohigh-andmiddle-incomeneighborhoods.Thespiralofviolencecanbelookedatfromadifferentperspectivethanthatwhichiscommonlyadopted.Owingtothebrutalityofpoliceaction,therewasavery

aggressiveresponsefromtheyouthwholivedinconditionsofextremedisintegrationandanomie.Bylabelingthemviolent,thepolicehelpedtomakethemso.Whicheverwayitisseen,thisfactorhelpedtoweakentheinterclasssolidaritythathadbeensoarduouslyconstructedbythedemocraticmovement.

Tothismustbeaddedaparadoxicaleffectoftheemergenceofthe"lineofprotection."Thiswasmadeupofactorswhowererelativelycentraltothepoliticalandeconomicsystem.Thecentralityoftheactorsisfrequentlylinkedtotheirclosenesstopositionsnotonlyofpowerbutalsoofprestige,honor,andprivilege.This,whileinducingtrust,alsomakesthemtheobjectofresentment.InacountryaspoliticallypolarizedasChile,thegreatmajorityofthosecallingtheprotestandformingthelineofprotectioncamefromthesectorsmostmilitantlyopposedtoPopularUnityandPresidentAllende,whosesymbolicimportancewasstillintactinthepopularsectorsdespitetheattemptsmadebyofficialpropagandatowipeitout.Theparadoxicaleffectarises,therefore,fromthefactthatthelineofprotectionalsoledtothedemandfortheirownidentitybythepoliticalandsocialsectorsthathadsufferedthelongestandmostsystematicpersecutionduringthefirstdecadeofmilitaryrule.Ifonetakesintoaccountthefactthateventhesymbolicactionscallingforprotest(thebangingofpotsandsoundingofhorns)hadtheiroriginsinanti-Allendeprotests,plusthemuchgreatersusceptibilityofthemarginalareastorepression,onecanunderstandtheprofundityofthedemandforidentity,autonomy,anddifferentiation.

Atthesametime,thegrowingviolenceinmarginalareas,themoreintensiveuseofallendistasymbolsbythedemonstrators,andtheopenresentmentshownintheseareastowardtheleadersandtacticsofthemiddleclassallledtoagrowingterroronthepartofthemiddleclass.Therewasfearofpolarizationandthedictatorshipofthemasses,againstwhichthemiddleclasshadrisenuponlyadecade

earlier.Thegrowingsocialsegmentationoftheprotestsbecamethemechanismthroughwhichfearofthestatereturnedtooneofitsoriginalsources:civilsociety'sfearofitsownself-destructivetendencies.

ThetragedyoftheChileanprotestmovementmanifesteditselfmostclearlyinAugust1983.InsteadofattemptingtousethesocialandpoliticalrealignmentofJunetorechanneltheeffectsofsocialdivisionintoanewformofpoliticalexpression,themovementsoughttorepresentthatdivisioninthepoliticalarena.OnAugust7,1983,fourdaysbeforethebiggestchallengetotheauthoritarianregime,theDemo-

craticAlliancewasestablished.ThiswasmadeupofthepartieswhoweresignatoriestotheDemocraticManifesto(ChristianDemocrat,Radical,themajoritysectionoftheSocialistparty,andothersmallparties).ItsfirstactwastosupportthecallforaprotestonAugust11and12,whichhadbeenmadebydifferentsectors.OnAugust25,themajorityofthepartiesinthealliancebeganaseriesofdialoguemeetingswiththegovernment,whichwasrepresentedbyitsnewministeroftheinterior.Afewdayslater,however,asecondgroup,thePopularDemocraticMovement,wassetup(composedoftheCommunistparty,theMovementoftheRevolutionaryLeft,factionsoftheSocialistparty,andothersmallparties).ItsfirstpublicexpressionwasacategoricalrejectionofthedialoguewiththegovernmentcarriedoutbytheDemocraticAlliance.Fromthatmoment,therewasanexplicitdifferenceoforientationbetweenasemi-institutionalopposition(preferringdialogue,authorizedmarchesanddemonstrations,judicialbattles,andacquisitionofinfluenceandcontroloverlegalorsemilegalsocialorganizations)andasemi-insurrectionalopposition(preferringtoformmilitias,engageinassassinationattempts,andtakepartinlocalstrikes).Betweenthetwotheonlypointofcontactwasthesporadicrepetitionofroutineprotests.

Inconsequence,theprotestsof1983(andnotthoseof1984)mustbeanalyzedasmovementsthatcouldhaveovercomethesocialandpoliticaldivisionof1973butfailedtodoso.Thiswastheessentialconditionforrelegitimizingpolitics,andthusthefailureoftheprotestsalsodiscreditedpoliticsforthemajorityofthepopulation.Ifthecoupof1973hasbeenofferedasaclassicexampleoftheMarxisttheoryofthestate-inwhichthearmedforcesappearasthedefendersoftheinterestsofthedominantclass-thentheChileanprotestsof1983-84wouldhavetobeidentifiedasaclassicexampleofHobbesiantheory.Thepersistenceofamilitarydictatorship,farfrom

simplybeingaquestionoftherelationshipbetweenciviliansandthemilitary,cametobeexplainedbythenatureoftherelationsoffearandmistrustamongciviliansthemselves.

Democratization

Themilitarygovernmentconcentratedparticularlyondealingwiththeeconomicaspectsofthecrisisof1983.Thismayhavebeenduetoitserroneousdiagnosisoftheprotestssolelyasareactiontothesevererecessionaffectingthenationaleconomy,orbecauseitcoulddolittle

else,givenitslackofaneffectiveplanforpoliticalandinstitutionalnormalization.Thiseconomisticoutlookhadalreadybeendominantamongtheideologuesoftheregimesincetheyovercamethepreviousrecessivecycle(1974-77).Theofficialtechnocracymaintainedtheexpectationofaneffectivetransitiontowardademocracy"protected"bythearmedforcesandfoundedon"acountryofpropertyownersandnotproletarians,"inGeneralPinochet'sownwords.Itwasacceptedthatanincreaseinconsumptionlevels,theextensionofprivateproperty,andreductioninthesizeofthestatewouldautomaticallycreatetheconditionsforastabledemocracythatexcludedthepoliticalleft.Suchconfidencewasshowntobecompletelynaiveinthelightofpost-1983developments.

From1984,throughtheapplicationofaseriesofcorrectivemeasurestoeconomicpolicy,principallytoexchangeratestrategy,theChileaneconomybeganavigorousrecovery.Nevertheless,thisprocessdidnotleadinanywaytoanincreaseinlevelsofsupportfortheregime.Politicalopinionpolls,whichwerecarriedoutingreaterfreedomfrom1985onward,clearlyillustratethispoint:declaredsupportforGeneralPinochetneverexceeded30percentofthesamplesinterviewed,whilethedesireforachangeofgovernmentandspeedyreturntodemocracysystematicallyexceeded45percentofresponses.

9Thesesurveyscannotbecomparedwithsimilarstudiescarriedoutbeforetheeventsof1983(becausesuchstudieswerenotauthorized,andthosewhomanagedtocarrythemoutcoulddosoonlyinsuboptimalmethodologicalconditions).Thereforeitisnotpossibletoconfirmwithempiricalevidencethatthemilitarygovernmenthadlostsupportduringtheyearsofeconomiccrisisandsocialprotests(unlessthedisputedfiguresofthe1978and1980plebiscitesaretakenasabase).Itis,however,certainthatthemilitarygovernmentdidnotgainsupportfromthepopulationasaresultofeconomicrecovery.

Thegeneralperceptionofthepopulationwasthatthemilitarygovernmenthadnodesiretoadvancetowardanyformofdemocratictransition,butsimplyaspiredtoremainperpetuallyinpower.Fora"transitionfromabove"totakeplace,themilitarygovernmentwouldhavehadtotakeconsistentstepstoopenupacompetitivearenaforpoliticalrepresentation,recognizingarealitythatwouldnotbealteredfrom1983onward:thereconstitutionofthepoliticalpartiesaswellasunion,student,andprofessionalorganizations.Thesenotonlyexpressedthemselvespubliclyandenjoyedsolidsupportfromthepopulationbuthadevenbeenrecognizedattheheightofthecrisisbythe

governmentitself,asitengagedin"dialogue"tofindsolutionstothepoliticalcrisis.

Butassocialmobilizationthroughtheprotestsbegantodecreaseinintensity,themilitarygovernmentdiscardedthiscourseofactionandacceptedtheresignationoftheveteranright-wingpoliticalleader,SergioOnofreJarpa,asministeroftheinterior.HehadbeenappointedtothispositionbyPinochetwiththeveryobjectiveofinitiatingadialoguewiththeoppositionatthemostcriticalmomentofthecrisis.Onceagain,thegovernment'sconductgaveclearsignalsofitsaspirationtoclingtothepersonalconcentrationofpowerratherthantoadvancetowardsomeformofpoliticalopening.

"Dictatorshipsarelikebicycles:whentheystopmoving,theyfall."Thisphrase,attributedtotheSpanishideologueJoséAntonioPrimodeRivera,isremarkablyappropriatefordescribingthefateofthesupposed"politicalplan"oftheChileanmilitarygovernment.Throughouttheyearsofmobilizationandprotest,theonlyconstantfactorthatappearedtoguideitsactionwasthatofarrivingatthe1988plebisciteandfindinganewsourceofCaesaristlegitimacy.Andalthoughtherealityofeventspointedurgentlytotheneedtomodifythetimetableforinstitutionalchange,theonlypossiblesourceofconsensuswithinthepowerbloc(andinparticularamongthearmedforces)onhowtoachievethiswithoutaffectingtheconcentrationofpowerinthehandsofthecommander-in-chiefofthearmywastoadherestrictlytothecalendarsetoutinthe1980constitution.TheconstitutionalnormbecameasourceofbothstrengthandweaknessforGeneralPinochet.Hisbaseofsupportfullyacceptedthathewouldstayinpoweruntil1988,assetoutintheconstitutionapprovedin1980.Atthesametime,hissupporterskepttheirdistancewithrespecttohisstayinginpowerafterthatdateandstartedtoperceivehimasanobstacletothesocialandeconomicstabilityofthecountry.Thewell-knownfablewithwhichWilfredParetoillustratedhistheoryofelite

circulationholdstrueagain:oncetheemergencythatbroughtthe"lions"topowerhasreceded,theybegintobereplacedby"foxes."

10

ThefirstsignsofagrowingautonomyofthepoliticalrightwithrespecttothemilitarygovernmentcamealittleaftertheexitoftheirveteranleaderfromtheInteriorMinistry.PartycurrentsappearedthatsoughttorepresentthebaseoftheoldNationalparty.OrganizationssuchasNationalUnity,NationalWorkFront,andtheIndependentDemocraticUnionallmadetheirpublicappearancein1985,withtheaimofpoliticallysupportingthegovernmentand"continuingitswork"

after1988.AlthoughtheirdiscoursewasoffranksupportforGeneralPinochetandhisgovernment,thefactthattheyhadtheirownautonomousconstitutionaftertwelveyearsofrecognizingmilitaryleadership(followingtheirself-dissolutionafterthe1973coup)representedaclearmessageofindependence.

TheCatholicChurchalsochangeditspoliticalroleduringtheupheavalof1983.Institutionally,theVicariateofSolidarity,andthemultipleinitiativesithadsupported,continuedinthedefenseofhumanrights.Itsobjective,however,followingthereplacementofthearchbishopofSantiagobyamoreconservativesuccessor,wasnowbasedonthecreationofdialogueandunderstandingbetweentheforcesofthepoliticaloppositionandtheprincipalciviliansupportersoftheregime.ThetestimonialoppositionofCardinalRaúlSilvaHenríquezgavewaytothediplomaticeffortsofCardinalJuanFranciscoFresno,intunewithnewtendenciesintheVatican.Theappearanceonthesceneoftheoppositionpoliticalpartiesfavoredthischangeofprofile.

Theevolutionofthepoliticaloppositionaftertwoyearsoftheprotestmovementreflectedthedefinitiveseparationofthetworoadsthathademergedatthepeakoftheprotests.Thefirstsoughttocreatethepoliticalconditionsforanegotiatedtransitionbetweenthecivilianforcesoftheoppositionandthosesupportingthemilitarygovernment.Itwasheadedbyabroadcoalitionofparties,whosecenterofgravitywastheunderstandingbetweentheSocialistpartyandtheChristianDemocrats.ThesecondwasbasedaroundtheCommunistpartyanddirectedtowardtheoverthrowofthemilitaryregimebyrevolutionarymethods.

Therevolutionaryroadarrivedsomewhatoverdueandhadabrieflife.Foralmostthreedecades,theChileanCommunistpartyhadbeenamodelofreformistpoliticsandhadsystematicallyopposed,inits

relationswithleft-wingallies,revolutionarypositionsthatitconsideredtobebothinadequateforthe''nationalanti-oligarchictransformation,"asestablishedinitsprogram,andpoliticallyisolationist.Usingthesamecriteria,thepartyanalyzedthePopularUnityexperienceandthereasonsforitsdefeat.

11Thisledittoputforwardtheideainlate1973ofbuildinga"broadfrontagainstfascism,"withtheobjectiveofrestoringdemocracy.ThefrontwouldbebasedonanalliancebetweenthepartiesofPopularUnityandtheChristianDemocrats,unitedinoppositiontothePinochetdictatorship.Thisapproachwasreplacedbythestrategyof"popularrebellion"-theoreticallyatfirst,aroundthemiddleof

1979,andinpracticetowardtheendof1983(withthesettingupofanarmedorganization,theManuelRodríguezPatrioticFront,orFPMR).

Thisrevolutionarypolicyattemptedtocontinuetheinsurrectionalroadoncetheprotestmovemententereditsdeclinetowardthemiddleof1984.Incontrasttothenationalmovement,however,itattemptedtoradicalizetheformsofchallengetothemilitaryregime,resortingtoevermorespecializedandviolentformsofstrugglethatinturncontributedtotheebbofsuchmassivemobilizations.Twoeventsin1986demonstratedthedefinitivedistancingofthispolicyfromthedemocraticmovementanddestroyeditscapacitytoofferaninitiative.ThefirstwasthediscoverybythesecurityservicesofasubstantialarsenalofweaponsthattheFPMRwasattemptingtobringintothecountrythroughasmallfishingportinthenorthofthecountry.Thesecondwasthe"flightforward"bytheFPMR,amonthafterthefrustrationofthatepisode,withthefailedattempttokillGeneralPinochet.BothactionsledtoarecoveryoftheleadershipcapacityofPinochetandthesecurityserviceswithinthepowerblocandtoatemporarywithdrawalofsupportbythepopulation-fearfulofaviolentoutcome-fortheoppositiontotheauthoritarianregime.

ItisstrangetonotethatincontrasttothischangeintheCommunistpartyanexactlyoppositechangetookplaceattheheartoftheSocialistpartyandthe"newleft"ingeneral,bothofwhichhadbeenexponentsofrevolutionarytransformationuntilafterthefallofAllende.Thischangegrewoutofacritiqueofsocialism,assumingademocraticobjective,andledtoaprocessof"renovation"ofasocialdemocraticnature.Suchaprocessofsocialistrenovationwas,inturn,apreconditionfortheconstitutionofthealliancethatwouldheadthedemocraticmovementandleadtothetransitiontodemocracy.Thechangeswithinthecenter-leftrequiredtoovercometheoriginsofthe1973crisisdidnotcomefromtheantifascistfrontoutlinedbytheCommunistparty,butratherfromanunderstandingbetween

renovatedsocialistsandtheChristianDemocratleadershipemergingin1983andheadedbythosesectorswithinthepartythathadbeenmostcriticalofmilitaryintervention.

Throughouttheperiodofintensesocialmobilization,thepoliticalroadofoppositiontotheregimeconsistedbasicallyofovercomingthreechallenges.Thefirstwastheorganizationofthemajorityparticipatingintheprotests,reestablishingthehistorictiesofpartyrepresentationandgivingthemaunifiedtacticaldirection.Thesecondwastheconstructionofrelationswiththecivilforcesthatsupportedthe

militaryregime,bringingaboutanonconfrontationalpoliticalarenaforthereplacementofauthoritariandecisionmaking.Thethirdwasthetransformationofthe1988plebiscitefromaritualofCaesaristlegitimationintoanopportunityforpeacefulchangeandeffectivetransitiontowardademocraticregime.

ThechangesthatweretakingplaceonthepoliticalrightaswellasthechangeinthepoliticalprofileoftheCatholicChurchfacilitatedthefirstefforttoovercomemilitaryinvolvementinpoliticalrelationsamongcivilians.InAugust1985,ontheinitiativeofthechurchofSantiago,ameetingtookplaceforthefirsttimebetweenpersonalitiesrepresentingawiderangeofpoliticalcurrents(fromregimesupporterstorepresentativesofgroupsthathadmadeupPopularUnity)inordertodebatethetransitiontodemocracy.Themeetingendedwiththesigningofa"NationalAccordfortheTransitiontoFullDemocracy."Thiswasanimportantsymbolicmilestonewithinthenewpoliticalphasethatwasopening.Althoughthedocumentdidnotcontainanyagreementthatwouldchangethetimetableofinstitutionalizationsetoutintheconstitutionof1980,itdidmarkthepossibilityforanewbasicconsensusthatwouldendtherecentexceptionalpoliticalyears.Thenationalaccordwastomarkthebeginningofsubsequentmeetingsthattendedtoreestablishthebasicsolidaritiesofthepoliticalclass,profoundlyweakenedsince1973.

Theestablishmentofacommontacticaldirectioninthedemocraticopposition-whichhaditsimmediatepredecessorintheDemocraticAlliancesetupin1983-wasfavoredbythe1988plebiscite.TheDemocraticAlliancehadbeenbasedonanunderstandingbetweenmodernizingfactions-untilthen,inthemajority-oftheChristianDemocratandSocialistparties.Butthedeclineintheprotestmovementin1984wasaccompaniedbyaradicalizationofpartybasesthatstrengthenedthemostuncompromisingsectors.Thedecisiontoparticipateintheplebisciteof1988thereforecameatatimewhenthe

allianceanditsmodernizingcenterwerelosinggroundto"traditional"extremes(expressingthehistoricreluctanceoftheChristianDemocratstoformalliancesandtheorthodoxleftismoftheSocialistparty).Thepathrepresentedbytheplebiscite,however,reducedtheimportanceofthesedifferences.Allthatwasrequiredwasasimple"no"toPinochet,withouttheimmediatenecessitytoproduceacommonalternativegovernmentprogram.FromtheDemocraticAlliance,thepoliticaloppositionevolvedintothecoalitionfora"no"voteintheplebisciteof1988.

Themobilizationforthe"no"becamethemostimportantsocialmovementinthecountrysincethefirstprotestsof1983.Asintheprotests,theprincipaladversarywasthefearofregimerepression,andtherewasasimilarnecessitytoovercometheheroicsyndromeandreplaceitwithanaggregationofsmallgesturesthatcouldbemadebytheentirepopulation.Incontrasttotheprotests,however,theplebisciteactuallypermittedaninstitutionaloutcomeforthemassiveexpressionofdiscontent.Ifthecandidateofthemilitaryjuntadidnotachievemajoritysupportamongthepopulation,therewouldhavetobeopenelectionsinaperiodofnotmorethanayear.Inthisway,dissidentbehaviorcouldnotonlyincreasebutalsoseethepossibilityofasuccessfuloutcome.Thiswasexactlythebalancebetweenchangeandorderthatthedemocraticmovementhadnotmanagedtoachievebyitselfduringthemobilizationsof1983-84.

Theresultsarewellknown.Anintenseoppositionmobilizationduring1987-88managedtoconvincethevastmajorityofcitizenstoregistertovote,despitetheuniversalsuspicionofmanipulationandfraud.Avarietyofoppositionpartieswereregisteredaswell,inspiteofthehighlevelsofaffiliationdemandedofthembythemilitaryjuntaasarequirementforregistration.Thiswasacriticalsteptowardensuringadequatesupervisionoftheballotinallthevotingcentersofthecountry.Finally,the"no"wasgivenapositiveandhopefulcontentinordertoestablishanatmosphereinwhichthepeacefultransitiontodemocracywouldbepossible.OnOctober5,1988,ontheproposalofthemilitaryjuntathatGeneralAugustoPinochetremainpresidentforafurthereightyears,the"no"alternativeobtained56percentofthevoteagainst44percentforthe"yes."Thecivilforcessupportingtheregimeimmediatelyrecognizedtheoppositiontriumph,asdidthecommander-in-chiefoftheairforce.Thegovernmenthadtodothesamehourslater.

Thecoalitionfora"no"openedthewayforalong-termunderstanding

amongthepartiesthathadsupportedit,becomingtheCoalitionforDemocracy.AbodyofeightyconstitutionalreformswasapprovedinaplebiscitethefollowingyearthroughaconsensusarrivedatamongtheCoalitionforDemocracy,thecivilianpoliticalforcesthathadsupportedtheregime,andthegovernment'sInteriorMinistry.Towardtheendof1989,anewgovernmentheadedbythecoalitionemergedtriumphantfromthepolls.ItachievedanabsolutemajorityintheChamberofDeputiesandanimportantrepresentationintheSenate(whichre-

mainedpartiallymadeupofsenatorsdesignatedbythepreviousregime,accordingtotheconstitutionalreformagreedtoin1989).Thedemocratizationofthecountryfinallybeganaftersixteenyearsofdictatorship.AndincontrasttootherLatinAmericanpoliticaltransitions,itdidsoinafavorableeconomicclimate.

2TheEconomy:FromtheStatetotheMarketBetween1964and1990,thestructuralandinstitutionalbasesoftheChileaneconomywereradicallyandirreversiblychanged.Thetransitionoverthisquarterofacenturywasbothrapidandtraumatic.Inthemiddleofthe1960s,Chilehadarelativelyclosedeconomythatdependedprincipallyonthecopperexportenclave,witharestrictednumberofmarkets.Thestatesectorwaslargeandcontrolledanextensivenetworkofpublicfirms,theagriculturalsectorwasbackward,andindustrialdynamismwasconcentratedprincipallyinmetallurgy.Twenty-fiveyearslater,thesituationwasverydifferent.Chilehadanopeneconomywithextendedanddevelopedmarkets.Thepublicsectorwasleanerandfocusedonmacroeconomicmanagementandregulation.Fewstatecompaniesexisted(althoughtheCODELCOcoppercompany,amega-firmthathadbeennationalizedin1971,remainedinpublicownership).Theagriculturalsectorhadbecomefarmoreadvanced,principallythroughexportingfruitproducts,whileindustrialdynamismwaslargelyconcentratedintheprocessingofnaturalresources.Muchmoreemphasiswasplacedonadiversifiedexportbase(90percentconcentratedinminerals,forestry,fishing,andfruitand10percentinmanufacturing).

Overthesetwenty-fiveyears,therefore,theChileaneconomiclandscapecompletelychanged.Althoughitcontinuestobeasmalleconomy,dependentonabundantnaturalresources,itssectoralandspatialstructureisverydifferent,asareitseconomicinstitutions.Notonlyhasthestate'srelationshiptotheeconomybeentransformed,butgreatchangeshavetakenplaceinmarketstructures,firms,andtheworkplace.

Thereisnodoubtthatduringthesetwenty-fiveyears,long-termsecularprocessesalsoledtovisiblechangesinthecountry.Thepopulationincreasedfrom8millionto13million,urbanizationfrom72percentto82percent,andaverageeducationfromfivetoeightyears.Transportandcommunicationsnetworksgrew,integratingwhathadpreviouslybeendistantandinaccessibleareas.YetChilewasfarfromexperiencingthetypeofinexorablechangethattookplaceinthepostwarperiodinAustraliaandNewZealand,inBrazilbetween1960and1980,orintheUnitedStatesbetween1880and1910.Itdidnotreceivehugenumbersofimmigrants,andtherewasnoconquestofnewterritories-notevenofnewagriculturallands-afterthisprocesshadbeencompletedinthe1930s.

TheStateandElites

Thetransformationsdidnotcomeaboutasaresultofrapidcapitalistexpansion,dissolvingandtransformingeverythinginitspathandledbyahighlydynamicbourgeoisie.Neitherweretheyparticularlyduetoaculturalatmospherefavorabletosuchchanges.Althoughtherearesignsthatthisprocessisnowbeginningtotakeplaceduringthe1990s,suchwasnotthecaseduring1964-90.TheaveragegrowthofGDPwasrelativelylowduringthisquarterofacentury,whencomparedwithotherhistoricalperiods,andwassubjecttowidefluctuations(seefigure2-1).Likewise,inthe1970stheChileanbusinessclasswasnotverydynamic.Althoughonecannotlabelitsimplyastraditionalandbackward,itisclearthatthebusinessclasshadbeensleepingfortoolongintheshadeaffordedbystateprotectionandbarrierstointernationalcompetition.Finally,theinstitutionsandcultureprevalentduringtheseyearswerefarfromfavoringtheroadthatthecountrytookfromthemiddleofthe1970s.

Inotherwords,itwasnotacaseofslowandinexorablestructuralchangesthaterodedtheexistinginstitutionsuntiltheyfinally

collapsed.InChilethereversewastrue.Overthisquarterofacenturyradicalinstitutionalchangestookplacethatledtotheveryrapiddestructionandre-creationofthesocialandeconomicfabric.Simultaneousprocessestookplacewiththedismantlingofoldstructures(forexample,inthedeindustrializingperiodof1973-83)andthecreationofnewones(forexample,thenewexportmodel),aswellasthedissolutionofentiresocialgroups(suchasthelandowningoligarchy)andtheemergenceofothers(theneweconomicgroups).

Figure2-1.PerCapitaGDP,1970-95

Sources:CentralBankofChile;NationalStatisticalInstituteofChile.

Ourargumentisthatnearlyadecadeofprogressivereforms(1964-73)andalittlemorethanfifteenyearsofneoliberalor"free-market"reforms(1973-90)werelednotbymarketsorcivilsociety,butratherbythestateandbyelitesfirmlyrootedinit.Itisstrikingthatalthoughthereformsof1964-73hadatotallydifferentorientationfromthosethatwereimposedin1973-90,thereisacertaincontinuitybetweenbothperiods.Theeconomymayhavebeengivenitsdefinitiveshapeduringtheyearsofauthoritarianrule(1973-90),yetthespeedandscopeofthereformswereduenotonlytothepowerofthestatebutalsotothefactthatcivilsocietyandtheeconomywereinaverymalleablecondition.

Itcouldbesaidthatfornearlyaquarterofacenturyitwaspoliticsthatshapedtheeconomy,althoughtheeconomystillproceededtochangeaccordingtoitsowngradualdynamic.Inthe1990s,areverseprocesstookplace,withtheeconomybecomingmoreindependentfromthestateandevenfrompolitics,althoughpoliticsalsocontinued

todevelopfollowingtheirownlogic.TheChilethatistheobjectofstudyinthisbookisnotonethatemergedfrominexorableglobalprocesses,northroughsomeoveralldevelopmentprocess.Insteaditisacountrytransformedbydrasticchangesintherelationshipbetween

stateandeconomy,inmarketregulations,andevenatthemicrolevelinthepowerrelationsinfactoriesandbetweendifferenteconomicagents.Thehistoryofthischangebeganin1964,butitsrealgenesiswasbetween1973and1990.Thisisthetimeperioduponwhichwefocus.

RuptureandContinuity,1964-90

TheneoliberalreformsweremostlyimposedonChileansocietybytechnocraticandmilitaryelites,protectedbytheauthoritarianregime.Theywereactivelysupportedbythebusinessclassandpassivelysupportedbyimportantsectorsofthemiddleclasses.Carriedoutundertheaegisofanauthoritarianregime,thesereformspromotedamodelofpoliticaleconomyanticipatingthatoftheThatchergovernmentinEngland,aswellasthatoftheInternationalMonetaryFundandWorldBankduringtheLatinAmericandebtcrisisofthe1980s.TheradicalanddurablenatureofChileanneoliberalismisanimportanthistoricalphenomenon,notjustbecausetheright-wingeliteadoptedanextremeandradicalideology,butbecauseitmaintainedthisposition-withsomeadjustments-inspiteofthefactthattheauthoritarianregimeenteredacrisisphaseafter1983,begantobedismantledafter1988,andwasfinallyreplacedbyademocraticallyelectedgovernmentin1990.

Itmightatfirstsightappearasiftheeventsthattookplacebetween1973and1990werethesoleworkofthosewhogovernedthecountryduringtheseseventeenyears.Butnotypeofeconomicchange,howeverabruptitmightbe,cantakeplaceoutsidethelimitsandpossibilitiesimposedbyhistoricallegacy.Whatwasachievedduring1973-90waspossiblenotjustbecauseofthedictatorialcontextbutalsobecausetheprogressivereformsthathadprecededit,carriedoutbythedemocraticgovernmentsofFreiandAllende,werealsoradicaland,insomecases,irreversible.Thiswasthecasewithagrarian

reformandthenationalizationofcopper.

DuringthedecadebeforethePinochetregime,thereweretwodemocraticgovernmentswithverysubstantialprogramsforchange.ThefirstwastheChristianDemocratgovernmentofEduardoFreiMontalva(1964-70),whichbegantheagrarianreform,introducedthepartialnationalization("Chileanization")ofcopper,andencouragedLatinAmericaneconomicintegration.ThesecondwasthegovernmentofSalvadorAllende(1970-73),whichheadedacoalitionofleft-wingpar-

tiesthathadtriumphedlegitimatelyatthepollsandwascommittedtoinitiatingatransitionfromcapitalismtosocialism.ThisgovernmentundertookchangesthatradicalizedtheFreireformsbyincreasingagrarianreformandcompletelynationalizingcopperandironore.Italsointroducednewreformssuchasthenationalizationofthebankingsystem,aswellasstateinterventioninlargeprivatecompanies.

Thusduring1964-73andinthemidstofgreatsocialandpoliticalconfrontations,aseriesofincreasinglyleft-wingeconomicreformswereintroducedthatconfiscatedthepropertyoftheminingtransnationalsandthelandedoligarchy.Butthishadmorefar-reachingeffects:itweakenedtheeconomicpowerofthenationalbusinessclasswhileleavingtheirpoliticalpowerintactsothattheycouldmobilizethroughtheirbusinessassociationsandright-wingpoliticalparties.Inasituationofdeepeconomiccrisis,thebusinesssectorgavebroadandtotalsupporttothenewmilitarygovernment,whichgreatlyincreasedthedegreeoffreedomenjoyedbythetechnocracyespousingfree-marketreformsafter1973.Infact,thisiswhatdistinguishesChilefromUruguayandArgentina,wherethepoliticalandeconomicweightofthebusinessclassremainedveryimportantevenafterthecoupsofthe1970s,andthemilitarydidnotenjoythesamedegreeofautonomy.

TheBackgroundofFree-MarketReforminChile

ItisimportanttofocusnotonlyonthediscoursebutalsotherealityofneoliberalismasitexistedinChile.Thedoctrineaffordedacentralplacetomarketforces,yetattheendof1973therewasnopartoftheeconomythatwasnotdirectlyorindirectlymanagedbythestate.Inspiteofitscrisisanddisorganization,thestateremainedcrucialtothefunctioningoftheChileaneconomy.Whenthemilitarytookpower,therewerenoalternativeinstitutionsoreconomicagents.Previousreformsandrecentradicalpoliticalandsocialconfrontationshadleft

marketsinsuchdisarraythattheywereeithermanipulated,distorted,ornonexistent.

Thisproducedastrangesituation,althoughonethatisnothistoricallyuncommon.Giventhedefeatofpopularmovementsandoftheleft,aswellastheweaknessofthebusinessclassandmarkets,therelativepowerofthestate,controlledbythemilitaryandtheneoliberaltechnocracy,increasedconsiderably.Thiselitepossessedarationalizingdiscourse,hadnopreviouscorporatelinks-althoughthisdidnotimpedethemfromacquiringsuchlinksovertheyears-andenjoyed

Table2-1.BasicEconomicIndicators,SelectedYears,1974-95Indicator 1974 1977 1980 1983 1986Population(1974=100) 100.0104.7109.5114.7120.4TotalGDP(1974=100) 100.099.9126.2113.6131.8PercapitaGDP(1974=100) 100.095.4115.299.1109.5Investment(percentofGDP) 17.413.316.612.018.9Publicexpenditure(percentofGDP) 32.424.923.128.430.0Unemploymentrate(percentoflaborforce) 10.811.810.419.18.8Emergencyemploymentprogram(percentoflaborforce)

0.05.35.413.30.4

Annualinflationrate(percent) 375.963.431.223.117.4Averagerealwage(1974=100) 100.0113.9138.2135.1143.2Averageminimumwage(1974=100) 100.093.4110.497.183.6Source:CentralBankofChile;NationalStatisticalInstituteofChile.

considerablesocialandbusinesssupport.Moreover,therewerenolimitsontheuseandabuseofforce.Thusitwaspossibletobeginaprocessofstructuralreformswhoseinitialtriggerwastheeconomic''shock"planofApril1975,aplanthatwasneitherdevisednorimposedbytheIMFortheWorldBank.Overtime,theelitegainedexperience,expandeditsfieldofactivity,and,afterthecrisisof1982-83,wentfromanorthodoxmonetaryapproachtoamoreheterodoxone,thistimedevisedandimposedbytheIMFandtheWorldBank.

TheMainPhasesofPoliticalEconomy,1973-90

Between1973and1990,Chileexperiencedaprofoundrestructuringofitsproductivesystem,imposedbymilitaryandtechnocraticeliteswhosharedacommonprojectforchangeandafree-marketorneoliberalideologyinitsmostextremeform.Thesechangesandtheirconsequencescanbeseparatedintotwodecades.Thefirst,between1973and1983,wascharacterizedbythedestructionoftheexistingsocioeconomicfabric.Thesecondwascharacterizedbythecreationofnewsocioeconomicnetworksthattookshapearoundtheendofthe1980s.Thisrestructuringprocessaffectedthevarioussectorsoftheeconomyindifferentwaysandatadifferentpace,butitwasparticularlyintenseinagricultureandindustry.

Thefirststageofeconomicchangewasmarkedbystructuralreformstowardamoreopeneconomy,thesecondbymeasurestocreateexport-baseddevelopment.Therearesimilaritiesbetweenbothstages,butthefundamentaldifferenceliesinthefactthatthefirstwasafoundationalperiod,whilethesecondwasdedicatedtofine-tuningandadjustingthemodel.Incontrasttothefirstperiod,thesecondincludedprotectionfortradedgoodswhoseexportwassupportedbytariffandexchangeratepoliciesthatfavoredexportingcompanies.Thiswasnotapermanentfeature,however,sinceafter1990thedegreeofopeningincreasedviathereductionoftariffsandreal

exchangerates,theestablishmentofmultilateraltradeagreements(GATTin1994),andbilateralaccordswithMexico,Colombia,andArgentina.

StructuralReformstoCreateanOpenEconomy

Thefirstphaseofreform,from1973to1983,wasmarkedbytwomassiverecessions(1974-75and1982-83),astable2-1clearlyillustrates.Thiswastheperiodofstructuralchangethatwouldleadtothecreationofanopeneconomy.Thesystemofregulationsprotectinga

closedeconomywithacopperexportenclavewasdismantled.Threemajorreformswererapidlyinitiated.First,therewasacommercialopeningthroughthewholesalereductionofhightariffbarriers.Second,statecontrols,especiallyinstrategicmarkets(suchasthefinancialmarket)weredismantled.Third,thefirstwaveofprivatizations,whichaffectedprofitablepubliccompanies,gotunderway.AlthoughthereweresimilarchangesinArgentinaandUruguay,thoseinChileweremoreradicalandwerenotreversedinthe1980s.Theyalsotookplacewithinthecontextofeasyaccesstocredit:privateexternaldebtmultipliedtentimesbetween1976and1981.Tariffswerereducedfromanaverageof105percentin1973to10percentin1980,atthesametimethatthepesobecameincreasinglyovervalued.Thiscausedarapidincreaseinimports,whichquadrupledbetween1975and1981,whileexportsgrewatamuchlowerrate.Thisledinturntoagrowingbalanceofpaymentsdeficit,althoughnotfiscaldeficits.Suchasuddenincreaseinimports,withoutacorrespondingexportstimulus,unleashedamajordeindustrializationandrationalizationofChileanindustry.Whenthiswascombinedwithadrasticreductioninpublicemployment,thehighratesofunemploymentalreadyassociatedwiththe1974-75recessionbegantoclimbstillhigher.

StructuralAdjustment:TowardanExport-BasedEconomy

Thesecondphase,from1983to1990,beganwithanexternaldebtcrisisanddevelopedintoaperiodofstructuraladjustmentleadingtothecreationofanexport-basedeconomy.Thistookplaceintandemwithaneconomicrecoverythatwouldleadtorenewedexpansionafter1988.Abroadrangeofreformswereundertakeninordertoconsolidatethemarketsystemand"subsidiary"stateandatthesametimeadjusttheopeneconomymodel,whichhadledtogrowingexternaldebtandhadplungedthecountryintocrisisbetween1982and1983.Oneofthemostimportantshiftsinpolicyduringthepost-

1983periodinvolvedthedecisiontoimposetightstateregulationon"strategic"markets(interestrates,exchangerates,minimumwages,agriculturalprices,andpublictariffs)inordertostimulateastructuralmodificationofrelativepricesthatwouldfavoranexporteconomy.Thegovernmentintroducedaseriesofdevaluationsthatledtoariseintherealexchangerate.Italsopermittedtariffstorisefrom10percentin1982toanaverageof25percentin1985,fallingbackto15percentin1990.Thisprotectionallowedtheagriculturalandindustrialsectorssomemargin

forrecovery,andtheygrewatrateshigherthan6percentbetween1983and1990.

Atthesametime,therewasafurtherwaveofprivatizations,aspartoftheagreementwiththeIMFandWorldBanktoimprovethefiscalcapacityoftheChileanstate,whichwasunderstrainasitattemptedtorescuethecountry'scrisis-riddenbankingsector.Theseprivatizationsinvolvedpublicservicessuchastelephonesandelectricity.Unlikethesituationthatmarkedreforminthecapitalandexchangeratemarkets,however,fewregulatorymechanismswereestablishedinthisprocessofprivatization.Theresultwasaconcentrationofprofitinrelativelyfewhandsandtheemergenceofneweconomicgroups.Thegovernmentalsocontinuedwiththereformofsocialsecurity,withtheaimoffreeinguplargeamountsofcapitalforprivateuse(currentlysocialsecurityfundsrepresent40percentofGDP).Thesameprocesstookplaceinthehealthsystem,wherethemostprofitablesectorswereprivatized.Finally,earlierlaborreformswereconsolidatedinawaythatledtoahighlyflexibleuseoflaborandextremelyrestrictedopportunitiesfortradeunionactivity.Economicrecoveryledtoarapiddeclineintherateofunemployment,whichfelltolessthan6percentin1990.

PrincipalNeoliberalReforms,1973-90

Table2-2summarizeschangesineconomicpolicyintermsofeightprincipalmodifications.Theseincludeforeigntradepolicy,pricecontrolorregulation,publicownership,fiscalpolicy,interestratepolicy,capitalcontrols,laborpolicy,landmarkets,andsocialsecurityfunds.Thefollowingdiscussionwillprovidefurtherinformationoneachareaofreformandestablishthebasisforamoreanalyticaldiscussionintheremainderofthechapter.

TradeLiberalization

TheChileaneconomyattheendof1973combinedahighlevelofprotectionwithdependenceononeprincipalexport(copper).Thereweremultipleexchangeratesandageneralizedsystemofquotas,andtariffsrangedfromanaverageof105percenttoamaximumof220percent,reachingtheirhighestlevelforconsumerdurablesandtheirlowestforindustrialinputs.Inaddition,importsrequired"priordeposits."Inshort,itwasanextremelycomplexsystemthathaddevelopedpiecemealovertime.Between1973and1983,withinthecontextofreformsdesignedtoopentheChileaneconomy,changesintrade

Table2-2.PhasesofNeoliberalEconomicPolicy,1973-90Basicreform

1973:TheendofthePopularUnitygovernment 1973-82:Towardanopen

economy1983-90:Towardanexporteconomy

Foreigntrade

Multipleexchangerates,importquotas;hightariffs(average105percent,maximum220percent);previousimportdeposits;tradedeficit

Singleexchangerate;fixedtariffof10percent(notcars);nootherbarriers;withdrawalfromAndeanPact,tradedeficit

Singleexchangerate;tariffsriseto25percentin1985,fallto15percentin1990;nootherbarriers;tradesurplusfrom1985

Prices Generalpricecontrol;littleinfluenceonrelativeprices

Freeprices;between1974-75,3,000controlslifted;fixedtariffsandexchangerate(1979-82);indexedwages

Freepricesandwages;indexedtariffsandfixeddevaluationstoexchangerate

PrivatizationIn1970stateowns67banksandfirms;in1973stateowns251andhasintervenedin259

In1980stateowns47firmsandonebank,includingCODELCO

In1990stateowns41firmsandonebank,includingCODELCO

Fiscalpolicy"Cascade"sales/purchasetax;highpublicemployment(12percentofgainfullyemployed);highpublicdeficits

VAT(20percent);removalofwealthandprofittaxes;indexationoftaxes;publicemploymentfallsto8percent;publicsurplus(1979-81)

VATdownto18percentin1990;publicemployment6percent;publicsurplusexcept1986

Internalcredit

Statecontrolofinterestrates;state-ownedbanks;creditcontrols

Freeinterestrate(1976-82);banksreprivatized;deregulationofcapitalmarkets;statebanknotprincipallender.

"Suggested"interestrate(1983-87);bankregulation,especiallythoseindebttocentralbank;capitalmarketsregulated.

Externaldebt

Capitalcontrols;governmentmainforeigndebtor;controlonforeigninvestmentandprivate

Freecapitalmovement;privatesectormainforeigndebtor;nodiscriminationagainst

Noprivateaccesstoforeignloans;IMFandWorldBankloans;debtrenegotiation;no

foreigndebt foreigninvestment;easyprivatecredit

discriminationagainstforeigninvestment

(tablecontinuedonfollowingpage)

(tablecontinuedfrompreviouspage)

Labormarkets

Highlevelofunionization;sectoralbargaining;closerelationwithpoliticalparties;public-sectorunionsinfluential;industrialtribunalsandautomaticwageadjustments

Repressionofunions,nocollectivebargaining,andrighttostrikeremoveduntil1979;indexedthanoneunionperfirm,collectivenegotiationsatfirmlevelonly,voluntaryaffiliation,maximumsixtydaysstrike,noindustrialtribunals;emergencyworkprograms:500,000in1983;minimumwageabolishedin1979,reinstatedin1982

Lowlevelofunionization(11percent);restrictedbiannualcollectivenegotiation;public-sectorunionsbanned;automaticwageadjusmentsended;fallinminimumwageinrelationtoaveragewage;endofemergencyworkprograms(1988)

Landmarket

Morethanhalfoffarmlandaffectedbyagrarianreform;latifundiosystemeliminated

Progressivedisposalof10millionhectaresin3,700propertiesheldbystate:30percentreturnedtooriginalowners,31percentsoldtonewowners,29percentdeliveredtoex-tenants,10percentretainedbystate.Latifundiodoesnotreappear;stronglandmarketdevelops

Largetractsofnonagriculturalland(mostinforests)ownedbystatebefore1970soldortransferredtoprivateinterests;inagriculturalsector,extensivesubcontractingchainsformedtolinklargeexporterswithmediumandsmallproducers

Socialsecurity

Contributionsfrombothemployersandemployeeswithfiscalsubsidyforthepoorestthird;nonwagecostshigh(40percentofwages)

Reform1981;privatepensionfunds(AFPs)onindividualcontributionbasis;nonactiveworkersfinancedbystateduringtransitionperiod

In1991,900,000pensionersinoldsystem;AFPshave3.7millionmembers;nonwagecostslow(3percentofwages)

Sources:P.Meller,"Revisióndelprocesodeajustechilenodeladécadadel80,"ColecciónEstudiosCIEPLANno.30(Santiago,December1990);andauthors'analysis.

Table2-3.IntegrationintotheWorldEconomy,SelectedYears,1974-95Indicator 1974 1977 1980 1983 1986 1989Exports(billionsofU.S.dollars) 2.2 2.2 4.7 3.8 4.2 8.1Imports(billionsofU.S.dollars) 2.4 2.2 5.5 3.2 3.4 7.1ExportsaspercentofGDP 20.4 20.6 22.8 24.0 30.6 32.0Numberofexporters 200 250 800 500 1,800 3,465ExportsandimportsaspercentofGDP 43.3 40.9 49.3 43.9 55.7 60.3Averagenominaltariff(percent) 75.0 22.0 10.0 18.0 20.0 15.0Indexofnominaltariffs(1974=100) 100.0 29.3 13.3 24.0 26.7 20.0Realexchangerate(1974=100) 100.0 92.4 87.6 103.7 147.4 157.0Foreigndebt(billionsofU.S.dollars) 4.0 5.3 10.9 17.2 20.0 16.3Foreigndebtratiotoexports 1.9 2.4 2.3 4.5 4.8 2.0Source:CentralBankofChile.

policyledtoasingleexchangerate,thereductionandlevelingoffoftariffsto10percent(excludingcars),andtheeliminationofquotas.Thesewereevenenactedintoconstitutionallaw.

Theresultwasadramaticfallinprotectionfortradableandimport-substitutinggoods.Withinthisframework,allprohibitionsonimportswereremoved,andtariffsfell.Thiswasnotcompensatedforbyahigherrealexchangerate-giventhemassiveincreaseinforeignloansbutnotforeigninvestment-whichleftthenationaleconomyextremelyvulnerable.Aftertheforeigndebtcrisis(1982-83),thegovernmenttemporarilyincreasedthedegreeofeffectiveprotection,optingforaformofstructuraladjustmentthatwouldallowtheconsolidationofanexportmodelandtradesurpluses.Itwasduringthistimethatthe"drawback"systemwasestablished,whichfavoredthedevelopmentofnontraditionalexports.

Withinaspaceoffifteenyears,then,theChileaneconomywasradicallytransformedthroughaunilateralprocessofopeningtotheexteriorthatwasmorepronouncedinthecommercialthanthefinancialsector.Duringthe1980s,thegrowthrateofexportswasnearlythreetimesthegrowthrateofGDP;thusexportsincreasedfrom20.4percentofGDPin1974to32percentin1989.Atthesametime,thelevelofopeningtotheexteriorrosefrom43.3percentto60.3percent(seetable2-3).

ItisinterestingtocomparethecasesofChileandMexico,whichexperiencedsimilarprocessesofopeningtotheexteriorbutshowconsiderablestructuraldifferencesintermsoftheimportanceofforeigntradeandthedegreeofspecializationofbotheconomies.In1990,exportsandimportswere26percentofGDPinMexico,whileinChiletheywereover68percent.Thesearestructuraldifferencesthatemergefromtherelativeimportanceoftheinternalmarket.Anotherrelevantfactoristhedegreeofrelativespecializationinboth

economies.Mexicoshowsamoreadvancedlevelofindustrializationandagreaterdispersalofexportgoods,ifgasolineandcopperareexcludedfromthecalculations.

1

ItshouldnotbeforgottenthattheprincipalcompetitiveadvantageofChileanexportswasnotsomuchlowwages-asisthecasewiththemaquiladorasinthemajorityofLatinAmericancountries-butratherthecountry'svastquantitiesofrenewableandnonrenewablenaturalresources,forwhichthereisahighlevelofinternationaldemand.Thishasbeenthecaseparticularlyformining,fishing,andforestry.Forfruit

exports,lowwageshavebeenimportant,althoughprincipallybecausetheyensureverylargeprofitsforproducers.

PricePolicy

Oneofthemaintransformationscarriedoutbythestatewastheeliminationoffixedpricesnegotiatedwiththeprivatesector.Between1973and1983,nearly3,000pricecontrolswerelifted-manyatatimeofhyperinflationandrealignmentofrelativeprices(1973-74)-althoughthemilitarygovernmentretainedcontroloverstrategicpricescentraltomacroeconomicplanning.Therelativesuccessofthisstabilizationpolicy(intermsofinflationcontrol)openedthewayforamonetaristpolicy,inwhichanattemptwasmadetodevelopaneconomicstrategybaseduponthemonetaryapproachtothebalanceofpayments.Foratimemarketswereautomaticallycoordinatedthroughtheuseoftheexchangerateasananchor.Giventheabundanceofforeigncredit,however,thispolicyledtomassiveforeigndebtandthecrisisof1982-83.

Thissetbackheraldedalessorthodoxformofneoliberalism.Thestructuraladjustmentofthe1980swasbasedontherealignmentofrelativepricestoincreaseexports.Marketcoordinationdidnottakeplaceautomatically,butthroughmini-devaluationsintheexchangerate,"suggested"(inreality,controlled)interestrates,fixingofminimumwagessothattheirgrowthwasalwayslessthaninflation,anagriculturalpricingpolicythatfavoredtherecoveryoftraditionalagriculture,andanindexedtariffpolicy.Thisrepresentedaformofindirectregulationofrelativepriceswiththreeclearprinciples:raisingtherealexchangerate,increasingfiscalincome,andreducingrealwages.

ThePrivatizationofPublicFirms

AlthoughawaveofprivatizationssweptovermostLatinAmerican

countriesduringthe1990s,thiswasnotthecaseinChile,wherenearlyallpubliccompanieshadalreadybeenprivatizedbetween1973and1990.Ofthe25banks,nearly500companies,and3,700farmsunderstatecontrolin1973,only41firms(includingCODELCO)andonebankwerestillinthehandsofthegovernmentin1990.

2

PrivatizationinChiletookplaceinvariousstagesandinvolvedanumberofdifferentapproaches.Duringthefirstphase(1973-74),firmsthathadbeentakenoverunderPopularUnitywerereturnedtotheiroriginalowners.3Inthemajorityofcases,thisoccurredduringthefirstmonthsofthemilitarygovernment(duringDecember1973,around

260firmswerereturned).Atthesametime,compensationwasgiventoNorthAmericanmultinationals,especiallytothoseaffectedbytheexpropriationofthecopperandtelecommunicationsindustries.Thesepaymentsamountedto$1.3billionat1988prices.

Thesecondstage(1975-82)wasconcurrentwithliberalizationofthefinancialsystemandoftrade.CORFO,thestateagencyresponsibleforadministeringpublicfirms,solditssharein135companiesthroughauction.

4Thisgreatlystrengthenedcertainnationaleconomicgroupsandledtoacentralizationofcapital,whichwasconsiderednecessaryfortheoperationoftheneweconomicmodel.Nevertheless,atthebeginningofthe1980sstatecompaniesstillhadasubstantialpresenceintheeconomy.Sixoutofthetenbiggestcompaniesinthecountrybelongedtothestateatthetime.

Thethirdstage(1983-85)representedastepbackintheprivatizationprogram,astheexternaldebtcrisisledtothebankruptcyofeconomicgroupsthathadtakencontrolofmostoftheprivatizedbanksandfirms.Thestateintervenedinthefinancialsystemandinanimportantnumberoflargecompanies.ButshortlyafterwarditbegantoreprivatizebanksthathadbeenrestoredtogoodhealththroughthepurchaseoftheirliabilitiesbytheCentralBank.Ineffect,thiscreatedadebtthatwouldremainonthebooksoveranindefinitetimeperiod.

Thefourthstage(1985-89)affectedtwotypesoffirms:thosethathadbeenthesubjectofstateinterventionduringtheexternaldebtcrisisandlargepublicutilities.TheproceduresfollowedduringthenewprivatizationsweresimilartothoseinotherLatinAmericancountriesandallowedtheparticipationofforeigncapital,whichbegantoinvestasneverbefore,takingadvantageoftheperiodof"popular

capitalism"-atermthatwasinvogueatthetimebuthassincegoneoutoffashion.Formsofprivatizationrangedfromtheclassicsystemofbiddingbybusinessgroupstotheconversionoftheexternaldebt(debt-equityswaps),aswellasthedirectsaleofsharestoindividuals.5

Thefourthwaveofprivatizationalsoincludedstatefirmsthat,untilthemiddleofthe1980s,wereefficientandgeneratedsurplusesforthestate.Someofthesecompanies(suchastelephonesandelectricity)hadbeenestablishedbetween1940and1950withtheaimofplayingafundamentalroleinnationaldevelopment.Duringtheperiodfrom1985to1990,andevenaftertheplebisciteofOctober1988,whichPinochetlost,somethirtycompanieswererapidlytransferredtotheprivatesector.Theseincludedleadingcompaniesinmining,steel,electricity,telecommunications,andfoodproduction.Thestateincurredgreat

lossesonthesales.Itisestimatedthat,onaverage,theyweresoldforhalftheirrealvalue.Takingintoaccountonlythefirmsthatweresoldin1986-87,oneanalystcalculatedalossof$600million.

6Despitethefactthatprivatizationgeneratedfiscalrevenues,italsoproducedasharpdeclineinstateincome.Ithasbeenestimatedthatbetween1990and1997thestatewillloseapproximately$2.5billion,whichrepresentsalmost8percentofChileanGDP.

TheLiberationandExpansionofMarketForces

Thedismantlingoftradebarriersandcontrols,theprivatizationoffirms,andincreasingaccessto"macro-markets"between1973and1990ledtoasignificantexpansionofmarketforcesinsuchfieldsasfinance,labor,andland.Newmarketswerealsoestablishedinsocialsecurityandhealth.Thedevelopmentofmarketsinareaswheretheyeitherhadnotexisted,orhadbeenstronglycontrolledbynaturalmonopoliesorsectoralpressures(business,professional,orlabor),ledtoadismantlingandreconstructionofmanysocialnetworksandtotheintroductionofnewformsofdisciplineontheactionsofeconomicagents.Itisimportanttonotethatthisprocessdevelopedmorerapidlythanthecreationofrulesorregulatorymechanisms,eitherformalorinformal.Therefore,althoughtheneoliberalreformsaimedtofreeupmarkets,deregulationproducedchaoticsituationsbecausethestatecouldnotlimititselfsolelytoasubsidiaryroleandwasforcedtomakesubstantialinterventions.Thus,althoughthepowerofprivateeconomicgroupsincreased,thestateretaineditscentralrole.

LiberalizingCapitalMarkets

Thedevelopmentoffinancialmarketsandthereorganizationofthebankingsystemwerethecentralelementsofeconomicmanagementinthe1980s.From1974on,theprivatefinancialsectordeveloped

veryquicklyinacontextofabnormallyhighratesofinterest.ThisculminatedinthemostprofoundcrisisinthehistoryoftheChileanbankingsystem.

ReorganizationoftheFinancialSector.

Until1973thefinancialsystemhadbeenmadeupofanumberofsmall-scaleprivateinstitutions,averylargestatebank,andasavingsandloanssystem(SINAP)thatstrictlybelongedtoneithertheprivatenorthepublicsector.Thescantimportanceofthefinancialsectorcanbeseeninthefactthatitrep-

resentedonly4.5percentofGDPinDecember1970.Thefinancialsystemwasdominatedbythepublicsector,whichrepresented31percentofthetotal,followedbySINAPwithasimilarshare,privatecorporationswith27percent,andfinallytheprivatebankingsystemwithonly12percent.

Theprocessofchangethatwasbegununderthemilitaryregimedemandedasapriorconditionthereorganizationofthefinancialsectorinordertoforcetheexistingbusinesssector-thenfinanced,subsidized,andsupportedbythestate-tobecomeefficient,notthroughorganizedoradministeredcapitalism,butthroughmarketmechanisms.Theprocessoffinancialliberalizationandcentralizationproceededrapidly.AssoonasthecountryhadbeenbroughtundercontrolinDecember1973,interestrateswerefreedcompletely,removingallrestrictionsonprivateloans.Thenin1975,allbanksundertheauthorityofCORFOwereauctionedoff.Theoretically,therewerelegallimitsontheownershipofbankingassets,andthestatewasforbiddentoinvestinthesector.Nevertheless,thesestructureswereunsuccessfulinpreventingparticipationintheprivatizationprocessbymanycompaniesbelongingtothesameowners.Facedwiththissituation,thegovernmentabolishedlegislationcontrollingtheownershipofbanksin1978.

Oncethemarkethadbeenfreed,newinstitutionsemerged.In1974authorizationwasgivenfortheformationofprivatefinancialorganizationsthatcouldlendmoneytofirmsandindividuals.Inordertocompetewiththebanks,theseorganizationscapturedfundsatahigherinterestrateandlentthematlowerrates.Thisledtospectacularbutultimatelyinsolventgrowth,forcingtheauthoritiestodeclareseveralinstitutionsbankrupt.

7Attheendof1976,thegovernmentfounditnecessarytocallanabrupthalttotheexperimentwithunregulatedbankingandtoincrease

sevenfoldtheminimumamountofcapitalneededtosetupafinancialinstitution.

Duringtheearlyyearsofthemilitaryregime,guidelinescoveringforeigninvestmentwerealsosubjecttodramaticchanges.Attheendof1974,restrictionsonforeignbankinvestmentinChilewerelifted,andinJanuary1977ChileformallywithdrewfromtheAndeanPact,thusremovingeveryobstacletothistypeofinvestment.

Asnewformsofprivatebankingemerged,thepowersoftheoldfinancialsystemwerereduced.InJanuary1978,forexample,themonopolyformerlyenjoyedbytheCentralBankonfinancingproductiveactivitiesthroughpreferentialloanswasendedandtheprivatebankingsystemallowedtoengageinsimilaractivities.Bythistimeaswell,

savingsandloanassociations,whichformedanimportantpartofthetraditionalfinancialsector,hadbeenmanipulatedinamannerthatquicklybroughtabouttheirdownfall.Attheendof1974,theywereallowedtoundertakenewactivitiesthatincludedloanswithoutinterestraterestrictions.Thenafewmonthslater,inJune1975,thegovernmentrestrictedwithdrawalsfromthesavingsaccountsofassociationstooneamonth.Giventhatthebankscouldundertakethesameoperationswithoutrestrictions,therewasamassivefallinconfidenceamongsavingsandloancustomersandaseverecrisisinthesectorinSeptember1975.Inoneyear,thetwenty-oneexistingassociationswerereducedtoone,andthelatterdisappearedcompletelyinApril1980.

Theweakeningofthesavingsandloansystemwasaccompaniedbyaparallelgrowthinthebankingsystem.

8Nevertheless,thelargenumberofbanksandfinancialsocietiesdidnotleadtoasubsequentfallininterestrates,whichstoodatsixtimesthelevelofinternationalrates,despiteaperiodofexcessliquidity.GrowingfinancialdifficultieseventuallyforcedtheCentralBankto''suggest"asystemofinterestrates,apracticethatwasnotabandoneduntilDecember1987.

ExcessiveDebtandthe1982Crisis.

Spurredbyfaithintheself-regulationofthemarket,themilitarygovernmentremovedallrestrictionsonforeignborrowingbybanksattheendof1979andallowedprivateindividualsorcompaniestoreceiveloansinforeigncurrencyaswell.Theobviousconsequencewasafurtherincreaseinforeigndebt.9Mostofthismoneywasdestinedforconsumptionorforthepurchaseoffirms,manyofwhichwerebankrupt;thustheaccumulationoffinancialcapitalledtoa

massivegrowthin"papercompanies,"withverylittleproductiveinvestment.

ThebeginningofthedecadesawaninternationalrecessionthatunleashedafinancialcrisisinChile.InMay1981,oneofthebiggestprivatefirmsinthecountry(CRAV)collapsedundertheweightofdebt,draggingotherfirmsandbanksdownwithit.Interestratesincreasedstillfurther,provokingamassivefinancialcrisis.InDecember1981,thesuperintendentofbankingannouncedthatfinancialinstitutionsowed$2.5billion-doublethecombinedcapitalofallofthem.Thecrisisdraggedonthrough1982,andthescaleofthecatastrophewasobviousbyAugustofthatyear.Loansworth$1.236billionhadenteredthecountry,with$1.148billionleavingintheformofinterestandamortizations.Twentypercentofthebankswithforeigndebtwereinarrears.

From1981until1984,emergencyconditionsprevailed.TheCentralBankboughttheoverduedebtoftheprivatebankingsystem.Byearly1982,nationalreserveshadfallenbyabilliondollarsandthedailydemandontheCentralBankbythebankswas$22million.ThedoublingofthepriceofthedollarinMay1982ledtoaworseningofthedebtcrisis,forcingthegovernmentintoacompletereversalofformerpolicy.OnJanuary13,1983,threeinstitutions(withalevelofdebtmorethanthreetimestheirassets)wereliquidated.Anotherfive(withdebtsoftwicetheirnetworth)weretakenover,whiletwowerekeptunder"observation."Withinthefollowingtwoyears,fourteenoutoftwenty-sixnationalbanksandeightoutofseventeenfinancialinstitutionscameunderstatecontrol.Paradoxically,theneoliberalgovernmentthereforecametoexercisegreaterstatecontroloverthefinancialsectorthanhadbeenthecaseduringthegovernmentofSalvadorAllendebetween1970and1973.

ThedebtoftheseinstitutionswassoldtotheCentralBank.Bytheendof1985thedepositsofbanksandinstitutionsthathadbeentakenoverbythestaterepresented98percentofthedepositsoftheCentralBankand30percentofthedepositsofthenationalbankingsystem.Thesefiguresdonotincludefundsthatwerewrittenoff.Inaparallelprocess,negotiationstookplacefortherepurchaseofinstitutionsthathadbeentakenoverbytheCentralBank.Thustheprivatebankingsystemwassavedfrombankruptcybytransferringitsdebtstothestate.

Finally,themilitaryregimeabandoneditsfaithinthetotalderegulationofthefinancialsystemandinitiatedaperiodofstrictcontrolandvigilance.Thenewbankinglaw,passedin1986,placedlimitsonstateguaranteesfordepositsatthesametimethatitgavewidepowersofoversighttothesuperintendentofbanksandfinance.Suchapolicyreversalwasrequiredbytheneedtodealwiththeburgeoningpublic-sectordebt.By1988theCentralBankowedmore

than$7billionasaresultofitssalvageoperation.Yetatthesametime,tenbanksowedtheCentralBank$2.5billion.Althoughtherewasnofixedrepaymentdate-anirregulararrangement-thisobligedtheTreasuryandCentralBanktocoordinatepolicyandregulatethefinancialsector.

TheLaborPlanandtheDeregulationoftheLaborMarket

Aftertheviolentrepressionofthefirstmonthsandyearsofthemilitarygovernment,therewasalengthyperiodwhentheregulationoflabormarketsinvolvedtheexclusionofunionsandcollectivebargaining.Anewdisciplinewasbroughttobearupontheworkforce,based

onrepressivemeasuressuchasthedissolvingofunions,aswellastheeliminationofindex-linkedwageincreases,theendofstatecontributionstounions,andtheprohibitionofcollectivenegotiations.Thisdisciplinewasreinforcedbyasituationofhighunemployment,inwhichthestateintervenedtocushiontheeffectsofalowdemandforlaborthroughimplementationofpubliclyfundedemergencyworkprograms.

In1979theperiodof"savagederegulation"gavewaytooneoflegislatedderegulation,asanewlaborplanwasintroducedtoreplacetheoldlaborcodeof1931.Theplanrecognizedtherighttojoinaunion,therighttocollectivenegotiation,andtherighttostrike.Nevertheless,theserightswerecircumscribedbyotherregulationsfavorabletoemployers.Thusunionaffiliationwasnotcompulsory(norisitnow),andemployershadtheauthoritytofireworkerswithoutgivingcause.Withinacompany,therecouldbemorethanoneunion,withunaffiliatedworkersenjoyingtheresultsofconcessionswonbytheunions.Althoughtherighttostrikewasallowed,sowastherightofemployerstolockoutworkersortemporarilyclosetheenterprise.Theemployercouldcontracttemporarystaffduringastrike,andstrikingworkerswerenotpaid.Finally,afteracertainnumberofdays,workershadtoreturntowork,acceptingthelastoffermadeorfacedismissal.Atthesametimethatthelaborplanwasintroduced,theoldindustrialtribunals,whichhadtendedtofavortheworkers,weredissolved.Asfinishingtouchestotheplan,centralunionorganizationsthathadmanagedtosurvivewereabolishedin1981andsomeunionleaderswereexpelled.

Unionleadersdidadapttothenewlegislation,sinceitwaspreferabletotheabsolutederegulationthathadexisteduntil1979.Incomparisonwiththesituationthathadprevailedbetween1973and1979,businessleadersfacednewrestrictions,buttheseweremorethanoffsetbytheflexibilitywithwhichtheycouldusethelaborforce.Thehighrateof

unemploymentalsoallayedanyfearstheymighthaveentertained.Thenumberofunionizedworkersfelltobelow10percentoftheworkforce,whiletheaveragesizeofunionswasreducedbyathird,andthenumberofunionswiththerighttonegotiatefellbyhalf.Notuntil1988didthissituationbegintoimprove.

Withthelaborplan,labormarketflexibilitybecameahallmarkofbusinesspracticeintheformalsectoroftheChileaneconomy.Endingthesystemofcollectivecontractsanddevelopingamodelofflexibleindividualcontracts(withtheexceptionofworkersinthestatecopperindustryandtheCentralBank)increasedtheabilityofthefirmtoimposechangesinorganization.Thisreducedfunctionaldifferentia-

tion,encouragedsubcontracting,andincreasedtemporaryorfixedtermcontracts.Reducingthecapacityofunionstoorganize-whetherthroughrepression,theintroductionofnonunionizedlaborrelations,orincreasingdifferentiationwithintheworkforce-gaveemployersmuchgreaterroomformaneuver.Finally,thestatepolicyofreducingtheimportanceoftheminimumwageallowedfurthererosionofanyfixedcomponentinwageswhileincreasingthescopeforvariationinlaborcosts.

ExpansionoftheLandMarket

Until1964thepredominantformofpropertyintheChileancountrysidewasthetraditionallargelandholding,orestate,knownasthelatifundio.

10Chileanagricultureduringthisperiodwasorientedtowardtheinternalmarketanddependeduponstatesubsidiesprovidedforthepurposeofreducingthepricesoffoodproductswithalowincomeelasticityofdemand.Farmoutputwasvirtuallystagnantformanyyears,andsectoralproductivitydeclinedduringthe1950satanannualrateof0.4percent.Inconsequence,Chileregisteredatradedeficitinagriculturalproducts,andthesectorfellfurtherandfurtherbehindinrelationtotherestoftheeconomy.

Nevertheless,thereweresomesignsofchangeintheagriculturalsectorfromthe1940son-related,amongotherfactors,totheincreasingfragmentationoflargelandholdings.Between1955and1965,thenumberofagriculturalholdingsdoubled,toreach25,000.Attemptstomodernizeproductionwereheldbackbythelackofgenuinelandmarketsaswellasbyold-fashionedmanagementtechniques.

Attheendofthe1950sandthebeginningofthe1960s,analyses

suggestedthattheextremeconcentrationofpropertywasoneoftheprincipalfactorsimpedingagriculturaldevelopmentandlimitingthecontributionofthissectortothenationaleconomy.Aconsensusemergedthattheresponsibilityforallnationalills-realorimaginary-couldbelaidatthedoorofthelatifundioandthatitwouldbeimpossibletoadvancewithoutincreasingthesupplyoffoodstuffsbybringingthepeasantryintoacloserrelationshipwiththelandandthemarket.Inordertoendthelatifundiosystemandcreateefficientagriculture,agrarianreformwasproposed.

TheprocessbeganduringthepresidencyofEduardoFrei(1964-70)andgatheredmomentumunderthePopularUnitygovernment,withthesupportofanimportantpeasantmovement.Between1964and1973,morethan5,000holdingswereexpropriated,covering10million

hectares,equivalentto60percentofthecountry'sarableland.

11Itcanbesaidwithoutexaggerationthatby1973therewasnotasinglelatifundioremaininginthecountry.Yetdespiteexpectations,themilitarycoupdidnotbringaboutareturnofthelatifundio.Instead,theauthoritarianregimechosetogiveanewtwisttotheprocess,acceleratingtheprivatizationofagriculturalpropertybutalsorestructuringitandfavoringthegrowthofamarketeconomyinagriculture.

Thefirststepwastoreturnsomeoftheexpropriatedlandtoitsoriginalowners:30percentofthe10millionhectaresthathadbeenexpropriatedwastreatedinthisway.Another10percentwasreservedforthestate,and31percentwassoldtonewowners.Theremaining29percentwasgiventoex-tenants.

In1978alawwaspassedthatofficiallypermittedthesaleofland.Renting,landauctions,andtheformationofprivatecorporationsthusbecamenewpossibilities.Atatimewhencapitalmarketswereundergoingliberalization,itwaspossiblefor"economicgroups"tomakedifferenttypesofinvestmentlinkedtoagriculture.Theserangedfromexportloanstocommercialcredit.Agriculturebecamemoredynamicandmoreorientedtowardtheexportsector,particularlyfruit.Italsogrewmoreindustrialized:"packings"and"tradings"becamecommonexpressionsinthecountryside.Newfirmsandstructuresemerged,which,inthecaseoffruitproduction,represented10,000industrializedfarmstiedtotradingcompaniesthatexportedtomarketsindevelopedcountries.AndthevalueofChileanagriculturalexportsrosefrom$21millionin1973to$683millionin1988-amultipleof33.

Theexportsectorwasconcentratedoverwhelminglyinthecentral

valley,buttherewasalsoasharpincreaseinproductivitywithintraditionalagriculturethroughoutthecountry.Thisledtotheexpansionofintermediatecitiesandnewcentersofregionaldevelopment.Changesalsotookplaceintheforestrysector,wheretherewasanewconcentrationofproperty.Together,thesedevelopmentsledtoaboominagricultureandforestryduringthe1980s,favoredbytheincreaseintherealexchangerate,statesubsidies,andasubstantialimbalanceinlaborrelationsbetweenownersandworkersinthecountryside.

TheReformoftheSocialSecuritySystem

Amongthemostimportantofthemodernizationsundertakenbytheauthoritarianregimewasthereformofsocialsecurityin1981.Thistransformedsocialsecurityintoasystemofprivatesavingsadministeredbyprivatecapital.

Since1924Chilehaddevelopedasystemofsocialsecuritywithwidecoverageforoldage,incapacity,anddeath,aswasthecaseforsimilarprogramsinEurope.Themajorityoftheurbanpopulationbelongedtooneofthreeschemes:thesocialsecuritysystem,thepublicemployees'fund,orthefundforprivateworkers.Thestatewascompletelyresponsibleforadministeringthesewelfarefunds.

By1981therewasastrongconsensusthatthesystemwasinadisastrouscondition.Itwasbaseduponover2,000generallawsand3,000complementarylaws.Therewerethirtysocialsecurityofficesandseventywelfareservices,aswellasnumerouscomplementaryorganizations,andcomplaintsregardingmaladministrationwerewidespread.Overandaboveadministrativeproblems,however,therewasacleareconomicproblem.Resourcesdevotedtosocialsecurity(includingfamilyallowances,pensions,andotherformsofsocialsupport)grewfromalmost20percentoffiscalexpenditurein1973to50percentin1980.

ItisinterestingtonotethatthereformofthesystemdidnotoriginateintheFinanceorEconomicMinistries,butratherintheMinistryofLabor,whichwasrunatthetimebyJoséPiñera,aHarvard-trainedeconomist.ThearrangementproposedbyPiñeraandhisassociateswassimple:therewouldbenosharedresponsibilitiesorstateadministration.Instead,eachemployeewouldbeobligedtosaveasignificantpartofhisorherincome-notlessthan10percent-andhanditovertoaprivateentitythatwouldberesponsibleforinvestingit.Theseentities,whichweretobecomeknownasAFPs(pensionadministrationfunds),wererequiredtoguaranteewiththeirownassetsthemoneysdepositedwiththem.ThisgaveworkersacertaindegreeofsecuritywhenchoosinganAFP.ThesystempermittedmemberstoswitchtheirsavingsfromoneAFPtoanother,buttheirlevelofpersonalsavingswastheonlyfactordeterminingfinalbenefits.

Atthesametime,thecreationoftheAFPshadtheimportanteffectofpermittingtheformation,practicallyovernight,ofanewbusinessclassthatdidnotneedlargeamountsofitsowncapitalinordertoestablishitself.AllthecapitalthenewempresariosneededcamefromthemembersoftheAFPsthemselves.

Thestateassigneditselfaminimalroleinregulatingtheoperationofthesystem,anditguaranteedaminimumpensionforworkerswhocouldnotfinancethemostbasiccontributionsduringtheirworkinglife.Workerswereexpresslyforbiddenfromparticipatinginthenewformofadministration.Therewasabsolutelynotendencytowardjoint

managementoranyotherkindofvaguelysocializingformula,suchascooperatives.Pensionfundswerecentralizedinprivatehands;itwasassumedthatthiswouldbethebestguaranteefortheworker.

Curiously,workersswitchedpensionsystemswithsurprisingease.Withinayear,almost30percentofthemhadmadethechange.Itisnotclearwhetherthiswasduetotheexcellenceofthesystemorbecause,inthedepressedworldofincomesandpensionsin1980,thestatehadpromiseda10percentwageincreaseforthosewhomadethechange.Atanyrate,thereformsof1981broughtaboutanacceleratedliberalizationofthepensionsystem.Theoldsavingsfundswerepreventedfromtakingonnewmembers,andonlythosewhohadalreadyreachedoldagewerepermittedtoremainwithintheearlierprograms.

Ayearandahalflater,economiccrisisforcedthestatetotakeovertheAFPs.Shortlyafterward,however,theywereputupforsale,andsomemergerstookplace.Thisinturnallowedtheentranceofforeigncapital.ThusofthefourteenAFPsinChile,morethanhalfarecontrolledbyforeignconsortia.Atthesametime,twoAFPscontrolmorethan60percentofthetotalaccumulatedcapital.

Thereformofthesocialsecuritysystemallowedthemassiveresourcescreatedbyactiveworkerstobechanneledtowardtheprivatesector.Itwaspurelyandsimplyacaseofliberatingfundsforcapitalistaccumulation.Nevertheless,theweaknessesofthefinancialsystemweresuchthattheactivitiesoftheAFPshadtobecloselyregulated.Theseregulations,designedintimesofcrisis,seriouslylimitedtherangeofinvestmentpossibilitiesforpensionfunds,whichcouldbeusedonlyforlow-riskprojects,suchaslargeenterpriseswithasolidhistoryofearnings.Thisledtoaprogressiveaccumulationoffundsthatcouldnotbeconvertedintoproductivesavingorinvestment.

Onlyin1992didparliamentdebateaprojecttoreformthecapitalmarkets,devotingparticularattentiontotheAFPs.Theresultwasanewlawthatbroadenedinvestmentopportunities,whilealsolimitingtheexerciseofmonopolycontrolandimprovingthelikelihoodthatcontributorswouldbeinformedoftheirinvestmentsandoftheadministrativechargesinvolved.

FiscalAdjustmentandSocialServices

Finally,duringthefirstdecadeofthemilitaryregime,aprofoundfiscaladjustmenttookplace,dedicatedtoreducingtheimportanceoftariffsasasourceoffiscalincome,increasingtheefficiencyofindirecttaxation,andreducingspending.Inthecaseofsocialpolicy,thisre-

ductionwastobebalancedbyincreasedtargetingofresourcestowardthepoorestsectors.

SinceChilehadanextensiveforeigndebt,reducingthefiscaldeficitwasessentialanddemonstratedthecapacityofthestatetogainautonomyfromthepressuresofdifferentsocialsectors.Atthesametime,normalizingthefinancesoftheCentralBankwasalsoakeyindicationofthecapacityofthegovernmenttoconfronttheconstantimbalancesofaperipheralorsemiperipheraleconomy.

Thisledtoabreakwiththeoldpatternofgrowthintheprovisionofsocialservices.Overanumberofdecadesbefore1973,servicessuchashealth,socialsecurity,telecommunications,andinfrastructurehadbeenrunbythestateandwereorientedtowardsatisfyingthedemandofhigh-andmiddle-incomegroupsbeforebeingextendedtopoorersectors.Infact,muchofthelegitimacyofthestatewasderivedinthisway.Afastexpansionofpublicservicesledtoagrowingleveloffiscaldeficit.Italsoledtotheincreasingimmobilityoflargequantitiesoffinancialcapital.

ThereformsthattookplaceinChilecreatedanewformoflegitimationverydifferentfromtheoldbureaucraticpopulistmodel.Theprivatizationofsignificantareaswithinthepublichealthandeducationprograms,involvingopenorimplicitsubsidiesforthosechoosingtosatisfytheseneedsthroughthemarket,allowedhigh-andmiddle-incomegroupsaccesstoservicesofbetterqualitythanthoseoperatedbythepublicsector.Atthesametime,thereductionofsocialspendingandincreasedtargetingtowardspecificprojects(suchasthereductionofinfantmortality)ledtoanoveralldeteriorationinaccesstopublicservicesforlow-incomegroups.Partialprivatizationinhealthandeducationalsofreedupsurplusesthatweretrappedinthepublicsectorandconvertedthemintoprivatecapital.

TheMythofthe"Subsidiary"State

Thereisafalse,albeitwidelyaccepted,ideathatneoliberalisminChileinvolvedastatethatintervenedina"subsidiary"fashiononlywhenprivateenterprisewasnoteffective,andthatmarketswerelefttofunctionfreelyorsavagely(dependingonone'sviewpoint)withouttheinterferenceofthestate.Theideathattheneoliberalstateworkedonlytoliberatemarkets,whilewithdrawingprogressivelyfromtheeconomy,takesnoaccountoftherealroleofthestateinChilebetween

1973and1990.Onthecontrary,thestatewashighlyinterventionist,andfivebasicargumentssupportthiscontention.

First,traditionalindicatorsofthelevelofpublicspending(excludingpublicdebtrepaymentsandfiscalrevenue)asapercentageofGDPwerehigherunderthemilitaryregimethanin1961-70.During1983-88,averagegovernmentspendingasaproportionofGDPwas25.1percent,whilein1967-72itwas23.6percent.Between1983and1988,averagetaxincomeasaproportionofGDPwas25.6percent,comparedwith21.2percentbetween1967and1972.Fiscalrevenueswereindexedsothattheywouldnoterodewithinflation.

Second,althoughthepublicsectorwaslargerin1973thanitisatpresent,stateagenciesweresubjecttomultiplesocialandpoliticalpressuresthatpreventedthemfromactinginacoherentmanner.ThiswasamajorproblemforboththeFreiandAllendegovernments.After1973thereversewastrue:thestatewasalmosttotallyprotectedfromsocialpressure,andthepoweroftheexecutivewasvirtuallyunlimited.Asthestatehasgrownmorecompact,itsstructurehasalsobecomemorehierarchical,whichhasincreaseditscapacityforinterventioninsocietyandtheeconomy.

Third,itshouldnotbeforgottenthatitwaspublicownershipofthecopperindustry,nationalizedduringtheAllendegovernment,thatgavethemilitarygovernmentimportantfiscalrevenues,preventingitfromhavingtodemandmorefromtherestoftheeconomy.IthasbeenestimatedthatthenationalizationofcopperaloneprovidedthestatewithadditionalresourcesofmorethanU.S.$10billionbetween1974and1989,

12whichhadaverypositiveeffectonthebalanceofpaymentsandfiscalaccounts.

Fourth,inspiteofthefactthattherangeofproductsandactivitiesunderpricecontrolwasdramaticallyreducedfrom1973on,thestatemaintainedstrategiccontroloverrelativeprices.Throughsystematicchangestotheexchangerate,interestrates,publictariffs,andagriculturalprices,thestatetookanactiveroleindeterminingthelevelofpricesandprofitsintheeconomy.Nolesssignificantwerecoercivestateregulationsoflabormarketsandwages.Throughthesimplemechanismofrestrictingunionactivityandcollectivenegotiations,wageswerehelddown,especiallyforlargenumbersofpeopleengagedinprecariousemployment.13

Finally,itisimportanttonotethatduringtheperiodbetween1985and1988,halftheincomeofextremelypoorgroupsinChilecamefromsubsidiesandfiscalsupport.Alloftheseindicatorsbearwitnesstothe

fiscalandmonetaryimportanceofthestateand-afterthecrisisof1981-83-toincreasingstateregulationoftheeconomyinwaysthatwereneverneutralbutwereintendedtopromotespecifickindsofbehavioronthepartofeconomicagents.

Infact,duringthe1980s,inthemiddleofstructuraladjustmenttowardanexport-basedeconomy,theneoliberalstate-farfrombeingreducedtoasubsidiaryrole-actuallystrengtheneditspositionintheChileaneconomy.Takingahistoricalperspective,itisclearthat,givenadeepeningcrisisandgrowingresistancefromcivilsocietyatthistime,therealizationofthefree-marketutopiarequiredanextensivestrengtheningofthestate.

Governmentattemptstoliberalizemarketssufferedserioussetbacksduetomarketfailures,andtherewerethusobjectivelimitstofurtherderegulation.Foronething,therewasaseriesofpublicgoodsandservicesthatcouldonlypartiallybeprovidedbymarketsalone,suchashealth,education,andtheenvironment.Thismeantthatthesphereofactionofthestatehadtoremainconsiderablywiderthanthatenvisagedbyneoliberaldoctrine.Second,giventhattheimmensemajorityofmarketsdidnotconformtotheidealizedneoclassicalmodel,theneedforregulationofprivatizedindustriesquicklybecameapparent.Thiswasespeciallythecasefornaturalmonopoliesandmarketswithprofoundinformationimbalances.Thebankingindustryandtelephoneandelectriccompaniesweregoodexamplesofthis.Furtherproblemsrequiringstateintervention,includingunfaircompetitionanddisorganizedmarkets,emergedwiththeopeningtotheexterior.

Attemptsasregulation,whichbegantobeimplementedduringthe1980s,facedfairlyseriousobstacles.Theseincludedtheweaknessofsomestateinstitutionswhendealingwithpowerfuleconomicgroups,theabsenceofadequateinformationsystems,andstrongpressure

fromtechnocratswho,intheirconversionintoeconomicgroups,hadtakenwiththemanextensiveknowledgeofthefunctioningofthestate.Nevertheless,therecontinuedtobeaninexorabletendencytowardtheconstructionofnewformsofregulationduringthe1980s.Paradoxically,theradicalnatureoftheneoliberalsubsidiarystaterequiredanincreaseinpublicintervention.

InstitutionalTransformations

Thusweconclude,first,thatthefree-marketreformscouldbeimplementedonlybecauseoftheexistenceofastrongstate;andsecond,

thattheconsequencesofthesereformsdidnotincludeaweakeningofthestate.Althoughthestateretiredfromsomefunctions(suchaspublic-sectorcompanies),itwasstrengthenedinothers(macroeconomicpolicy).ButthestudyofinstitutionalchangesoccurringwithinChileancapitalismshouldnotfocusexclusivelyonwhatoccurredinthesphereofstateandmarkets.Thefundamentalchangestakingplacebetween1973and1990involvednotonlythepublicsectorandmarketsbutalsoprivate-sectorinstitutions,suchaseconomicgroupsandfirms,aswellasmechanismsofcoordinationotherthanthoseofmarkets.

Duringthisperiod,economicinstitutions,likesocialstructures,weresubjecttosimultaneousprocessesofdismantlingandrestructuring.Thisprogresswassometimesconcealedbehindmorevisibletransformationssuchasderegulationandprivatization,whichcancreateadistorted-ifconvenient-viewofwhatwasactuallytakingplaceatthetime.Afterall,thegeneraldiscussionofatransitionfromstate-dominatedtofree-marketeconomy-withoutlookingtoomuchfurtherintospecificcases-providesacommonconsensusbetweenleftandright,althoughtheymightdisagreeastowhethertheconsequencesofthetransitionhavebeenpositiveornegative.

Partofthisconsensusrestsondescriptionsoftheexpansionofdecentralizedmarketsgovernedbypricemechanismsandtheconcomitantweakeningofoldcommandhierarchies.Nevertheless,coordinationamongprivateeconomicagentsdoesnottakeplaceinidealizedmarkets,withoutsubjectsandpowerrelations,butinunequalmarketsthatareinfluencedbypublicregulationsandeconomicgroups.Therearealsomanykindsoftransactions,involvingbothformalandinformalcontracts,thatgobeyondthelimitsofthemarket.

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InChile,asineverycapitalistcountry,coordinationamongeconomicagentstakesplacenotonlythroughmarketsbutalsothroughmechanismsofhierarchyandcommand.Intheprivatesphere,suchcommandtakesplacewithinthefirm.15Hierarchiesamongeconomicagentsappearwithinconglomerates,suchastheprivateeconomicgroupsthathavedevelopedsospectacularlyduringthepastfewdecadesinChile.Newtypesofformalandinformalsubcontracting,inwhichlargerfirmsimposeconditionsonanunequalbasis,arenowverycommon.ItisnoexaggerationtosaythatthegrowthofpowerfulconglomeratesandtheextensionoftheircontroloversmallerfirmshasbeenasimportantadevelopmentinrecentChileaneconomichistoryastheopeningtowardinternationalmarkets.

Itwouldappearsomethingofaparadoxthatinaneconomyincreasinglyopentotheworldmarket,internalhierarchicalorganizationswerestrengthenedratherthanweakened.Butthevastmajorityofmarketsarebasedonfirmsorgroupsthatdependfortheircompetitiveedgeontheirpowerandorganizationalefficiency.ThishasbeenclearlyseeninvariousAsiancountrieswithastronglinkbetweenthestateandeconomicgroupsandintheUnitedStateswiththecloselinkbetweencorporationsandthepublicsector(forexample,themilitary-industrialcomplex).

TheReorganizationofCapital:EconomicGroups

PracticallyallsectorsoftheChileaneconomyarecurrentlycontrolledbylargefirmsthatinturnbelongtoeconomicgroups.Morethanatanyotherstageinitshistory,Chileisdominatedbyconglomerates-nationalorforeign-thatwerestrengthenedbytheeconomicpoliciescarriedoutbetween1973and1990.Thedictatorialstatenotonlysavedthemfinanciallybutalsosoldthemefficientstatecompaniesatundervaluedprices,andthenresoldthecompaniesoftheeconomicgroupsthatwentbankruptinthe1981-83crisis.

Theneweconomicgroupsarenolongerbasedprimarilyon''paper"companies,butnowarecomposedoffirmswith"chimneys":inotherwords,theylinkfinancialandproductivesectors.Diversificationininvestmentappearstobethegoldenruleoftheprincipalgroups,andtheyalwaystrytogaincontrolovermarketleaders,thusobtainingmonopolyprofits.

Theconglomerateshavegonethroughalearningprocessthathasallowedthemtodevelopinadifferentwaythaninthepast.First,theyaremoreprofessionalthanbefore;and,evenwhentheyremaininthehandsoffamilies,youngergenerationsaregivenpostgraduatetraining.Second,ownershipismoreindirect.Thisisnotonlyfortaxpurposesbutalsotofreeupcapital.Thetendencyistocentralize

ownershipininvestmentsocieties.Third,theyaremorediversifiedandgovernedbyaprofessionallogicthatfacilitatesforwardplanning.Thefundamentalobjectiveistomaximizetherateofexpansioninordertoraisetheaverageprofitrate.Fourth,towardtheendofthe1980stheeconomicgroupsbecamemoreinternationalized,formingallianceswithforeignconglomeratesandmakingdirectinvestmentsinLatinAmericaandfinancialinvestmentsindevelopedcountries.Fifth,thenationalgroups

are"pricetakers"attheinternationalleveland"pricemakers"atthenationallevel.

TheeconomicgroupsaretheprincipalsourceofindependentdecisionmakingwithintheChileaneconomy.Notonlydotheymakedecisionswithregardtopricesandoutput;theyalsodecidethelevel,timespan,andlocationofinvestmentandhowsuchinvestmentsarefinanced.Thesedecisionsareoffundamentalimportanceforthenationaleconomy.Itisthereforeworthreiteratingthatthroughouttheperiodfrom1973to1990,thestatefavoredthegrowthofthesenationaleconomicconglomerates,whichhaveperfectedtheirinternalorganizationandgainednotonlybusinessexperiencebutalsoincreasingautonomyfromthestate.Theyhavealsoestablisheddirectlinkswiththeinternationalfinancialsystem.

TheTransformationoftheFirm

Whatactuallytakesplacewithinthefactoryorcompanywallsoftentendstobeoverlooked.Yetitisinthemicrocosmofproductionthatmanyoftheimportantsecretsofthiscapitalistrecoveryareultimatelytobefound.

Rationalization,1973-83.

Between1973and1979thewaywasclearedfortransformationofenterprisesthroughrepressionoftheunionmovement,enactmentofnewlaborlegislation,andthefiringofthemostcombativesectorsoftheworkingclass.Particularlyfrom1975on,therewasaprocessofintensecapitalistrationalizationassociatedwiththeremovalofobstaclestoforeigntrade.Thecrisisof1981-83wasthecatalystthatledfirmstostreamlinedramatically;wholedivisionswereremoved,workerssacked,andsurplusorobsoletemachineryscrapped.

Oneofthemoststrikingaspectsofthisprocesswasthereductioninverticalintegrationwithinfirms.Manyofthemnotonlygotridof

entiresectionsbutalsobeganasystematicpolicyofsubcontractingpartsoftheproductionprocessthattheyhadpreviouslycarriedoutthemselves.Fortechnicalreasonsthiswaslesspronouncedinindustrieswithcontinuousorsemicontinuousproductionprocesses.Butingeneraltheeconomicgroupspromotedaformallegaldismantlingoflargecompanies,creatingspecializedsubsidiarieswithadegreeoffinancialautonomy.Thishascontinueduntiltoday,notonlyinresponsetotheneedtorationalizeproductionprocessesstillfurtherbutalsotoenhancethemobilityoffinancialcapital.

Attheworkplacelevel,theprincipalchangeinvolvedtheincreasinglyintensiveuseofTayloristmethodsoforganizationandcontrol,whichcouldnotbefullyusedinthepreviousperiod.

16Duringthe1960s,manyownersattemptedwithlittlesuccesstorationalizetheirindustrialplant,buttherewerethreemainobstacles.First,thescaleofproductionwasgreaterthanthesizeofthemarkets,leadingtotheneedforamixtureofdiverseproductswithdifferentproductiontechniques.Thishadtheeffectofintensifyingproductionlineproblems.Second,laborlegislationandthestrengthoftheunionsproducedcontinuousresistancetorationalizationplans.Third,businesseswereoftenincapableofadequatelyincorporatingnewformsofmanagementandorganization.Thereforetheyalternatedbetweencompromisewiththeworkforceandattemptsatrationalization.Whentheseattemptsfailed,businesseswoulddemandcompensationfromthestate.

Nevertheless,duringthefirstdecadeofauthoritarianrule,alltheobstaclestorationalizationwereovercome.Inthefaceofexternalcompetition,andwithanauthoritarianstatethatwasalwayspreparedtouseanironhandinenforcingrepressivelaborlegislation,employerswereabletobreaktheunions,doawaywiththemodelofcollectivecontracts,anddramaticallyaltertheincentivesystem.Theresultwasnotonlyafallinwagesbutanincreaseincontrolovertheworkforceandabovealltheincreasedflexibilityintheuseoflabor.

Theownersachievedthreetypesofflexibility.Thefirstwasfunctionalflexibility,withthecapacitytorelocateworkersindifferentfunctionsordepartmentswithinthefirmandnoneofthelegalobstaclesorresistancebyunionsthathadmarkedtheperiodbefore1973.Thesecondwaslaborflexibility,withthecapacitytohireorfirewithverylittlelegalrestriction.Thethirdwasthecapacitytoreduce

wagesincrisissituationswithnoeffectiveresistance,giventhattherateofunionizationdidnotexceed12percent.

Themethodwasrepressiveandalwaysaccompaniedbysystematicattemptstocurbunionpower.Itwasfurtheraidedbydraconianlaborlegislation.Hencethedictatorialstatewasassociatedwithwidespreadauthoritarianpracticeswithinthefirm.Thisauthoritarianrationalizationwasimposedunderaone-sidedlogic;workerresistanceagainsttheeconomicmodelwasimportantatthenationallevel,butitcamefromoutsidethefactoryratherthanwithinit.Workerssimplydidnothavethecapacitytoorganizelargestrikes.Thefreedomofactionforownersandmanagersofenterpriseswasthusveryhigh;theycouldorganizeproductionassuitedthembest,andtheonlyrestrictionon

thespeedandintensityofchangewasthecapacityofthefirmitself.Thisexplainswhy,bythemiddleofthe1980s,theChileanproductionsystemwascapableofasustainedrecoverybasedonlowwages,heavyworkschedules,flexibleuseofthelaborforce,aggressivecommercialstrategies,andacompetitiveadvantageinminingandagriculture.

AuthoritarianTechnologicalModernization.

Althoughtechnologicalandorganizationalchangecharacterizedtheperiodfrom1983to1989,thissituationcontainedanimportantparadox.AgreatdealofevidencepointstothefactthatmoderntechnologieswerecombinedwithTayloristworkpracticesdatingfromthebeginningofthecentury.ThenoveltyinChilewasthereforenothingmorethanflexibilityintheuseoflabor,inconditionsthatdidnothingtoimprovetheemploymentconditionsoftheworkforce.Thisstrangecombinationofthenewandtheoldwasthebasisofwhathasbeencalledtheneo-Tayloristroadtomodernization.

17

Thesocialconsequencesofsuchaformofmodernizationhavebeenandcontinuetobeextremelyunsatisfactoryforthecountry.Ontheonehand,thereisabodyofworkerswithstablejobs,relativelyhighwages,andmultifaceted,creativetasks.Withoutconstitutinganew"laboraristocracy,"thisisaminoritygroup.Ontheotherhand,thereisagreatmassofworkerswithhighlyprecariousemploymentconditions.Thisincludesnotonlytemporaryworkersinthecountrysidebuthundredsofthousandsofsubcontractedworkerswhodonothavefixedcontractsortheabilitytojoinaunion,muchlesstheoptionofcollectivenegotiation.Theycarryoutmonotonoustasks,withnopossibilityofparticipatinginthemanagementofthefirm.

Furthermore,inbanksandservicecompanieswhereconditionsaresupposedlybetterfornonprofessionalworkers,anotherparadoxisapparent.Theveryrapidintroductionofnewinformationtechnologiesisconvertingtheofficeofthefutureintothefactoryofthepast,inawayreminiscentofGarson'sconceptofthe"electronicsweatshop."18Workersengageinrepetitiveoperations,leadingtoexhaustionandnervousdisorders.Thisharshuseofthelaborforceandtheworseningofcapital-laborrelationsisareflectionofthemethodsfavoredbyneo-Taylorism.

EstablishingProductionChains

IncreasingflexibilityandefficiencywithintheChileanproductionsystemisexplainednotonlybywhattookplaceinsidethefirm,but

alsobytheestablishmentofsubcontractingchainslinkinglargefirmswithsmallandmediumones,manycharacterizedbylowproductivity.Suchchainsexistinfruitproduction,fishing,andforestry,andtheyarebeingdevelopedinminingandthegarmentindustry.Telecommunicationsperformafundamentalroleinthisprocess.

Thereisaveryunequalpowerrelationintheseproductionchains,whicharedominatedbyoligopoliesbelonginginturntoeconomicgroups.Thesubcontractedfirmsoperatealmostasdepartmentsofabigfirm,althoughtheyareindependentofit.Withinthissystem,thereisacertainamountofcompetitionamongoligopoliesandanextremelyhighdegreeofcompetitionamongthesubcontractors.

Thesmallandmediumfirmsthatformpartofproductionchainsareoftwotypes:eithertheyarerelativelynewcompanieswhoseownersareprofessionalsortradespeopleofurbanorigin,ortheyareolderfirmsthathavebeenreconverted.Some(fruit)haveincorporatedmoretechnologyandcapital,andothers(fishing,wood)less,butallhavemodernizedinordertobecomepartoftheseproductionchains.Theworkersofsuchcompaniesarenonunionized,themajorityworkforlowwages,andtheyperformspecializedtasks.TheuseofTayloristmethodsismuchlessprevalentthaninthelargerfirm,butcertaintechniquesareimposedfromoutside.Theformsofspecializationrequiredbytheproductionchainand,inmanycases,thekindoftechnicaladviceofferedbytheoligopolisticfirms(asinthecaseoffruitproduction)tendtoreproduceTayloristpractices.

Theextensiveuseofsubcontractingallowslargefirmstoshiftcostsandriskstosmallerenterprises,whilesurplusesaretransferredfromthesubcontractedfirm(anditsworkforce)totheeconomicgroupthatdominatesthenetwork.Obviouslyitisdifficultforsubcontractedfirmstogrowintolarger,moremoderncompanieswhentheymusthavesuchashort-termhorizon,theybearmostofthebruntofchanges

intheeconomiccycle,thereisnoadequatestateregulationoftheirrelationswithcontractors,andthestatepermitsthemtotransferalloftheircoststotheworkforce.

TheConcentrationofPowerandIncome

Insum,therehasbeenanimmensetransferofsurpluses,operatinginfourkeydirections:

Fromthestatetolargecapital.Thistookplacefirstbetween1982and1983,whenthestateusedpublicfundstosolvethecrisisinthe

financialsector,andagainbetween1985and1989,whenthirtyefficientprofit-makingpublicfirmsweresoldatknockdownprices.

Fromwagestoprofits,orfromthepoortotherich.Thisisepitomizedinthefallofaveragerealandminimumwages.Thiswasnotsimplyacaseofwagesfailingtokeepupwithinflation.Asanoutcomeofaspecificgovernmentattackontheminimumwage,workersalsohadtoworkforfarlowerwagesthanhadbeenthecaseinthepast.Theprocessofexpropriationoftheincomesofthepoor-whoaremostlyworkers-wassointensethatby1988theshareofnationalincomeoftherichest10percentofthepopulationhadrisentoalmost42percent.Tenyearsearlierithadbeen35percent.

Thetransferofincometowardtheexportsector.Thiswaspossiblebecausebetween1983and1989therealexchangeraterosemuchfasterthanotherpricesintheeconomy(inotherwords,thepesoremainedrelativelyundervalued).Suchachangeinrelativepricessignifiedamassivetransferofresourcesfromsocietyingeneraltotheexportsector,dominatedbythebigeconomicconglomerates.

Theincreasingrateofdestructionofnaturalresources.Thecostofthisformofdeteriorationdoesnotshowupeitherinfirms'balancesheetsorinthenationalaccounts.Thereisacloserelationshipbetweentheexploitationofthelaborforceandthedestructionofnaturalresources,representingthe"transfer"ofsurplusextractedfromthenationalheritagetoprivateeconomicgroups.

3TheActors:FromClassestoElitesWhoweretheprincipalactorsinthisprocessofstructuraladjustmentthathadsuchanimpactuponChileansociety?Whatwastheroleplayedbythemilitary,thetechnicalteams,andthebusinesssector?

Asmentionedabove,politicaltransformation-themovefromdictatorshiptodemocracy-wasprincipallytheworkofanoppositiontothemilitaryregimethatbrokeawayfromaheterogeneousanddisruptivesocialmovementandmanagedtoinsertitselfintotheauthoritarianpoliticalinstitutions.Thisledtoarevivalofthecivilianpoliticalclassandtherenovationoftheoldpartysystem.Theidentificationoftheactorsinvolvedintheprocessofeconomictransformationwouldappeartobemorestraightforward,butisnotasclearasitseemsatfirstsight.

Twodifferentapproachesareoftenusedtoanswerthisquestion.Thefirst,ofastructuralnature,consistsofidentifyingthesocialgroupswhobenefitedmostfromtheeconomictransformationsandattributingtothemresponsibilityinthelastinstanceforthecorrespondingdecisions.Thesecondapproachinvolvesconstructingtheframeworkofrelationswithinwhichtheprincipaldecisionsweremade,placinginitthesubjectswhointervenedinthesedecisions,identifyingtheprocedureandconsistencyofthestateelite,andreconstructingtheirrelationswithsocialgroupsfromdifferentsituationsatcriticalmoments.

Followingthefirstoftheseapproaches,theanswerisfairlybrief.Intheshortandmediumterm,thosemostfavoredbytheeconomictransformationsthattookplaceunderthemilitaryregimecanbeidentifiedasthesmallnumberofconglomeratesoreconomicgroups

thatcametocontrol,inafewyears,theprincipalfinancial,industrial,andcom-

mercialinstitutionsofthecountry.Butinsociology,asincriminalinvestigation,itisnotenoughtoestablishwhobenefitsfromaneventinordertodetermineitsauthor.And,inthecaseofChile,thespecificinfluenceofthebusinesssector,includingthepowerfuleconomicgroups,wasconsiderablylessdirectthanisoftenthought.Anexaminationoftheactualhistoryofthesetransformationssuggeststhatthemediationofanelitewithautonomyfromtheimmediateinterestsofdistinctfactionsoreconomicpowergroupswasfundamentalinbringingthesechangesabout.

TheBusinessGremios

Theidentificationofthebusinesssectorasthedecisiveactorintheeconomictransformation(sometimesclaimedbythissectoritself),stemsfromaconfusionbetweentheoriginsofthemilitarygovernmentandtheoriginsoftheeconomicpolicythatitcarriedout.However,theyneedtobecarefullyseparated,asthisdistinctionchangedthecharacterofthegovernmentfromsimplyreactivetofoundationalorrevolutionary.

TheChileanbusinessclassplayedadecisiveroleintheoppositiontothesocialistgovernmentofSalvadorAllendeandPopularUnity,aswellasinitsdestabilizationandoverthrow.Duringthattime,businessorganizationsmoveddirectlyfromsectoralpressuretopoliticalstruggleandwerenotablysuccessfulinmaintainingthedisciplineoftheiraffiliates,particularlywhenitcametocallsforthemostradicalformsofmobilization.

Theoldersectoralorganizationsofbigbusinesshadpreservedforsometimetheirroleaseconomicpressuregroupswithouttransferringtheiractivitiestothepoliticalfield.(Theseincludedmanywithalonghistory,suchastheNationalAgriculturalSociety,foundedin1838;theCentralConfederationofCommerce,foundedin1858;the

NationalMiningSocietyandtheNationalIndustrialSociety,bothfoundedin1883;andmorerecentadditionssuchastheAssociationofBanksandFinancialInstitutions,createdin1943;ortheChileanConstructionChamber,foundedin1951.)Nevertheless,theycametogether,evenbeforethePopularUnitygovernment,intheConfederationofProductionandCommerce,withtheaimofdefendingtheroleofbusinessinsocietyandtherighttoprivateproperty.Theywereconcernedaboutthe"socializingthreat"thathadbeeninitiatedbytheagrarianreform,whichtheyfelttobeembodiedintheprincipalpoliticalforcesofthe

country(theCommunistandSocialistpartiesontheleft,aswellastheChristianDemocrats).

Withinthecontextofapoliticalrightwhosefortuneswereindecline,thecreationoftheconfederationattheendofthe1960ssignifiedanattempttounitetheownersofbusinessesasasocialclass,overandabovetheirspecificcorporateinterests,andtoincorporatemediumandsmallfirms.Thenumericalforceofthesesectors,aswillbeshownlater,wouldbedecisiveinfirstresistingpoliciesofstateexpropriationandlatermovingtoaquasi-insurrectionalposition.

Butsuchattemptshadnotbeencompletelysuccessfulinthepast.Forseveraldecadesbigbusinessorganizationshadencountereddifficultiesinunitingsmallbusinessesaroundthem.ThelatterwereorganizedprincipallyintheConfederationofRetailTradersandSmallIndustry(foundedin1938)andthetransportfederations(theChileanTruckOwnersFederationandtheNationalFederationofIndependentTaxis,bothfoundedin1953;theNationalFederationofChileanBusOwners,foundedin1958;andsmallerorganizations).Theseorganizationshadmaintainedadegreeofindependencefrom,andalsoenteredhabituallyintoconflictwith,theorganizationsofbigbusiness.Theyweredependentupontheevolutionofaninternalmarket,weremotivatedbyamiddle-classdiscourse,andmadeprotectionistdemandsonthestate(againstexternalcompetitionaswellasagainstmonopolisticcontrolofinternalmarkets).Theirleadershadhistoricallymaintainedcloselinkswithcentristornational-populistpoliticalcurrentsandtheyvigorouslyassertedtheirdifferencefromthebigbosses(whomtheypejorativelyreferredtoasthe"economicright").

TheperiodofPopularUnityofferedtheopportunitytoovercomethesehistoricdifferencesandreplacethemwiththelogicofaproprietaryclassdefendingcorporateinterests.Inthegovernment

programoftheforcesoftheleft,proposalsforexpropriationwerelimitedtolargeagriculturalpropertyandthelargefinancial,industrial,anddistributivemonopolies.Thiswaspreciselybecausetheleftrecognizeddiversityinthebehaviorofthedifferentleadersofthebusinesssector.However,thepopularbasethatconstitutedthegovernment'ssupportquicklydemandedmoreexpropriationthanthatcontainedinthegovernmentprogram.

Ashasalreadybeenmentioned,theclassbaseofradicalunionismcouldbefoundmuchmoreinsmallandmediumbusinessesthaninthelargeenterprises.The"antimonopolistic"reformsofPopularUnity,whichsoughttheallianceoratleasttheneutralityofthemiddlesectors,

didnotprovideimmediatesolutionsfortheworkersofsuchfirms.Yetitwasinthesefirms,preciselybecauseoftheireconomicweaknessandthehighsignificanceofwagesintheircoststructures,thatworker-ownerconflictoverwagesandconditionswasespeciallyacute.Thelackofimmediategovernmentpolicytowardthesefirmscreatedagapthatwouldbefilledbydirectpressurefromthemassesthemselves.

Limitedtocarryingoutitsreformswithintheframeworkofexistinglegality,andintheabsenceofadequatelegislationtonationalizefirmsthroughexpropriation,theAllendegovernmentresortedtotwoparallelmechanismsfortheformationofthesocialareaoftheeconomythathadbeensetoutinitsprogram.Ontheonehand,itnegotiatedthepurchaseofimportantsharepackagesforthestate.Ontheother,it"intervened"incompanies(throughthereplacementofmanagementwithagovernment-designatedadministrator)onthegroundsofmal-administration.

1Motivatedbythefactthattheycouldcountonasympatheticgovernment,manyunionsfromsmallandmediumcompaniesbeganindefinitestrikesoverwages.Thiswasdoneintheknowledgethatiftheydidnotachievetheirdemands,thegovernmentwouldbeobligedtointerveneinthecompany-aseffectivelyhappenedinthemajorityofcases-andreplacetheownerswithdesignatedadministrators.

Thisprocess,whichexpandedtheoriginalprogramofexpropriation,wasrapidlyaccompaniedbyotherformsofactionfrombelow.Thesewereprincipallyindefiniteoccupationsofurbanlandsoragriculturalsitesthatwerenotlegallysubjecttoexpropriation,asameansofapplyingpressureonthegovernmenttobringabouttheirexpropriation.Increasingly,therefore,theassurancesgivenbytheleadershipofPopularUnitytosmallandmediumcompaniesthattheir

propertieswouldnotbeaffectedbytheexpropriationpoliciesoftheAllendegovernmentdisappearedintothinair.

Incontrasttotheforecastsoftheleft,theconflictbetweentheAllendegovernmentandsmallandmediumfirmswasmoreacutethantheconfrontationbetweenthegovernmentandbigbusiness.Whilethesmallandmediumfirmsweresoonengagedinapitchedbattleagainsttheunionsandthepracticeofintervention,thelargecompaniesactedwithinamarketlogic,negotiatingdirectlywiththeMinistryoftheEconomytosecureacceptablepricesforthesaleofpackagesofsharesintheircompaniestothestate.Forthisreason,itwasthesmallandmediumfirms,ratherthantheirlargercounterparts,whowerethefirst

tomovedirectlytoradicalpoliticalstruggleagainsttheAllendegovernment.

Withallofthis,bytheendof1971theorganizationsofdiversestrataandfactionsofthebusinessclassconvergedtoformasolidmovementinthedefenseofprivateproperty.Theorganizationsofbigbusinesstookontheradicaldiscourseofthesmallandmediumfirmsinthefaceofwhattheysawasthethreateneddisappearanceoftheprivatesector.AsGuillermoCamperowrites,thefirstcommonmobilizationtookplacearoundanissueloadedwithsymbolicmeaning:''oppositiontothegovernmentpurchaseofsharesinthePaperandCardboardManufacturingCompany.Presidingoverthissemi-monopolisticcompanywastheex-Presidentandex-candidateforthePresidencyoftheRepublicin1970,JorgeAlessandri.ItwasacentralandsymbolicnucleusofChileancapitalism."

2

Whatfollowedthisunificationofthebusinessassociationsandtheiradoptionofpoliticalstruggleiswellknown.Theseorganizations,actingjointlywithotherrepresentativebodiesofthemiddlesectors(principallyprofessionalorganizationsandsomestafforganizationsfromthecopperindustry),unleashedanaggressivemobilizationthatreacheditshighestpointinOctober1972andAugust1973withthegreat"employers'strikes."Thesedisruptednationalproductionanddistributionforprolongedperiodsandprovidedthecontextforthoseplottingthemilitarycoupthatwouldoverthrowtheconstitutionalgovernment.

Theradicalmobilizationofthegremios(suchwasthenamebywhichthesediverseorganizationsestablishedacommonidentity)hadtwopoliticaleffectsoftheutmostimportance.First,aswasshowninchapter1,itsupplantedpoliticalpartiesastheleadingforceofthe

oppositionand,inparticular,leftthecentristpartieslittlescopeformaneuver.Secondly,itprecipitatedtheconversionofthemilitarycommand,whichAllendehadbroughtintogovernmenttocombatthestrikesandfillthegapleftbythepartiesofthecenter,intoamajorpoliticalactor.ThedirectnegotiationsthatthemilitaryandgremioleaderscarriedoutduringtheAllendeadministrationwouldformanimportantprecedentforthecreationofthepowerblocthatemergedwiththecoupd'étatin1973.

Neitherthesefacts,northestrongallegiancequicklypledgedbythemajorityofgremioleaderstothemilitarygovernment,explainstheadoptionoftheneoliberalmodelbythePinochetgovernmentwithinashortspaceoftime.AsCamperocorrectlystates,"Thecoalitionofthe

variousgremiosectorscameaboutthroughthearticulationofacommonprincipleofoppositionandnotbecausetheyhaddevelopedaunitedsocio-economicprojectforthefuture."

3

Camperogivestwoprincipalreasonswhythisdidnotoccur:Inthefirstplace,businessorganizationslackedapersistentpracticeofreflectiononthesocialorderandalternativesforchange."Manygremiosofbigorsmallfirmstendedtoconsiderthemselvesmoreassubjectsoftheestablishedorderthanagentsofsocialtransformation.Asaresult,theirperspectivewaslessdefinedby'socio-politicalprojects'thanbyalogicofadaptiveeconomicbehaviorand/orofcompetition."4

Inthesecondplace,thevery"heterogeneityofstrictlyeconomicinterestsmilitatedagainstcommonprojects,sincetherelationsofdominationbetweenbigandmediumorsmallbusinesswereevident."5Whatheldthesegroupstogetherwasacommonfearofasocialistthreattoproperty,buttheyhadnocoherentvisionofanalternativesociety.Thiswouldbecomeclearduringthefirstmonthsofmilitarygovernmentwiththereappearanceofimportantdifferencesbetweendistinctgremiosandwiththedifficultiesexperiencedbythemilitarygovernmentindefining,overandaboveemergencyanti-inflationarymeasures,acoherentmodelofpoliticaleconomy.

Camperodocumentsthevariousperspectivesthatemergedbytheseconddayofmilitarygovernmentonhowtopreservethepowerofthegremiosinthenewcircumstances.Thegremiosofsmallandmediumfirms,undertheleadershipoftheTruckers'president,LeónVilarín,insistedonmaintainingthegremiosasamovement"bothofdialoguewithandmobilizedsupportforthegovernment."6However,thebigfirms(ledatthetimebythepresidentoftheConfederationof

ProductionandCommerce,JorgeFontaine)maintainedthat"thegremiosshouldfurtherthegoalofnationalunity,promotingdevelopment,socialjusticeandtherestorationofmoralvalues.Itwouldthereforebeagreatmistaketobecomeabigpoliticalpartyorasubstituteforone.Wearemenofworkandwhatinterestsusisproduction."

Norwasthereagreement,whetheramongthegremiosorwithinthegovernment,withrespecttoeconomicpolicy.TomásMouliánandPilarVergarahaveshownhow,withinthegovernment,nogroupenjoyedaclearhegemonyamongthetechnocratsandcivilianeconomistswhohadbeencalledupontocollaboratein"nationalreconstruction."7Consensuswaslimitedtoageneralframeworkofcommonprinciples(privateproperty,freecompetition,openingtointernationaltrade)andabodyofurgentmeasurestomeettheneedsofthemoment(devaluation,

freeingprices,arestrictivewagepolicy,fiscalmoderation,thereturnofexpropriatedand"intervened"firms,indemnitiesforforeigncompaniesthathadbeennationalizedunderthepreviousgovernment).Butinrelationtoeconomicstrategy,therewasneitherclaritynorconsensus.

ACivilianTechnocracy:The"ChicagoBoys"

Agreementontheneedtoreacttoacommonthreat,withoutanacceptedcommonprojectforthefuture,ledtoagrowingconcentrationofpower,notonlywithinthemilitaryhighcommand,butalsowithinanewlycreatedciviliantechnocracy,formallyindependentfromthedistinctbusinessfactions.ThebondsofloyaltythatwereestablishedbetweenthistechnocraticgroupandGeneralPinochetpermittedthedevelopmentofamilitarydictatorshipthatwasnotsimplyreactionarybutwouldalsoinstigateacapitalistrevolution.

Thebeststudyofthistechnocraticelite,byJuanGabrielValdés,arguesonthebasisofawiderangeofinterviewsthat

theadmiralsandgeneralswhotookpowerinChilein1973didnothaveadefinedprojectforgovernment.ThedoctrineofNationalSecuritytowhichtheymadeconstantreference...couldnotproducethedesignforanefficientrelationshipbetweenthestateandcivilsociety.TheChileanArmedForceslackedexperienceingovernmentandwereforcedintoaction,notwithadeterminedplantoimposeamilitaryadministration,butratherasareactionagainstwhattheyconsideredtobeagravethreattonationalsecurityandtheirveryinstitutionalexistence:theAllendeadministrationandtheradicalizationofthepoliticalandsocialsituation.

Thisdeficiencymadeitselfparticularlyapparentintheeconomicsphere.TheNavy,whichinitiallytookchargeoftheeconomy,agreedonlyonthegravityofthesituation....Nevertheless,thenewauthoritieslackedtechnicaltrainingineconomicmatters.Clearly,thisdoesnotmeanthattheydidnothaveageneralideologicalposition.Owingtotheirbackgroundinthemiddleorupperclasses,aswellastheirconservative

traditions,theofficersoftheChileanNavyinstinctivelyfavoredliberaleconomicpoliciesanddetestedthesocialistprojectofPopularUnity.

Fromtheendof1972,somehighnavalofficershadmadecontactwithagroupofoppositioneconomistswhoweresecretlyworkingonanalternativeplanforgovernment.Theplanwasreadyforthe

dayofthemilitarycoupandhadbeendistributedtotheofficialsofthethreebranchesoftheArmedForceswhoinitiallyoccupiedpositionsinthegovernment.Thenewauthorities,however,motivatedprobablybyadesireforinternationalrecognitioninthisfield,optedatfirstforthosepeopletheyconsideredtohavethegreatestprestige.

8

Amongthosewithwhomcontactwasmade,accordingtotheinformationofferedbyValdés,wereimportantfigureslinkedtotheChristianDemocratgovernmentofEduardoFrei:ex-ministersSergioMolinaandRaúlSáezaswellastheex-presidentoftheCentralBank,CarlosMassad.Sáez,anengineerassociatedwiththestructuralisteconomicschooldevelopedduringthe1960sbytheEconomicCommissionforLatinAmerica(CEPAL),enjoyedgreatinternationalprestige.Heeffectivelybecametheministerforfinanceandeconomicsunderthemilitaryregime,whichconfirms,withoutadoubt,thattheinfluenceoftheneoliberaleconomicteamwasnotasgreatatthetimeassomehavelaterclaimed.

Economicconceptsthatenjoyedcurrency,atleastduringthefirstyearofmilitaryrule,appeartohavehadmoretodowithapoliticalthanastrictlytechnicallogic.Ineffect,thecentralpointthatwasbeingdebatedduringtheearlydefinitionofaneconomicstrategywastheverycharacterofthemilitarygovernment.Astrategyof"restoration,"orreturntotheoldequilibriumthathadbeenbrokenduringthePopularUnityperiod,impliedatthesametimeadefinitionofthemilitarygovernmentasaparenthesisbetweentwociviladministrations-aperiodofrepressivepacificationafterwhichpowerwouldbereturnedtothepartywiththegreatestelectoralstrengthandparliamentaryrepresentation(theChristianDemocratparty).9

Thelogicofcentralizingpowerinthepresidentofthemilitaryjunta,

whichcorrespondedtoa"Portalist"ideologywithinthearmedforces,was,however,incompatiblewiththisscenario.10NeithertheaspirationsoftheChristianDemocratparty(forwhichtheArmyHighCommandstillreservedastrongresentment,owingtothescantattentiontheFreigovernmenthadpaidtotheirdesireforinstitutionalmodernization),northoseofthegremios,whotriedtosetupacorporatistmodelofpoliticalparticipation,cameclosetobeingrealized.Thelegitimation(bythemilitaryjuntaanditspresident)ofatotalreplacementofthetraditionalpartysystem,andevenofthesocialbasethathadsupportedthecoup,hadtobebasedonadifferentorderfromthatwhichhadexistedbeforethePopularUnitygovernment.Therewerenoready-

madegroupstoformthebasisforthisneworder,whichwouldrequirealongperiodofcontrolbya"tutor."Thesimpleideaofnormalizationoftheeconomyhadtobereplacedbythecreationofaneweconomicorder.Clearlytheradicalprojectoftheneoliberaleconomists,whowouldlaterbecomeknownasthe"ChicagoBoys,"

11wasfarmorecongruentwithsuchideasthanthepragmaticrealismoftheotherciviladvisorstothemilitaryjunta.Onthispoint,theyenjoyedadecisivecomparativeadvantage.

Butwhoweretheseneoliberaleconomists?Theywerecertainlynotspokespeopleordirectrepresentativesofanyofthepressuregroupsrepresentingthevariousinterestsatstakeinthebusinessworld.Overandabovetheirsocialbackgrounds,thepersonallinksthattheymighthavehadwithcertainpoliticalparties,ortheirworkingrelationshipwithspecificfirmsorservices,thedecisivefactorintheidentityoftheChicagoBoysisthattheyformedanideologicalcommunitybasedontheireducationaltrajectories.Asoneofthegroup'sbest-knownmembersputsit:

Aroundthemiddleofthe1950s,theUniversityofChicagohadinitiatedaprogramofacademicexchangewiththeCatholicUniversityinChile,sendingsomeofitsprofessorstoChiletocarryoutresearchwhileatthesametimereceivingChileanpostgraduatestudents.Byvirtueofthisprogram,accompaniedbyasystemofgrants,aroundonehundredstudentshadcompletedtheirstudies,graduatingfromtheUniversityofChicago[duringthe1960sandearly1970s]....By1972,manyoftheseeconomists,backinChile,enteredtheuniversitiesasfull-timeteachers.Othersenteredpublicposts,especiallyduringtheFreigovernment.Therestbegantoworkforthemajorfirmsofthecountrybutallformedacommunity,swelledeveryyearbygenerationsofneweconomistsleavingChileanuniversities,whosharedatechnicallanguage,arationalistapproachtothesolutionofproblems,andthedesiretocontributewiththeireffortstothecreationofaprosperous,justandfreesociety.The

majorityoftheseeconomistsaretoday-whethertheylikeitornot-knownasChicagoBoys.12

This"class"origin,linkedtothepossessionofattributesandqualificationshighlyvaluedinthemeritocraticcultureoftheChileanmiddleclass,becameinitselfanimportantfactorinthegroup'sideologicalinfluenceoverthemilitaryestablishment.Chileprovidesacontrastto

otherLatinAmericancountriessuchasArgentinaorBrazil,insofarastheupperranksofthemilitary(especiallyinthearmy)comeoverwhelminglyfromtheurbanmiddleclassandshareitsmodernizingnature,opposedtothearistocraticfeaturesofupper-classlandowners.Theconstitutionofacommunityofeconomistswithtechnicalknowledgegavethediscourseofthisgroupauniversalistappeal.Itwaspreciselytheelementthatwaslackingintheparticulardiscoursesofthepoliticalpartiesaswellasthevariousgremios,especiallywhendealingwithanactorsuchasthemilitary,whichdidnotpossessdirectlinkswithspecificinterestgroups.

13

Ontheotherhand,thespecificacademicbackgroundoftheseeconomistswasbynomeansirrelevant.TheDepartmentofEconomicsattheUniversityofChicagowasuniquewithintheNorthAmericanacademiccommunity.Wellknownfromthebeginningforitstheoreticalconservatismandextremeneoclassicism,thedepartment"keptalivethevisionofafundamentaltruthforasmallcircleoftheinitiatedduringthedarkyearsofKeynesiandespotism."14ChicagowasacenterofresistanceinthefaceoftheclearpoliticalandculturalhegemonyenjoyedbyKeynesiantheoryfromthe1940son.ThishasbeendescribedbyChicago'sprincipalintellectualleader,MiltonFriedman,intheintroductiontoCapitalismandFreedom:"Thoseofuswhowereprofoundlyworriedbythedangertofreedomandprosperityposedbythegrowthofgovernment,thetriumphofthewelfarestateandKeynesianideas,madeupasmallminorityandwewereconsideredeccentricbythevastmajorityofourintellectualcolleagues."HencetheagreementforacademiccollaborationwiththeChileanCatholicUniversity

reflectedtheeffortsofagroupofChicagoprofessorstoprotectthetrue

scienceofeconomics,thatis,orthodoxneoclassicaltheory,fromthesocializingoffensiveofKeynesianism.Duringtheepochinwhichtheagreementsforcollaborationweresigned,thegroupsoftheChileanrightweresufferingfromaprofoundhegemoniccrisis,andthe"mission"whichwastransmittedtoChilegavetothoseChileaneconomiststrainedinChicagothestrengthneededbygroupswhofeltcalledupontofollowarevolutionarydestiny.15

ThetaskofextendingtheinfluenceoftheseeconomistsinChileansocietywasnoteasy.TheyhadtoconfrontcompetitionfromasolideliteofeconomicprofessionalstrainedintheCEPALstructuralistschool,whoseheadquartersinSantiagohadbeenfordecadesasource

ofideologicaldisseminationtotheintellectualsofthecountry.Inaddition,theirpolicyprescriptionsrancontrarytowhathadhistoricallybeen,atleastsincethe1920s,theprogramofthepoliticalright,theirnaturalally,andofthebusinessclass.Thebreakwithdemocraticinstitutions,thesubsequentremovaloftheinfluenceofthepoliticalpartiesongovernmentconduct,andthenecessityofthemilitaryelitetofindalonger-lastingsourceoflegitimacythanthatwhichcouldbeprovidedbyasimpleprogramof"pacification"offeredanunexpectedopportunityfortheunfoldingofthe"pure"planoftheChicagoeconomicschool.

TheearlyconnectionsestablishedbetweenthemilitaryandthetechnicalteamsoftheChristianDemocratstendedtodiminishanddisappearedaltogetherwhenthepartyputpoliticalconditionsonitsparticipation-chieflyintermsofthelifespanoftheregimeandthecallingofnewgeneralelections.

16Thisopenedthewayfortheneoliberaleconomists,insofarasitincreasedtheindependenceofeconomicmanagementfrompolitics,butitstilldidnotfreethatmanagementfromthepressuresofthebusinessassociations.

AsCamperopointsout,"Thetradition...ofthebusinessgremiosand,indeed,oftheirleadershipwasstatistinpractice.Infact,theirdevelopmentbenefitedinthe1920s,andaboveallinthe1940s,fromstateprotectionwithintheframeworkofimport-substitutingindustrialization."17Forthisreason,althoughtheexperienceofPopularUnityhadledthemtoamoreclearlyantistatistposition,thereturnofpoliticalsecurityunderanauthoritariananti-Marxistgovernmentencouragedbusinesstopressforprotectionofnationalindustry.

Thepreoccupationoftheorganizationsofbigbusinesswiththegrowingpoweroftheneoliberaltechnocracyinthespheresofgovernment(andinparticularitsgrowinginfluenceovertheheadofthejunta,GeneralPinochet)wasclearlymanifestatthebeginningof1974inaspeechbythepresidentofthepowerfulNationalIndustrialSociety:"LikeallChileans,"hestated,alludingtothelackofinfluenceofthebusinesssectorindrawingupeconomicpolicy,

ourknowledgeofeconomicpolicyislimitedtoverybroadprinciples....Adevelopmentmodelcannotbealientotheparticularnatureofthepeoplewhoadoptit,norruncontrarytotheirphysicalandhistoricalcharacteristics....Economicachievementsareonlymeansofachievingcertainpoliticalandsocialgoals,butcannotbeconsideredasendsinthemselves.Thisiswhatdistinguishesthe

statesmenfromthetechnocrat:theformercannotbesubjectedtothelatter.

18

Intheviewofthisimportantleader,adevelopmentstrategymustbebasedonthefollowingprinciples:

Mixedeconomy,statefirmsonlyinhigh-riskstrategicareasandtheprovisionof"non-economic"services,theabsolutenecessityofplanningasamechanismforforecastingcyclicalcrises,openingupacompetitivecapitalmarket,theentranceofforeigncapitalregulatedbystatutestoprotectthenationalinterest,appropriateuseoftariffstoregulatenationalandinternationalcompetition,andtransformationofthetraditionalstructureofthefirmtoallowtheachievementofsocialdevelopmentobjectives,withoutwhichtherewillneverbeasocial-marketeconomy.19

Similarstatementsweremadebysmallandmediumorganizations,whichcomplainedaboutlackofconsultationwithregardtotheeconomicpoliciesdirectlyaffectingthem.

TheabsolutehegemonyoftheChicagoBoyswasnot,however,achievedovernight.Itbecameevidentonlytowardtheendof1975andwassymbolizedbythewithdrawalfromthegovernmentofMinisterforEconomicCo-ordinationRaúlSáezandtheapplicationofaharshpolicyofanti-inflationaryshockbyhissuccessor,JorgeCauas.

The1974-75crisiswasthecatalystthatledtothedefinitivetransferofleadershipineconomicpolicyfromthebusinessgremiostotheciviliantechnocracy.20Thiscrisis,ineffect,ledtotheweakeningoftheprincipalfactorthathadallowedthebusinessclasstomaintainacertaincriticalperspectiveongovernmentdecisions.Theincreasinglyunstableeconomicsituationbegantoleadtodoubtsconcerningthepoliticalirreversibilityofthemilitaryregime.Thespecterofanuncontrollablesocialexplosionthatwouldbreathelifebackintothe

defeatedforcesofPopularUnityledthebusinessclasstocloseranksaroundthemilitaryand,inparticular,aroundGeneralPinochet.Thegeneral,forhispart,handedoverallpositionsofeconomicresponsibilitytotheneoliberaltechnocracy,alsoremovingthenavyfromthepositionofresponsibilityforeconomicpolicy,whichithadheldunderthedivisionoflaborintroducedbythemilitaryjuntain1973.Inthisway,thecrisisof1974-75markedanimportantmilestoneintheconcentrationofnot

onlyprivateeconomicpowerbutalsopoliticalpower,arisingfromthecivil-militaryrebellionof1973,inthehandsofanelitethatwasautonomousfromimmediateclassconsiderations.Asinanyrevolutionworthyofthename,thesocialbasethatproduceditwasreplacedbyanelitethatproclaimeditselftobetherevolution's"guidinglight."

Thedominationofthesenewactorsduringtheperiodfrom1975untilthecrisisof1982permittedsustainedtransformationoftheoldeconomicorder.Theprotectionistresistancethathadbeenofferedinvaryingdegreesbythebusinessgremioswasbroken,andthegovernmenteconomicteamgaveitselfovercompletelytothetaskofopeningtheChileaneconomytotheexterior,favoringthedevelopmentofonlythosesectorsthatenjoyedcomparativeadvantagesoverexternalcompetition.Onebasicinstrumentwasareductionintariffs.Freeingupthecapitalmarketsandthencompletelyopeningtoexternalfinancialflowsconstitutedtheprincipalinstitutionaltransformationthatwouldpreparethewayformassiveprivatizations.

Itdidnottakelongfortheimmediateconsequencesofthesemeasurestobecomeapparenttovariousbusinesssectors.Aftertheprofoundrecessionof1974-75,the"reactivation"thatbeganaround1976wasclearlyselective.Whilethebiggestwaveofbankruptciessincethegreatcrisisof1929sweptthecountry,somefirmsfromtheprimaryexportsector,andsomeinvolvedintheprocessingofnaturalresources,beganaslowprocessofadvance.Butthemostnotablefeatureofthisperiodwasthattheliberalizationofthecapitalmarket,aswellasveryhighinterestrates,encouragedanincreasingshiftofcapitalfromtheproductivetothefinancialsector.Takingadvantageofahighlyprofitableprimaryinformalfinancialsystemandtheeliminationofrestrictionsonobtainingprivateforeignloans,theexpectedoffspringoftheantistatistmodelemerged:thelarge

economic-financialgroups,whichwerethefirstrealactorsintheprivateeconomywhosoughttotakeaclearleadintheneworder.

TheNewFinancial-EconomicGroups

InanarticlewritteninthemiddleoftheChileaneconomicboom,RicardoLagospointsoutthatwhatwasnovelaboutthisperiodwasnottheexistenceofgreatprivateeconomicconglomerates.

21Thesehadalwaysexistedinthecountry,despitehavingbeenbatteredbythenationalizationpolicyofPopularUnity.Whatwasoriginalwasthat

themaingroupsarenewcomersandtheyarenothingliketheirpredecessors.Analysisofthegroupsfromthepastshowsthattheyhadtheirorigininactivitiesinvolvingproductivegoods-agriculture,industryormining-andfromthere,theyhadexpandedtheirinteresttofinancialactivities....Moreover,thesegroupshadalonghistoryandtrajectory.

Thenewlyemerginggroups,onthecontrary,

havenohistoricrootsanddonothavetheirorigininthecontrolofoneorseveralfirmslinkedtoproductivegoodssectors,butratherinthecontroloffinancialactivity....Themanipulationofthefinancialapparatushasallowedthemto[buyupbusinessesandthus]bringnewfirmsintothegroup,butupuntilthepresent,theyhavenotcreatednewones....Thethirdcharacteristicisthehighdegreeofcentralizationandcontrolthattheyexertoverthefirmsthattheyown....Thedestinyoftheassetsofaparticularfirm,anditsplansforexpansion,aredecidedatalevelfarfromthefirmitself,andtheexecutivesofthefirmhavelittlesayinthematter.

The"fourthandfinalcharacteristic,"accordingtothisauthor,is

therapidexpansionthatsuchgroupshaveundergoneinthelastsevenyears.Therearenoprecisefiguresthatallowustoextrapolateanannualgrowthrate.Itisevident,however,thatthechangefromapositionofalmostnothing,whichwasthesituationprevailinginSeptember1973,tothecurrent1981positionimpliesarhythmofexpansionunheardofinChile.Today,twooftheprincipalgroupscontrolsharesworthmorethanathousandmillion,oronethousandfivehundredmillion,dollars.Obviously,thishashappenedunderveryspecialconditions,butinanycase,thisisahighlyunusualpattern.Itisnotjustamatterofthe"efficiency"ofsomewithrespecttoothers.Itissomethingmore.

22

This"somethingmore"waspreciselythe"visiblehand"throughwhichthestateproposedtocreateaprivateeconomicpowerwiththeend-accordingtoitsexpressedideology-of"makingtheeconomy

independentfrompolitics."Thediscoverythatnewgroupswithouthistoricalrootswereemergingtestifiestotheprocessthatwastakingplace.Itwasnotacaseofconsolidatedsocioeconomicactorswho

expressedthemselvespoliticallythroughthistechnocraticelite.Onthecontrary,thetechnocraticelitecreatedconditionsthatwerefavorablefortheemergenceofnewbusinessleaders.Thesefavorableconditionswererapidlycapitalizeduponbyafewaudaciousbusinessmen.

Thepaththatledtotheconstitutionoftheselargefinancial-economicgroupscanbedescribedfairlysimply.First,withthemajorityofthebanksstillcontrolledbythepublicsector(theentirebankingsystemhadbeentakenunderstatecontrolduringPopularUnity),thestateallowedthecreationoffinancialsocieties.Givenlowliquidityandtheexistingrestrictionsontheoperationofthebanks,thesefinancialsocietiesachievedarateofgrowthintheirdepositsandloansmuchhigherthanthatofthebankingsystem,inspiteofthefactthattheirinterestrateswerenotablyhigher.Thestrongestofthesefinancialsocietiesformedtheembryoofthefirstgroups.Towardtheendof1976,aseverecrisisinthesystem(manifestedinagrowingnumberofbankruptciesandfrauds)ledtoincreasedcontrolbytheBankingSupervisoryCommitteeoverthefinancialsocieties.Thesocietiesweredividedintotwogroups,designatedas''formal"(thosethatweresubjectedtothiscontrol)and"informal"(thosethatwerenot).Thusonlythemostpowerfulcouldstayinthemarket.Onceprivateaccumulationhadreachedimportantlevels,thebanksthemselvesweretransferredbythegovernmenttotheprivatesector,fallingintothehandsofthefinancial-economicgroupsthathadaccumulatedrapidlyintheearlierspeculativeperiod.Finally,thebanksweregiventhecapacitytoobtainexternalcredit.Thisledtoanopeningtowardinternationalfinancialcapitalandimpliedunequalinternalcompetition,sincefirmsownedbythegroupshadaccesstocheapexternalcredit,thankstothehighinternationalliquiditythatwascharacteristicofthelatterhalfofthe1970s.Firmsnotbelongingtothegroupshadtoborrowexpensivelyfromthebankingsystem,which

inanycasewasownedbythesegroups.

Therelationshipbetweentheseemergingprivateeconomicgroupsandthestatetechnocraticelite-incontrasttowhathappenedwiththegremioorganizationsofthebusinessmen-becameextremelyfluid.AsLagoshaspointedout:

Two"classes"ofexecutivehavebeenemergingwithinthelargestgroups:theanalystsandthemanagers.Theroleofthelatteriswellknown;theyareinchargeofthefirmandtheirroleistocombinelabor,capital,primarymaterialsandotherinputsandtechnologyinordertoproduceagoodorservice.Theanalysts,ontheotherhand,

observetheglobalprogressoftheChileaneconomyanddecidetheexpansionpolicyofthegroup,intimber,textiles,metallurgy,fruitexports-fromminingproductiontoproductionoffoodstuffs-dependingontheirvisionofthefutureofthenationalorinternationaleconomy.Inthisprocess,themuchreviledconceptofplanninghasbeenextensivelyused,butwithineachgroup.Thisisacommonprocessinadvancedcapitalistcountries.Itisstrangethatitwasnotmuchusedinpreviousdecades.Todaythesegroupanalystsareplannersbutobviouslyintheinterestsofthegroup.Itisthecaseofabourgeoisiethatusesandrespectstechnicalskill.

23

Inpractice,itwasthesametechnocraticleadershipthatcirculatedfluidlybetweenmanagementpostsinthestateandstrategicadvisorypostswithinprivategroups.Thisleadershipnotonlycreatedtheconditionsfortheemergenceofanewbusinessfactionbutalsomodernizedbusinessmanagement,displacingthehistoricpoweroftraditionalfirms.Thesefirms'"efficiency,"whichhadbeenbasedontheircapacitytoinfluencethenationalstateinordertoachievepositionsofcompetitiveprivilegeintheinternalmarket,lostallrelevancewithintheframeworkofanopeneconomy,inwhichnewelitesexercisedgreatpower.

Therewasstillonefundamentalelementmissingfortheinternalaccumulationofcapital,andtheconditionsthatweretobringitaboutdidnotpresentthemselvesuntil1978.Thefirstprimitivedivisionoflaborofthemilitaryjunta,inwhichthenavytookcontroloftheeconomy,hadleftresponsibilityforsocialpolicyinthehandsoftheairforce.Fromthebeginning,giventhecriticaltensionthathadexistedinemployer-workerrelationsunderPopularUnity,thefocusofattentioninthesocialfieldwasonlaborpolicy.Butsincethebattlewithradicalunionismwasconfinedtothe"political"areaofthe

administration,laborpolicyreformconcentratedonamorelimitedareaofconcern:employer-workerrelationswithinthefirm.

Thefirststepstowardinstitutionalreforminthefieldoflaborrelationswereofacorporatistnature.TheMinistryofLabor-originallyheadedbyanairforcegeneral-triedtoreestablishsomecontactwithnon-Marxistunionorganizations.Thiswasinrelationtofourbigprojectsfortheredefinitionoflaborrelations,whichwouldreconstituteapowerfulbutdepoliticizedunionism,"associated"withtheeconomicsuccessofthefirms.Theprojectsincludedapreliminaryplanforreformingthelaborcodethathadbeeninforcesince1931,astatuteofsocialsecurity,astatuteofoccupationaltraining,andwhatwascalled

thesocialstatuteofthefirm.Thislatterwasperhapsthemostambitiousofthefourandsought,amongotherthings,toestablishmechanismsforworkerparticipationatthelevelofproduction.Suchaneffortenjoyedthefirmsupportofthepersonwithultimateresponsibilityforsocialpolicy-thecommander-in-chiefoftheairforceandmemberofthemilitaryjunta,GustavoLeigh.

The"socialprojects"werepresentedformallyatthebeginningof1975andwerereducedtoonlytwooftheoriginalfour:thesocialstatuteofthefirmandthenationaltrainingsystem.Inspiteofthis,theairforcegeneralswhohadparticipatedintheirelaborationinsistedthattheprojectswerepartofalargerscheme.Thiswouldincludeareformofthelaborcodewithreferencetoworkers'organizationsandtheprocessofcollectivenegotiation,aswellasasocialsecurityreformthatwouldallowworkersto"participateintheownershipofnationalwealthcreatedthroughtheinvestmentofsocialsecurityfunds."

24

CamperoandValenzuelaarguethatthepresentationoftheseprojectswasindicativeoftheclashbetweentwodifferentoutlookswithinthemilitarygovernment.

Thoseheadingsocialandlaborpolicy(GustavoLeighandNicanorDíazEstradarespectively-bothAirForcegenerals)accordedanimportancetotheirprojectswhichwentmuchfurtherthananexaminationofthespecificcontentsmightsuggest.Ineffect,thefinaloutlineoftheSocialStatuteoftheFirmwassimplyasystemwhichprovidedworkersandemployerswithinformationonthefunctioningofthefirm.TheTrainingStatutegavemorecontroltotheemployersthantotheworkers,althoughitdidofferthelattersomepossibilitiesfortechnicaltraining.Inreality,theideaofLeighandDíazEstradaseemstohavebeendirectedtowardsdefiningapositionthatwouldcounterbalancetheliberal-capitalistproposalsandthetransnational

frameworkthatwasgrowingincreasinglystrongwithineconomicpolicy.Infollowingthisline,bothmilitarymenseemedtobeseekingsocialsupportfromtheworkersfortheirmorenationalisticandpopulistproposals,whichwereframedwithinacorporatistideology.Thegapwasgrowingbetweentheinstitutionalizingandpopulistpolicyofthesocial-laborsectorwithinthegovernmentandeconomicpolicy.25

Thisconflictwouldberesolvedonceagainbythecentralizationofpoliticalpowerinthehandsofthecommander-in-chiefofthearmed

forces(andpresidentofthejunta),GeneralPinochet.Afterthepresentationofthesocialandlaborreforms,Pinochettookstepstoensurethattheyenteredintolongperiodsofstudybycommission(asinthecaseofthereformstothelaborcode)orthattheywereneverappliedinspiteofhavingbeenformallyapproved(asinthecaseofthesocialstatuteofthefirm).Theministeroflabor,DíazEstrada,resignedinFebruary1976andwassucceededbyalawyerclosetothepositionsoftheneoliberaleconomicteam,SergioFernández.Later,in1978,GeneralLeighwassackedfromhispositionascommander-in-chiefoftheairforceinanaudaciousshowofstrength(whichalsosweptintoretirementmostofthegeneralsinthatbranchofthearmedforces).

26

Afterabriefperiodofcompromise,PinochetnamedtheHarvard-trainedeconomistJoséPiñeraasthenewministeroflabor,therebyopeningthewayforhisyoungfree-markettechnocratstoredefinesocialpolicyTheappointmentofPiñeramarkedthebeginningofanextensiveandradicalattemptbytheneoliberaltechnocracytotransformthecountry'ssocialinstitutions.ThisisgraphicallyrepresentedbyValdésasamomentinwhichtheeliteofeconomistshad"utopiawithinarm'sreach."Notonlythenewinstitutionalismandeconomicpolicy,butthewholesocialstructureofthecountryopenedupasapotentialfieldforexperimentation,baseduponthepuretruthofrationalchoiceandthecalculusofmarginalutility.Andalthoughthepriceofthisexperimentwastheacceptanceofdictatorship,itwasapriceworthpaying,asPiñerahimselfmadeclearinastatementthat(withitsaffirmationofthevolontégénérale)bringstomindbothLeninandRobespierre:"Althoughitisclearthatthesereformscannotbecarriedoutunderthetraditionalrulesofthepoliticalgame,themajorityofcitizensgivethegovernmenttheirsupportsothatitcan

meetitsobjectives."27

AprogramwassetinmotionthatreceivedtheMaoist-soundingtitleof"ThePlanofSevenModernizations."Themostimportantoftheserelatedtothereformoflaborrelations,thesocialsecuritysystem,andthetwoprincipalareasofpublicsocialspending,healthandeducation.

Thelaborreformsproposedtolegalizeunionorganizations,startingfromtheprincipleof"unionfreedom."Withineachfirmanynumberofunionscouldexist,providingtheysatisfiedtherequirementforaminimumnumberofworkers.Eachworkerhadtherighttowithdrawfromaunionornottojoinanyunion.Intersectoralcollectivebargainingwasnotpermitted,andwageagreementshadtoberelatedtopro-

ductivitytomakethem"technical"andnottransformtheminto"amechanismfortheredistributionofwealth."Theunionhadtobeaformofsocialandtechnical,butnotpolitical,participation.Federationsandconfederationswouldbeallowedonlyanadvisoryrole.Therighttostrikewaspermitted,butwithamaximumdurationofsixtydays,andtheemployerwasentitledtodeclarealockoutorsackworkersunderthepretextofpromotingthegoodofthefirm.Theminimumwagewasabolishedin1979,alongwiththeemployer'sobligationtopaysocialsecuritycostsforyouthandapprentices(measuresdesignedto"introduceflexibilityintothelabormarketintheinterestofworkers,"sincehighpensioncostsandminimumwagelegislationtendedtofavorunemployment).Initsoriginalform,allowancewasmadeforanautomaticannualwageadjustmenttotakeaccountofinflation,butthiswasneverappliedandwasformallyrevokedayearlater.

Themostfar-reachingreform,however,wasthatofthesocialsecuritysystem.ThesystemprevailinginChileforfourdecadeswasonethatcorrespondedtothe"solidaritysharingsystem"ofcollectivecontributionsrunbythestate,underwhichactiveworkersfinancednonactiveworkerswithatheoreticallyegalitariandistributionofthebenefits."The'modernization'ofnationalinsuranceschemesconsistedofprinciplesthatranexactlycontrarytothosepreviouslyexisting.Individualcontributionsreplacedcollectiveones,thelevelofprotectionwasdeterminedbytheincomelevelofthepersoninsured,andpensionfundsweretransferredto'privatehands,'aeuphemismforthePensionAdministrationFunds(AFP)setupbyindividualeconomicgroups."

28Thisreformhadanenormousimpactontheabilitiesofthefinancial-economicgroupstoraisecapital.AccordingtocalculationsbyJoséPabloArellano,atthetimethesystemwasintroduced,social

securitycontributionsmadeupasumofresourcesequivalentto20percentofallthedepositsincurrentaccountsoftheentirenationalbankingandfinancialsystem.29

ReformswithasimilarinspirationwereimplementedinthefieldofhealthcarewiththecreationofInstitutesofHealthInsurance(ISAPRES),whichallowedemployeestoauthorizethetransferofhealthinsurancefunds(whichhadpreviouslybeenchanneledintoprovincialhealthservices)intoprivateprograms.Thismeasurewasaccompaniedbyanotabledeclineinfinanceforthepublichealthsystem,leadingtoamassivetransferoffundsfrombetter-offworkers-particularlyadministrativeemployees-totheprivatesector.

Intheareaofeducation,alessradicalreformtransferredtothemunicipalitiestheadministrationofpubliclyfinancededucationalestablishmentsandthenegotiationofcontractsforteachingstaff(whichhadpreviouslybeencentralizedintheMinistryofEducation).

Thephilosophythatguidedthesetransformationswassimpleandwouldacquireagreaterconsistencyinthefuture,whentheoldNationalPlanningOffice(ODEPLAN)emergedasanewcenterfortheneoliberaltechnocracyandtookcontrolofsocialpolicy.Theargumentwasthatthestateshouldconcentrateitseffortsexclusivelyonthepoorestsectorsofthepopulation,targetingthemforsocialspending.Thegreaterthereductioninexpendituresonpublicbureaucracy,themorethetaxburdenoffirmscouldbereduced,favoringinvestment.Thiswouldleadtomoreopportunitiesforemployment,andthepopulationwiththeleastresourceswouldthenbeabletoescapefrompoverty,pullingthemselvesupbytheirownbootstraps.

30

Therefoundingofsocietydidnotstopatthispoint,however.ThephilosophicalenthusiasmoftheeconomistscontributeddecisivelytothemilitaryefforttoinstitutionalizeandlegitimizethepowerofGeneralAugustoPinochet.Thisoccurredthroughanewpoliticalconstitution,subjectonceagaintoacontroversialreferendumintheformofa"plebiscite"in1979andcomingintooperationthefollowingyear.

By1980,then,theinfluenceofthethreeprincipalarchitectsofthenewChileanrealitywasapproachingitszenith.VirtuallyallpoliticalpowerwasconcentratedinthehandsofGeneralPinochet.Thankstothistotalpower,theneoliberaleconomistswereabletoimposetheirfree-marketeconomicmodelonallpubliceconomicandsocial

institutions.Andasaresultoftheinstitutionalconditionsgeneratedbytheseactors,financial-economicgroupsfacednooppositiontotheirdominationofthedomesticmarket.Inthefaceofthisimplacabletriangle,andinthemiddleoftheboomledbythefirmsbelongingtotheprincipalgroups(andagrowingcapacityforconsumptionamonghighandmiddle-incomegroups),theoldcorporateorganizationsofthebusinesssectorhadtoretreatintoadaptiveorsupportivestrategies.Thisframeworkwouldbemodifiedonlybythegreatcrisisprovokedbytherecessionof1982-83.

ACorporateInterlude

The1982crisishaditsoriginintheinsolvencyoftheedificeconstructedbythefinancial-economicgroupsandwasprecipitatedbya

highlevelofdebt,coupledwiththeincreasedpriceofexternalcreditandadecliningmarketforexportscausedbytheinternationalcrisis.Themonopolisticactivityofthegroupswascalledintoquestionbyalargesectionofthebusinesscommunity,whosawthemselvesashavingbeendraggedintothecrisisbythedominoeffectthatthebankruptcyofcertainleadingfirmstransmittedtothebanksandotherproductivesectors.

Themostimmediatereactioncamefromthesmallandmediumbusinesses,groupedsincetheendofthe1970sintheConfederationofSmallandMediumCompanies.Towardthemiddleof1982,thesegremios-particularlyinthesouthernprovincesofthecountry-begantomovefrompartialcriticismofeconomicpolicytoactivemobilization.Theyopenlycriticizedgovernmentsupportoftheeconomicgroups.Theleadersoflargercompanies,albeitmorereluctantly,concludedthatthecrisiswasnotofatransitorynatureandurgedthegovernmenttofollowamorepragmaticandlessideologicaleconomicpolicy.Thismeantrestrictingtheautonomyofthetechnocratsandarrivingatnegotiatedmeasureswiththebusinessassociations.Tothepressurefromthegremiosthatarosefromtheeconomiccrisiswouldbeadded,thefollowingyear,thesocialandpoliticalemergencyunleashedbythesocialprotestsdiscussedinchapter1.Afterthegoldenagethathadbeguninthepostcrisisperiodof1976,thethreepillarsofthegovernmentelitewereincreasinglythreatenedwithcheckmate.

Theelitecontrollinggovernmentandtheprocessofsocioeconomictransformationwasfacedwiththreetypesofchallenge.Thefirstwasamassivesocialrebellion,headedbyarebornpoliticaloppositiondemandingtheendofthemilitaryregime.Thesecondwastheeffortmadebyleadersofsmallandmediumfirmstorevitalizetheoldgremioorganizationsandmobilizethemtooffsetthedirectiontakenbythetechnocraticeconomicteamwithinthegovernment.Thethirdwasthatposedbytheprincipalbusinessleadersofthecountry,

groupedintheConfederationofProductionandCommerce,whosoughttonegotiateapragmaticprogramtoovercomethecrisis,involvingareorientationofthegrowthstrategythatwouldnotendangertheoverallmarketnatureoftheeconomy.

Changestothepowerstructurefollowedswiftly.Attheendof1981,confrontedwithacriticalsituationreflectedintheoverdueloansofmanybanksandfinancialsocieties,thegovernmentdecidedtointerveneineightofthesecreditinstitutionsinordertopreventageneralcollapseofthefinancialsystem.Atthesametime,anarmygeneral(Luis

Danús)withgreaterpowersofinterventionintheeconomywasdesignatedasdirectorofODEPLAN,whileJoséPiñerawasremovedfromhispostasministerofmining.Atthestartof1982,PinochetdismissedtheintellectualleaderoftheChicagoBoysinChile,SergiodeCastro,fromtheMinistryofFinance(replacinghim,nevertheless,withanothertechnocratofsimilarstampbutlessinfluence).Thepolicyofmaintainingafixedexchangerateagainstthedollar,implementedbetween1979and1982asanessentialpartoftheideaof"automaticadjustment,"wasreplacedwithcontinuousdevaluationsofthepeso.GeneralLuisDanúsmovedfromODEPLANtooccupytheMinistryoftheEconomy.Aroundthemiddleof1983,asanimmediateconsequenceofthesocialprotests,SergioFernández-aprincipalallyoftheneoliberaltechnocracy-wasreplacedasministeroftheinteriorbyveterannational-corporatistpoliticianSergioOnofreJarpa.Togetherwithnewministersintheeconomicfield,hewascloselylinkedtothepragmaticorientationofmajorcompanies.Facedwithasituationthatwouldrequirecompromiseandnegotiation,asmuchwithpoliticalsectorsaswithsocialones,Pinochetassumedacertaindistancefrompolicymaking.Thiswasanattitudesimilartothatofapresidentinaparliamentarysystem,givingresponsibilitytohisnewministeroftheinterior,Jarpa,forthedecisionsadopted.

Nevertheless,thisperiodrepresentedabriefinterludeintheexerciseofpowerwithoutcounterweightbyPinochetandhisyoungtechnocratsingovernment.Thefirstchallenge,ofsocialprotest,ashasalreadybeenshown,lostitsimmediateexplosiveforcewiththeincreasinglyroutinenatureoftheprotests,althoughitwouldleadtothedefeatoftheregimeinthemediumterm.ThesecondchallengewasfromthesmallandmediumbusinessesthathadfeltclosetovictorywiththedesignationofJarpatoheadthecabinet.

31Theirattemptsatmobilizationandpressure,nevertheless,were

overcomethroughseparatenegotiationsonthedemandsofvarioussectorsanddidnotleadinanydegreetoanorganicincorporationoftheoldgremiomovementintothemilitarygovernment.Thefinalchallenge,representedbybigbusinesssectorswhosoughttonegotiateaglobalprogramforeconomicpolicy,wasmetbyarefusalonthepartofthegovernmenttogivein.Itrespondedonlywith"segmentedandgradualresponsestospecificdemands."32

Thereasonforthisnewstrengthonthepartofthegoverningelite,whichquicklyallowedittobecomeindependentagainfromthebusinessgremiosandtodoawaywiththeveteranpoliticiansinthecabinet,wastherecompositionoftheciviltechnocracyunderanewleadership

(thatoftheengineerHernánBüchi).Thelatterwasthencapableofgivingacoherentresponsetothethreegreatproblemsfacingtheeconomy:therenegotiationandpaymentoftheexternaldebt,thecrisisinthenationalfinancialsystem,andthecrisisofcredibilityintheoveralleconomicmodel.

Aboveall,thecrisisdidawaywiththemodelofthe"minimumstate,"characterizedbyitspassivityinthebusinesssphere,andledtoaphasedominatedbyan"activestate."Thisinvolvedtherenegotiationofdebt,aswellasnewexternalloanstocovertheinterestpaymentsthatcouldnotberescheduled,andledtoanagreementwiththeInternationalMonetaryFundforanewdeflationaryadjustmentthatcombinedarestrictiononglobaldemandwithareorientationofthegrowthstrategy.Tothisend,anactiveroleforthestateemerged,designedtoincreaseinternalsavingsandinvestment,expandexports,andachieveaseriesofmacroeconomictargets(involvingnetinternationalreserves,newexternalloans,tariffandexchangeratepolicy,maximumnonfinancialpublic-sectordeficit,maximuminflationrate,andwagepolicies).TheagreementswiththeFundwerecertainlyhelpfulforthetechnocraticeliteinthefaceoftheexpansionaryproposalsofthebusinessassociations.

Theconfidenceoftheprincipalbusinessleadersinthemanagersofeconomicpolicyrecoveredrapidly,thankstounwaveringstateassistancetothelargedebtorsduringthecrisis.

33Theexternaldebt,forthemostpartrunupbyprivateagentswithoutstateguarantees,becameapublicresponsibilitywhenthestatesteppedintoguaranteetheoverdueloansoftheprivatesector.Thesettingupofa"preferentialdollar"forexternaldebtorssignifiedatransferofpublicfundstotheseagentsof35percentofthevalueoftheirdebts,towhichwasaddedthepossibilityof"dedollarizing"externaldebts.Thisuniqueformofstateinterventioninfavorofthe

businessclasswasalsoevidentinthehandlingofinternaldebt.Successivestateinterventionsinbanksandfinancialsocietiesmeantthat64percentoftheseinstitutions'capitalandreservescameunderpubliccontrol.Sodidasignificantpartoftheproductivesystem(owingtothefactthatalargenumberofbankruptfirmspassedintothehandsofthecreditorbanks,andhencetothestate,whichhadintervenedinthelatter).Thisinterventionistwave,however,whichallowedthestatetoaccumulateaneconomicpowerevengreaterthanthatofthegovernmentduringthenationalizingperiodofPopularUnity,wasquicklyfollowed-assoonastheeconomicindicatorsshowedsignsofrecovery-byanewandevenmoredrastic

waveofreprivatizationsthatreturnedthefirms("cleansed"byfiscalaid)toprivatehandsandincludedotherimportantfirmsthathadhistoricallybeenpartofthepublicsector.

Thepolicyfollowedasaresultofthecrisisledtotheselectivereconstitutionoftheinternaleconomicgroupsandanewformofassociationbetweenthesegroupsandforeigncapital.Ontheonehand,themainpurchasersoffirmsinthissecondwaveofprivatizationswerethepensionadministrationfundscreatedintheperiodbeforethecrisis.Bytheendof1985,thesefundscontrolledresourcesequivalenttomorethan10percentofGDP.Ontheotherhand,theformulaofcapitalizationusedtoovercometheproblemofexternaldebt(whichconsistedofallowingforeigninvestorstobuybondsinthemarketforChileanforeigndebt,whichtheycouldthenuseforinvestmentpurposeswithinthecountrybyexchangingthemforsharesinprivateorpubliccompanies)meantanewinjectionofcapitalthatwent,principally,tothepensionadministrationfunds.Foreigninvestorswereattractedbythefunds'rulesforbiddingriskyinvestments,whichconstitutedprotectionagainstthekindofspeculativespiralthathadledtothecrashof1982.

Havingovercomeboththeimmediatepoliticalemergencyoftheprotestsof1983andthemostseriousdebtproblems(whichhadpromptedlargerbusinessgremiostopressureforgreaterparticipationineconomicdecisionmaking,andsmallandmediumbusinessestocallforthereplacementofthemanagementteam),bothPinochetandthecivilneoliberaltechnocracyregainedincontestablepower.Figuresfromthewiderworldofpoliticsandbusinesswhohadjoinedthecabinetduringthemostseveremomentsofthecrisis,andwhohadarousedhopesamongleadersofbusinessgremiosthattheymighthaveavoiceinthemilitarygovernment,quicklydisappeared.AsPinochetwouldgraphicallyputitlater,drawingonanimagefromboxing,thisperiodhadsimplybeenacaseofsidesteppingtorecover

strength.

TheDeclineoftheElite

ThestubborntendencyoftheeliteinpowertoseekautonomyfromtheclassthatsupporteditexplainstheradicalnatureofthetransformationsatworkinChileanSociety.Thesetransformationshelpedtogenerate(throughthestate,asinthedreamsofmanygreatreformers)anewcivilsociety;andthisallowsonetounderstandanothersalientfeatureoftheChileanexperience,whichwasthepeacefulnatureofitspoliticaltransitiontodemocraticrule.

Theverysuccessinthecreationofnewgeneralrulesforsociallife,particularlythereductionofdirecteconomicstatepower,increasedtheadvantagesforthebusinesssectorofhavingpoliticalmanagementundertakenonapredominantlyadministrativebasis,ratherthanbyaneliteguidedbyafoundationallogic.Thepersistenceoftheeliteincreasedtherisksofwidespreadpoliticalconflictandcyclicaleconomiccrises,whichcouldsignifyapermanentgameof''allornothing"-agamethatiseasilyacceptedwhenoneisclosetohavingnothing,butnotquitesoreadilywhenoneisclosetohavingall.

Asalreadymentioned,althoughthesocialandpoliticaloppositiontothemilitarygovernmenthadnotachieveditsimmediateobjectivesbyinsurrectionalmeansintheprotestsof1983,ithadmanagedtodevelopagrowingmovementgearedtowardthedefeatofPinochetbypoliticalmeans.Intheabsenceofotheralternatives,thismeantthatattentionwasfocusedontheplebiscitescheduledfor1988.

Forthesereasonstheleadersofthebusinessgremios,althoughtheycontinueduntilthelastdaytogivetheirsupporttothemilitarygovernmenttheyhadhelpedtoinstall,alsobegan,withthepassingofthe1983crisis,toextendtheirindependencewithrespecttothispowerelite.Untilthecrisis,theironlydialoguehadbeenwiththemilitarygovernment;followingthecrisis,theyopenedupchannelsofcommunicationwiththebigunionbranchesandoppositionpoliticalparties.Thiswaswiththeperspectiveofdevelopingwhatwascalledaprocessof"socialcooperation."Atthesametime,theoldpoliticalright,whichfollowingthemilitarycouphadagreedvoluntarilytodissolveitspartystructures,begantoreestablishthempublicly,inorderto"supportbutnotformpartofthegovernment."Thus,whilePinochetreturnedtothecenteroftheringfollowinghisneatfootwork,readytoknockoutorbeknockedout,membersofthepublicwerealreadybuyingtheirticketsforthenextfight.Theautonomyoftheelitefollowingthecrisisof1983wouldbethelast

thattherestructuredChileancapitalistclasswouldacceptforreasonsof"emergency."

Somethingsimilarwastakingplaceinthesphereofmilitarysupportforthegovernment.Theairforce,thenavy,andeventhemilitarizedpolice,whichovertheyearshadsufferedtheblowsattendantuponthecentralizationofallpowerinthehandsofthecommander-in-chiefofthearmy,emphasizedtheirsupportfortheinstitutionaltransitionestablishedbythe1980constitution.TheywouldstickbyPinochetuntilthe1988plebiscite,buttheywouldnotbedisposedtofollowhiminanytypeofcoupattemptifhelost.

Thesewerethelastmomentsofasituationinwhichthegoverningelitecoulddominatetheclassthathadsupportedit.Thisdominationhadbeenbaseduponthelackofanationalprojectthatwouldgivevoicetothepoliticalandsocialaspirationsofbusiness,aswellasthecontinualpresentationofcatastrophicalternativesinwhicheverythingthathadbeenwoncouldbelostinamoment.TheoldbusinessorganizationsandtherebornpartiesofthepoliticalrightwereoutdoneuntilthelastdaybythestrengthofGeneralPinochetandhiseconomists.Tellingly,thepresidentialplebisciteincludedPinochetasthecandidate,inspiteofthepubliclackofenthusiasmmanifestedbythemajorityofrightistpoliticians.Thefollowingyear,thepresidentialcandidateoftheblocthathadsupportedthemilitarygovernmentwasHernánBüchi,whohadledtheneoliberaltechnocracythroughthecrisisof1983.

Butthedefeatofbothwasnotadefeatforthebusinessclass.Themilitaryreturnedtothebarracks,theChicagoBoystomanagingthemostimportantfinancial-economicgroupsinthecountry,andtheoldorganizationsofemployerstospeakingforthemselvesagain.Thedialoguebetweenthebusinessgremiosandthemajorityright-wingpoliticalparty,ontheonehand,withtheunions,politicalparties,andgovernmentoftheDemocraticCoalitionontheother,hasbeenakeytotheorderlynatureoftheChileanpoliticaltransition.

4RestructuringandtheNewWorkingClassesDuringthedecadefrom1982to1992,thesocialstructureofChilewasfundamentallytransformed,particularlyinrelationtotheconditionofworkersandthenatureofpoverty.Thecentralthesisofthisstudyisthatthebreakupoftheoldsocialstructure,whichwasthemostimportantfeatureoftheperiodfrom1973to1982,hasbeencompleted.Thiswasaperiodcharacterizedbyrisingunemployment,afallinwagedwork,agrowthinurbaninformalemployment,andanincreaseinmarginality.Bycontrast,1982-92wasaperiodofsocialrestructuring,whichspeededupafter1986,andwasmarkedbyfallingunemployment,areductionininformalandtertiary(services)employment,andanincreaseinwagedwork.

Examinationofwhattookplacebetween1973and1992leadstotheconclusionthatarealhistoricalcycleofdestructuringandrestructuringhasoccurred.ThisissimilartowhattookplaceinChilebetween1920and1940-aperiodthatencompassedthenitratecrisisandtheIbáñezdelCampodictatorship,lastinguntilthePopularFrontandthebeginningsofimport-substitutingindustrialization.Nevertheless,thecyclethatwouldseemtohavejustendedhashadawiderspatialimpact,adifferentstructuraldirection,andagreatersusceptibilitytofuturechangesandfluctuations.ThisisbecausetheChileaneconomyismoreopen,andhencesectorsandregionsaresusceptibletomorerapidandintensesituationsofexpansionordeclinethanwasthecaseatthemiddleofthecentury.

Thedirectionandmagnitudeofchangecannotfailtoimpresstheobserver.Inthelastthree-monthperiodof1982,morethan1.2millionpeoplewereunemployedorparticipatinginemergencywork

programs.

Tenyearslater,thenumberofunemployedhadbeenreducedtolessthan250,000,atthesametimethattheemergencyworkprogramshadceasedandinformalurbanemploymenthadexperiencedarelativedecline.Thismeansthatbetween1982and1992morethanamillionChileanslefttheranksoftheunemployedatthesametimethatunderemploymentwasfalling.Ofcourse,theofficialstatisticsaregenerousintheirunderstandingofwhatconstitutesanemployedperson.

1Itisneverthelessundeniablethattherateofunemploymenthasbeensubstantiallyreduced,from27percentin1982to4.4percentin1992.

Theconsolidationofthenewlyemergingeconomyandsocialstructurehascoincidedwiththedemocratizationofthecountry.ThishasopenedthewayforasubjectivereshapingofChileansociety,whosecharacteristicswilltakeyearstoacquireamoredefinitiveform.Inthemeantime,itisimportanttodocumentandanalyzethemajortrendsofchangeoccurringwithintheworldofwork.Thatisthepurposeofthischapter.

TheNewWagedEmployment

Duringthe1980s,varioussociologicalandeconomicstudiespointedtoaprocessoffallingwagedemploymentinthedevelopedindustrialworld,withoutpayingsufficientattentiontonotableexceptionssuchasJapanandthenewlyindustrializingcountriesofSoutheastAsia.TherewasatendencytoviewthisphenomenonasaglobalprocessthatwasbeingextendedtoLatinAmerica.Theoriginsoftheprocesswereseentolieinstructuralcrisis,aswellasthetransitiontowardaneweconomicmodelinwhichtheso-calledwagerelationlosesimportance.2Bythesametoken,workersasadifferentsocialgroupandrelevantsocialactorsalsobecomelesssignificantinthepolitical

system.

EmergingTrends

During1973-83Chileappearedtohavefollowedthesameroad,asillustratedinfigure4-1.Therewasareductionintherelativeandabsoluteimportanceofwagedworkers,asmuchinthemiddleasintheworkingclass.3Wagedworkfellduring1972-83from65.7percentto48.2percentoftotalemployment.4Thisdeclinewasintimatelyrelatedtotwoeconomiccrises,thefirstin1974-75andthesecondin1982-83.Between1979and1983,thetotalnumberofwagedworkersfellfrom1.9millionto1.4million.Halfofthisreductioncanbeexplainedbyadrasticreductioninpublicemployment(-75,000)andamajor

Figure4-1.WagedWorkers,asPercentageofEmployedPopulation,1976-94Source:NationalStatisticalInstituteofChile,NationalEmployment

Survey.Dataareforfourthquarterofeachyear.

decreaseinindustrialemployment(-65,000).Theoriginofthisrapiddeclineinwagedemploymentwasthefierceneoliberalstructuraladjustmentthataggravatedtheconsequencesoftwoexternalshocks(1974-75and1981-83)andgenerateddeeprecessionandmassiveunemploymentinthetradablegoodssector(forexample,themanufacturingindustry).Thisimpactwasdeepenedbythedrasticrationalizationofpublicemployment.

Nevertheless,between1983and1992theevidenceshowsareversalinthisprocess.Duringthatperiodemploymentincreasedby1.8millionpeople,86percentofwhomwerewaged.Bythebeginningof1987,therateofwagedworkwashigherthanin1980-81(theyearsbeforethe1982-83recession),andby1992thisratestoodat63.1percentoftotalemployment,whichwasalsohigherthanin1966andalmostthesameasin1970.

5

Atthesametime,itisimportanttonotethatalthoughtheproportionofthelaborforceinwagedworkincreasedbetween1982and1992,thesamedidnotoccurwiththeshareofwagesinnationalincome,whichremainedstationaryataround38percent.Hereitshouldbepointedoutthatthefallinwagedworkinthepreviousperiod(1975-

82)wasaccompaniedbyaconsiderableincreaseintheconcentrationofpersonalincome,andthatthereboundinwagedworkdidnotreversethesituation.Currently,therichest10percentofthepopulationcontrols40percentofdisposablepersonalincome-asituationthatdoesnotappeartohavechangedsignificantlysince1988.

Theexplanationforthisphenomenonliesintwomajorgroupsoffactors.First,therearestructuralfactorsinvolvingtheconcentrationofwealthinChile'ssmallopeneconomy.Thesehavetheiroriginintheenhancedweightoflargecompaniesthatproduceordistributethemajorityofexports.Aroundfifteencompaniesnowcontrol85percentofexports.Themajorityproduceprimarygoodsonalargescalewithcontinuousproductionandahighcapital-laborratio.Second,thereareinstitutionalfactorsthathavetodowiththeorganizationandcontrolofcapitalmarketsandfacilitatetheconcentrationofsurpluses.Furthermore,theorganizationofthelabormarketleadstoitssegmentationandtothemassivepresenceofprecariousemployment.Theweakbargainingpoweroflaborhasconsistentlymeantthatthegrowthofproductivityperperson-hourhasbeensuperiortothegrowthofrealwagesperhour.

Atthesametime,itshouldbepointedoutthatthissituationisnotnecessarilypermanent.TheChileaneconomyisgrowing,withinthecontextofatypeofrealchangethatisqualitativelydifferentfromthatwhichhastakenplaceinthepast.Thereisaprogressivedevelopmentofmanufacturingindustryandproductiveservices.Tothatmustbeaddedacertaintightnessinthelabormarket,thewideningofnegotiationandcollectivebargaining,andthefutureinstitutionalreformsthatwilltakeplaceinamoreadvancedstageofdemocratictransition.Allofthisshouldfeedthroughintoagradualbutprogressiveincreaseintheshareofwagesinnationalincome.

TheNewWorkingClass(es)

Overallevidenceinvitestheformulationofvariousdifferenthypothesesaboutthesocialandpoliticalimpactoftherenewedgrowthinwagedwork.Abasicallystructuralistapproachcouldidentifysuchatrendwiththeinevitablereturnoftheworkingclasstothepoliticalandsocialarena,perhapsintheformofunionmovementswiththepotentialtoinfluencethepartiesofcenterandleftbyreinforcingtheirclassdiscourseandrepresentation.Thiswouldstrengthentheorganicnatureofcivilsociety,creatingaspacefortherebirthofwhatwasformerlyknownasthe"compromisingstate"inChileanarrangement

fortherepresentationandreconciliationofconflictingintereststhatisbothnecessaryandpossibleinasmallopeneconomy.Dependingonthestandpointfromwhichthisisanalyzed,suchapossibilityeitherfansoldfearsorrevivesolddesires.

Butthisissimplyoneofseveralpossibilities,therealizationofwhichdependsonavarietyofpolitical,social,andculturalfactors.Infact,ananalysisofthereturntowagedworkleadstotheconclusionthatthisdoesnotentailthereproductionofthepastatall,butratherthecreationofeverydifferentstructuresofsocialrelations.Therootsofsomeofthesecanbeoutlinedasfollows.

ChangesintheGenderCompositionoftheLaborForce.AnotabledeparturefromthepastinvolveschangesinthegendercompositionofthewagedworkforceinChile.Althoughwomenconstituteaclearminority,theirsharehasgrownmarkedly,from15.9percentin1966to27.6percentin1992.Wagedwomen'sshareoftotalfemaleemploymenthasalsorisen,from42.7percentto58.6percentbetween1966and1992.Thisincreaseisaccountedforbythegrowthofwagedfemalelaborintheprimaryandtertiarysectors,whichcontrastswithadeclineinthesecondarysector.

SectoralChanges.Table4-1comparesthepositionofwagedworkoveraseriesofthree-yearperiods:1976-78,thefirstyearsofneoliberalstructuraladjustmentwithinthecontextofanauthoritarianregimeandthebeginningofaneconomicrecovery;1982-84,yearsofrecessionandhighunemploymentbeforethesecondstructuraladjustmentofamoreunorthodoxtype;and1990-92,yearsofeconomicexpansionwithinthecontextoftransitionanddemocraticgovernment.Comparingthesituationbetween1976-78and1990-92,itisapparentthatalthoughshiftsinthedistributionofwagedworkamongeconomicsectorshavenotbeenverylarge,significantchangeshaveindeedoccurredwithinsectors.

Intheprimarysector,therewasadoublingofwagedworkersinagriculture(includingforestry),between1976-78and1990-92.Thegrowthtrendcontinuedevenduringthecrisisof1982-84,reflectingthedynamicsofmodernizationintheChileancountryside.Atthesametime,theproportionofallwagedworkinthecountrythatcouldbeattributedtotheagroforestrysectorincreasedfrom14percentto16percent.

Inthesecondarysector,wagedworkinconstructionalmosttripled,althoughthisgrewataninferiorratetototalemploymentinthesector.

Table4-1.PopulationinWagedEmployment,bySector,SelectedPeriods,1976-92a

1976-78 1982-84 1990-92Sector ThousandsPercentThousandsPercentThousandsPercentPrimary 297 19 293 19 558 19Agriculture 219 14 227 15 458 16Fishing 10 ... 15 1 20 1Mining 69 4 52 3 80 3

Secondary

469 29

42027

848 30

Manufacturingindustry

356 22 318 20 595 21

Utilities 29 2 24 2 22 1Construction 84 5 78 5 231 8

Tertiary

83452

843

54 1,477 51

Commerce 191 12 243 16 406 14Transportation/communication

134 8 129 8 209 7

Financialservices 60 4 85 5 181 6Otherservices 180 11 170 11 491 17Publicemployment

270 17 215 14 190 7

Total 1,601 100 1,556 100 2,883 100Source:NationalStatisticalInstituteofChile(INE),NationalEmploymentSurvey,fourthquarter.a.Three-yearaverages.

Notsurprisingly,opportunitiesforwagedemploymenthavealsoincreasedmarkedlyinthoseareasofmanufacturingindustrydirectlylinkedtotheprocessingofnaturalresources.Activitiesinindustriessuchastextilesandmetallurgyhave,however,declinedinimportance.

Ingeneral,thetertiary(orservices)sectorhasshownapatternof

increaseinwagedwork,aprocessthatsloweddownwiththecrisisbutacceleratedduringthesecondhalfofthe1980s.Betweenthebeginningandtheendoftheperiodunderdiscussion,therateofwagedemploymentwithinthesectorrosefrom50percentto58percent(although,asnotedintable4-1,theproportionofallwagedlaborinthecountryattributabletothetertiarysectorremainedalmostconstant).Whatisparticularlystrikingisthatthegrowingimportanceofwagedlaborrelationswithinthissectortookplacedespiteanabsolutedeclineinpublicemployment,whichfellby30percent,andasashareofthetotalwagedworkforcedeclinedfrom17percentto7percent.

Atthesametime,thenumberofwagedworkersincommercedoubled,atrendtowardgrowththatcontinuedevenduringthe1982-84recession.Salariedemployeesinfinancetripledoverthewholeperiod,aprocessthatwastemporarilystalledduring1982-84whenthecrisis

Table4-2UrbanandRuralWagedWork,SelectedPeriods,1976-92aTypeofemployment 1976-

781982-84

1990-92

NationalemploymentIndexoftotalemployment 100 111 160Indexoftotalwagedwork 100 94 174Rateofwagedwork(percent) 58 44 62

UrbanemploymentIndexofurbanemployment 100 113 173Indexofwagedemployment 100 113 186Rateofwagedwork(percent) 61 45 64

RuralemploymentIndexofruralemployment 100 103 112Indexofwagedemployment 100 83 113Rateofwagedwork(percent) 47 39 49Ruralemployment/totalemployment(percent)

22 22 15

Ruralwaged/totalwaged(percent) 18 18 12

Agriculturalemployment(excludingfishing)Indexoftotalemployment 100 98 167Indexofwagedwork 100 103 229Rateofwagedwork(percent) 44 47 55Agriculturalemployment/totalemployment(percent)

18 16 19

Agriculturalwaged/totalwaged(percent) 13 12 17

Ruralemployment/agriculturalemploymentRuralemployment/agriculturalemployment(percent)

118 123 79

Ruralwaged/agriculturalwaged(percent) 129 108 70Source:NationalStatisticalInstituteofChile(INE),National

EmploymentSurvey,fourthquarter.a.Three-yearaverages.

directlyaffectedthefinancialsectoroftheChileaneconomy.Between1976-78and1990-92,thetwosectorsincreasedtheirrelativeweightfrom16percentto20percentofthetotalwagedlaborforce.

ShiftsbetweenUrbanandRuralAreas.

Between1976and1992,therewereimportantchangesinthespatialdistributionofwagedworkers.Urbanemploymentgrewmorequicklythanruralemployment,reflectingaprocessofurbanizationthatreducedtheabsolutenumberofresidentsandsizeofthelaborforceintheruralareas.Ascanbeseenintable4-2,bothtotalandwagedruralemploymentdeclinedasapercentageofnationalemployment,whilewithinruralareasthemselvestheproportionoftheworkforcereceivingsalariesorwagesgrewlessthanthatinurbanareas.

Nevertheless,wagedrelationswereextendedinthecountryside,andthereisreasontothinkthattheproportionofwagedworkinagricul-

tureandfishingmaybeunderestimated.Inthefirstplace,itwouldappearthatmanyruralworkerscategorizedasself-employedare,inreality,wagedpieceworkers.Inthesecondplace,table4-2revealsagrowingspatialasymmetrybetweenplaceofresidenceandworkintheagriculturalsector,sinceanincreasingproportionofthosewhoworkinthecountrysideliveinurbanareas.Thisisespeciallysofortemporaryworkerswhocurrentlyliveinsmallandintermediatecities.

Theindicatorsareextremelyrevealinginthisrespect.Between1976and1992,theproportionoftotalemploymentrepresentedbyruralemploymentfellfrom22percentto15percent.Nevertheless,agriculturalemployment(excludingfishing)increaseditsrelativeimportanceintotalemploymentandevenmoresoinwagedemployment.In1976-78and1982-84thereweremoreworkersintheruralsectorthanintheagriculturalsector.Thiswasreversedinthesecondhalfofthe1980sandisreflectedinthefiguresfor1990-92,suggestinganaverageof680,000peopleinruralemploymentand800,000inagriculturalemployment(excludingfishing).Suchaprocesswas(asnotedabove)concomitantwithareductioninthetotalpopulationandlaborforceofruralareas.

Itisclearthatthisisrelatedtotheexpansionanddiversificationofagricultureandagro-industrialproduction,whichisconcentratedintermsofproductandemploymentinthecentralvalley.Between1976and1992,wagedemploymentfellinthenorthernandsouthernregionsbutgrewinthecentralvalleyandextremesouth.

SpatialDecentralization.

Between1976and1992,therewasanincreaseof1.4millionwagedworkersinChile.Forty-threepercentofthisincreasetookplaceinSantiagoand10percentinthetwonextlargestcities(ValparaísoandConcepción),while24percentisexplainedbygrowthinintermediatecities,21percentinotherurbanareas,and2percentinruralareas.

Thusalthoughthebulkoftheexpansionofthewagedlaborforcewasconcentratedinurbanareas,asignificantchangeoccurredinthetendenciesinpreviousdecadesforgrowthinwagedlabortobeconcentratedalmostexclusivelyinthethreelargestcities.Althoughmorethan50percentofwagedworkerscontinuetobeconcentratedinthesecities,theirrelativeimportancehasdecreasedandtheproportionofthelaborforceinwagedlaborhasbecomemoreuniformbetweenlarge,medium,andsmallcities.Thisreflectsastructuralchangeinthegeographyofwagedlaborinthecountry.

Figure4-2.EmployersandWagedWorkers,1976-94

Source:NationalStatisticalInstituteofChile,NationalEmploymentSurvey.Dataareforfourthquarterofeachyear.

Ingeneral,theproportionofallwagedworkinChilethatiscarriedoutinurbanareashasgrowncontinuouslyoverthepastfewdecades,increasingfrom70percentto84percentofthetotalbetween1970and1990.

DispersionofWagedWorkersamongMoreFirms.

TheChileanbusinessclassunderwentadoubleprocessofchangeoverthe1980s.Ontheonehand,therewasthereconstitutionofpowerfulnationaleconomicgroupsandtheentranceofforeigncorporateinterests,strengthenedinbothinstancesbytheprivatizationofstateenterprises.Ontheotherhand,therewasanexpansionofsmallandmediumbusiness.

Thisexpansionwasnotequallyspreadacrosssectors.Inorderofimportance,greatergrowthwasregisteredintheprimarysectorthaninthesecondaryandtertiarysectors.Theurbanconcentrationofbusinessincreased,withareductioninSantiagobutasignificant

increaseintheintermediatecitiesofConcepciónandValparaíso.

Figure4-2illustratesthedramaticgrowthinnumberofemployersregisteredbynationalemploymentstatisticsoverthepastdecade.Althoughduringtheperiodofeconomicrecuperationthatlastedfrom

1976to1980therehadbeenlittlegrowtheitherinemployersorinwagedworkers,thissituationchangedcompletelyfrom1983on.Thenumberofemployerstripledinthefollowingdecade,andthenumberofwagedworkersdoubled.Sincethenumericalexpansionofthebusinessclasswasregisteredprincipallyinsmallandmediumfirms,itisnotunreasonabletosupposethatagoodpartofthegrowthinwagedworkalsotookplaceinthistypeofenterprise.Thiswouldsuggestaprocessofdeconcentrationordispersionofwagedworkersamongfirms.

6

TheNewInformality

Agreatdealofattentionhasbeenpaidbysocialscientiststothe''informalization"oftheeconomyinbothindustrialanddevelopingcountries.Theconcepttendstobeusedintwowaysthatareinsomerespectssimilarbutinothersquitedifferent.Thefirstbasesanalysisofinformalityontheexpansionofcertaintypesofeconomicrelationsthat,eitherowingtoacrisisorthedominantmodeofregulationoftheeconomy,constituteareaswherethestateintervenesinaweakordiffusemanner.Thesecond,whichiswidelyadopted,seesinformalityasabodyofagentswithcertaincharacteristicswhoarelocatedintheurbanworld.Thislatterconcepttendstobeexpressedintermsofanurbaninformalsector.

Eachusageoftheterm"informality"isassociatedwithadistincttheoreticaltradition.Thefirstiscurrentlyemployedwithinregulationtheory,whereagentsappearinacomplexworldofeconomicrelations.Thesecond,focusingontheurbaninformalsector,iscloselyrelatedtostructuraldualism.Thereare,however,stillfurtherdifferencesofemphasiswithinthesecondcamp.Someauthorshave

understoodtheurbaninformalsectorasasocialsystemdifferentfromtheformaleconomy,butsubordinatedtothelatterthroughrelationsofunequalexchange.7Thisideaisalongwayfromtheoriesthatusetheconceptofamarginalmassthatispresumedtobeafunctionaltothegeneralsystem.8

IntheChileancase,variousargumentshavebeenputforwardtoexplaintheexpansionoftheurbaninformalsector.Onehighlightsgrowingrural-urbanmigration,whetherbecauseoftheincapacityoftheruralworldtoabsorbthegrowthintheeconomicallyactivepopulationorbecauseoftheattractivenessforthepeasantofthedifferentialbetweenruralandurbanwages.9Anotheremphasizeslowdemandforlaborinthemodernurbansector,owingtothetechnologies

employedthere.

10ThereisalsothesuggestionthatgrowthoftheinformalsectorislinkedtothecrisisoftheChileanwelfarestate,whichduringthe1960spartiallycoveredtheurbanworld.Inthisargument,theincreasingincapacityofthestatetoguaranteeindirectwagespromotedthedevelopmentofalternativesurvivalstrategieswithinthelow-incomesectors.Suchaprocesshasbeenfunctionaltocapitalism,sinceitreducesthecostsofreproducingthelaborforce.Finally,anotherimportantschoolofthoughthasarguedthatthesuccessiverecessionsof1974-75and1982-83,aswellasneoliberalpolicy,haveledtoprocessesofdeindustrializationand"spurious"service-sectoractivity,or"tertiarization."Thelatterisunderstoodtoinvolvehiddenunemploymentandtoconstitutearefugeforlabordisplacedfromothersectors.11

Itiswellknownthatstatisticalproblemscanseriouslydistortanyanalysisoftheurbaninformalsector.Astrictdefinitionofthesectorincludesself-employedworkers,unwagedfamilymembers,andwagedworkersinmicroenterprises(employingonetofiveworkers)andexcludesdomesticworkers,aswellastechnical,professional,andmanagerialstaff.12Nevertheless,giventhatinformationwithrespecttowagedworkersinmicroenterprisesisnotavailable,amorerestricteddefinitionoftheurbaninformalsector,whichincludesonlytheself-employedandunpaidfamilylabor,isgenerallyused.(Theexclusionsalreadymentionedaremaintainedinthislattercase.)

StagnationofInformalEmployment

InChile,thepopularizationofthetermledtotheimpressionthattheurbaninformalsectorwasexpandinginthelongterm,especiallyintheservicessector,despitethefactthatastudyofthesectorfor1960-

80pointedtothecontrary.13Usingthemorerestricteddefinition,itcanbeseenthatthecensusesof1960,1970,and1982revealaprogressivedeclineintheimportanceoftheurbaninformalsectorwithrespecttotheurbanworkingpopulationasawhole.Usingotheravailableinformation,itispossibletoshowthatitwasduringthe1970sthattheurbaninformalsectorgrewmorerapidlythanurbanemploymentasawhole(seetable4-3).Thisoccurrednotonlybecauseoftherecessionin1974-75,butalsobecausethetypeofrecoverybetween1976and1980didnotprovideforasignificantincreaseinemploymentinsectorslikeindustry.14Nevertheless,duringthe1980stheurbaninformalsector-initsrestricteddefinition-grewatalowerratethantheurbanworkingpopulation.Asaconsequence,theChileancaseisnotcongruentwithtraditionalexplanationsofariseininformality.

Table4-3.AverageAnnualRatesofGrowthintheUrbanInformalSector,SelectedPeriods,1960-90

PeriodTotal

populationUrban

employmentUrbaninformal

1960-70 2.04 2.35 1.631970-80 2.23 4.07 5.011980-90 1.56 3.17 2.77Source:AlvaroDíaz,"LareestructuraciónindustrialautoritariaenChile,"RevistaProposiciones17(SUR,1989),basedondatafromINEandPREALC.

Amoredetailedanalysisfor1976-94isprovidedinfigure4-3,whichsuggeststhatinChileinformalityisprocyclicalandthatbetween1988and1994itwasbelowthelevelsof1979-81.Nevertheless,itisobviousfromtheprecedingdiscussionthattheurbaninformalsectorisunderestimatedhere,sinceitisnotpossibletoincludewagedworkers,inparticularthoseofmicro-industries,inthedatabaseutilizedtocreatefigure4-3.Takingaccountofthisfactor,onecanatleastconcludethatthemakeupoftheurbaninformalsectorhaschanged.Therelativeimportanceofself-employedworkersandunpaidfamilylaborhasdeclined,whiletheimportanceofwagedworkershasincreased.AndgiventheexpansionofwagedworkinChile,itcouldbearguedthat

Figure4-3.UrbanInformalSector,1976-94

Source:NationalStatisticalInstituteofChile,NationalEmploymentSurvey.Dataareforfourthquarterofeachyear.

whatishappeningisnotdecreasinginformality,butratheranewtypeofinformalityinthecountryfrom1983on.Theevolutionoftheso-calledurbaninformalsectoratthebeginningofthe1990shasadifferentdynamicfromadecadeago.Itisnotincreasingasaresultoftheexpansionofsmallmercantileproduction,asinthepast,butratherthroughthepathofsmallcapitalistproduction.

Thequestion,however,doesnotendthere.Thedualistideathattheurbaninformalsectorisawell-differentiatedsubsystemcannotexplainthenewformsofregulationthatcharacterizetheChileaneconomy.ItdoesnottakeintoaccountthefactthatthesystematicimplementationofneoliberalisminChile,andthederegulationofmarketsthatthisimplies,hasfundamentallychangedthenatureofrelationsbetweencapitalandlabor,aswellasbetweensectorsofcapitaland,aboveall,thetypeofeconomicregulationexercisedbythestate.Suchaprocessmakesitextremelycomplicatedtounderstandmanifestationsofinformalityintherealworld.

InformalSectororInformalRelations?

Theuseoftheconceptoftheurbaninformalsectorentails,nowmorethaneverbefore,anumberoftheoreticalandmethodologicalproblems.

First,informalitycannotbesimplydefinedasagroupofactivitiesnecessaryforsurvival,orjustasarefugeforunemployedlabor.AsPortes,Castells,andBentonhaveremarked,itcannotbea"euphemismforpoverty."

15Theso-calledinformalsectorisaveryheterogeneouscategory,inwhichtheincomesofcertainsegmentsmaybesuperiortothoseoftheformalsector.ThisiscertainlytrueintheChileancase.16

Neithercaninformalitybeequatedwiththepresenceofasupposed

precapitalistsector.Theurbaninformalsector-whetherinitsnarrowerorwiderdefinition-iscertainlymonetized.Itmaytendtooperateona"cashup-front"basis,butitalsocontainsextensivecircuitsofinformalcredit,inChileasaroundtheworld.17

Neithercaninformalitybeassociatedwiththetraditional,thenon-modern,orthenonrationalintheWeberiansenseoftheword.Infact,itrepresentsaspecificstyleofmodernization,witharationaledifferentfromthatofthepast.

Second,theboundariesofinformalityarenotclear.Theinformalsectorismadeupnotonlyoftheself-employedbutalsoofemployersandwagedworkerswhoworkinconditionsthatarenotdirectlyregulatedbythestate.Nevertheless,thereareplentyof"formal"compa-

nies,operatingaslegalentitiesandpayingtaxes,thatstilloperatewith"informal"laborrelations.Theyemployworkerswithoutlegalcontract,awidelyprevailingpracticeinsmallandmediumfirms.ThisisparticularlyeasytodoinChilebecauselaborlegislationimposedin1979(andminimallymodifiedin1991)permitsit,andthestateplaysaweakroleinregulationoflabormarkets.

Largecompaniesdonotoftenresorttothistypeofpractice.Nevertheless,adoptionofastrategythatentailsareductionintheinternalverticalintegrationofcorporations,andhenceanextensiverelianceonsubcontractingtosmallandmediumcompanies,iswidespreadinChile.Thishastwoconsequences.First,itestablishesanewsetofasymmetricalrelationsbetweenlargeandsmallcapital,involvingagreementsthatrelatenotonlytopricesbuttochainsofdistribution,directcredit,andthetransferoftechnology.Theseareorganicrelationsthatshapethemarketbutarenotregulatedbythestate.Second,subcontractingleadstonewrelationsbetweenlaborandcapitalthatareinstitutionalizedneitherbythestatenorbycollectivenegotiation,butratherbyagreementsbetweenindividualworkersandemployers.Thisincreasestheflexibilityofcapitalandreducesthelaborcostsofthesubcontractingcompany.Althoughsuchcompaniesmaybelegallyregistered,thecommonpracticeisnottopermitunionsandtoavoidcollectivebargaining.Theirmixedemploymentpractices,whichincludehiringworkerswithandwithoutacontract,leadtoprecariousemploymentconditionsfortheworkforce.

Asaresult,asituationhasariseninChileinwhichlinksinachainofcapitalhaveappearedbetweenwhataretraditionallyunderstoodasformalandinformalcompanies.Formalcompanies,forexample,usehomeworkersintheclothesindustry;andthisformatisrepeatedinvarioussectorsoftheeconomy(includingtheagro-exportindustry,mining,andforestry).Althoughsucharrangementsexistedinthe1970s,theywerewithoutdoubtfarmorewidespreadinthe1980s.

TheNewInformalityinChile

Insum,then,anewprocessofinformalizationisunderway,characterizedbyachangeinthecompositionoftheurbaninformalsectorandbytheinformalizationofanimportantsegmentofcapital-laborrelations,aswellasofrelationswithincapital.Inthissense,itcanbesaidthatinformalityhasincreased,butinaverydifferentmannerfromthatsuggestedbythetraditionaluseoftheconceptofinformality.

Drawingontheprecedinganalysis,wecanmakefouradditionalassertionswithrespecttotheadvanceofinformalityinChile.First,themercantileformofinformality(self-employedworkers)didnotincrease,owingtothevigorousinterventionoftheauthoritarianstateinthelabormarketattimesofdeepeconomiccrisis,usingemergencyworkprogramstoprovidetheotherwiseunemployedwithwagedwork.Theseemergencyprogramsfirstappearedbetween1974and1975andin1982-83employedmorethanhalfamillionpeople.Ifthathadnotoccurred,itispossiblethatanautonomousmercantileinformalsectorwouldhaveemerged,ofakindnotlinkedtotheformalsector.Inthiscase,therecouldhavebeenadualeconomy.

Second,sincethebeginningofeconomicrecoveryin1983,therecoveryandexpansionofsmallandmediumfirmshasbeenaccompaniedbyanewformofinformalityofaspecificallycapitalistnature.Theurbaninformalsectorofthe1990sisdifferentfromthatatthebeginningofthe1980s,especiallybecauseoftheincreasedweightofwagedworkers.

Third,untilthebeginningofthe1980s,theinformalandformalsectorsinChilewererelatedpredominantlythroughthesurvivalstrategiesofpoorfamilies,whoproducedorsoldwagegoodsorprovidedpettyservices.Currently,aproductiverelationshipbetweentheurbaninformalsector-initswidestsense-andtheformalsectorhasemerged,baseduponthekindsofproductionchainsalreadymentioned.Ratherthandifferentiatedsystems,therefore,thereisasinglecomplexsystemthatishighlysegmented.ThisisthecaseinnumeroussectorsoftheChileaneconomyandparticularlythoserelatedtoexport.

18

Fourth,informalityisoftenassociatedwiththedisorganizationofa

matrixofinstitutionalpower-theprofoundcrisisofaneconomicsystemand,inparticular,acrisisofstateregulation.Inthissense,theurbaninformalsectorcanconstituteapermanentescapefromeffortsmadebyacrisis-riddenstatetoreinforceorreinstateinstitutionalization.19Thisisnot,however,thecaseinChile.Informalityinthe1990sisanintegralpartofanewmatrixofpower,notanescapefromit,andreflectstheeffectivereorganizationofapoliticalandeconomicsystem.

PatternsofChangeintheServicesSector

ThegrowingimportanceofemploymentintheservicessectoroftheChileaneconomywasalsoarecurringthemeineconomicliteraturefromthe1970stothemiddleofthe1980s.Between1960and1973,

Figure4-4.EmploymentintheServicesSector,1970-94

Sources:CentralBankofChile;NationalStatisticalInstituteofChile.

tertiaryorserviceemploymentinChilerosefrom41percentto52percentoftotalemployment.Therateofgrowthbecamemuchmorerapidinthefirstdecadeofdictatorship,whenemploymentinthissectorrosefrom52percentto66percentoftotalemployment(seefigure4-4).

20

Developmentsduringthedecadefrom1973to1983thereforeappearedtoreflectastructuraltendencyvisibleinthe1960s.Twoargumentswereputforwardatthetimetoexplainthisphenomenon.Thefirstsuggestedthatthegrowthofemploymentintheservicessectorwasafunctionofthegrowthofproductionwithintheindustrialsector.Theseconddepictedthisincreasingservice-sectoremploymentastheproductoftwoprocesses:first,andoflesseroverallimportance,thedevelopmentofcertainservicestypicalofcapitalistmodernization(suchasfinancialservices);second,andmoreimportant,thegrowthof"spurioustertiarization,"whichinvolvedhiddenunemployment.21

Thelatterexplanationseemsmostappropriatetodescribetheopeningdecadeofthedictatorship.GiventhestagnationanddeclineofChileanindustry,onecouldspeakoftertiarizationwithdeindustrialization,22aprocessthattookplacenotonlyduringtworecessions(1974-75and1982-83)butalsoduringaperiodofrecovery(1976-

81).Thispatternofcapitalistdevelopmentduring1973-83wasindicativeofagrowingautonomyoftheservicessectorfromtheprimaryandsecondarysectors.And,inspiteofthefactthatrapiddevelopmentoffinanceandforeigncommercegeneratedanexpansionofemployment,therelativeweightoftheseinservice-sectoremploymentwasverylow.

Insummary,theempiricalevidenceindicatesthattheprincipalsourceofemploymentinthetertiarysectoratthetimewasofa"spurious"nature:itcamefromtheexpansionofsmallinformalcommerce,emergencyworkprograms,andthegrowthofprivateservicesofvarioustypesthatprovidedarefugefromtheunemploymentgeneratedinotherareasoftheeconomy.Thiswouldappeartobetheupshotbothofacrisisintheoldmodelofdevelopment(import-substitutingindustrialization)andthefailureoftheneoliberalexportmodel.

TheEndoftheOldForm

Duringthe1980sthesituationchanged.Ineffect,duringtheeconomicrecoveryof1984-90,theprocessoftertiarizationwasreversed.Inthosesevenyears,employmentintheservicessectorfellfrom64percentto51percentoftotalemployment.

23

Statisticssuggestthatthecurrentsituationisnotsimplyareversalofthecrisisof1982-83,butindicatesachangeinemploymentbehaviorduringeconomicrecovery.Thisconclusioncanbesupportedbycomparing1976-81and1983-88.Inthefirstperiod,tertiaryemploymentincreaseditsrelativeweightintheworkforcefrom52percentto57percent,butinthesecondperiodthatsharefellfrom64percentto51percent.

Suchachangeinthepatternofemploymentintheservicessectorindicatesmodificationofthedynamicoftheeconomyasawholeandoftherelationsbetweensectors.Doesthismeantheendoftertiarization?Thereisnotsufficientevidencetosustainthisargument.Aswillbenotedlater,itwouldbemoreappropriatetotalkofanewtertiarization,determinedbynewdynamicsthatleadtoachangeinthestructureofthesector.

Infact,returningtotheearlydebateoverthenatureofservice-sectorgrowthinChile,thenewevidencewouldsuggestthatiftheideaofspurioustertiarizationwascorrectfor1974to1983,theappropriateargumentforthepost-1989period,oncethedeclineofspurioustertiaryemploymentwascomplete,couldbeverydifferent:aperiodmayhave

beguninwhichthegrowingimportanceofemploymentintheservicessectorisgovernedbythedemandoftheindustrialsectorforlabor.

WhetherthisisinfactthecasecouldbedeterminedonlybyanalyzingthecourseofchangeintheentireChileaneconomy,whichiswellbeyondthescopeofthisbook.Itis,nevertheless,importanttomoveatthistimebeyondanyanalysisoftheservicessectorasasingleentitygovernedbycertainsimilareconomic"laws."Thecategorytakesinallthoseactivitiesthatarenotclassifiableintheprimaryandsecondarysectorsandwhoseonlyhomogeneityliesinnotproducingmaterialgoods.

24Furthermore,thissector-ifithaseverexistedassuch-hasahighlysegmenteddynamicandismovedbyfactorsofverydifferenttypes.Amoredetailedanalysisofchangestothestructureoftertiaryemploymentwouldappeartobearthisout.

DisaggregatingService-SectorEmployment

Fortheperiodfrom1970to1990,fourcategoriesofservice-sectoremploymentcanbeidentified:"spurious"employment,whichincludesemergencyworkprogramsandinformaltertiaryemployment;publicsectoremployment;financial-sectoremployment;andtertiaryemploymentlinkedtothedynamicsoftheprimaryandsecondarysectorandtothemodernnonfinancialservicessector.25Theadvantageofthisclassificationisthatitallowsonetounderstandtheverydifferentfactorsthathaveinfluencedthecourseofchangeineachsubsectorwhilemaintainingsomecontinuitywiththekindsofanalysisputforwardintheearly1980s.

Declineof"spurious"tertiarization.

AccordingtoAníbalPinto,"spurious"tertiarizationincludesdisguisedunemploymentanddiverseformsofinformallow-productivity

activities.26Tothismustbeadded,intheChileancase,theemergencyworkprogramsdevelopedbythegovernmentbetween1974and1986.Theterm"spurious"issynonymouswithsomethingdeformedorbastardizedandimpliesaprocessthatdeviatesfromthe"normal."Inthissense,theconceptofspurioustertiaryemployment,althoughimaginative,isambiguousandopentotwopossibleinterpretations.Thefirstseesemploymentinlow-productivityservicesasdysfunctionaltoanideal-typeeconomy,whilethesecondseesitasaformofhypertrophyof"normal"historicaltendencies-aphenomenonbelongingtoaperiodofcrisisandtransitionfromoneregimeofaccumulationtoanother.

Thefirstdepictionishighlydebatable.Therepairmen,icecreamsellers,gas-fitters,andelectricians,aswellasthestreetvendorswhohawkproductsmanufacturedinlarge-andmedium-sizedformal-sectorcompanies,areallpartofcapitalistproductionandexchange.Theyareindispensableforassuringthematerialconditionsofexistenceforhigh-,medium-,andlow-incomefamilies.Thisbeingthecase,therewillalwaysbeatypeofinformal"low-productivity"employmentthatexpressesvisibleandinvisible,unstable,andprecariousunderemployment.Itisnotspuriousbydefinition,andevenlessisitdysfunctional.

Thesecondapproach,linkingspurioustertiarizationtothehypertrophyoflow-productivityemploymentintheservicessectorduringaparticularperiodofeconomiccrisisandreorganization,predictstwopossibleoutcomes.Oneisconsolidationofthelow-incometertiarysectorasaphenomenonwithitsowndynamicandpeculiarlinkswiththerestoftheeconomy.(ThiscouldhavehappenedinChileifthecountryhadlivedthroughaperiodofprolongedstagnationwithouttherecoveryandexpansionthatfollowed1983.)Theotherisitsreductionorevendisappearance,asthecrisispassesanditgraduallystopsfunctioningasarefugeforthosesectionsofthelaborforcenotabsorbedbyothersectorsoftheeconomy(includingtherestoftheservicessector).

StatisticalevidencefortheChileancasein1984-88suggeststhelatteroutcome:spurioustertiaryemploymentcametoanendinChile,atleastuntilthenextrecessionorprolongedstructuraladjustment.Thisdoesnotmeanthedisappearanceofallhiddenunemploymentorunderemploymentbutrathertheeliminationofakindoftertiaryemploymentthatoperatedasahavenforlaborinatimeofcrisisandrestructuring.Itdisappearedastherecoveryof1984-89andthepost-1989expansiontookhold.

Anapproachatestimatingthisphenomenonisthefollowing.LetuscalculatethelevelofinformalemploymentinservicespluspopulationenrolledinemergencyworkprogramsasapercentageofthetotallaborforceofChileduring1970and1990.Theseyearsrepresenttheextremesofthetimeperiodunderconsiderationandcanbeconsiderednormalyears.Theaverageofthefiguresfor1970and1990is11percent,ascanbeseenintable4-4,line6.

Thenletuscalculatethissameindicatorduringvariousotheryearsbetween1970and1990.Asisshownintable4-4,thisseriespeakedat25percentin1983.Ifspuriousservice-sectoremploymentisdefinedasthedifferencebetweenfiguresforvariousyearsinthisseriesandthe

Table4-4.EstimationofSpuriousService-SectorEmployment,SelectedYears,1970-90ThousandsunlessotherwiseindicatedVariable 1970 1976 1980 1983 1986 1990(1)Laborforce 2,9093,1823,6363,7684,2704,729(2)Populationenrolledinemergencyworkprograms

0 158 191 503 221 0

(3)Informalservicesemployment 321 359 485 433 481 546(4)2+3 321 517 676 936 702 546(5)4/1(percent) 11 16 19 25 16 12(6)3/1innormalyears(1970and1990)(percent)

11 11 11 11 11 11

(7)5-6=spuriousservicesemployment(percent)

0 58 14 5 1

Source:NationalStatisticalInstituteofChile(INE),NationalEmploymentSurvey,fourthquarterofeachyear,withtheexceptionof1970,whenfiguresrefertothethirdquarter.

averageof11percentovertheentireperiod,thenitwouldseem(asindicatedinline7)thatitroseto14percentin1983,inthemiddleoftherecession,andalmostdisappearedin1990.

Insum,then,whatcanoneconcludeconcerningthecausesoftheexpansionandcontractionoflow-productivity,low-incometertiaryemploymentinChilebetween1970and1990?Thepossibleexplanatoryfactorscanbegroupedinthreecategories:conjunctural,whichstemfromtheeconomiccycle;longterm,whichstemfromtherapidurbanizationexperiencedbythecountry;andstructural,relatedtothechangeintheregimeofaccumulationoreconomicdevelopmentthatshookthecountryduringthefirstdecadeofthePinochetdictatorship.

Turningfirsttotheeconomiccycle,onewouldexpecttoseespurioustertiaryemploymentconsistentlyexpandingandcontractinginline

withperiodsofrecessionandrecovery.Althoughthelow-incometertiarysectordidcontractduringthe1984-90recovery,nothingsimilaroccurredduringtheearlierrecoveryof1976-81.Thevicissitudesoftheeconomiccyclearethusnotsufficientasanexplanationofevents.

Therhythmofmetropolitangrowthandurbanizationdoesnotprovideasatisfactoryexplanationeither.Theavailableevidenceindicatesadecreasingtendencyintherateofurbanizationbetween1960and1990.Theaverageannualrateofgrowthofthepopulationinthemetropolitanregionfellfrom3percentto2.3percentbetween1960-70and1980-90.

Table4-5.EmploymentintheNonfinancialPublicAdministrativeSector,SelectedYears,1976-90Typeofemployment 1976 1980 1983 1986 1990Publicemployees(thousands) 267 231 215 201 175Laborforce(thousands) 3,1823,6363,7684,2704,729Servicesemployment(thousands) 1,5971,9482,1222,2672,474Publicemployees/laborforce(percent) 8.46.45.74.73.7Publicemployees/servicesemployment(percent)

16.711.910.18.97.1

Source:GovernmentofChile,PersonnelAllotment,BudgetLaw.

TounderstandtheevolutionofspurioustertiaryemploymentinChile,then,itisnecessarytolookattheevolutionoftheconcretedevelopmentstrategyofthemilitarygovernment.Duringthelatter1970sunemploymentinthepublicsectorandinindustryadvancedrapidly,despiteeconomicgrowth,whilemorethanhalfamillionworkerscametohaveaprecariousjobinemergencyprograms,organizedandbadlypaidbythestate.Inthisway,thegovernmentmanagedtocreateareal''reservearmy,"whichhadby1983becomeevenmoreimportantthantheinformalservicessector,andwhichwouldrapidlydisappearinthe1983-89recovery.Itisalsonecessarytolookmorecarefullyatotherelementscontributingtotheevolutionoftertiaryemployment-includingspurioustertiaryemployment-between1970and1990.

Thefallinpublicemployment.

Withthesystematicimplementationofneoliberalism,publicemploymentfellprogressivelyfrom1973on.Between1972and1990,theproportionofthetotalworkforceaccountedforbythepublicsectorasawholefellfrom12percentto6percent,areductionfrom360,000to280,000employees.

Ifonelooksonlyattheevolutionofpublicemploymentinthetertiary

sector(excludingemploymentinpubliccompaniesthat,privatizedornot,constitutepartofthesecondaryorprimarysector),andifonefurthermoreexcludespublicemploymentinfinancialinstitutions,thepictureislikethatpresentedintable4-5.

Tertiarypublicemployment(nonfinancial)showsapersistentfall,inbothabsoluteandrelativeterms.Inabsoluteterms,thenumberofjobsdeclined34percentbetween1976and1990.Inrelativeterms,publicemploymentinthetertiarysectorfellfrom8.4percentto3.7percent

Table4-6.EmploymentinFinancialServices,SelectedYears,1976-90

Employmentinfinancialservices

YearThousandsPercentoflaborforce

Percentoftotalemployed

Percentofservice-sector

employment1976 63 2.0 2.3 3.91980 101 2.8 3.1 5.21983 110 2.9 3.4 5.21986 156 3.7 4.0 6.91990 203 4.3 4.6 8.2Source:NationalEmploymentSurvey(INE),fourthquarter.

ofthegainfullyemployedpopulation.Theimportanceofpublicemployeesintheservicessectorwasreducedbyslightlymorethanhalf.

Astable4-5wellillustrates,thiswasanalmostlinearprocessthatdidnotdependontheupsanddownsoftheeconomiccycle,butratheronthewillandcapacityofthemilitarygovernmenttoapplyaneoliberalprojectoveraprolongedtimeperiod.

Theexpansionofthefinancialsector.

Thegrowthofemploymentinthefinancialsectorbeganinthemiddleofthe1970s-preciselyatthetimewhenfinancialcapitalbegantodevelopitsowndynamic,distinctfromthatofproductivecapital.Theexpansionofemploymentinthefinancialsectorisduetothefactthattheaccumulationofcapitaltookplaceatafasterratethantheincreaseinlaborproductivityinthatsector.

During1976-90,employmentinfinancialservicesmorethantripled(seetable4-6).Frombeingasectorofmarginalimportanceintertiary

employment,itcametotakeonagrowingsocialsignificance,aswitnessedbythefactthatiteventuallysurpassedminingasasourceofemploymentinChile.

Itshouldbenotedthatafter1983thefinancialsectoralsodiversifiedveryquickly,leadingtoafallintherelativeweightofthebankingsector.Between1978and1990theimportanceofthelatterwasreducedfrom33percentto16percentofallemploymentinthefinancialservicessector.

Productiveservicesandthenewtertiarization.

Threesubsectorscanbegroupedundertheheadingofproductiveservices.Thefirst

containsthosecompaniesinthetertiarysectorthatdependuponthedynamicsofgrowthandmodernizationintheagriculturalandindustrialsectors,suchasserviceindustriesinthebusinessofrepairandmaintenance,thoseinvolvedinforeigntrade,andtransportcompanies.Thesecondinvolvesbranchesofmoderncommercesuchasshoppingcenters,fastfoodrestaurants,supermarkets,hotels,andtourism.Thiscommercialsubsectorcreatesandsometimescontrolslongchainsofeconomicactivitythatincludesectorsoftransportandproduction,thuspromotingchangeinproductionandprocessingtechnologiesinmanycompaniesintheprimaryandsecondarysector.Thethirdismodernservicessuchastheproductionofsoftwareandservicesthatareeminentlynecessaryforthereproductionofcapital(suchasadvertising).Thefateofthissubsectordependsnotonlyonindustrybutalsouponageneraldemandthatariseswithinmanyspheresoftheeconomy.

TheNewCharacteroftheServicesSector

WideningtheanalysistotakeintoaccountthelastthirtyyearspresentsaninterestingpictureoftheevolutionofthetertiarysectorinChile.Severalgeneralconclusionscanbedrawn.First,duringthe1960stheredoesnotappeartohavebeenatertiarizationofemployment.Second,thisprocesswasconcentratedin1973-83,yearscharacterizedbytwomajorrecessionsandaforcedstructuraltransformation.Third,thereversalofthisprocessoccurredduring1984-90,aperiodmarkedbytherecoveryandthentheexpansion(post-1988)oftheChileaneconomy.

Thebalancefor1984-94wouldappeartoshowaprocessof"detertiarization"ofemployment.Inreality,however,itmightagainbebettertotalkofanewtypeoftertiarization,ofgreatimportanceintheeconomy,causedbyanexpansionaryphaseofcapitalismandtheconsolidationofanewmodeofcapitalistregulationaswellasanew

formoforganizingtheeconomicsystem.

Itisdifficulttosaywhethertherelativeweightofservicesemploymentwillcontinuetofalloverthecomingyears.Thereare,however,sometendenciesthatcanbepredictedwithareasonabledegreeofcertainty:publicemploymentwillnotcontinuetofall,anditisprobablethatitwillshowagradualrecovery;financialemploymentwillnotgrowfurther;andinformalemploymentinserviceswillbecomemorestable,unlessthereisanewrecessionthatcouldleadtoaresurgenceofspurioustertiaryemployment.Giventhesetendencies,andassuming

thateconomicgrowthcontinues,theevolutionofthetertiarysectorwillchieflybedeterminedbythedevelopmentofproductiveservices.

TheNewSocialCharacterofPoverty

Thesocialcharacterofpovertychangedduringthe1980sinChile.Atthebeginningofthatdecade,povertymanifesteditselfinunemployment,ininformalemploymentsuchasstreetvending,andinemergencyworkprograms.By1982,whenalmostathirdofthelaborforcewasopenlyunemployed,aconsensusprevailedthatanyonewhodidhavework-especiallyintheformalsector,althoughwagestheremightbelow-couldbeconsideredpartofthemiddle-incomestratumorarelativelyprivilegedsectorofthepoor.

Fromthesecondhalfofthe1980s,intheheatofeconomicrecovery,theemploymentsituationbegantoimprove.Thesamewasnot,however,thecaseforrealwages.By1990therateofunemploymenthadfallento5.7percent,butaverageandminimumwageshadnotreturnedtotheir1981levelandhadgrownfurtherapart,indicatingincreasingwagedifferentiation.

ThePersistenceofInequality

Theeconomicandoccupationalrecoveryof1985-90wascenteredaroundexportgrowthandbaseduponlowwages,ahighlevelofinternaloligopsony,andaflexiblelabormarketwithsevererestrictionsonunions.Thisrecoverywasaccompanied,orperhapsconsolidated,byanotableincreaseinsocialinequalities.Althoughdatalimitationsmakeitdifficulttodocumentwhattookplaceduringthatcrucialdecade,informationprovidedbytheNationalStatisticalInstitute(INE)isextremelyrevealing.In1978,therichest10percentofthepopulationcontrolled35percentofallnationalincome.Tenyearslater,thesamedecilereceived42percent.Itisobviousthatthesituationofthepoorest40percenthadtogetworse.In1978,14.5

percentofthenationalincomewenttothissector,whilein1988thefigurehadfallento13.4percent.

Anevaluationof1978-88thussuggestsadeteriorationintheincomesofthepoorestsectors.Duringthistime,theofficialnumberofextremelypoorrosefrom12percentto15percentofthenationalpopulation,whilethepercentageoffamiliesofficiallyconsideredtobepoorrosefrom24percentto26percent.Apertinentindicatorinthis

respectisthedailycaloricconsumptionofthepoorest40percentofthepopulation,whichfell7percentovertheyearsunderconsideration.By1990thenationalhouseholdsurveyconductedbythenewgovernmentfound5.2millionChileans,or40.1percentofthetotalpopulation,livinginpoverty.

27

Sincetheinstallationofademocraticgovernmentin1990,incircumstancesofcleareconomicrecovery,therehasbeenasignificantimprovementinworkingconditionsandwages.Between1990and1992,therateofunemploymentfellfrom5.7percentto4.7percent,thelowestsince1971.Atthesametime,threedevelopmentshavefavoredaprogressiveincreaseinworkers'incomes.First,therehasbeenatighteninginlabormarketsthathasfavoredagradualriseinwages,althoughnotafallinwagedifferentiation.28Inthiscontext,itisworthpointingoutthattherehasalsobeenanincreaseinhoursworkedperweek,fromanaverageof48.5in1990to50.5in1992.Second,thenumberandmembershipoftradeunionshasgrown.Between1990and1992unionmembershipdoubled,covering22percentofwagedworkersdirectly,butfavoringindirectlyaround35percent,whoreceivedthebenefitsofcollectivenegotiationsandagreements.Third,therateofinflationhasfallensubstantiallyfrom27.3percentin1990to12.7percentin1992and8.2percentin1995.Giventhatwageadjustmentsarebasedonpastinflation,thisalsofavorsariseinworkers'incomes.

Thusaveragerealwageshavegrownatamoderatebutsustainedrate,outstrippingtheir1981levelsin1992.Asaresultofthisprocess,aswellastheincreaseinsocialspending-whichinChileiseffectivelytargetedtowardlow-incomesectors-governmentestimatessuggestthatthenumberofpeopleinpovertydroppedfrom5.2millionin1981

to4.5millionin1992and3.8millionin1994(or28percentofthetotalpopulation).Inthiscase,1.4millionpeoplemayhaveemergedfrompovertybytheendofthethirteen-yearperiod.

Nevertheless,inspiteoftheincreaseintherealincomesofworkersandofthepoorest40percentofthepopulation,therehasbeennosignificantchangeinthedistributionofnationalandpersonalincome.Theshareofnationalincomeattributabletowagesfellbetween1990and1992,andtherichest10percentofallChileanscontinuestoreceivearound40percentofthetotal.Therehasnotbeenanysignificantchangeinthedistributionofnationalincomebyquintiles.

ThefiguresjustmentionedwouldsuggestthatwhilethenumberofpeopleinChilelivinginpovertyisdeclining,thedegreeofinequalityisnot.Howcanoneexplainthisapparentparadox?

Oneofthemostobviousexplanationsisthataverageproductivityhasgrownfasterthanaveragewages,whichareearnedbytwo-thirdsoftheemployed.Forthethree-yearperiod1990-92,forexample,theproductivity-wagerelationgrewby1.7percent.Althoughnotthesubjectofthisbook,thereisthereforeaclearneedtoanalyzeingreaterdetailthestructuralandinstitutionalcharacteristicsofthemodelofdevelopmentthathascontinuedtoreproduceinequality-eventhougheffortsaremadetooffsetsuchatrendthroughanincreaseinsocialspending.

InformalityandPoverty

Officialestimatesfor1992suggestthatofthethirdofthelaborforcelivinginconditionsofpoverty,20percentliveinruralareas,aproportionsimilartotheweightoftheseareasinthepopulationasawhole.ThismeansthatthevastmajorityofthepoorinChilearetobefoundinurbanareas.

Ofthetotalpoorin1992,about10percentwereunemployed.Ifonecombinesthisgroupwithanother,composedofthosewholiveingeographicalareasthathavebeenisolatedormarginalizedfromthedynamicofgrowth(areasofstructuraldecline),itappearsthataboutathirdofthetotalworkforcelivinginpovertycouldbedescribedas"marginalized."Thismeansthattwo-thirdsofthelaborforcelivinginpovertycannotbeexplainedbymarginality.Suchasituationconstitutesoneofthegreatchangeswithrespecttotheperiodfrom1975to1983,whenthevastmajorityofthepoorwereeitherunemployedorparticipatinginemergencyworkprograms.

Newevidencefromthehouseholdsurveyof1990(CASEN)reinforcestheviewthat"informality"ormarginalityisnolongeragoodindicatorofpovertyinChile.Whilethoseemployedinformaloccupationsearnonaveragesome27percentmorethanthoseininformaloccupations,45percentofinformalemploymentislocatedin

thetwohighestincomequintiles.Manyjobsandprofessionsintheinformalsectorarehighlyproductive(andearnhighincomes),andinformalityisnotsynonymouswithbackwardnessorlowproductivity.Clearly,informalityandpovertyarenotthesamething.

Atthesametime,manyofthosewhoareformallyemployedarepoor.Forty-onepercentofthetwolowestincomequintilesanalyzedinthe1990householdsurveyareassociatedwithformalurbanemployment,25percentareengagedininformalurbanemployment,andtherestarecategorizedunderheadingsofagriculturalemploymentordomestic

service.Thisillustratesthefactthathavingaformaloccupationdoesnotnecessarilyimplyescapingfrompoverty.Indeed,theranksofthepooraremadeuptoagreatextentofpeoplewhowouldusuallybeconsideredformallyemployed.

PrecariousWagedEmployment

Precariouswagedemploymentconstitutesthesinglemostimportantelementofpovertyinpresent-dayChile.Suchworkmayormaynotbeassociatedwithsometypeofcontractualarrangement.Thereisasectorofwagedworkerswhodonothaveaformalcontractandwhosenumbersaredifficulttoestimate.AccordingtotheCASENsurvey,about17percentofthewagedlaborforcein1990hadnocontract,whileaccordingtotheLaborStudiesProgram(PET)thefigureisaround30percent.Atanyrate,itisclearthatasignificantminorityofworkersandstaffhaveaninformalwagesituation,althoughthisproportionshowsatendencytodiminishovertime.Simultaneously,however,alargeproportionofthosewhodohaveatemporaryorpermanentcontractarealsosubjecttoaprecarioussituationintheiremployment,encouragedbythecurrentlaborlaw,whichallowsahighlevelofflexibilityintheuseofthelaborforcebyemployers.

Thisprecariousnessismanifestedinlowlevelsofjobstability,dependenceuponincomefrompiecework,poorworkingconditions,rigidspecializationatwork(whichcomesclosetoaneo-Tayloristformoforganization),littleaccesstotraining,fewpossibilitiesforinternalmobilityinthecompany,impedimentstocollectivenegotiation,lowlevelsofparticipationand,sometimes,subjectiontoauthoritarianrelationsintheworkplace.

Precariousemploymentisnotananomalyofthemarket,nordoesitderivefromanatypicalsituationincertainsmallortraditionalcompanies.Theevidencefromdozensofstudiescarriedoutinfirmsbetween1988and1994showsthatprecariousemploymentexistsnot

onlyinsmallfirmsbutalsointhemajorityofmediumfirmsand,toacertainextent,survivesaswellinlargeprivatecompanies.

29Smallcompanies,likethetensofthousandsofsmallsubcontractingfirmsthatarenowcloselylinkedtomoredynamicsectorsoftheChileaneconomy,arenotnecessarilybackward;andfarfromconstitutingatraditionalorbackwardformofbusinessbehavior,precariousemploymentarisespreciselyfromthestyleofcapitalistmodernizationthathastakenplaceinChileoverthepastfewdecades.

Asalreadynoted,precariousemploymentisassuredbylaborlegislationandbyformsofofficialregulationoflabormarketspromotedbythedictatorshiptoensurethatfirmscoulduselaborflexibly.Recentreformshavenotsubstantiallymodifiedthesituation.Atthesametime,largecompanieshaveabandonedpreviouslaborpractices,whichresteduponstrategiestofixandstabilizethelaborforce,infavorofaflexibleapproachinvolvingthesubcontractingofmanyactivitiesthatwerepreviouslycarriedoutwithinthecompany-particularlyinlarge-scaleminingandindustry.

30Furthermore,inthecentralvalley,thetraditionallargelandholding(latifundio)hasbeenreplacedoveranumberofdecadesbyamultitudeofmediumandsmallagriculturalproducerssubcontractedtolargetradingcompanies.IntheSouth,thelatifundiosoftheforestrysectorthatbelongtolargecompaniesarenotdirectlyexploitedbythesecompaniesbutratherbysubcontractedfirms,andasimilarsituationprevailsinthefishingindustry.

Ingeneralterms,thelargecompanycontrolsachainofsmall-andmedium-sizedsubcontractedorsupplycompaniesofvarioustypes,whichtendtosituatethemselvesinsmallormediumurbancentersatstrategicpoints,ensuringeconomiesofscaleandaccesstogoodroadtransport.31Labormarketswithinthechainbecomesharplysegmented.Workerswhobelongtothenucleusofthecompany,withstableemployment,tendtobemenwhoworkfulltime,arepermanent,andhavealegalcontract.Workersontheperiphery,whohaveshort-termcontractsorworkparttime,aremoreoftenlikelytobewomen.Thisislow-skilledworkandthereisanabundantsupplyofapplicantsinthelabormarket.Third,thereareexternalworkerswhoarehiredbyminingandforestrypropertiesorbysubcontractingcompanies.

Precariousemploymentrestsuponanunstableandinformalrelationbetweenlaborandcapitalthatvariesaccordingtothephaseoftheeconomiccycleandthedegreeofdivisionoflaborbetweencompanies.Intheareasandsectorsexperiencingperiodsofexpansion,withaconsequentincreaseinthedemandforlabor,precariousemploymentdoesnotnecessarilydeclineinfavorofmorestablealternatives.Insteadthereisachangeintheinternalcompositionofprecariousemployment.Theproportionofworkerswithsporadicemployment,followedbyunemployment,fallsduringcertaintimesoftheyear,andthenumberofworkerswhocanfindemploymentthroughouttheyear-inseveraljobsorthroughanumberoftemporarycontracts-increases.32Theindividualisnolongerlimitedtosporadicworkinonecompany,butfindsmoreregularworkbasedonshort-termcontractswithvarious

companies,orengagesindifferentjobs(implyingdifferentworkingconditions)withinthesamecompany.

Thesituationinconstructionisveryrevealinginthisrespect.Employmentinthesectorisprocyclical,butcompaniesdonotriskincreasingthestaffonapermanentcontractwhentheeconomicpictureimproves.Theyhavebecomeaccustomedtotheadvantagesofflexibilityprovidedbyaccumulatedchangesintheregulationofthelabormarketandprocessesofrationalizationthatbeganinthe1970s.

33

Arecentstudydrawsattentiontoasimilartendencyinthecaseofagricultureinthecentralvalley,whereaperiodofexpansionanddiversificationoftheproductivestructureimpliesattenuatingtheseasonaldemandforlabor.Thismeansthatevenagriculturalworkerswithtemporarycontractsmustconstantlyshiftjobs,andthatthelinebetweenthisworkforceandwhatisusuallydefinedasoccasionallaborisverydifficulttodraw.Infact,thetotalnumberofagriculturallaborersinChilehasprobablybeengrosslyoverestimated,asasinglepersonengagingincontractandoccasionalworkmightwellhavebeencountedseveraltimes.EmploymentsurveysconductedbytheNationalStatisticalInstitutewouldseemtoconfirmsuchfears,sinceseasonaldifferencesforagriculturalemploymentdonotexceed50,000,whileclaimsaremadefortheexistenceof400,000temporaryfarmworkersinChile.34

Inconclusion,then,povertyisnolongersimplyexpressedintermsofunemploymentandmarginality,butisreproducedinnewwaysandamongawidestratumofworkers.Thisplaceslimitsonstrategiesorpoliciesfortheredistributionofincomethatconcentratetheireffortsontheinformalsectorortheverysmallcompany.Theconditionsforequalitycannotnowbeconstructedthroughincreased,focalized

socialexpenditure.Thereisagrowingneedfortheconstructionofmoretransparentandlessdistortedmarkets,moreopenandlessauthoritariancompanies,greateraccesstoeducationandtraining,morepossibilitiesforunionorganizationandparticipationatwork,andwageandefficiencypoliciesbasedonthejustdistributionofincreasesinproductivity.Allofthesearedecisiveelementsinanyattempttoensureanewtreatmentforlabor,withinanewcontextofdevelopmentanddemocracy,inthesmallopeneconomyofChile.

5ACapitalistRevolutionChileanhistoryfrom1964to1990wasprofoundlytraumaticforthosewholivedthroughtheperiod.Thisiswhyconsensusabouttheeventsthattookplaceduringthisquarterofacenturyissodifficult.ThegovernmentofSalvadorAllendeandtheauthoritarianregimeofAugustoPinochetwillcontinuetodividefuturegenerationsofintellectualsandpoliticiansuntilthepassageoftimefinallyputsanendtothesedivisions.

Uptonow,wehavefocusedourattentionprincipallyontheperiodfrom1973to1990.Thetwomilestonesofthiserawerethemilitarycoupof1973andthestartofthedemocratictransitionduring1988-90-botheventsthathadanenormousimpactontheChileannation.Referencetothisperiod,however,reflectscontingentapproachesthatcriticizeoreulogizetheoldauthoritarianregimeanddonotrecognizeanycontinuitybetweentheyearsbeforeandafter1973.Theyear1973marksadeeprupturethatispositiveforsomeandtragicforothers.Inthisapproach,theperiodbefore1973appearsalmostasapre-history,ashatteredpastthatenteredintoirreversiblecrisisandtodayappearstobeburiedforever.Itisworthwhile,nevertheless,totakeadifferentapproach.

Inouropinion,although1973symbolizesthecrisisandruptureofanera,itisalsopartofamuchlargerprocessofchangeencompassingapproximatelyaquarterofacentury.Putsimply,between1964and1990Chilelivedthroughaperiodoftransformationthataltereditshistoricalfoundations.ThegovernmentsofFrei(1964-70),Allende(1970-73),andPinochet(1973-90)attempted,indifferentwaysandwithdifferentorientations,tocarryoutprojectsfortheradical

transformationofthecountry.Inthissense,theywereallrevolutionarygovernmentswithahighlyideologicalbase,dominatedbyeliteswitha

far-reachingsenseofpurpose,whosediagnosiswasofacrisisinsociety,theeconomy,andthepoliticalsystem,requiringradicalchange.

Itisclearthatwhattookplaceinthisquarterofacenturywasnotatallagroupeffortcarriedoutbythreesuccessivegovernments.ThemilitarygovernmentcutshortandreversedwhathadbeenstartedunderFreiandAllende.Thefinalanddefinitivedirectionwasimposedbythemilitaryregime,whichcarriedoutgreatstructuraltransformations,especiallyintheeconomicsphere.Thisgaverisetotheterm''neoliberalrevolution."Butalthoughthedestructionofwhathadgonebeforewasprofoundandextensive,whattookplacebetween1973and1990wasalsobasedpartlyonthetransformationsthathadbeencarriedoutbyprecedinggovernments.

Toalargeextent,theradicalnatureoftheneoliberalprojectwaspossiblebecausetheattemptsthathadprecededitwerealsoradical.Giventhedimensionofthechangesthattookplace,itwouldseemappropriatetospeakofarevolutionaryepoch,whichwasnotconfinedtothepoliticalspherebutcoveredthesocietyandeconomyaswell.Ratherthananeoliberalrevolution,itwouldbebettertospeakofacapitalistrevolution,witharadicaltransformationoftheregimeofaccumulationandthemodeofregulationinthemostfundamentalaspectsoftheeconomicsystem,includingthestate,thefirm,markets,wages,andprivateproperty.Asimplefocusonneoliberalismdoesnotpermitfullunderstandingofthisprocess.

TheNeoliberalReorientationofPreviousReforms

Theparadoxoftheeventsthattookplacebetween1964and1990isthattheforcesthatsoughttoimposetheirgoalswerediametricallyopposedandactedinthenameofverydifferentprinciplesfromwhatactuallycametopass.TheChristianDemocratsandPopularUnitydid

notenvisageliberalizingthecapitalistorderbutratherreformingoreliminatingit.Theydidnotseektoweakenthestatebuttoreformitandstrengthenit.Theiractions,however,eventuallyfacilitatedthetaskofthemilitaryregime.Therearethreestrikingexamplesofthispoint.

NationalizationandPrivatization

TheFreigovernmentcarriedoutaprogramofindustrializationbasedlargelyonpublicinvestment,whichincreasedthepowerofthestate.Inaddition,stepsweretakentostrengthennationalcontrolovernaturalresourcesthroughtheso-calledChileanizationofcopper.TheAllende

governmentacceleratedthisprocess,nationalizingcopperandtheentireminingandbankingindustry.Therewerealsointerventionsin,andconfiscationsof,largepropertiesintheindustrialandagriculturalsectorsbelongingtoeconomicgroups,botholdandnew.Inspiteofthedifferencesbetweenthetwogovernments,therewascontinuityinthesensethatanenormousamountofpowerandwealthwasconcentratedinthehandsofthestate.

Withtheadventofmilitaryrule,aprolongedprocessofprivatizationandreprivatizationbegan,whichinvolvedmorethan500publiccompaniesanddevelopedintwogreatwaves.Thelastoftheseprivatizingdrivestookplaceintheperiodfrom1985to1990andincludedservicecompaniesthathadbeeninthehandsofthestatesincethe1930s.Thisallowedfortheextensionofprivateaccumulationintoareasthathadhithertobeenoutofbounds.Infact,privatizationcanbeunderstoodasaprocessofprimaryaccumulation,insofarasthepricesofpubliccompaniesweresetbelowtheir(theoreticallyestimated)marketvalue.Thesaleofstateenterprisesfacilitatedtheemergenceofneweconomicgroups,someoftechnocraticorigin,aswellastheentranceofforeigncapitalinareasthathadbeenrestrictedduetothepressureofdomesticprivatecapital.Ingeneralterms,theassetsofthestatebecamecapital,andthewagedworkofpubliccompanyemployeesbecameproductive.Publicinvestmentduring1938-73wastransformedintoastockofprivatecapitalthat,tobefullyutilized,hadtobesubjecttoanintenseandrapidprocessofrationalization.

Thismeansthatthebuildupofpubliccompaniesintheperiodfrom1938to1973andthenationalizationsoftheperiodfrom1970to1973werethepreludetoanexpansionofcapitalismtowardthestate.Somethingsimilar,butonamuchlargerscale,isnowtakingplaceinthecountriesofeasternEurope.Ironically,itcouldbesaidthatthenationalizingstatewasreexpropriatedinthe1970sand1980s.Far

fromrepresentingareturntothepast,privatizationservedasanewsourceofcapitalistaccumulationandasthebasisforthereconstructionofanewbusinessclass.

TheStateandtheNationalizationofCopper

Itisstrikingthatcopperescapedthegreatprivatizingdriveofthemilitaryregime.Itwouldseemthat,inthisinstance,pragmatismtriumphedoverideology,becausetherewerealwayspressuresforprivatization.Nevertheless,thispragmatismconcealedafarmorebasicfact.Capitalismhasneverexistedwithoutastate.Themarketeconomy

hasneverfunctionedwellwithoutastrongstate.Furthermore,itwasimpossibletocarryoutaneoliberaltransformationwithoutastrongstatethatcouldovercomeaseriousfiscalcrisis.

ThenationalizationbytheAllendegovernmentoflarge-scalecoppermining,whichuntil1971hadbeeninthehandsoftransnationals,aswellasthefoundingofCODELCO,significantlyincreasedstateincomeinbothforeignanddomesticcurrency.Duringtheneoliberalperiodbetween1974and1989,thisexportsectorgeneratedadditionalresourcesofmorethanU.S.$10billion,whichhadaverypositiveeffectonthebalanceofpaymentsandthebudget.Particularlywiththeincreaseinthepriceofcopperafter1985,thestatecouldcountonenormousresources,whichallowedittoavoidaprolongedfiscalcrisis,rescuethefinancialsector,andgraduallyaddressthecrisisofexternaldebt.

AgrarianReformandtheLandMarket

Theagrarianreformimplementedbetween1964and1973destroyedtheoldagrarianorderinChilewithoutcreatinganewone,incontrasttotheexperienceofMexico(withtheejido),theUSSR(withthekolkhozandsovkhoz),orYugoslavia(withtheself-governingcooperative).Butitwaspreciselytheweakeningofthelandowningoligarchythat,after1973,allowedthemilitarygovernmenttoassertitsautonomyfromtheforcesoftheoldoligarchicalorderwhilesimultaneouslyunleashingfiercerepressionagainstthepeasantmovement-perhapsthecruelestandmostextensiverepressioninChile'smodernhistory.

Withthedemobilizationofboththepeasantryandthelandowningoligarchy,themilitarygovernmentbeganaprocessofpartialreturnofexpropriatedlands,accompaniedbytheallocationoflandtitlestosmallholderswho,giventheirlackofcreditandtechnicalassistance,werequicklyforcedtosell.Thepatternofsalesofagricultural

propertiesbetween1973and1979completelychangedthenatureoftheagrariansector.

Amarketinlandwascreatedthathadpreviouslynotexisted,andanewbusinessclassappeared,whichreorganizedtheoldagriculturalstructurebasedaroundthelatifundioandreplacedthelaborpracticesassociatedwithit.ThusanidealclimatewascreatedfortheadvanceofcapitalismintheChileancountrysideoncetheoldpatternsofprecapitalistdevelopmenthadbeenbroken.

TheimportanceforneoliberalreformofmeasurestakenbyChristianDemocratsandthePopularUnitygovernmentcanbeexploredthroughconsideringthreenegativepropositions:

First,iftheAllendegovernmenthadnotnationalizedasignificantnumberoffirms,theprocessofcentralizationofcapitalwouldinallprobabilityhavebeenhaltedbytheresistanceofthebusinesssector,whichwouldhaveappliedpressureforthemaintenanceofaprotectiveanddevelopmentaliststate.Andifpubliclyownedassetshadnotbeenavailableforprivatization,amajorelementintheprocessofneoliberalaccumulationwouldhavebeenmissing.Thenominaldepreciationofphysicalcapitalwaspossibleonlythroughthesaleofstate-ownedenterprisesatlowprices.Thedegreeofcapitalmobilitythatcameabout-includingabreathtakingdegreeofmovementonthepartofdomesticandforeigneconomicgroupsafter1985-dependeduponprivatization.

Second,ifcopperhadnotbeenpreviouslynationalized,itisdifficulttoimaginethatthemilitarygovernment-whichwasurgentlyseekingtocultivategoodrelationswiththeUnitedStatesandtocreateconditionsofsecurityforforeigninvestors-wouldhaveexpropriatedimportanttransnationalfirms.Withouttherevenuegeneratedbycopper,thefiscalcrisiswouldhavecontinued,andprospectsfortherecoveryofthefinancialsystem-andoftheChileaneconomy-wouldhavebeenmuchweaker.

Third,ifadrasticandextensiveagrarianreformhadnotbeencarriedoutbeforethecoup,thisnecessarytaskwouldinalllikelihoodhavebeenpostponed,asitwasinBrazil.ThePinochetgovernment(actinginthedefenseofprivateproperty)certainlywouldnothaveconfrontedthelandowningoligarchy.Becauseoftheweakpositioninwhichtheprioragrarianreformhadlefttheoligarchy,however,themilitaryregimeenjoyedconsiderableroomformaneuver.Iftheagrarianreformhadnotpreviouslytakenplace,themostlikelyscenariowouldhavebeenthemodernizationofthelatifundio.Thiswouldhaveoccurredonamuchmorelimitedscalethanprovedtobethecaseinthe1980sandcouldnothavegeneratedthecompetitive

capacityshownbythecurrentsystem,whichisbasedonthesmallandmediumagriculturalenterprise,linkedthroughsubcontractingtoagro-industryandtheexportmarket.

Thesespeculationsallowustoputforwardthefollowingargument:between1964and1973,thegovernmentsofEduardoFreiandSalvadorAllendenotonlydissolvedwhatwasleftoftheoldoligarchicalorderbutalsobegantodismantlethefoundationsoftheparticularcapitalistorderthathadbeenconstructedsincethe1930sandhadbeenshowingsignsofcrisissincethe1950s.Duringthisperiod,newsocialmove-

mentsemerged-youth,peasants,andshantytowndwellers-whoquestionedtheoldsocialorderandmodifiedthelogicofprogramsforsocialchange.Stillmoredecisively,duringthisperiod,therulingclassessawtheirpowergravelyweakenedandhadtocontemplatethepossibilitythatonlyradicalsocialchangewouldpermitareconstitutionoftheirleadership.ThisledtoarevolutionarysituationinthestrictestLeninistsense:neitherthoseatthetopnorthoseatthebottomcouldcontinueinthesamewayasbefore.

Later,between1973and1989,Chilelivedunderadictatorshipthatoperatedontheassumptionthatthecountrywasatwar.Themilitaryregimetriedtomoldallareasofthesociallandscapetoconformtoprinciplesofpossessiveindividualism,patriarchalauthoritarianism,andthetotalseparationofthepublicfromtheprivate.Subsequenthistoryshowedthatitdidnotsucceedcompletelyinthisobjective,butitstillmanagedtoproducetransformationsofanextraordinarymagnitude.Therewasacapitalistreorientationofagrarianreformandthecreationofamarketinland,thefinancialsystemwasliberalizedandacapitalmarketestablished,theeconomywasopenedtotheexteriorandtransnationals,andthefirmwasrationalizedandsubjecttoauthoritarianmodernization.

Thetaskofneoliberalismwasmadeconsiderablyeasierbytheradicalnatureofthereformscarriedoutbythetwopreviousgovernments.Thisisnottoundervaluetheaudacityofthemilitaryandtheneoliberaltechnocrats,butitexplainsthecontextinwhichtheirso-calledmodernizationscouldbealmostcompletelyrealized.ThisseemstoustobeacharacteristicoftheChileanexperiencethatisoffundamentalimportanceforcomparativestudies.Itindicatesthattheopportunitiesforasuccessfulandradicalcapitalisttransformationarebetterinthosesocietiesthathaveexperiencedapreviousprocessofadvancedsocialization.

Thereisanotherimportantaspectthatmustbetakenintoaccount.Thosewhobegantherevolutiondidsobyattackingtheoldorder,amixtureofoligarchicalandcapitaliststructuresonlypartiallyintegratedintoworldmarketsandprotectedbythestate.Buttheydidnotsucceedinarticulatinganeworder.Atthetimeofthemilitarycoup,bothsocietyandeconomywereintransition;newstructureshadnotcrystallized,butwereinflux-akindofliquidstate,inwhichtheyweresusceptibletotransformationandnewdirections.Thus,althoughtheyneitherexpectednordesiredtodoso,theeliteswhosupportedFreiandAllendepavedthewayforPinochetandhisciviliantechnocratsto

modifytheiroriginalobjectivesinfavorofaprogramofsystematic,radicalreformsofaneoliberaltype.

TheRoleoftheElites:FromRevolutiontoModeration

AblueprintfortheprocessofchangethatoccurredinChilebetween1964and1990couldnotbefoundinanymanualortheoreticaltext.The"revolution"wasnotimposedfromtheoutside,norwasitanendogenousprocessthatcanbeattributedtomarketforces.Itwastheresultoftransformationsundertakenbythreefoundationalgovernments,althoughitsdefinitiveprofilewasconstructedunderthemilitarygovernment.

Whattookplacebetween1964and1990isquiteastonishinginitsprofundity.Thereisnosimilarexperienceintwentieth-centuryChile.Theonlyparallelcanbefoundbetween1860and1880,aperiodofcrisisinvolvingenormousterritorialexpansiontowardthesouth,duringthewarsassociatedwiththelastMapucherebellions,andtowardthenorth,withtheoccupationof180,000squarekilometersoflandinthewarswithPeruandBolivia.Incontrasttothatearlierexperience,therecentexpansionofChileancapitalismhasnotbeenterritorial,althoughithascertainlyimpliedextensivegrowthtowardnewareasofaccumulation.Therearesimilaritiesbetweentheperiodsfrom1860to1880andfrom1964to1990.Inbothcases,thedecisiveandbloodybattleswereundertakenbythemilitary.Incontrasttothelastcentury,however,inmoderntimesthechangeswereinitiatedbyciviliansfromtheleftandcenter,tobequicklyappropriatedbytherulingclassesinordertoconquerstateandsocialareasor,inotherwords,marketsandsourcesofaccumulation.

Althoughthescopeofthesechangesinvitesuseoftheterm"revolution,"atnotimewasita"silentrevolution,"

1whichwouldimplythatitwasbroughtaboutbytheinexorable

advanceofcivilsocietyormarketforces.TheChileof1990wasnotcreatedbyaprocessofcapitalistexpansionthatinevitablydismantledthefoundationsoftheoldorder.Onthecontrary,therateofgrowthbetween1964and1990waswellbelowthelevelsachievedinothercountriesthatalsoexperiencedsimilarperiodsofradicaltransformation,suchastheUnitedStates(1880-1910),Brazil(1960-80),andSouthKorea(1960-90).Whatoccurredwasarevolutionimposedfromabove,fromtheupperranksofthestate,whichduring1964-90wasgovernedsuccessivelybythreepoliticalelites,allwithprogramsfortheradicaltransformationofthecountry.

Theoriginsofthishistoricalprocesscanbefoundinthe1950s,whenthefirstversionofneoliberalismappearedwiththeKlein-Sachsmission(atechnicalconsultancy,contractedbytheIbáñezgovernmentinitsbidtobringdowninflation),whiletheleftsetoutaprogramofadvancedstructuralchangeandtheChristianDemocratpartywasformed.Fromthenon,andthroughout1958-89,allgoverningeliteswererevolutionaries,althoughindistincttimesandsituations.The"revolutioninliberty,"the"peacefulroadtosocialism,"andthe"neoliberalrevolution''wereallradicalprogramsofsystemicchange.

Thestrugglebetweentheeliteswasimplacable.Onceingovernmentorpower,eachfactionarguedforthenecessityofovercomingtheburdensofthepast.Duringtheruleofthecenterandtheleft,bothagreedontheneedtosweepawaytheremnantsoftheoldoligarchicalorderbutdifferedastowhetheritwasnecessarytoreformorovercomecapitalism.Theright,afterabandoningitsuselesseffortstoreturntothepast,cametounderstandthegainstobemadefromcapitalistmodernityanddecideduponaradicalandglobaltransformationofeconomy,society,andeventhestate,whosebusinessandprotectionistfeaturestheyhadhelpedtobuildupoverhalfacentury.Overthisentireperiod,therefore,thediscourseofthegoverningelitesalwaysappealedtomodernityandstructuraltransformation,althoughwithverydiverseandopposingmeanings.

Nevertheless,wheneachelitewasinopposition,exactlytheoppositetookplace.Atfirst,itwastheright,inthenameofpreservingtheoldorder,whichviolentlyattackedtheChristianDemocratandPopularUnitygovernments.Butafterthemilitarycoup,theneoliberalrevolutionwasseverelycriticizedbytheChristianDemocratsandtheleft,whichalsoappealedtothepastandtothetraditionalorder,idealizingtoacertaindegreetheold-style,crisis-riddencapitalismandforgettingtheimplacablecriticismstheyhadmadeofitduringthe

1950s.

Thusalltheelites-whennotinpower-defendedtheoldorder,inwhichtheirsupportersappearedtohavelivedbetter,andemphasizedthedestruction,disorder,anomie,andinsecuritycausedbytheprocessofmodernization.Alltheelitesdenouncedtheomnipotenceofthestate;therightspokeoftotalitarianism,whilethecenterandtheleftspokeofauthoritarianismanddictatorship.Andwiththesediscoursestheysucceededinunderminingthegoverningfaction.

Thesewerenotjustthevagariesofpolitics.Theelitesdidnotactaloneamidstaseaofsocialtranquillity.Theywereinterpretingavastrangeofsocialinterests.Theyloosenedthechainsthatrestrictedthe

constitutionandmobilizationofclasses,groups,actors,andsocialmovements.Thus,insuccessivestages,thewholeofChileansocietywasmobilizedandthrownintoawhirlwindoftransformation.Greatmovementsshookthecountryandthethreeeliteswerecarriedonthecrestsofthesewaves.Noteventherepressionthatfollowedthecoupof1973couldprevent,adecadelater,thereappearanceoftheoppressedmasses,althoughitwasonlyforashortperiod(1983-86)inanattempttoremodelsocietyandreconstituteapoliticalsystemthatseemedtohavedisappearedunderthebootsofthemilitary.

Inthisprocess,alltheeliteswhoinitiatedthissuccessionofradicalchangesendedupbylosingpoliticalpower.TheChristianDemocratswereovertakenbytheleftandtheright,whilePopularUnitywasoverthrowninitsthirdyearofgovernment.Pinochetismo,which,incontrasttoitspredecessors,managedtocompleteitsprogramofeconomicandpoliticalchanges,wasalsodefeated-thusintheendobtainingonlyapyrrhicvictory,ashasoftenoccurredinhistory.Butthesuccessiveandcombinedactionofthesethreeforcesproducedacapitalistrevolution,confirmedbythenatureoftheorderconstitutedandtheclassthatitstrengthened.

Structures,Movements,andSocialActors

Althoughelitegroupsappeartohaveplayedtheprincipalroleinthetransformationsthattookplaceoverthelastthirtyyears,itisclearthathistoryismuchmorecomplexthanthis,sincetheeliteshavealsobeenovertakenbyhistoricalevents.Thewiderthehistoricalperspectiveadopted,themorethisfactbecomesapparent.Whatwastherelationshipbetweenthesestructuralchangesandchangesintheareaofsocialaction?Theargumentofthisstudyisthatthehistoryofsocialmovementsbetween1972and1992canbeunderstoodonlyinrelationtotheprofoundchangesthattookplaceinthesocialstructure.

Bywayofanexample,wecanconsiderresistancetothedictatorship.Thismighthavebeenverydifferentwithoutthechangesinindustrialemploymentthattookplaceinthe1960s.Yetthedrasticreductioninindustrialemploymentbetween1975and1980showsthatthedefeatoftheworkers'movementwasnotachievedthroughrepressionalone.Neoliberalreformandstructuraladjustmentdestroyedthesocialbasesthathadnourishedthepowerofunionsandleft-wingpartiesinthe1960s.Equally,thehistoryoftheprotestsmighthavebeenverydiffer-

entiftheeconomiccrisishadlasted.Thiswouldhaveledtocontinuingunemploymentandinformality,conditionsthatproducedmanyoftheprotagonistsoftheprotests.Again,eventsweredifferent,aseconomicrecoverychangedthesocialstructureandweakenedthesocialandculturalbasesthathadsupportedthegreatmobilizationsbetween1983and1986.

Itispossibletointerpretwhattookplacebetween1973and1993intermsofthreecyclesthataffectedthesocialcircumstancesofbothpopularandmiddlesectors.Inthefirstcycle,therewasanalterationofthesocialstructurethatemergedfromimportsubstitutionandthesocialcontractinChileandlastedforalmosthalfacentury,fromthe1930stothemid-1970s.Themostimportantfeaturesofthisperiodwererapidurbanizationconcentratedinthemetropolitanregion,agrowthinwagedwork,andanincreaseinindustrialandpublicemployment.Itwasaperiodinwhichbigprivateandpubliccompanies,withahighuseoflabor,employedapredominantlymalelaborforce.Thiswasstableemploymentwithcollectivecontracts,influenceovertheorganizationofproduction,andasignificantpresenceofpoliticalparties.

Theexhaustionofthisphasecameafterthemilitarycoupof1973,deepeningafter1975andendingincollapseduringthecrisisof1982-1983.Adramaticopeningofnationalmarketstoforeigncompetition,stagnationoftherealexchangerate,twodeeprecessions(1975-76and1982-83),andthederegulationoflabormarketsbroughtrapidchange.Firmsweredrasticallyrationalized,leadingtohighunemploymentbutalsoallowingcompaniestoregaincontrolovertheproductionprocessandtouselaborflexibly.Atthesametime,privatizationcausedareductioninpublicemployment.

Thesecondcyclewaslinkedtotheriseanddeclineofsocialrelationsproducedbytheseneoliberalreforms.By1982morethanhalfofthe

laborforce(53.3percent)waseitherunemployed,inemergencyworkprograms,orintheinformalsector.Largenumbersofyoungpeopleandtheunemployedwereconcentratedinlow-incomesettlements,leadingtotwosimultaneousandrelatedprocesses.ThefirstwasasocialanomieofthetypedescribedbyDurkheim.Thesecondwastheappearanceofnewnetworksofsolidarityofaterritorialnature(shantytown,neighborhood,street),supportedbythechurch,nongovernmentalorganizations,andpoliticalparties.Bothprocessesmustbeunderstoodinordertomakesenseoftheprotestsof1983andthecomplexsocialphenomenaunderlyingthem.

Thisstructureofinteractiondevelopedbetween1973and1983,butbegantodeclineafter1984.Almosttenyearsafterthecrisisof1983,thepercentageofworkerswhowereunemployedorpartoftheinformalsectorhadfallento29.5percent.Between1983and1993,morethanamillionworkersfoundemployment,whichledtoadissolutionofthesocialstructuresthathadformedduringtheperiodfrom1973to1983.

Thethirdcycleisassociatedwithnewpatternsofsocialrelationsemergingfromexport-leddevelopment.Theperiodfrom1983to1993wascompletelydifferentfromtheprecedingdecade;wagedworkgrew,informalemploymentfell,andevenabsolutepovertyfell.Therewasastrikingincreaseinindustrialemployment,whichgrewfromlessthan350,000in1982tonearly840,000in1993.Butlaborrelationsandwelfareprovisionsborelittleresemblancetothoseofthepre-1973period.

Therehavebeencorrespondingchangesintheorganizationofcivilsociety.Theanomieandsolidaritynetworksthatwereproducedduringtheperiodofneoliberaladjustmenthavebeenaltered.Thereisnowmoreemphasisontheworkplacethantheneighborhood.Between1982and1992,thenumberofunionsgrewfrom4,048to10,725,andthenumberofmembersincreasedfrom347,000to723,000.Anewprocessofformationofcollectiveidentitiescanbeseen,althoughatthesametimeothervaluesandidentitiesarebeinglost.

Insum,socialmovementsdevelopedwithinthreedistinctsituations.Thefirstwasthedismantlingofthestructuresthathademergedoverfourdecadesuntil1973.Thesecondwastheemergenceofsocialmovementslinkedtothedaysofprotestbetween1983and1986.Theprincipalactorsintheseprotestswerenottheworkers,aswasthecaseinBrazilin1979,butresidentsoflow-incomesettlementsand

unemployedyouth.Thiswasatransitoryphenomenon,althoughsomethoughtatthetimethatitmightbecomemorepermanent.After1986,withthedeclineoftheprotestsandtheirtransformationintoacivilmovementdirectedbyacoalitionofdemocraticparties,anewprocessbegan.Thiswasmanifestedintheslowbutsustainedgrowthofsocialorganizationssuchasunionsandofficialneighborhoodcommittees,reflectingnotonlythegradualappearanceofnewopportunities,butalsotheconstitutionofanewsocialstructurethatwasmoreorganicthanitsimmediatepredecessor.BecauseoftheopennatureoftheChileaneconomy,however,thisstructurewasalsounstable.

The1990s:WaitingfortheNewActors

Thestudyofthebehaviorofsocialactorsduringthedecadeof1983-93raisesmanyquestions,notallofwhichhavebeenadequatelyanswered.Thereisastrikingcontrastbetween1983and1993.Inthefirstyear,awaveofprotests,andthesocialmovementswhichtheyengendered,markedaturningpointinChileansociety.Theyappearedveryrapidly,consideringthatduringthepreviousdecadeoppositiontothemilitaryregimehadbeenweakanddispersed.Nevertheless,contrarytoexpectations,theprotestsandsocialmovementsdidnotcontinuetogrow.Theyenteredaperiodofdeclineandafter1986wereabsorbedintoavastcivicmovementcentereduponthepoliticalpartiesthattriumphedinthe1988plebiscite.Inthemid-1990s,thereisanewrangeofsocialactorswhohavelittleincommonwiththeirpredecessors:theyarelessmilitantandnotsodisposedtoadoptconflictualpositions.Thepredictionsofthemajorityofobservers-whetherhopefulorcatastrophic-havenotcometopass.

Withinthecontextofademocratictransition,inwhichtheeconomyisgrowingbutvastsocialinequalitiescontinuetoexist,therehasnotbeenanexplosionofsocialconflictbutanatmosphereofrelativesocialcalm.ThiscontrastswiththeexperiencesofBrazil,Argentina,andUruguay.Moreover,since1988,theradicallibertarianandantisystemicviewspresentduring1983-86havebeensweptawaybyatideofculturalconservatismandpoliticalrealism.Theactionofthepoliticaleliteshasbeentransformedintotheartofthepossible,puttingabrakeforsomeyearsonthedevelopmentofnewsocialprojects.So-callednewsocialmovementshavenotemerged;insteadtherehasbeenarecoveryintheunionmovement,operatingonapragmaticbasisbutwithacapacitythatcouldnothavebeenexpectedtwentyyearsago.

Ourgenerationhasseenanexceptionalperiodoftransformation,

markedbysocialandpoliticalstruggleamongeliteswithradicalprojectsforthetransformationofsociety.Thewinnerofoneofthesebattlesiswellknown.Butthesubsequenttransformationsareextraordinarilycomplex.Thesocialmovementsthatemergedandthendisappearedinthe1980swouldappeartobelongtoapastera.Thenewonesstillspeakhaltingly,inadifferentlanguage.Overtime,theywillrenewacountrystillmarkedbytwentyyearsofoppressionandwillstrengthencivilsocietyinamultitudeofnewways.

Notes

Introduction

1.MarioGóngora,EnsayohistóricosobrelanocióndeestadoenChileenlossiglosXIXyXX(Santiago:EdicionesLaCiudad,1981).

Chapter1

1."Representativebodies"ofthestatearethosedirectlyorindirectlyrenewedthroughelections(parliament,thepresidency,andotherhighadministrativepositionsfilledthroughpoliticalappointment)."Permanentbodies,"ontheotherhand,areprofessionalinstitutions,formallyindependentofthepopularwillasexpressedthroughelections(thejudiciary,thearmedforces,thestablepersonnelofpublicadministration).

2.On"ibañismo"andthesecondgovernmentofCarlosIbáñez,seethestudybyJeanBernadetteBrugel,"Populism,NationalismandLiberalisminChile:TheSecondAdministrationofCarlosIbáñez,1952-1958,"Ph.D.thesis,UniversityofLiverpool,1986.OnthegovernmentofEduardoFreiandtheChristianDemocrats,seethestudybyRicardoYocelevsky,LaDemocraciaCristianchilenayelgobiernodeEduardoFrei(Mexico:ElColegiodeMéxico,1989).

3.Adramaticanddetailedaccountoftheevents,illustratingthiscollapseofthepossibilitiesforrepresentativepolitics,canbefoundintheposthumousbookbythethencommander-in-chiefofthearmy,GeneralCarlosPratsGonzález,Testimoniodeunsoldado(Santiago:Pehuén,1985).

4.Onthissamepoint,seechapter3.

5.Thetitleofcaptain-generalwasassumedbyGeneralPinochetand

createdexpresslyforhim.

6.ThePrince,chap.5.

7.Thiscalculationisbasedontheinput-outputmatrixfortheChileaneconomyin1977.Ontheusefulnessofthisindicatorasameasureofpower,seeFernandoCortésandAnaJaramillo,"Relacionesdepoderenlosconflictoslaborales,"ElColegiodeMexico,MexicoCity,1979.

8.Onthesefiguresandtheconceptofthe"inorganic"intheemploymentstructure,seeJavierMartínezandEugenioTironi,LasclasessocialesenChile:Cambioyestratificación1970-1980(Santiago:SUR,1983).

9.SeeCarlosHunneus,Loschilenosylapolítica:Cambioycontinuidadenelautoritarismo(Santiago:CERC-ICHEH,1987),p.34.

10.Trattatodisociologiagenerale(Florence:Barbera,1916).

11.AdefinitiveandexhaustiveexampleofitscriticismsoftherevolutionaryroadcanbefoundintheCentralCommitteedocument,Elultraizquierdismo,CaballodeTroyadelImperialismo(1975).

Chapter2

1.TohaveabetterideaofthedifferencesbetweenMexicoandChile,onecanlookatthegeographyoftheirinternationaltrade.Mexicoisanopencountry,borderedtothesouthbyagroupofsmallCentralAmericancountriesthataccountforonly0.7percentofitsforeigntrade.Tothenorth,ithasavastfrontierwiththeUnitedStates,thelargesteconomicforceintheworld,whichrepresents65percentofMexico'sforeigntrade.Notonlygoodsandcapitalbutmillionsofpeopletravelacrossthisborder.Bycontrast,Chileisathinandisolatedcountry,hemmedinbythePacific,theAndes,theAtacamadesert,andAntarctica.Only3.1ofitsexportsand8.1percentofitsimportsarecarriedoutwithneighboringcountries(Argentina,Peru,andBolivia),whiletheUnitedStatesrepresentsonly21percentofitsforeigntrade.Fifty-sixpercentofthistradetakesplacewithEuropeandJapan.AfreetradeagreementwiththeUnitedStatesthereforewillnothavethesameimpactasitwillforMexico:thebiggerimpactwillarisefromChile'sintegrationintoMERCOSUR.

2.Untilnow,onlytheMexicanexperiencecompareswiththeChilean.InMexico,ofthe1,155industriescontrolledbythestatein1982,only223remainedbyMay1992.Inbothcountriestheprivatizationprocessisvirtuallycomplete,althoughitisstrikingthatbothPEMEX(petroleum)andCODELCO(copper)haveremained

outsidetheprivatizationprograms.

3.DuringPopularUnity(1970-73),notonlywerealargenumberoffirmsnationalized,butanevenlargernumberwereundergovernmentadministration,althoughnotlegallyremovedfromtheirowners.Furthermore,therewasalargesectorofindustrialandagrarianpropertiesthathadbeentakenoverbrieflybyworkerswiththeaimofsecuringgovernmentintervention.

4.Inninety-oneofthesecompaniesithadamajorityshare.CORFOalsotransferredtotheprivatesectoritsshareholdingsinsixteencommercialbanks.Atthesametime,morethan600salesofminingassets,agro-industrialplants,andpropertytookplace.

5.Throughthesemethods,differentpartsofthe"greyarea"(companiesinwhichthestatehadintervened)weretransferredtotheprivatesector.Bigindustrialfirmsandtheirsubsidiarieswerecontrolledbynewlocaleconomicgroups,transnationalcorporations,andacombinationofboth.Foreigninvestorsconcentratedonthesocialsecuritycompanies(AFP)andtheinsurancemarket,whichwerecontrolledbyNorthAmericanfinancegroupssuchasBankersTrust,Aetna,andAmericanInternationalGroup.Amongthem,thesegroupscontrolled65percentofthesharesoftheAFP.Thereprivatizationofthelargebanksthathadbeentakenoverduringthe

crisisfollowedadifferentpath.Thenewownerswerenotnationaleconomicgroupsorforeigncompaniesbutratherthetechnocratsresponsiblefortheiradministration,whowerenowconvertedintobankers.

6.MarioMarcel,LaprivatizacióndelasempresaspúblicasenChile(Santiago:CIEPLAN,1989).

7.ThemostdramaticcrisiswasthatinvolvingthefinancecompanyLaFamilia,whichbelongedtomembersofthegovernment.Aftermakingloanstoitsowners,itwasdeclaredbankrupt.Thegovernmentcovereddeposits,butonlypartially.

8.Between1974and1981,thenumberofbanksdoubledfromtwentyonetoforty-five.Atthesametime,whilethesavingsandloanassociationsweremovingtowardextinction,financialcompanies,whichhadnotexistedatallbefore1974,numberedtwentyonein1981.Theshareofprivatebanksinthefinancialsystemrosefrom45percentto70percent,whilethatofthestatebankfellfrom35percentto15percent.Alongwithdiversification,therewasalsoahighlevelofconcentration.Fivebankscontrolled60percentofbankingcredit,64percentofotherfinancialcredit,and30percentoftheforeigndebtin1981.

9.Mediumandlong-termdebt-thatis,debtnotcontrolledbytheIMF-rosefrom$3.261billionin1973to$12.5billionin1978.

10.EightpercentoftheagriculturalholdingsinChile,withanareaofmorethan200hectareseach,controlled90percentofthearablelandofthecountryin1960.Atthesametime,therewere46,000propertiesoflessthan1hectareand160,000propertiesoflessthan10hectares.Togethertheseaccountedfor60percentofallfarms.Changeinthisextremelypolarizedagrariansectorwasstymiedfrom1938on,whenthepartiesoftherightadheredtoaplanforindustrializationin

exchangeforacommitmentnottoreformagriculturalpropertyortopermitpeasantunionization.ThedominantmodelofindustrializationinChileledtothetransferofsurpluses-throughpricedifferentials-fromtheagriculturaltotheindustrialsector.

11.Thenumberofbeneficiaryfamiliesreached61,000,towhichshouldbeadded15,000singlemenwhohadpreviouslybeenlandlesstenants.Landholdingswithover80hectaresof"basicirrigation-quality"landwereexpropriated,leavingtheownerswithareserveorconcession.However,giventhenumberofpeasantsdemandingland,thiswasinsufficient;andaproposalwasmadetoexpropriateholdingsover40hectares,withoutleavingareserve.Peasantsweregroupedintosettlementsorcooperatives.

12.See"CopperRevenueduringtheMilitaryRegime,"ColecciónEstudiosCIEPLAN,no.24(1988),pp.85-111.Theestimatesfor1989arebyAlvaroDiaz.

13.Until1983thegovernmentimposedautomaticwageadjustments.Morerecently,coerciveregulationhasoperatedthroughthelaborplan.Minimumsalarieshavebeenreadjustedonastaggeredbasis,sothatbetween1981and1989theyfellbehindaveragesalaries.

14.Fortwodecades,anattempthasbeenmadetodevelopanappropriatetheoreticalapproachforexploringthesimultaneousnatureofcoordinationthroughmarketsandcoordinationthroughprivateorpublichierarchies.Thisnewperspectivedeviatesfromtheprincipalcurrentofeconomicsand

withoutrejectingthenecessaryrigorofthediscipline,activelyseeksanewalliancewithotherareasofsocialsciencesuchashistory,politicalscience,andsociologyinordertoescapefromthelimitsandrestrictionsimposedbypositivisttheory.EspeciallyimportantinthisdevelopmenthavebeentheworksoftheeconomichistorianAlfredChandler;OliverWilliamson,wholaidthebasisforaneo-institutionalapproachtotransactioncosts;andAlfredEichner,whodevelopedapost-Keynesiananalysisofthenewmicroeconomyasthebasisforanexplorationofnewmacroeconomicapproaches.

15.RonaldH.Coase,"TheNatureoftheFirm,"Economica,vol.4,n.s.386(1937),pp.386-405.

16.TaylorismisthemethodofscientificorganizationoflaborpioneeredbyFrederickWinslowTaylor(1856-1915),whodevelopedasetofstudiestorationalizeproduction,perfectthedivisionoflabor,andincreaseproductivitythroughtime-savingdevices.AmonghismostfamousworksisThePrinciplesofScientificManagement(NewYork:HarperandBrothers,1911).

17.AlainLipietzandDanielleLeborgne,"ElFordismoysuespacio,"RevistadeCienciasEconómicas1-2(SanJosé,CostaRica,1988).

18.BarbaraGarson,TheElectronicSweatshop(PenguinBooks,1988).

Chapter3

1.Thiswasfacilitatedbyoldlegislationthathadfallenintodisuseandhadbeenestablishedinthecriticaldaysofthe"SocialistRepublic"of1931.Thelawallowedthedesignationofadministratorsinthecaseofanobviousboycottonthepartofthefirm'sdirectors.

2.GuillermoCampero,Losgremiosempresarialesenelperíodo1970

-1983:Comportamientosociopoliticoyorientacionesideológicas(Santiago:InstitutoLatinoamericanodeEstudiosTransnacionales,1984),p.58.Withrespecttothisperiod,aswellasthefirsttenyearsofmilitarygovernment,wereferthereadertothisstudybyCampero,whichprovidesmuchoftheinformationforthischapter.

3.Ibid.,p.290.

4.Ibid.

5.Ibid.

6.Ibid.Formanygremiomembersfromthissector,theaspirationwastointegratethemovementwiththestate,aswasproposedinthe"multigremialcongress"thattookplaceatthebeginningofDecember1973.Theprincipalideawastocreatecouncilsattheregionalandlocalleveltoresolvesocioeconomicquestions.Thesewouldbemadeupofrepresentativesofthemilitarygovernmentandcivicmultigremialcouncils.SeeCampero,Losgremiosempresariales;thecompleteresolutionscanbefoundin"ActasCongresoMultigremial,"ElMercurio(Santiago),December12,1973.

7.TomásMoulíanandPilarVergara,Estado,ideologíaypolíticaseconómicasenChile,1973-1978(Santiago:CIEPLAN,1979).

8.JuanGabrielValdés,LaEscueladeChicago:OperaciónChile(BuenosAires:GrupoEditorialZeta,1989),p.17.

9."Constitutionally,"ifthiswordcanbeused,thiswouldhavebeentheappropriatesuccession.Withthepresidentoftherepublicdeadandhis

ministersincapacitated,theconstitutiondeterminedthatthepresidencyshouldgotothepresidentoftheSenate.Atthetime,thiswastheex-presidentoftherepublicandleaderoftheChristianDemocrats,EduardoFreiMontalva.ItwasthehopethatthiswouldtakeplacethatledmanyleadersoftheChristianDemocratstosupportthecoupandthemilitaryjunta.

10.ThisideologyisbasedonthepoliticalthoughtofthefamousstatesmanDiegoPortales(1793-1837),probablyoneofthemostimportantpoliticalthinkersduringtheeraofstatebuildinginLatinAmerica.Amongthemanycharacteristicsofhispoliticalpersonalitywashisindependencefromthemultiplepartiesandpoliticalfactionsofthetime.Thisconviction,combinedwithhisauthoritarianapproachtopower,hasbeenemphasizedbyhistorians(aprincipalsourcefortheformationofthemilitarymentality)andwasalwayslinkedtothe"foundational"natureofhiswork.Portalescreatedaformalstatethatgavepoliticalcontinuitytotherepublicfornearlyhalfacentury,whileneighboringcountriesweresubmergedinrepeatedstrugglesforpower.

11.Forthisgroup,itwasnotacaseofreturningtothepre-Allendedevelopmentpathbutrather,inthewordsoftheirintellectualleader,SergiodeCastro,ofreversing"threepreviousdecadesoffailedpolicies,"giventhat"theresultsofthepreviousgovernment[PopularUnity]wereonlytheculminationofaprevioustendency."

12.RolfLudersinPedroIbáñezOjedaandRolfLuders,"UnaeconomíaparaChile,"mimeo,Santiago,June1983,citedinValdés,LaEscueladeChicago,p.16.

13.TheconvergencebetweenamilitaryeliteandaneducationalelitewasnotwithoutprecedentinthecontemporaryhistoryofChile.Theperiodofcivilpeaceandinstitutionalstabilitythatbeganinthe1930sandcollapsedatthebeginningofthe1970s,andwasbasedona

strategyofimport-substitutingindustrialization,originatedfromasimilaralliancebetweenthemilitaryandcivilengineers.Thedifferencethistimewasthepersonalizationofmilitarypower.

14.HarryG.Johnson,OnEconomicsandSociety(UniversityofChicagoPress,1975),p.103.

15.Valdés,LaEscueladeChicago,p.37.

16.Valdes,LaEscueladeChicago,p.77.

17.Campero,Losgremiosempresariales,p.130.

18.OrlandoSáenz,"ElCaminodeChile,"January9,1974,citedinCampero,Losgremiosempresariales,p.105.ThetargetofthelastremarkwasobviouslyGeneralPinochet.

19.Ibid.

20.Camperoarrivesatasimilarconclusionbasedonananalysisofthemanystatementsbythebusinessleadershipbetween1973and1975:"Thehandingoverofeconomicpolicyoccurredasapoliticaloptioninthefaceofthecrisisof1974-75.Thedisagreementsbetweenthegremiosandthegovernment'stechnocraticteamwerestifledduetoafearofthepoliticaldestabilizationwhichdisputesovereconomicpolicymightproduce."Andheaddsthefollowingrevealingquotationfromaninterviewgrantedtohimbytheex-presidentoftheNationalIndustrialSociety,OrlandoSáenz."In

1973,thebusinesssectordidnothaveanationalproject....Iftheyhad,theywouldnothavelettheChicagoBoysgettheirfootinthedoor.Theywouldhavedefendedtheirownpoliticalproject....Inotherwords,itwouldhavebeenthissectorwhichreplacedthepoliticalpartiesthathadbeenwithdrawnfromcirculation....Inthelongrun,theso-callednationalprojectoftheChicagoBoyswasmorepowerfulthanthatwhichthebusinesssectormighthavehad.''(Campero,Losgremiosimpresariales,p.132)

21.RicardoLagos,"LaNouvelleBourgeoisie,"AmeriqueLatine,no.6,CETRAL,Paris,1981.

22.Ibid.,p.46.

23.Ibid.,p.47.

24.FromaspeechbyGeneralLeighreproducedinLaTercera,January11,1975,quotedinGuillermoCamperoandJoséAntonioValenzuela,Elmovimientosindicalenelrégimenmilitarchileno(Santiago:InstitutoLatinoamericanodeEstudiosTransnacionales,1984),p.205.

25.Ibid.,p.208.

26.ThesackingofGeneralLeighcameabout,aswasshowninchapter1,becauseofhisoppositiontothe"nationalconsultation"of1978,whichwassupposedtosupportPinochetinthefaceof"theinternationalaggressionagainstourcountry"and"reaffirmthelegitimacyoftheGovernmentoftheRepublicasthesovereignbodyintheprocessofinstitutionalization."BothaspectsweredirectlyrelatedtotheinternalcompetitionthatLeighrepresentedfortheleadership.TheinternationalcondemnationthatmostworriedthegovernmentwasthethreatofaboycottfromtheAFL-CIOagainstChileanexportsbecauseoftheregime'srefusaltocedeanylegalspacetoChileanunions.Theimportanceaccordedtotheprocessof

institutionalizationalsoclearlyreflectedthepressureoftheairforcetocreateacorporatistlaborregimethatwouldcounterbalancethegrowingpowerofthefinancial-economicgroups.

27.QuéPasa,December27,1979,quotedinValdés,LaEscueladeChicago,p.32.

28.EugenioTironi,Autoritarismo,modernizaciónymarginalidad(Santiago:EdicionesSUR,1990).Foradetailedstudyofthisreform,seeJoséPabloArellano,Politicassocialesydesarollo:Chile,1924-1984(Santiago:CIEPLAN,1986).

29.JoséPabloArellano,"SistemasalternativosdeSeguridadSocial:Unanálasisdelaexperienciachilena"(Santiago:CIEPLAN,1980).

30.AbasicformulationofthisphilosophycanbefoundinODEPLAN,InformeSocial,1983(Santiago,1984).Theimmediateeffectsofthetargetingpolicies,however,oftenincludedagrowingsegregationofthepoorpopulationandafallinthequalityoftheassistancetheyreceived.Asummaryofconclusionsreachedin1986invariousareasofsocialpolicycanbefoundinJavierMartínez,Efectossocialesdelacrisiseconómica:Chile,1980-1985(Santiago:CEPAL,SocialDevelopmentDepartment,1986).

31.JarpawastheprototypeofthetraditionalChileanlandowner.HehadbeentheundisputedleaderofoppositiontoSalvadorAllendeand,withoutdoubt,adecisivefactorinthegrowingradicalizationoftheanti-Allendemovement(whichincludedtheChristianDemocrats).Hisrelationswith

thegremiomovement,andparticularlywiththesmallandmediumbusinesssectors,remainedintactandhewasthusasymboloftheunityofallthegremioswithrespecttotheoriginalmilitaryintervention.Jarpahadalongcorporatisthistory.Incontrasttomanyright-wingleaderswhoseoriginslayindemocraticorganizations,whetherconservativeorliberal,JarpahadcomeoutofoneofthemanynationalistauthoritariangroupsthathadsupportedthepopulistleadershipofGeneralCarlosIbáñezdelCampointhefirsthalfofthe1950s.

32.Campero,Losgremiosempresariales,p.305.

33.Foradetailedanalysisofthesemeasures,seechapter2.

Chapter4

1.Since1986thefollowingdefinitionofemployedandunemployedpersonshasbeenutilizedbytheNationalStatisticalInstituteofChileinitslaborforcesurveys:

(a)anemployedpersonisanyonewhoduringtheweekprecedingtheinterview(1)engagedinoneormorehoursofremuneratedworkintheemployofothers(whetherwagedorsalaried,oncommissionorremuneratedinkind);orasanemployerorself-employedperson(suchasfarmers,merchants,independentworkers,orotherprofessionals);orinunremuneratedfamilylaborinvolvinganaverageofatleastfifteenhoursofworkperweek;or(2)despitehavingajoborowningabusiness,didnotworkduringthatweekduetovacations,short-termillness,permissiontobetemporarilyabsent,orforsomeotherreason.

(b)anunemployedpersonisanyonewhowasnotworkingduringtheweekprecedingthesurvey,and(1)hadpreviousregularworkexperience,anddesiredandhadactivelysoughtworkatsomepoint

duringtheprecedingtwomonths,buthadnotbeenabletofindit;or(2)hadnopreviousregularemploymentbutwantedtoworkforthefirsttimeandhadattemptedduringtheprevioustwomonthstoobtainemployment.

2.Theterm"wagerelation"comesfromregulationtheory.SeeRobertBoyer,Teoríadelaregulación(SaoPaulo:EditorialBrasiliense,1988).

3.EugenioTironiandJavierMartínez,"Claseobreraymodeloeconómico:UnestudiodelpesoylaestructuradelproletariadoenChile,1960-1980,"WorkingPaper15(Santiago:SUR,1983).

4.WagedworkisdefinedhereasthesumofallworkersandsalariedemployeescountedinthequarterlyemploymentsurveysoftheNationalStatisticalInstituteofChile(INE).Personsinmilitaryserviceorassociatedwithemergencyworkprogramsarenotincludedinthecategoryofwagedwork.

5.Therateofwagedworkisunderstoodasthewagedworkforce,definedinnote4,dividedbythetotalworkforceofthecountry.Itisdifficulttocomparetherateofwagedworkduringthe1990swiththeperiodbefore1973,sincethecensusesof1960and1970tendedtooverestimatethesituationinthecountrysidebyconsideringallinquilinos(tenantsenjoyingusufructofaplotoflandinreturnforacontributionoffamilylabortothelandlord)aswagedworkers.Asignificantproportionofallinquilinosre-

ceivedupto50percentoftheirincomesinnonwageformsbeforethe1970s.Atthesametime,theemploymentsurveysoftheNationalStatisticalInstituteafter1976havetendedtounderestimateagriculturalwagelaborbyconsideringseasonalpieceworkerstobeself-employed.

6.Itwouldseemthatin1960thereweremorethantwicethenumberofwagedworkersperemployerasin1990.Thismustbetaken,however,asonlyaroughapproximation,sinceinformationfromthe1970censusisbeingcomparedwiththeannualaveragefigureprovidedbythenationalemploymentsurveyofINE.Thefirstsourceshowsfiftyworkersperemployerin1960,andthesecondsuggestseighteenworkersperemployerfor1990.

7.VíctorTokman,"Tecnologíaparaelsectorinformalurbano,"OccasionalDocument19(Santiago:PREALC,1978).

8.JavierMartínezandArturoLeón,Clasesyclasificacionessociales:Investigacionessobrelaestructurasocialchilena,1970-1983(Santiago:CED-SUR,1987).

9.JosephRamos,"Segmentacióndelmercadodecapitalyempleo,"TrimestreEconómico,vol.202(April-June1984);andUrbanizaciónysectorinformalenAméricaLatina(Santiago:PREALC,1991).

10.NorbertoGarcíaandVíctorTokman,"Transformaciónocupacionalycrisis,"RevistadelaCepal,no.24(1984).

11.AníbalPinto,"Metropolizaciónyterciarización:Malformacionesestructuraleseneldesarrollolatinoamericano,"RevistadelaCepal,no.24(1984).

12.PREALCalsoexcludesallthosewhoworkintheagricultural,fishing,andminingsectors.

13.JaimeGatica,"Laevolucióndelempleoformaleinformalenel

sectorservicioslatinoamericano,"Document279(Santiago:PREALC,1986).

14.SeeAlvaroDíaz,"LareestructuraciónindustrialautoritariaenChile,"RevistaProposiciones,no.17(1989).

15.AlejandroPortes,ManuelCastells,andLaurenBenton,TheInformalEconomy:StudiesinAdvancedandLessDevelopedCountries(JohnsHopkinsUniversityPress,1989),p.11.

16.TironiandMartínez,"Closeobreraymodeloeconómico,"p.201.

17.GilbertMathiasandPierreSalama,OestadosuperdesenvolvidodasmetrópolesaoTerceiroMundo(SãoPaulo:EditorialBrasiliense,1986);andVicenteEspinoza,"NetworksofInformalEconomy:WorkandCommunityamongSantiago'sPoor,"Ph.D.thesis,UniversityofToronto,1992.

18.Díaz,"LareestructuraciónindustrialautoritariaenChile."

19.ThispointismadebyHernandodeSoto,Elotrosendero(Lima:Ed.OvejaNegra,1986).

20.Analysisof1960-85isbasedonestimatesfromEstebanJádresic,EvolucióndelempleoydesempleoenChile,1970-1985:Seriesanualesytrimestrales,ColecciónEstudiosCIEPLAN,no.20(1986).

21.Ramos,"Segmentacióndelmercadodecapitalyempleo";andPinto,"Metropolizaciónyterciarización."TheseargumentswerepublishedintheCEPALReviewinDecember1984.Acriticalrésuméofthedebate,aswellasdiscussionoftheempiricalevidence,canbefoundinGatica,"Laevolucióndelempleoformaleinformal."

22.Gatica,"Laevolucióndelempleoformaleinformal."

23.Thesefiguresshowtertiaryemploymentwithrespecttototalemployment,nottheeconomicallyactivelaborforce,sinceunemploymentwouldhavedistortedtheanalysis.

24.Gatica,"Laevolucióndelempleoformaleinfomal."Thisisnotmeanttosuggestthatservicesareunproductive.

25.Ramos,"Segmentacióndelmercadodecapitalyempleo."

26.Pinto,"Metropolizaciónyterciarización."

27.GovernmentofChile,MinisteriodePlanificaciónyCooperación,EncuestadeCaracterizaciónSocioeconómicaNacional,1990survey.

28.ThegrowthoftheaveragewageinrelationtotheminimumwageinfactillustratesincreasingdifferentiationinthewagestructureofChile.

29.StudiescarriedoutbyPREALC,CEPAL,SUR,PET,CED,andCIEPLAN,SantiagodeChile

30.SeeAlejandroMardónezMartínezandPabloSierra,Losserviciosalproductor:UnanálisisparaelcasodelcobreenChile,CEPAL,March1991.

31.Between1980and1990,employmentinthetransportsectorgrewby47percent,whilethenumberoftransportemployersquadrupled.

32.FranciscoLeón,"Elempleotemporalenlaagriculturachilena,1976-1990,"CELADE-OPS,Santiago,1991.

33.CeliaMontero,"LaindustriadelaconstrucciónenChileyArgentina,"preparedforCNRS-ORSTOM,Paris,1988.

34.León,"Elempleotemporalenlaagriculturachilena."

Chapter5

1.Translator'snote:Thereferenceistoapro-Pinochetaccount,JoaquínLavín,Larevoluciónsilenciosa(Santiago:EditorialZigZag,1987).

Index

A

AFPs.SeePensionfunds

Agrarianreforms,44,45,61-62,76-77,133-35

Agriculturalsector,48,62,123

latifundiosystem,4-5,61-62,128,133

seasonaldemandforlabor,129

transformationof,4-5,41,61-62

wagedworkin,105

Agroforestry,105

Airforce,90,91,99

AlessandriRodríguez,Jorge,17,79

Allende,Salvador,32,134

coupagainst,11-12

electionof,10

expropriationby,78-79,133-34

interventionintocompanies,78-79

reformsof,44-45

resultsofreformsof,2.

SeealsoPopularUnityparty

Altamirano,Carlos,14

AmnestyInternational,13

AndeanPact,57

Araucanianwar,6

Arellano,JoséPablo,93

Asia,69,102

AssociationofBanksandFinancialInstitutions,76

B

BankingSupervisoryCommittee,89

Bankruptcies,87

Banks,49,55,56-59,72,89

Bolivia,136

Bonilla,Oscar,15

Büchi,Hernán,97,100

Businesssector,76-81

dispersionofworkersin,109-10

economicgroups,87-94

governmentcriticizedby,95

andprecariousemployment,128

roleinmilitarycoup,79-80

smallandmediumfirms,73,77,95,114,115,128

andtechnocraticelites,85-87

transformationofthefirm,70-74

unionsandoppositionpoliticalparties'relationswith,99

C

Campero,Guillermo,79-80,91

Capital,liberalizationandreorganizationof,56-58,67,69-70,87,90

CatholicChurch,17-18,36

CatholicUniversity(Chile),83

Cauas,Jorge,86

Caudillismo,10

Censorship,27

CentralBank,55,57-59

Centralizationofpoliticalpower,15-16,91-92,94,99

CentralUnionWorkers(CUT),13,23

CEPAL.SeeEconomicCommissionforLatinAmerica

ChicagoBoys.SeeTechnocraticelites

ChileanConstructionChamber,76

ChristianDemocratparty,10-11,27,36,82,131,138

CoalitionforDemocracy,39

CODELCO,30,41,54,133

CommitteeofCooperationforPeaceinChile,17

Communistparty,36,37

ConfederationofChileanEmployees,28

ConfederationofCopperWorkers(CTC),18,22-23,29-30

ConfederationofProductionandCommerce,76,95

ConfederationofSmallandMediumCompanies,95

Conglomerates,62,68-70,73,87-94,104

Constitution,Chilean,16-17,35,94

Constructionindustry,105,129

Contracts,andwagedemployment,127

Copperindustry,6,44,49,66,131-33

CORFO,55

D

Danús,Luis,95-96

deCastro,Sergio,96

Debt,foreign,53,55,58-59,65,98

Deficit,fiscal,65

Deindustrialization,42,117

DemocraticAlliance,32-33

DemocraticManifesto,28

DemocraticWorkersUnion,28

Democratization,3-4,18,33-40

Deregulation,60

DíazEstrada,Nicanor,91,92

Dictatorship,andeconomictransformation,2-3.SeealsoMilitaryregime

E

EconomicCommissionforLatinAmerica(CEPAL),82,84-85

Economiccycles:andlow-incometertiaryemployment,120

andpoliticalprotests,20-21

Economicgroups,62,68-70,73,87-94,104

Education,94

Elites.SeeTechnocraticelites

Emergencyemploymentprograms,115,118,119,121

Employment,30,101-04

informal,110-15,118-20,126

public,121-22

rural,107-09

tertiary,106,115-24

unemployment,48,60,101-02,139

urban,107-09

Exchangerates,34,48,49,53,54

Exiles,14,27

Exports,41,47,49,53,62,74,104,115,117,140

Expropriation,byAllendegovernment,78-79,133-34

F

FatherlandandFreedom,13

Fernández,Sergio,92,96

Financialsector,56-59,97,106-07,122-23.SeealsoEconomicgroups

Financialsocieties,89

Firms:privatizationof,54-56

transformationof70-74.

SeealsoBusinesssector

Fontaine,Jorge,80

Foreigninvestment,inChile,6,57,64,87,98

Forestrysector,62,128

Free-marketreforms.SeeNeoliberalpolicies

FreiMontalva,Eduardo,10,44,61,131,134

Fresno,CardinalJuanFrancisco,36

Friedman,Milton,84

G

Gendercompositionoflaborforce,105

Gremios.SeeBusinesssector

H

Healthcare,49,93

Humanrightsabuses,bymilitaryregime,12-18

I

IbáñezdelCampo,Carlos,9-10,137

Imports,48

Income,concentrationof,73-74,104,124-26

Industrialoutput,andtertiaryemployment,116

Inequality,persistenceof,124-26

Informalemployment,110-15,118-20,126

Informationtechnologies,72

InstitutesofHealthInsurance(ISAPRES),93

InternationalMonetaryFund(IMF),44,47,49,97

Intervention,byAllendegovernment,78-79

J

Japan,102

Jobstability,127

K

Kennedy,Edward,13

Keynesianism,84

Klein-Sachsmission,137

L

Labormarkets,59-61,71-72,90-93

Lagos,Ricardo,87

Landmarket,61-62,133-35

Latifundiosystem,4-5,61-62,128,133

Left-wingeconomicreforms,43-45

Leigh,Gustavo,12,16,28,91,92

Leighton,Bernardo,14

Letelier,Orlando,14

M

Machiavelli,Niccolo,21

ManuelRodríguezPatrioticFront(FPMR),37

Marketforces,liberalizationof,56-58,67,87,90.SeealsoNeoliberalpolicies

Massad,Carlos,82

Media,opposition,27

Mediumbusinesses,73,95,114,115,128

Mexico,47,53,133

Middleclass,6,8,32,83-84

Militaryregime:businessleaders'supportfor,79-80,97-98

pensionfunds,63-64

privatization,4-5,54-56,132

repressionby,12-18,20,27,31-32,47,59-60

resistanceto(1983-84),18-33

socialspending,94

and

technocraticelites,42-44,90,94

andtertiaryemployment,121.

SeealsoPinochet,Augusto

Minimumwages,61,74,93

Moffit,Ronnie,15

Molina,Sergio,82

Moulián,Tomás,80

N

NationalAccordfortheTransitiontoFullDemocracy,38

NationalAgriculturalSociety,76

NationalFederationofChileanBusOwners,77

NationalFederationofIndependentTaxis,77

NationalIndustrialSociety,76,85

NationalIntelligenceCenter(CNI),18

NationalIntelligenceDirective(DINA),15,18

Nationalizationofcopper,4-5,44,66,131-33

NationalMiningSociety,76

NationalPlanningOffice(ODEPLAN),94

NationalStatisticalInstitute(INE),124

NationalUnionCoordinator,28

NationalWorkersCommand,28

Naturalresources,53,74

Navy,90,99

Neoliberalpolicies:debt,58-59

financialsector,56-58

andinterventioniststate,65-67

labormarkets,59-61,92

landmarket,61-62

andPinochet'spower,94

andpreviousreforms,131-36

privatization,54-56

andsocialrelations,139-40

andsocialservices,64-65

socialsecuritysystem,62-64

tradeliberalization,49,53-54.

SeealsoTechnocraticelites

Nitrates,6

O

ODEPLAN.SeeNationalPlanningOffice

Oligopolies,73

OnofreJarpa,Sergio,35,96

Openeconomy,47-48

Oppositionmedia,27

P

PaperandCardboardManufacturingCompany,79

Pareto,Wilfred,35

Partysystem,recompositionof,9-11

Pensionfunds(AFP),63-64,93,98

Peru,136

Peso,devaluationof,48,96

Piñera,José,63,92,96

Pinochet,Augusto:businesssectorsupportfor,86

concentrationofpowerin,15-16,92,94

contradictorysignalsaftercoup,12

headofmilitarydictatorship,2

plebiscitaryformsoflegitimization,94

andtechnocraticelites,34,94-96.

SeealsoMilitaryregime

Pinto,Aníbal,118

PlanofSevenModernizations,92-93

Policebehavior,26,31-32

Politicalparties,9-11,28,30,32-33,35-36

PopularDemocraticMovement,33

PopularUnityparty:agrarianreforms,61

antistatistposition,85

andbusinesssector,77-78

andmilitaryregime,131

overthrown,138

recompositionofpartysystem,10-11

andSocialistparty,36.

SeealsoAllende,Salvador

Poverty,61,66,74,124-29

Prats,Carlos,14

Precariousemployment,127-29

Pricecontrols,54,66

PrimodeRivera,JoséAntonio,35

Privatization,49,54-56,65,98,131-32,134

Productivityoflabor,116,126

ProjectforNationalDevelopment,28

Protestmovement(1983-84),18-33

Publicemployment,121-22

Publicinvestment,132

Publicspending,66,94

Q

Quotasystem,49,53

R

Radicalparty,9,10

Rationalizationofproductionprocesses,70-72

Repression,bymilitaryregime,12-18,20,27,31-32,47,59-60

Resistancetomilitaryregime(1983-84),18-33

Right,political,35-36,38,77

Ruralemployment,107-09

S

Sáez,Raúl,82,86

Savingsandloanssystem(SINAP),56,58

Seasonaldemandforlabor,129

Sectoralemploymentchanges,105-07

Servicessector,106,115-24

SilvaHenríquez,CardinalRaúl,36

Smallbusinesses,73,77,95,114,115,128

Socialistparty,36,37

Socialsecurity,49,51,62-64,93

chile: the great transformation

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