Chile, 25 Years Later

 

 

Manuel Riesco

 

Centro de Estudios Nacionales de Desarrollo Alternativo

CENDA

 

 

Vergara 578, Santiago, Chile

http://cenda.cep.cl

tel: 562 2775555 fax: 562 3020405 email: mriesco@cep.cl

 

Chile, 25 Years Later

 

Years Of Turbulence And Change

It has been 25 years since Chilean President Salvador Allende was overthrown and died violently, loyal to his people and his country. A US supported military coup thus put an end to the revolutionary period that crowned a decade of deep social reforms, during the sixties and early seventies, under the democratic governments of Eduardo Frei Montalva and Salvador Allende. The world is quite familiar with the ensuing long 17 years of murderous military dictatorship, headed by Pinochet. A generalized popular uprising followed by his defeat in a 1988 plebiscite put an end to Pinochet’ rule. Two democratic presidents, Patricio Aylwin and Eduardo Frei Ruiz-Tagle, have presided through the nineties over a slow and still unfinished transition to democracy.

In this paper will try to walk the narrow edge of analyzing certain economic and social aspects of this turbulent period as a whole. Not only in its violent confrontations, but in it’s unity as well.

During the whole period, this small country of 14.7 million people (INE-Empleo), that lies over a very long and even narrower geological collision zone on the edge of the world, has in fact changed itself upside down. Perhaps, finally ending the long delayed transition from it’s old oligargic and agrarian self and going through the doors of modern capitalist era. In the process, all it’s classes have been radically transformed, some of them gone away never to come back. Springing out of those changes, Chilean economy has been hailed worldwide into "tiger" class. Some people, quite few, have benefited enormously in the process. Most others would feel better depicted by the words with which working class pioneering organizer Luis Emilio Recabarren saluted the XX century: "There are evident progresses in the century gone by, that cannot be denied...of all progress that the country has benefited of, the proletariat has none but contributed to it, for it’s adversaries to enjoy it" (Riesco-Des.Cap.).

It is not the purpose of this paper to go into detailed analysis of the IMF showcase economic policies applied both by Pinochet’s "Chicago Boys" and the Social and Christian democratic economic authorities of Presidents Aylwin and Frei Ruiz-Tagle. Rather, it will try to drill into the underlying political economy of the process. It will take a brief look over some of the deep changes occurred in the country’s social relations –the way people work and live– and how these have affected its economic performance.

From such a point of view, the dark legend that clouds the economic performance of the turbulent Allende times, seems to dissolve in the brilliance of the revolutionary social transformations performed during those years. It is in the popular radicallity of those times, perhaps, where the clues to the remarkable dynamism of the whole period are most probably to be found.

The Irreversible Legacy Of The Age Of Revolution

It is perhaps not well known that Pinochet, who violated most Chilean laws, abided instead, almost to the letter, with two key ones: Copper Nationalization and Agrarian Reform. Both laws–together with the distribution of half a liter of milk to every child to stop malnutrition, putting an end to illiteracy and extending obligatory basic schooling from six to eight years and the Reform of the university system–as it is well known, comprise the main legacy of the Frei Montalva and, specially, the Allende periods.

In the case of copper nationalization, it is true that Pinochet back in 1974 paid some illegal compensations to the US companies that formerly owned the mines nationalized by Allende. Also, Pinochet and his minister Piñera twisted the nose of the Chilean Constitution, even their own, to give away what already amounts to 61% of the country’s mining production, to foreign companies that cheat not to pay even the token taxes they are meant to.

But, on the other hand, Pinochet not only maintained state ownership over CODELCO, the National copper company formed by Allende, but it also doubled it’s production. On the whole, Chilean copper production –still by far the country’s main produce–grew from 743.4 thousand of pure copper tons in 1973 to 1.6 million tons in 1989 and to 3.1 million tons in 1996 (CENDA). Of that amount, CODELCO still outputs 39%, that is, over 1.2 million pure copper tons a year.

The profits of CODELCO for the Chilean State have been considerable. The state company is quite astoundingly profitable, one of the six most lucrative companies in the world between 1989 and 1992, according to Fortune Magazine. The rent associated to Chilean copper –due mainly to the top notch quality of the ore and nearness of minerals to ports– is considerable. It can be estimated considering that CODELCO’s profits over sales tripled the industry’s worldwide average, between 1990 and 1995. Between 1994 and 1996, CODELCO’s returns to the state, including profits and taxes, were 3.6 billion dollars and its returns over the last ten years, forward accruited at 10% annual rate, add up to 20 billion dollars. In such a small economy as Chile’s, these figures are quite relevant. CODELCO’s income pays for a sizable portion, around 11%, of Government income. Roughly the equivalent to the revenue of corporate income tax or to 34% of the cost of all the government’s housing, education and health programs put together.

By contrast, the overall taxes paid by the foreign companies who, as has been mentioned, already produce 61% of all copper mined in the country, are on the range of 200 million dollars a year. The above figures hint to the magnitude of the losses of the Chilean Government due to the permissive mining taxing system instituted by Pinochet’s Minister Piñera. Private mining companies easily loophole the tax law by carrying a disproportionate debt to equity ratio, thus concealing their earning transfers as interest payments. Also and most irritating, they file their local companies under a special legal figure originally designed to offer tax breaks to small miners. They do this by holding back their refined copper production to the limit established by this special legal figure, some 70.000 tons a year and exporting the rest as concentrate. In this way, for example, Canadian Broken Hill owned Escondida, the largest mine in the world, that produces over 800.000 tons a year of pure copper, is considered a "medium" mine for legal purposes, because it produces 69.999 tons of refined copper a year. The overall mining tax damage has been estimated in over a billion dollars a year and several proposals are presently being discussed to put an end to it.

Important as Allende’s Copper Nationalization has been, it is probably in Frei Montalva’s and Allende’s Agrarian Reform where the single most important origin of the subsequent Chilean economic developments should be looked for.

The Agrarian Reform put end, finally, to the type of labor relationship called "inquilinaje" or "latifundia". As it is well known, the nucleus of this traditional relationship consisted in the session by the "latifundista" of some of its land to his "inquilinos", in return for which they had to pay in work, their own and their family members’. Latifundia consolidates in Chile early in the XIX century when, coincidentally with independence from Spain, the remnants of the old Spanish Crown protected Indian land tenancies are eliminated. It peaks during last century and shows remarkable endurance, well into the XX. By 1960, although in a quite decomposed form, inquilinos and other latifundia dependent peasants made up about half of the –by then quite important– agricultural workforce, being the rest independent peasants and Indian communal type of settlements (Riesco-Des.Cap.). There was some argument at that time, in social sciences, as to the importance of the traditional vs. capitalist elements in agriculture and the social structure as a whole. There was consensus, though, in political as well a social actors about the importance of a deep change in land-owning structures. The main 1964 presidential contenders, Frei Montalva and Allende both had Agrarian Reform as the key point in their programs. The law was finally passed under President Frei Montalva, in 1967. This process was backed by the Alliance For Progress, impelled by the USA in Latin America after the Cuban Revolution.

During the governments of Presidents Frei and Allende, the land expropriations carried out in execution of the Agrarian Reform Law the Chilean State affect 52% of the agricultural surface of the country and practically all of the cultivated lands. (Riesco-25 Años).

After the 1973 coup, Pinochet did not return the land to their property status prior to the Agrarian Reform, except in counted cases where the legal process of expropriation had not been completed. In general, the destination of the expropriated land was, more or less, the one specified in the Agrarian Reform Law. This law established that a part of the lands, denominated "reserva," would be left to the old proprietors. A 30% of the expropriated land, approximately, had this destination. Most of the expropriated land, though, around 40%, was delivered the peasants, a 20% in individual property and a 20% to cooperatives. The remainder was auctioned off, mainly to large forestry companies or delivered to non-profit institutions (Riesco-25 Años). Only some of the peasants received lands, many of the them "inquilinos" who worked as supervisors in the old "latifundios". Twenty five years later, about 2/3 of them still have their farms and about half of these are relatively prosperous.

The latter has also occurred, quite frequently, with sons of the old proprietors who, starting from their "reservas," have developed, in many cases, modern agricultural companies of medium size, many of them dedicated to the export of fruits and vegetables. Next to that, large companies have acquired big extensions of land they exploit, mainly in forests and winery, with quite modern agricultural technologies.

The extraordinary surge experienced by Chilean agriculture during the last years– just one example of it: between 1975 and 1994 the fruit export multiplied from 100 to 1.200 thousand tons per year–is explained, mainly, by these processes as a whole.

Most of the peasants did not receive land from Pinochet, except for the houses they lived on and in most cases, not even that. The Pinochet regime was specially harsh on those peasants who deserved the land the most, namely, those who had actively baked Agrarian Reform. Most of them grossed the numbers of the one in six, or so, of the peasant families who were simply expelled out of their lands during those years. In fact so many of them were singled out and imprisoned or killed in the days immediately after the coup, that their names make up a majority of the 3000 engraved in stone, in the monument to those killed or who disappeared under Pinochet.

The Harsh Tale Of Primitive Accumulation

As a result of the described process, a good part of the peasants had to abandon the lands they had lived upon for generations, to stumble, heads on, crowding into the uncertainties of the transitional social relations that mould the ways to modern social structures. That process had been taking place in Chile for many years, was accelerated substantially by Agrarian Reform and not been completed yet at all, has continued on up to the present day. This quite dramatic trip, in Chile as in the rest of the world, has twined the basic social fibre of the still fully ongoing historical transition to modern capitalist times. A few small countries first, the rest, one by one, region by region, continent by continent, following suit along the last two centuries. Thus has been written, in these years, by what up to date amounts more or less a half of humanity, the harsh tale of primitive accumulation.

Since 1970 Chilean GDP has grown triple, rollercoasting up and down throughout two deep crisis in 1975 and 1982 and up again into a steep and until now uninterrupted 7.8% mean annual growth period since 1985 (See "PGB1" charts in appendix Im_PGB1.gif). In fact during this 12 year long growth spree, the Chilean economy has been one of the world’s most dynamic, gaining full 10 places in a 143 country ranking of Gross National Product. By 1992 it had attained place 34 in a 117 country ranking of per capita Gross Domestic Product (GDP), purchasing parity (EA 3D Atlas). Famelic as the animal may be, the Chilean economy has acquired a certain feline status, specially in the eyes of the international official economists’ community.

It is not unusual for economists to avoid certain important economic questions or address them with rather abstract and formal recipes. The fact, for example, that in certain stages of their development, economies tend to accelerate and go through long periods of high growth, while mature countries consider anything above 2% annual rate, overheated. At most, an answer to such phenomena would appeal to something as sophisticated as the "law" of diminishing returns.

In the case of Chilean economy, instead, the mentioned dynamism seems to stem, rather, out of complex and contradictory historical developments through which millions of people quite radically changed the way they work and live. Somehow, the same activities the vast majority of them had executed for generations– basically working from sunrise to sunset, for the benefit others most of the time and always exhaustingly past the inflection point of diminishing returns–suddenly acquired economic importance. Even though they continued to live quite frugally, perhaps worse than before, their work quite surprisingly started to show up in the National accounts. They have seen, for themselves, even less gold than before in their lives. Nevertheless, they seem to have been endowed the Midas touch.

People actively participating in the economic process have swelled in Chile, during this period. Those whom statistics classify as "occupied" doubled in the last three decades, while the population grew by half, during the same period. The number of occupied persons grew from 2.7 millions in 1970 up to 5.4 millions in 1997, a 95% increase, decimals considered.

In the same period, Chilean population grew from 9.3 million up to 14.7 million, 57% in a more precise estimate. (See "Ocupación y Desocupación" chart, in appendix Im_OcDes.gif) In fact, overall population has been decreasing rapidly, after peaking in the mid sixties. Chile’s Population Annual Growth Rate, moved up, from a midrange position of 68th between 156 countries, in 1950, until 1965, down to place 107 in 1995. It should be noted that it gained good 33 places in this scale, during the revolutionary years (See table below and See "Population, Annual % Growth Rates" charts in appendix Im_Pob2.gif Im_Pob3.gif ).

Chile: Population Growth Rate, 1950-1995

Year

Population Annual Growth Rate (%)

Place in world ranking of 156 countries (higher to lower PAGR)

1950

2.16

68

1965

2.39

72

1975

1.71

105

1985

1.68

102

1995

1.55

107

Source: AE 3D Atlas

Of course and Chile has proven to be no exception, modern occupation has showed itself to be quite hazardous. Occupation growth has not in the least run smooth. Quite the opposite. unemployment has grown as lively as employment and jumped roughly up and down all the same, in a scissors movement, of course. Gone for good were the good old sixties, with their under 5% unemployment rates. After 1973, unemployment has never been under that figure and it peaked as high as 31% of the workforce (occupied plus unemployed) during the eighties’ crisis. Recently, after reaching a minimum of 5.3% in 1997, unemployment is moving up to the 6% level, as the first breezes of the Asian monsoon are reaching Chile’s coast (See "Ocupación y Desocupación" chart, in appendix Im_OcDes.gif).

Added together, occupied and unemployed have increased more rapidly in Chile than other countries, in the same period. Thus, between 1970 and 1995, Chile moved up seven places, from 63 to 57, in a 142 country economically active population ranking. During the same period, Chile moved down 8 places in the total population ranking (EA 3D Atlas).

The peasantry, classic mine of primitive accumulation, has rendered its generous quota to attain this feat.

The turbulence of the sixties and seventies accentuated the process of peasant migration to the cities, process that continues up to this day, at a quite impressive rate. Chile had been urbanising throughout the century and had already attained a rather high, 60% urban population even back in the fifties, figure that reached 74% by 1970. This process has continued and even accelerated since then. Cities as a whole grew more than 71.3% between 1970 and 1995. The total population of the country grew from 9.34 to 14,2 million inhabitants, 52.1%, meanwhile rural population in fact decreased slightly by 0.1 million people, in the same period. The percentage of urban population increased from 75 % in 1970 to more than 84% in 1995. In (See "Población Urbana y Rural" chart, in appendix Im_Pob.gif ).

Chile’s already acromegalic capital city, Santiago, grew from 2.89 million inhabitants in 1970 to 5.2 million inhabitants in 1995, that is, 80.2%. As it can be seen, comparing this figure with the ones above, Santiago is not only still growing faster than the total population, but also than the rest of cities as a whole. Even so, some decentralisation tendency may be observed already, towards some regional capitals like Copiapó and Iquique in the northern part of the country, Rancagua near Santiago to the south, or Temuco and Puerto Montt, farther south. All this cities more than duplicated their inhabitants in the same period and together with others, are growing even faster than Santiago itself. In this way, Chile seems to be following the pattern established in older capitalist countries where, in the initial stages of development, people tended to concentrate in one or a few enormous cities, to be followed by a more reticular trend, whereas cities are concerned (See "% of Population in Large Cities" charts in appendix Im_Ciu1.gif , Im_Ciu2.gif , Im_Ciu3.gif , Im_Ciu4.gif ).

As a result –it should be mentioned at least briefly–air, water and traffic pollution in Santiago are reaching quite intolerable and dangerous levels. These are perhaps the worst of considerable ecological problems that are becoming commonplace in Chile, these days. They are a good example of how the voracious young capitalist stage of development of the country is tearing the environment of Chile’s remarkably beautiful but quite fragile natural settings at a rather fearful pace.

Between 1987 and 1997, the percentage of those employed in agriculture, hunting and fishing relative to overall employment fell from 20.9% down to 14.4%, according to new census estimates. During the same years, for example, a whole new fishing industry has sprung to life –trout farming in the oxygen rich waters of southern Chiloé archipelago–that already employees over 15.000 people, making Chile’s salmon exports one of the largest in the world, up from nothing 15 years ago. That means agricultural workforce has been declining even faster. According to the old estimates, people employed in agriculture, hunting and fishing had been declining down from 30% in 1960, to reach 15% in the mid 1980th, with a big lurch in the early seventies, coincidentally with Agrarian Reform. If the new data series, starting in 1985, is projected back to 1960, the resulting agricultural proportion of occupied workforce well surpasses 40% by that time (see "% Ocupación en la Agricultura" chart, in appendix Im_OcAg1.gif). The same result may be appreciated as the absolute numbers of those occupied in agriculture, hunting and fishing steadily decrease, as measured by the old or new data series, at the same time overall occupied workforce doubles and triples over the years (see "Ocupación en la Agricultura" chart, in appendix Im_OcAg2.gif).

In recent years, the proportion of agriculture in the workforce has been going down almost one percentage point per year. That means just in the last five years some 250.000 peasants left the countryside to join the ranks of urban occupied or unemployed. Considering their families, no less than one million people, 1/15th of the population, have been undergoing such a decisive historical change in such a short a period of time. Whatever the yardstick, the fact is that peasantry in Chile, though still in the levels England perhaps almost one hundred years ago, has been declining at a very rapid pace, during the last three decades.

Statistics, of course, are incapable of rendering even a pale picture of the human drama involved. It is not bulldozers, maybe, as in John Steinbeck’s "Grapes of Wrath" that throw peasants out of the homes they lived in for generations, though sometimes they do get bulldozed out. In the coastal hills of central and southern Chile, these days, it is really pine trees–and the capitalist companies who buy out the peasants to plant them–that quite literally pour down over the hills, pushing peasants families out. Where to? Perhaps also to become fruit pickers, as in the California of the 1930ths. Or anywhere, but out of a way of life they can’t stand any longer. It is true that older peasants usually do not leave their lands easily. Not until, as this author has witnessed, they cut down their last tree and sell their last cow. But it is also true that, if some people may have romantic ideas about traditional country life, the peasants themselves and specially their younger kin, do not have them in the least. They suffer the harshness and brutality of traditional peasant life –it’s sheer idiocy according to Marx, that is to say, it’s terrible disconnection– from dawn to dusk. That is, mainly, why they are quite willing to leave places, many of which are amongst the most beautiful that can be found anywhere. To plunge into the uncertainties and helplessness of life for the poor in the towns and cities of nowadays Chile.

That is not to say that the process runs without resistance. Quite on the contrary, being many of these peasants members of Mapuche Indian communities, for example, their plight is no stranger to the recent National agitation in those regions. On the other hand, the nature of peasant agitation in Chile is quite different as other peasant movements presently surfacing strongly in Latin America. As has been remarked, in Chile there are no landowner death squads, for example. Perhaps because Agrarian Reform did away with traditional landowners altogether.

The Modern Quarries Of Golden Eggs

During the last three decades, Chile has withdrawn liberally out of the three large quarries of value producing active population. Housewives, that second reserve of modern productive workforces, together with peasants, have also contributed their part.

Women as a percentage of workforce have increased rather considerably in Chile, in the last decades. From 22% back in 1970, females as % of males in the labor force have increased to 29% in 1992. Relative to other 140 other countries, Chile climbed 9 places, from 99 to 90, measured by this indicator (EA 3D Atlas). Relative to other Latin American countries, Chile has grown faster in this indicator than Brazil and Perú, has surpassed Mexico and even Argentina and is catching up on Uruguay (See "Labor Force, % of females" chart in appendix Im_Muj.gif). By 1995, the female component of the Chilean workforce had climbed up to 32.1% and was growing at a 4.1% annual rate, while the workforce as a whole was growing at a 3.0% annual rate (INE), as a trend of the previous decade.

Chile’s still quite backward social structure has ample resources left in the above mentioned wells to ensure continued withdrawal for years to come. It has a long way to go before agricultural workforce reach the 2% levels, or women in the workforce the 40% levels it has had for many years in countries like the UK. But, alas, Chilean economy has also been second to no one in tapping that rather contemporary fountain of value producing labor: commodity production of services.

Perhaps it was Chicago Boys’ influence or perhaps the temporarily low level of resistance Chilean salaried workforce had been pushed into, by Pinochet. Whatever the reasons, the fact is that relatively socially backward Chile has pioneered a lot of Reagan-Thatcher type "restructuring".

Probably, once again, ideas and words tend to be quite more universal than the social conditions they sometimes refer to. So, the same words or concepts are many times used to represent quite different things in different places. Without their users even being aware that they are talking about different matters, of course, because it seems to be quite difficult to really comprehend what one hasn’t lived through to see. In Chile, after all the changes witnessed in these years, it does feel fairly clear that some things were quite different to what they were thought, talked and meant to be. Capitalism, for one, seems to be a quite different animal now, to what was thought and talked of –quite a lot, by the way, in some circles, if enough coffee or beer were available–back in the Chile of the sixties. Or working class, or capitalist class, etc. It would not even amount to an irony to add Socialism to this enumeration.

With due caution then, to different social realities, some words may be said about the kind of "restructuring" carried on by De Castro, Piñera, Buchi and their rather insensible kin, in the Chile of the late seventies and eighties. Quite a lot of restructuring has carried on through the nineties and the social and Christian democratic technocrats seem to be quite enthusiastic in this respect, though they pay at least lip service and also real tribute, to certain social responsibility.

The key sectors targeted for the so called "modernisations" of Piñera et al. were all state companies and the public pension, health and educational systems. The magic ointment for everything was, of course, privatisation. Where outright privatisation did not seem possible, outsourcing would do, instead. Together with Government sponsored "modernisations", private companies did a lot of outsourcing of their own.

It is not within the scope of this paper to go into detailed analysis of each of this measures. Something will be mentioned further down, regarding the impact privatisations had on the nurturing of nascent Chilean modern bourgeoisie. Something similar will be said regarding the impact of this measures on the young Chilean working class. At this point, though, it should be emphasised that, on the whole, "modernisations" resulted on a massive transferral of non commodity producing workers, into the mainstream of value adding economic activity.

The world renowned Chilean Administradoras de Fondos de Pensiones (AFP) privately administrated capitalisation based pension system is a good example of the former. As is well known, the AFP system replaced a state administrated, pay as you go pension system, by one in which the pensions are financed making employees "owners". The new system is based on privately administrated individual retirement accounts, where all employees are obliged to deposit 10% of their wages, on a monthly basis. In addition to that, they are discounted another 2-3% of their wages for AFP administrative charges and accident insurance. Starting in 1981, the AFP system has enrolled, by now, the entire 5.4 million strong workforce and accumulated some 30 billion dollar in the pension funds, about have of Chile’s yearly GDP. About 40% of the fund is invested in state bonds and the rest splits evenly between housing bank bonds, other corporate bonds and shares. About 2% of the fund is currently invested abroad. The system has been important for the development of Chilean capital markets, as has been in practice acknowledged by the five large firms who have secured control of the industry, most of them alliances between Chilean and foreign finance sector groups.

The main criticisms of the system stem, first, from the fact that only some 30% of all affiliates will ever get more than the minimum, 100 US$ state secured minimum pension. That figure is estimated considering that 40% of the subscribers do not make their monthly payments, mainly because they are self employed and of the 60% of the ones that do enter their monthly payments earn such low wages that they will never accumulate enough in their accounts even for securing the minimum pension. Another criticism stems out of the huge cost of the system, administrative fees by AFPs amount to fully 1/5 of each monthly deposit, ten times as much as the Singapore state run capitalisation system costs. Finally, much scandal has surfaced regarding the way AFP owners manipulate board elections in the companies they invest pensioners funds.

From the point of view of this paper, the AFP system has transformed the non commodity oriented work of the 2.000, or so, state employees who ran the old system, in a complete commercial industry, that sells some 600 million dollars a year, the amount of AFP administrative fees, employs some 20,000 persons–roughly the same as copper giant CODELCO–and earns some 100 million dollars a year. Some contribution to GDP!

Similar effects have been obtained by the privately run Institutos de Salud Previsional ISAPRE health insurance system. This system operates based on a 7% obligatory wage discount that goes to ISAPREs for health insurance purposes. In this case there remains a state run health insurance agency, where employees may choose to deposit their 7%, as some 50% of the workforce, the lower paid strata, in fact do. Even so, already 2/3 of the overall health expenditure goes to the private system. Again, the old non market oriented public health system –much of which still survives, chronic patient itself in critical condition–has given way to the creation of a whole new billion service dollar industry. A similar story may be told of the private educational sector. Nowadays, the new less than ten year old private university system already enrols half of all university students. As is the case with the remaining public health system, the state university system stumbles on, quite a prisoner of it’s own non commodity production structure and vocation and the demands made to it to compete with the private industry that thrives alongside.

Corporate restructuring affected mainly the state enterprises, certainly the privatised ones but also the ones that have remained under state ownership. CODELCO, for example, has reduced it’s workforce by half since 1990, while significantly increasing it’s output in the same period. Mainly, corporate restructuring has taken the form of outsourcing different services that were previously done in house, to private contractors. CODELCO, again, employees as many contractor workers as it’s own, by now.

The results of Chilean restructuring have been quite considerable. As they show up in the National accounts, service sector GDP has been growing steadily faster than the fast growing goods producing sector and fairly over the GDP as a whole. Public services, on their part, have not grown at all. Starting at 100 in 1985, goods producing sector GDP index doubled in ten years, reaching 210 by 1995. GDP as a whole indexed 240 and service sector index topped 245, in the same period and starting, also at 100 in 1985. Public services index, meanwhile, practically stayed levelled at 110 (see "PGB Bienes, Servicios, Administración Pública" charts, in appendix Im_PGB2.gif).

Once again, it is not without reason that workers resist "restructuring" or "modernisations" everywhere. The meaning of these words for all of them in Chile has been "uncertainty" and, for many of them, early retirement when they are lucky or outright unemployment, in quite many cases.

The political economy of the all the above emphasised human displacements is, of course, well known. Peasants in their traditional surroundings, housewives at home and service salaried workers imbedded within state or company structures, all of them interchange their –quite considerable and useful–work in a direct, or most of it, in a non mercantile manner. That is, they do not sell it’s product, whether goods or services, but render it priceless to their own and their families well-being or their company’s or community requirements. As soon as they leave farm, home, public office or company service department, they join the ranks of salaried or self employed merchandise producers, or simply the ranks of the unemployed.

Salaried Or "Informal" Commodity Production?

It is not the intention of this paper in the least, to imply that the proportion of the population involved in commodity production is the sole source of the large disparities observed between countries’ economic performance. Quite on the contrary, the purpose of the paper is to emphasise the importance of social relations in economic performance, in general.

In the case of Chile–and most of the world, perhaps, except for the OCDE countries,–the most relevant change in the last decades regarding it’s social relations seems to have been the massive defection–certainly quite forced by historical circumstances–of its inhabitants from activities of one type or the other, some traditional, others themselves transitional, where direct, non market oriented, work interchange made up for most of their day. And their equally massive entrance into commodity producing activities of different type and nature.

Exactly where to? There seems to be ample evidence that in Chile, at least, the masses of new commodity producers pouring out of their niches and into the marketplace don’t seem intent in following anybody’s magic flute into petty producing foreverland of any nature. Rather, they seem impelled to follow the trail already walked by their similar in Europe last century and the rest of the developed or NIC world in this one. That is, to modern social formations where capital dependent salaried workers conform the incontestably dominant production relation.

That is not to say that self employed or "informal" types of employment are non existing in Chile in our days. Rather on the contrary, self employment remains in fact quite important, by far number two, after salaried forms of employment, in the occupied workforce. It has grown as fast and at times even slightly faster than salaried employment. By 1995, the occupied workforce statistics comprised some 1.4 million persons classified as self employed or family members, 27% of the occupied workforce at that time. Salaried workers added up to 3.6 million persons, 70% of the occupied workforce, including 274 thousand persons who earn their salary on personal services, mainly domestic. The remaining 3% of occupied workforce is classified as employers, even though quite many of those probable employ less than 10 persons (see "Composición de clase Población Ocupada, 1995" chart, in appendix Im_Cl1.gif ). In the decade ending in 1995, self employed plus family members grew at 3.63% annual rate, almost exactly parallel but a bit over the 3.61% annual rate of growth of salaried employees, excluding personal services, in similar period (see "Composición de clase Población Ocupada, 1985-1997" chart, in appendix Im_Cl2.gif).

It is not strange at all that self employment remained stable as a proportion of occupied workers during the Chilean "jaguar" growth decade. In fact it is rather remarkable that salaried employment has been able to absorb enough of the new workers flowing into the marketplace in this period to maintain the above noted proportion. It is normal, as well, that in cyclical crisis, part of the salaried workers throwed into unemployment search refuge, as well in self employment or family economic activities. The long term trend, though, tells a different story. As has been mentioned above, both rural inhabitants and persons occupied in agriculture have diminished from over 40% of the population and occupied workforce, respectively, back in the 1960s, down to under 15% in the present day. Self and family employment, on the other hand, are much more frequent in rural activities, where they comprise over 37% of the occupied workforce than in the urban environment, where they are just over 20% of the occupied workforce (Riesco, Des.Cap.).

The argument as to whether capitalist development increases or decreases salaried workers is everlasting, because, in the one hand, it quite obviously both increases and decreases salaried workers and on the other hand, considerable interests, cultural and political mainly, are deeply embedded in the support of one and the other thesis. Although the author of this paper is quite convinced, both theoretically and factually, as well as politically biased toward the "proletarian growth" side, making an argument in such a direction it is not the purpose of this paper. It is rather to point out the relative infancy of capitalism as a whole, both in Chile and in the world at large, that the overall argument in the paper is headed towards. In this sense, it is not enough to affirm that occupied salaried workers have doubled in Chile since 1970, which they indeed in the very least have, to prove that the Chilean working class is today twice as strong as before. The point in this paper is, rather, that the Chilean working class seems to be just starting to conform as such, in the best of cases. And, of course, always speaking in purely economical "in itself" terms. For this purposes, though, qualitative analysis seems to be more suited than statistical figures.

Quite a large proportion of the salaried workers in Chile are employed in very small companies. At least 1/5th of those employed in manufacturing, for example, worked in factories with 20 or less employees. It seems quite difficult that Marx, for example, would have considered those factories as an example of full blown capitalist production. Similar reasoning has recently suggested the census bureau to keep the number of persons, mainly women, employed in personal services as a separate statistics from other salaried employees. In this sense, although Chile nowadays presents a quite high salaried proportion of it’s occupied workforce, the meaning of such a figure is probably very different to a similar one, or even a lower one, in a more mature capitalist country.

The most studied case in point has been, of course, that of persons employed in latifundia. Up until the 1960s, peasants employed in latifundia which comprised a quite large portion of the overall workforce by then, engrossed the official "salaried" portion of the occupied workforce. This type of "salaried" workers are no longer existent in Chile nowadays.

A similar critical analysis may be intended regarding the labor relations that for decades developed in the centres that conformed, by far, the largest concentration of workers of the Chilean economy, the very heart of the XX century Chilean working class: coal, nitrate copper and other large mines. They were, evidently involved in highly competitive commodity production. In those industries, of course, the owners were as capitalist as can be, in most cases share companies from Great Britain or the United States.

Quite a different story though, may be told about the actual labor relations within the mine’s compound. Capitalist on the outside, those "enclaves" looked quite latifundia like on the inside. The "enganche" recruiting system, for example, through which peasant were picked out of the "haciendas" to be packed aboard ships and trains to the mining camps, one thousand kilometres away, up in the desert, surely had little to do with a regular labor market functioning. It was not until the 1930 crisis that a more traditional wage labor "offer" became available to nascent capitalism, in the thousands that flooded the roads and streets of Chile, back from the closed nitrate mines.

"Campamento" or "Oficina" like labor regimes stayed that way for a long time. In 1997, finally the Government decided to put an end to the long agony of the coal mines at Lota, in southern Chile, the oldest large worker concentration in the country. An interesting press report was published then by Chile’s leading newspaper El Mercurio. The report pointed out that, after three or more generations working on the mine throughout it’s longer than a century existence, the peasant traces in the miners’ culture remained quite vivid. Poignantly so, at the time when they were finally forced to end their that way of life and confront the highly unprotected environment of present Chilean labor life. Strangely, the report somehow seemed to be describing the death of Chile’s last latifundia, instead of it’s pioneer capitalist company. Camp life, where everything–all services from the health care down to minor repairs in domestic artefacts, including "pulpería" commerce, of course, most of them operating money-less some other even with "tokens"–was owned and done by the company, was a salient characteristic of labor relations in these companies. Employment for life, that considered the workers’ descendants, was another. In CODELCO, for example, company that maintained the century old practices of it’s American owned predecessors, it was not until the democratic governments decided upon the "restructuring" of the company, in the 1990ies, that such a culture was deeply affected. The few large private companies that developed in sectors other than mining, electricity, telephones and paper followed quite similar patterns. And CODELCO still is, by far the largest Chilean company, the only one of world class size.

Large worker concentrations in XX century's Chile were to be found, secondly, in the state companies and public services. The former –railways ports, water utilities and some others since early in the century, hydroelectricity and steel since the 1940ies, mainly–could be said to be involved in commodity production. Up to a certain point, though, if the chronic deficits of some of this companies are considered. The latter–health care, education, public road maintenance, state administration, military, etc.–were not involved in commodity production at all. The labor relations within this services and somewhat in the state companies too, followed the classic state public service bureaucratic discipline and also considered employment for life and descendants.

Apart from the above mentioned, relatively large worker concentration developed in the 1950ies and 1960ies in the import substitution manufacturing industry, mainly textiles. In these highly protected monopolies, labor relations, again, followed the latifundia type model quite closely, including the typical factory owned urban village around itself where workers dwelled.

Of course, large commodity producing worker concentrations, owned by capitalists, but with pre-capitalist internal labor relations have not in the least been infrequent. Rather, they seem to be the natural way capital had of organising production where proper wage workers were still centuries away, in their social making. The extreme case being, of course, slavery in America, where 600.000 thousand strong worker concentrations (Blackburn), probably the world’s largest during the XVII, XVIII and well into the XIX centuries. All the sweetness of the world’s sugar thus produced, of course, went to Europe’s nascent capitalism.

The only place in Chile where large capitalist companies developed during this century following the better known US or Australian model was Patagonian Tierra del Fuego, in the extreme south. This region, whose primitive inhabitants were "colonised" by the turn of the century in the same murderous North American style, developed huge sheep ranches with large wool and meat export industries, amongst the largest in the world. Characteristically, then, only where latifundia never existed did early capitalist development follow, in Chile, more familiar patterns.

All the above mentioned salaried employer forms have come to an end, in Chile, during the last three decades. Wage labourers today, instead, work mostly in private companies, most of them small or medium sized, but in some large companies or conglomerates as well. True, teachers and health care workers, the country’s largest labor unions, still work, most of them, in the public sector. But, as it has been mentioned, both are going through rough times, mainly due to the competition of nascent capitalist industries that thrive alongside them.

The preceding analysis should not, by any means, suggest that Chilean XX century salaried worker concentrations should not be emphasised with all the relevance assigned to them by social science throughout the century. Quite on the contrary, the evidence on their importance to the emergence of Chilean XX century popular actor, from it's very roots, is overwhelming. Therefore and this is the main thesis of the present paper, they should be considered as the main articulators of the vast popular movement that precipitated the social transformations that, in turn, are relevant to explain the overall changes the country has experienced in recent decades, specially it's economic performance. On the other hand, more transitional features of Chilean XX century proletariat may now well seem rather more in accordance with the character of the historical changes that actually took place in Chile, mainly promoted by their activity.

It seems quite clear, though, that more salaried workers than ever, in Chile these days, are getting to know crude labor market facts and what subordination to capital really means. It would not be totally misguided, perhaps, to consider that modern wage labor seems to be reaching adolescence in Chile, just now. As Chilean capitalism itself, probably and most certainly, Chilean capitalists themselves.

Chilean Bourgeoisie, Forced Into Being By Revolution

British magazine "The Economist", analyzing Chilean economy’s evolution during recent decades, pointed out a significant fact. The most relevant transformations realised by Pinochet’s dictatorship were possible, according to The Economist, because they did not encounter the same conservative resistance that delayed the same measures for decades in other countries. The Economist’s conservative pressure groups included labor unions, for sure but, more significantly, the magazine mentioned two other social sectors in the first place: traditional landowners and "import substitution" monopoly industrialists. Both groups, of course, had been hardly hit by Allende’s expropriations.

The Chilean "high classes" have undergone quite a change, during the last three decades. From a deeply conservative sector, "mummies" as they used to be called, there sprung an aggressive bourgeoisie, brutal in its politics and quite entrepreneurial in their economics. Only in the cultural and religious aspects they still maintain a conservative stance. El Mercurio’s Sunday cultural supplement –that recently carried an interesting assessment of Communist Manifesto that stated the inevitability of liberal economics to do away with traditional values – and recent multiparty legal proposals in favour of divorce are quite a good proofs that cultural conservatism of Chilean bourgeoisie will not endure for ever, either.

Chile seems to have has been undergoing it’s own "Age of Capital" during recent decades.

Nurtured by huge transferral of public property into private equity during the Pinochet years –mainly through the privatisation component of Piñeras’s "modernisations" and financial recovery of the debt crisis–and quite some by the ensuing democratic governments as well, the leading barons of the Chilean bourgeoisie have also become quite a moneyed lot. So much, in fact, that they have been recently opening season to their own "Age of Empire" investing throughout Latin America.

Their international alliances have been changing rapidly, as their own assertiveness grows up. Out of the US camp and towards Latin American and, not strangely, Spanish capital. It is possible that Spanish and Latin American capitals may be entangling this days much in the way US and British capitals did at the turn of the century. With the whole of Latin America as their hunting enclosure. In just three years, as it is well known, Spanish capitals, in alliance with Chilean ones but others from diverse LA countries as well, have gained control of the continent’s electric, banking and telephone systems.

It is quite indicative that the main Chilean groups involved in LA electric ventures sprung out of Pinochet’s privatisation of Chilean state electrical companies and are funded, mainly, by the AFP system.

The Many Stages Up The Curve To Modernity

It has been implied throughout this paper that–quite deeper than economic policies or political regimes of one type or the other –the main tempo of the transitions to modern societies should be listened to in the movement of their social relations. Social relations conform quite an entangled complex in any country or at any moment of time in the life in a given one. It does not seem easy to establish some measurable evidence to support or reject of the above mentioned hypothesis. An intent has been made in this paper, nonetheless, to test a certain correlation between social and economic development. The same will be presented in what follows, with all due caution, rather as an illustration than as empirical evidence.

The degree of overall social development was estimated through the movement of one variable, namely the percentage of agricultural workers in the occupied workforce. On the other hand, overall economic performance was estimated through per-capita Gross Domestic Product, as a proxy for productivity. It must be emphasised that both variables have been selected not by their own significance, which they have, but mainly as estimators of the overall movement of social relations, on the one hand and overall economic performance, on the other.

Both variables were plotted one against the other, with data from Chilean statistics for the last thirty seven years, from 1960 to 1997. The result is quite a smooth curve, that starts down to the right in 1960, when agriculture occupied over 30% of workers and per-capita Gross National Product (GNP) was under 4.000 US$ dollars. Only occupied workers were considered, in both ratios. The curve climbs up to the left, as percentage of agricultural workers decline down to 14.4% in 1997 and per-capita GNP grows a bit over 7.500 US$ dollars. In both calculations, 1986 US$ dollars are used (see "PIB per Cápita vs Ocupados en Agricultura" chart, in appendix Im_Ries2.gif ).

Another plot was made of the same variables, only this time for a cross section of countries, with data for 1991. In this case, Gross Domestic Product, purchasing power adjusted, was used. The result is, again, a curve that starts down at the right, with countries whose agricultural workers comprise sixty percent of the workforce and whose pre-capita GDP are under 2.000 US$ dollars. The curve climbs to the left, as agricultural proportion of the workforce goes down to under 5% and lower for the more advanced countries (see "Gross Domestic Product - per Capita (purchasing parity)" chart, in appendix Im_Ries1.gif).

In both plots, exception made of some points, the rest fall in quite good adjustment over rather smooth curves. The non coincident points are, most of them, due to data errors (El Salvador, for example, a quite notoriously peasant country, appears with less than 1% rural population) or discontinuities in the data series.

The Ever Resurgent And Always Frustrated Actors Of Non Dominated History

As has been argued along this paper, Chilean economic performance during the last decades seems to stem out of deeper regions than a few IMF preferred monetary, fiscal or tariff economic policies. The dynamic movements of all the country’s social actors in a rapidly changing scenario seems to lay in the background of all the upwardly moving macroeconomic indicators.

The political economy of the whole process, though, has not acted on it’s own, as well. All the political turbulences of the period, Chile’s own "Age of Revolutions" have been the play’s author and director. The main political actors throughout most of the period, has not been the bourgeoisie. Strangely enough, but quite in accordance to other transitions to modern times. It has been only recently that the Chilean bourgeoisie has taken the matters of politics directly into it’s own hands. That occurred only after it secured the leadership of the anti-dictatorial movement and assumed the post Pinochet Government Since then, it has occupied the whole political scenario almost exclusively for itself.

Before the bourgeoisie took over directly, the Chilean military played the role of post- revolutionary order and in spite of their quite conservative leaning personal preferences, they had no choice but to consolidate the main social transformations. They did it their brutal way. After the defeat, 25 years ago, of the possibility of a leftist inspired post revolutionary order, ugly as that species has also proved to be, Pinochet was probably the worst way to go through it, considering the sufferings he imposed upon the mass of Chilean people.

Many matters evidently are out of this paper’s scope and many others simply have been left out. The generous imperial tax paid by Chileans to the international banking community during these years, for one.

But a few ending words must be said in regard to the simple people. The ones who precipitated the whole process in a bold revolutionary way, back in the sixties and early seventies. The same who constituted the main democratic resistance during the Pinochet years and, when the time came, insurrected all along the country and voted Pinochet out of Government. As Recabarren said a century ago, they have contributed everything to the process...to be enjoyed by their adversaries.

As it is well known, Chile remains "top ten" in regressive income distribution, sixth to be precise, according to World Bank, among all nations. Even though many people have gone over the poverty line in recent years, about one in each five still lays under it. The overall income is split almost in halves, the first of which goes to he upper 10% of the population The other 90% of the population has to conform itself with the other half of all income. Wages are still under the level obtained in 1972, under President Allende, although productivity has increased 60%, in the same period (see "Remuneraciones Y Ocupación" chart, in appendix Im_OcRem.gif).. The plight of all peasants, women and workers affected by social transformations has been mentioned above.

All that is true and quite dramatic in many cases. The majority of Chileans feel it and have been expressing it lately, both in UN sponsored surveys, where Chileans appear as the most critical towards their present condition amongst Latin Americans, despite the country’s economic performance. The magnitude of their protest abstention and vote annulment in recent National elections point in the same way.

But simple people have also got something out of this whole process where themselves have been so important actors. As it is well known, Chile is a remarkable narrow country, so much that in many places you can see across it in a clear day. Nevertheless, just a couple of decades ago, many Chileans who started all this process had never had the chance to know the sea. All Chileans nowadays know how their sea looks like. At least.

Manuel Riesco

June. 1998

 

 

 

Bibliography

Blackburn, Robin (1996) "The Making of New World Slavery", Verso, London.

CENDA, Base de Datos Cuadernos, (1998), Centro de Estudios Nacionales de Desarrollo Alternativo, Santiago. In what follows, any figure without specific reference means it is taken from Base de Datos Cuadernos CENDA. This database, available in http://cenda.cep.cl, contains newspaper clippings with economic news since 1992 on.

EA 3D Atlas, Data World Resource Institute, CD-ROM.

INE-Empleo (1997), Base de Datos de Empleo, SEM_CATE.XLS, SEM_RAMA.XLS, SEM_SFDT.XLS,SEM_TASA.XLS, Instituto Nacional de Estadísticas, Santiago, Chile.

Riesco-25 Años, Riesco, Manuel (1995), "Chile 25 Años Después", Revista Encuentro XXI, Nº3, pgs. 107-121, Santiago.

Riesco-Des.Cap., Riesco, Manuel (1989), "Desarrollo del Capitalismo en Chile Bajo Pinochet", Ediciones ICAL, Santiago.