State, Market, and Democracy in Chile: The Constraint of Popular Participation

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Stat e, M a r k e t, a n d D e mo c r ac y i n Ch i l e

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Stat e, M a r k e t, a n d D e moc r ac y i n Ch i l e Th e Const r a i n t of Pop u l a r Pa rt ic i pat ion

Pau l W. Po sn e r

STATE, MARKET, AND DEMOCRACY IN CHILE

Copyright © Paul W. Posner, 2008. All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles or reviews. First published in 2008 by PALGRAVE MACMILLAN™ 175 Fifth Avenue, New York, N.Y. 10010 and Houndmills, Basingstoke, Hampshire, England RG21 6XS Companies and representatives throughout the world. PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin’s Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978–0–230–60595–4 ISBN-10: 0–230–60595–8 Library of Congress Cataloging-in-Publication Data Posner, Paul W. State, market, and democracy in Chile : the constraint of popular participation / Paul W. Posner. p. cm. Includes bibliographical references and index. ISBN 0–230–60595–8 1. Neoliberalism—Chile. 2. Political participation—Chile. 3. Chile— Politics and government—1988– I. Title. JC574.2.C5P67 2008 3239.0420983—dc22

2007047296

A catalogue record for this book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: May 2008 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

In memory of my aunt Beatrice Schlomann and for Heather and Sam


Con t e n t s

List of Tables

ix

Acknowledgments

xi

Abbreviations 1 Neoliberalism and the Quality of Democracy in Chile 2

The State in Society: Conceptualizing Collective Action and Popular Participation in Latin America

xiii 1 17

3 Business, Labor, and the State: The Transformation of the State-Society Nexus

37

4 Democratization, Political Representation, and the Rise of Popular Dissatisfaction

65

5 Local Democracy and the Transformation of Popular Participation

97

6

Social Welfare Reform and Impediments to Social Cohesion and Collective Action

123

7 Neoliberalism, Democracy, and the Transformation of State-Society Relations in Argentina

159

8 Neoliberalism, Democracy, and the Transformation of State-Society Relations in Mexico

177

9 Conclusion

195

Notes

203

References

215

Index

231


L i st of Ta bl e s

3.1 3.2 3.3 3.4 4.1 4.2 4.3 4.4 4.5

5.2 5.1

Rates of Unionization and Average Union Size—1952–2004 Rate of Collective Bargaining—1990–2004 Strike Activity—1959–2004 Percentage of Workers without Contracts according to Income Quintiles, 1990 and 1996 Effects of the 66 Percent Clause on 1993 Congressional Elections Effects of the 66 Percent Clause on 1997 Congressional Elections Electoral Participation in Chile 1988–2005 (in 1000s ) Political Party Identification in Chile 1991–2005 Ideological Self-placement—Chilean Electorate September–October 1990 to October–November 2005 Municipal Election Results 1996, 2000, and 2004 Political Parties’ Methods of Selecting Candidates—Municipal Elections

44 56 59 62 81 81 85 86 87 110 112


Ac k now l ed gm e n t s

Anyone who has undertaken the task of writing something as involved and demanding as a book understands the difficulty of identifying and thanking all those who have contributed to the project’s completion. As difficult as this task may be, I would not feel that my work was complete if I did not recognize at least some of the many people who have helped me bring this project to a successful conclusion. Among those I would like to recognize are Jonathan Hartlyn, who was a careful reader of the dissertation out of which this manuscript evolved, and offered insightful suggestions on how to improve it. I would also like to give a special thanks to Bill Smith of the University of Miami, who graciously honored my request to join the dissertation committee and who has been a source of professional support and guidance ever since. Additionally, I would like to thank David Carrithers who was a great support to me while I was at the University of Tennessee at Chattanooga. Finally, I would like to express my most profound gratitude to Joel Schwartz, whose moral support and guidance have helped to sustain me throughout the entirety of my graduate and professional career. Among the other scholars I would like to thank are Silvia Borzutzky, Jean Mayer, Viviana Patroni, and Kenneth Roberts, each of whom generously provided me with copies of their work, which I found enormously helpful. In Chile, there are a number of scholars I would like to thank. Manuel Antonio Garretón was generous with both his time and his insight. I would also like to offer special thanks to Marcelo Charlin and Sergio Rojas of the Universidad de Santiago, Carlos Ruiz of the Centro de Estudios Públicos, and Javier Martinez of SUR for providing me with essential guidance and support. Of course, some of the most critical support I received while doing the research for this book came from Chileans who are dealing firsthand with the issues that the book addresses. Though I am sure to omit the names of many individuals who deserve to be recognized, I would like to gratefully acknowledge at least some of the many Chileans who helped to broaden my understanding of their country: Claudio Hueppe, Raúl Puelle, Domingo Namuncura, Gonzalo Meza, Anibal Palma, Luis Barrera, Daniel Arias,

xii / acknowledgments

Juan Carlos Estay, Juan Robles, Gregorio Cano, Guillermo Campero, Mario Albequerque, Marcelo Monsalves, José Hidalgo, Carmen Gloria Allende, Padre Oscar Muñoz, Carlos Ramirez, Oscar Peña, Ateleo Gaete, Soledad Araos, Sergio Robles, Luzmenia Toro, Julio McKay, Alfredo Galdames, Jacqueline Tichauer, Luciano Valle, Julio Pérez, Jaime Riquelme, Maria Cucurella, Alejandro Rojas, Maribel Zuñiga, Yesna Salazar, Raúl Oyarce, Claudia Valdina Espinosa, Maria Soto San Martín, Vilma Caroca, and Tamara Saez. Not only were there many Chileans who helped me in my research, there were also many who enriched my life with their close personal friendship and generosity. To the Quappe family, Cecilia, Rodrigo, Pablo and Lillian, and Eleana, and to Angel Nalli I extend my warmest thanks. Earlier versions of some of the empirical research and ideas developed in this book appeared in “Popular Representation and Political Dissatisfaction in Chile’s New Democracy,” Journal of Interamerican Studies and World Affairs 41 (1) (Spring 1999): 59–85; “Local Democracy and the Transformation of Popular Participation in Chile,” Latin American Politics and Society 46 (3) (Fall 2004): 55–81; and “Development and Collective Action in Chile’s Neoliberal Democracy” Political Power and Social Theory18 (2007): 85–129. I am grateful to these journals for permission to reproduce some of this previously published material. I also would like to thank the University of Chattanooga Foundation and Clark University for their financial support, which facilitated some of the field research involved in this project. Additionally, I am grateful to former students at Clark University— Andrea Lopez Duarte, Yeshi Gusfield, Chris Rea, and Fauna Shaw—for their research assistance. Finally, I would like to thank my family and friends who supported and encouraged me throughout the writing of the book. Thanks go out to my cousin, Walter Schlomann, for carrying on his mother’s legacy of generosity and warmth. To my sister, Jennifer Posner Lehner, I owe tremendous thanks for her affection, admiration, and encouragement. Thanks to Dave Schwartz and Rob Krueger for lending support and a sympathetic ear on numerous occasions. I am grateful to my son, Sam, for reminding me that trains, sharks, and super heroes are at least as important as writing a book. Above all, I owe my deepest and most profound thanks to my wife, Heather. Her companionship, support, and sacrifice have nurtured and sustained me through the many challenges I have confronted in writing this book; her love has made it all worthwhile.

Abbr e v i at ions

AD AFJP

Alianza Democrática Administradoras de los Fondos de Jubilaciones y Pensiones AFORES Retirement Fund Administrators AFPs Administradoras de Fondos de Pensiones AUGE Acceso Universal de Garantías Explícitas or Explicit Guarantees of Universal Access CAS Comunal Social Action Committees CCE Business Coordinating Council (Consejo Coordinador Empresarial) CERC Centro de Estudios de la Realidad Contemporánea CESCO Concejos Economico y Social Comunal or Community Economic and Social Councils CGT Confederación General de Trabajo (General Confederation of Labor) CMHN Mexican Council of Businessmen CODECOS Consejos de Desarollo Comunal y Social or Communal Social Development Councils COECE Coordinating Committee for Commercial Export Business Organizations COPARAMEX Confederación Patronal de la República Mexicana COREDES Regional Development Councils CORFO Corporation of Production Promotion CPC Confederación de la Producción y el Comercio CROC Confederación Revolucionaria de Obreros y Campesinos CSES Comparative Study of Electoral Systems CT Congreso del Trabajo (Labor Congress) CTA Central of Argentine Workers CTM Confederación de Trabajadores Mexicanos CUT Central Unitaria de Trabajadores

xiv / abbreviations

DESAL

Centro para el Desarollo Económico y Social de América Latina ESOP Employee Share Ownership Program EZLN Ejército Zapatista Liberación Nacional (Zaptista National Liberation Army) FONASA National Health Fund (Fondo Nacional De Salud) FOSIS Fund for Solidarity and Social Investment FREPASO Peace and Solidarity Front IMSS Mexican Social Security Institute (Instituto Mexicano de Seguro Social) INFONAVIT State Housing Fund ISAPREs Institutions of Provisional Health (Instituciones de Salud Previsional) ISI Import Substitution Industrialization LFT Ley Federal de Trabajo (Federal Labor Law) MDP Movimiento Democrático Popular MINVU Ministerio de Viviendas y Urbanismo MIR Movimiento Izquierda Revolucionario MWG Municipal Working Group NAFTA North American Free Trade Agreement NSMs New Social Movements PAN Partido Acción Nacional (National Action Party) PBU Prestación Básica PC Partido Comunista PDC Partido Demócrata Cristiano PJ Partido Justicialista PPD Partido Por Democracia PRD Partido Revolucionario Democrático PRI Partido Revolucionario Institucional PROGRESA Program for Education, Health, and Nutrition (Programa Educación, Salud y Alimentación) PRONASOL National Solidarity Program (Programa Nacional de Solidaridad) PRSD Partido Radical Socialdemócrata PS Partido Socialista RN Renovación Nacional SERCOTEC Service of Technical Cooperation SEREMI Regional Ministerial Secretariats SERVIU Regional Service of Housing and Urbanization SHP Social Housing Program SNTSS National Social Security Workers Union

abbreviations / xv

SOFAFA SUBDERE UCR UDI UNT

Society for the Promotion of Manufacturing Subsecretaría de Desarollo Regional y Administrativo Unión Cívica Radical Unión Democrática Independiente National Union of Workers (Unión Nacional de Trabajadores)


Ch a p t e r O n e Neol i be r a l i sm a n d t h e Q ua l i t y of D e moc r ac y i n Ch i l e

Introduction In response to the wave of democratic transitions which swept Latin America beginning in the 1980s, the preoccupation of most scholars of Latin American politics shifted, from examining how democratic regimes can be established and sustained to how they can be improved. In this regional quest to improve democracy, researchers and policymakers confront a significant challenge—how to enable traditionally marginalized segments of the population to share the benefits of economic and political reform. This issue is particularly pressing for at least two reasons. First, even in countries that have experienced commendable growth under neoliberalism, inequality has increased and poverty remains a substantial, if not growing, problem (Korenciewicz and Smith 2000). Second, the persistence of high rates of poverty and inequality, coupled with other issues of concern—government corruption, continued human rights abuses, and the persistent lack of accountability of civilian and military leaders, to name but a few—calls into question the ability of these new democratic regimes to protect and promote their citizens’ welfare (O’Donnell 2001). Indeed, as a recent United Nations study indicates, the failure of democracy to produce more tangible economic and social benefits for most Latin Americans has led to increasing disenchantment with democratic government throughout the region, even in countries such as Chile that have fared relatively well economically (Programa de las Naciones Unidas para el Desarollo 2004). Thus, to the extent that fledgling democratic regimes are unable to deliver essential public goods, their legitimacy becomes increasingly dubious. Strengthening democratic legitimacy and reducing poverty and inequality will ultimately depend in large measure upon increasing the capacity of marginalized segments of the population to promote their interests through effective collective action. The disadvantaged and marginalized will be unable to share the benefits of development unless they

2 / State, Market, and Democracy in Chile

can participate in the political system in a manner that motivates political leaders and policymakers to address their concerns. Despite the evident appeal of facilitating the effective political participation of traditionally marginalized segments of the population, there are formidable obstacles impeding its realization. While successful (re)democratization has removed many of the obstacles to collective action present under authoritarianism, it has also produced new challenges unique to democratic regimes. Under democratic regimes, for example, the salience of a single opponent or enemy against whom to rally declines or altogether disappears. And as the salience of a unifying threat diminishes or disappears, the importance of partisan loyalty and competition reemerges, making it more difficult to build unity around a common agenda or shared set of political objectives. This difficulty appears particularly acute as a result of the neoliberal reforms adopted throughout the region. In the broadest sense, structural reform has led to a redrawing of the boundaries of the public and private, thereby reducing the range of issues and public policy options around which social and political actors can mobilize. Moreover, structural reform has fragmented and weakened the social networks that support the construction of collective identities and the recognition of common interests that are essential to collective action (Lechner 1998). Structural reform’s impact on Latin America’s already high levels of social stratification is particularly evident in the labor market. Marketoriented reforms have produced a decline in the formal sector of the economy, a weakening of organized labor, and an expansion of the informal sector. The informal, in contrast to the formal, sector is characterized by precarious employment, diverse, small-scale production, workforce dispersion and thus a fragmentation of interests around which it is exceedingly difficult to construct a common agenda or collective identities (Portes, Castells, and Benton 1989, 31). The decline in labor-based and leftist parties and the adoption of neoliberal welfare regimes exacerbate these conditions. Neoliberal welfare regimes reinforce labor market stratification to the extent that they operate on the basis of individual capitalization and means testing rather than the principle of social solidarity. Without the organizational leadership of leftist parties, the popular sectors’ traditional allies, it becomes increasingly difficult to overcome this stratification and to build effective mass movements that can assert popular sector interests. Thus, the problem of marginality is related to the issue of collective action. The earlier literature on transitions and democratization paid insufficient attention to these issues, focusing instead on the role of elites in demobilizing civil society and in establishing new democratic institutions (Avritzer 2002, 32–35). From this perspective, Przeworski argued in regard to the establishment of new democratic regimes that, “[o]nce

Introduction / 3

political rights are sufficiently extensive to admit of conflicting interests, everything else follows” (1991, 10). Yet this position did not appear to be tenable in the Latin American context, given the persisting impact of authoritarianism and the ongoing negative impact of structural adjustment. On one hand, the persisting threat of authoritarianism, or at least its lingering influence, presented the problem of “reserved domains . . . areas of policy that elected government officials would like to control in order to assert governmental authority or carry out their programs, but are prevented from controlling by veiled or explicit menaces of a return to authoritarian rule” (J. S. Valenzuela 1992, 65). On the other, structural adjustment and the social dislocations it has produced have undermined the strength of traditional collective actors and the linkages they historically have maintained with political party allies and the state.1 Where such conditions prevail, candidates may assume office via democratic elections but the representativeness of the democratic process is compromised. In recognition of these problems, scholars began paying greater attention to the wide diversity of postauthoritarian regimes and the problems they pose for full democratization. In the process, however, they often erred either by “stretching” the concept of democracy, applying it to cases for which it was inappropriate, or by developing an enormous number of subtypes (Collier and Levitsky 1997, 430–431). More recently, scholars have begun to overcome this lack of conceptual clarity, and to bridge the divide that emerged in academic debate over procedural versus substantive notions of democracy, by shifting focus to democracy’s qualitative dimensions. O’Donnell (2004), for example, has expanded the debate from a narrow focus on the institutional structure of political regimes to a broader emphasis on the extent to which states ensure citizens’ rights and freedoms through enforcement of the rule of law. Similarly, Diamond and Morlino (2004) have advanced consideration of the quality of democracy by identifying and assessing key dimensions on which democracies vary, including, among others, participation, competition, and vertical and horizontal accountability. With regard to participation, they note that democratic quality is high when we in fact observe extensive citizen participation not only through voting but in the life of political parties and civil society organizations, in the discussion of public policy issues, in communicating with and demanding accountability from elected representatives, in monitoring official conduct, and in direct engagement with public issues at the local level. (2004, 22–23)

Rather than abandoning a minimal definition of democracy for a more substantive one,2 these authors have helped to advance scholarly debate by making the connection between the quality of democracy and its


durability, legitimacy, and likelihood of consolidation (Ibid., 20). From this perspective, participation can help strengthen democracy by building regime support among citizens through enhanced political accountability and representation. Yet, though the value of effective political participation may now be clear, the road to its realization in contemporary Latin America is not. Despite the emergence of democratic regimes across the region, scholars increasingly observe a contradiction between the expansion of democratic rights and freedoms and the rising economic hardship, social dislocation, and compromised capacity of subaltern groups to protect their interests under neoliberalism (Lechner 1998; Roberts 2002; Kurtz 2004; Weyland 2004). This research attempts to understand this contradiction through an in-depth look at the Chilean case. It builds upon previous research by articulating the connections among the transformation of the state’s linkage to civil society, the recasting of its political institutions and social policy, and the structure of political opportunity confronting the popular sectors. It emphasizes how changes in party-base linkage, the labor code, social welfare provision, and the structure of local government have not only exacerbated growing economic inequities but also undermined the popular sectors’ incentives and capacity for collective action. This analysis thus challenges the assumption prevalent in much of the political economy literature and promoted by advocates of market-oriented reform that the state under a market-based economy plays a minimal, if not neutral, role in structuring economic and political opportunities. Critics of state interventionist development models such as Olson (1965, 1982) and Krueger (1974, 1992) have argued that distributional coalitions promote state intervention to secure rents for themselves, which impedes economic efficiency and growth. It is on this basis that these critics advocate scaling back state intervention and expanding market liberalization. However, as Schamis (1999, 2002) and Teichman (2001) observe, economic and political elites have colluded in the process of market liberalization and state retrenchment in Latin America to create new market reserves and a new set of economic winners and losers. Control over the state and its policies has been central to this project. Given the significance of the state in shaping relations of power and influence, conflict in Latin America has often revolved around efforts by competing groups or class factions to control the state and shape its institutions to their ends. The transition from state-led to market-oriented development must be understood in this light. The adoption of neoliberal reforms throughout the region resulted from the failure of the previous development model (import substitution industrialization, ISI) to reconcile state functions in a manner that produced economic and political stability. Authoritarian regimes and reformist democratic governments, in

Introduction / 5

alliance with their supporters in civil society, engaged in efforts to change the nature of the state’s embeddedness or linkage to society. These efforts have, in turn, changed the balance of social forces in society and their relative influence on the state and its policies. Dominant groups in civil society have been able to translate their market power into political power by promoting the adoption of state policies and institutions that reinforce their economic interests (Schamis 1999, 2002). The growth of this relationship between private economic power and the state under neoliberalism in Latin America has erected substantial barriers to popular sector collective action, and thus influence, even in the context of democracy. Neoliberalism, Democracy, and the Chilean Case Study To understand the contradictions between neoliberal economics and democratic politics described above, we need to briefly consider the philosophical underpinnings of each of these forms of social organization as well as their practical implications. As suggested earlier, the guiding principle behind the pursuit of democracy is that government should be responsive and accountable to its citizens. Thus, although there exists a diversity of democratic regime types, generally speaking, citizens in such regimes are recognized to have a broad range of interests that they can share and pursue in common. Democratic competition therefore revolves around building winning electoral coalitions that will enable groups of citizens with shared interests to utilize the state apparatus to realize, protect, or promote these interests. In theory at least, this means that, “the people of a country acting through a democratic process, can decide collectively that goods other than those maximized by the market should be the goal of development” (Przeworski 1992, 53). From the neoliberal standpoint, the preceding depiction of democracy presents possibilities whose realization would not only be economically inefficient but also morally unjust. Economically, democratically sanctioned state intervention is inherently inefficient because, neoliberals assert, it corrupts the efficient allocation of resources that only market mechanisms can assure. Morally, the democratic principle of majority rule is unjust to the extent that it infringes upon or usurps the rights, particularly property rights, of private individuals. On this point, the comments of Friederich von Hayek, one of the intellectual progenitors of neoliberal philosophy and economics, are instructive: Agreement of a majority on how to distribute the spoils it can extort from a dissenting minority can hardly claim any moral sanction for its

6 / State, Market, and Democracy in Chile proceedings—even if it invokes the figment of “social justice” to defend it. What happens is that political necessity created by the existing institutional set-up produces non-viable or even destructive moral beliefs. Agreement by the majority on sharing the booty gained by overwhelming a minority of fellow citizens, or deciding how much is to be taken from them, is not democracy. At least it is not that ideal of democracy which has any moral justification. Democracy itself is not egalitarianism. But unlimited democracy is bound to become egalitarian. (Hayek as quoted in Nishiyama and Leube 1984, 357; italics in the original)

To prevent these potential negative consequences of democratic governance from occurring, the neoliberal prescription is simple and straightforward—severely limit the power of the state to intervene in the economy or usurp the rights of private individuals. In other words, according to the neoliberal view, the state should be subsidiary to the market, managing only those functions and responsibilities, such as national security and the administration of justice, which individuals or intermediate associations cannot manage on their own. If the state is structured in this way, the power of special interest groups (e.g., unions and other groups that represent the interests of the popular sectors) to extract redistributive concessions from the state and to thereby subvert the efficiency of the free market will be drastically curtailed. These conditions, in turn, will allow producers to produce “efficiently” and competitively and will minimize the fiscal and political pressures with which the state must contend. The appeal of these ideas to Latin American military leaders and economic and political elites who in one form or another have had to confront the failures of state interventionism—the overwhelming redistributive demands of the popular sectors, hyperinflation, and the related increase in political instability—is well documented. To one degree or another, Latin American government leaders and their right-wing supporters have over the past several decades relied on neoliberal ideas and strategies to restructure their respective states and economies. Since the implementation of such structural reforms has generally been related to political regime change, it seems appropriate to consider in what way and to what extent economic liberalization may have impinged upon or affected the process of democratic reform in Latin America. In assessing the quality of democracy in the region, in particular, we want to know how neoliberal reform has impacted on the political capabilities of the popular sectors. For both empirical and theoretical reasons, Chile is an excellent case to investigate this issue. Empirically, Chile stands out among Latin American cases as the country that has most extensively and most successfully dismantled the formerly dominant state-centric model of development and replaced it with a comprehensive set of market-oriented institutional and

Introduction / 7

policy reforms. Since by and large this metamorphosis from statism to neoliberalism was a precondition for Chile’s transition to democracy,3 the Chilean case presents a real test of the degree to which a market-oriented mode of development is compatible with the popular sectors’ political inclusion and participation. Research Design This research analyzes the popular sectors both from the perspective of their engagement in the labor market and on the basis of where they live, that is, the urban shantytowns or poblaciones surrounding Santiago. I chose this analytical approach for several strategic reasons. First, although in the past the urban marginal sector was thought of as a kind of third world lumpen proletariat (see the discussion of modernization and dependency versions of marginality theory in chapter 2), the class composition of shantytown populations is actually quite heterogeneous, including individuals affiliated with organized labor, those who work in the formal sector on a subcontractual basis, those who work in the informal sector, and those who are engaged in seasonal work and thus regularly migrate between urban and rural environments. What these individuals do not have in common in terms of their work experience, they share in terms of the marginal status of the living conditions in their communities. Out of this shared sense of material deprivation and territorial isolation develops their common identity as pobladores. Thus, examining Chile’s popular sectors on the basis of where they live provides insight into the political, social, and economic circumstances of as diverse a cross-section of Chile’s underprivileged as is possible. Second, the economic and political relevance of where the popular sectors live and consume has dramatically increased as a result of precipitous deindustrialization,4 the decimation of the organized labor movement, and the unprecedented increase in economic informalization and heterogeneity,5 all of which were brought about through a combination of authoritarian force and neoliberal restructuring. These radical transformations in the Chilean social structure have tended to shift the relative importance within the popular sectors “from the classes to the masses,”6 that is, from the organized labor movement to the more heterogeneous, less organized agglomeration of the popular sectors in the shantytowns. Despite the resuscitation of Chilean industry since the mid-1980s, this calculation continues to be valid since the labor movement remains weak and fragmented. Indeed, the persistence of repressive features of the labor code as well as the pervasive practice of subcontracting within industry,7 both originally established under the military regime, indicate the importance


of complementing an assessment of organization in the labor market with an examination of the organizational capabilities of the popular sectors from within the shantytowns. This importance is reinforced by the fact that for many within the popular sectors, the institutions of local government and social welfare provision provide their primary point of contact with the Chilean state and political system. Third, the popular sectors’ current political influence from within the shantytowns is of interest because of the key role the shantytowns have played in the evolution of Chilean politics over the past several decades. The political incorporation of the residents of the shantytowns played a key role in the populist political strategies of both the Frei and Allende governments, during the pinnacle of ISI expansionism that preceded the 1973 coup. As such, the denizens of the shantytowns were the target of intense efforts by incumbents to co-opt their support through corporatist policies and institutions. Ironically, these corporatist institutions and policies— prominent among them the neighborhood associations (juntas de vecinos) and governmental housing programs—established the institutional channels which, with the organizational assistance of center and left political parties, opened the way for an exponential increase in popular mobilization and demand making. Such popular political capacity and demand making helped to ignite right-wing fears that inspired the military coup. It was to be expected, then, given the threat that groups organized from within the shantytowns apparently posed to elite interests, that they would be among the most economically and politically repressed of all groups that suffered under the military regime. Paradoxically, under such extreme conditions of repression poblador organizations emerged with an unprecedented degree of unity and organizational autonomy both from political parties and the state (Oxhorn 1995). It was therefore the popular groups organized in the shantytowns that constituted the core of the resistance to the dictatorship. Such groups spearheaded the grassroots movement whose efforts were instrumental in reopening spaces in civil society for political organization and protest and initiating the drive toward redemocratization. Hence the central role played by these urban marginal groups as both victims of repression and protagonists of democracy presents us with a fourth and final reason for assessing the political capacity of the popular sectors under Chile’s new democracy. Have the popular sectors been incorporated into Chile’s new political system in a manner that will enable them to recuperate from the losses they suffered under the military regime or to fully share the benefits of democracy? The methodology constructed to address this question consists of four elements. The first element involves the assessment of the interrelationship between urban marginal groups and political parties. The second

Introduction / 9

is centered on an examination of the prevailing institutional channels through which popular groups can organize and participate in politics at the local level. And the third and fourth elements respectively focus on the structure of municipal government and the distribution and delivery of social welfare resources, particularly at the local level. I conducted extensive interviews in Santiago in 1993 (50), 2001 (25) and 2006 (25) to investigate each of these issues. Findings relevant to the first element of the research project were drawn primarily from two sets of interviews: one with upper echelon and midlevel leaders of all the major political parties and another with grassroots community leaders. The obvious intent behind conducting these interviews was to ascertain the nature of the relationship between the party system and the pobladores. With respect to party leaders, I interviewed individuals who were central committee members or otherwise situated within the upper echelons of the party hierarchy as well as party leaders in intermediate positions (e.g., municipal council members). In four out of the six cases, I was able to interview party leaders whose sole or primary responsibility was to coordinate party activities with respect to pobladores. In the other two cases (PPD, Partido Por Democracia and RN, Renovación Nacional), this was not possible since the parties in question did not have specific departments that were responsible for relations with pobladores. The interviews covered three main areas of inquiry: (1) the parties’ respective historical relationships with the urban marginal sector; (2) the parties’ respective positions or policies regarding political incorporation of the urban marginal sector; and (3) each party’s community involvement and/or grassroots organizational activities. The themes I discussed in interviews with grassroots leaders mirrored those I discussed in interviews with party elites and mid-level leaders. Thus I queried grassroots leaders about the historical relationship between their groups and/or communities and political parties, their attitudes toward and involvement with the political parties, and the nature and extent of party activity in their communities. The rationale for focusing research of party-base linkage on interviews with grassroots leaders as opposed to, for example, interviews with individuals randomly selected within the poblaciones, was founded on two considerations. First, even during the height of mobilization under the dictatorship, only about 15 percent of the marginalized were organized (Campero 1987, 260). Thus it was the minority of pobladores, who were organized, that made the marginal sector such a potent force in its challenge to the authoritarian regime’s legitimacy. Second, community interests and activities are most clearly articulated at the group level. It is at this level that collective identities are forged, policies and tactics shaped,


and practical actions undertaken. Thus I interviewed social leaders and informed representatives of popular groups to assess the position of their respective groups on integration into the formal political sphere. Although the decision to interview grassroots leaders was based on almost self-evident criteria, the choice of which communities to investigate and which leaders to interview was not as readily apparent, given the great diversity, quantity, and spatial separation of poblaciones and poblador groups that exist in Santiago. A solution to this problem was suggested by Cathy Schneider’s (1995) research on mobilization of poblaciones during the dictatorship. Through her investigations she was able to distinguish between three different types of communities based on their propensity to mobilize against the dictatorship. Low level mobilization poblaciones are those with no reported protest activity between 1983-1986. Sporadically mobilized poblaciones are those with a high level of protest (as measured by amount of newspaper coverage), but a limited range of activity on national protest days, and a low level of political activity between protests. Combative poblaciones are those poblaciones most often featured in the press, with the largest range of protest activity on national protest days. They are also the poblaciones that maintain the highest level of political activity between national protests, those considered to be most combative by both scholars and organizers. (Schneider 1995, 218, 222)

On the basis of Schneider’s categorization, I selected three distinct poblaciónes for investigation, one of each type she identified: (1) La Pincoya in the municipality of Huechuraba (northern Santiago)—a low level mobilization población; (2) Lo Hermida in the municipality of Peñalolen (eastern Santiago)—a sporadically mobilized población; and (3) Yungay in the municipality of La Granja (southern Santiago)—a combative población. In contrast to their differences in terms of mobilization during the dictatorship, these communities share much in common in terms of socioeconomic and demographic indicators. They have, in fact, been among the poorest and least developed in Metropolitan Santiago. The data compiled by Dockendorf (1990) illustrate this point well. According to this data, for example, the municipalities of La Granja, Peñalolen, and Huechuraba had among the highest rates of infant malnutrition and the poorest quality of health care in all of Metropolitan Santiago during the 1980s (Ibid., 108–109). During this period, these communities also had the greatest percentage of housing in poor condition, with Peñalolen and Huechuraba occupying first and third place respectively in this category (Ibid., 89–90). Not surprisingly, these communities also had among the highest rates of population density and lowest rates of industrial and commercial development (Ibid., 23, 74, 77). And equally unsurprisingly, these

Introduction / 11

municipalities had among the highest fiscal deficits and the worst income distributions among greater Santiago’s municipalities (Ibid., 196, 132–135). Investigating popular sector organizational activity in shantytowns in these municipalities, essentially the same in terms of demographic indicators but varied in terms of their level of mobilization during the dictatorship, established a basis for comparison from which could be derived general propositions about the level of popular sector organization and integration within the formal political system. In selecting interviewees in each of these communities, I employed the following criteria. First, in each comuna or municipality I interviewed at least one council member (concejal ) from the municipal council (consejo). Second, in each municipality I interviewed at least one representative from the community advisory council (CESCO, Consejo Economico y Social Comunal, established to advise the mayor of each municipality on the interests and concerns of different segments of the community). Third, in each población I interviewed group leaders from functional organizations such as popular education groups, sports clubs, and cultural associations, as well as territorial organizations, namely the neighborhood associations (juntas de vecinos). And finally, in each población investigated, I interviewed community leaders responsible for the administration of local housing committees, as well as randomly selected applicants for state housing subsidies. As discussed in chapter 6, the distribution of housing resources has historically been one of the issues of greatest contention between the urban marginal sector and the Chilean state. The populist policies pursued by the Frei and Allende governments increased popular expectations that the state would satisfy burgeoning public demand for low-cost housing while they simultaneously strengthened the capability of popular groups to press the government to meet these growing expectations. Having recognized how existing social welfare policy facilitated collective action on the part of the popular sectors, neoliberal technocrats in the Pinochet regime were intent on restructuring the administration of housing and other welfare subsidies in a manner that would subvert this facilitation. Interviews with leaders of neighborhood housing committees and participants in state-sponsored housing programs were intended to determine whether the Pinochet regime had achieved its objective or whether redemocratization had in some way negated or mitigated the impact of neoliberal welfare reform. Similarly, interviews with municipal government officials and leaders of territorial associations were designed to assess the extent to which formal institutional channels, whose functioning had been either manipulated from above or entirely shut down during the dictatorship, had been reestablished in a manner once again conducive to popular participation.


Research Findings and Structure of the Analysis As subsequent chapters demonstrate, this study reveals substantial institutional impediments to the incorporation and participation of the popular sectors. Comparison among the three communities investigated revealed no significant differences in this regard. Thus, these findings paint a profoundly negative picture of the popular sectors’ capacity for effective political participation under Chile’s new democracy. Whatever unity existed among poblador organizations before the transition to democracy has all but disappeared, as have many of the poblador organizations. Among the still active organizations with which I came into contact, no significant linkages with political parties have been established other than what appear to be purely clientelistic ties. What’s more, present institutional arrangements militate against the incorporation and efficacy of autonomously organized grassroots organizations. And as was evident in the administration of housing subsidies, these antiparticipatory patterns are reinforced by the mode of welfare distribution, largely unchanged from the system instituted under the military regime, which encourages competition, divisiveness, and individualism rather than unity and collective action. At a more general level of analysis, this research points to a number of other important patterns observed in the Chilean case that lend understanding to popular sector organization and participation in Latin America more broadly.8 With respect to labor reform and the structure of labor markets, this study indicates that the interaction between economic liberalization and labor code reform increases workers’ vulnerability to market forces at the same time that it stratifies them on the basis of their individual economic means. While employers benefit from these circumstances by being able to make use of labor more flexibly—hiring and firing according to market demand—workers find themselves in increasingly precarious circumstances that limit their capacity to identify common interests and work together to protect them. Additionally, this research demonstrates how market-oriented social welfare reform exacerbates such labor market conditions. It does this by (1) articulating how distinct welfare regime types (social democratic, corporatist, and liberal) provide different incentives and opportunities for collective action among the popular sectors; and (2) demonstrating how liberal welfare regimes such as Chile’s undermine the popular sectors’ capacity for concerted political action through stratified assignment and delivery of social welfare resources. Along the same lines, this study suggests how state and economic reform in accordance with market principles affect linkages between political

Introduction / 13

parties and their popular sector constituents. In short, this analysis suggests that with drastically reduced state resources at their disposal and with concerns about market stability preeminent, political parties will refrain from the common practice under ISI of organizing and inciting grassroots constituents to place ever-increasing demands upon the state. In an open market, producers cannot pass along the cost of increased wages and benefits to consumers without suffering a loss in competitiveness. Moreover, the public’s ability to demand increasing social welfare resources from the state may ignite inflationary pressures and make private investors reluctant to invest. This study demonstrates that under such circumstances, politicians and state managers will attempt to keep political participation, and the social demands it generates, at a minimum. Finally, this study contributes to our understanding of the relationship between decentralization and democracy. It does so, in part, by qualifying the claims made by advocates of decentralization—particularly public choice theorists and key development institutions such as the World Bank and the Inter-American Development Bank—who argue that decentralization fortifies democracy at the local level by making local government more autonomous from national control, more accountable to local populations, and more efficient in the distribution of goods and services. These advocates fail to distinguish adequately among different forms of decentralization, that is, administrative, political, and economic. Consequently, they fail to recognize that decentralization can actually be used to diminish local economic and political control. As explained in detail in chapter 5, when the transfer to local governments for the administrative responsibility of services traditionally controlled by the central government is not accompanied by a commensurate devolution in policymaking authority or control over resources for local leaders, decentralization is likely to magnify the spatial segregation and fiscal dependence of the poorest communities on the central government. In turn, such spatial segregation and fiscal dependence will enhance the central government’s ability to manipulate and control local populations rather than heightening their ability to make local politicians responsive to their concerns. Under such circumstances, citizens will have little incentive to participate in local government and will generally remain alienated from the political system. The analysis substantiating this argument is structured as follows: chapter 2 presents a critique of theories postulated to explain popular sector collective action in Latin America. Subsequent to this critique, it presents an alternative understanding that emphasizes the state’s role in promoting or impeding popular sector collective action. Chapter 3 evaluates the manner in which the Pinochet regime restructured the relationship between business, labor, and the state in accordance with neoliberal principles.


It notes the ways in which the ruling Concertación has perpetuated this restructured relationship among business, labor, and the state and assesses its impact on the organizational capabilities of the Chilean labor movement and workers in general. In this regard, the chapter demonstrates that while business associations and the economic interests they represent have maintained the privileged economic position and policymaking leverage with state officials that they established during the military regime, high levels of commodification, stratification, and economic inequality persist among workers, and the labor movement remains severely weakened relative to its pre-coup strength. Chapter 4 examines how the structural and institutional reforms associated with the adoption of neoliberalism in Chile have affected the mode of linkage between the parties of the center and left and the popular sectors. It articulates how market-oriented reform, party renovation, and the institutional constraints that have accompanied Chile’s democratic transition have operated in synergistic fashion to severely restrict the political representation of the popular sectors in the political arena. Chapter 5 assesses the extent to which the structure and organization of municipal government in Chile facilitates the popular sectors’ participation in local politics. It concludes that structural reforms severely constrain local leaders’ resources as well as their policymaking prerogatives, thereby undermining incentives for popular participation. In addition, it finds that institutional arrangements limit public officials’ accountability to their constituents and severely circumscribe opportunities for citizen input in decision making, creating a vicious cycle of low levels of popular participation and limited accountability. Chapter 6 considers the impact market-oriented social welfare reform has had on the organization and capacity for collective action among the popular sectors. It reveals that reform of Chile’s social welfare regime reinforces the inequities and stratification that neoliberal reforms have produced in the labor market, weakens social capital, and imposes substantial impediments to collective action among the most vulnerable, and finally, reinforces the concentration of corporate power, both political and economic. Through examination of the Argentine and Mexican cases, chapters 7 and 8 respectively consider the extent to which the negative impact of neoliberalism on popular sector organization and participation in Chile manifests itself in other Latin American countries that have undergone substantial neoliberal reform. Drawing upon the findings revealed in these case studies coupled with those drawn from the Chilean case study, chapter 9 develops a comparative analysis of the three cases. This analysis identifies a number of important areas in which these cases differ: (1) the timing of reform (pre- or postauthoritarian); (2) regime legacies—for

Introduction / 15

example, the extent to which key social actors such as organized labor are tied to dominant political parties; and (3) the level of party competition and the nature of party ideology. Despite differences in these three key areas, and the resulting differences in state-society relations, examination of these cases reveals neoliberal economic reform’s pervasive negative impact on popular sector organization and political opportunity in these nascent democratic regimes. Across all three cases, we see a decline in unionization and collective bargaining, the increased flexibilization of labor contracts along with increased informality and the attendant fragmentation of the labor movement, and substantial stratification in welfare coverage. The transformation of historically labor-based parties in Argentina and Mexico as well as center-left parties in Chile has compounded the impact of these social and economic reforms, leaving the popular sectors without strong and dependable party allies to represent their interests in the political arena. This comparative analysis suggests, then, that the association between neoliberalism and democracy in Chile, Argentina, and Mexico has not been a virtuous one when viewed from the perspective of the popular sectors’ capacity for organization and concerted action. In the final analysis, neoliberal reforms have intensified commodification and stratification among the popular sectors, undermining their collective strength and incentives for concerted action. As a result, their ability to hold public officials accountable and to compel them to represent their interests is compromised.


Ch a p t e r Two Th e Stat e i n Soc i e t y: Conc e p t ua l i z i ng Coll ec t i v e Ac t ion a n d Pop u l a r Pa rt ic i pat ion i n L at i n A m e r ic a

Introduction Over the past several decades, scholars have produced a voluminous amount of research addressing the issue of collective action on the part of subaltern groups in Latin America and other regions across the globe. Significant diversity in research agendas and theoretical and methodological approaches continue to exist among those engaging in such research. Yet, increasingly, consensus has emerged over the dynamic interrelationship between the state and civil society in shaping the propensity and capacity for political participation and collective action, particularly among historically excluded segments of the population (McAdam, Tarrow, and Tilly 1997). Historical events and empirical research have steadily eroded the plausibility of theories and conceptual frameworks that posit some sort of rigid dichotomy between state and society, modern and traditional social sectors, or capitalist and precapitalist economic sectors. Thus, for example, recent research on political economy in Latin America counters the notion of the state’s neutrality in the context of a market economy as suggested by proponents of neoliberal reform (e.g., Krueger 1974, 1992; Olson 1965, 1982; Williamson 1990). Critics of the neoliberal perspective suggest instead that powerful economic forces in civil society are able to shape state institutions and policies to their ends (Schamis 1999, 2002; Teichman 2001). Similarly, while much of the early literature on new social movements (NSMs) eschewed consideration of structural and institutional constraints in favor of emphasis on the autonomous development of culture (Evers 1985; Laclau and Mouffe 1985; Slater 1985), more recently, analysts have begun to consider the interrelationships among state institutions, economic structures, and the development


of culture and social movements in civil society (Schild 1998; Slater 1994, 1998). Likewise, researchers engaged in the study of social capital have challenged earlier presumptions that such capital develops in civil society outside the realm of state influence or control. They have documented ways in which state intervention has either greatly facilitated or impeded the development of social capital. They have also identified conditions under which states and actors in civil society can work together in synergistic fashion to generate effective development outcomes (Evans 1996a; Fox 1995, 1996; Fox and Gershman 2000; Heller 1996; Ostrom 1996; Kumlin and Rothstein 2005). This chapter draws upon such insights with an eye toward articulating a conceptual framework by which to understand the impediments neoliberal reform presents to popular sector political participation and collective action in present-day Latin America. Contrary to conceptualizations that view the state as more or less autonomous or separate from civil society, this analysis views the state as both a reflection of power and resource disparities in civil society and a prime agent in the construction of such disparities. In other words, it views states as embedded in a set of social relations which shape state structure and policies. In turn, state institutional structures and policies have a formative impact on the structure and organization of civil society, shaping the capacity and propensity for collective action among various segments of the population (Evans 1995, 12–13, 1996; Migdal 2001).1 In other words, embeddedness shapes state structure and policies, which in turn shape the structure of political opportunities for various actors in civil society. The essential argument of this work is founded upon an understanding of these interrelationships in the Chilean case. It asserts that the military regime’s radical restructuring of the Chilean state, imposed during its nearly seventeen years in power and bequeathed to its democratic successor in 1990, transformed the state’s linkage to (or embeddedness in) civil society in a manner that gave the proponents and beneficiaries of neoliberal reform a privileged position in shaping state structure and policy. These neoliberal proponents thus were able to adopt reforms that not only reinforced their economic and political privileges but also simultaneously severely weakened the capacity and propensity of the most disadvantaged in Chilean society to engage in political participation and collective action. As a result, these less fortunate citizens are handicapped in their ability to hold political leaders accountable and thus to improve their life chances through effective use of the political process. To the extent that this is the case, the quality of Chilean democracy is seriously compromised. To substantiate this argument, it will be necessary to establish conceptually the interrelationships among state embeddedness, state structure and

The State in Society / 19

policy, and the structure of political opportunity for diverse and competing actors in civil society. The first step in accomplishing this goal is to critically examine competing arguments regarding the relationship between the state and civil society and the factors that facilitate or impede popular sector political participation and collective action. Thus the sections from “Marginality and Modernization Theory” through the section on “State Embeddedness and Political Opportunity” trace the evolution of thinking on these issues, from modernization and dependency theory, to work on the informal economy and new social movements, to more recent work on political economy and social capital. This analysis reveals the shortcomings in theoretical approaches that do not recognize the fundamental interrelationship between the state and civil society. On the basis of this critique, the section on “State Embeddedness and Political Opportunity” more fully articulates the alternative framework for understanding popular sector collective action adumbrated above and indicates its relevance to the analysis developed in subsequent chapters. Marginality and Modernization Theory Many of the original theories of popular sector participation and collective action in Latin America were essentially theories of marginality. The historical emergence and content of such theories are best understood as a reaction to the increases in size and power of the popular sectors that occurred in many parts of Latin America after the onset of the Great Depression. The pattern of development that ensued in the wake of the Great Depression encouraged the growth of the Latin American working classes and of popular class consciousness in several ways. First, the Depression provided the impetus for the initiation of import substitution industrialization (ISI) throughout the region as a means of compensating for reduced trade opportunities with the core countries. As a consequence, state intervention in the economy generally increased, as did job opportunities in the industrial sector. Second, the increasing ranks of the industrial working class resulting from ISI drew upon the ideas of European socialism and the example of the Soviet Union to bolster their sense of solidarity and to increase their effective opposition vis-à-vis the dominant classes. Third, the modernization of agricultural production in the countryside in the postwar period, and the resultant loss of rural jobs, initiated an unprecedented urban migration, which was accompanied by increased political mobilization and a dramatically increased number of actual and potential members of the working class. Finally, the combined effect of these various factors on the strength of subordinate class unity and opposition was intensified by the ascendance of the United States to economic


and political hegemony in the region and the ties that local elites developed with the new hegemon. The subordinate classes’ growing awareness of the linkages between domestic and North American elites and their own exploitation gave them common and easily targeted class enemies against which to rally. Faced with new threats from below, the dominant classes had to find new means to establish their legitimacy and to protect their privileged social position. Functionalist social science served their purposes well, helping to define and to diagnose marginality, and ultimately to prescribe its remedies. According to functionalism’s precepts, every social structure is based on a set of shared values among its members. The commonality of values presumably serves to regulate individual and group behavior, thereby establishing and sustaining societal equilibrium. “The ‘marginals’ in this case are defined as permanently outside of the society since they do not participate in the shared values which are the definition of society itself ” (Perlman 1976, 245). The archetype of this form of argument was found in Max Weber’s The Protestant Ethic and the Spirit of Capitalism (1930). Drawing upon Weber’s analysis, researchers surmised that if the Calvinist ethic had served as the driving force behind the spectacular growth and development of modern capitalism, then what was lacking in underdeveloped societies, and in the less developed segments of advanced societies was a similar set of values and cultural norms necessary for the achievement of economic, political, and social progress. Thus emerged the traditional/modern dichotomy, which imputed responsibility for inequality to the cultural, ethical, or psychological backwardness of the disadvantaged. Even those who were highly sympathetic to the plight of the disadvantaged interpreted inequality in this manner. For example, anthropologist Oscar Lewis argued that it was the “culture of poverty” and not poverty itself that was the source of deprivation and social isolation of society’s disadvantaged (1966, 70–73). Samuel Huntington took Lewis’ analysis one step further, arguing that the marginalized would inevitably become radicalized and revolutionary, threatening the stability and development of those societies from whose benefits they were excluded (1968, 281). On the basis of these projections, Huntington suggests the necessity of repression and exclusion of the popular sectors until the political institutions of a given third world society are sufficiently developed to withstand the destabilizing impact of popular mobilization. Ultimately, however, Huntington concluded that the stability and development of any society struggling to modernize will depend, not on the exclusion of the popular sectors, but upon their organization and incorporation into a stable and coherent institutional framework (Ibid., 461).


Many analysts who shared Huntington’s preoccupations considered increased popular participation an essential strategy to combat marginality and to preempt the growth of radicalism in the popular sectors. Prominent among them was Gino Germani, a Harvard-educated Argentine sociologist, who argued that marginality results from the uneven transition of traditional societies to modernity, or industrial society. An “asynchronous” or uneven process of development produces the coexistence of traditional and modern attitudes, values, beliefs, behaviors, institutions, social categories, regions, and so on (Germani 1980, 49). As a consequence of this uneven process of development, some traditional elements of society are left behind and do not participate in, nor benefit from, modernization. Thus some individuals, groups, and regions become marginalized (Kay 1989, 92). The remedy for such social inequity was implicit in Germani’s diagnosis—social, economic, and political participation must be engendered among the popular sectors to inculcate in them modern values and behaviors. They will thereby be enabled to overcome their marginal status. The message proved to be a powerful one to Latin American elites and policymakers looking for effective means to counter the political advance of communism in the region and the threat of revolution that it portended. The extent to which marginality theory was utilized for such purposes is most dramatically exemplified by the work of DESAL (Centro para el Desarollo Económico y Social de América Latina), established and directed by a Belgian Jesuit priest, Roger Vekemans, in Santiago, Chile in the 1960s. It was DESAL’s mission, with Vekemans as its leader, to intellectually bolster the Christian Democratic party and thus to help provide a counterweight for economic elites to the growing challenges from below.2 The developmentalist ideology that Vekemans and his colleagues propagated characterized the marginalized as lacking the psychological and psychosocial attributes for participating in modern society (Vekemans, Giusti, and Silva 1970, 71). The marginalized, in other words, are alleged to be victims of their own backwardness. Since they live outside the margins of modern society and lack the psychosocial capabilities to integrate themselves into the mainstream, they have to be incorporated through a process of asistencialismo or the application of social assistance policies. It is assumed that by directing social services toward the betterment of their living standards, the marginalized will become passive participants in society, and that as their living standards and levels of education gradually improve, their passive participation will evolve into active participation. In this manner, they will overcome their marginal status and become full citizens, capable of enjoying all the benefits and assuming all the responsibilities of modern life.


Chile’s 1964 presidential election provided a unique opportunity to test the theories and policies advocated by DESAL. The organization was closely associated with the election winner, the reformist Christian Democratic government of President Eduardo Frei. Once in office, Frei’s government established the National Council for Popular Promotion (Consejo Nacional de Promoción Popular), which was staffed by DESAL members. Their project was to create and coordinate social assistance programs aimed at integrating marginal groups. Apart from implementing policies such as raising the minimum wage and promoting self-help housing schemes, the government encouraged shantytown dwellers to set up neighborhood associations (juntas de vecinos) and cooperative organizations for mothers (centros de madres) (Kay 1989, 97). In retrospect, these programs are best understood as part of a larger project by the government to stave off what it perceived as a revolutionary threat from below by organizing the popular sectors into corporatist associations to be controlled by the state. Yet, despite the sophistication of the programs and the support of the Alliance for Progress, the Christian Democrats’ efforts to co-opt the popular sectors produced unanticipated and unwanted results. Rather than mollify those who were supposedly predisposed toward radicalism and revolution, government policies and programs aimed at co-optation often facilitated the increased political awareness and cohesion among individuals and groups who previously had little or no political inclinations or experience. Indeed, there was little overt political activity within the Chilean popular sectors, to say nothing of radicalism or a predisposition toward revolution, until several conditions had been met: (1) the state had established institutional channels through which the popular sectors could transmit their demands; (2) it had indicated some willingness to meet such demands; and (3) the political parties of the left and center began to engage in intense efforts to organize and mobilize the popular sectors. As empirical research was to demonstrate, “[i]n the absence of both external mobilization efforts and perceptions of governmental receptivity to non-parochial, ‘class-based’ or cross-community demand making, the potential for such activity among the migrant poor will remain very low” (Cornelius 1974, 1146). The claims of those who espoused functionalist or culturalist explanations of marginality thus found little support in objective circumstances. The popular sectors demonstrated little, if any, proclivity towards radicalism, even under conditions of extreme deprivation. Their direct involvement in demand making and other forms of overt political activity was conditioned by factors largely external to their immediate circumstances such as the desire of elites to co-opt popular sector support or to preempt


popular opposition. Consequently, the extent to which the popular sectors demonstrated reluctance to involve themselves in the formal political system was due not to their adherence to retrograde or antisocial values and norms, nor to their irrationality. Rather, empirical studies would show, it was indicative of their keen awareness of the limitations the status quo imposed upon them.3 Dependency and Informal Economy Perspectives Critics who attacked conceptualizations such as those advocated by DESAL and Germani argued that one of the modernization paradigm’s most egregious shortcomings was its failure to recognize society’s class character. From the dependency perspective, class structure and class conflict were at the heart of marginality. However, the dependency perspective did not always transcend the criticisms it leveled at other theories. In particular, though dependentistas argued that marginality was the product of a particular manner of social integration and participation—rather than nonintegration or nonparticipation as suggested by modernization theory—they were generally unable to articulate the precise mechanisms by which such integration took place. For example, Peruvian sociologist Anibal Quijano posited the existence of a “marginal pole,” which refers to a level of the economy, “whose relevance to the productive necessities of the key sectors of the system is almost insignificant, and is in this precise sense ‘marginal’ ” (1977, 124; author’s translation). Similarly, Argentine political scientist and sociologist José Nun (1969) espoused the notion of a “marginal mass,” a segment of labor that will never be absorbed into the dominant sectors of the capitalist economy. Thus dependentistas such as Nun and Quijano replicated the dualist logic that pervaded the modernization literature, substituting a marginal/capitalist dichotomy for modernization’s traditional/modern dichotomy. Indeed, the views of dependency theorists such as Nun and Quijano and modernization theorists such as Germani coalesced around the assumption that the marginal sectors engage in stagnant precapitalist economic activities that make a minimal, if not negative, contribution to capital. However, other dependency theory proponents rejected this dualist logic, asserting instead the integral relationship between so-called traditional and modern or capitalist and noncapitalist segments of society. Cardoso and Faletto (1979), for example, asserted that economic and social relations are fundamentally intertwined, the implication being that dominant economic actors exploit subordinate classes through political and institutional means. In their words, “An economic class or group tries to establish through the political process a system of social relations


that permits it to impose on the entire society a social form of production akin to its own interests” (Ibid., 15). Accordingly, subordinate classes are not excluded from capitalist development but made subordinate within it through both economic and political means. Research on the informal economy supported this notion of linkage between the supposedly backward segments of the traditional economy and the modern, capitalist economy. Rather than reflecting the spread into urban areas of traditional subsistence activities, informal labor and enterprises were discovered to be closely articulated with modern, capitalist firms (Hart 1973; Kowarick 1979; Portes 1978). As Portes and Walton observed, “such activities do not generally correspond to traditional subsistence production, but embody continuously changing requirements and opportunities in the ‘modern’ economy’ ” (1981, 81). As such, the abundant labor in the formal sector does not depress wages in the manner originally postulated by dependency theories of marginality. Although wages of formal sector workers in developing countries continue to be lower than those in developed countries, they have not been forced to the level of subsistence. Instead, the gap between the wages of workers in the formal and informal sectors, or between more and less productive sectors of the economy, has tended to increase. Some analysts explain the less than expected impact of surplus labor on formal sector wages by citing the interest of dominant sector firms in maintaining a stable work force, for which they are presumably willing to pay higher wages (Tokman 1989). Other analysts, however, emphasize the impact of union activity and labor and social welfare legislation, which secures for formal sector employees advantages generally not available to those who work in the informal sector, their work being, by definition, unregulated and unprotected by the state (Mesa-Lago 1978). These two explanations are not, of course, mutually exclusive. Nonetheless, it bears mentioning that the economic and social policies implemented by Latin American authoritarian regimes from the 1960s through the 1980s, and the severe repression these regimes utilized to implement such policies, were aimed at decimating the collective bargaining power of trade unions and rolling back the social welfare concessions that organized labor had wrested from the state through generations of struggle. Efforts by authoritarian regimes to terminate or drastically curtail these benefits indicate the importance they have played in maintaining the privileged economic position of organized labor vis-à-vis the informal sector. The central role the state has played in these struggles points to its primacy in shaping economic and political outcomes. By articulating the manner in which state policies have served to structure differential earnings between the formal and informal sectors, for


example, the study of the informal economy has indicated the manner in which the economic interests of dominant groups are translated into policy outcomes that are clearly to the disadvantage of those who are not protected by the state. In an environment of increasing international economic competition, state policies have enabled firms to pursue cost reduction through increasing reliance on subcontracted or informal sector workers, thereby circumventing the control of organized labor. Capital profits from the employment of informal labor not only by avoiding payment of indirect wages in the form of social benefits, but also by skirting state-imposed restrictions on hiring and dismissal, such restrictions being applicable and enforceable only in the formal sector (Portes et al. 1989, 30). Accordingly, those who work in the informal sector are not excluded from participation in the modern economy, as many dependency and modernization theorists previously argued. Rather, they are excluded from the benefits and protections typically associated with employment in the “modern” economy’s formal sector. The structuralist approach to the study of the informal economy articulates the interrelationship between the formal and informal sectors, and in the process, directs our attention to the mediating role of the state in structuring social and economic relations. However, the development theories that have received the most attention in recent years—those focused on new social movements (NSMs), market-oriented reform (the Washington Consensus), or the development of social capital—initially rejected this notion. Like modernization and dependency theory of old, they articulated instead culturalist or economistic explanations of the means by which development takes place and the marginalized can come to enjoy the benefits of modern society. Yet, as historical events and empirical research have demonstrated these earlier formulations to be untenable, analysts working within these various theoretical and methodological frameworks have increasingly begun to recognize the role the state plays in either promoting or impeding social and economic development. New Social Movements This evolution is clearly evident in the NSMs literature. The primary tendency in the early NSMs literature was to counterpose the state against civil society, and to theorize civil society as sufficiently autonomous for the achievement of social and cultural democracy. The common denominator among all these movements, according to Laclau and Mouffe, is their “differentiation from workers’ struggles, considered as ‘class’ struggles” (1985, 159). The radical democratic potential that many analysts originally attributed to them was to be found in the increasing autonomization


of the multiple spheres out of which they emerged. Confronting the status quo with a “plurality of concrete demands” would lead to a “proliferation of political spaces” and a “radically open and indeterminate view of society” (Ibid., 41, 39). Constructing alternative discourses would help to subvert and offer a more humane alternative to the power structures which dominate society (Evers 1985, 48–49). Unfortunately for those whose interests are at stake, such optimistic appraisals have not been validated by tangible historical results. Indeed, as Ruth Cardoso observed, “[t]he hope that popular groups would unite and expand throughout urban areas can no longer be sustained. Hence, the assumption that these organizations . . . [are] capable of renewing the entire political system has also become untenable . . . .In fact, the growth of social movements was actually not as extensive as initially envisioned” (1992, 292). Only by exaggerating the autonomy of spheres within which NSMs have emerged (and more and more frequently, disappeared) could the democratizing potential of these movements have been so grossly overestimated. And only by erroneously correlating the diminished strength of the working class with a presumed reduction in the importance of economic and institutional constraints in structuring social organization could postmodern analyses have so exaggerated the so-called autonomy of spheres. If anything, the increased heterogeneity of the work force and the diminished strength of organized labor, both consequences of economic and institutional restructuring, have made it exceedingly more difficult for the popular sectors in Latin America to mount a unified opposition to oppressive economic and social conditions. Because the early NSMs literature paid insufficient attention to the instrumental or material interests that inspired movement formation, it neglected to consider how the movements might express such interests through formal institutional channels and linkages with political parties. In Willem Assies’ view, “[t]he problem is not only to guarantee the autonomy of civil society itself but to raise the question of democratic control of the state” (1994, 86–87). The state must therefore be understood, not in purely essentialist terms as the realm of bourgeois domination, but as a more fluid set of institutional arenas within which organized groups can pursue collective interests. Many theorists who previously emphasized the primacy of civil society and the need for movement autonomy now appear more disposed to such an understanding of state/society relations. As David Slater acknowledges, “From a perspective which seemed to have rediscovered civil society we are now moving back to the trenches and ramparts of institutionalized powers. This . . . means that movements in society are more closely connected to the constraints and influences of the political system” (1994, 6).


The Political Economy and Social Capital Perspectives Like the proponents of NSMs, advocates of market-based reform and social capital have begun to see the development process in terms that emphasize the role of the state in promoting participation. Despite this innovation, however, the tendency has been in much of the political economy literature and research on social capital to conceptualize the state in a manner that fails to capture its status as both a reflection of power and resource disparities in civil society and a prime agent in the construction of such disparities. Moreover, like modernization theory, neither the political economy literature nor the literature on social capital adequately considers how economic liberalization can negatively impact national development and the organization and potential for collective action of disadvantaged segments of the population. Instead, the tendency is to cast development in terms of how domestic institutions can be reformed in such a way as to improve the developing nation’s delivery of public goods and participation in the international economy. The role of state agencies and collaborating nongovernmental organizations is to make institutions more efficient and to include target groups in the development process. This understanding assumes that the marginalized can be empowered without seriously threatening the status quo, an assumption which, given the historical record of political exclusion and repression in Latin American, is highly questionable. The pervasiveness of this assumption within the development community is not surprising when we consider the notion of the relationship between state and economy prevalent among market reformers. The proponents of neoliberal reform have argued that rent seeking and economic inefficiency go hand in hand with government intervention (Buchanan 1980; Krueger 1974, 1992; Olson 1965, 1982; Williamson 1990). Therefore, to limit rent seeking, corruption and inefficiency, government intervention in the economy should be limited. Doing so will limit the ability of distributional coalitions4 to utilize state policies to protect their market interests at the expense of the rest of society. Curiously, however, this approach never considers the possibility that similar distributional coalitions might organize to induce governments to withdraw from the economy so that they might gain directly from liberalization at the expense of other segments of society (Schamis 1999, 240, 2002). Rather, Haggard and Kaufman (1992, 1995), Bates and Krueger (1993), Williamson (1994), and others who study the “politics of economic adjustment” contend that because liberalization diffuses economic benefits and concentrates economic costs, market reform can only be carried


out by policymaking elites insulated from political pressures. Implicit in this conceptualization is the notion of the state’s autonomy, if not political neutrality. We are led to believe that when the state adopts marketoriented reforms, it does so in spite of substantial resistance from interest groups that stand to suffer economically, such as domestic producers and organized labor, and more importantly, without commensurate inducements to or pressures from potential beneficiaries of economic liberalization such as export-oriented producers. This same notion of the state’s autonomy and neutrality is apparent even in instances in which the mainstream development community has recommended greater state intervention. Originally, the neoliberal perspective touted by the proponents of the Washington Consensus posited economic growth in civil society as the catalyst for political and social development. The Washington Consensus considered the state relevant only to the extent that its putative minimal role in a market economy would avoid problems such as rent seeking and corruption associated with Latin America’s previously dominant economic model, ISI. As such, “getting the prices right” through the adoption of appropriate structural reforms and legal protections for private property was expected to be sufficient to spur growth, and ultimately, political and social development.5 The failure of this orthodox neoliberal approach to produce the results anticipated has led policymakers and international financial institutions such as the World Bank to adopt a more nuanced approach to development focused on the cultivation of social capital. The concept of social capital, as popularized by Robert Putnam, refers to “features of social organization, such as trust, norms, and networks that can improve efficiency of society by facilitating coordinated actions” (1993, 167). In his highly acclaimed book, Making Democracy Work (1993), Putnam argues that the dramatic differences between northern and southern Italy are the result of the two regions’ substantially divergent levels of social capital. According to Putnam, “Collaboration, mutual assistance, civic obligation, and even trust . . . were the distinguishing features in the North. The chief virtue of the South, by contrast, was the imposition of hierarchy and order on latent anarchy” (1993, 130). These marked differences in social capital, which originate in the late medieval period, presumably explain the divergent trajectories of northern and southern Italy in terms of the development of democracy and good governance. In short, the North evolves along a path that leads to good governance and strong democracy, while the South’s trajectory leads to instability, corruption, and weak democracy. We can explain their divergent development paths on the basis of the North’s high, and the South’s low, levels of social capital.


There are a number of significant problems with this analysis, among the most egregious of which is Putnam’s selective reading of Italian history. In the words of Sidney Tarrow, [H]is image of the late-medieval northern city-state as a paragon of civic republicanism is telescopic, to say the least. That the early Italian citystates had associational origins did not make them inherently civic, or even “horizontal.” After a short period as voluntary associations, most of them produced closed urban oligarchies, fought constantly over territory and markets, and left the urban poor vertically compromised. (Tarrow 1996, 391)

Tarrow points out that Putnam provides no defensible basis, either theoretical or empirical, for attempting to explain the northern regions’ civic superiority over the South on the basis of the brief appearance of republican governments in some northern Italian cities approximately 800 years ago. More importantly, he ignores “the effect of the pattern of state building on indigenous civic capacity” (Ibid.). In this regard, Tarrow points out that every regime that governed southern Italy from the twelfth century until national unification in 1861 “governed with a logic of colonial exploitation” (Ibid.). Furthermore, the North continued to dominate the South even after unification. Yet, Putnam’s analysis does not incorporate the role of the state as an independent variable in the successful or failed development of social capital. Instead, “the state is external to the model, suffering the results of the region’s associational incapacity but with no responsibility for producing it” (Ibid., 392).6 This mode of reasoning is strikingly similar to the functionalist understandings of development postulated by Max Weber in the early 1900s and modernization theorists of the 1960s and 1970s such as Germani. As a consequence, Putnam’s notion of social capital lends itself to culturalist, ethnocentric understandings of development, according to which underdeveloped societies can advance toward development only by adopting the norms and practices of the more advanced societies.7 Such reasoning ignores the vital role of the state in structuring power relations and life chances among competing groups in society. It also ignores the ways in which those who control the state can utilize policies and programs to structure the organization of civil society and the potential for political participation and collective action. The World Bank’s notion of social capital is similar to Putnam’s and thus fraught with similar problems.8 As previously mentioned, the notion of social capital emerged as an important element in the World Bank’s thinking regarding development in the early 1990s as it became increasingly apparent that market reforms were failing to produce increased economic growth and reduced levels of poverty and income inequality


(Bebbington et al. 2004; Fine 1999; Korzeniewicz and Smith 2000). Rather than jettison emphasis on structural adjustment, advocates within the Bank searched for a way to demonstrate that economic liberalization and globalization were still beneficial for the poor. It was under these circumstances that the notion of social capital was incorporated into the Bank’s development lexicon and practice. Accordingly, the dominant view that emerged within the Bank was that the “function of social capital is to create efficient and equitable exchange and service provisions” (Francis as quoted in Bebbington et al. 2004, 40). This understanding reflected the trend within economics to incorporate insights from microeconomics to help explain and address macroeconomic problems. As such, the focus on social factors that either impede or facilitate the workings of the market meant that social relations had now been effectively “endogenized” as part of macroeconomics. While the emphasis on state intervention to rectify market imperfections was not new to proponents of structural adjustment, the emphasis on improving social interactions among target populations to facilitate the efficient functioning of the market was (Fine 1999, 2). It is important to stress that the Bank’s newfound focus on state intervention to promote social capital in no way represents a return to statist development theory or practice. If anything, it reflects an instrumental and reductionist understanding of social relations as market relations, in which social relations are evaluated for their ability to “create efficient and equitable exchange and service provisions” (Bebbington et al. 2004, 40). The economic theory underlying this understanding of the linkage between social relations and the market is essentially neoliberal. It does not recognize, as do post-Keynesian analysts, for example, the importance of the relative bargaining power of groups with competing economic interests and the related influence of state institutional arrangements in determining such things as employment levels and income distribution.9 Indeed, in this understanding of social capital, “we do not see the idea that markets will inherently lead to unequal accumulation, that social inequality means that market models will aggravate poverty, or that the state has any role to play in leveling wealth through asset redistribution”(Ibid.).10 Instead, the state’s role in development is cast as neutral and apolitical. In the words of Mohan and Stokke, “[t]hese views divorce ‘technical’ questions of economics from the ideological concerns of ‘politics’ so that the logic of the market is presented as natural” (2000, 251). Such an understanding of social capital, in fact, fails to acknowledge the tension between social relations built upon mutual trust and cooperation in pursuit of collective goods and market relations founded on individualism, competition, and pursuit of personal wealth.11 Moreover, such discourse conceals the state’s role in structuring power relations and the distribution of material


resources in society. Thus, this contemporary preoccupation with the primacy of the market represents a recasting of the functionalist discourse of modernization theory. Development is cast in linear, ahistorical terms in which all societies must adopt similar economic reforms and societal norms to emulate the economic trajectories of more advanced societies.12 This characterization of the development process reflects a contradiction between a normative focus on integration with the international economy and a methodological focus that attributes economic conditions within developing countries primarily, if not exclusively, to national factors and policies (Gore 2000, 793). Indeed, by conceptualizing the process of development exclusively in terms of how the domestic economy can better integrate itself with the international economy, it sidesteps the thorny issue of how linkage with the international economy may have negative repercussions for domestic development and vulnerable segments of the population. In other words, such an economistic conceptualization of development precludes consideration of how the adoption of market-oriented reforms may actually impede the participation and social organization presumably facilitated by the promotion of social capital. Recent empirical research illustrates the problematic nature of the World Bank’s approach to social capital. In addition, it brings to light the key role that the state plays in either promoting or impeding the social trust and cooperative social relations that are associated with social capital and effective collective action. In the Mexican context, for example, Jonathan Fox notes that World Bank lending has tended to reinforce the power of government ministries and the patronage resources of autocratic government officials who have a vested interest in subverting the organization of the potential beneficiaries of antipoverty programs. He argues that, as a result, the World Bank “appears to be contributing, on balance, to the dismantling of social capital, especially among the many independent community-based economic organizations on the front lines of grassroots development” (1996, 970–971). Fox and Gershman (2000) reach similar conclusions in a recent study of the impact of the World Bank on social capital in rural development projects in the Philippines and Mexico. They conclude that in most of the case studies “project managers either ignored or were hostile to existing forms of pro-poor social capital” (Ibid., 413). As a result, these studies indicate a tension between the promarket policies advocated by the World Bank and the creation of social capital among disadvantaged populations. In contrast, other recent studies indicate that state-provided protections from market forces can enhance the development of social capital. For example, in the study of the impact of welfare-state policies on the promotion of social capital, Staffan Kumlin and Bo Rothstein conclude


that universal welfare-state institutions tend to increase social trust while market-oriented means-testing social programs undermine it (2005; see also Rothstein 2001). Patrick Heller’s study of Kerala, India illustrates how an activist and interventionist state coupled with a high level of workingclass mobilization can enhance development, promote the expansion of social capital, and strengthen democratic politics (1996). Heller’s analysis is but one example of the ways in which state and society can interact synergistically to promote development and the expansion of social capital (Evans 1996b; see also Lam 1996 and Ostrom 1996). Both sets of studies suggest that social capital and the capacity for collective action do not emerge in isolation from the influence of the state. Furthermore, they indicate that the promotion of market-oriented reform and the development of social capital so crucial to the development of democracy are often at odds with one another. State Embeddedness and Political Opportunity The foregoing critique suggests that if we are to understand the conditions that facilitate or impede political participation and collective action, we must dispense with conceptualizations that view the state and civil society as more or less autonomous from one another. An alternative perspective views the state as both a reflection of power and resource disparities in civil society and a prime agent in the construction of such disparities. In other words, it views states as embedded in a set of social relations that shape state structure and policies. In turn, state institutional structures and policies have a formative impact on the structure and organization of civil society, shaping the political opportunity structure and capacity for collective action among various segments of the population (Evans 1995, 12–13, 1996b; Migdal 2001). As Theda Skocpol notes, states’ “organizational configurations, along with their overall patterns of activity, affect political culture, encourage some kinds of group formation and collective political actions (but not others), and make possible the raising of certain political issues (but not others)” (1985, 21). Thus, the manner in which the state is embedded in society shapes state structure and policies, which in turn shape the structure of political opportunities for various social and political actors. Political opportunity structure essentially refers to “the degree to which groups are likely to be able to gain access to power” (Eisinger 1973,1). In describing the development of modern nation states and thus the potentially national scope of social movements, Charles Tilly suggested that the political opportunity structure “corresponds to the process by which a national political system shapes, checks, and absorbs the challenges which


come to it” (1984, 312). Skocpol refines this understanding by emphasizing the importance of the institutional arrangements of the state and political parties, which “affect the capabilities of various groups to achieve selfconsciousness, organize and make alliances” (1992, 47). In other words, the state plays a fundamental role in structuring the political identities, opportunities, and capacities of groups throughout civil society. The manner in which the state performs this function under neoliberalism differs radically from the way it operated under statism. This radical difference derives largely from the degree of commodification and stratification to which it has allowed the popular sectors to be subjected under each model of development. Commodification refers to the degree to which workers are subjected to market forces with little or no protection by the state. Stratification indicates the extent to which citizens are divided on the basis of economic and social differences. The transition from statism to neoliberalism has been characterized by the increasing commodification and stratification of the popular sectors. To the extent that this commodification and stratification has increased, the popular sectors’ political opportunities and capacity to act collectively have been degraded. A brief comparison of statist and neoliberal development modes illustrates this point. Under statist development, the state afforded the popular sectors greater protection from market forces than it does under neoliberalism. Latin American states that pursued this mode of development were embedded in an uneasy alliance among domestic and foreign capital and the working classes. The class compromise that this implied emerged from hybrid political regimes, which oscillated between democracy and authoritarianism or manifested elements of both (Garretón et al. 2003). The state became the focus of popular sector collective action as those in control of the state incorporated increasing segments of the popular classes to facilitate the development of an internal market and to promote party dominance. Political parties pursued ideological (directive) encapsulation of the popular sectors, clientelistic division, or both. The emphasis on industrialization and internal market development led to the increased size and strength of labor movements. Corporatist social welfare regimes, though they divided the popular sectors by creating distinct social welfare systems for different occupational groups, nonetheless expanded the role of the state in providing for citizens’ social welfare needs. Thus under statist development in Latin America the working classes grew in strength, the state’s role in managing the economy and addressing social welfare needs expanded, and political parties attempted to distribute expanded state resources in a manner that increased their bases of support. The confluence of these factors increased the popular sectors’ expectations


regarding state intervention on their behalf, established incentives for collective action, and opened institutional channels through which popular groups could promote their interests. Ultimately, however, this relationship between state and society was neither salubrious nor sustainable. State and political party dominance restricted the autonomy of civil society, and thus the quality of democracy, while the expansion of popular sector demands fueled hyperinflation and intensified social and political conflict. The result was economic crisis, and, in many cases, authoritarian backlash. The adoption of neoliberal reforms must be understood in this context. Though the extensiveness and timing of adoption of such reforms has varied significantly across the region, state reformers have to varying degrees dismantled the class compromise constructed under statism and enabled economic elites to assert their prerogatives. Consequently, we are left with a conundrum—while the transition to democracy may have made these societies more open, state and economic reform may have nonetheless undermined or diminished the popular sectors’ organizational capabilities and political opportunities. To assess whether and to what extent this is true, we need to consider the manner in which these states’ embeddedness may have changed in the transition from statism to neoliberalism. Additionally, we must examine reforms in key areas— labor markets, unionization, and social welfare regimes—to determine how and to what extent the popular sectors’ organizational capabilities and political opportunities have been impacted. In addition, we must consider the manner and extent to which neoliberal reforms may have impacted the manner in which political parties link with the popular sectors in civil society. Once we have made this assessment we can consider the repercussions of these changes on popular participation and the quality of democracy. The logical place to begin this analysis is with the Chilean case. Under the tutelage of the military regime, Chile adopted neoliberal reforms earlier and more extensively than any other Latin American country. These reforms were a radical departure from the profoundly state-oriented development model pursued by the socialist regime of President Salvador Allende and his Unidad Popular (Popular Unity) government. Thus, the impact of the transition from state-led to market-oriented development on the popular sectors’ organization should be most starkly evident in the Chilean case. In fact, the restructuring of state-society relations that has occurred over the past quarter century or so has been characterized by the concentration of corporate economic power in the hands of a few conglomerates whose representatives have played a key role in reshaping economic and social policy. Associations representing corporate interests


have been able to perpetuate their political and economic leverage since the 1990 democratic transition while organized labor’s relative influence has declined dramatically. As the analysis in chapter 3 illustrates, the result has been the adoption of labor policies and practices that continue to severely handicap the labor movement’s organizational capabilities by promoting commodification and stratification.


Ch a p t e r Th r e e Busi n e s s, L a b or, a n d t h e Stat e: Th e Tr a nsfor m at ion of t h e Stat e-S oc i e t y Ne x us

Introduction Since its inception, the Chilean state has played a substantial role in structuring the balance of power between business and labor. As a result, it has had a profound impact on the popular sectors’ capacity for collective action and political participation. Although retrenchment and repression were common, for much of the twentieth century, the state evolved in a manner that granted the labor movement and the popular sectors more generally, increasingly greater representation and influence. By facilitating the inclusion and representation of segments of society that historically had been underrepresented, if not altogether excluded, the process of state development made Chilean politics significantly more democratic. However, with the overthrow of President Salvador Allende’s Unidad Popular (Popular Unity) government on September 11, 1973, the Chilean Armed Forces brought this process of increased democratic inclusiveness and popular sector political participation to an abrupt halt. Subsequent to the coup, the military unleashed a wave of brutal repression against organized labor, leftist parties, and popular sector interest associations intended to reverse the process of increasing popular sector incorporation and influence. In addition to physical repression, the military regime implemented, with substantial business sector support, a series of institutional and economic reforms that brought intensified market pressures to bear on workers and weakened their capacity for collective action. Though the transition to democracy has removed the threat of statesponsored physical repression, the basic framework of labor reforms established under the dictatorship remains largely intact. As a result, high levels of commodification, stratification, and economic inequality persist and the labor movement remains severely weakened relative to its pre-coup


strength. In contrast, business associations and the economic interests they represent have maintained the privileged economic position and policymaking leverage with state officials that they so effectively established during the military regime. Therefore, the Chilean state is now embedded in a society radically different from that which existed during the pre-coup period, manifested in labor’s severely compromised capacity to protect and promote its interests within Chile’s new democratic regime. To substantiate the preceding argument, this chapter first examines the logic of state-society relations present during Chile’s oligarchic and populist phases. Subsequently, it evaluates the manner in which the Pinochet regime restructured the relationship between business, labor, and the state in accordance with neoliberal principles. Finally, it notes the ways in which the ruling Concertación has perpetuated the relationship between business, labor, and the state established under Pinochet and assesses the impact this relationship has had on the organizational capabilities of the Chilean labor movement and workers in general. From Oligarchy to Populism The populist state that emerged in Chile in the 1920s evolved out of profound changes in the international economy over the preceding half century and their resulting social, political, and economic impact at home. Beginning in the 1870s, growing industrialization and technological sophistication in Europe intensified the demand for South American mineral deposits, the primary result of which in Chile was intensive sodium nitrate extraction in the northern desert. The exponential though often wildly fluctuating growth in the nitrate industry until the world economic collapse of the 1930s dramatically altered Chile’s social structure, creating the core of an industrial working class, expanding the ranks of the bourgeoisie, and building a small but increasingly influential nucleus of middle-class professionals and civil servants. All of these new social sectors would grow increasingly frustrated with their exclusion from the governing alliance of aristocrats and traditional economic elites that had ruled Chile without challenge since the nation’s independence from Spain in 1810. Out of this frustration gradually emerged well-organized and unified demands for political incorporation into the Chilean state (Bergquist 1986, 47; Gil 1966, 52–53). The demand for incorporation was spurred on by the interaction of several key factors. Among the most important of these was the fact that the fledgling working class was increasingly well organized and radicalized, due in large measure to the dedicated efforts of socialist activists such as Emilio Recabarren, who despite immense repression had persevered for decades in their efforts to organize mine workers and other emergent working class

Business, Labor, and the State / 39

groups. The success of the efforts of Recabarren and his cohorts was facilitated by the starkness of the contradictions present in the mining industry. Juxtaposed with the squalid, harsh and perilous working and living conditions of the miners, was the obvious affluence of the mines’ managers and owners, most of whom were foreign nationals. Such apparent contradictions gave the miners a clear understanding of the source of their exploitation. Mining communities thus provided fertile grounds for the building of working-class consciousness, cohesion, and militancy (Bergquist 1986, 57). Working-class consciousness, cohesion and militancy only intensified as a result of the mining industry’s volatility and the repressiveness of the state in its efforts to contain worker demands and power. The volatility of the mining industry, which became particularly pronounced after the emergence in 1910 of a cheaper, synthetic substitute for naturally occurring sodium nitrate, helped to solidify consensus within the workers movement that greater state intervention was needed in order to protect the economic and social interests of those Chileans most vulnerable to dramatic shifts in the labor market. Although the state’s harsh repression of strikes and mass mobilizations had some initial success in suppressing the growing labor movement, it ultimately proved ineffective in stemming the mounting tide of popular rebellion. Indeed, rather than extinguishing popular resistance, state repression incited the incipient labor movement to increased consolidation of its power and intensified militancy through strikes and mass protests (Bergquist 1986, 65; Gil 1966, 54). Adding to the pressures for change impinging upon the Chilean state were the growing frustrations and demands of the emerging middle class. The economic standing of the Chilean middle class was made particularly precarious as a result of rigid land tenure system in the South and the capital-intensive nature of mineral extraction in the North, conditions which impeded the development of a class of small landholders and small industrial entrepreneurs.1 The ruling oligarchy further exacerbated the economic woes of the middle class through its practice of currency depreciation, which destroyed the incentive for domestic savings and investment (Gil 1966, 52). Adding insult to injury was the oligarchy’s practice of vote-buying, which though illegal was widespread and consequently accentuated the plutocratic character of government. Although historically the middle class, along with the previously inchoate working class, had resigned itself to the oligarchy’s dominance in these areas, such resignation was increasingly replaced by activism with the gradual evolution of political associations and parties capable of heightening class consciousness and representing the interests of politically and economically excluded groups. These groups joined forces with the reformist contingents of the bourgeoisie under the banner of the Liberal Alliance to support the presidency of


Arturo Alessandri Palma in Chile’s 1920 presidential election. Alessandri’s victory over the rightist National Union coalition ushered in a new era in Chilean politics, one in which the middle and working classes would effectively challenge the heretofore unrivaled power of the Chilean oligarchy. The reformist agenda Alessandri elaborated in his first speech before the Chilean Congress, in which he outlined plans for, among other things, abolition of the parliamentary system, presidential election by direct vote, state control of banks and insurance companies, monetary stability, and social security, was a significant indication of just how much the political landscape had been transformed. Most of these policy objectives were aimed at either satisfying the needs and demands of the middle and working classes or reining in the unbridled power of the oligarchs who controlled the Chilean Congress (Ibid., 57). As might be expected, President Alessandri confronted staunch congressional resistance to his policy agenda. This was true despite the fact that the 1924 elections gave him a majority in both houses of Congress. With Congress and the President at loggerheads, with middle-class discontent mounting, and with state repression having failed to stem the tide of labor unrest, the Chilean military intervened in 1924 to restore social stability and political order. The military’s intervention allowed Alessandri to rule unobstructed by Congress. With his newfound political power, the President was able to implement institutional and economic reforms which bolstered the position of middle- and working-class groups and which significantly diminished the power of the ruling oligarchy. Such reforms included the implementation of a new Constitution that provided for a strong executive by transferring authority and control of finances from the Congress to the President and by establishing widespread suffrage, a permanent electoral register, the legalization of a multiparty political system, and direct presidential election. In addition, Alessandri implemented a graduated income tax, labor reform and a social security system (Gil 1966, 58–59). As dramatic as this reform program may have appeared in the context of Chilean politics of that time, it would be a mistake to conclude that the Alessandri government was committed to revolutionary transformation of Chilean society. On the contrary, its reformist efforts were designed with the intent of co-opting and fragmenting the labor movement as well as bringing middle-class sectors under state control. This is clearly evident when we examine the structure of the social security system and the labor code implemented during the first Alessandri administration. The 1924 law that set the legal parameters for Chile’s highly regulated labor union system divided the labor movement between blue- and white-collar workers. For blue-collar workers the law established plant unions as the


basic organizational unit; the law designated craft unions to fulfill this organizational function for white-collar workers. The divisive impact this government-imposed split between blue- and white-collar workers had on the labor movement was exacerbated by the labor code’s prohibition against union federations negotiating collective contracts (Borzutzky 1991, 81). To some extent, the growing interventionism and centralization of the Chilean state coupled with the competitive nature of the democratic political regime enabled the labor movement to counteract its political weakness through symbiotic ties to political parties. As with previous reforms, state interventionism and centralization were tied to fundamental changes in the world economy. With the collapse of the export market for nitrate and other primary products in 1929, middle- and working-class groups pressured the state into taking a greater role in industrialization and economic development. Thus, through the expansion and manipulation of a centralized state bureaucracy, successive governments adopted measures to expand, or in some cases create, the industrial sector according to a strategy of import substitution industrialization (ISI). The center-left Popular Front alliance consolidated this development strategy shortly after its electoral victory in 1938 by creating a state development corporation, Corporación de Fomento de la Producción (Corporation of Production Promotion, CORFO), which assumed responsibility for the state’s role in production and the deliberate planning of the national economy (Bergquist 1986, 73). The eruption of World War II reinforced this economic strategy by making it necessary to replace imports, which because of their war efforts the developed countries could no longer provide (Cardoso and Faletto 1979, 146). With this state-centered development model solidly in place, the coalitional politics which dominated Chile’s pluralistic political system allowed all members of the populist alliance to form part of the state and to extract benefits from it. Competing political parties were encouraged to maintain their respective bases of support through the promise and distribution of increasing shares of state resources. In this regard, the parties of the left courted the support of the labor movement by developing strong ties to the Marxist-oriented Confederation of Workers or CUT (Central Unitaria de Trabajadores, Central Unit of Workers). Through the development of such linkages the labor movement strengthened its ability to promote its interests at the national level (Drake 1996, 119–120). Although this mode of interest mediation gave the central government and the political parties that controlled it considerable control over civil society, it also placed enormous political burdens and fiscal pressures on the Chilean state. The trajectory of Chilean development after World War II aggravated such pressures and made them increasingly difficult to manage. In particular, the rise to power of the Christian Democratic Party (Partido


Demócrata Cristiano, PDC) and the successful Communist revolution in Cuba greatly intensified the already high degree of political polarization in Chile, which in turn magnified the economic and political problems faced by the Chilean state. On one hand, the success of Castro’s revolutionary efforts in Cuba encouraged the left in Chile to be more assertive, more ideologically dogmatic, and more politically inflexible. On the other hand, the PDC’s ascension to power at the center of Chile’s party system ensured that there would be little scope for compromise between competing ideological factions. For although the PDC identified itself as a centrist party, the role it chose to play at the center was dramatically different from that played by the party that previously dominated the political center, the Radical Party. In contrast with the Radical Party, which was a positional centrist party dedicated to finding compromise positions between extremes on the left and the right, the PDC was a programmatic party, dedicated to the realization of its own unique set of principles and policies (Scully 1992, 11). Thus rather than acting as a bridge between the competing ideological visions of the left and right, the PDC advocated a political position that was distinctly its own. In the end, this posture produced irreconcilable political differences among the left, right, and center. Initially, however, the divisive stance assumed by the PDC was not apparent. Indeed, the 1964 landslide presidential victory of Christian Democrat Eduardo Frei would not have been possible without substantial support from the right. Nonetheless, the right-wing Liberal and Conservative parties, as well as the more moderate Radical Party, originally supported Frei, not because they had reached an understanding with him concerning major policy issues but because they saw it as the only means of defeating what they considered to be an even greater threat from the left. Yet once President Frei embarked upon implementing his policy agenda the support he had enjoyed from the right quickly began to disintegrate. This was to be expected since many of the reforms the Christian Democrats implemented or attempted under Frei’s leadership were directly antithetical to the interests of the elite groups represented by the right-wing parties. These policy initiatives included land reform, wage and benefit increases for workers coupled with progressive tax reform, and finally, institutional reforms designed to politically incorporate the previously excluded rural and urban marginal sectors. Apart from improving and expanding Chile’s domestic economy, the foregoing policies were intended by President Frei to increase his party’s constituency base by strengthening its support among middleclass, working-class, rural and urban marginal sector voters. In the end, however, the Frei administration succeeded only in alienating voters from these diverse social strata by increasing expectations for the satisfaction of material demands beyond what it could fulfill.


With respect to wage and benefits policy for example, the government stimulated worker demands for increases well beyond what it could deliver, thereby undermining the viability of Frei’s reformist approach to reconciling competing social demands. Although the Frei administration initially was able to raise real wages by its targeted rate of 20 percent, ultimately such increases were bought at the price of elevated inflation, reduced economic investment and expansion, and the alienation of both business and labor (Ascher 1984, 134–135). On the labor side, the government’s policies were least favorable to those working-class sectors whose support the PDC had the greatest interest in winning, namely the unorganized workers who were not affiliated with the CUT. Like Ibáñez and Alessandri before him, President Frei had refused to give legal recognition to the CUT, which was closely linked to the Socialist and Communist Parties. To build his party’s base of popular support, he was more interested in courting the allegiance of workers who in view of their unorganized status were less likely to be tied to the parties of the left. Ironically, however, when wage increases won by organized labor began to accelerate inflationary pressures, the Frei administration responded by raising the minimum wage—the wage rate that primarily affected unorganized workers—at a lower rate of increase than that of negotiated wage increases or the ensuing rise in the cost of living. Moreover, in an effort to reduce inflationary pressure produced by the public sector, the government cut social spending in areas such as housing, which were most deleterious to the urban poor (Ibid., 139). The Frei government adopted these particular anti-inflationary measures primarily because the growing strength of organized labor left it little other choice. Union membership increased 8.8 percent in 1965 and 16.5 percent in 1966 (see table 3.1 for union membership figures). The surge in union membership was accompanied by a dramatic upswing in the number of strikes waged during this period: 1965 saw a 30 percent increase in strikes over the preceding year and 1966 a 48 percent increase (Stallings 1978, 105; also see table 3.3). This growth in labor militancy produced results in terms of expanded political support for the left and wage increases for workers that far outstripped increases in the cost of living. To counteract the inflationary pressures such wage increases created, Frei was forced to pursue the path of least resistance by imposing proportionally greater sacrifices upon unorganized workers. However, this strategy did little to assuage the left while it antagonized the right. The government lost the support of investors and producers by instilling in them the threat of state intervention and expropriation. Increased state investment in the economy, in response to the private sector’s growing reluctance to invest, only fueled the business community’s fears of impending socialism. In efforts to restore investor confidence, the

Table 3.1

Rates of Unionization and Average Union Size—1952–2004

Year

Unions Active Unions

1952 1954 1956 1958 1960 1962 1964 1965 1966 1968 1970 1971 1972 1973 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

2028 2039 2351 1866 1752 1752 1839 2010 2669 3424 4758 5401 6326 6692 4597 3977 4048 4401 4714 4994 5.391 5.883 6.446 7.118 8.861 9.858 10.756 11.389 12.109 12.715 13.258 13.795 14.276 14.652 14.724 15.192 16.310 16.987 18.047

** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** 7.707 8.323 7.974 7.891 7.505 7.476(est.) 7.446 7.439 7.057 7.659 7.410 8.149 8.967 9.414

Population Affiliated w/Unions 288,131 298,049 314,992 274,316 229,993 245,147 268,877 292,653 340,869 412,027 628,396 789,621 883,188 939,319 386,910 395,951 347,470 320,903 343,329 360,963 386,987 422,302 446,194 507,616 606,812 701,355 724,065 684,361 661,966 637,570 655,597 617,761 611,535 579,996 595,495 599,610 618,930 669,507 680,351

Total Employed Labor Force 1,489,700 ** ** ** 1,605,900 ** ** ** ** ** 2,719,900 2,808,200 2,836,000 2,784,300 3,331,000 3,453,100 3,124,000 3,284,500 3,433,400 3,671,300 3,862,850 4,001,290 4,285,440 4,463,420 4,525,530 4,630,670 4,877,430 5,109,290 5,122,760 5,174,410 5,298,680 5,380,190 5,432,350 5,404,480 5,381,460 5,479,390 5,531,260 5,675,130 5,862,900

Rate of Average Unionization Union Size (%) 19.3 ** ** ** 14.3 ** ** ** ** ** 23.1 28.1 31.1 33.7 11.6 11.4 11.1 9.8 10.0 9.8 10.0 10.6 10.4 11.4 13.4 15.1 14.8 13.4 12.9 12.3 12.4 11.5 11.3 10.7 11.1 10.9 11.2 11.8 11.6

Source: For 1952–1968 data: Valenzuela 1978, 28, 31 and Stallings 1978, 246. For 1970–1985 data: Cortázar 1997, 240. For 1986–2004 data: Dirección del Trabajo. ** Data not available.

142 146 134 147 131 140 146 146 128 120 132 146 140 140 84 100 86 73 73 72 72 72 69 71 68 71 67 60 55 50 49 45 43 40 40 39 38 39 38


Frei government attempted to hold down wages by limiting cost of living adjustments for workers and cutting government spending, particularly in housing and public works. Yet these actions did little to restore investor confidence but instead further alienated industrial workers and other segments of the popular sectors already disenchanted with the Christian Democrats’ reformism. Meanwhile, within the PDC, the apparent failure of Frei’s reformism strengthened the position of more radical elements, who were able to ensure the nomination of their presidential candidate, Rodomiro Tomic. The fact that Tomic’s platform was nearly indistinguishable from that of his leftist rival, Popular Unity candidate Salvador Allende, indicated the extent to which, instead of stemming the tide of revolutionary fervor in Chile, the institutional and economic reforms implemented by President Frei helped to intensify popular demands and leftist stridency (A. Valenzuela 1978, 37–39). Under these circumstances, the right had little reason to lend its electoral support to the Christian Democrats as it had done in 1964, a condition that made it possible for the Unidad Popular to win the 1970 presidential election. With Allende’s ascension to power, the polarizing dynamics put in play under the Frei administration continued unabated. Having won only 36 percent of the popular vote, compared to nearly 35 percent for the right’s candidate, Jorge Alessandri (A. Valenzuela 1989, 184), and Frei’s 56 percent in 1964, Allende obviously had very limited backing from business from the outset. Whatever support he had was quickly squandered by his government’s inability to reassure small and medium-sized producers that their property was safe from expropriation. One of the factors that made the Allende government’s reassurances to small and medium producers that they would not be expropriated less than convincing was its willingness to invoke a 1932 law, Decreto Ley 520, to expropriate those enterprises it deemed most crucial to the success of its economic agenda. The Socialist government which ruled for twelve days in 1932 implemented Ley 520 to allow state intervention in or requisition of companies having difficulty in producing essential goods as a result of the economic crisis brought on by the Great Depression. Allende’s Socialist government utilized the law to implement a much more ambitious program of expropriation than was possible in twelve short days in 1932; the ambitiousness of this program inspired fear among all producers, no matter how large or small (Ascher 1984, 244–245). The administration’s willingness to assume control of factories taken over by militant workers vanquished any hopes that a union between small- and medium-scale producers and “monopolists” could be averted. The now united business community became increasingly antagonistic toward the government. The rate of private investment, which fell in every year of the Allende administration,2 was symptomatic of the lack


of investor confidence. As the newly mobilized segments of the popular sectors joined with organized labor to press for greater concessions, business sought to derail the socialist government. “The decisions to leave land uncultivated, close down factories, and otherwise undermine the economy constitute the most clear-cut instance of economic action designed literally to force replacement of the regime, with complete disregard for shortterm economic rationality” (Ibid., 257). Without the capacity to maintain investment and economic growth, the collapse of the Allende government became increasingly imminent. The government became, in effect, first a hostage and then a victim of the social demands and expectations stimulated by its policies and its rhetoric. The 1973 military coup, which was executed with the strong backing of business, was the right’s response to the popular sectors’ growing capacity to demand and win concessions from the state. For Allende then, even more so than for Frei, the mobilization of the popular sectors proved to be a double-edged sword. On one hand, opening up new institutional channels for popular participation and increasing state welfare subsidies enabled the socialist government to strengthen the support of organized labor and enlist segments of popular sectors previously unincorporated into the political system. On the other hand, the more the government catered to popular interests and demands, the more it alienated those segments of capital whose cooperation it needed if it was to successfully reconcile economic growth and social equity. The resulting polarization of society crippled the nation’s economy, undermined the legitimacy of the Chilean state, and precipitated the military coup that ousted Allende’s democratically elected socialist government. From Democratic Populism to Neoliberal Authoritarianism Following the coup, the Pinochet regime reacted to Chile’s economic and political crises in two ways. First, through armed repression, the shutdown of democratic institutions, and the banning of political activity, it attempted to eliminate all channels of individual and collective political expression. Second, the regime attempted to stabilize the economy and dismantle the statist policies and programs adopted under previous administrations. The dictatorship’s economic and social policy was initially fragmented with neither policy area dominated by neoliberals. Ultimately, however, this initial fragmentation gave way to a coherent set of neoliberal policies in both economic and social spheres (Kurtz 1999). The convergence of economic and social policy along neoliberal lines occurred between 1979 and 1982. The success of neoliberal policies in taming inflation helped persuade


military leaders that market-oriented policies might be effective in other policy areas as well (Ibid., 416). Thus, in addition to liberalizing the economy and privatizing most state-owned industries, military leaders, in cooperation with market-oriented technocrats (the “Chicago Boys”) and a pragmatic coalition of business interests, restructured the social welfare system and rewrote the labor code in ways that would increase the susceptibility of workers to economic competition and the vagaries of the international market. Along with export producers, the neoliberal technocrats in charge of social policy within the Pinochet regime viewed the state’s labor code and social welfare system as a drag on competitiveness. “They represented a new phase in rightist political economy in the world, in that they actually used their privileged positions in the state apparatus to devise and apply a policy package aimed at dismantling, and then restructuring, civil society in accordance with their radical market views” (Stepan 1985, 323). The core constituency that supported these reforms consisted of a coalition of diversified economic conglomerates that concentrated their investment in those areas in which Chile had a comparative economic advantage. Thus their firms focused on manufacturing in internationally competitive industries such as food processing and paper and export activities such as mining, fishing, and agriculture. The transformation of the state’s core constituency under the military government led to a shift in development focus from industrialization and production for domestic consumption to an emphasis on the export of primary and manufactured products. This shift undermined the economic, and thus the political, leverage that workers had enjoyed under the previous mode of development. Since the domestic market is insignificant for the forms of enterprise in which the large conglomerates concentrated their investment (e.g., copper, fruit production, wood pulp and timber, and fish meal), state planners and policymakers within the military government had little incentive to be concerned with raising wages or social benefits. Instead, the primary preoccupation of the Pinochet regime and its business sector supporters was minimizing the popular sectors’ demand-making and organizational capabilities so that they would not impede the implementation and smooth functioning of Chile’s new export-oriented development model (Lagos 1983, 64; Cortázar 1993, 2–4). The regime’s efforts in this regard severely weakened organized labor and in general made the popular sectors much more heterogeneous and fragmented (Angell 1991, 189–198; Díaz 1993, 1–2). Initially, the large economic conglomerates were able to ensure the representation of their interests through a revolving door relationship with the military government. Many important executives and directors from firms controlled by these conglomerates joined the government after the military took power, mostly in second-tier positions. Over time,


however, they assumed positions of greater importance (Schamis 2002, 54–55). Thus, “key policymakers of the Pinochet government served on the boards and in the executive offices of large economic conglomerates before and after holding cabinet and central bank positions, leading to collusion between economic and political power” (Ibid., 65). José Piñera, a Chicago-trained economist and executive at the Cruzat-Larraín conglomerate before joining the military government in 1978, best personified this collusion. As minister of labor and social security, he designed the military regime’s labor code and oversaw the privatization of social security. This cozy relationship between big business and the military government initially appeared to work well for the conglomerates and the economy as a whole, leading to the rapid growth of economic sectors in which Chile had a comparative advantage. However, the evaporation of cheap foreign credit in the early 1980s exposed the weaknesses of this economic arrangement and led to a severe economic crisis. The fallout from this crisis led, in turn, to a change in relations between government and business that would serve to perpetuate business’ dominant influence in policymaking through the democratic transition to the present. Rather than investing in production, the export-oriented conglomerates built their phenomenal expansion on highly leveraged buyouts, a strategy that worked as long as international liquidity was high and interest rates were low. However, when in the early 1980s liquidity dropped precipitously and interest rates spiked, overindebtedness led to a wave of bankruptcies across the country (Silva 1996a, 307). The ensuing economic crisis provoked a political crisis for the regime, which faced massive popular protests beginning in May of 1983 and opposition from business sectors deprived of privileged access to policymakers before the crisis and disenchanted with orthodox neoliberalism. Primarily through Chile’s dominant interest association, the Confederación de la Producción y el Comercio (CPC), they demanded greater flexibility in policymaking and more inclusive access to policymakers. To counter the influence of the Chicago Boy radicals, the leadership of the CPC sponsored a series of meetings during the 1982–83 economic crisis designed to build a consensus among Chile’s business leaders over a national economic policy that would stimulate investment and economic recovery. The proposals that emerged from these meetings departed only moderately from neoliberal orthodoxy, indicating the business community’s acceptance of the fundamental elements of the military regime’s economic policy. The more significant change reflected in the outcomes of these meetings was an emphasis on unity among Chile’s diverse business sectors. Major lobbying efforts had to be conducted in the name of the CPC rather than individual sectoral organizations lest government


technocrats reject them as too narrowly defined and thus threatening to the general health of the economy. Pleasing government technocrats became increasingly important since by 1985, once Chile’s economic and political upheavals had subsided, the military government recruited top economic policymakers almost exclusively from the ranks of experienced technocrats rather than business leaders. As a result, it became increasingly necessary to present policy proposals in terms of their likely impact on the economy as a whole rather than the benefits they might produce for specific economic sectors (Ibid., 309–310). The consultation and coordination of economic policy between business and government established at this time set the pattern for businessstate relations that have continued through the democratic transition to the present. These relations were founded on a business community that was highly unified and committed to using its political clout to protect its economic interests. These interests were defined first and foremost in terms of the perpetuation of neoliberal economic and social policy and a strong desire to prevent any reversion to statism. The increased cohesion of the business community and its increased autonomy from state control in the context of a liberalized economy, gave it considerable leverage over government policy. The return to electoral politics, first with the 1988 plebiscite and then the 1989 elections, strengthened this leverage by putting added pressure on government to work with business to ensure positive economic outcomes in terms of employment and growth (Ibid.). Meanwhile, the ascending power and influence of business were mirrored by the relative decline and fragmentation of the labor movement and popular sector opponents to neoliberalism. Thus, over the course of the dictatorship, the Chilean state’s embeddedness had been transformed in a manner that would pose substantial obstacles to popular sector collective action even under democracy. The transformation of party-labor relations, which occurred over the course of the dictatorship, compounds the impact of structural reforms on labor’s organizational capabilities. In the early years of the dictatorship, authoritarian repression coupled with the military regime’s ban on political activity sundered the traditional symbiotic relationship between organized labor and political parties of the center and left. As the labor movement regrouped and opposition to the military regime mounted, labor’s role in organizing mass demonstrations, work stoppages, and other forms of resistance against the dictatorship was successful in forcing an opening in civil society. This opening allowed political parties and their leaders to reemerge (Garretón 1989a, 173–175). However, this reemergence did not lead to a reestablishment of the close ties with labor that existed before the coup. Instead, the parties that led the democratic opposition and that


now form the Concertación distanced themselves from the labor movement and committed themselves to the preservation of the market economy and related state reforms established under Pinochet. The Christian Democratic and Socialist Parties, the dominant parties in the democratic opposition and the governing Concertación, concluded that excessive state intervention in the economy and excessive party intervention in civil society were the primary causes underlying the collapse of Chilean democracy. On the basis of this assessment, they committed themselves to the preservation of the market economy and related state reforms established under Pinochet and distanced themselves from the labor movement. As a result, labor policy under democracy is substantially the same as it was under authoritarianism. Though the three Concertación governments who have held office since the transition have increased social spending, the state’s economic model continues essentially unchanged, and the organizational strength and influence of labor on the state and state policy remain severely compromised while business maintains its privileged position. Moreover, despite the return to democracy, linkage between political parties and the labor movement remains weak, giving organized labor limited influence in the political arena. The following section will elaborate this argument more fully by examining in detail key policies and institutional arrangements. The Labor Code, Precarious Employment, and Social Disarticulation under Democracy While all three Concertación governments have attempted to enact substantial labor reform, they all have failed. Their failures have resulted from a confluence of factors: (1) the electoral arrangements bequeathed to the democratic regime by the dictatorship, including the binomial electoral system and designated senators (discussed in detail in chapter 4), which overrepresent the right, giving it veto power over proposed reforms; (2) the increased influence of business associations with political leaders and policymakers, cultivated under authoritarianism and perpetuated under democracy; (3) an attendant decline in the influence of organized labor; and (4) the preoccupation of political leaders with maintaining macroeconomic stability and Chile’s comparative advantage in an open economy. Thus, labor reform efforts in the Concertación governments in office between 1990 and 2006 followed a similar pattern: proclamations by government officials of the importance of labor code reform, the government’s emphasis on negotiations between business and labor in devising labor policy with a minimal role for the state (social concertation), intercession by the state when such negotiations collapse or fail to produce results, government’s


scaling back of reforms in response to pressure from business associations and economic elites, despite vociferous protests from organized labor, and finally the passage of modest reforms that do little to remedy the severe power and resource inequities between business and labor. While the Concertación’s lack of a legislative majority explains, in part, the failure of the Aylwin and Frei governments to pass meaningful reform, the Lagos government’s passage of only modest reforms despite possessing majorities in both chambers of Congress points to the primacy of another factor. The common thread running through all three administrations has been the desire to protect political and macroeconomic stability by avoiding conflict with business associations, primarily the CPC and the Sociedad de Fomento Fabril (Society for the Promotion of Manufacturing, SOFAFA), and the economic elites whose interests they represent. The consequence has been the continued marginalization of organized labor in policy formulation and the preservation of a labor code and labor markets that impose extreme obstacles to collective organization and action among the popular sectors. To appreciate how little progress has been made on labor reform in Chile since the 1990 transition, we must first consider the major labor reform elements the military regime implemented through the 1979 Plan Laboral. The labor code’s more deleterious elements included the introduction of new bargaining entities inside firms, so-called bargaining groups (grupos negociadoras), designed to compete with unions and thereby undermine the traditional structure of one union per enterprise. Additionally, the Plan prohibited workers from negotiating on any matters that interfered with the employer’s right to organize work and promoted precarious contracting by allowing employers to modify work contracts without consulting employees. The new code further strengthened the employers’ hand by allowing them to lock out workers and hire replacement workers during strike action (Decreto Ley 2758). Moreover, the law circumscribed the legal length of strikes to sixty days, after which time workers had to return to work or face dismissal (Haagh 2002a, 39–40; Martínez and Díaz 1996, 60). Finally, the law gave employers the right to fire workers without providing justification, prohibited regulation of the workload as well as the work day, and drastically restricted the right to collective bargaining (Frank 2002, 41–42). The precipitous decline in unionization among Chilean workers, from a pre-coup rate of 34 percent to approximately 10 percent throughout the 1980s, epitomized the detrimental impact such reforms had on the labor movement (Roberts 2002, 15, 22; see table 3.1 below for unionization rates 1952–2004). Before the transition, the leaders of the Concertación and labor’s peak association, the CUT, were essentially in agreement over the necessity of reforming the Pinochet labor code to redress the extreme inequities the


military regimes’ neoliberal development policies had created. In practical terms, the center-left alliance and the CUT agreed on the need to expand worker participation rights, to promote investment in job training, and to increase employment stability in exchange for wage variability (Haagh 2002b, 93). However, this agreement proved to be short-lived. Both the Concertación and the CUT had to contend with a business sector that was highly cohesive and fully committed to maintaining the fragmentation and evisceration of the labor movement that it had achieved during the dictatorship (Haagh 2002a, 61). Through implicit threats of destabilizing the democratic regime, the business sector was able to extract from the Concertación legislative concessions on key labor reform issues (Haagh 2002b, 94). In the process, it precipitated division between the Concertación and the CUT. These dynamics are evident in the process of labor reform negotiations that ensued under the transition government of President Patricio Aylwin. The Aylwin government proclaimed as one of its primary objectives the achievement of “growth with equity.”3 In other words, the Concertación would preserve the neoliberal model’s emphasis on economic growth but it would also emphasize the promotion of greater economic and social equality by adopting social and labor policies aimed at improving conditions for Chile’s poorest citizens. Reforming the more extreme elements of the military regime’s labor code was an essential step in achieving this objective. Despite its good intentions, however, the Alywin administration was able to enact only modest changes to the military regime’s labor code. Its limited success resulted, in part, from its reluctance to antagonize the business sector by advocating on behalf of the labor movement. Rather than assume an activist role on behalf of labor to help compensate for its relative weakness vis-à-vis business, the government emphasized the importance of businesslabor accords with minimal intervention from the state. However, soon after beginning negotiations in early 1990, the CPC and the CUT were deadlocked. The CPC opposed any proposals that would require a statement of cause for worker dismissal or that would enhance worker representation. Moreover, it rejected restricting collective bargaining to unions and resisted any attempts to limit employers’ ability to modify work contracts granted to them by the Plan Laboral. Above all, the CPC remained steadfast in its opposition to any reforms that would facilitate the discussion of labor issues beyond the firm level (Haagh 2002b, 95–96). Given this stalemate, the Aylwin government was forced to pursue separate negotiations with the CPC and CUT. Ultimately, it presented its own set of legislative proposals, which were a watered-down version of its 1989 Program. While the 1989 Program called for “profound” changes to restore workers’ rights and create equitable capital-labor relations, the


government backed away from advocating such profound reforms once in office. It now argued that labor policy should be defined by the autonomous negotiation of workers and management. The sole form of state intervention was to be enforcement of compliance with the rules of the game. Moreover, to limit debate and minimize conflict, the government introduced the most important labor reform projects in the Senate, where, given the presence of the designated senators, the Concertación was in the minority. As a result, it succeeded in passing only modest reforms but was able to attribute culpability for the significant concessions it made to its rightist opposition (Barrett 2001, 585). The most important change adopted under the Alywin administration relates to the employer’s last offer in contract negotiations. If this offer is identical to the previous contract and includes a wage adjustment at least equal to the inflation rate, the employer has the right to replace workers from the first day of the strike (Article 157) (Frank 2002, 42). In what would appear to be a counterbalance to this provision, the law stipulates that even if striking workers have been replaced by strikebreakers, they should be allowed to return to their jobs after the strike. However, according to Volker Frank, In practice . . . this does not happen. The new law simply requires employers “to justify” the dismissal of a worker. This is usually done by arguing that it was “necessary.” An employer’s decision, furthermore, cannot be contested; the employer can only be forced to pay additional compensation. Thus employment protection during strikes is effectively eliminated by employers’ unrestricted power to fire workers. (Ibid.)

The ineffectiveness of the aforementioned reform compounded the Aylwin administration’s failure to repeal much more egregious elements of the Pinochet labor code. For example, the Aylwin legislation failed to repeal the Pinochet labor code’s restriction on permissible issues of bargaining. Consequently, the new law proscribed any matters that “may limit the employer’s ability to organize, direct or administer the firm” (Gonzáles Moya 1991b, 52). This provision perpetuated the most important provision of the 1979 code (Haagh 2002b, 101). The new labor code’s preservation of bargaining groups reinforced employer dominance vis-à-vis labor. The Pinochet regime introduced bargaining groups to compete with unions and thereby to undermine their power. These were groups of any number of workers that assembled for the purpose of bargaining and dissolved once a labor agreement was signed. Unlike unions, bargaining groups had no legal right to information. Moreover, these groups would typically sign a convention rather than a contract, the distinction being that conventions did not grant them the right to strike or other minimal rights normally


entailed in collective bargaining. Worker use of bargaining groups and conventions increased substantially throughout the 1990s, resulting in a relative decline in the strength of unions (Ibid., 103). Labor code reforms under Frei did little to rectify these inequities. Shortly after assuming office in March of 1994, the Frei administration enacted legislation that recognized public employees’ associations by granting them legal status (Frank 2002, 42–43). However, despite this positive development, the CUT severed relations with the administration in November 1994 in reaction to Frei’s perceived slow response to its proposals for more expansive labor reforms. In attempts to placate the labor movement and counteract its pro-business image, the government submitted a second package of labor reforms to Congress in January 1995. The proposal package included reforms to expand collective bargaining, to end the employer’s right to replace striking workers, and to adopt flexibility provisions that were less lopsided in favor of business (Ibid., 43–45). Taken together, these reforms, if enacted, would have substantially improved protections for workers in Chile’s labor market. Ultimately, however, the government failed to placate the CUT and antagonized the right. The rightist majority in the Senate immediately rejected the reform package while business launched a strident campaign attacking the CUT. Meanwhile, in response to the government’s half-hearted attempts to pass the reforms, the CUT resumed its confrontational approach. The 1996 CUT elections, in which Socialist vice president Arturo Martínez defied his own party by negotiating with the Communist Party to help elect a Socialist as president and a Communist as vice president, reflected the growing divide between the government and the labor movement (Barrett 2001, 591–592). The Frei administration’s failed reform efforts in 1997 and 1999 did little to repair this divide. The pattern of labor reform witnessed under the Aylwin and Frei administrations persisted under President Lagos. Like its predecessors, the Lagos government proclaimed the importance of significant labor reform early on in its administration and laid out an ambitious reform program, only to significantly scale back its proposals in response to opposition from business associations and employers. As a result, Lagos passed only modest reforms, thereby appeasing the business community, exacerbating the existing rift between the Concertación and the CUT, and leaving the labor movement with nearly as little influence and organizational capacity as it possessed before the democratic transition. During the 1999 presidential campaign, Lagos and his team emphasized their commitment to passage of an ambitious labor reform program that included a substantial increase in collective bargaining rights and the prohibition of employers from replacing striking workers. However,


even before Lagos’ inauguration, employers announced that they would oppose these reforms. In attempts to mollify this opposition and to avoid the pitfalls previous Concertación governments had encountered, the Lagos administration decided to reestablish direct negotiations between the CPC and the CUT. While the government was willing to move slowly and achieve reforms incrementally, labor minister Ricardo Solari made clear that it would not abandon “fundamental aspects” of the new reform, namely the prohibition on replacing striking workers and the right to collective bargaining of interenterprise unions (Frank 2002, 50). By July 2000, however, only a few months after its original proclamations, the government had deemphasized the importance of these reform proposals. With respect to the replacement of striking workers, for example, minister Solari asserted that though the law allows this practice, it had actually never occurred. This was, as Frank notes, an “astonishing” claim, given that throughout the 1990s the Direccion del Trabajo regularly published reports substantiating and criticizing precisely this kind of employer abuse (Ibid., 51). What was ultimately most influential in determining government labor policy was not data documenting employer use of replacement workers during strikes but pressure from business to keep this right intact. On September 7, 2000, in a meeting to discuss major economic issues, representatives from Chile’s most influential employer associations asserted to Lagos and his top ministers that the stalled labor reform project was creating uncertainty and threatening reactivation of the economy. The next day, Solari announced that the government would drop from its reform proposal interenterprise collective bargaining and the prohibition against replacing striking workers (Ibid., 52). Although the government would reincorporate these provisions in December 2000 in response to pressures from the labor movement and parties within the Concertación, by January 2001 it had again abandoned them (Fernández 2002, 34–35). Thus, once again, pressure from the business community had succeeded in forcing the Concertación to dramatically scale back labor reform, despite strong opposition from the CUT. The labor reform law that the Senate passed on September 11, 2001, did take some modest steps toward addressing the inequities between business and labor. For example, unions or bargaining groups could now legally demand official financial information from firms several months in advance of collective bargaining negotiations. The law also reduced the number of workers required to form a union and no longer allowed firms to demand the dissolution of unions. In addition, the law established that, beginning in January 2005, the legal work week would be lowered from forty-eight to forty-five hours (Ibid.). Despite these advances, little progress was made on the issues of


primary concern to the labor movement—collective bargaining and the use of replacement workers during strikes. With respect to the latter issue, the law did not ban the practice of hiring replacement workers during strikes. It merely made the practice more costly for employers by requiring them to pay a bond for each replacement worker to be shared among the strikers.4 Workers fared no better with respect to the issue of collective bargaining. The law maintained the established practice of allowing firms to decide voluntarily whether to engage in collective bargaining negotiations. The perpetuation of this practice compounded the impact of a number of other factors that undermine workers’ capacity to bargain collectively. For example, workers in firms with more than 50 percent state ownership are barred from collective bargaining. Moreover, unions that operate beyond the plant level, including interenterprise and transitory unions created by the 1979 Plan Laboral, do not have the right to bargain collectively. As a result of restrictions such as these, only 10–12 percent of the Chilean labor force enjoys the right to bargain collectively (Frank 2002, 41). Moreover, since collective bargaining is contingent upon the willingness of employers to engage in negotiations, only about 4 percent of Chilean workers actually participate in collective bargaining (see table 3.2). Given these continuing disparities in bargaining power between business and labor, the CUT was profoundly dissatisfied with the government’s reforms. To register its dissatisfaction, Table 3.2

Rate of Collective Bargaining—1990–2004

Year

Salaried Employees

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

311,2680 319,9030 336,7330 355,4240 351,9060 359,2890 371,3080 378,7620 375,8590 374,0110 373,5950 375,9320 378,7300 387,2630 399,6110

Source: Dirección del Trabajo.

Salaried Employees Involved in Collective Bargaining 184,556 252,385 226,445 255,226 226,759 210,089 225,659 192,256 206,230 161,834 182,792 160,197 175,852 137,985 165,212

Rate of Collective Bargaining— Salaried Employees (%) 5.9 8.0 6.7 7.1 6.4 5.8 6.0 5.0 5.5 4.3 4.9 4.3 4.6 3.6 4.1

Business, Labor and the State / 57

the CUT leadership declined to attend the government’s signing ceremony announcing passage of the labor reform law (Ibid., 44). Since the promulgation of the 2001 labor reform law and despite the passage of a second labor reform proposal, relations between the government and the CUT showed little signs of improvement. The Lagos administration continued its emphasis on economic growth, macroeconomic stability, and labor flexibility as the proper means for improving conditions for Chilean workers. Meanwhile, the CUT continued to view the government as insufficiently attentive to labor’s concerns. These divisions came to a head in 2003 as discussions of a second reform proposal dealing with labor flexibility were developing. In setting the stage for these discussions, President Lagos emphasized that economic growth remained the government’s central objective and reaffirmed the necessity of maintaining the existing fiscal scheme (i.e., maintaining a budget surplus of at least one percent of GDP). Prominent business leaders, including CPC head Juan Claro, responded positively to the president’s comments (La Tercera May 22, 2003). In contrast, CUT president, Arturo Martinez, was highly critical of Lagos’s remarks. “In matters of labor flexibility,” Martinez responded, “the government has not listened to the workers or the labor movement. This [reform] does not provide employment, only precariousness. We feel defrauded because in these types of matters the government only listens to entrepreneurs” (La Tercera, May 21, 2003b; author’s translation). In an effort to demonstrate its opposition to the government’s position and to punish the business community for its lack of respect for existing labor standards, the CUT called a national work stoppage (paro) for August 13, 2003. Rather than demonstrating the CUT’s strength to the government and the business community, the limited support the paro received exposed the labor movement’s weakness and internal divisions. As a result, instead of feeling pressured to address labor’s primary concerns, the government now had more leeway to pursue labor reform consistent with its economic objectives. Accordingly, it successfully passed a second round of reforms on May 16, 2005. These reforms focus on reducing the lengthy delays in adjudicating workers’ complaints against employers, from the norm of a year or more down to a few months. To accomplish this goal, the new legislation doubles the number of judges specializing in labor matters from twenty to forty (La Tercera, May 16, 2005). While these are positive reforms, their impact remains to be seen since they did not take effect until March 2007. More importantly, however, they do little to address the fundamental causes underlying the severe power and resource inequities that continue to exist between business and labor in contemporary Chile. The perpetuation of bargaining


groups continues to undercut the negotiating power of traditional unions. Collective bargaining remains voluntary; given the antipathy of Chilean business associations and employers to the practice, its steady decline since the transition was to be expected (see table 3.2). The original strictures of the military regime’s Plan Laboral that prohibit workers from negotiating on any matters that might interfere with the employer’s right to organize work remain in force. The expansion of the judicial system to more efficiently adjudicate workers’ complaints against employers may ensure that more workers are duly compensated for their dismissal. Nonetheless, employers retain the right to dismiss workers on the open-ended grounds that it is necessary for the efficient functioning of the firm. Moreover, employers retain the right to hire replacement workers during strikes; the new law merely requires them to pay a bond for each striking worker that they hire. The law will need to be in effect for some time before we can determine whether it will reduce employers’ propensity and capacity to subvert the impact of strikes by hiring replacement workers. Yet given the relatively low level of strike activity since the 1990 transition, it appears that this powerful right wielded by employers has been a significant deterrent against workers engaging in strikes (see table 3.3). Finally, the 2001 reform measure lowering the number of workers necessary to form a union may have actually weakened the labor movement. Since the reform went into effect, the number of unions has steadily increased while the average number of workers per union has steadily declined, indicating a diminution of the labor movement’s collective strength (see table 3.1). As previously noted, the labor code further weakens the position of workers by continuing to allow employers to arbitrarily modify work contracts, thereby subjecting workers to precarious employment and a high level of commodification and stratification. Before the military takeover, the legislation regulating employment security, the so-called job security law, stipulated that workers could not be fired without just cause (Ruiz-Tagle 1989, 81). With the implementation of Decree Law 2,200 in 1978, the military regime undermined this guiding principle in Chilean labor relations. The military regime’s law, which continues in force today, allows employers to unilaterally modify work contracts on such things as the duration of employment, conditions of dismissal, and level of remuneration. The objective of this reform was to enable employers to adjust the size and composition of their workforce in response to economic fluctuations. In other words, it was intended to make the utilization of labor more flexible in relation to the employers’ economic interests (Cárdenas 2005, 6). To facilitate the achievement of this objective, employers developed new modes of contracting workers. These included permanent

Table 3.3

Strike Activity—1959–2004

Year

Strikesa

1959 1960 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

204 245 416 564 723 1073 1114 1124 977 1819 2709 3289 ** 28 68 57 31 36 38 42 41 81 72 101 176 219 247 224 196 187 183 179 121 108 125 86 117 92 125

Workers Involved 82,188 88, 518 117,084 138,474 182,359 195,435 225,480 292,794 275,406 656,170 304,530 397,142 ** 10,700 22,500 14,900 6,900 3,600 3,600 8,500 3,900 9,900 5,600 17,900 25,010 45,910 26,962 25,098 16,209 24,724 25,776 19,278 12,608 10,667 13,227 11,591 14,662 10,443 13,013

Total Days Duration 2,162 ** ** 3,497 ** 11,052 ** ** 3,420 ** 12,461 13,814 ** 560 1,428 1,197 589 468 456 882 615 1,134 1,008 1,616 2,643 2,725 2,975 2,578 2,640 2,324 1,795 1,850 1,204 1,308 1,121 805 1,363 802 1,586

Average Days Duration 10.6 ** ** 6.2 ** 10.3 ** ** 3.5 ** 4.6 4.2 ** 20 21 21 19 13 12 21 15 14 14 16 15 12.4 12.0 11.5 13.5 12.4 9.8 10.3 10.0 12.0 9.0 9.4 11.6 8.7 12.7

Source: For years 1959–60, 1963, 1965–66, 1969: Valenzuela 1978, 31. For years 1964, 1967–68, 1971–72: Stallings 1978, 247. For years 1979–1989: Haagh 2002, 119. For years 1990–2004: Dirección del T.rabajo, Departamento de Relaciones Laborales, Gobierno de Chile. a Data for years 1979 to 1989 include both legal and illegal strikes. ** Data not available.


(indefinite) and impermanent (definite) contraction, with the latter being divided into a number different types of temporary contracts, for example, seasonal contracts, or contracts for specific jobs or services (Ibid., 5). There are a number of factors associated with temporary employment that make workers who work under these types of contracts exceptionally vulnerable to market forces while at the same time making it particularly difficult for them to pursue collective action. As for collective action, the Labor Code revised under the military regime and in force today prohibits collective bargaining by temporary workers. It states that “workers subject to apprenticeship contracts or those that are contracted exclusively for the performance of a determinant job or transitory or temporary task” are prohibited from negotiating collectively (Código del Trabajo 2006, 113–114; author’s translation). Compounding the impact of this legal restriction is the high degree of stratification among workers who labor under these kinds of conditions. Employees who hold stable positions tend to be men while subcontracted and part-time employees tend to be women (Martínez and Díaz 1996, 128). On the other hand, many men are subject to the same degree of employment instability as women, a condition that does not necessarily diminish when economic growth spurs increased employment opportunities. Rather than finding permanent positions during periods of economic expansion, workers engaged in subcontracting more typically find an increase in these sorts of opportunities. Thus a worker who is accustomed to subcontracting for only one firm may now find such opportunities at a number of firms or a number of different jobs within the same firm. The stratification found among subcontracted employees is even more pronounced among the increasing number of workers who work without any contract at all. Since 1990 there has been a generalized increase in the number of workers without contracts in all demographic groups and within all types of firms. Nonetheless, women, young people below twenty years of age, and workers employed in firms with fewer than ten employees continue to constitute those segments of the population with the greatest percentage of workers without a contract (Cardenas 2005, 10). Moreover, despite the economy’s recovery from the Asian financial crisis of 1997–98, the rate of informal sector employment in 2005 still exceeded the rate of such employment in 1997, with nearly 40 percent of all workers working in the informal sector (Reinecke and Velasco 2006, 3, 21).5 In light of the financial incentives employers have for hiring informal sector workers this trend is unsurprising. In contrast with their formal sector counterparts, informal sector workers are not entitled to severance payments when they are terminated and employers are not obligated to pay social security taxes to insure them against injury. As a result, employers


have strong incentives to maintain or expand their reliance on informal sector workers into the future.6 When taken together, the labor market conditions described above produce a high degree of labor flexibility for Chilean employers and an equally high degree of employment insecurity for Chilean workers. In this regard, analysts have noted an accelerated rate of employment creation and destruction in Chile in comparison with other countries. This high level of employment volatility is reflected in the fact that a quarter of all salaried jobs are created and destroyed every year (Reinecke and Ferrada 2005, 31). Given Chilean workers’ high levels of employment insecurity and low rates of collective bargaining, it is not surprising that income inequality and the disparity between increases in real wages and productivity are high and growing. The disparity between increases in productivity and real wages recorded in 2005, 5 percent, was the highest in eight years. If we add the gap registered in 2004 (2.4 percent), the difference between productivity and monthly real wages increased to 7.5 percent in two years (Reinecke and Velasco 2006, 15). And as the gap between real wages and productivity has grown so has income inequality, with the income share of the poorest decile falling from 1.24 in 1990 to 1.17 percent by 2000 (Giovagnoli, Pizzolitto, and Trias 2005, 9). It is important to note that the increase in income inequality in Chile is directly related to an increase in the percentage of workers working without contracts. Workers with contingent or informal work arrangements earn significantly less than their counterparts with permanent work contracts (Amuedo-Dorantes 2005, 604, 607). The impact of this earnings disparity has become increasingly salient. Indeed, between 1994 and 2000 “the average contribution of contingent and informal wage and salary work arrangements to male and female earnings inequality rose by more than 50 percent” (Ibid., 604). Compounding the impact of this earnings inequity between formal and informal sector workers has been the growing number of informal sector workers among low-income groups. While there has been an increase in the number of workers without contracts in all demographic groups since 1990, the greatest increase has been among workers in the bottom quintile of income (Cárdenas 2005, 9; see table 3.4). The increase in income inequality signifies the transformation of Chile over the last twenty-five years from one of the most equitable societies in Latin America to one of the most inequitable not only in the region but in the world. In the early 1970s, only Argentina had a more equitable distribution of income when compared with Brazil, Costa Rica, Honduras, Mexico, Peru, and Venezuela (Sheahan 1987, 28, table 2.2). Today, however, the only Latin American countries with worse income distributions

62 / State, Market, and Democracy in Chile Table 3.4 Percentage of Workers without Contracts according to Income Quintiles, 1990 and 1996 Quintiles

Percentage Workers without Percentage Workers without Contracts 1990 Contracts 1996

1 2 3 4 5 Total

27.6 21.6 17.3 13.5 9.5 17.3

40.1 30.1 22.1 18.1 13.0 23.9

Source: Cárdenas 2005, 9.

than Chile are Brazil and Colombia. Globally, Chile has the ninth worst income distribution in the world (World Bank World Development Report 2005, 258–259). Conclusion State policy has been central to the creation of the inequities in economic and organizational power between business and labor described above. Contrary to claims of market reformers noted in chapter 2, the adoption of neoliberal reforms in Chile has not limited the ability of distributional coalitions to utilize state policies to protect their market interests at the expense of the rest of society. Instead, it has merely reconfigured the balance of economic and political power between business and labor in favor of the former. The Chilean state is now embedded in a set of relations in which the business community is highly unified and wields enormous influence with elected officials and policymakers. In contrast, labor is fragmented and weak, with levels of unionization only modestly above what they were during the dictatorship and rates of informality higher than they were in 1990.7 Though the number of unions has increased in recent years, the average number of members per union is only slightly more than half what it was in 1986 and well below pre-coup levels, indicating a severe diminution of labor’s collective strength. This diminution is further reflected in the increasingly common practice of subcontracting, which exacerbates stratification, as well as the rate of collective bargaining, which at only 4 percent of the salaried labor force is significantly lower than it was in the early 1990s. The right of business to replace striking workers and to negotiate with bargaining groups, practices the dictatorship instituted to eviscerate labor’s bargaining power, reinforce its diminished capacity for collective action.


The perpetuation of such policies, through nearly two decades of democratic rule, reflects the ability of the CPC and other business associations to time and again achieve their objectives with respect to state labor policy. Meanwhile, the CUT has witnessed the deterioration, if not demise, of the Chilean labor movement’s symbiotic relationship with its traditional, leftof-center party allies. That the center-left Concertación has abjured close ties with organized labor is a telling indicator of how radically state-society relations in Chile have changed from the pre-coup to the post-coup periods. Prior to the coup, organized labor and the left depended on each other for the realization of material and political goals. This symbiosis reached its peak under Allende, with CUT officials participating in the Unidad Popular government. In the post-coup period, the PS (Partido Socialista) has distanced itself from the CUT and labor more generally, preoccupying itself with maintaining macroeconomic stability rather than working to reinvigorate the labor movement. While the Communist Party is still closely tied to the labor movement, it has been isolated electorally and thus rendered politically ineffectual. As chapter 4 explains, this change in the relationship between centerleft parties and the labor movement is symptomatic of a broader transformation in party-society linkage in Chile. The constraints that the military regime imposed on Chile’s democratic transition, coupled with the impact of structural reform and political renovation of the dominant parties of the center and left, have created a breach between the popular sectors and their traditional party allies. Thus, despite the Concertacion’s successive victories in national elections, there exists widespread disenchantment with political parties and Chilean democracy. This has led to pervasive political apathy and declining political participation, conditions anathema to high levels of democratic accountability and representation.


Ch a p t e r Fou r D e moc r at i z at ion, Pol i t ic a l R e p r e se n tat ion, a n d t h e R i se of Pop u l a r D i s sat isfac t ion

Introduction As described in chapter 3, the structural and institutional reforms the military regime adopted radically altered Chile’s economy, eviscerated the organized labor movement, and increased informal and subcontracted modes of employment, all of which militated against popular sector collective action. Workers were subjected to intensified market pressure while the increased heterogeneity and stratification of employment made it exceedingly more difficult for them to develop the common bonds that facilitate collective action. How did the democratic opposition respond to these conditions and what impact has their response had on the popular sectors’ propensity for political participation and capacity for collective action under Chile’s new democratic regime? While chapter 3 indicates that the military regime’s democratic opposition, now the governing Concertación, has not rekindled close ties with or attempted to reinvigorate the Chilean labor movement, how has it responded to the popular sectors more broadly? And what does the mode of linkage the parties of the center and left have pursued with the popular sectors tell us about the quality of Chilean democracy? Historical and recent appraisals of the Chilean party system would give us reason to expect positive responses to these questions. Assessments of the Chilean party system before the 1973 coup as well as in the postauthoritarian period characterize it as well institutionalized and highly stable.1 In particular, Chilean political parties historically have cultivated strong ties to society and provided voters clear and consistent ideological and programmatic choices. Moreover, while the current party system reflects a high degree of continuity with that which existed before the coup, today’s center-left parties have abandoned goals and practices that they believe


contributed to the breakdown of democracy. Thus, leading Concertación parties such as the PDC and PS (Partido Demócrata Cristiano and Partido Socialista), which during the prior democratic regime were guilty of a high degree of ideological rigidity and unwillingness to compromise, have adopted a much more consensual approach to politics. This commitment to consensus is exemplified even more by the Party for Democracy (Partido Por la Democracia, PPD). Given its creation before the 1988 plebiscite to unify electoral opposition to Pinochet, the PPD is free of the ideological baggage its coalition partners carry from the pre-coup period. Thus it is less constrained in its pursuit of policy consensus within the Concertación (Plumb 1998). The center-left’s newfound commitment to compromise and consensus suggests, at a minimum, that the Chilean party system is no longer susceptible to the kind of ideological polarization and political stalemate that precipitated the breakdown of democracy in 1973. Consistent with this widely observed decline in ideological polarization, several studies indicate a transformation of the dominant cleavages present in the Chilean polity. While class and religious cleavages dominated precoup politics, a number of scholars have observed a significant decline in these forms of cleavage and the rise of an authoritarian-democratic cleavage (Valenzuela and Scully 1997, Torcal and Mainwaring 2003, Ortega Frei 2003). In other words, a profound division has emerged in contemporary Chilean society between those who supported and those who opposed the Pinochet regime. Given the Concertación’s avowed opposition to the military regime’s authoritarian legacy and commitment to address the enormous social debt Pinochet’s policies created, this form of cleavage would appear to bode well for popular sector representation. Yet despite these positive trends and the Concertación’s enviable record in promoting economic growth and reducing poverty, the public holds a dim view of political parties and major political institutions such as Congress and is less than enthusiastic in its appraisal of Chilean democracy (Valenzuela and Dammert 2006). Party identification and electoral inscription have declined significantly while rates of electoral abstention have steadily increased. These trends are mirrored in the deep and pervasive disenchantment with political parties expressed by popular sector leaders and shantytown dwellers interviewed for this study. What explains this contradiction between the continuity and stability exhibited by the Chilean party system and the pervasive dissatisfaction with Chilean political parties and democratic institutions? This chapter argues that one of the primary explanations for this contradiction pertains to the transformation in the relationship center-left parties have assumed vis-à-vis society in general, and the popular sectors in particular. Whereas in the pre-coup period these parties sought to organize and mobilize

The Rise of Popular Dissatisfaction / 67

the popular sectors largely on the basis of appeals to class interests, in the postauthoritarian period they have eschewed such appeals and the mobilizing strategies associated with them. In short, the constraints the military regime imposed on Chile’s democratic transition, coupled with the impact of structural reform and political renovation of the dominant parties of the center and left, have limited both the ability and willingness of the popular sectors’ traditional party allies to promote their organization and represent their interests in the political arena. This has led to widespread political apathy, disenchantment with political parties and the state of Chile’s new democracy, and declining electoral participation. The combined impact of these factors undermines political accountability and representativeness and thus compromises the quality of Chilean democracy. A brief conceptual overview of pacted transitions, an analysis of the evolution of party-base relations in Chile, an examination of the institutional arrangements impeding more effective political representation, and finally, consideration of evidence indicating popular disenchantment with political parties and government policy substantiate the foregoing argument. The Pros and Cons of Pacted Democratic Transitions To understand the present status of Chilean democracy, we must first comprehend the conditions and constraints under which Chile transitioned from authoritarian to democratic rule. This transition was made possible by a pact between the authoritarian regime and the democratic opposition. As the following discussion illustrates, this pact facilitated the transition from authoritarian rule by imposing constraints on the democratic regime that would take its place. These constraints have compromised the quality of Chilean democracy. A pact is an explicit, though not necessarily publicly stated, agreement among political elite “which seeks to define . . . rules governing the exercise of power on the basis of mutual guarantees for the ‘vital interests’ of those entering into it” (O’Donnell and Schmitter 1986, 37). The proponents of pacted democratic transitions assert that pacts “enhance the probability that the [transition] process will lead to a viable political democracy” (Ibid., 39). According to this understanding, “democratization advances ‘on the installment plan’ as collective actors, each preferring a different mode of governance or a different configuration of institutions, enter a series of more or less enduring compromises” (Ibid.). Despite this positive portrayal, however, even the proponents of pacted democratic transitions recognize the limitations such antidemocratic arrangements impose upon


the regimes to which they give birth. As O’Donnell and Schmitter observe, for example, the principle disadvantages of such sequential changes are twofold: one, they tend to make possible only marginal and gradual transformations in gross social and economic inequities . . . ; and two, they foster disenchantment (desencanto . . .) on the part of those who struggled for democracy in the expectation that it would bring them immediate benefits either in the form of control over the state apparatus or rapid, substantial improvements in the welfare of the actors and classes with whom they identify. (Ibid., 44)

If, as the preceding comments indicate, the proponents of pacts are aware of some of the significant limitations these arrangements may impose upon democratic reform, other analysts are even more conscious of such limitations. They maintain that the manner in which democratic regimes are originally constituted has an enduring impact on their capacity for reform and their long-term viability.2 Thus in a kind of political catch-22, once the initial stages of regime transition have taken place, pacted agreements and concessions that may have initially made democratization possible often become impediments to further democratic reform. This is particularly evident in the political arena, which depending upon the relative balance of power between pro- and antidemocratic forces when negotiating the transition, is subject to constriction well before the first democratic elections are held. Since both the military and economic elites are reluctant to proceed with a transition to democracy without first protecting their interests, their shared objective is to institutionalize modes of decision making and political competition that exclude or disadvantage their opponents. In principle, the leaders of the democratic opposition may be adamantly opposed to such objectives. In practice, however, the more powerful and recalcitrant the antidemocratic forces, the more necessary it becomes to accept some of their demands. Hence, the need arises for the democratic opposition to demobilize their grassroots militants and to exclude or minimize the political influence of opposition parties or groups that are unlikely to accept the conditions established by the pact. The parties committed to the pact typically respond to these political exigencies in several ways: first, by restricting decision making on controversial issues to political elites within their ranks; second, by agreeing to limit the policy agenda so that it does not threaten the fundamental interests of either the military or economic elites and; finally, by constructing, or at a minimum, acceding to the adoption of electoral laws and other institutional mechanisms that discriminate against parties or groups opposed to the new political accord. In this manner, grassroots leaders and the more radical elements within the opposition movement


will be effectively shut out of the decision-making process and will have little capacity to ensure that their interests or concerns are duly considered in the formation of public policy. Accommodation in the economic realm is closely linked to the foregoing process of political accommodation. For, whether explicitly acknowledged or not, dominant political actors function as the representatives of concrete socioeconomic interests.3 The “rules of the game” and the institutional channels they establish for the expression and reconciliation of competing interests set the parameters for future socioeconomic reform. In this regard, the new state structures sanctioned by political elites committed to a pact institutionalize the boundaries between the public and private sectors, establish guarantees for private property, and create the institutional framework within which the identities and organizational capabilities of collective actors are constituted. In the light of the manner in which agreement on such fundamental issues is reached, there is no reason to assume, as do the more optimistic analysts, that pacted democracies will incrementally become more democratic. Rather we should recognize that due to the elite nature of the negotiations that guide the democratization process, the resulting agreements and institutional arrangements may present enduring obstacles to greater public accountability and to a more equitable sharing of political power. As Karl observes: In relying upon elite negotiations . . . a democracy by pact can institutionalize a conservative bias into the polity, creating a new status quo which can block further progress toward political, social, and economic democracy. Indeed, . . . pacts can exemplify the conscious creation of a deliberate socioeconomic and political contract that demobilizes new social forces while circumscribing the extent to which all actors can participate or wield power in the future. (Karl 1986, 198; emphasis added)

This scenario seems particularly relevant to explaining transitions such as Chile’s, in which the authoritarian regime leaves power without having suffered major setbacks and with the institutional apparatus it established during its reign essentially intact. In this so-called transaction mode of transition,4 in which the authoritarian regime possesses substantial capacity to impose conditions and constraints, there is a conservative, antidemocratic bias built into the process of political and institutional reform. The continued autonomy of the military after the transition, and the lingering threat of military intervention represented by such autonomy, only exacerbate this conservative, antidemocratic bias. For, under these conditions, political elites most committed to pacted democracy will in all probability continue to adhere to a manner of doing politics and


formulating public policy that is predicated upon exclusive, elite-centered negotiations. This suggests that, at a minimum, political parties reluctant to challenge the military and committed to maintaining the political stability established by the pacted transition, will continue to eschew the kind of relations with their grassroots militants that could lead to a potentially destabilizing escalation of popular demands. In other words, these parties are likely to avoid the kind of grassroots mobilization of their constituents considered to have provoked authoritarian reaction in the past and to be threatening to military and economic elites in the present. This is precisely what has occurred in Chile. Now that the democratic transition has passed and the difficult work of democratic consolidation is well under way, the same political and institutional arrangements that impeded the political influence of the popular sectors during the transition continue to have a negative impact on the willingness and capacity of their traditional political allies to represent their interests. To fully appreciate the impact of this legacy, we need to retrace the historical steps that led to its creation. To this end, the next two sections examine the transformations undergone by opposition political parties and the Chilean party and electoral systems since the 1973 coup. These transformations are the cumulative effect of the economic and institutional reforms enacted by the dictatorship as well as the “renovation” experienced by center and left party elites during years of internal persecution or foreign exile. Their combined impact has been to neutralize the electoral significance of the far left, to overrepresent the right, and to encourage the remaining center-left parties to form a broad-based, multiclass coalition committed to maintaining political stability at the expense of representing popular interests. The Transformation of Party-Base Linkage in Chile The form of linkage between center-left parties and their traditional bases of support changed dramatically during the seventeen-year period separating the breakdown and restoration of democracy in Chile. Ties between parties and their popular sector constituents that in the past were primarily directive, programmatic, and clientelistic are today primarily electoral.5 In other words, before the coup, parties of the center and left attempted to indoctrinate and direct the actions of grassroots constituents, offered them clear and distinct policy choices, and provided material incentives to build and maintain party loyalty. Today, however, the parties of the Concertación do little, if any, direct organizing of the popular sectors, offer policy choices that do not challenge the neoliberal fundamentals established by the military regime, and have few material resources to distribute in contrast to


what was available under state-led development. They engage the popular sectors for winning specific electoral contests, utilizing modern campaign techniques such as mass media advertising that rely little, if at all, on the organization and action of traditional party militants. The reasons for this transformation from populism to electoralism are at once structural, institutional, and ideological. In terms of the impact of structural reform, the neoliberal development model implemented by the military regime removed many of the means and incentives for political parties to build or maintain popular constituencies through the distributive control over state resources. Ideologically and institutionally, the renovation of the parties comprising the Concertación and the institutional arrangements that they accepted as a precondition for their assumption of power have all but preempted the possibility of a reversion to previous forms of party-society linkage. Although this restructuring of party-base relations has reinforced political stability, in part by decreasing the pressure of popular sector social demands on the state, it has not come without costs. As the following analysis demonstrates, the diminished responsiveness of political parties to popular sector concerns that these changes have entailed has resulted in increasing political apathy and declining electoral participation. Authoritarian Repression, Structural Reform, and Social Fragmentation Historically, political parties in Chile have served as the primary interlocutors between the state and civil society.6 Voluntary organizations in civil society were constrained by the necessity of operating through channels controlled by the political parties to gain access to state resources and power. Under these circumstances, “political action consisted of organizing a social base in order to bind it to party structures and thus exert pressure on the state, at times demanding fulfillment of claims and at other times seeking to take control of the state itself ” (Garretón 1989a, 12). Thus, clientelistic, and to a much greater extent directive, linkages defined party-base relations in the pre-coup era.7 Where clientelistic linkages predominated, parties acted as a channel for the exchange of votes for favors, and grassroots structures were boss-ruled or nonexistent. Where directive linkages predominated, parties—as agents of political education or of coercion, or both—attempted from the national to the grassroots level to control the behavior of citizens in accordance with their particular political agendas. Regardless of which kind of linkage prevailed, parties attempted as much as possible to utilize state resources to gain popular sector support.


Given the high degree of state involvement in the economy under ISI, and the high degree of competition within the Chilean political system, the prevalence of these types of party-base linkages meant that state budgets and expenditures became increasingly inflated and political institutions became increasingly unstable in response to mounting pressures from the popular sectors. These problems reached unprecedented and unsustainable levels during the Popular Unity government of President Salvador Allende and ultimately led to the military takeover on September 11, 1973.8 As noted in chapter 3, the military regime reacted to Chile’s economic and political crises in two ways. First, it attempted to eliminate all channels of individual and collective political expression through armed repression, the shutdown of democratic institutions, and the banning of political activity. Second, the regime embarked upon a radical reform of the Chilean state and economy to ensure that they would operate in keeping with free market principles. To this end, military leaders in cooperation with market-oriented technocrats (i.e., the “Chicago Boys,”) liberalized Chile’s economy, and privatized most state-owned enterprises and many state-controlled resources and functions. Additionally, they restructured the social welfare system and rewrote the labor code in ways that would increase the susceptibility of workers to economic competition. With respect to liberalization, the authoritarian regime reduced the average nominal tariff rate on imports from a high of 94 percent in 1973 to a uniform rate of 10 percent by 1979 (Foxley 1983, 65, 71). The regime followed a similar pattern with respect to privatization of state-owned industries. While there were 507 public enterprises in 1973, by 1980 the state retained only 15 (Ibid., 61). The Pinochet regime’s reform of Chile’s social welfare system was equally dramatic. By 1989 public expenditures on health, education, and housing were only 22 percent of their 1970 level (French-Davis and Muñoz 1990, 147). The impact of such a dramatic drop in the level of social welfare funding was reinforced by political-administrative reforms implemented by the military regime, including the implementation in 1981 of a private social security system based on individually capitalized, privately administered retirement accounts (the Administradoras de Fondos de Pensiones or AFPs), a privately contracted health insurance system (Institutos de Salud Previsional or ISAPREs), and the transfer to municipal governments of many social welfare functions formerly managed by the central government. There were at least two major political consequences of these reforms. First, the privatization or municipalization of resources formerly controlled by the central state severely limited the degree to which political parties would in the future be able to distribute social welfare benefits in


accordance with their political agendas or in response to popular demands. Second, privatization and muncipalization reinforced social inequities among different strata of the popular sectors and thereby undermined the material incentives for the development of popular unity around shared welfare concerns. While the better-off segments of the popular sectors were able to avail themselves of social benefits in accordance with their individual earning power, the less fortunate segments were forced to rely upon the inferior resources and services provided in the severely reduced public sector. The provision of such inferior services and benefits at the municipal level diminished the potential for popular unity by reinforcing territorial divisions and inequities.9 The impact of the foregoing reforms was compounded by labor reform. As noted in chapter 3, the military government’s Labor Plan of 1979 stipulated, among other things, that (1) bargaining would henceforth be carried out at the level of the individual firm (i.e., there would be no collective bargaining) (2) strikes were to be limited to sixty days after which time the strikers would automatically be fired, and (3) employers were given the right to contract other workers during strikes. The combined effect of these reforms greatly reduced the organizational strength of the popular sectors and severely diminished the state resources available for the organization of popular groups around common material interests or concerns. Thus, the authoritarian regime’s drastic state restructuring undermined parties’ clientelistic, programmatic, and directive ties to the grassroots. Party Renovation, Popular Demobilization, and Electoral Linkage While the Pinochet regime replaced Chile’s state-led development model with a radical program of neoliberal reforms, the opposition struggled to organize a mass movement potent enough to bring about the restoration of democracy. However, the common pursuit of this goal among the various factions that comprised the democratic opposition did not obviate the need to reconcile the profound ideological differences that had contributed to the breakdown of democracy in the first place. The manner in which these competing factions attempted to build a unified opposition movement, and the way they responded to the ideological divisions that characterized the pre-coup era, was shaped by their respective interpretations of the causes of the democratic breakdown. The far left (represented by the Movimiento Democrático Popular or MDP), which perceived the collapse of the Popular Unity government to have resulted from inadequate preparation for armed confrontation, emphasized the necessity of


armed struggle to defeat Pinochet. On the other hand, reformist center and left elements (represented by the Alianza Democrática or AD), attributed the democratic collapse to ideological polarization and thus stressed the need for elite consensus and compromise as means to restore and preserve Chilean democracy. As events unfolded, the distance between these two positions and the groups that espoused them became increasingly pronounced. Ultimately, the AD’s reformist approach prevailed. As the following analysis demonstrates, the AD’s success was predicated on the demobilization and isolation of the popular sectors. To fully appreciate the impact of the AD’s success (and the MDP’s failure) in dealing with the military regime on the political fate of the popular sectors, we need to know something about the nature of these rival alliances. The MDP was largely the creation of the more radical faction of the Chilean Socialist Party, the PS-Almeyda, which split with the party’s renovated faction in 1979. Shortly after the military takeover, competing leadership factions emerged that were divided over whether to maintain the party’s revolutionary line or to adopt a more moderate approach to restoring democracy and constructing Chilean socialism. The faction led by Allende’s former foreign minister, Clodomiro Almeyda, held fast to the Socialist Party’s identity as the vanguard of the revolutionary movement. Attributing the Unidad Popular’s demise largely to a failure to prepare for the inevitable military confrontation with reactionary forces, the Almeyda faction insisted that armed struggle and mass popular mobilization were the only means for ousting the dictatorship. The opposing faction, led by the party’s acting secretary general, Carlos Altamirano, asserted to the contrary that the political isolation of the working class was the primary cause of the UP’s defeat, and thus, the building of a broad political consensus, along the lines of European social democracy, was the appropriate means for restoring democracy and realizing the ideals of socialism. These factional disputes came to a head in an April 1979 meeting of the party’s Central Committee in East Berlin, during which Altamirano was deposed and Almeyda installed as secretary general.10 Thus, while the renovated faction of the PS had abandoned any revolutionary pretensions or aspirations, the PS-Almeyda continued to adhere to Leninist doctrine and to accept the legitimacy and necessity of armed struggle. To strengthen its position, the PS-Almeyda formed the MDP in September of 1983, an alliance with the Partido Comunista (PC) and the Movimiento Izquierda Revolucionario (MIR)11 whose aim was the removal of the dictatorship through “all forms of struggle.” Repudiating negotiations with the military regime, the MDP called for the formation of a broad, antifascist front capable of ousting General Pinochet. In contrast, the AD, the precursor to the present Concertación, eschewed the use


of violence against the military regime and sought instead to negotiate its peaceful abdication of power.12 Comprised of the dominant PDC, the renovated faction of the PS, and some smaller center and left parties, the AD was founded upon a set of fundamental principles that included the guarantee of private property and free enterprise, respect for democratic rights and liberties, repudiation of revolution as a legitimate means for the attainment of political power, and finally, a more limited role for the state in managing social and economic relations. The AD’s and MDP’s opposing strategies for dealing with the dictatorship were rooted not only in their doctrinal differences but in practical considerations related to their respective bases of support. Perceiving that the labor movement had been too weakened by neoliberal restructuring and authoritarian repression to play a vanguard role in the revolutionary struggle, the parties of the MDP shifted the focus of their mobilization efforts from the “classes to the masses: that is, from the more organized and formal sectors of society to the more amorphous and marginalized ones” (Garretón 1989b, 274). In practical terms, this meant organizing and mobilizing shantytown dwellers, in many instances preparing them for armed struggle. In contrast, the middle-class constituents courted by the AD were unaccustomed to being subject to armed repression. There were clear limits to which they would tolerate the escalation of violence and social instability in attempts to return Chile to democratic rule. Thus, to pacify the military regime and to ease the middle sectors’ fears regarding the threat of civil strife, the AD resolved to isolate the revolutionary left, the PC in particular, and to pursue a negotiated transition to democracy.13 The turning point in the competition between the AD and the MDP came in September of 1986 after the Communist Party’s armed wing, the FPMR,14 failed in its assassination attempt against General Pinochet. Before the FPMR’s failed plot, the PC had interpreted the monthly national protests that first erupted in May of 1983 as a clear indication that its insurrectionist strategy was working to weaken the military regime. Based on this reading of political events, the PC began to intensify its violent activities. Ultimately, however, its intensification of armed confrontation backfired. Although the dictatorship was initially put on the defensive by the eruption of wide-scale national protests, once the economic crisis that precipitated the protests began to subside, Pinochet recaptured the initiative. In November of 1984, he declared a state of siege and thereafter began to increase the level of political violence and repression. As a result, the middle-class sectors that had willingly participated in nonviolent public protests began to withdraw their support. The FPMR’s unsuccessful assassination attempt only exacerbated the military regime’s repressiveness and the opposition’s shrinking base of popular support, convincing all but


the most radical that a negotiated transition was the only viable path to the restoration of democracy. Thus, at this point the PS-Almeyda abandoned its Communist Party allies and opted for a salida política (political exit). Rhetoric notwithstanding, the PS-Almeyda had never been fully committed to a policy of military confrontation. As Almeyda himself insisted, “We never thought . . . that our own military force was going to play a central role. We thought the party had to play the role of an agent of mobilization of the masses, to be an organizer of the masses and the protests. . . . The Communist Party, at least those within the FPMR, were thinking of a military confrontation, but we never thought of that” (quoted in Roberts 1998, 308). Thus, as the PC intensified its violent activities, the latent differences between the PC and the PS-Almeyda rose to the surface. The resulting tension drew the PS-Almeyda closer to the Christian Democrats and the Renovated Socialists in search of a political exit from authoritarian rule. Consequently, by July of 1987 the PS-Almeyda had affirmed its strategic independence from the PC, abandoned the vía armada (armed struggle), and called upon its militants to register in the electoral roles being prepared for a plebiscite. Undoubtedly, the turnabout in the PS-Almeyda’s position was motivated more by necessity than by a sudden conversion to the ideals of renovated socialism. Party leaders feared that if they did not oppose the dictatorship via the electoral arena, the PDC would be allowed to dominate the plurality of prodemocracy forces mounting in opposition to military rule. This fear provided the necessary impetus for the PS-Almeyda to rebuild the Socialist Party along with the Renovated Socialists. The two socialist blocs were able to surmount their pronounced ideological and tactical differences through a process of elite negotiation from which grassroots leaders and popular organizations were excluded.15 A fundamental point of agreement that emerged from these negotiations was shared respect for the autonomy of social organizations in civil society and rejection of the traditional vanguard role of the party. In other words, the party would neither continue to identify itself as the primary agent of social change within civil society nor assume as its primary responsibility the organization and mobilization of popular groups.16 In theory, this renovated posture with respect to the party’s role in social organization would prevent the kind of ideologically charged, politically divisive manipulation of civil society that party leaders understood to have been a leading cause of the breakdown of democracy in 1973. It would in the words of former party secretary general and minister of labor, Jorge Arrate, make “politics less elitist and gradually more popular” (Arrate and Hidalgo 1989, 107).


In practice, however, the party’s newly assumed posture within civil society only widened the existing breach between grassroots militants and party elites, particularly as the party shifted its focus from mobilizing for confrontation in the streets to competition at the ballot box. Political strategy was now increasingly determined by party elites in consultation, not with the grass roots, but with elites from the other parties that made up the Concertación. This trend toward increasing elite control was particularly evident in the party leaders’ dissolution of the umbrella organizations that they had constructed to shape the disparate opposition groups in the shantytowns into a broad-based, unified opposition movement. Without their overarching political leadership, these disparate grassroots groups became atomized and lost their ability to have a significant impact upon the character of the democratic transition (Oxhorn 1995, 258). Thus the split that was evolving between party elites and grassroots constituents in the PS was symptomatic of a larger phenomenon occurring in the Concertación as a whole. Once popular opposition had opened sufficient space in civil society for political parties to safely resurface, the struggle for democracy began to transform itself from one based upon grassroots organization and mass mobilization into one in which political elites negotiated behind closed doors with minimal, if any, input from the popular sectors.17 Adding to the strength of the reunited Socialists and the Concertación was the presence of the PPD. The PPD was originally formed by leaders of the PS as an instrumental umbrella party designed to unite and enlist disparate left-of-center political forces in the effort to defeat Pinochet in the 1988 plebiscite. After the 1989 elections, however, the PPD established itself as a party in its own right, distinct from the PS. The creation of the PPD turned out to be highly advantageous for the renovated Socialists. With no strong ties to the grass roots or the labor movement and no historical ties to the Allende legacy, the PPD was free from the revolutionary baggage burdening the PS and consequently was able to attract significant middle-class support. As a result, the renovated left could bolster its electoral position in a manner that was not feasible for the Communists or other far-left entities. The newly emerged PPD, therefore, supplanted the PC in a center-left alliance that was more moderate and more reluctant to challenge the status quo than any of the center-left alliances that had preceded it. In this sense, the decline of the Chilean Communist Party, which from its former position of preeminence among Latin American leftist parties had descended to the point of near irrelevance in the electoral arena, was strategically intertwined with the ascendance of the renovated left in Chile. At the same time, the ascendance of Chile’s renovated left was clearly a prime factor in the demobilization of the grassroots opposition movement that began in 1986. Indeed, from the moment that the PS-Almeyda opted


to join the renovated Socialists and the Christian Democrats in pursuit of a salida política, (political exit) the opposition movement took on an increasingly elitist character. Party leaders, who for many years had remained in the shadows to avoid persecution, now assumed center stage in negotiating a transition to democracy. Ironically, it was the initial success of the labor movement and grassroots social movements in opposing the dictatorship that had enabled political parties to emerge from clandestinity and to reassert their control over the popular sectors. However, once it was apparent that the strategy of popular resistance had failed to forcibly oust the dictatorship, opposition leaders agreed to accept the regime’s 1980 Constitution and to pursue an electoral exit from military rule.18 This strategy inevitably de-emphasized the efforts and initiative of the labor movement and popular sector social movements. As a consequence of this elite-controlled transition strategy, the gulf between grassroots militants and party elites significantly widened, leaving many at the base feeling excluded from the political process. Institutional Impediments to Popular Sector Representation Key institutional arrangements implemented by the military regime before the 1989 elections have exacerbated the breach between political parties and popular sector constituents that developed during elite negotiations over the restoration of democracy. The most important of these are the designated senators in Congress and the binomial electoral system. Each of these institutional arrangements has artificially skewed electoral representation in favor of the right and compelled parties of the center-left to focus on maintaining coalition consensus at the expense of developing closer, more responsive linkages with popular sector constituents. As a result, both reforms have served to limit the political system’s responsiveness to the popular sectors and thereby weakened their incentives to participate. These problems are clearly evident with respect to the designated senators. While the military regime claimed that the appointment of designated senators was intended to “safeguard” democracy, their true purpose was to protect the interests of the right. The 1980 Constitution stipulated the appointment of nine senators every eight years. The Supreme Court had the responsibility to choose three of these senators, two from among its former members and one who had previously served as a controller general. The National Security Council was obligated to choose four members, comprising one former commander from each branch of the military and the national police. The remaining two members were to be chosen by the president; one was to be a former rector of a state university and the other


was to be a former minister of state. In addition, the constitution required that individuals designated as senators had to have served in their previous positions for a minimum of at least two continuous years (González Moya 1991a, 38–39). This requirement insured that, at least initially, the designated senators would be individuals who served in the authoritarian regime and were thus likely to be committed to preserving its legacy. Before Pinochet stepped down as president, he made sure that these nine senatorial seats were filled with officials closely connected to the authoritarian regime. Although one designated senator died during his term and was not replaced, the remaining eight in the right wing’s voting bloc transformed the Concertación’s slight majority of 21 to 17 senatorial seats, won in the 1993 congressional elections, into a 21 to 25 majority for the right. Similarly, the appointment of a new set of designated senators after the 1997 congressional elections transformed the Concertación’s slight legislative majority of 20 to 18 into a 22 to 25 majority for the right. With this majority, the right effectively blocked any attempts by the Concertación to amend the constitution, which requires a two-thirds majority in both chambers of Congress, or 31 senators and 80 deputies (Ibid., 75–77). Over time, however, as new, designated senators were appointed, they became more moderate politically. Given the Concertación’s victory in every presidential election since the reestablishment of democracy, it has been able to gradually change the composition of the bloc of designated senators to its advantage. The constitutional provision that allows presidents that have served at least six years to become lifetime senators reinforced this trend.19 As a result, the group of designated senators appointed in 1998, along with the more moderate segments of the right, agreed with the Concertación to terminate the practice of designating senators in March 2006 when the terms of the sitting group of designated senators expired.20 The termination of this provision presents new possibilities for positive reform. Nonetheless, as was demonstrated by the discussion of labor reform in chapter 3, the role of the designated senators has been significant in preserving Pinochet-era reforms and the state-society relations these reforms have helped to produce. While the practice of designating senators was terminated in 2006, the right has resisted reform of the binomial electoral system and thus it remains intact. As a result, it perpetuates the right’s unfair electoral advantage and continues to contribute to the weakening of party-society linkages and electoral trends that have negative implications for Chilean democracy. These trends include a substantial decline in party identification and a parallel increase in self-identified independent voters, rising rates of voter abstention and nullification of votes, an increase in protest votes, and a low level of confidence in political parties. To fully appreciate


how the binomial electoral system contributes to these negative electoral trends, it is useful to consider the historical circumstances under which it was devised. On May 6, 1988, the military regime instituted Law 18,700 (Constitutional Organic Law on Popular Elections and Vote Counting) in preparation for democratic elections. This law established both the regulations governing future democratic elections and the formula for electing the president for the 1989 election and thereafter. However, as originally promulgated, Law 18,700 omitted the electoral formula for electing members of the Chamber of Deputies and the Senate. Only after Pinochet’s defeat in the October 1988 plebiscite did the military regime establish the legal regulations governing these elections (Pastor 2004, 44). Law 18,799, implemented more than a year after Law 18,700, formally instituted the binomial electoral system. This system established two member districts for all legislative elections. A party or political pact is guaranteed half of the seats in any electoral district in which it wins a minimum of 33.4 percent of the vote. This percentage unduly rewards second-place finishers and, not coincidently, is roughly equivalent to the vote percentage historically received by the Chilean right. Thus, in congressional races, for example, for a party or voting bloc to gain both seats in a given district, it must win more than two-thirds of the district vote, or double the number of votes received by the second-place party or pact (the 66 percent majority clause). The antidemocratic effect of the 66 percent majority clause is dramatized by the results of the 1989 Senate race between PPD candidate Ricardo Lagos and UDI (Unión Democrática Independiente) founder Jaime Guzman in the district of Conchali. Despite winning 175,000 more votes than Guzman, Lagos lost his bid for the district’s second seat because Guzman’s 224,000 votes were greater than one half of Lagos’s 399,000 (Caviedes 1991, 89; Ensalaco 1994, 420). Such stringent requirements cost parties or pacts opposing the right 4 Senate and 8 Chamber seats in the 1993 elections and 3 Senate and 6 Chamber seats in the 1997 elections (see tables 4.1 and 4.2). The designers of the binomial electoral system compounded its bias in favor of the right by gerrymandering electoral districts. They based their gerrymandering on the assumption that Chileans who supported Pinochet in the 1988 plebiscite were likely to support the right in subsequent parliamentary elections (Navia 2004). Pinochet’s support had been concentrated in rural areas, less populated and traditionally more conservative than urban centers. Conscious of this rural bias in favor of Pinochet and the right, the military regime’s electoral architects constructed the electoral map so that the twenty least-populated districts elect forty deputies while the seven most-populated urban districts, which have roughly the same population, elect only fourteen deputies (Pastor 2004, 45).

Table 4.1

Effects of the 66 Percent Clause on 1993 Congressional Elections

A. Second Seat Concertacíon Loses—Chamber of Deputies District Number and Name

5 Chaqaral Copiapo 28 San Miguel Lo Espejo 29 La Pintana Puente Alto 34 S. Fernando S. Vicente 38 Constitución Maule 48 Angol Colhipulli Traiguen 55 Osorno S. J. de la Costa 60 Punto Natales Punta Arenas

Concertacíon Concertacíon Right-wing Candidate Percentage Candidate Number/Percentage of Vote Number/Percentage of Votes of Votes 53.3

16,021/24.4

13,273/20.2

50.3 61.6 51.8 58.0

43, 346/24.8 47,740/29.4 22,927/25.0 14,826/22.8

39,452/22.5 31,969/19.7 20101/20.7 13,670/21.0

52.1 61.1

15,511/22.2 26.0

14,283/19.1 25.6

59.0

20,981/29.2

16,998/23.6

B. Second Seat Concertacíon Loses—Senate Circuit/Region Number and Name

3 Region III Copiapo Vallenar 11 Region VII Sur, Linares Cauquenas

Concertacíon Concertacíon Right-wing Candidate Percentage Candidate Number/Percentage of Vote Number/Percentage of Votes of Votes 56.0

29,043/26.5

23,733/21.7

59.5

42,184/26.5

40,934/25.7

Source: Ministerio del Interior, Santiago, Chile.

Table 4.2

Effects of the 66 Percent Clause on 1997 Congressional Elections

A. Second Seat Concertacíon Loses—Chamber of Deputies District Number and Name

4 Antofagasta 5 Copiapo 7 La Serana 9 Los Vilos

Concertacíon Concertacíon Right-Wing Candidate Percentage Candidate Number/ Number/Percentage of Vote Percentage of Vote of Votes 58.56 50.45 50.5 49.72

24,737/27.14 11,183/23.41 18,210/25.02 12,661/22.99

19,224/21.12 10,251/21.46 15,849/21.77 8,621/15.66 Continued

82 / State, Market, and Democracy in Chile Table 4.2

Continued

District Number and Name

34 San Fernando 46 Arauco

Concertacíon Concertacíon Right-Wing Candidate Percentage Candidate Number/ Number/Percentage of Vote Percentage of Vote of Votes 42.42 49.82

15,352/19.56 13,499/19.32

15,019/19.14 10,227/14.64

B. Second Seat Concertacíon Loses—Senate Circuit/Region Number and Name 2 Region II 9 Region VI 19 Region XII

Concertacíon Concertacíon Right-Wing Candidate Percentage Candidate Number/ Number/Percentage of Vote Percentage of Votes of Votes 61.15 48.06 58.21

43,032/26.1 75,603/23.05 15, 871/27.62

39,515/23.97 67,615/20.62 13,877/24.15

Source: Ministerio del Interior, Santiago, Chile.

Andrés Allamand, former head of the right-wing Renovación Nacional (RN), acknowledges that the binomial electoral system, in conjunction with the designated senators, has, “objectively favored the parties of the military regime (read the present opposition), granting to them greater political and legislative power than would have otherwise arisen from electoral results” (Allamand 1999, 182; author’s translation). These impediments have limited the Concertación’s ability to enact beneficial legislation (e.g., labor code reform) or democratic reforms (e.g., amending or terminating the binomial electoral system). Accordingly, they compromise the parties’ ability, and thus willingness, to respond to popular sector demands. The binomial electoral system further impacts the nature of partysociety linkages by compelling the formation of pacts, which has led to ideological homogenization among the parties of the Concertación and exclusion of the far left. Significant tensions have arisen among competing parties within the Concertación, particularly between the centrist PDC and the leftist PS, over issues such as poverty reduction, adjudication of human rights abuses, and social justice. Bitter differences have also arisen over the formation of electoral lists for elections at all levels of government. However, the binomial electoral system has compelled these parties to subordinate their programmatic and ideological differences to form coalitions that will ensure their electoral survival and contain the electoral strength of a right whose potential dominance the center-left considers a threat to democracy. While the practice of coalition formation induced by the binomial electoral system has promoted political consensus and stability, it has also


stifled the expression of natural conflicts and acute programmatic differences among coalition partners. It thereby undercuts the role of political parties as agents of representation (Munck and Bosworth 1998, 486). This problem is compounded by the electoral isolation of the far left that has occurred under the binomial system. Excluded from the Concertación, and without other coalition partners that can adequately complement its modest electoral strength, the Communist Party—the most vocal critic of the Chile’s neoliberal development model—has been unable to gain legislative representation at the national level. These changes in the electoral landscape have significantly narrowed the ideological and programmatic options available to voters and widened the breach between parties and popular sector constituents that evolved during the final years of the dictatorship. Disenchantment, Public Opinion, and Electoral Trends Thus, electoral reforms imposed by the military regime coupled with the renovation of center-left parties have created disincentives for popular participation and contributed to widespread disenchantment with political parties and political institutions. This disenchantment is evident in recent public opinion polls as well as trends in voting behavior among the electorate, both of which portend negative consequences for the quality of Chilean democracy. Warning signs can be seen not only in the public’s view that there is an imbalance of power between business elites and unions (92 percent; CERC 2002b, 6) but also in the extremely low opinion that the public holds of political parties and key political institutions. Only 22 percent of the public has confidence in the Chilean Senate, 20 percent in the judiciary, 18 percent in the Chamber of Deputies and an abysmally low 9 percent in political parties (CERC 2005, 2). The public’s exceptionally low estimation of political parties reflects the view of the overwhelming majority of Chilean citizens that the political parties do not share their concerns (85 percent) and only preoccupy themselves with the people at election time (92 percent) (CERC 2002b, 6). The public perceives a clear disjunction between its concerns and the state’s policies, with 83 percent indicating that the state allocates insufficient resources for healthcare, 70 percent holding the same view with respect to education, 67 percent with respect to public safety, and 60 percent with respect to housing (CERC 2002a, 2). More broadly, 67 percent consider social equality more important than individual liberty, a perspective clearly at odds with neoliberal ideology, political economy, and social policy as they have been adopted in Chile (CERC 2004, 3).


The public’s disenchantment with economic and political institutions, and in particular political parties, is having a negative impact on electoral politics in Chile. Voter turnout and voter registration as percentages of the voting-age population have fallen significantly since the democratic transition while the casting of spoiled or blank ballots, noncompliant abstention and nonregistration have become highly common (see table 4.3). For example, in Chile’s 1997 legislative elections, 40 percent of Chileans decided to cast blank and spoiled ballots, to abstain, or not to register. Similarly, only 58 percent of eligible Chilean voters voted for a party in the 2001 legislative elections compared with nearly 85 percent who did so in the 1989 legislative elections. With just over 60 percent of eligible voters casting votes in 2005, the results for the most recent presidential and congressional elections are only marginally better (see table 4.3). Among the most significant factors explaining these trends are distrust in representative political institutions and dissatisfaction with the political system’s performance (Carlin 2006, 243). Several characteristics stand out with respect to these electoral trends. First, the decline in voter registration is particularly pronounced among Chilean youth. As Carlin observes, Chileans who reached voting age during the transition period or later are more inclined not to register than to cast a valid vote. In a dramatic indication of this trend, he notes that youth from the post-Frei generation are 69 times more likely not to register than to cast a valid vote (Ibid.). However, despite their extremely low rates of registration, it is important to emphasize that Chilean youth are no more apolitical when compared to the rest of society (S. Madrid 2005). Their lower rates of electoral participation may be explained, at least in part, by a second prominent trend in contemporary Chilean politics—a significant decline in party identification. As tables 4.4 and 4.5 illustrate, the percentage of Chileans who do not identify with any political party or ideological position has increased substantially since the early posttransition years. Given the impact of structural reform, party renovation, and institutional arrangements such as the binomial electoral system on partysociety linkage noted above, the decline of party and ideological identification is not surprising. However, such declines do not necessarily indicate widespread disinterest in politics. Indeed, recent survey research indicates that most Chileans are relatively well informed politically. For example, in a recent survey conducted by CSES (Comparative Study of Electoral Systems), 58 percent of respondents were able to name the interior minister. Perhaps more indicative of widespread political awareness, 92 percent of respondents could correctly situate Chilean political parties on an ideological spectrum

Table 4.3

Electoral Participation in Chile 1988–2005 (in 1000s)

Year

Voting Age Population

1988 1989 1992 1993 1996 1997 1999 1999 2nd 2000 2001 2004 2005 2005 2nd

8,062 8,243 8,775 8,951 9,464 9,627 9,945 9,945 10,100 10,500 11,119 11,323 11,323

Registered Voters

7,436 7,558 7,841 8,085 8,073 8,078 8,084 8,084 8,089 8,075 8,012 8,221 8,221

Actual Voters 7,251 7,159 7,044 7,377 7,079 7,046 7,272 7,316 7,019 6,992 6,874 7,157 7,143

Valid Votes

7,187 6,980 6,411 6,969 6,301 5,796 7,055 7,169 6,452 6,107 6,123 6,894 6,941

Null & Blank Votes 65 181 623 308 779 1251 216 148 566 884 751 263 202

Abstainers & Unregistered 824 1,163 1,722 1,540 2,306 2,513 2,674 2,628 3,082 3,509 4,245 4,166 4,190

Source: Electoral Service of Chile (www.elecciones.gov.cl) and National Institute of Statistics of Chile (www.ine.cl).

Voters/ Registered Percentage

Valid Votes/Voting Age Population Percentage

96.6 92.3 81.9 84.3 76.6 71.1 90.0 90.5 86.8 86.6 85.8 87.0 86.9

89.1 84.6 73.2 75.8 65.3 59.6 70.1 71.1 63.9 58.2 55.0 60.9 61.3

Table 4.4 Year Party PDC UDI PC RN PS PRSDa UCC PPD PH Others None/No Response

Political Party Identification in Chile 1991–2005 Question: With which of the following political parties do you identify with most? 91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

32.5 8.0 1.8 10.6 7.2 2.4 5.9 8.4 0.8 1.8

28.5 5.3 3.7 9.3 5.9 3.3 5.9 7.8 1.8 1.8

40.3 5.1 1.6 10.7 5.8 1.5 4.8 7.6 1.6 1.5

32 4 1 9 6 3 3 10 2 0

29 4 2 7 7 2 3 9 n/a 1

24.7 4 1.4 8.0 5.9 1.5 2.4 10.2 1.0 0

23.6 4.7 1.6 6.6 5.9 1.1 1.1 6.6 n/a 0.5

24 5 1 4 5 0 0 5 n/a 0

16 10 2 10 8 2 2 11 n/a 0

15.6 9.3 1.7 9 8.1 1.2 1.5 8.6 n/a 0.2

14.2 8.1 2.4 9.4 7.1 1.4 1.0 9.0

13.3 10.0 2.6 8.6 7.8 1.1

10.9 9.0 2.6 6.8 8.7 0.8

16.2 12.4 1.9 6.2 10.4 0.5

11.8 10.0 2.3 13.5 11.4 1.4

8.9

0.4

0.6

9.6 2.2 0.2

10.6 1.3 0.4

12.6 2.6 0.4

21.1

24.7

25

27

35

38.8

45.2

41

38

43.7

46.9

47.1

46.7

40.1

34

Source: Centro de Estudios Públicos (http://www.cep.cl). a The Partido Radical (PR) and the Partido Social Demócrata joined forces in 1995. Figures for years prior to 1995 are the sum of the percentages for each party.

The Rise of Popular Dissatisfaction / 87 Table 4.5 Ideological Self-placement—Chilean Electorate September–October 1990 to October–November 2005 Question: With which political position do you sympathize with the most? Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Right/Center Right 15.2 19.7 22.6 28.6 27 26 26.2 23.2 23 28 23.4 22.9 22.7 21.1 21.2 26

Center 29.5 33.0 22.4 18.5 17 16 15.9 10.3 10 12 10.8 12.9 13.8 9.0 12.4 15.6

Left/Center Left

Independent/None

28.2 23.3 31.4 33.4 28 26 23.3 20.4 26 24 23.4 23.9 19.8 22.6 24.2 25.8

22.4 19.5 20.2 14.3 10 26 29.5 37.1 35 31 35.1 33.8 35.5 39.5 36 28.6

Don’t Know/ No Answer 4.7 4.6 3.4 5.1 6 6 5.2 9 8 6 7.2 6.5 8.2 7.9 6.2 3.9

Source: Centro de Estudios Públicos (http://www.cep.cl).

(CSES 2004, 6). On the basis of findings such as these, the study’s authors suggest that, “the Chilean does not reject politics without knowing about it; rather s/he rejects politics because s/he knows much about it and appreciates continuing to reject it, drawing arguments from the information in order to do so” (Ibid., 7). Party-Base Linkage—The View from the Shantytowns The public’s disenchantment with political parties and the Chilean political system manifested in opinion polls and declining electoral participation is similarly evident at the grass roots. Interviews conducted with grassroots leaders in the shantytowns of Santiago in 1993, 2001, and 2006 indicate a pervasive sense of alienation and frustration among shantytown residents, including base militants and social leaders belonging to the major parties of the Concertación. In general, these local leaders expressed serious skepticism regarding the concern of party leaders for the needs and interests of the pobladores. Some of the strongest sentiments of this sort were


expressed, as might be expected, by militants of the Socialist Party. As one Socialist Party militant explained, The party is not what it used to be. Before there was a direct relationship with the union movements, student movements, poblador movements. Today this is not the case in the Socialist Party, especially because many of the current leaders were exiled and as a result have brought a vision of European social democracy to Chile. Their reality conflicts with the reality of our country. These differences create a lot of conflict in the party. Besides, the interests of the cupula [party elites] are different from the interests of pobladores. This bothers pobladores a lot. And that is another reason why leftist parties do not have the support they should have.21

Another longtime party militant was even more critical in his assessment of the relationship of the PS with the grass roots: Until 1989 the PS had money for its departamento poblacional [department dealing with shantytown dwellers]. With the reunification of the party all that was lost. At one time there were thirty paid militants. Today there are none; the party gives not one cent to grass roots organizing. Within the PS and within the Concertación policies do not exist for dealing with the grass roots, but neither do the parties care if anything happens. They do not have the political will. Instead, the game of the political parties today is to maintain political stability. Social conflicts are managed but they are not resolved. The economy is better but this is not translated into greater horizontal solidarity but into the logic of the individual above everything.22

When asked to respond to such charges, Anibal Palma, national subsecretary of the PS, acknowledged that there is clearly reduced participation in those organs of the party dealing with peasants, workers, and shantytown dwellers. But this has occurred not because the party has distanced itself from the working class and the popular sectors, but because there are increasing numbers of social leaders in society and because the people feel themselves capable of dealing with their own problems. In Chile the era of statism has passed. Now the citizenry is more realistic, more knowledgeable—they reject the solutions of the past.23

Thus for Palma the Socialist Party’s “renovated,” less involved relationship with civil society, particularly with the popular sectors, has been a positive transformation that leaves little reason to be nostalgic for the revolutionary politics of Allende’s Popular Unity government. In his view, the renovation of the Socialist Party has not meant that the popular sectors have been excluded but rather that the party has become more inclusive, broadening


its political appeal by earning a reputation for responsible, competent leadership in government. Today we are more inclusive and less ideological. In the past we were considered a party of the popular sectors, but we were faulted for our poor public management. Today our ministers are considered, if not the best, among the best. They no longer have an image associated with the disorder, lines, inflation, and economic crises which occurred in the past. As a result of this renovated image and new style of management we can compete electorally with the Christian Democrats.24

This view of Chile’s socialist renovation is shared by Gonzalo Meza, the grandson of President Allende and a former municipal councilman for the center-left PPD in the municipality of La Granja. Like Palma, Meza rejects the populist and revolutionary politics that reached their peak during his grandfather’s presidency. Indeed, Meza’s attraction to the PPD stemmed from the party’s freedom from the burden of a revolutionary past and its flexible, undogmatic brand of socialism. But in contrast with Palma, Meza recognizes the elitist nature of Chile’s new democracy and the problems this presents in integrating the popular sectors. This transition in Chile has been carried out at an elite level, that is, at the level of the cupulas. And it was intentionally done this way by the Concertación, military people, and the right, everyone except the Communist Party. Now, however, we need to find ways to better incorporate the popular sectors, to encourage their participation. Especially after the 1989 elections many people lost interest in participating. They had such high expectations and when these were not immediately realized, they stopped attending the neighborhood association meetings. Before 200 to 300 people attended these meetings; today only ten do. Out of those ten, six are leaders. However, they do take part in national elections. This happens because political parties have concentrated more on the transition from above instead of working closely with the pobladores.25

Meza’s characterization is one which, in some respects, resonates with the perspectives of both party elites and grassroots militants. For example, base leaders and party elites generally agree that many pobladores held exceptionally high expectations of the changes that the democratic transition would bring. According to accounts given by party elites and base militants from the PS, PPD, and PDC, when these expectations were not immediately fulfilled many pobladores, especially the poblador youth, became disenchanted with politics and withdrew their participation. Elites and militants also frequently cited lingering fear of political persecution, distrust of local government officials (many of whom had originally been


appointed by Pinochet), and the perception that the legitimacy of local institutions such as the neighborhood councils had not yet been restored, as important reasons why pobladores have been reluctant to participate. Although they agree on the preceding points, base leaders and party elites clearly diverge when it comes to assessing the responsibility of political parties for the apathy and cynicism that pervades the grass roots. While the vast majority of the grassroots leaders questioned identified the failure of political parties to respond to the needs and interests of the base as a primary cause of such apathy and political disinterest, among party leaders interviewed, only the representative from the Communist Party made a similar assessment, although he was quick to exclude his own party from culpability.26 Predictably, the responses of mid-level party leaders on this issue were closer to the position taken by the majority of grassroots leaders interviewed. Indeed, among center and left parties of the Concertación, only the mid-level leader from the PDC failed to identify a split between party elites and grassroots constituents as a major cause of apathy among the popular sectors. Rather than attribute popular sector alienation from the political process to their own doing, center and left party elites within the Concertación interviewed in 1993 emphasized the lingering ill effects of authoritarian repression. For example, all the Concertación party leaders interviewed identified persistent fear brought on by the experience of authoritarianism as the greatest cause of the popular sectors’ reluctance to participate in politics. In contrast, scarcely more than a third of the grassroots leaders interviewed considered such fear to be a major cause of popular political apathy. Their differences over the effect of residual fear among pobladores aside, centrist and leftist grassroots leaders generally agree with political elites that Pinochet’s authoritarian legacy has had an extremely negative impact upon the popular sectors’ willingness to participate in politics. In this regard, centrist and leftist political leaders at all levels share a common perception—the dictatorship’s seventeen-year attack on the political class, in which politicians were constantly vilified as corrupt, dishonest, and self-interested, has made the public exceedingly distrustful of politics and politicians. Moreover, among the center and left political leaders there was near unanimous agreement that the institutional legacy bequeathed to democratic leaders by their authoritarian predecessors presents significant impediments to popular political unity and efficacy.27 Predictably, elites and grassroots leaders affiliated with the political parties most sympathetic to the economic and political project of the authoritarian regime—the right-wing RN and UDI—interpret present political conditions in a manner significantly different from their centrist and leftist political rivals. None of the right-wing party representatives interviewed


perceived fear to be a factor shaping the political attitudes or behaviors of the popular sectors. And only one of the right-wing leaders questioned considered a split between party elites and grassroots militants to be a factor contributing to popular political apathy. Similarly, with a single exception, the right-wing leaders rejected the idea that the institutional legacy of the authoritarian regime presents obstacles to popular political efficacy and unity.28 Despite these differences, there are some important similarities between the perceptions of right-wing grassroots leaders and grassroots leaders of the center and left. Most notably, regardless of party affiliation or ideological inclination, base leaders tended to attribute low levels of popular participation in local institutions such as the neighborhood associations to widespread distrust of politicians as well as disillusionment with the government’s failure to fulfill popular expectations for higher salaries, more housing, and improved health care and education. Such pervasive distrust and disillusionment at the grass roots has made the Concertación, as the ruling coalition, particularly susceptible to criticism from popular sector constituents. Common among grassroots militants interviewed from parties affiliated with the Concertación was an acute sense of being manipulated by the leadership of their respective parties. As one Christian Democratic Party activist explained, Here at the base we have closer ties with local leaders from other parties than with the elites of our own parties. There is a clear division between la base y la cupula. They party bosses never come to ask our opinions or find out our needs. They call us only when they need support, before an election or when they need a show of strength.29

A militant from the PPD expressed similar feelings of distrust and resentment toward party leaders and politicians: The democracy which exists now is not as democratic as people say it is. The cupulas govern without us; we are not heard! You can knock on all the doors you want but the only time they seem to listen is if there is a story in the newspaper which makes them look bad. Many people are alienated by politics and politicians here in Chile. In one way or another, these people have been deceived by the parties. The cupulas make their decisions without consulting the people here. They never ask us, “[D]o you want this or that?” They never come to the poblaciones to discover what it is the people really want. The only time they come is at election time, and once the election is over they disappear.30

Asked to comment on their relationships with their respective parties, base militants affiliated with the parties of the Concertación reiterated


time and again the distrust and sense of betrayal expressed in the above passages. This pattern was consistent not only across party lines but also across the territorial boundaries of the different shantytowns investigated within greater Santiago.31 Moreover, subsequent interviews reinforce these original findings. Interviews with grassroots leaders conducted in 2001 and 2006 suggest that little has changed since the early years of the transition.32 Grassroots leaders and activists interviewed in these years expressed nearly identical sentiments as those interviewed in 1993. With respect to the split between the party elites and grassroots constituents noted above, for example, the comments of a social leader in Yungay were typical: In a democratic process, the government must listen to the people, must listen to the popular organizations and evaluate if what they ask for is just or not. But what happened is that the political parties remained at home, they shut down their activities in the población. One does not see their programmatic action here. I see that there isn’t concern with problems such as healthcare among the political parties . . . in an election campaign there are many candidates that make promises that they will fix things after the election—the problems with pensions, with healthcare, et cetera—they make promises, but from experience they don’t achieve much. With the political parties there is practically no active mobilization, there are no party representatives to which the people can go to for advice or assistance, at least not in this población.33

These sentiments are echoed by a community leader in the población of La Pincoya affiliated with the Christian Democratic Party: Participation is well-directed during elections . . . elections bring people together. But “los gran politicos” should have more concern and pay more attention to the grassroots militants and pobladores, not just during elections, but always. Local leaders from other parties share the same problem. For me what is most important is being a social leader, a representative of the people in this community, more than being a militant for the party. . . . All the parties are the same, including the DC, after the elections the parties forget about the problems of the pobladores in this community.34

Similar criticisms were expressed by a former leftist activist in Yungay: The left is divided and they need to find a way to operate. This division is between those people at the top and those at the bottom. The latter ones do not have any participation in society. Before there used to be some communication between those at the top and those at the bottom of political parties. But today that communication does not exist. This is determined by the political scenario present in Chile nowadays. People at the top of

The Rise of Popular Dissatisfaction / 93 political parties do not need the approval of those at the bottom to operate. Today, politics belongs to those at the top.35

The view that the political parties of the Concertación had adopted an instrumental relationship with their grassroots constituents, seeking support at election time and then abandoning the población, was as palpable in 2006 as it was in preceding years. The frustration of a community leader in Yungay echoed sentiments expressed by many others: Political parties support us during election campaigns and then they leave us. They win to fight each other, to privatize, give away industries, et cetera. They fight for hegemony and to privatize companies that provided utilities for people. Companies that never lost money. And why did they sell them? People see those cases and they learn from them. They conclude that we no longer need solidarity. . . . And who ends up paying? We, the people, not the state nor the companies that have the money.36

Implicit in the preceding comments is the notion that the government’s reforms have done little to address the essential needs of the popular sectors. Other shantytown residents made these criticisms more explicitly. As one resident of Yungay articulated: What I don’t like is that delinquency and drugs are not properly dealt with. You can’t go to the plazas because there, where children should be playing, it is full of drug addicts. That didn’t happen before. When I was a little girl in the sixties, there weren’t any drugs and there wasn’t so much delinquency. But now we have an epidemic . . . .This situation is never going to end. That’s why I don’t like any political regime. All politicians are full of bla bla! They don’t do anything at the end of the day.37

While the preceding comments reflect cynicism on the part of a pobladora not engaged politically or socially, others who have a history of engagement with political parties and as social leaders exhibit cynicism as well. As a grassroots leader in another community observed, The assistance my party [PPD] gives us here in this community is very minimal. It is like all of the other parties—it comes closer to the people only at election time. As a result, many people are alienated by politics and politicians here in Chile. In one way or another, these people have been deceived by the parties. The leaders of the political parties do not want to recognize that despite the fact that many people are poor in the poblaciones, and despite the fact that they may not be educated, they are not stupid!38

Clearly, then, as evidenced by the foregoing interviews, the split that developed between base militants and party elites over the course of the


dictatorship has persisted if not widened now that Chile has made the transition to democracy. On the positive side, fear is no longer a factor that helps to explain why pobladores choose not to become actively engaged in the political system. Despite this positive development, many grassroots leaders continue to perceive that the Concertación has failed to translate the restoration of democratic institutions and party politics into meaningful representation of the popular sectors’ interests. Conclusion Since the collapse of democracy in 1973 and its reestablishment in 1990, party-society relations in Chile have undergone profound changes that have adversely affected the quality of the nation’s democracy. Structural reform, party renovation, and the institutional constraints that have accompanied Chile’s democratic transition have operated in synergistic fashion to severely restrict the political representation of the popular sectors in the political arena. This restricted representation has led, in turn, to declining confidence in political parties, increased apathy, and declining electoral participation, all of which undermine political accountability and representativeness and thus compromise the quality of Chilean democracy. Institutional constraints the military regime imposed as a precondition to democratization have ensured the perpetuation of the structural conditions that have vitiated the traditional mode of linkage between centerleft parties and civil society. Given the democratic opposition’s inability to oust the Pinochet regime by force, authoritarian rulers were able to dictate the conditions under which they would transfer power to civilian authorities. As a result, they were able to compel the democratic opposition’s acceptance of key institutional reforms, designated senators and the binomial electoral system in particular, which have artificially constrained the Concertación’s electoral strength and thus its policymaking latitude. Moreover, the binomial electoral system has reduced party competition and thereby blurred ideological and programmatic distinctions among parties of the Concertación, leaving voters without clear options from which to choose. The restructuring of party-base relations in accordance with the institutional and structural reforms imposed by the military regime has been facilitated by the philosophical stance and actions taken by the “renovated” parties of the Concertación. The leaders of these parties reasoned that if ideological polarization and the overpoliticization of the state and civil society had caused the breakdown of Chilean democracy in the past, then future democratic stability could only be assured by depoliticizing state and society. To this end, center-left parties have abandoned the ideological


rigidity and polarization that characterized the pre-coup period. Yet, in the process they have also relinquished their traditional role of organizing and mobilizing groups within society. The result of the Concertación’s adoption of this strategy has been a relative demobilization and depoliticization of the political arena and increasingly limited opportunities for the popular sectors to gain representation of their interests. In this regard, it bears emphasizing that the disappearance of politically structured class cleavages noted by Torcal and Mainwaring (2003) and others does not imply the disappearance of class divisions in terms of economic disparities. To the contrary, as demonstrated in chapter 3, high levels of economic inequality persist. However, the parties of the Concertación have avoided focusing on this issue in a way that would facilitate the organization and mobilization of the popular sectors. Indeed, in contrast with the programmatic diversity that characterized pre-coup party politics, today there is acceptance of the neoliberal development model across the political spectrum, with the exception of the far left. And while the far-left PC is quite vociferous in its criticisms of the market-based model of development, it is unable to offer voters a viable electoral (and hence programmatic) alternative to the ruling Concertación. The political renovation of its former coalition partner, the PS, coupled with the constraints the binomial system imposes on political parties and the electorate, has left it electorally excluded and impotent. The far left’s electoral exclusion and the pursuit of consensus within the Concertacíon have undoubtedly minimized ideological conflict within the party system and facilitated the preservation of a high level of political stability. However, this stability has come at the expense of a more representative and responsive form of politics. The result of this trade-off has been widespread distrust and disenchantment with political parties and other democratic institutions and a significant decline in political participation. If the parties of the Concertación fail to provide the institutional linkages necessary to revitalize traditional collective actors and to enable new collective actors to take shape, they will undoubtedly fail to overcome this distrust and disenchantment. In other words, without the Concertacíon’s demonstrated willingness to be more responsive to the needs and concerns of its grassroots constituents and to make local and national government more democratic, civil society will remain weak and fragmented and the popular sectors will remain largely alienated from the political arena. As a result, there will be little foundation upon which to build an electoral democracy that effectively represents those most in need of representation. To the extent that this trend pervades Chilean politics, it reflects the emergence of a vicious cycle that does not bode well for the quality of the nation’s young democracy. In essence, those citizens most in need of


political representation are increasingly discouraged from participating. The more they withdraw from the realm of electoral politics and the less they are capable of engaging in effective collective action, the less able they are to hold public officials accountable. And the less beholden these public officials feel to those alienated from the political system, the less likely they will be to enact policies that address their concerns. If this dynamic continues, policy will continue to be skewed in favor of the business community and upper- income Chileans, leading to further alienation within the popular sectors and thus the likelihood of their increased electoral retreat. With the perpetuation of this pattern, the quality and legitimacy of Chilean democracy will rest on increasingly shaky ground. Unfortunately, as chapter 5 suggests, the nature of local government in Chile gives us little reason to be optimistic about overcoming these negative trends.

Ch a p t e r Fi v e Loc a l D emoc r ac y a n d t h e Tr a nsfor m at ion of Pop u l a r Pa rt ic i pat ion

Introduction The close linkages between parties and society that characterized Chile’s pre-coup period were developed most effectively at the local level of government. The intensity of these ties grew exponentially during the late sixties and early seventies in response to the growing ideological polarization emanating from the party system, particularly between the centrist PDC and its leftist competitors. During this period Chile convulsed with grassroots political activity. Rallies, demonstrations, and land seizures were increasingly common in shantytowns surrounding Santiago and other major urban centers. Perhaps unwittingly, the Christian Democrats under President Eduardo Frei Montalvo (1964–70) facilitated this intense grassroots mobilization. The party established a corporatist program through municipal government, Promoción Popular (Popular Promotion), which it hoped would provide a monopoly of influence over previously marginalized and unincorporated segments of the population. In this manner, the PDC intended to broaden its base of support and establish itself as the ultimate arbiter of Chile’s political destiny. Instead, it alienated the right and provoked intense competition from the left. Like the Christian Democrats, the Socialists and Communists aggressively organized, mobilized, and encouraged previously marginalized segments of the population to demand greater responsiveness and resources from the state. This dynamic intensified under President Salvador Allende, threatening the Chilean state’s fiscal and political stability and ultimately contributing to the democratic breakdown of 1973. It was not surprising, then, that soon after taking power, the military regime initiated forceful measures to suppress local collective action and to break the nexus between political parties and their grassroots constituents. Despite this repression, popular


resistance and mass demonstrations emanating from the shantytowns challenged the Pinochet regime’s legitimacy and prompted the liberalization process that concluded with the return to democracy in 1990. Thus politics and collective action at the local level played a key role in both the breakdown and restoration of Chilean democracy. The essential role that local politics have played in Chile’s modern political history suggests the importance of local government to any qualitative assessment of contemporary Chilean democracy. The importance of evaluating local government to assess the quality of Chilean democracy is reinforced by a number of other considerations. For one, the significant role local politics have played in Chile’s recent political history provides a useful basis of comparison by which to assess popular participation and local government under different regime types and development models. In addition, as in many other Latin American countries, radical transformations in Chile’s social structure brought about through authoritarian repression, structural reform, and economic liberalization have tended to shift the relative importance within the popular sectors “from the classes to the masses,”1 that is, from the organized labor movement to the more heterogeneous, less organized agglomeration of the popular sectors in the shantytowns surrounding major urban centers. Finally, for many within the popular sectors, the institutions of local government provide their primary, if not only, point of contact with the political system and the state. These conditions make examination of popular sector participation in local government a primary consideration in the qualitative assessment of Chile’s new democracy. To what extent, then, does municipal government in Chile facilitate the political participation in local politics of groups that have been marginalized historically? The argument presented here provides a disappointing answer to this question. In short, structural reforms, institutional arrangements, and the dominant mode of political party-base linkage, all militate against effective popular sector participation in local democracy. Structural reforms have severely constrained local leaders’ resources as well as their policymaking prerogatives, thereby undermining incentives for popular participation. Meanwhile, institutional arrangements limit public officials’ accountability to their constituents and severely circumscribe opportunities for citizen input in decision-making, creating a vicious cycle of low levels of popular participation and limited accountability. As substantiated in chapter 4, the parties of the governing center-left Concertación have reinforced this vicious cycle by pursuing a mode of linkage with civil society designed to promote their electoral success with only minimal organization and participation of their grassroots constituents. Such conditions fit well with the desire of elites of both the right and the Concertación to depoliticize civil society to preserve macroeconomic and political stability. Yet

Transformation of Popular Participation / 99

they leave in doubt the efficacy of popular participation and the strength of local democracy in Chile. To develop this argument, the following section delineates essential conditions for facilitating popular participation in local democracy. Subsequently, the analysis examines popular participation in local government in the pre-coup, military regime, and posttransition periods. Local Democracy and Popular Participation Strong local democracy requires accountability of public officials and institutional access that facilitates the active political participation of local constituencies. If citizens are to hold their local officials accountable and if their local officials are to be responsive, then these citizens must participate through established local institutional channels. Institutional arrangements that facilitate accountability and access include direct election of mayors and other public officials and institutional channels that allow citizens to participate in decision making in their jurisdictions. Direct election of mayors is desirable since indirect elections have “tended to perpetuate the strength of political insiders, who [are] often more accountable to their party hierarchy than to the public at large” (Peterson 1997, 14). Institutional channels must facilitate participation beyond the mere act of voting since elections are infrequent and allow for only limited citizen input or feedback regarding specific local concerns or policy options. Therefore, “direct citizen participation requires that citizens have clear information regarding the municipal budget and service costs and that they participate in actual budget choices” (Ibid., 20). Moreover, there should be formal structures that clearly spell out the roles that citizens and community organizations should play in collaborating with municipal government. In this regard, “advisory committees” are not highly valued by the population. Instead, “effective participation with local government has been organized mostly around public works projects that bring immediate benefits, and around a process that allows participation in budget allocation” (Ibid., 16–17). The foregoing assessment suggests that popular sector participation in local government is highly sensitive to the prevailing opportunity structure. A wide range of research supports this conclusion. Such research indicates that state structures and institutions as well as the kinds of linkages political parties develop with civil society are the primary determinants of the level and form of popular sector political participation. Recent comparative work by Portes and Itzigsohn (1997) and Houtzager and Kurtz (2000) as well as earlier comparative works by Goldrich (1970), Cornelius (1974), S. Eckstein (1977), Castells (1983), among others, conclude that


popular sector constituencies structure their participation in accordance with the political opportunities and resources that are available to them. Accordingly, structural arrangements that severely limit local officials’ revenue base as well as their ability to shape policies in accordance with constituent demands will, all things being equal, act as disincentives to popular participation. Without the ability to address constituents’ demands, local officials will have little incentive to encourage, and constituents little incentive to engage in, political participation and collective action. Whether parties facilitate popular sector access and participation depends upon the kinds of relationships they assume vis-à-vis civil society. Parties that adopt a participatory form of linkage, for example, attempt to serve as an agency through which citizens can themselves participate in government and tend to be closely linked with organizations in civil society; they have strong grassroots organizations and are internally democratic. In contrast, as noted in chapter 4, electoralist parties are primarily concerned with mobilizing an electoral constituency rather than organizing and mobilizing groups in civil society. Their primary objective is to develop the broadest possible base of electoral support, which requires attracting unorganized and often independent voters and developing a multiclass electoral constituency. To the extent that grassroots party structures exist, party leaders typically control them and mobilize party activists only for electoral purposes (e.g., registering new voters, canvassing, getting out the vote, etc.). Without high levels of autonomous organization in civil society, this form of linkage will not be an effective means for grassroots constituents to promote their interests. Similarly, in parties that adopt clientelistic linkages to civil society, grassroots structures are boss-ruled or nonexistent and therefore do not facilitate effective collective action; such parties act as vehicles for the exchange of votes for favors. Finally, parties that adopt a directive form of linkage act as agents of political education and/or coercion. Such parties attempt to maintain control over their constituents (Lawson 1988, 16–17). They typically have strong roots in social organizations—labor unions, peasant associations, urban neighborhood organizations, and so on—but their work in these areas is an extension of party organizing and it reflects an effort to build social bases for the party’s political project rather than for the purpose of strengthening civil society in its own right (Roberts 1998, 75). As noted in chapter 4 and substantiated more fully below, center and left parties in Chile have adapted their mode of party-base linkage in accordance with changing political and structural conditions and related changes in their agendas and perceptions of democracy. Under state-led development before the 1973 coup, center and left parties were driven by the desire to control the state and its resources for the realization of their


distinct ideological objectives. To achieve these objectives, they pursued primarily directive and clientelistic linkages with constituents in the local political arena. By the mid- to late 1980s, however, conditions had changed dramatically. State resources upon which to build and maintain grassroots constituencies had been severely curtailed and the left’s primary base of support, the labor movement, had been decimated. Moreover, the majority of the parties of the center and left had concluded that their ideological zealousness and inflexibility had contributed to the collapse of democracy. Their new focus became the achievement of elite consensus and the establishment of an electoral democracy in which the market, not the state, predominates and in which parties mobilize constituents to win elections rather than to transform society or to promote participation. This strategy, and the structural and institutional reforms that have supported it, has served to perpetuate the military regime’s project of depoliticizing civil society to maintain political and macroeconomic stability. Yet it has done little to facilitate the participation and collective action of those segments of society who, after years of authoritarian repression and radical economic reform, are most in need of political representation. Comparison of contemporary local politics in Chile with local politics during the pre-coup and military regime eras substantiates this conclusion. Local Government and Popular Participation during the Pre-coup Period From the 1940s until the 1973 military coup, a number of forces interacted to expand popular participation in Chilean local government. Unfortunately, the same forces that propelled increased popular participation also provoked political and fiscal instability and contributed to the collapse of democracy. These forces related to Chile’s state-led development model as well as the prevailing form of party competition and party-base linkage. Consistent with the logic of state-led development, fiscal resources in the Chilean state were increasingly centralized. As a result, the fiscal dependence of local governments and the fiscal pressure on the central government intensified. The manner in which increasing party competition and ideological polarization expressed themselves exacerbated these fiscal pressures. Driven by the desire to realize their distinct ideological objectives, center and left parties (primarily the Christian Democratic, Socialist, and Communist Parties) competed for political dominance through both clientelistic and directive linkages, particularly with previously politically excluded segments of the population such as urban shantytown dwellers. Through clientelistic ties, local leaders exchanged votes they were able to deliver on behalf of congressional members for patronage that these


national politicians could distribute through party networks. Under directive linkage, “political action consisted of organizing a social base in order to bind it to party structures and thus exert pressure on the state, at times demanding fulfillment of claims and at other times seeking to take control of the state itself” (Garretón 1989a, 12). On one hand, party efforts at co-optation treated the popular sectors as political pawns in their ideological competition. On the other, it made the parties victims of their own strategies by unleashing popular demands that they could not satisfy and popular protests that they could not contain. Ultimately, increasing popular sector political activity and demand- making threatened the economic privileges of conservative elements within Chilean society, who as a result, allied themselves with the armed forces to carry out a military coup. A brief historical overview will clarify these interrelationships and their repercussions with respect to local democracy. Since the 1940s, the center and left political parties that had dominated the Chilean state resisted attempts by oligarchic elements in the provinces to decentralize resources or political power (Cleaves 1969, 10). As a result, power and responsibility for addressing social and political demands were increasingly concentrated in the hands of the central government. To meet the increased obligations that centralization brought with it, the central government routinely channeled funds collected from municipalities to the Tesorería General (General Treasury) and delayed repayment of its debt to local governments for long periods of time. Under these circumstances, the percentage of state funds allocated to the municipalities steadily declined after World War II while the lion’s share of local budgets, instead of being devoted to social investment, was consumed by basic operating expenses (Cleaves 1969, 25–26; A. Valenzuela 1977, 52). The growing discrepancy between local needs and the ability of local governments to meet such needs forced local leaders to rely on their political and bureaucratic contacts at the national level to gain access to scarce resources. Therefore, political party linkages between local officials and their national party brokers provided key channels through which local political interests were mediated. Local political leaders extracted resources from the central government through their contacts with these national political brokers (A. Valenzuela 1977, 154–156). In return for such resources, local leaders turned out the vote for congressional members who delivered patronage through party networks. Particularly in the emerging urban shantytowns, center and left parties complemented these essentially clientelistic practices by operating in a more ideological and collective fashion (Ibid., 161). They organized and controlled squatter settlements, assisting their residents to place resource demands directly upon the state (Castells 1983, 207).


Although these modes of interest mediation gave the central government and the political parties that controlled it considerable control over local politics, it also placed enormous political and fiscal pressures on the Chilean state. This pressure, and the popular sector mobilization that helped to ignite it, increased exponentially with the rise of the PDC in the 1950s. As noted in chapter 3, the PDC was programmatic and highly ideological. Unlike the previously dominant centrist party, the Radical Party, it was much more interested in pursuing its own agenda than finding compromise positions between extremes on the left and the right (Scully 1992, 11). Thus, ideological division and party competition, already a significant feature of the Chilean political system, increased substantially with the ascendance of the PDC. At the local level, such ideological polarization and competition were the impetus for reforms that the Christian Democratic government of President Eduardo Frei Montalvo (1964–70) instituted in 1968. Frei’s program of Promoción Popular involved, among other things, the establishment of juntas de vecinos or neighborhood associations, which were to form a network of community organizations coordinated at the national level by a Consejería de la Promoción Popular (Council of Popular Promotion). In establishing this corporatist institutional framework, the PDC hoped to increase dramatically its political support, which would in turn facilitate the realization of its ideological project. However, the PDC’s corporatist reform measures failed, primarily because the legal sanctioning of the juntas greatly intensified local political participation and demand- making beyond a level that the central government had the capacity to satisfy (Portes and Walton 1981, 125–126). The various parties and factions of the center and left fueled this demand-making from below through their competitive efforts to organize and mobilize previously dormant segments of the popular sectors (Castells 1983, 207).2 Thus the inauguration of Promoción Popular and its sanctioning of a national network of neighborhood associations gave tremendous impetus to the unleashing of material demands from sectors of Chilean society that had never before played an active role in politics. The increase in land seizures—8 in 1968, 73 in 1969, and 220 in 19703 —exemplified this upsurge in material demands at the local level. It also underscored the government’s inability to either satisfy popular demands or assuage the business community’s concerns about the increasing spread of leftist radicalism. Under these circumstances, the Chilean right had little reason to lend its electoral support to the Christian Democrats as it had done in 1964, a condition that made it possible for the leftist Unidad Popular government of Salvador Allende to win the 1970 presidential election. With Allende’s ascension to power, the polarizing dynamics put in play under the Frei administration continued unabated. In efforts to


respond to popular demands, the Popular Unity government increased fiscal spending by more than 70 percent” (Ascher 1984, 243). Under such circumstances, inflationary pressures accelerated and Allende’s already meager support from the business community evaporated. As the newly mobilized segments of the popular sectors joined organized labor to press for greater concessions, business and other right-wing elements sought to derail the socialist government. The political system’s inability to contain the escalation of such class conflict made the 1973 military coup all but inevitable. Local Government and Popular Participation under the Military Regime Once the Chilean military toppled President Salvador Allende’s socialist government, it embarked upon a radical overhaul of the Chilean state, including a fundamental restructuring of local government. The objective of the military regime’s state reform project was to guarantee the order and political stability needed to carry out neoliberal economic restructuring. This objective required the political, economic, and social exclusion of the previously mobilized popular masses (Garretón 1989a, 81–83). To achieve this objective, authoritarian leaders developed the notion of a “protected” or “limited” democracy, which established as its primary tenet an apolitical conception of participation. The apolitical character of officially sanctioned participation would be assured by the fact that, with the regime’s banning of political parties and its severe restriction of civil liberties, individuals would be forced to represent themselves as private citizens, not as members of larger political entities. Participation in this context acquired a merely passive character wherein private citizens were expected to express through highly constricted institutional channels support for actions and decisions that were taken without their input or representation. Under these circumstances, participation would no longer be a right that citizens could exercise freely but a concession by the authoritarian regime for the purposes of corporatist control (Pozo 1986, 5; Gallardo 1989, 25). The military regime’s decentralization reforms were designed in accordance with the foregoing objectives and strategies. As such, they were intended to limit the democratic freedoms and demand-making capacity of the popular sectors to protect the fiscal stability of the Chilean state and the macroeconomic performance of the Chilean economy. Accordingly, decentralization under the military regime transferred significant administrative responsibilities to lower levels of government while political power and control over resources were further centralized. In short, from a system of governance that facilitated the representation of local interests at the


national level (A.Valenzuela 1977), the military regime sought to transform the Chilean political system into an institutional vehicle for promoting the interests of the national government at the local level (Marcel 1994, 104). Almost immediately after it assumed power, the military regime took steps to achieve its objective. On September 25, 1973, just fourteen days after its violent overthrow of President Allende, the military regime enacted Ley 25, which declared the cessation of the functioning of the municipal councils and their democratically elected representatives and established a mayor designated by the military junta as the sole political authority in each municipality. In place of the municipal councils, the military regime established the CODECOS (Consejos de Desarollo Comunal y Social or Communal Social Development Councils), whose purpose was to advise mayors on issues of concern to their communities. The regime attempted to portray the CODECOS as legitimate institutions for popular participation. Yet, with the central government appointing their members and with no decision-making authority, there appeared to be no legitimate basis for this claim (Pozo 1981, 29, 1986, 21). In conjunction with these reforms, the military government forced the resignation of all community leaders and appointed their replacements, outlawed Marxist political parties, and prohibited unions, trade associations (gremios), and public administration organizations from participating in the CODECOS. Finally, to prevent the autonomous action of community organizations, the Interior Ministry mandated that such organizations receive prior governmental permission before holding meetings (Pozo 1981, 27–30, 1986, 15–21; Gallardo 1989, 22–25). Consequently, the authoritarian regime’s program of administrative decentralization and limited “democratic participation,” coupled with armed repression, enabled it to subvert the brokerage and directive roles played historically by Chilean political parties. The regime destroyed the institutional nexus through which parties could represent the interests of their constituents before the state. The military regime did not stop at breaking the institutional linkage between parties and their grassroots constituencies. In addition, it reorganized the provision of social welfare services in a manner that shifted fiscal responsibility onto municipal governments at the same time that it severely limited their decision making and revenue-generating autonomy. The dictatorship’s neoliberal social welfare scheme neutralized the significance of political participation characteristic of the previous welfare system, in which social policy originated in response to citizens’ demands mediated through the party system. Now the design and implementation of social policy would be handled by government technocrats insulated from the pressures of popular demands, the intended result being the depoliticization of social policy.4


The military regime attempted to justify its policy of municipalization on the grounds that it would increase administrative efficiency and augment opportunities for constituent populations to participate in the shaping of policies directly affecting them. Yet the institutional arrangements the military regime established for popular participation were patently undemocratic. Moreover, it consulted none of the relevant populations on whose behalf it allegedly designed and implemented social policies. Likewise, its claims concerning the gains in administrative and economic efficiency that were to be achieved through municipalization were contradicted by the objective outcomes of such reforms. Indeed, the transfer of responsibility to municipal governments for the provision of education and health care, rather than improve economic efficiency, generated municipal deficits (Raczynski 1994, 58). The causes and consequences of such deficits were similar for both educational and health care reforms. In each case, municipal deficits were precipitated by two factors: (1) the privatization of services, which allowed the diversion of substantial resources away from the public sector; and (2) the central government’s setting of fee for service payments (i.e., conditional transfer payments) significantly below the rate of inflation (Castañeda 1992, 20). The regime’s policy of allowing private schools to compete for students, and therefore funds, typically allocated to public schools only exacerbated the fiscal problems confronted by the municipal school systems. The increase in students attending private schools, coupled with a sizable decrease in overall government expenditures, resulted in a significant decrease in funds for public education.5 Similarly, the creation of private alternatives to services previously provided almost exclusively by the public sector produced a demonstrable decline in the public health care sector’s revenues and expenditures (Raczynski 1994, 69). In general, rather than granting local governments greater freedom to borrow funds or collect revenues to meet their increased fiscal obligations, the dictatorship insisted on increasing their dependence on funds transferred from the central government through the Fondo Comunal Municipal (Municipal Common Fund). This was evident in its municipal tax policy, which impeded municipal governments from borrowing funds to meet their fiscal needs.6 Instead, they were expected to derive their operating revenues from vehicle and property taxes, taxes on productive and business activities, and user fees for municipal services (González Moya 1996, Artículos 11 and 12; Dockendorf 1990, 188). Since under this system tax rates were (and continue to be) set by the central government, municipal governments had limited ability to structure revenue collections in accordance with local needs (Marcel 1994, 107, 108).


Thus, the Pinochet regime was very effective in restructuring government in Chile in a manner that shifted the fiscal burden from the national to the local level and thereby protected the national budget and economy from inflationary pressures generated from below. It achieved this objective first by severing the institutional linkage between political parties and grassroots constituents and second by making local officials accountable to regime leaders rather than the constituents residing in their municipalities. Accordingly, groups organized at the local level lost the demandmaking capacity that they had used so effectively before the democratic breakdown. Finally, even if local leaders wanted to be more responsive to the needs and concerns of the citizens over whom they ruled, the dictatorship restructured local government’s financing as well as its administrative responsibilities in a way that gave these leaders virtually no autonomy with respect to revenue generation or policy design and implementation. The military regime’s eradications program substantially increased the impact of these reforms by reinforcing the social segregation and economic dependence of poor communities. This program, which the regime carried out from 1979 to 1985, eradicated 28,703 families (172, 218 persons) from encampments adjoining upper- and middle-income neighborhoods and relocated them to housing projects situated in the poorest municipalities on the city’s outskirts (Rodriguez 1992, 4–5). While to the benefit of the upper strata of society in Santiago the eradications freed up prime downtown real estate for speculative development and “cleansed” wealthier areas of their poor population, to the detriment of the popular sectors they substantially increased the social demands and fiscal burdens confronted by the city’s most overburdened and impoverished communities. The municipality of La Pintana represents a striking example of this latter phenomenon. In 1984, as one of the poorest municipalities in Metropolitan Santiago, La Pintana spent less than four U.S. dollars per inhabitant on public services;7 by comparison, Providencia, Santiago’s wealthiest municipality, spent the equivalent of eighty-five U.S. dollars per inhabitant, approximately twenty-five times more than La Pintana (Portes 1989, 22). Yet despite La Pintana’s obvious fiscal limitations, by 1985 the military regime’s eradications program had ensured that over half its population (53 percent) would consist of relocated groups (Morales and Rojas 1987, 109). Ironically, the military regime’s political repression and constriction of resources and local institutional channels for demand-making provided the impetus for the emergence of a plethora of popular sector groups who organized in the shantytowns to promote and protect their interests. With the regime’s dismantling of the populist state and its ban on political parties, these groups—community soup kitchens, self-defense organizations,


youth and religious groups, and a multiplicity of others—developed in isolation from traditional forms of state and party control. They played a key role in the mass mobilizations and public protests that, from May of 1983 through July of 1986, put increasing pressure on Pinochet to loosen his authoritarian grip. Moreover, they provided fertile opportunities for the many intermediate and lower-level party leaders who went into hiding in the shantytowns to develop direct ties to the pobladores. Yet once the popular protests had created sufficient space in civil society for party elites to resurface, these elites reasserted their dominance over the popular sectors and took control of the opposition movement. Ultimately, the reemergent party elites transformed the popular struggle from one of mass mobilization and violent opposition to electoral contestation. As discussed in chapter 4, during the period between the Chilean military’s overthrow of the Popular Unity government and when the democratic opposition entered into transition negotiations with the military, the elites and parties leading the opposition movement had gone through a process of political renovation (Roberts 1998, Walker 1990). This renovation facilitated a convergence between the constraints that the military regime wished to impose upon Chile’s new democracy and the steps the democratic opposition was willing to take to ensure the stability of the new regime. Consequently, the renovated democratic opposition demobilized its mass opposition movement and accepted the military regime’s neoliberal economic model and the 1980 Constitution as well as the demobilization of its mass opposition movement as preconditions to democratization.8 Party leaders dissolved the umbrella organizations that they had constructed to shape the disparate opposition groups in the shantytowns into a broad-based, unified opposition. Without the parties’ overarching political leadership, these groups atomized and lost their ability to influence the democratic transition (Oxhorn 1995, 258). Under these conditions, the Concertación shifted the opposition’s focus to electoral contestation, orchestrated the defeat of Pinochet in the 1988 plebiscite, and restored civilian rule under the leadership of Christian Democratic President Patricio Alywin in 1990. Local Government and Popular Participation after Redemocratization The opposition’s acceptance of the military regime’s preconditions as well as its commitment to depoliticizing civil society ensured that many of the essential elements that defined local government under the dictatorship would remain intact after the democratic transition. It also signaled that once in power, the now ruling Concertación would take steps to ensure


elite control over local politics. Thus, while redemocratization has brought important reforms of municipal government, significant impediments to effective accountability and local political participation persist. To be sure, residents of municipalities no longer live under the constant threat of authoritarian repression and can once again elect their local officials. Yet, they do not enjoy the connection or influence with political parties that they possessed before the coup or even during the dictatorship.9 Instead, the parties of the center and left have distanced themselves from their followers at the base.10 Moreover, local institutional arrangements do not hold leaders fully accountable to their constituents or give citizens a meaningful voice in municipal decision making and budget making. Finally, the administrative and financing structures of local government remain essentially the same as they were under the dictatorship, giving local leaders little discretionary control over resources or policy design and implementation. Therefore, municipal residents have little incentive to participate in local government, levels of participation are quite low and local democracy remains weak. On the other hand, municipal governments in Chile continue to bear a fiscal burden that generally exceeds their capacity to generate revenue while the national government puts significant restrictions on transfer payments and is thereby able to keep in check local level fiscal demands and expenditures. Because of significant differences in the class composition of Chilean municipalities, this lack of fiscal sufficiency and autonomy weighs most heavily on the Chilean underclass.11 Examination of the institutional, fiscal, and administrative structures of local government in Chile substantiates the foregoing argument. With respect to institutional structures, while Chilean municipal government has made important strides toward greater democratic accountability in recent years, significant constraints remain. For example, existing municipal electoral arrangements do not allow the direct election of municipal council members (concejales). Instead, municipal election outcomes are largely determined by electoral pacts and subpacts among allied political parties, an arrangement that in many instances means that the candidates receiving the highest number of votes are not the ones who actually assume office.12 In fact, on average, 43 percent of council members elected in Metropolitan Santiago in 1996 received a lower percentage of the vote than the highest vote getters among losing candidates (Posner 1999, 76–77). The pact arrangements that characterize the municipal electoral system diminish its proportionality. This is because only parties or candidates that have pacted with either the major right-wing pact (which includes the RN and the UDI) or the center-left Concertación (which includes the PDC, PPD, PS, and PRSD [Partido Radical Socialdemócrata]) have a reasonable chance of winning a significant number of municipal council seats.


Results from the 2004 municipal elections illustrate this point well. Out of a total of 2,144 seats, these two pacts won 2,012. Three other pacts, along with a number of independent candidates, gained the remaining 132 seats. The poor showing by the pact headed by the PC illustrates another significant consequence of this electoral system. Without the benefit of an alliance with the PS, which it enjoyed before the coup, the PC won only 4 mayoralty and 38 council seats in the entire country. The comparable numbers for the PS were 45 and 255 (see table 5.1 for these data). Thus Chile’s municipal electoral system, in theory proportionally representative, in practice functions like a majoritarian or plurality system in that it favors larger parties or pacts. As a result, the right and center-left pacts have managed to thwart challenges to their dominance and to maintain their elitist manner of governing. Recent municipal electoral reforms, which mandate the direct election of mayors and allow their reelection, provide an important, though only partial, antidote to this problem. In its original form, the Ley Orgánica Constitucional de Municipalidades did not allow the direct election of mayors. Instead, it stipulated that the municipal council candidate who received the greatest number of votes and who also received at least 35 percent of the vote would become mayor. However, owing to the large number of parties Table 5.1

Municipal Election Results 1996, 2000, and 2004

Concertación Pact

Mayors 1996

Mayors 2000

Mayors 2004

PDC PRSD PPD PS Independent Total Alliance for Chile Pact RN UDI Independent Total Left Pact PC PH Independent Total

102 16 34 38 7 197

85 15 28 32 9 169

99 12 34 45 13 203

456 173 201 171 53 1054

424 102 215 207 87 1036

456 119 231 255 65 1126

67 5 60 132

72 45 48 165

38 51 15 104

288 35 315 638

292 184 208 684

386 404 96 886

2 0 0 2

1

4 0

28

21

5

2

38 27 24 89

0

Council Members 1996

4

Source: Sercvicio Electoral Republica de Chile 1996 and 2000.




that typically field candidates13 and because even the party with the largest following, the PDC, can claim on average the allegiance of less than 20 percent of the electorate, it was common for no candidate to reach the 35 percent threshold to become mayor. Under the electoral arrangement in operation before the 2004 municipal elections, when no candidate received the necessary quota of votes to become mayor, the municipal council selected the mayor from among its members.14 Naturally, the council members who united in electoral pacts negotiated to elect one of their own. Under these circumstances, mayors—like the municipal council members who elected them—were beholden to party elites as much as or more than they were to the constituents of their communities. By establishing the direct election of mayors and by allowing for reelection, Ley 19.737 helps to diminish the elitist nature of municipal electoral arrangements and to increase the accountability of local elected officials to their constituents. However, as table 5.2 illustrates, party elites in all the major parties maintain a significant degree of control over candidate election for municipal elections, thereby limiting the positive impact of this reform in terms of democratic accountability.15 The institutional channels established to allow grassroots constituents input regarding local policy issues—the CESCO (Concejos Economico y Social Communal or Community Economic and Social Councils) and the juntas de vecinos (neighborhood associations)—do not offset shortcomings in local electoral arrangements. These institutions are strictly advisory in nature and thus largely ineffective in encouraging popular participation or transmitting community demands to local leaders. For example, as an advisory board to the mayor, the CESCO (like its precursor under the military regime, the CODECO) has no power to ensure mayoral accountability; it cannot make binding resolutions, create or implement policy, or impose sanctions. Its sole function is to offer advice on community concerns, which the mayor is free to heed or ignore. As one leader and CESCO member in the municipality of La Granja in Metropolitan Santiago observed: CESCO is merely a consultative body with no real power. Those of us who belong to CESCO are like an umbrella that protects the mayor. He asks our opinion and we can say either yes or no to his projects, but that’s it . . . . A law needs to be passed to make this organization more pluralistic.16

Grassroots leaders alone do not hold the critical view of the CESCO noted above. Indeed, all the council members from the three Metropolitan Santiago municipalities investigated in this study share the view that these community councils function poorly as representative institutions.

112 / State, Market, and Democracy in Chile Table 5.2 Political Parties’ Methods of Selecting Candidates—Municipal Elections Political Party

Method of Candidate Selection

Partido Comunista(PC)

Cells produce a list of recommended candidates and present it to the 80-member Central Committee. The Central Committee makes the final selection of candidates. Every 4 years the party’s Central Council establishes the criteria necessary to become a candidate. Party members who meet these criteria compete in preelections in the municipalities in which they want to run for office. If the aspiring candidates do not meet the party’s criteria, party leaders in the community submit a proposed list of candidates to the 90-member Central Committee, which then makes the final selection. The party holds a municipal level vote to choose precandidates. Local leaders order the list of precandidates according to their respective vote percentages and send the list to the National Council (Consejo Nacional). The Council then picks the candidates it wants, irrespective of the order of the list sent by the community. Any party member in good standing is eligible to be considered as a candidate. The list of interested candidates is passed on to a selection committee, made up of ex-party presidents and party luminaries, which picks the local government candidates. Interested party members in good standing present themselves to the party. The General Council (Consejo General) chooses those candidates which it feels have the best possibility of winning. Party members interested in being candidates for office in municipal government present themselves to the local party office. In turn, this office sends the names of all prospective candidates to the National Directive (Directiva Nacional), which comprises 9 people (1 president, 5 vice presidents, 1 secretary general, 1 treasurer, and 1 pro secretary). The directive chooses the candidates.

Partido Socialista(PS)

Partido Por Democracia(PPD)

Partido Demócrata Cristiano(PDC)

Renovación Nacional(RN)

Unión Democrata Independiente(UDI)

For example, Carmen Gloria Allende, Socialist concejal in the Santiago municipality of Huechuraba, observed that because there is extremely low community participation in the neighborhood associations from which a large percentage of CESCO representatives are elected (see figure 5.1), the CESCO are unrepresentative of popular interests. This organization [CESCO] functions as an advisory board. You can either take or ignore what CESCO says. People are really skeptical about politicians. This can be illustrated by the fact that only one hundred neighbors from the juntas de vecinos are registered. [Being formally registered with

Transformation of Popular Participation / 113 Communitywide Elected Officials

Organization Representatives

CESCO

ALCALDE

(Economic and Social Advisory Council) 30 members in municipalities with 100,000 or more inhabitants CONCEJO CONCEJALES 6–10, depending on size of municipality TERRITORIAL ORGS

FUNCTIONAL ORGS

BUSINESS ORGS

Elect 40% of CESCO members



Unión Comunal

Sports Clubs Real Estate Religious Manufacturers Assocsiations Merchants, etc. Motherhood Centers Elderly Assocsiations etc.

Neighborhood Associations (Juntas de Vecinos)

Figure 5.1

The Structure of Local Government in Chile

the juntas entitles them to vote for members of the CESCO.] And they register because they feel that they have to do it. So, I have the impression that the communal organizations are not well represented by CESCO. With municipal councils, people are legally compelled to vote. But this is not the case with CESCO. Thus, the leaders are not chosen by the pobladores.17

For many grassroots leaders, the low levels of membership and citizen participation in the neighborhood associations have common origins in the institutional legacy of the dictatorship. To ensure that the neighborhood associations would not recapture their former political power when democracy was restored, the military government instituted its own Ley de Junta de Vecinos, just months before President Aylwin assumed office. With essential elements of the military regime’s law still in force, it is widely perceived among grassroots leaders that the neighborhood associations have


not regained the legitimacy and influence they held before the military takeover. The original law governing juntas de vecinos, Ley 16.880, passed on August 7, 1968, granted the neighborhood associations substantial powers and responsibilities. These included the preparation of both an annual plan for urban betterment and a budget for the execution of the plan . . . the organization, promotion, and participation in the formation of cooperatives, especially consumer goods, handicrafts, and housing . . . with the object of bettering the socioeconomic conditions of the inhabitants of the respective neighborhood units . . . to collaborate in the control of prices, as well as the distribution and sale of necessities . . . ; to contribute to the removal of trash, the management of collective transit, to render an opinion before granting licenses for the sale of alcoholic beverages . . . .; to collaborate in the protection of persons and property in the neighborhood . . . ; to assist in finding work for the unemployed. (González Moya 1993, 7–8; author’s translation)

In contrast, Ley 18.899, instituted by the military government on December 30, 1989, said virtually nothing regarding the object and functions of the neighborhood associations or community organizations, and in essence, granted them no substantive powers or responsibilities. In addition, the military regime’s law sanctioned the formation of several neighborhood associations within the boundaries of one territorial unit, a provision that has reinforced partisan divisions and limited popular unity. A municipal council member affiliated with the right-wing Renovación Nacional acknowledged this problem: Carlos Rodriguez [of Renovación Nacional] had been elected president of Junta Vecinos 19 [in población Lo Hermida] by the pobladores, in a democratic way. But his title was taken away due to political reasons. In these instances, people take advantage of the new law and immediately form another Junta de Vecinos, without taking the votes of the pobladores into account. Consequently, Carlos Rodriguez’s junta was divided and another formed, called Simón Bolívar. This is the biggest one in Sector 4. The pobladores divided themselves because they did not accept the fact that the president that had been democratically elected was then dismissed. So there are two juntas de vecinos, one which is directed by Renovación Nacional (Carlos Rodriguez is the president) and another directed by the left. This illustrates what happens in general.18

Given these circumstances, it is not surprising that grassroots leaders characterize the neighborhood associations as lacking resources and decision-making authority and incapable of overcoming factional divisions or motivating pobladores to participate. Indeed, the grassroots leaders


interviewed for this study estimated that 1 percent or less of their respective communities’ populations participate in the neighborhood associations. An anecdotal account illustrates these circumstances. During a meeting of neighborhood association number 11 in Santiago on June 14, 2001, I inquired how many potential, as well as actual, members there were for this particular neighborhood association. The neighborhood association president informed me that there were 40,000 potential members but only 150 actual members. There were 8 members present at the meeting, which those present informed me was the norm. When compared with the estimated 15 to 20 percent of pobladores who actively participated in local organization and mobilization during the dictatorship, and an even higher percentage still who participated in the neighborhood associations and other popular organizations before the coup, these figures appear abysmally low.19 The vast majority of the grassroots leaders interviewed attributed such low levels of popular participation to the failure of the leaders of the Concertación to give the juntas greater resources and greater capacity to encourage grassroots unity. As one social leader summarized it: After the transition, the juntas de vecinos did not organize. The people of the población did not see them as presenting solutions to their problems. The communities have no money and the political leaders are not preoccupied with the people’s concerns. The connection with people at the base does not exist—the juntas de vecinos do not represent anyone! This is part of the overall process of depoliticization and disarticulation. The leaders of the Concertación realized that the powerful popular organizations that helped to oust Pinochet could be used against them. So they tried to weaken and disarticulate the popular organizations. They come to the poblaciones only when they need votes.20

A social leader affiliated with the Communist Party who was involved in grassroots organizing before the coup presented an equally critical assessment of the current functioning of the juntas de vecinos: The neighborhood association law passed under Frei was the best. It conferred a lot of power upon the juntas de vecinos, such as putting them in charge of health care, nutrition and housing problems. It also allowed for a communal structure of a provincial and national type. But above all, the power that they had was the most important thing . . . .During the dictatorship the law was abolished and another was enacted. But this law had many defects. One of them is that many juntas de vecinos can be formed in one territorial sector. This divides juntas de vecinos . . . this law goes against the principle of unity among pobladores. If you have numerous juntas de vecinos per territory, the participation of pobladores becomes weaker.

116 / State, Market, and Democracy in Chile Therefore, pobladores have different points of view on existing problems. This allows the mayor to favor some juntas over others.21

Another grassroots leader expressed similar sentiments over the divisive nature of the statutes governing neighborhood associations: The neighborhood association system has a lot of problems. Although juntas de vecinos are autonomous, the legislation governing these associations does not represent their objectives. This law, which was inherited from the government of Pinochet, establishes that apart from the juntas de vecinos which exist, there can be more than one junta per territorial sector. Therefore, if you have around seventy pobladores, you can form a junta de vecinos. The purpose behind this is to divide the associations. So, this is very contradictory for the base. Today there are four to five juntas per territorial unit. This divides the pobladores and does not help them solve their problems.22

Though the Concertación has now replaced the military regime’s law governing neighborhood associations, the new law does little to address the concerns and criticisms raised by popular sector leaders noted above. The statute continues to allow multiple neighborhood associations in each territorial unit.23 Moreover, it does little to enhance the substantive powers of the juntas de vecinos.24 As a result, the neighborhood associations continue to be ineffective institutional vehicles for facilitating popular sector participation and unity and grassroots leaders remain dissatisfied. One grassroots leader summed up this perspective: Mayors are not close to the people; concejales are only close to the people when there is a political election. It is the social leaders that move the community, that are close to the pobladores. Therefore, we want a law which would allow only one junta in each territorial unit. This law will give leaders of the juntas more power before the municipal authorities. They will not be able to put us off but will have to listen to us.25

While most grassroots leaders interviewed voiced frustration over the way in which the law governing juntas exacerbates divisions within communities, others suggested that the main problem is that the juntas are generally ineffective and unresponsive to community needs. As a community leader in Yungay observed, There are two neighborhood associations now since they were divided. One is controlled by Carlos Ramirez [Christian Democratic party], the other by Sergio Robles [Communist party]. Both associations are inert, they don’t function, they don’t serve the community. There is not much competition since none of them do much. For example, the association is open from 7:30 to 9:00 pm. Tell me, how does it benefit you to have an association that opens one and a half hours per day? So that doesn’t work.

Transformation of Popular Participation / 117 I always complain to the board of directors. Why can’t they open at 8 am? There are people, for example, that want to open a theater workshop. But they don’t have a place to do it. There are others who want to do aerobics, carpentry, and many other things. The associations do not do anything in this regard.26

The frustration and cynicism expressed in comments such as those above reflect grassroots leaders’ disenchantment both with the institutions of municipal government and the political parties that control them. More fundamentally, they reflect the persistence of the breach between party elites and grassroots militants that emerged over the course of the democratic transition. As noted in chapter 4, this breach originated largely from the political renovation of the center-left and is exacerbated by the binomial electoral system. Leaders of the parties associated with the Concertación reasoned that their renovated, laissez faire posture toward civil society would prevent the kind of ideologically charged, politically divisive manipulation of the popular sectors that they understood as a primary cause of the 1973 democratic breakdown. They further anticipated that it would make “politics less elitist and gradually more popular” (Arrate and Hidalgo 1989, 107). In practice, however, this new posture only widened the existing breach between grassroots activists and party elites. The military regime’s binomial electoral system compounds the divide between party elites and popular constituents. With the undue advantage this electoral arrangement gives to the right, the center and left have been encouraged to subordinate their programmatic differences and maintain their electoral alliance to prevent an even greater overrepresentation of the right. Thus, by imposing a bipolar pattern of competition on parties that have historically divided themselves according to three ideological blocs—right, center, and left—the binomial electoral regime seriously distorts the extent to which societal interests are fairly represented in the political arena (Munck and Bosworth 1998, 486–487). Therefore, as established in chapter 4, the electoral regime has increased the incentives for party cooperation and alliances, reduced the incentives for competition, and reinforced the tendency already prominent amongst the centerleft parties of the Concertación to de-emphasize ideological differences and focus on elite consensus to the exclusion of popular sector input. Consequently, the posttransition period has witnessed a significant decline in party identification among the Chilean electorate, increased apathy among grassroots leaders and their followers, and significant voting abstention and nullification in municipal elections.27 One of the primary causes of these negative trends appears to be the public’s perception that local leaders are not in touch with their communities. When asked


in a 1996 Centros de Estudios Publicos survey to identify the primary problem affecting their communities, low- and middle-income respondents most frequently responded, local politicians’ “lack of contact with the community” (Centro de Estudios Públicos 1996, 32).28 More recent survey data suggest that this feeling of disenchantment with political parties is widespread among the Chilean public. In a 2002 CERC (Centro de Estudios de la Realidad Contemporánea) survey, for example, 92 percent of respondents agreed with the statement that “the majority of politicians remember the people only during elections after which they forget them” (2002b, 6; author’s translation). The detachment of center-left parties from their constituencies at the municipal level has created a space for political influence which the far-right UDI, the party most closely linked with the Pinochet legacy, has effectively exploited. The rise in the UDI’s influence in local government is evident in recent electoral trends. While the UDI was only able to elect 5 mayors and 35 council members in 1996, by 2004 it had elected 51 mayors and 404 council members (see table 5.1). When asked to explain this relative shift in local government influence, representatives from the dominant parties of the Concertación acknowledged the failure of their parties to be sufficiently involved in building and maintaining grassroots constituencies. Most striking in this regard was the admission by Luciano Valle, national secretary of Social Organization of the Chilean Socialist Party, that presently the party has no formal organization devoted to popular sector political education or organization and has essentially abandoned its tradition of grassroots organizing.29 However, both party leaders and grassroots activists from the Concertación are quick to identify another significant factor in the rightward shift in local political power—the UDI’s superior resources and clientelistic practices. In this regard, the comments of Anastasio Castillo, a community leader affiliated with the PDC in Huechuraba, were typical: “People here are poor. The UDI takes advantage of them to gain political support by distributing food . . . and money . . . to win votes.”30 Alfredo Galdames, national director of UDI’s project to build support among pobladores and chief of staff for UDI mayor Pilar Urrutia in the municipality of Conchali, casts the situation in a different light. He ascribes the Concertación’s declining support and the lack of local participation to the center-left alliance’s focus on politics rather than good management and solutions to local problems, a criticism not unlike those lodged by the Concertación’s own grassroots constituents. Conversely, he attributes the UDI’s success to the effective management of its leaders as well as their high ethical standards. When asked to identify the differences between the manner in which leftists have governed and the UDI’s governing style, he noted the party’s willingness to draw upon private sector assistance. This


willingness was evidenced in his discussion of local education. “The schools in this community, the preparation of the teachers and the students, are very poor. We cannot compete with the private schools—the state does not have sufficient resources. So we seek assistance from the private sector. We have very good relations with the business community here.”31 To illustrate how this strategy has been effective, he noted that under Mayor Urrutia the local government had been successful in acquiring funds to establish and maintain a school for young, pregnant girls. He was particularly proud of the fact that the mayor had just recently signed an agreement in New York for an annual grant of $20,000 from the conservative Manhattan Institute to help operate the school and to evaluate its success. He also noted the local government’s success in securing private sector support for the construction of low-cost housing in the community.32 UDI grassroots supporters reinforce the image of the party drawing upon private resources to address community needs with much more modest examples such as the provision of food or resources for local organizations such as sports clubs and youth groups. These examples suggest not that the UDI is alone in its use of traditional patronage strategies but rather that the party has superior access to private sector resources, which enable it to employ such strategies with greatest effect. The party’s success in utilizing private sector resources to cultivate popular sector support provides vindication for the architects of Chile’s neoliberal revolution, particularly Jaime Guzman, the UDI’s founder and principal author of the military regime’s 1980 Constitution. One of the fundamental principles Guzman and his fellow constitutional architects espoused, and which is deeply embedded in the constitution, is the notion of the subsidiary role of the state. In short, rather than trying to supplant or control the market as was the case under ISI, proponents of neoliberalism asserted that the state should play a subordinate and supportive role in relation to the market. The scaling back of the state that followed from this ideological precept cut off the life-blood of center and left parties that had depended upon access to state resources to build and mobilize their constituencies. The Concertación’s commitment to abandon traditional mobilization strategies and to preserve the primacy of the market has reinforced the impact of these neoliberal reforms. As a result, local politicians who lack outside support for their community projects are hamstrung in a number of ways. First, taxes are both set and collected by the central government (Yáñez and Letelier 1995, 143). Consequently, local governments have a severely limited capacity to structure taxes, including the creation of new taxes or the setting of tax rates, in line with local needs (Ibid., 154). Moreover, because the treasury department sends the property taxes it collects to the municipalities, it has no


incentive to deal rapidly with delinquent taxpayers, and consequently local governments lose significant amounts of money (Ibid., 169).33 Second, the central government’s strategy for helping municipalities deal with their fiscal shortfalls—financial transfers—puts substantial constraints on how municipalities can spend their resources while simultaneously underfunding them (Nickson 1995, 139–140). The central government’s method of funding and regulating education and health care services provided at the municipal level epitomizes each of these problems. Since the fixed rate at which the central government subsidizes local governments for each student enrolled or each clinic visit is insufficient to cover the real cost of providing these services, the financial situation of the municipalities has deteriorated. To cover the shortfall caused by inadequate funding from the central government, the municipalities have had to use their own income, thereby reducing the funds they have available for social investment and producing a transfer to the central government (Nickson 1995, 139–140; Yáñez and Letelier 1995, 149, 154). Finally, while some municipalities might be tempted to borrow to compensate for the central government’s insufficient funding or to circumvent its tight regulatory control, statute impedes them from doing so (Nickson 1995, 140; Yáñez and Letelier 1995, 170).34 Conclusion The foregoing policies exacerbate the dire fiscal straits of Chile’s poor municipalities, constrain the ability of local leaders to respond to constituent needs and concerns, and undermine incentives for popular participation. The UDI has been able to capitalize on the conditions of scarcity these reforms have aggravated by drawing upon its strong ties to the private sector to address popular needs left unmet by the state. The parties of the center-left Concertación, on the other hand, appear to be the victims of policies they endorsed as a precondition to democratization. Without independent resources with which to engender grassroots support and committed to depoliticizing civil society, these parties have witnessed the UDI’s ascension and the collapse of their historical monopoly of influence in the shantytowns. In response to these trends, the Socialist and the Christian Democratic Parties have begun to rethink their relationship with their constituents at the grass roots. Julio Pérez, national secretary of the Community and Neighborhood Action Front of the Chilean Christian Democratic Party (formerly Departmento de Pobladores), indicated that the party has begun a new, grassroots effort to rebuild party support in the shantytowns and to encourage political participation.35 Similarly, Luciano Valle, national


secretary of Social Organization of the Chilean Socialist Party, confided that while presently the PS has no formal organization devoted to political education or popular organization there is recognition within the party that strategies need to be developed to encourage popular participation.36 To the extent that it shapes party policy, this shift in thinking will have positive repercussions for the strengthening of local democracy in Chile. In contrast to the PS and the PDC, however, the PPD has no plans to step up its organizational activities vis-à-vis the popular sectors, according to Juan Reyes, the PPD’s Secretario Nacional de Sindicatos.37 Moreover, structural reforms and local institutional arrangements still stand in the way of more meaningful and effective political participation in local government. Institutionally, the law inherited from the military regime that governs the formation and operation of neighborhood associations is but one element in the current structure of local government that militates against popular unity and participation. While the limited powers and resources of the juntas, as well as their creation along factional lines, inhibit popular unity and participation, similar problems are evident in other aspects of local government. For example, lack of participation in the juntas affects the representativeness of the CESCO, a substantial portion of whose members are elected through votes taken within the juntas. Moreover, support for the CESCO continues to be weak since as advisory boards these organizations have little or no influence to satisfying the interests or demands of the populations they are intended to represent. The establishment of direct election of mayors is a partial remedy for these institutional inadequacies. Nonetheless, the indirect election of council members weakens the nexus between constituents and elected leaders. To the extent that these council members owe their positions to the political pacts to which their parties belong, these important municipal officials have limited incentives to do the political bidding of their popular constituencies. Yet, even if such institutional constraints were not present, there would remain considerable disincentives to popular sector participation in local government. Such disincentives are particularly evident when we consider the manner of distribution of social welfare resources. Mayors and other local officials have little to no control over the amount of social welfare resources available for distribution in their communities. Such decisions are made by the central government in accordance with national political and economic objectives. Thus, the autonomy of local communities, particularly those that are poor and inhabited almost exclusively by the popular sectors, is almost nonexistent. Under these circumstances, where local leaders cannot be held fully accountable to their constituents and to the extent that they are held accountable have little to offer their constituencies


in the way of resources, the popular sectors have few incentives to engage in collective action or to participate in local government. It is little wonder then that disenchantment with local government in Chile is widespread while participation in local institutions is low, if not declining. As chapter 6 substantiates, social welfare reform has compounded these problems, working hand in hand with state retrenchment and decentralization to reinforce stratification and to encourage competition, rather than unity and solidarity, among the popular sectors.

Ch a p t e r Si x S o c i a l We l fa r e R e for m a n d Im pedi m e n t s to Soc i a l Coh e sion a n d Collec t i v e Ac t ion

Introduction Social welfare reform was a major component of the authoritarian regime’s efforts to transform Chile’s state and society in keeping with neoliberal principles. According to neoliberal theory, disseminated in Chile by the University of Chicago’s Milton Friedman and his acolytes, the market—if allowed to operate unfettered—ensures that workers are paid what they are worth, obviating the need for trade unions and institutions of social protection. Indeed, collective actors such as trade unions and social welfare provisions that insulate workers from market forces can compromise social well-being by artificially increasing the price of goods and services. Such price distortions lead to an inefficient distribution of resources, exacerbate inflationary pressures, impede economic growth and increase unemployment.1 On the basis of this reasoning, military regime officials and neoliberal technocrats, the so-called Chicago Boys, concluded that reforming Chile’s welfare regime according to market principles was a necessary counterpart to labor market reform. In short, to break the vicious cycle of high inflation, high unemployment and low growth, the private sector had to assume control over social welfare resources and functions that under ISI were controlled by the state.2 In implementing this reform, regime officials proclaimed that their objective was to restructure social welfare provision on the basis of technical, apolitical criteria that would enhance the efficiency of service delivery for the benefit of both the state and individual citizens. The state would benefit from the diminution of political and fiscal pressures made possible by the private sector’s assumption of many of the social welfare functions formerly fulfilled by the public sector. Individuals would benefit through


the establishment of greater freedom of choice and a more direct correlation between individual effort and economic reward. The institutionalization of this market-based, technocratic approach to social welfare provision would, according to the Chicago Boys, overcome the inefficiencies and inequities of the social welfare regime that had evolved under state-led development. Notwithstanding the regime’s claims regarding the apolitical nature of its reforms, they were clearly designed to achieve political objectives authoritarian rulers shared with their business sector supporters. These included decimating organized labor and other collective actors on the left, subverting the principle of social solidarity and replacing it with an emphasis on individual responsibility, and depoliticizing social welfare policy by wresting it from the control of political parties and the influence of social actors. Moreover, while the new welfare system may have removed some of the inefficiencies of the old system, it exacerbated rather than alleviated inequality. And while the regime’s reforms did depoliticize social welfare policy to a large extent, by shifting responsibility for welfare provision to either municipal governments or the private sector, the state continued to bear an enormous fiscal burden, particularly with respect to the provision of retirement benefits. In addition, in the areas of health care and pensions, the reform of state policy led to the subsidization of private sector interests with public resources. The combined impact of these reforms was to reinforce the inequities and stratification that neoliberal reforms had created in the labor market. In so doing, these reforms further undermined social capital and the incentives and capacity for collective action among the popular sectors. And finally, they led to the concentration and enhancement of corporate power, both political and economic. As with labor reform, the governing Concertación has kept the military regime’s social welfare reforms essentially intact. Consequently, the impediments to popular participation and collective action social welfare reform erected under authoritarian rule have persisted after the transition, thereby compromising the quality of Chilean democracy. To develop this argument, this chapter first articulates a conceptual framework by which to understand the relationship between social welfare regimes and social organization. Subsequently, it applies this framework to an analysis of the impact of social welfare reform on social organization in Chile. Specifically, it examines pension and health care reform, as well as targeted assistance programs such as housing and the Fund for Solidarity and Social Investment (Fondo por Solidaridad y Inversión Social, FOSIS) for their impact on social stratification and market protection among the popular sectors. This analysis reveals that, taken together, these reforms

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perpetuate a social welfare regime that severely limits market protections, reinforces a high degree of social stratification, and imposes substantial impediments to collective action among the most vulnerable segments of Chilean society. Conceptualizing the Interrelationship between Welfare Regimes and Social Organization Welfare regimes differ considerably in terms of the level of stratification and market protection, or decommodification, they promote. With respect to market protection, welfare regimes can be distinguished according to the degree to which they enable citizens to “freely, and without potential loss of job, income, or general welfare, opt out of work when they themselves consider it necessary” (Esping-Andersen 1990, 23). The decommodifying impact of welfare regimes can, in turn, be evaluated according to three distinct criteria: (1) the level of benefits they offer; (2) the ease of access with which citizens can receive such benefits; and (3) the extensiveness of benefit coverage. The more generous the benefits provided by welfare regimes, the more they establish access to such benefits as a social right, and the more extensive the social strata they cover, the greater the decommodifying effect they will have. Conversely, the more limited the benefits welfare regimes provide, the more they restrict access to such benefits on the basis of discriminatory means testing, and the more they differentiate coverage among different social strata, the more limited will be the market protection they provide and the more extensive will be the stratification among different segments of society. Far from being neutral in their political impact, welfare regime administrative structures are instrumental in reinforcing one or the other of the preceding patterns of welfare provision. In other words, depending upon their institutional design, administrative structures will tend either to support decommodification or to reinforce the primacy of the market. Centralized administrative structures, for example, which administer benefits more or less standardized in terms of the levels at which they are provided, the ease with which they are accessible, and the diversity of social strata entitled to them, tend to promote social solidarity and continued support for the welfare state. In contrast, decentralized administrative structures fragment coverage by administering a diversity of programs to a variety of competing clienteles. They thereby impede accessibility, reinforce social stratification, and ultimately inhibit social solidarity. We can better appreciate the preceding points by considering the welfare regime schema devised by Esping-Andersen (1990). On the basis


of the three criteria previously cited—benefit levels, ease of access, and social strata covered—Esping-Andersen’s conceptual model identifies three distinct welfare regime ideal types: liberal, corporatist, and social democratic. The regimes that are the most limited both in terms of the benefits they offer and the social strata they cover Esping-Andersen denotes as “liberal” welfare regimes. In such regimes, benefits are typically modest and access to them is dependent on rigid means testing associated with stigma. The states whose welfare regimes most closely resemble the liberal model often further restrict the realm of social rights by subsidizing private welfare schemes. The result is “a blend of relative equality of poverty among state-welfare recipients, market differentiated welfare among the majorities, and a class-political dualism between the two” (1990, 27). Welfare regimes structured in this fashion effectively thwart the convergence of middle and working class support for a more comprehensive welfare state. In short, to the extent that economically privileged citizens are able to provide for their own needs in the private sector, they are likely to be reluctant to subsidize those who have been less successful in the marketplace. Moreover, citizens who are compelled by their precarious economic circumstances to request public assistance are subjected to stigmatizing means testing as a prerequisite for obtaining benefits. Through the employ of these administrative mechanisms, liberal welfare regimes are able to significantly limit access to, as well as inhibit demand for, benefits. And finally, liberal regimes often compound the effects of the foregoing administrative arrangements by implementing complex sets of differentiated programs, which by creating diverse, sometimes competing working class constituencies subvert working class unity. In stark contrast to liberal welfare regimes, social democratic welfare regimes are founded upon a strong alliance between the working and middle classes. All social strata are incorporated under one universal, state-sponsored insurance system. The result is a highly decommodifying welfare regime which, instead of reinforcing class stratification as is the case in liberal regimes, promotes essentially universal solidarity in favor of the welfare state. Corporatist welfare regimes possess elements in common with both social democratic welfare regimes. Much like the social democratic model, these welfare regimes provide social welfare benefits almost exclusively through state sponsorship; market-based social welfare schemes play little or no role. However, similar to the liberal model, corporatist welfare regimes maintain status differentials among different social strata and therefore tend to have a negligible impact on inter-class unity and economic redistribution.


Welfare Reform and the Three Phases of State-Society Relations in Modern Chile If we apply the preceding conceptual guidelines to an historical analysis of the Chilean case, we observe the formation and operation of three successive phases of state-society relations—populist, neoliberal-authoritarian, and neoliberal-democratic—each with distinct implications for the nature and degree of social welfare coverage and grassroots political participation. Over the course of the populist phase of development, the administration of social welfare benefits became increasingly centralized while the level of benefits, ease of access in obtaining them and the extensiveness of coverage all increased. Governments which increased the state’s role in social welfare provision created incentives for historically disadvantaged or excluded segments of the population to unite and mobilize to obtain what they perceived to be their fair share of resources. Thus, under ISI Chile’s welfare regime was corporatist in nature but evolving in a social democratic direction. During the neoliberal-authoritarian phase, the military regime forcefully reversed this pattern. While under the current, neoliberal-democratic phase, the governing Concertación has increased benefit levels, it has otherwise maintained the structure of the liberal welfare regime established under Pinochet. As a result, incentives for popular organization and mobilization around the distribution of social welfare benefits have been undermined. Protection from market forces remains low while class stratification remains high. A brief historical analysis will make these patterns more clear. In the populist phase, the populist coalition that ruled Chile from the 1930s until the 1973 military coup originally incorporated within the state’s corporatist welfare and democratic political regimes only those segments of the popular sectors most strategically important to the success of ISI. Yet the existence of highly competitive center and left political parties representing both middle- and working-class elements (primarily the Socialist, Communist, and Christian Democratic Parties) coupled with a highly centralized, interventionist state, encouraged the political incorporation and inclusion within the corporatist welfare regime of previously excluded, marginal social strata. Although the original impetus among those parties responsible for the incorporation of previously excluded, marginal sectors was the desire to achieve political and ideological hegemony through the expansion of their respective constituencies, none of the competing political factions succeeded in achieving this objective. Instead, the exploding demands of newly organized and mobilized popular groups increased the fiscal and political pressures burdening the already overextended Chilean state, thereby accelerating hyperinflation and political polarization (Borzutzky 2002, 42–43).


It was in response to these conditions that authoritarian reaction brought an end to nearly fifty years of uninterrupted Chilean democracy. Therefore, it is within this context that the institutional and social welfare reforms implemented by the Pinochet regime during Chile’s neoliberalauthoritarian phase of development must be understood. In essence, the authoritarian regime’s state reforms were largely guided by the desire to undermine the political and economic power the popular sectors had accrued over the previous fifty years of Chile’s development. Economic liberalization would facilitate the accomplishment of this objective by bringing international market pressure to bear upon workers within Chile’s small, underdeveloped economy. However, successful liberalization itself depended upon the establishment of a number of key conditions. First and foremost among these was the closure of institutional channels through which the popular sectors could express their political and social demands. In addition, successful market liberalization required the establishment of a social welfare regime which, rather than responding primarily to popular needs and demands, would reinforce the primacy of market competition and stratification. Thus, with the expert assistance of neoliberal technocrats, the military government radically refashioned the existing corporatist welfare regime into an extreme version of the liberal ideal-type conceptualized by EspingAndersen. Many of the resources and functions previously controlled by the Chilean state were privatized. Meanwhile, citizens who did not have the wherewithal to avail themselves of the superior services in the private market were forced to rely on the now severely compromised and inferior resources available to them in the public domain. In this manner, the authoritarian regime created a highly stratifying social welfare system that subverted the potential for popular unity coalescing around shared social welfare concerns. As is explained in greater detail below, the military regime subverted the potential for popular unity around the issue of inferior welfare resources by targeting programs at specific groups and by administering such programs through the territorially divided and administratively distinct municipal governments. In this manner, the regime made it exceedingly difficult for popular groups to recognize and pursue common objectives vis-à-vis the state. Thus, state decentralization worked hand in hand with welfare privatization to reinforce economic disparities and social atomization. The negative consequences of such reforms as they have impacted upon the popular sectors have not changed substantially since Chile’s successful transition to democracy in 1990. Instead, the constraints imposed upon Chile’s democratic transition, the enduring impact of the neoliberal transformation of the Chilean state, and the renovation of center and left


political parties that historically have represented the popular sectors have interacted in synergistic fashion to ensure that popular welfare concerns and political demands continue to be subordinated to the requirements of Chile’s market-oriented development model. In other words, as a result of this confluence of factors, existing administrative arrangements and institutional channels for the formation and conveyance of popular demands continue to discourage popular unity and participation and impede collective action, particularly at the local level of government. The remainder of this chapter substantiates this argument by examining the structure of specific social welfare reforms and their impact in terms of recommodification and social stratification. Pension Reform With respect to social security reform, the military regime replaced the original system, which was based on combined contributions from workers, employers and the state, with a privately managed pension system, the Administrators of Pension Funds (AFPs). Under the new system, benefits are based on individual characteristics and contributions. In adopting the new system, one of the primary objectives of military rulers and their corporate allies was to dismantle the public pension funds and thereby disarticulate the groups—blue- and white-collar workers, civil servants, and professional associations—organized around them. The accomplishment of this objective would, in turn, facilitate the functioning of the market economy free from political interference from these groups (Borzutzky 2002, 229). The military and the business sector were largely successful in achieving these objectives. However, characterizing the new system as purely “private” in contrast with the old “public” system is inaccurate. Although the private sector now manages the bulk of pension funds, the state continues to play a significant role in financing transition costs to the new system as well as providing guarantees and regulatory mechanisms (Gillion and Bonella 1992). In light of these considerations, a more accurate characterization of the new system focuses on the manner in which it distributes risks and benefits as well as the (dis)incentives it establishes for solidarity among workers. When considering these features of the new system, we see that many workers, particularly the large percentage of self-employed, subcontracted and informal sector laborers, have fared quite poorly. Economic risks have been transferred to individuals, many of whom do not have sufficient means to accumulate the resources necessary for a pension that will sustain them once they retire. Moreover, the manner in which the system distributes benefits and risks exacerbates already high levels


of stratification among workers on the basis of occupational and gender differences. These conditions impede the ability of workers to find collective solutions to the dire economic conditions that many confront in retirement. In stark contrast, employers as well as the corporate entities that control the pension funds have reaped substantial benefits from market-based reform. The enormous economic resources the AFPs control indicate the substantial benefits that have accrued to the corporate conglomerates that control them. In 1985, the AFPs had accumulated capital assets equivalent to 9.73 percent of Chile’s GDP; in 2000 that figure had risen to 52 percent (Borzutzky 2002, 224). The small number of AFPs that control the assets of the insured magnifies the concentration of economic resources in the hands of the AFPs and the large conglomerates of which they are subsidiaries. When pension reform was originally instituted, there were twelve AFPs; today there are thirteen. Of those thirteen, the three largest, owned by economic conglomerates among the largest in Chile, cover 78 percent of all workers participating in the system (Mesa-Lago 2002, 1314). Along with the economic conglomerates that control the AFPs, employers have experienced substantial benefits from pension reform. Employers benefit from the new system in two ways. First, they benefit from no longer having to make contributions to pension funds on behalf of workers. And second, the significant reduction in wage costs that this change has produced facilitates employers’ increased competitiveness in the global economy.3 Some analysts also assert that pension fund privatization greatly increases the domestic savings rate, thereby providing more capital for private investment. However, empirical evidence suggests that the increased savings rates observed in Chile in the late 1980s resulted from the 1984 tax reform rather than pension fund privatization (Kay 2000, 191). While pension reform has generated economic benefits for corporate conglomerates and employers, it has delivered meager benefits for workers and imposed substantial fiscal burdens on the state that will persist for decades to come. When we factor in commissions charged by AFPs, the average worker entering the system after 1990 received negative annual returns through 1998 (Ibid., 198). The negative impact of commissions on workers’ returns reflects the failure of privatization to reduce administrative costs as market reformers had predicted. Administrative costs have essentially remained constant—2.09 percent of average income in 1988 and 2.10 percent in 1998—despite the freedom of the insured to move from one fund to another (Borzutzky 2002, 223). All funds offer charges and portfolios that are virtually identical. The three AFPs with the largest number of insured, which as noted above cover more than three quarters


of all workers participating in the system, have not systematically charged the lowest commissions nor paid the highest capital returns. The insured’s lack of information and/or skill in choosing the best administrators and enticements by AFP salesmen or promoters (who earn commissions on the workers they sign up) impede the realization of lower costs and higher returns that were to be achieved through competition (Mesa-Lago 2002, 1314). Thus, much of the funds’ expenses relate not to providing better products for the insured but rather to marketing expenses involved in trying to attract additional customers. Such costs account for 37 percent of AFP operating costs and 60 percent of commissions charged to the insured (Borzutzky 2002, 224). As a result, marketing expenses sap the returns that accrue to the insured at the same time that they help the dominant AFPs reinforce their market positions and profitability. Nonetheless, the greatest problem workers confront with the reformed pension system relates not to its lack of efficiency or high marketing costs but rather its failure to cover a sizable portion of Chilean workers. While the old pension system covered approximately 80 percent of the labor force, the new system covers only around 60 percent. This problem is most acute among the self-employed. Though they make up roughly a third of the labor force, only 4 percent of the self-employed are contributing to the pension system (Ibid., 220). Given the low wages and precarious nature of employment in Chile, it is not surprising that workers in the informal sector or those who rely primarily on subcontracting for employment will be the least able to make consistent contributions to individual pension funds. According to Manuel Riesco, 70 percent of workers contribute less than six months a year into their pension accounts while over half contribute less than four months (2004, 6). These circumstances are particularly problematic since only workers who make twenty years of contributions to AFPs are eligible for minimum pension subsidies from the state.4 Those who do not contribute consistently, and thus who fail to make the minimum of 240 contributions receive no return on their investment. Instead, they receive only the money they have paid into the account. One quarter of all AFP members fall into this category. Another quarter will not accumulate sufficient resources to reach what the state has determined is necessary for a minimal pension, despite having made regular contributions for twenty years or more (Taylor 2006, 188). Thus, workers most vulnerable to low wages and periods of un- and underemployment are also the most vulnerable with respect to retirement benefits. These workers are doubly punished since they are the most likely to be unable to meet the twenty-year requirement and/or the necessary savings to qualify for a minimum pension. Not surprisingly, many of the most vulnerable are women. In comparison with men, they are more likely


to work in the informal sector and experience higher rates of unemployment, greater labor instability, and lower incomes. Also, working women tend to experience more interruptions in their careers than men as a result of marriage and childbearing. Consequently, women, more so than men, will be unable to meet the requirements to receive a minimum pension. And even when they do meet the twenty-year requirement, their pensions will on average be lower than their male counterparts’ owing to their lower incomes and greater life expectancy (Arenas de Mesa and Montecinos 1999, 22, 29). The failure of individual capitalization to produce beneficial results for a majority of Chilean workers is mirrored in the failure of the privatized system to produce a reduction in fiscal costs for the state. To entice workers to transfer to the new system, the military regime permitted them to transfer their contributions to the old system into the profit-making entities that manage the new system, the AFPs. These transfer payments consume a quarter of the state’s annual social budget, usurping funding for other social needs. Moreover, this systematic transfer of state resources to the private sector has had a devastating impact on the old social security system, generating a deficit of nearly 5 percent of GDP (Vergara 1997, 213). In addition to financing the transfer of workers from the old system (an obligation that will continue until the last of these workers has passed away), the state is obligated to provide a minimum pension for those workers who have twenty years of contributions and who have reached the appropriate age (sixty-five for men and sixty for women) but whose personal funds fall below a specified minimum. Additionally, the state provides a limited number of public assistance pensions to the elderly destitute who have no other means of support (Decreto Ley 3.500; Gillion and Bonella 1992, 180). Between 1981 and 2000 fiscal costs related to these state obligations increased from 3.8 percent to 6.1 percent of GDP. Though fiscal costs are expected to decline over time, they are expected to still consume 3.3 percent of GDP in 2040, six decades after the reform was initiated (Mesa-Lago 2002, 1318). These figures illustrate the dramatic contradictions related to pension reform. On one hand, the private sector conglomerates that control the AFPs have accumulated vast resources, equaling half of Chile’s GDP. On the other, the state has been saddled with an enormous fiscal burden for decades to come while the majority of Chilean workers will likely be unable to accumulate sufficient resources to qualify for even a minimum pension. Such conditions are most prevalent among the most vulnerable in the Chilean labor market, particularly informal sector and subcontracted workers and women. Thus inequities in the pension system in terms of


class and gender are not only a reflection of stratification in the labor market—they also reinforce it. The privatized nature of the system compounds these problems by dramatically reducing the role of political parties in addressing them. While under the statist development model, political parties organized and mobilized popular constituencies around retirement resources, under neoliberalism this is no longer the case. In fact, the commitment to development based on neoliberal principles shared by the right and much of the center-left highly constrains the available public policy remedies political elites are willing to contemplate to redress the aforementioned inequities. Thus despite widespread dissatisfaction with AFPs, with only 29 percent of the public expressing confidence in them (CERC 2005, 2), political parties of either the right or the Concertación are unlikely to utilize dissatisfaction with the pension system as a basis on which to organize popular sector collective action. Health Care Patterns of inequity similar to those in Chile’s pension system are evident in the nation’s reformed health care system. As with the retirement system, the military regime created a private health care system, the for-profit Institutions of Provisional Health (Instituciones de Salud Previsional or ISAPREs), which are comparable to HMOs (Health Maintenance Organizations) in the United States. The ISAPREs cater to workers with higher incomes and drain substantial resources from the public system. They thereby reinforce the inequities and stratification endemic to Chile’s labor market. Accordingly, as with pension reform, the restructured health care system privileges higher-income Chileans as well as the corporate entities that own the ISAPREs. It relegates the majority of Chileans to a public system that possesses inferior resources and that itself promotes stratification through the decentralized administration of multiple, means-tested programs. Unfortunately, though health care reforms adopted under President Lagos (2000–06) were intended to address some of the most egregious problems present in the current system, they are unlikely to mitigate existing inequities or to reverse the public health care sector subsidization of the private sector ISAPREs. Many of the inequities in the present health care system are rooted in the ways in which the public and private components of this system are financed as well as the manner in which they determine eligibility. The private sector excludes patients on the basis of their health problems, risks, and ability to pay while the public sector is open to those the private sector


is unwilling to accommodate as well as those insured in the private sector. As a result, the ISAPREs are allowed to serve groups with high earnings and low health risks while the public sector is obligated to serve groups with low earnings and high health risks. This arrangement leads to perverse subsidies from the public to the private sectors, which enhance the latter’s profits (A. Barrientos 2002, 455). The first step the military regime took to create such a system was passage of health care reform legislation in 1981 that eliminated employer contributions; the new system was to be financed primarily through mandatory employee contributions. The insured could choose to direct their contributions to either the public system, the National Health Fund (Fondo Nacional De Salud, FONASA) or an ISAPRE. Initially, the regime set employee contributions at 3 percent. However, it raised the mandatory contribution to 7 percent in 1986 in response to a major deficit in the public system. This deficit resulted from the regime’s reduction of public subsidies for health care as well as the migration of higher-income groups to the ISAPREs (Borzutzky 2002, 235). The ISAPREs are only open to those workers whose incomes are high enough to afford private coverage, while FONASA is available to all citizens, including those who are covered in the private system. The military regime transferred huge resources from the public system to the ISAPREs. Allowing workers with higher incomes to divert to the private system contributions that previously would have gone to the public system exacerbates this problem. The inequities caused by this arrangement are substantial. For example, in 1990 the ISAPRES covered 14.6 percent of the population but used 39.1 percent of all benefit expenditures in the health care system (Gillion and Bonella 1992, 178). While after the democratic transition the percentage of the population enrolled in ISAPREs initially increased, since the mid-1990s it has decreased. Despite the decline in the percentage of the population enrolled, the percentage of health care expenditures diverted to ISAPREs has risen. Recent figures indicate that the ISAPRES absorb twothirds of payroll contributions while providing health care coverage for only 20 percent of the population (A. Barrientos 2002, 449). Meanwhile, over 80 percent of Chilean families in the two lowest income quintiles belong to the public health insurance system (Sapelli 2004, 260). This inequity is further compounded by the practice of the ISAPREs to exclude from coverage elderly people, the chronically infirm, those who suffer from preexisting conditions, and individuals with large families. Additionally, most ISAPRES affiliates cannot afford plans that cover costly health problems or diseases. Since there are no restrictions on people reverting to the public system, many do so to avoid paying substantially higher premiums for health care problems related to childbearing and old


age (Vergara 1997, 213). As a result, the public system operates as an insurer of last resort, absorbing cases that the ISAPREs prefer not to insure and thereby subsidizing the private health sector’s profits (Taylor 2006, 185). The manner in which the ISAPREs discriminate against groups on the basis of their particular demographic characteristics is particularly evident with respect to women and the elderly. A reform introduced in 1990 exempted the ISAPREs from paying maternity benefits; the state now pays these benefits (Borzutzky 2002, 235). While reforms introduced in 1990 were intended to end discrimination against women, the superintendent of ISAPREs, Alejandro Ferreiro, observes that the ISAPREs follow entirely arbitrary policies when determining coverage costs for women, the elderly, and newborns. In some cases, women pay three times more than men while some plans covering newborns can be as much as thirteen times higher than others (Ibid., 238). The dominance of just a handful of companies in the private health insurance market, similar to what exists in the pension industry, facilitates ISAPREs engaging in such practices. The three largest ISAPREs control 56 percent of the private health insurance market while the five largest firms control 73 percent. To build and maintain market share, ISAPREs utilize large sales forces (much like the pension industry), whose job is to identify high-income, low-risk groups (A. Barrientos 2002, 448). Stratification on the basis of socioeconomic distinctions is by no means exclusive to the private sector. FONASA reinforces the social stratification produced in the private sector by segmenting affiliates of the public system into four distinct categories—A, B, C, and D—on the basis of income level. The poorest affiliates, those in category A, are not obligated to pay for the care that they receive, while affiliates in the other three categories are expected to pay progressively higher fees for medical treatment based upon their greater income levels.5 The transfer of responsibility for primary care to municipal governments, instituted by the military regime in the early 1980s, further exacerbates socioeconomic inequities. As noted in chapter 5, the military regime’s eradications program, carried out between 1979 and 1985, substantially increased the already high level of social segregation and economic dependence of poor communities. Transferring additional responsibilities to municipal governments only increased these disparities. While wealthier communities were able to transfer more resources to primary care clinics, poorer communities fell further behind, thereby heightening inequalities in access and quality of care in the health care system. The Lagos government touted its health care reform plan, Plan AUGE (Acceso Universal de Garantías Explícitas or Explicit Guarantees of Universal Access), as an effective remedy for the inequities that exist in the health care system. Since the program went in to effect in July of 2005 and


was not fully operational until 2007, it is not possible to make a definitive assessment of this claim. Nonetheless, the structure of the program suggests that it will not adequately address the problems specified above; it may, in fact, exacerbate them. The plan guarantees coverage for a specified amount of time for a delimited set of health conditions. On the positive side, such guarantees establish health care as a right that the state has the obligation to fulfill.6 The establishment of such a right may provide the basis for collective action among affected constituencies if they perceive the state as failing to meet its obligations. However, the delimited nature of the program—some diseases and treatments are covered while others are not or are given lesser priority—belies the suggestion that it is universal in scope. Indeed, the plan may further undermine social solidarity by creating or reinforcing competing and unequal constituencies on the basis of (1) the ability to pay (as with the previous system, those with greater means are expected to pay more); (2) age and sex; and (3) diseases covered and not covered, which, in turn, exacerbates existing inequities on the basis of age and sex. Under circumstances in which there are insufficient resources or there is insufficient political will to provide full universal coverage, targeted assistance may be the next best option; ideally it will insure that those least able to pay will receive the greatest support. Yet for this arrangement to be effective, taxation and program funding must be sufficient. Unfortunately, the Lagos government was only partially successful in ensuring that Plan AUGE and other social welfare reform programs have sufficient funding. While Congress approved an increase in the value added tax from 18 to 19 percent in July 2003, the rightist opposition in the Senate rejected the government’s proposal for an increase in taxes on alcohol and diesel fuel. As a designated senator, former president Frei was in a position to break the deadlock between the government and the opposition. Yet he abstained, effectively defeating Lagos’s proposal. As a result, the government was left with a $100 million shortfall in revenues necessary to cover its social welfare programs (La Tercera July 4, 2003c). Such dissention between the government and members of its own coalition on these issues reflects the continuing struggles over achieving growth with equity in Chile and lessens the likelihood that Plan AUGE will be a significant improvement over the existing health care system. The Fund for Solidarity and Social Investment Obstacles to popular unity are not exclusive to social programs that originated during the dictatorship. For example, FOSIS, perhaps the most highly


acclaimed social program for alleviating poverty devised and implemented by the Concertacíon, reinforces central government control while simultaneously promoting popular sector competition and stratification. Like other social funds in Latin America, FOSIS operates according to a set of guiding principles: the promotion of cost efficiency and program efficacy through decentralized administration, targeting of subsidies, complementing of traditional social policies, and involving the public and private sectors, NGOs, and communities in collaboration with respect to antipoverty programs (Tendler 2000). Despite the lip service FOSIS pays to collaborative community involvement, it approaches poverty alleviation as a purely technical problem—how to facilitate more effective participation of the poor in the market economy. This approach leaves virtually no scope for the active participation of target populations in defining the nature of their marginal status or articulating effective remedies. Therefore, FOSIS does not address the structural causes of poverty and inequality highlighted in chapter 3, namely low wages, precarious employment, and severely limited collective representation. On the contrary, FOSIS is designed to facilitate the integration of the most marginalized segments of the population into the existing, hyperflexibilized Chilean labor market (Taylor 2006, 192). Moreover, FOSIS’s promotion of competition, stratification, and social fragmentation belies its self-referential claim to promote social solidarity. Because FOSIS requires groups within communities to compete against each other for access to scarce resources, the program impedes popular sector solidarity and stymies the development of social capital.7 Its real emphasis, then, is not promoting social solidarity but more fully integrating the poor into capitalist social relations and labor markets. By subsidizing local investments in human and physical capital, it seeks to remove barriers to market participation. In this sense, FOSIS serves as a model for programs that the World Bank asserts “empower” the poor (Ibid; cf. World Bank 2000; Taylor 2004). Such an understanding of how to assist the poor to overcome their marginal status is highly reminiscent of modernization theory’s emphasis on “asynchronous development” and asistencialismo (paternalistic social assistance). As discussed in chapter 2, proponents of modernization theory such as Gino Germani considered the pervasiveness of poverty and inequality in underdeveloped societies to be the result not of capitalism’s deleterious effects, but its uneven assimilation within developing societies. To overcome this “asynchronous” development, marginal populations had to be integrated into the larger society through the application of asistencialismo. FOSIS is founded on a similar understanding of the causes of marginality and how it is to be overcome. A key distinction, however, is that FOSIS


is designed to preclude or inhibit the mass participation and mobilization that resulted from the adoption of social assistance policies in Chile in the 1960s and early 1970s. Despite this crucial distinction, it appears that government officials have nonetheless utilized FOSIS as a source of patronage in much the same way that social assistance programs were utilized for this purpose during Latin America’s populist era. Thus, this analysis suggests that FOSIS is a hybrid program, possessing populist as well as neoliberal elements, both of which tend to divide popular sector communities. Examination of the institutional strictures that govern the way in which FOSIS functions serves as a useful starting point to flesh out the foregoing critique. In this regard, we can identify three key elements of the program that serve to inhibit popular sector unity and participation. These include budgetary constraints, the top-down design of the program, and the manner in which resources are distributed. The program’s budgetary constraints are highly problematic, given the expansive mission the government conceived for it. The Aylwin administration established FOSIS within the Planning Ministry (MIDEPLAN) in 1991 to promote development within low-income communities through the expansion of social welfare infrastructure, credit, and technical support for productive activities such as microenterprises. Despite this broad mission, the first Concertación government determined from the outset that funding for FOSIS would be modest. Accordingly, the program receives less than 1 percent of total social spending despite the fact that it targets a subsector of the economy that comprises not less than 25 percent of the total labor force (Vergara 1997, 211, 1994, 251, 257). The modest funding FOSIS receives means that no matter how effective its policies may be in alleviating poverty, their impact is necessarily limited. Modest funding levels also intensify the competition for resources within low-income communities, which as discussed in greater detail below, reinforces the stratifying elements of the program. The hierarchical structure of FOSIS, which gives appointed officials of the central government overarching programmatic control, creates additional problems by subverting the program’s avowed emphasis on popular sector participation. This hierarchical institutional structure and the elitist approach to governance it reinforces reflect the perpetuation of influential elements of the military regime’s authoritarian legacy. The military regime established the current structure of regional government in 1985, with the creation of the Subsecretary of Regional and Administrative Development (Subsecretaría de Desarollo Regional y Administrativo, or SUBDERE). The authoritarian regime’s creation of the SUBDERE was an integral part of its plan to decentralize administration of the Chilean state. Under this plan, the regime divided the nation into an increased


number of territorially segmented administrative units (13 regions, 55 provinces, and 328 communes or municipalities) each with its respective political authority (regional intendant, provincial governor, municipal mayor). Each such political authority was designated by the president of the republic and consequently was subordinated to the political line of the central government and obligated to obey the instructions and orders of the executive. As a result, the administrative process became exceedingly centralized, insuring that decision making at the local and regional levels would constantly be subjected to the authority of those officials of higher rank in the administrative hierarchy. Such constraints precluded the autonomy of subnational units of government. Moreover, while in theory the institutions established by the regime for the purposes of participation (COREDES, or Regional Development Councils, and CODECOS, or Communal Social Development Councils) could have provided a counterweight to the overwhelming power and authority of the central government, in practice they operated as mechanisms of political control through which the military regime could fill the vacuum left by its forced exclusion of political parties (Raczynski 1986, 21–23; Pozo 1986, 9). Under these circumstances, popular organization and collective action through legally sanctioned channels—once defining characteristics of the Chilean political system—became virtually impossible. Thus, from a system of governance that facilitated the representation of local interests at the national level, the Chilean political system was transformed into an institutional edifice that represented the interests of the national government at the regional, provincial, and local levels.8 Accordingly, as noted in chapter 5, deconcentration of administrative responsibility did not involve a commensurate devolution of policymaking autonomy and control over resources to lower levels of government. Instead, officials appointed directly by the president—the regional intendants and provincial governors—maintained these prerogatives. The democratic transition left this administrative structure fundamentally intact. Subsequently, the restoration of municipal elections in 1992 and the establishment of direct mayoral elections in 2004 have made the state’s administrative structure more democratic. However, these reforms have not led to substantial democratization of policymaking with respect to FOSIS. Instead, regional presidential appointees in consultation with state bureaucrats and regional council members make strategic decisions regarding which municipalities to target for assistance, the resources to be allocated for each program in each selected municipality, and the activities and resources required to complement those provided by FOSIS. In each region, a regional working group directed by the heads of the regional


FOSIS and MIDEPLAN offices formulates a proposal that addresses the preceding considerations. Subsequently, the head of the regional government (intendant), who is appointed by the president, and a council composed of regional representatives of line ministries discuss and approve the working group’s proposal (J. Barrientos 1999, 5, 10). Once the regional authorities have identified the municipalities to be targeted for assistance and determined the amount of funding they will receive, the intendants inform the mayors of the recipient municipalities. At this point, the targeted municipalities must approve an investment program consistent with the guidelines established by the regional governments. A Municipal Working Group (MWG), directed by FOSIS and municipal government representatives and with the participation of relevant municipal staff and representatives from intermediaries involved in program implementation, assumes responsibility for formulating the investment program and gaining its approval by the mayor and the municipal council. Intermediaries, typically NGOs, assist citizens from targeted communities in the formulation of small-scale projects for one of several programs (Capacity Building, Strengthening of Existing Organizations, or Income Generation in Rural Areas), which they then submit to the municipal government in a competitive selection process. Finally, the municipal government selects the projects to receive funding through allocation of FOSIS and local resources (Ibid., 10). A number of points bear mentioning when assessing the impact of this process on popular participation and community solidarity. Perhaps most importantly, FOSIS severely circumscribes popular sector participation, limiting it to the formulation of specific, narrowly defined projects in consultation with NGOs and other intermediaries. At no point in the process of program formulation and implementation does FOSIS provide any scope for community-wide discussion of local development needs and how they might be best addressed. Instead, targeting decisions are made by regional and local officials on the basis of technical criteria that preclude popular sector input. In addition, FOSIS places exclusive emphasis on the development of narrowly defined projects involving small numbers of needy citizens, precluding the engagement of whole communities or large segments of the population. Thus, the institutional design and incentive structure FOSIS has established militate against popular sector cooperation and collective action. The program’s severely limited resources, coupled with its territorially divided administration, diversity of programs, and competitive bidding process, reinforce social stratification and further subvert any impetus for community-wide organization and collective action.


The foregoing analysis suggests that FOSIS has helped to inhibit the politicization of social policy that characterized the pre-coup period. While in the past there was a high degree of partisan contention over social welfare policy, today there is ideological convergence between the right and the center-left over the desirability of targeted assistance programs. Moreover, major programmatic decisions, including the technical criteria utilized to determine program targets, the designation of target communities and funding amounts to be allocated are all determined by government technocrats in collaboration with presidential appointees. Thus, these key dimensions of policy have been removed from the realm of partisan politics. Nonetheless, depoliticization at the national and regional levels has apparently not prevented local leaders from awarding FOSIS contracts based on political considerations. On the contrary, many grassroots leaders assert that FOSIS grants are awarded on the basis of political connections that favor those communities and organizations most closely affiliated with the government. Such criticisms are not limited to the base, as a sociologist working in the MIDEPLAN office charged with overseeing the operation of FOSIS, Service of Technical Cooperation (SERCOTEC) intimated that “the vast majority of the FOSIS grants are awarded not according to need and technical merit but in a manner which promotes the political interests of the dominant party in government.”9 Interviews of shantytown dwellers across the political spectrum lend support to this assessment. Local residents and their elected representatives are divided over the usefulness of this program and the fairness of the manner in which grants are awarded. Many on the right viewed the program as a source of patronage for the ruling Concertación. For example, Alfredo Galdames, national director of the UDI project to build support among pobladores, asserted, “in the case of FOSIS, the Christian Democratic party controls everything. Some other resources are controlled by the left . . . clientelism still prevails today.”10 These views were echoed by a party official from the right-of-center RN, “If you look at the FOSIS projects that have been approved you will not find a person from Renovación Nacional or the UDI. FOSIS projects exist mainly to benefit the leaders of the Christian Democratic sectors.”11 As might be expected, pobladores affiliated with parties from the Concertación generally presented a more positive assessment of FOSIS; a number of interviewees indicated that they or someone they knew had received funding through the program. However, similar to criticisms by those on the right, even some shantytown dwellers linked to parties of the Concertación were critical of the way that the distribution of resources at the local level could be politicized. As one such grassroots leader put


it, “In a way, we need to beg constantly [for resources]. In order to get a project approved, we have to submit it to either FOSIS or the municipality. The central government gives one of these two the money and then they give the money to the people who developed the project in the shantytown . . . and if the municipalities act in a political way, all the different organizations will have to act likewise.”12 Thus this analysis suggests that FOSIS is a hybrid program, possessing both populist as well as neoliberal elements. On one hand, it represents a throwback to the practice of patronage most characteristic of Chile’s statist period. On the other, it promotes competition and stratification among communities and groups competing for the same pool of limited resources, as is characteristic of many neoliberal programs. Ultimately, the character of this program suggests that the asistencialismo of the statist era and today’s emphasis on targeted assistance share much in common, including, most importantly, the objective of controlling the popular sectors’ demand-making capacity. To the extent that FOSIS serves to achieve this goal, it reinforces the pattern of governance established under the dictatorship in which national authorities were able to utilize a decentralized administrative structure to represent their interests at the regional, provincial, and local levels of government. Local Government, Social Welfare, and Housing Housing policy in Chile operates in much the same way as FOSIS and therefore has a similarly deleterious impact on popular sector organization. Though slightly modified, the current housing program is essentially the same as that which was originally designed and implemented under military rule. To preempt the politicization of housing that occurred under Frei and Allende, the dictatorship restructured the allocation of housing resources in a manner designed to promote stratification and competition among potential recipients. By replicating this method of administration, the posttransition governments of the Concertacíon—like their authoritarian predecessors—have effectively subverted the unifying potential of the historically volatile housing issue. Municipal administration of housing policy circumvents the traditional organizational role played by political parties while it facilitates the imposition of central government policy objectives at the local level. Moreover, it severely constrains the development of popular sector unity within and across municipal boundaries. By imposing relative rankings upon families and the groups in which they participate, and making access to resources dependent on these rankings, housing policy reinforces the stratification and competition present in the labor market. In so


doing, municipal administration enables the central government to channel popular sector demands in a manner that contains fiscal pressures on the state. Whatever positive impact current housing policy may have on the fiscal health of the Chilean state, however, its impact on social capital has been decidedly negative. While the manner of distributing scarce housing resources impedes cooperation and promotes competition, the physical location of subsidized housing, on peripheral and substandard land isolated from social amenities, perpetuates the marginalization of poor populations. The structure of subsidized housing exacerbates these problems by not providing adequate space for familial cohesion or the development and preservation of social bonds. To fully appreciate the impact of current policy on social organization at the local level we first need to consider its historical precedents. Analysis of these historical precedents reveals a radical shift in the way in which ideologically distinct governments have approached the housing issue. While the Frei (1964–70) and Allende (1970–73) governments conceived of housing as a social right which the state had some obligation to fulfill, the military and Concertación governments have conceptualized housing as a commodity whose distribution should be determined primarily by market forces. From the latter perspective, state intervention is warranted only to the extent that it enables the poor to participate in the private sector housing market. Policymakers within the military and Concertación governments conceptualized housing policy in this fashion in deliberate attempts to prevent the kinds of social, political, and economic problems that had erupted under Frei and Allende. Both the Christian Democratic and Popular Unity governments had stimulated demand and expectations for housing among the popular sectors well beyond the state’s capacity to supply it. The initial upsurge in popular sector demands and expectations originated in response to policy and institutional reforms adopted by President Frei and the PDC in the late 1960s. As noted in chapters 3 and 5, when the PDC rose to prominence in Chilean politics, it was a programmatic and highly ideological party. To realize its ideological vision, the party adopted a program of Promoción Popular, which had the dual purpose of overcoming the extreme scarcity of resources and technical capabilities that characterized Chilean local government and winning for the PDC a new flock of adherents. Consistent with the theories of marginality and Christian communitarianism, which provided the philosophical foundations for these reforms, the party’s objective was to supersede the existing, traditional (that is backwards) local institutions, which supposedly promoted provincialism and passivity among their constituents. The new, corporatist institutions would help to build a consciousness of national identity and would encourage collective


solutions to community problems with the support of direct assistance and subsidies from the central government (asistencialismo). The cornerstone of this program at the grassroots was the establishment of juntas de vecinos, or neighborhood associations, which were to form a network of community organizations to be coordinated at the national level by a Consejería de la Promoción Popular (Council of Popular Promotion). To address the mounting needs and demands of the urban popular sector, competing political factions began to organize pobladores through the neighborhood associations and other grassroots organizations sanctioned by Promoción Popular to bring their demands directly before the relevant agencies of the central government. This organizational effort was particularly evident with respect to the issue of housing, which was of primary concern to the thousands of urban shantytown dwellers who were either without housing, lived in makeshift squatments, or were forced to live in overcrowded tenements. In response to the severe housing shortage confronting the nation, the Frei administration declared that “housing is a good of prime necessity to which every family has a right. In consequence, housing should be accessible to all families whatever their economic status” (MINVU 2004, 138; author’s translation). In order to address the housing shortage, the government created the Ministerio de Viviendas y Urbanismo (MINVU) in 1965 and a set of related autonomous state corporations the following year.13 These bureaucratic entities assumed responsibility for achieving the ambitious goal of constructing 360,000 housing units before the end of Frei’s term, with nearly 60 percent (213,000 units) to be set aside for the poor (Ibid., 128). Despite the establishment of these ambitious goals and the creation of a bureaucratic apparatus to achieve them, what the government was able to achieve fell well short of the nation’s surging housing demand. The increasing influx of migrants from the countryside swelled the ranks of the urban poor and elevated demand for housing significantly above the government’s construction targets. Compounding this problem was a severe rise in inflation in 1967, which forced the government to reduce spending on housing. Exacerbating these circumstances still further was the plight of the lowest income groups, many of whom were unable to obtain housing despite substantial state subsidies (Ibid., 134–135). When the Frei administration’s program to deal with the urban housing crisis, Operación Sitio, proved unable to satisfy the burgeoning demand for low-cost housing, leftist groups (mainly the PC, the PS, and to a lesser extent the MIR and the leftist factions of the PDC) organized mass mobilizations and land seizures (tomas) intended to force the government to immediately address the urban popular sector’s needs (Castells 1983, 199–200;


Kusnetzoff 1987, 159–160). The land seizures—8 in 1968, 73 in 1969, and 220 in 197014 —underscored the government’s inability to either satisfy popular demands or assuage the business community’s concerns about the increasing spread of leftist radicalism. Under these circumstances, the right had little reason to lend its electoral support to the Christian Democrats as it had done in 1964, a condition which made it possible for the Unidad Popular to win the 1970 presidential election. With Allende’s ascension to power, the polarizing dynamics put in play under the Frei administration continued unabated. Contributing to mounting popular demands and expectations, Allende proclaimed early in his administration that “housing is a fundamental right of all Chilean families, independent of their income level” (Kusnetzoff 1987, 162). The socialist president stated further that “it is the obligation of the State to provide housing to its people . . . it cannot be the object of profit” (MINVU 2004, 138; author’s translation). In attempts to make good on this proclamation, his government dramatically increased state investment in housing and social welfare. “Housing starts for 1971 were more than triple the total starts in the previous year. Fiscal spending increased by more than 70 percent” (Ascher 1984, 243). Such policies inevitably antagonized the entrepreneurial class, which was concerned that such steep increases in fiscal spending would exacerbate inflationary pressures and usurp economic prerogatives that properly belonged to the private sector. Thus, as the newly mobilized segments of the popular sectors joined with organized labor to press for greater concessions, business sought to derail the socialist government. The 1973 military coup, executed with the strong backing of business, was the right’s response to the popular sectors’ growing capacity to demand and win concessions from the state. As with other social policies, one of the authoritarian regime’s primary objectives in the reform of housing policy was to reverse the demand-making capacity the popular sectors had achieved under the Frei and Allende governments and state-led development more generally. The exponential increase in land seizures and grassroots demonstrations demanding housing throughout the 1960s and early 1970s, often orchestrated and led by operatives from center or left political parties, manifested the extreme importance of this issue to the popular sectors. The housing shortage provided a rallying point for popular interests around which party representatives were able to build grassroots constituencies. Indeed, involvement in organizational efforts related to the acquisition of land and housing tended to cultivate strong collective identities and feelings of unity among participants.15 In terms of macroeconomic repercussions, however, the rise in the demand for state housing subsidies


dramatically increased inflationary pressures. Each of these repercussions associated with the upsurge in the demand for housing was perceived by the dictatorship as a significant threat to its neoliberal agenda. Therefore, the regime set out to transform the housing issue from one which tended to fuel public sector spending, inflation, and popular unity to one which encouraged private investment, social stratification, and popular sector fragmentation. The military government’s strategy for achieving these objectives involved three elements: (1) shifting primary responsibility for housing finance and construction to the private sector; (2) stratifying lowincome households on the basis of income, savings, and other criteria established in accordance with the Comités Comunales de Acción Social (Comunal Social Action Committees or CAS) survey; and (3) allowing families of different income levels to compete for the same housing subsidies. With respect to the issue of stratification, the central government entrusted municipal governments with the implementation of policies and programs that were targeted primarily at the most needy. This delegation of responsibility was part of a broader process of administrative decentralization implemented by the military regime, according to which state ministries would be deconcentrated territorially through Secretarias Regionales Ministeriales (Regional Ministerial Secretariats or SEREMI). The various SEREMI were responsible for the execution of regional policies and the coordination of services in agreement with the instructions of regional intendants, who as noted above were presidential appointees and thus proxies for the central government. In line with these administrative reforms, the Pinochet government fused the four state corporations that the Frei administration had created to deal with the housing issue under the Servicio Regional de Vivienda y Urbanización (the Regional Service of Housing and Urbanization or SERVIU). Under this scheme, the municipalities were the sole mediators between SERVIU and other state agencies charged with the administration of social policies and the populations targeted by such policies. In other words, administrative deconcentration prevented political parties and social organizations from playing their historical role of organizing the popular sectors and representing their interests before the state. Under this new administrative arrangement, municipal governments were responsible for fulfilling four specific functions. First, they were expected to collect statistical survey information from each family to characterize the socioeconomic situation of their respective communal populations. To collect such information, in 1979 the military regime endowed municipal governments with special administrative structures, the Comités


Comunales de Acción Social or CAS (Communal Social Action Committees). In addition to coordinating all the different public and private social services targeted at the extreme poor of each community, the primary function of the CAS was to administer the Ficha de Estratificación Social (Index of Social Stratification), a government survey designed to assess the magnitude and urgency of social need in each community.16 Second, on the basis of the information collected through application of the Ficha CAS, municipal governments were expected to stratify the poor families of their communities according to their relative levels of poverty (Vergara 1990, 52–56).17 Third, utilizing the assessments made possible through the application of the Ficha CAS, municipal officials assigned benefits to selected families and individuals based on their respective calculated needs. Fourth and finally, municipal governments transferred the assigned benefits to the selected families and individuals (Gallardo 1989, 39–50). Unfortunately, the interplay between the targeting of resources by municipal governments on the basis of the CAS index and private sector financing and construction of housing for the poor greatly exacerbated, rather than ameliorated, the already severe housing shortage. The shift from predominantly public to predominantly private responsibility for the finance and construction of low-cost housing represented a dramatic departure from the historical pattern in Chile. As such, it had significant repercussions for both the quantity and quality of housing constructed to meet the needs of the most disadvantaged. Between 1960 and 1972, Chile’s public sector constructed and/or financed approximately 80 percent of all housing (Raczynski 1994, 37). In contrast, during the military regime, the public sector constructed roughly only 17 percent of all housing (Kusnetzoff 1987, 172). As a consequence of this shift, not only was the housing deficit twice the level at the end of the military regime as it was at the beginning, but also only 56 percent of new households gained access to their own housing.18 Moreover, despite the military regime’s emphasis on targeting subsidies to more effectively meet the housing needs of the most needy, half of the housing subsidies it provided for the alleviation of extreme poverty made their way into the hands of middle-income groups, as did three quarters of the housing itself. Finally, the housing that did make it into the hands of the most disadvantaged was generally of lesser quality and constructed in communities with inferior public resources and economic and social opportunities (Vergara 1990, 229, 230). The financing mechanisms established by the regime contributed to the foregoing problems in several ways. First, the government’s almost exclusive reliance on the private sector for the construction of housing for low-income sectors meant that practically all such housing was constructed where land


was cheapest—in the poorest areas, with the least resources, farthest from the city’s centers of economic and social opportunity (Ibid., 241). Second, the private sector was not only encouraged to build in inferior locations but also discouraged from building an adequate supply of low-cost housing. This undersupply resulted from the fact that it was not profitable for the construction industry to produce low-cost housing except on a large scale with assured demand (Castañeda 1992, 131). Such demand could not be assured, despite the mounting housing deficit amongst society’s poorest strata, because families from these strata typically did not possess the necessary savings and income to qualify for the credit that would have enabled them to purchase their own homes. At the same time, however, families that through the employ of the CAS index municipal governments had determined possessed adequate income and savings to qualify for private loans were allowed to compete for the same subsidies as those less fortunate than themselves. As a result, many of the resources the military government had allocated to help alleviate the housing crisis ultimately benefited either the middle sectors or the least disadvantaged among the lower sectors (Castañeda 1992, 134; Vergara 1990, 230–233). To remedy this problem, the regime established a program (the Social Housing Program, SHP) providing subsidies intended exclusively for the most needy. These subsidies would help to cover the rental or purchase of housing between 28 and 35 square meters, considerably smaller than the housing available to the middle sectors and previously available to the poorest sectors(Castañeda 1992, 134–135). Thus, in sum, those with inferior resources were unable to qualify for bank loans altogether or could compete only for the least costly, least desirable housing. The competitive process involved in acquiring low-cost housing and the stratification of the popular sectors in accordance with the economic criteria determined by the government destroyed the basis for building popular unity and pursuing collective interests which the housing issue had previously presented in Chile. Since the Concertación assumed power in 1990 it has devoted more resources to the housing program to reduce the substantial deficit that the Pinochet government had allowed to accrue over the previous seventeen years. In addition, it has made efforts to ensure that resources are more effectively directed to the neediest. However, it has pursued these objectives without changing the housing program’s administrative structure, the manner in which it allocates resources, or the kinds of resources which it allocates. As a result, while the housing deficit has declined and scarce resources appear to have been more effectively targeted at the poor, the manner in which resources are distributed and the structure and location of the housing itself continue to have deleterious effects on popular sector organization and social capital.


When President Aylwin assumed office in 1990, his government was fearful that the restoration of democracy would precipitate a return to land seizures among the urban poor. To preempt the reemergence of this problem, the government increased public expenditures on housing, developed programs targeted specifically at low-income allegados (multiple families leaving together in one dwelling), and improved the effective transfer of resources to the poor overall. The Frei administration continued the pursuit of these objectives. As a result, MINVU facilitated the construction of more than 90,000 housing units per year—achieving a substantial reduction in the housing deficit—and instituted more efficient targeting of resources destined for the most poor (MINVU 2004, 231). A 1998 government survey indicated that the benefits granted between 1994 and 1998 were focused on the poorest 40 percent of the population (Ibid., 234). Despite these positive achievements, a substantial contradiction exists between the government’s avowed commitment to equity, solidarity, and citizen participation and the actual impact of housing policy on popular sector organization. Indeed, rather than producing equity and solidarity, government policy produces stratification, competition, and distrust among popular sector constituencies. The element of competition is introduced into the housing distribution system in two ways: (1) by providing easier access to subsidies and a greater variety of subsidy options to pobladores with greater savings and better credit, and (2) by the manner in which the relative need of individuals and groups is determined. In the first instance, shantytown dwellers who have greater savings and earning power are eligible for private sector mortgages that are subsidized by the state and are eligible for housing which is more than twice the size of the housing available to the neediest residents of the shantytowns (100 vs. 42 square meters).19 In the second instance, state-imposed means testing stratifies low-income citizens according to relative need, determining in the process their eligibility for limited state benefits. The manner in which the state determines relative need and the targeted nature of access to housing subsidy benefits promotes competition and distrust among potential recipients. The state determines relative need on the basis of an updated version of the survey instrument originally adopted under the military regime, the Ficha CAS-2.20 As noted earlier, the instrument was designed by the military regime to target resources at the most needy in accordance with the principle of subsidiarity. In other words, the state would promote efficiency by delivering resources at the lowest level of government possible and with the ultimate objective of facilitating marginalized citizens’ participation in the private market. Accordingly, municipal officials administer the survey instrument, which assesses a variety of factors, including income, education, and the condition of the dwelling in which low-income residents


live. On the basis of this assessment, these officials assign a score intended to reflect the residents’ relative need—the higher the need, the lower the score. Individuals with lower scores have a greater likelihood of receiving more generous state subsidies. In addition, the lower their scores, the less credit burden they will be expected to assume and the lower the savings they will be expected to contribute to the purchase of their own home in the private market. To enhance their relative eligibility, residents of the shantytowns compete to portray their respective living conditions to municipal assessors in the neediest light possible, a practice that tends to cause resentment and distrust amongst neighbors. As one grassroots leader put it, “This policy divides the community. It encourages dishonesty and competition among families. If a family has a television or a wooden floor or anything that gives the appearance of being better off than its neighbors, in order to receive a higher ranking it will remove these things when the officials come from the municipality. Neighbors become suspicious of one another. Under these circumstances we can no longer build unity.”21 Other social leaders dealing with the housing issue voiced strikingly similar observations. For example, Sabina, leader of the Comité de Allegados in the shantytown La Pincoya in the municipality of Huechuraba, stated, “I do not agree with the way the needs of poor people are being assessed . . . people hide all their material possessions when they are visited by social workers. This assessment system is not good since it leads people to lie. Therefore, the scores are not fairly assigned to poor families.”22 Another social leader involved with the housing issue, in the shantytown of Yungay in the municipality of La Granja, expressed a similar criticism: “[T]his is not a fair system since social workers are very subjective when assessing people’s housing needs. For example, if they see that the pobladores have certain material possessions that they acquired with great effort, they might think that they are not in need of a house.”23 The extent to which this form of assessment provokes distrust amongst neighbors is reflected in complaints received by local government officials. As a government official in the Departamento de Estratificación (Department of Stratification) in the municipality of La Granja notes, The subsidies are always less than the number of applicants. So there are complaints. They ask, “Why don’t you give me those benefits, if I live in the same conditions as my neighbor and my neighbor had the score to apply for the subsidy?” But we can’t do anything about that. I can revise the ficha, but if the person signs and asserts that they are not working [being unemployed would entitle the applicant to a more generous subsidy], I can’t do anything about it. I don’t have the means to disprove them. Now it is

Social Welfare and Collective Action / 151 happening a lot that the person obtains benefits but they aren’t interviewed in their community—they are interviewed in a house of allegadas [multiple families living in a single dwelling], knowing that they will get the score they need.24

A government official who works with the issue of housing in the municipality of Huechuraba notes similar attempts by pobladores to manipulate the evaluation system in order to receive a lower score. He relates: I have witnessed it several times when I go to people’s houses and they keep me waiting outside. Sometimes the curtain or a window is a little open and I can see them starting to hide everything. Once they are done, they let me in and tell me how they do not have much . . . .A lot of people act that way. Unfortunately, here in Chile the concept of social assistance is very strong. We see it every day when people come here to ask for such things as food, cement, et cetera. Unfortunately, that has historically been the way. That is the problem with the housing subsidies—because people want the state to help them in every way, and that is not correct. We think it is about the capacity of the people to make it on their own that is fundamental. There has to be a change in the mentality of the people.25

The official’s perspective on the origins of this kind of behavior among the poor is reminiscent of modernization theory and reflective of neoliberal ideology. It suggests that poor citizens’ attempts to exaggerate their degree of deprivation stem from their retrograde expectations regarding state assistance and their failure to take responsibility for their own material well-being. Anachronistic or unrealistic expectations regarding state assistance may well exist among Chile’s poor. Nonetheless, comments from government officials and pobladores alike suggest that the behavior described above is a rational response to material deprivation, scarce housing subsidies, and stringent means testing. The combined impact of these factors heightens competition and undermines trust among residents of shantytowns who otherwise have much in common. Housing policy in Chile stimulates competition and impedes cooperation and collective action among the poor in at least two additional ways. First, although a number of state housing programs are designed to accommodate group applications, the onerous requirements involved and the high degree of competition for limited resources encourage those with greater resources to opt for individual solutions to their housing needs. Group applications typically require that (1) all members of the group possess the same relative degree of material disadvantage as reflected in their Ficha CAS scores; (2) members of the group possess a specified minimum amount of savings; and (3) the group develop a plan for the purchase or construction of housing that will adequately


meet the needs of all of its members and conform to applicable program requirements. Each of these requirements presents significant challenges to the group’s eventual success in being rewarded a state subsidy and obtaining satisfactory housing. With respect to the first requirement, for example, individuals with CAS index scores above the legally accepted minimum for a given program will not be allowed to participate in the group, no matter how close their personal connections or how committed they might be to helping the group achieve a successful outcome. As Raúl Oyarce, president of a Comité de Allegados in the shantytown La Pincoya explained: Your possibility of getting a house is dependent upon your Ficha CAS score. I think that is wrong because we all deserve a house . . . .Here, people have to have below 520 points in order to be in a committee. The people who have more than 520 are automatically left out . . . .I am for sure out of the committee due to my score, but I haven’t left yet. I am still fighting for the others. I wouldn’t like to leave the committee without having achieved anything.26

Despite his expressed desire to persevere in his commitment to the group, Mr. Oyarce indicates later in the conversation that he would soon apply for an individual housing subsidy and begin searching for a house on his own: “I will apply for a unified subsidy and focus on finding a house for me . . . .I will no longer be part of the committee. The people who stay in the committee will keep struggling and waiting. I can’t wait very long.”27 This example illustrates the manner in which means testing and the provision of a multiplicity of programs with varying requirements fragments groups and undermines incentives for collective action. In this instance, a group leader who was by all appearances committed and capable was compelled to leave the group in pursuit of an individual solution to a broadly shared problem, the lack of adequate housing. Collective solutions to housing needs are further hindered by the minimum savings requirement all group members are required to fulfill. A dilemma that Mr. Oyarce confronted as president of the Commité de Allegados in La Pincoya exemplifies this problem: I have approximately 39 families who are applying for a subsidy. When we were going to apply, I had to include only the families that had the money, only sixteen. I had to leave the others out because I can’t keep waiting. But it wasn’t only my decision as president. We got together as a committee and voted on the issue. The social assistant from the municipality supported us.


Another social leader, in the población Yungay described essentially the same problem: If in a committee there are forty families, they all have to save 180 thousand [pesos, about $300.00 or roughly twice the monthly minimum wage], which is the minimum savings amount for the basic housing program. If one of the members of the committee does not have the required savings, the application is not approved, even if all the others have met the requirement. That is why committees are complicated . . . .I am applying on my own so I don’t have any problems; I won’t have to depend on others to get the subsidy.28

The preceding factors that militate against group efforts amongst the poor to secure housing are compounded by an additional factor. In instances where all group members manage to accumulate sufficient savings to meet the minimal program requirements, they are expected to construct a project plan that incorporates everything from identification of land to be purchased to the design of individual housing units. In order to develop the specifics of such a plan, groups must rely on the expertise of consultants, to whom they pay a fee. Once a group has completed its plan, it must compete with all other groups in its region to be awarded the appropriate subsidies by SERVIU. Thus, housing policy in Chile introduces competition both in the initial assessment stage, when applicants are evaluated by local government officials to determine their eligibility to receive subsidies, and in the final stage, when group applicants submit their respective project plans for evaluation by SERVIU. Elaboration of these competitive requirements illustrates the substantial pressures that current policy imposes on collective efforts among Chile’s poor to obtain housing. They reflect an environment in which individuals, particularly those who possess economic means modestly better than the poorest of the poor, are encouraged to act on their own to find solutions to their housing needs. Those who have stable employment in the formal sector, and can demonstrate a record of good credit, have the option of obtaining a mortgage through a private bank. Those who are not employed in the formal sector and/or do not have a record of good credit are forced to compete for subsidies targeted at the most disadvantaged. In this manner, housing policy reinforces the stratification among the poor that prevails in the labor market. As a single mother seeking a housing subsidy explained, It is easier for those who have more money because they have credit. They have receipts, checking accounts, and those things give them a higher score to be able to apply for a bigger loan. If I was to go to a bank to request a

154 / State, Market, and Democracy in Chile loan, they wouldn’t give it to me . . . .I don’t have credit cards or anything to back me up. And I have a hard time saving because I have two children and am on my own. The other day one of my daughters fell and she had to go to the hospital, so I had to take 50,000 pesos from the savings account.29

As this poignant example illustrates, housing policy does little to alleviate, and in many instances reinforces, the impact of market pressures on those whose economic circumstances are already highly precarious. Moreover, while such policy could construct incentives that encourage collective solutions to shared problems, it does the opposite by reinforcing stratification and promoting competition. For those successful in obtaining housing through government-sponsored programs, conditions in terms of social cohesion and cooperation are little better. Publicly subsidized housing projects in Chile are characterized by physical and social isolation, the absence of adequate public spaces to facilitate social interaction, and individual housing units whose small size is insufficient to shelter families’ daily life or to accommodate extended family members. Each of these shortcomings has negative repercussions for social cohesion and the formation of social capital among the poor. With respect to physical and social isolation, for example, most publicly subsidized housing in Chile is built on the outskirts of cities, which forces those who accept housing there to move far away from friends, family, and old neighborhood social networks. This form of separation causes a breakdown in ties among relatives and friends; it disrupts systems of solidarity and trust established among old neighbors. These problems are compounded by the small size of housing units, which preclude the union of extended families (e.g., children caring for parents) and thus impedes the preservation of intergenerational social bonds. In addition, the lack of sufficient space for family activities or social interaction exacerbates social isolation and pushes kids onto the street, where they are exposed to drugs, violence, and other ills that typically afflict impoverished urban neighborhoods (Ducci 2000). The combined impact of these forces is to create lowincome neighborhoods, “consisting of families who have only their poverty in common . . . permeated by a sense of mistrust and lack of solidarity that recedes very slowly” (Ibid., 165). These conditions are but another indicator of the extent to which housing policy in Chile imitates and reinforces market forces to the detriment of those least capable of competing in the market. Scarce public resources and stratifying means testing to determine eligibility for these resources promote competition and distrust among neighbors. Onerous requirements for the successful completion of group housing proposals encourage the pursuit of individual, rather than cooperative, solutions to the lack of


housing. Central government control through administrative deconcentration perpetuates the lack of public input and exclusion of social and political actors that was established under the military regime. The role of municipal governments in the administration of housing policy, an extension of central government control, compounds the impact of class stratification by coupling it with territorial division, thereby promoting the preservation of the status quo. Finally, the relocation of recipients of housing subsidies to marginal lands on the outskirts of urban centers is a physical manifestation of their marginal status in Chilean society and a prime factor explaining the deficit of social capital among the urban poor. Conclusion The Pinochet regime’s reform of social welfare provision was clearly designed to reverse the economic and political gains made by popular sectors under the Frei and Allende governments. If we incorporate the preceding evaluation of housing policy into the larger analysis of the administrative and social policy reforms carried out under the dictatorship, the picture we develop is one in which the regime deliberately kept at a minimum popular demand-making capacity as well as public resources designated to meet popular needs in order to implement and facilitate the smooth functioning of its neoliberal economic model. Both institutional and social policy reforms inhibited or altogether precluded popular participation and efficacy and assured the restricted, highly controlled flow of resources to the popular sectors. The regime achieved these objectives by all but closing institutional channels for popular participation, banning political parties, severely weakening other traditional collective actors such as health care workers and teachers, privatizing functions and resources that formerly were the near exclusive province of the public sector, and greatly exacerbating the segregation and stratification of the popular sectors. The regime’s policy of decentralization functioned as the linchpin that united all these elements into a highly effective program of popular control. Contrary to the regime’s official pronouncements, the decentralization of administrative control did not lead to greater administrative efficiency; nor did it allow the popular sectors greater input into the design of programs and policies that would more effectively address their needs. Instead, municipal governments became instruments through which the central government could more effectively manipulate the popular sectors in accordance with its political and economic designs. In this regard, the authoritarian regime’s transfer to the municipalities of responsibility for services traditionally managed by the central government, such as health care and housing, reinforced central government


control in a number of interrelated ways. Perhaps most obviously, the military regime’s program of municipalization greatly increased the economic and social disparities separating communities that were highly segregated along class lines, severely magnifying in the process the fiscal dependence of the poorest communities upon the central government. In turn, such spatial segregation and fiscal dependence enhanced the central government’s ability to manipulate and control the popular sectors through the strategic targeting of social welfare subsidies as well as the weakening of collective actors opposed to neoliberal reform. The military regime’s policy of targeted assistance impeded popular resistance by severely compromising the material incentives for intra- and interclass unity. Groups and individuals who in the past may have had a stake in banding together to press the state for the fulfillment of their common needs were now put at odds by stratifying means testing and the necessity of competing against one another for the acquisition of increasingly scarce public resources. These dynamics persist despite the restoration of democracy. While public expenditures for social welfare have increased since the democratic transition, institutional and incentive structures regulating the distribution of social welfare resources have remained essentially intact. As a result, the social welfare regime continues to reinforce stratification and to impede intra- and interclass unity. Accordingly, Chile’s social welfare system conforms quite well with Esping-Andersen’s conceptualization of liberal welfare regimes. The substantial public subsidization of private pension and health care systems undercuts the likelihood that those groups who benefit the most from this arrangement—the upper and middle classes and better-positioned workers—might join with less fortunate workers to push the state for greater and more equitable benefits. What is more, the practice of individual capitalization in the pension system impedes the ability of workers to recognize common interests and common difficulties since the system encourages them to perceive their economic fate to be of their own making. In this regard, the system reinforces economic disparities between formal and informal sector workers as well as between men and women. Aggravating these social cleavages only intensifies the difficulty of uniting diverse segments of the popular sectors around common welfare concerns. Such cleavages are further aggravated by the means testing and competitive nature of resource distribution in social programs such as the state’s housing program, which undermine social capital. Finally, while the Concertacíon has touted FOSIS as an effective means of stimulating the growth of social capital and reducing poverty, it appears to function primarily as a mean of facilitating the integration of marginal populations into the competitive market economy.


In this light, we see that Chile’s social welfare regime reinforces the stratification and fragmentation produced in the nation’s labor market and reflects the market-oriented, technocratic approach to social policy adopted by the governing Concertación. Both of these elements of social welfare provision militate against popular sector organization and collective action. Chapters 7 and 8 consider the extent to which these patterns reflect the creation of a new, market-oriented state-society matrix in Latin America by examining the impact of neoliberal reform in the Argentine and Mexican cases.


Ch a p t e r Se v e n Neol i be r a l i sm, D e mo c r ac y, a n d t h e Tr a nsfor m at ion of Stat e-S oc i e t y R e l at ions i n A rg e n t i na

Overview of the Comparative Analysis The preceding analysis articulates the connections among the transformation of the Chilean state’s linkage to civil society, the recasting of its political institutions and economic and social policy, and the structure of political opportunity confronting the popular sectors. It argues that market-oriented reform in Chile, implemented by the military regime and perpetuated by democratically elected governments, imposes substantial impediments to collective action among Chile’s popular sectors. The constraint of popular participation, in turn, compromises political representation and accountability and thus indicates the negative impact neoliberalism has on the quality of Chilean democracy. To what extent is the negative impact of neoliberalism on popular sector organization and participation in Chile evident elsewhere in the region? Do countries in Latin America which have, like Chile, transitioned from authoritarianism to democracy and state-led to market-oriented development exhibit similar forms of state-society relations? More precisely, has their adoption of neoliberal reforms imposed similar impediments to popular sector organization and collective action? Chapters 7 and 8 develop a preliminary response to these questions through assessment of the Argentine and Mexican cases. Chile, Argentina, and Mexico possess important similarities and differences that make them useful cases to compare when attempting to understand the impact of neoliberal reform on the popular sectors’ capacity and propensity for collective action. Among the most striking similarities among all three cases is the degree to which economic elites have been able to gain privileged access to political leaders and policy makers (Schamis 2002; Teichman 2001). Despite this


important similarity, these cases differ as to when and to what extent they have adopted neoliberal reforms. As noted earlier, Chile adopted neoliberal reforms during General Augusto Pinochet’s seventeen year military dictatorship. Given the extensiveness of the neoliberal reforms the Pinochet regime adopted and its capacity to ensure their perpetuation even after it had relinquished power, the continued fragmentation of the popular sectors after the transition to democracy is not surprising. We find more mixed results in Argentina because most neoliberal reforms were implemented under the administration of democratically elected President Carlos Menem. As a result, the government had less latitude to use repression against the popular sector opponents of neoliberal reform and key social actors were in a position to resist or force modification of such reforms. Finally, the Mexican case is distinct from both the Argentine and Chilean cases. While neoliberal reforms were introduced under the PRI’s (Partido Revolucionario Institucional) authoritarian rule, this rule was less repressive than was the case under Chile’s military regime, but civil society was less organized and less autonomous than was the case in Argentina under Menem. Moreover, the defeat of the PRI in the 2000 presidential election after seventy-one years in power has increased the level of political competition in the country, presenting the prospect that political parties will become more responsive to the needs and concerns of the popular sectors. Ultimately, this analysis reveals that though there are important differences among the three cases, the similarities are equally, if not more, pronounced. With respect to key differences, we find, for example, that in contrast with the Chilean case, key segments of the Argentine and Mexican labor movements have been able to preserve some of the social protections that they accrued under state-led development. To the extent that such differences among the three cases exist, this analysis reveals that they can be explained by (1) the timing of reform (pre- or postauthoritarian); (2) regime legacies—for example, the extent to which key social actors such as organized labor are tied to dominant political parties; and (3) the level of party competition and the nature of party ideology. Despite differences in these three key areas, and the resulting differences in state-society relations, examination of these cases reveals neoliberal economic reform’s pervasive negative impact on popular sector organization and political opportunity in these nascent democratic regimes. Across all three cases, we see a decline in unionization and collective bargaining, the increased flexibilization of labor contracts along with increased informality and the attendant fragmentation of the labor movement, and substantial stratification in welfare coverage. While labor movements in Argentina and Mexico have been able to utilize their ties to traditional party allies (the Partido Justicialista or PJ

State-Society Relations in Argentina / 161

and PRI respectively) within the context of democratic electoral competition to maintain some of their historical privileges with respect to labor rights and social welfare benefits, the structural impact of tariff reduction, privatization, and economic crises have achieved in practice what market reform advocates could not achieve legislatively. In other words, increases in unemployment and employment insecurity resulting from economic liberalization have undermined the strength of unions and made workers more vulnerable to market forces, vitiating the influence of the labor protections that have remained in force. The transformation of historically labor-based parties in Argentina and Mexico has compounded the impact of these social and economic reforms, leaving the popular sectors without strong and dependable party allies to represent their interests in the political arena. In light of the dramatic decline in the strength and thus electoral importance of the organized labor movement in Argentina, the Peronist party has abdicated its historical role as a labor-based party, reverting to clientelism as the primary means by which to maintain popular sector support. Though Mexico’s PRI has not relinquished its ties to organized labor, since losing its monopoly of political power in 2000, it has attempted to maintain corporatist control of what remains of organized labor at the expense of the development of a more autonomous, more democratic labor movement. To substantiate the preceding argument, this chapter examines labor reform, social welfare reform, and the evolution of party-base linkage in Argentina. Subsequently, chapter 8 examines the Mexican case in similar fashion. Finally, the concluding chapter reviews the findings from analysis of the Chilean case and draws contrasts and comparisons among all three cases. In the process, it identifies the consistent manner in which neoliberal reform has had a detrimental effect on popular sector organization and political opportunity in contemporary Latin America. Regime Change, Market Reform and Labor Reform The military regime that usurped power in Argentina in March 1976 shared common economic and political objectives with its Chilean counterpart. These included reining in inflation, reducing the income and bargaining strength of the working class, shrinking the role of the state, and opening the economy to foreign trade and investment (Drake 1996, 158). Despite these broad similarities, there were two salient distinctions between economic and labor reform under the Chilean and Argentine military regimes. First, the Argentine military did not demonstrate the same degree of ideological commitment to neoliberalism as did the Pinochet regime.


And second, it did not attempt to repress the labor movement to the same degree as occurred in Chile. These two distinctions were interrelated. With respect to economic policy, the Argentine military pursued many policies that were statist in nature and favored the interests of domestic producers. For example, the military government revived a program of industrial promotion and coupled it with tax incentives for firms relocating in frontier provinces (the latter policy was based on national security considerations). In addition, it increased state investment in the military-industrial complex, infrastructure, and key industries such as petrochemicals. Domestic contractors and suppliers benefited from this increased state investment since preexisting legislation gave preference to nationally owned firms in public bidding for state contracts. These policies were coupled with a central bank program (1981–82) that allowed private debtors to transfer foreign obligations to the state (Schamis 2002, 129–130). Taken together, these policies exacerbated fiscal deficits and led to concentration of economic power in the hands of a small number of domestically oriented economic conglomerates. The expansion of state subsidies to promote industrialization coupled with the state’s assumption of private foreign debt generated large deficits, which forced the military government to rein in its distribution of subsidies. This fiscal belt-tightening intensified competition for scarce state resources, which in turn increased the importance of political connections and the incentives for favoritism, overinvoicing, and other misappropriations of state funds. The few private economic groups that most effectively employed these tactics had by the early 1980s accumulated substantial economic resources while the Argentine economy as a whole teetered on the verge of collapse. These self-proclaimed “captains of industry,” were responsible for the vast percentage of private foreign debt transferred to the state. They maintained their dominance through the manipulation of political connections and their effective control of diversified economic conglomerates, mostly family-owned and originally import-substituting (Ibid., 130–131). This emphasis on domestic industry helped to explain the Argentine military’s more equivocal approach to organized labor in comparison with the Pinochet regime. Given the continued importance of domestic industry in its approach to national development and the desire of a few leaders to promote state paternalism, the regime’s intent was to control labor rather than decimate it (Drake 1996, 163). This effort to control the labor movement involved a good deal of legal and armed repression. For example, one of the military junta’s first acts was to suspend the most important trade union rights, particularly those governing collective bargaining and strikes. In attempts to weaken the dominance of the Peronist unions, the junta imprisoned many Peronist union bosses, often replacing them with


military commanders. In addition, the 1979 labor reform legislation prohibited a closed shop, union political affiliations, and long terms and job security for union officials (Ibid., 162, 166). The military government’s liberalization of trade through the reduction of tariffs also negatively impacted the labor movement, precipitating deindustrialization, which led to declines in industrial employment and real wages and an increase in labor market stratification. Market liberalization provoked negative reaction from both organized labor and business leaders. Labor escalated strike activity in 1979 in reaction to the new labor legislation and declining real wages. Meanwhile, entrepreneurs complained that the government’s suppression of real wages and other anti-inflation measures were undermining consumer demand and driving many of them out of business. In contrast with the Chilean dictatorship, the Argentine regime responded to these protests by dropping plans to increase the domestic economy’s exposure to international market forces. The Argentine military regime’s brief and limited experiment with neoliberal economic policy neither appeased the business community nor neutralized the labor movement. Thus, when severe economic crisis erupted in 1980, the junta had limited options at its disposal. Ultimately, rather than pursue deeper market liberalization or more intense suppression of the labor movement, military leaders opted for a diversionary strategy, appropriation of the disputed Malvinas/Falkland Islands. They hoped that a swift, decisive victory would restore their legitimacy in the eyes of the public. Instead, their prompt defeat at the hands of superior British forces unleashed the public’s outrage at this national humiliation and years of economic mismanagement and severe human rights abuses. Protests and strikes became increasingly common, the latter being facilitated by the junta’s annulment of the law prohibiting strikes (Ibid., 177). In response to growing public disapproval, the military made a quick exit from office, leaving behind an inchoate economic liberalization project. Raúl Alfonsín, the Radical party’s (Unión Cívica Radical or UCR) victorious presidential candidate in the October 1983 election, was not inclined to resurrect the military regime’s liberalization project. Alfonsín defeated the Peronists on the basis of his pledge to protect human rights, to hold the military accountable for its abuses, and to restore order and civility to Argentine society. On a more mundane level, Alfonsín’s objective was to construct a new, permanent electoral majority for the UCR by absorbing the labor movement, which to that point was largely Peronist. To accomplish this objective, he needed distributive control over state resources to utilize material rewards to divide the labor leadership. For this reason, his government had little incentive to relinquish macroeconomic


control to the private sector. Moreover, the captains of industry, who had accumulated and exerted considerable economic muscle under the military regime, maintained their influence under Alfonsín through their ability to set key prices in the economy. As a result, expenditures for the industrial promotion regime and public contracts continued, exacerbating a fiscal deficit already compromised by debt service payments and the collapse of commodity prices. Under these conditions, Alfonsín’s Austral Plan was no longer effective in containing high inflation, and capital flight ensued (Schamis 2002, 131–132). Alfonsín’s inability to address these economic problems, and his limited success in prosecuting human rights abuses, led him to leave office six months before the expiration of his term. During his term, the labor movement had recouped much of its previous strength as well as many of the resources and rights it had enjoyed before the military coup.1 The labor movement’s resurgence, however, did not indicate the success of the UCR’s effort to lure it away from the PJ. In fact, by the end of Alfonsín’s tenure the labor movement was once again solidly in the Peronist camp. With labor’s support, Carlos Menem, the PJ’s candidate in the 1989 presidential election, won a resounding victory. Menem campaigned in typical populist style, promising massive wage increases for workers. However, the dire economic conditions present when he assumed office in July (the near depletion of foreign reserves and an inflation rate of 190 percent) militated against fulfillment of these promises. At the same time, the continued economic power of the large economic conglomerates and the strength of the labor movement constrained his policy options. In response to these constraints and Argentina’s dire economic conditions, Menem pursued a strategy of economic liberalization that compensated key industrial and labor actors within the old populist coalition. In other words, even as the Menem government opened Argentina’s economy to increased international competition, it provided powerful industrial and labor actors market protections to obtain their compliance. Thus, dominant unions and industrial sectors became part of the reform coalition (Etchemendy 2005, 63). With respect to market reforms, Menem proposed and Congress approved a number of key reforms early in his administration. These included a “State Reform Law” in August of 1989, which established the eligibility of nearly all state-owned companies for privatization, and the “Economic Emergency Law” in September, which granted the executive exceptional powers to expedite privatization (Schamis 2002, 133). Subsequent to the adoption of these reforms, Menem’s economics minister, Domingo Cavallo, proposed and Congress passed tariff reform and a program which pegged the peso to the dollar one-to-one (the Convertibility


Plan). All these reforms posed significant threats to the privileged status of domestic industry and workers. Thus, to minimize opposition and to facilitate the adoption of its market-oriented reforms, the Menem government provided compensation to key sectors of both industry and labor. In the case of industry, the government favored firms in four of the formerly protected sectors—oil, autos, steel, and petrochemicals—through compensatory policies such as a tariff regimes or targeted privatization to mitigate the impact of overall tariff reduction and exchange rate appreciation. The Menem government had good reason to compensate domestic firms in these four sectors in the process of economic liberalization. In addition to being the largest and most economically powerful firms at the outset of the reform process, these firms also belonged to the most influential industrial sector associations. Thus, given their economic power and political clout, these firms were in a position to derail or impede the liberalization process. To avoid such conflict, the government brought these domestic firms into the reform coalition through compensatory policies that allowed them to continue, if not expand, their economic dominance (Etchemendy 2005, 68–73). Menem pursued similar tactics to gain the cooperation of key segments of the labor movement. In stark contrast with Chile’s liberalization process, the Menem government attempted to co-opt the mainstream labor movement by bringing it into the reform coalition while providing very limited compensation to unemployed or informal sector workers.2 To elicit the cooperation of the Peronist unions, the government granted four kinds of payoffs: (1) preservation of the existing corporatist labor structure; (2) preservation of labor’s role in administering the health care system; (3) a privileged position for unions in the private pension funds market; and (4) a share of privatization for unions (Ibid., 74). The old Peronist union leadership sought these payoffs to protect its interests in the face of encroaching market forces that threatened to undermine its economic and political influence (Murillo 1997). Peronist union leaders anticipated that preservation of the corporatist labor structure would maintain their dominance vis-à-vis other unions and their own rank and file. By preserving a centralized collective bargaining framework, for example, this corporatist structure would prevent multiple unions from operating at the firm level. Union leaders considered preservation of the union-run health care system (the Obras Sociales) essential since it gave unions control over social security taxes paid by both employers and workers and thus was a crucial source of union power. Similarly, the unions expected that their ability to compete for workers in the partially privatized pension system would enable them to offset the increased economic power control over retirement funds would provide private sector firms.


Finally, while the Menem government perceived distribution of privatized state assets to workers as an effective means to gain the labor movement’s support for privatization, Peronist union leaders considered their control over such resources a means to maintain support among the rank and file. In this regard, it is important to note that only those workers remaining in companies after privatization were eligible to participate in the Employee Share Ownership Program (ESOP). Furthermore, the ESOP was managed by the monopolistic union in each company (Etchemendy 2005, 77). Thus, through payoffs to both key segments of domestic industry as well as the Peronist union leadership and formal sector workers, the Menem administration co-opted sufficient support from business and labor to push through substantial neoliberal reforms. These reforms included wide-scale privatization of state-owned firms, substantial tariff reduction, partial deregulation of the labor code, and the establishment of a peg of one-to-one of the peso to the U.S. dollar (the Convertibility Plan). While union leaders anticipated that the concessions granted them by the Menem administration would allow them to maintain their monopoly of control over the labor movement and protect formal sector workers from layoffs, ultimately they were mistaken on both counts. Whatever protection formal sector workers gained from the concessions the Menem government granted was undermined by the severe economic conditions precipitated by neoliberal policies, the adoption of which organized labor’s acquiescence had facilitated. As is discussed in greater detail below, as economic changes undermined the strength and importance of organized labor, the Peronistcontrolled Confederación General de Trabajo (General Confederation of Labor or CGT) declined in legitimacy, was challenged by the rival Central de los Trabajadores Argentinos (Central of Argentine Workers or CTA), and perhaps most importantly lost influence within the Peronist party. In short, economic crisis induced by neoliberal reforms created de facto labor flexibilization and undermined the strength and influence of organized labor in Argentine politics. Social welfare reforms compounded the decline in influence of workers by exacerbating the stratification that market-oriented reforms produced in the labor market, thereby making it more difficult to build working-class unity. Finally, the unions’ preoccupation with protecting their bureaucratic prerogatives left them little incentive to build linkages with the growing mass of unemployed workers. As a result, the labor movement was in no position to capitalize politically on the popular sectors’ explosive reaction to the precipitous declines in its living standards and economic security that neoliberal reforms produced. Discussion of the particulars of labor reform substantiates this argument. If we consider labor reform in Argentina in isolation from labor market conditions, it would appear that organized labor has been reasonably


successful in protecting itself from the extreme labor flexibilization that prevails in Chile. María Lorena Cook, notes, for example, that the Menem administration’s 1998 labor reform law (Law 25013) reaffirmed many of the organizational interests of the CGT, appeared to disregard IMF recommendations regarding labor reform, and rescinded the temporary labor contracts that the 1991 National Employment Act had established (2002, 16–17). Moreover, the government preserved union monopoly representation in the private sector, even in instances in which privatized companies were divided into more than one firm (Etchemendy 2005, 75). However, these examples of the manner in which the Argentine labor movement was able to preserve legal protections against flexibilization and the fragmentation of labor representation belie the impact of a radically transformed and declining economy on actual labor market conditions. Above and beyond labor legislation, the primary factors that determined the level and character of employment in Argentina were currency appreciation, induced by the Convertibility Plan, and trade liberalization, brought about by a dramatic reduction in tariffs. Currency appreciation made Argentine goods relatively expensive in the export market while currency appreciation coupled with tariff reduction made imports substantially less expensive. The synergy of these dual forces imposed intense market pressure on Argentine producers to lower their costs, which led them, in turn, to bring enormous pressure to bear on wages and employment. Accordingly, workers experienced a profound deterioration in the quality and stability of employment and a rapid and steep growth in unemployment. Employment and currency appreciation were linked in two ways. First, firms attempting to increase their competitiveness took advantage of the overvalued peso to purchase capital intensive technology, which made many workers superfluous. Second, firms financially incapable of adopting efficiency-inducing technology, or otherwise unable to enhance their competitiveness, were eliminated from the market, producing further losses in employment. As the Argentine peso continued to appreciate during much of the 1990s, these trends accelerated, leading to increased levels of under- and unemployment. Between 1991 and 1995, unemployment increased from 6 to 17 percent while underemployment increased from 8 to 13 percent (Barbeito and Lo Vuolo 2003, 3). Although employment levels did rebound in the late 1990s, by mid-2002, in the midst of Argentina’s worst economic crisis since the Great Depression, they reached 22 percent (Patroni 2004, 112). In essence, changes in the labor market amounted to de facto flexibilization. Even in the instance of new employment creation, many of the new jobs did not involve social security contributions, benefits granted by labor legislation such as vacation pay, or a formal contract. As much as 40 percent


of the labor force worked without protection under existing labor legislation or formal contracts (Ibid., 111, 112). Moreover, to the extent that collective bargaining continued, the state facilitated its increasing decentralization by promoting bargaining at the firm level and by approving agreements that included clauses that undermined existing legal protections. Between 1991 and 2000, agreements bargained at the firm level increased from 29 to 83 percent (Barbeito and Lo Vuolo 2003, 9). Under the weight of the foregoing conditions, real wages declined precipitously and poverty and income inequality increased substantially. Regarding real wages, with 1980 serving as a baseline (1980 5 100), real wages declined from 118.5 in 1974 to 78.4 in 2000 (Altimir, Beccaria, and González Rozada 2002, 55). Over the same period, income inequality as measured by the GINI coefficient increased from 0.36 to 0.51 (Ibid., 54). Finally, while the incidence of poverty during the reform period reached a low point of 16.1 percent of the population in May of 1994, in May of 2003 (the latest period for which figures were available at the time of writing) it had climbed to 51.7 percent (Instituto Nacional de Estadísticas y Censos, Argentina). Social Welfare Reform Taken together, the changes in the Argentine economy and labor market described above indicate the profound decline in the material well-being and economic power of workers in Argentine society. Unfortunately, changes in social welfare provision have intensified stratification among workers, and compounded the negative impact that economic reforms have had on the most vulnerable segments of the population. To understand the interrelationship between recent economic and social reforms in Argentina, and the impact social reforms have had on social stratification, it is essential to consider the origins of social welfare provision in the nation and the political and economic factors that propelled reform. This analysis reveals that the interplay between the government and unions with respect to social welfare reform was similar to their interaction over labor reform, with similar results. In other words, the unions attempted to shape social welfare reforms in a manner designed to protect their institutional and economic interests and the Menem administration granted them concessions to facilitate the successful adoption of reforms. However, while the unions were successful in shaping pension and health care reform in a manner that protected their bureaucratic and financial interests, the impact of neoliberal economic reforms has undermined many of these protections. Moreover, particularly with respect to health care reform, the preoccupation of the government and the unions


with formal sector workers has reinforced already significant inequities between formal and informal sector workers. At the same time, the manner in which the reformed health care system allocates resources reinforces the increasing heterogeneity and inequities that have occurred within the formal sector as a result of structural changes in the labor market. As a result, economic and social welfare reforms have interacted in synergistic fashion to compromise the popular sectors’ cohesion and capacity for concerted action. As indicated earlier, unions have played a significant role in social welfare provision in Argentina through the Obras Sociales. President Perón strengthened these union-controlled organizations by supporting their expansion over the expansion of public hospitals. The central role of the unions in social welfare provision was further strengthened during the 1966–73 military government through passage of the Obras Sociales Law 18610, which increased union influence by requiring contributions from employers and workers to their respective unions, even if they were not members (Golbert 2000, 230). Although the 1976–83 military government assumed control of union welfare programs, it did not alter their basic structure. Thus, when democracy was reestablished, union control was restored and the structure of the social welfare regime remained intact. Nonetheless, demographic and fiscal pressures indicated the need for reform. In fact, by the 1980s the pension system was virtually bankrupted and required substantial fiscal subsidies. However, Alfonsín’s government was too weak to carry out reform and thus reform was not implemented until the early 1990s under Menem. Given the democratic context in which reform took place and the continued strong ties between organized labor and the Peronist party, unions were able to prevent the complete privatization of the pension system as occurred in Chile. The government gained the unions’ assent to reform, in part, by allowing them to sponsor private pension funds of their own. Thus in 1994 a mixed pension system was established composed of a state-sponsored prestación básica (PBU) or universal basic payment and an additional payment accumulated in each beneficiary’s individually capitalized retirement account. As in Chile, the individual retirement accounts are managed by private insurance companies, the Administradoras de los Fondos de Jubilaciones y Pensiones (AFJP). While the reformed system addressed some of the problems inherent in the original retirement regime, it possesses features in common with the Chilean system that result in inadequate coverage and the reinforcement of high levels of stratification among workers. Perhaps the most significant problem the Argentine system shares in common with the Chilean is the low rate of compliance among workers (Ghilarducci and Liébana 2000, 758). Only 66 percent of


the Argentine labor force is covered by both systems and only 29 percent actively contributes (Mesa-Lago 2002, 1311). This problem is particularly acute among self- and unemployed workers and potentially more problematic than in Chile for at least two reasons. First, workers are expected to make thirty years of contributions to qualify for a state pension rather than the twenty years required in Chile (Arenas de Mesa and Bertranou 1997, 333). Second, since informal sector workers receive no employer contributions, they are expected to make contributions that amount to 27 percent of their earnings (Ibid., 334). Consequently, there are high incentives for evasion or underreporting of income among this segment of the labor force. Under these circumstances, for many workers the fundamental problem posed by the current system is not the level of benefits they are likely to receive but whether they will have access to retirement benefits at all. On the other hand, even the ability to make regular payments is no guarantee of an adequate pension since the average pension is currently less than half the value of the average salary (Golbert 2000, 234). Thus, as in the Chilean case the retirement system reinforces stratification, with the ability to accumulate sufficient retirement resources dependent upon individual success in the labor market. The high level of stratification seen in the pension system is equally evident in Argentina’s reformed health care system. As with the pension system, the core of Argentina’s health care system has its roots in the Obras Sociales. Through these social welfare funds, which primarily serve urban formal sector workers, unions contract out health care services to private sector providers. This system of health care provision is based on principles of solidarity, where workers’ earnings and related payroll contributions finance benefits. However, the large number of funds (over 300 by the 1990s) and the monopolistic rights funds had over a delineated set of workers made the system highly fragmented, chaotic, and inefficient. Moreover, with a virtual absence of state regulation, the system lacked accountability (Barrientos and Lloyd-Sherlock 2000, 418). Despite these problems and persistent underfunding of health care, attempts at reform before the 1990s failed due primarily to resistance from the Peronists and unions, which were reluctant to give up monopolistic control over the Obras Sociales (Lloyd-Sherlock 2004, 101). Unions’ resistance to health care reform was overcome as a result of the confluence of several factors. First, as a consequence of deindustrialization, significant shrinkage of the public sector, and increasing economic deterioration beginning in the mid-1990s, unions had less capacity to resist reform. Second, this problem was compounded by government pressure to decentralize collective bargaining, forcing the unions to resist reform on two fronts (Ibid., 105). Third, union resistance was overcome


through a strategy of “divide and rule,” in which selected governmentfriendly unions were the beneficiaries of substantial state funds as well as US $150 million which the World Bank provided to push through health insurance reforms (Barrientos and Lloyd-Sherlock 2000, 418). The main thrust of the reforms supported by the World Bank was to allow private insurers to compete with the union-controlled Obras Sociales for affiliates, with the objective of introducing greater competition and efficiency into the system. However, rather than promote competition and efficiency, the reforms have merely exacerbated the high degree of stratification that already existed under the Obras Sociales. As such, reform of the Obras Sociales was consistent with the broader policy objective of the government and the World Bank of increasing the labor force’s flexibility and international competitiveness (Lloyd-Sherlock 2004, 120). From this perspective, we see a number of important parallels with health care reform in Chile. First, the reforms do not promote an integrated health care system but instead put private health insurance in direct competition with social insurance (the Obras Sociales) and publicly funded provision, which primarily covers the poorest citizens (Barrientos and Lloyd-Sherlock 2000, 419). Second, private insurers have shown little interest in less affluent groups and attempt to recruit the wealthiest and healthiest to contract their services, leaving the Obras Sociales and the public system to cover the less affluent and the less healthy. Third, the public sector is further strained by unpaid use of its resources by the insured, a widespread practice (Ibid., 422). Fourth, the Obras Sociales reinforce labor market stratification; the great disparities in cost and quality of benefits provided by the various Obras Sociales are a function of the earnings capacities of the workers affiliated with them (Ibid., 421). Finally, the dramatic changes in Argentina’s labor market that have occurred since the early 1990s are reflected in the precipitous decline in the rate of health insurance coverage. Between 1990 and 1999, the total number of workers affiliated with Obras Sociales dropped from 18.8 million to only 8.9 million (Ibid., 420). Data from 1996–97 indicate that nearly three quarters of households in the lowest income quintile had no health insurance at all while over 35 percent of the population as a whole had no health insurance (Barrientos and Lloyd-Sherlock 2000, 421; LloydSherlock 2004, 120). Party Politics and the Transformation of Political Representation The radical changes in economic structure, labor market organization, and social welfare provision described above have inevitably had substantial


impact on party politics and political representation in Argentina. Unlike the Chilean case, however, significant changes in Argentine political parties did not occur before the democratic transition, and the party system remained essentially the same as it had been before the military takeover. Nonetheless, two significant changes within the electorate propelled equally substantial changes in the party system once democracy had been restored. First, the human rights movement, which had developed in reaction to the military regime’s severe abuses, spawned the growth of a multiplicity of citizens’ organizations—consumer groups, women’s rights groups, environmental organizations, and so on—that raised the public’s awareness of these issues and pressured policymakers to respond to their concerns. More broadly, these changes reflected the development of a better- informed and more demanding electorate that demonstrated an increased awareness of partisan alternatives (Torre 2005, 172). Second, economic crises and structural reforms initiated under the military regime forced the decline of the organized labor movement as the number of unionized workers fell as a result of deindustrialization. The interplay of these two factors had a significant impact on the party system and political representation. On one hand, the public’s heightened political awareness and increased expectations made it increasingly difficult for opposition parties to compete with the PJ. Since the opposition parties on the whole could not rely upon the kind of loyalty enjoyed by the PJ, when they failed to meet the electorate’s expectations while in office they suffered comparatively greater electoral losses. On the other hand, the decline of the industrial working class compelled the PJ to seek a broader base of support beyond organized labor. In the process of reaching out to middle- and uppermiddle class voters and loosening its ties to unions, the PJ transformed itself from a labor-based party to a patronage machine (Levitsky 2003, 2005). While its market-oriented economic and social policies were severely detrimental to the popular sectors, it was able to maintain substantial influence among the poor through the cultivation of clientelist linkages. Thus, in contrast with opposition parties, the PJ has been able to prevent economic crises from totally undermining its base of support or its ability to govern. The end result is a system of political representation in which the electorate has no credible alternative to the PJ, and large segments of the population have chosen to opt out of electoral politics in anger and frustration at the political class’s failure to address the country’s enormous social and economic problems. Under these circumstances, the PJ maintains its dominance through clientelist control while the popular sectors remain weak and fragmented, with little incentive to participate in electoral politics. The precursors to the development of these circumstances were at play in the 1983 presidential election. The victor, UCR candidate Raúl Alfonsín,


won largely on the basis of his pledge to prosecute the military’s human rights abuses, a position that resonated with a public sensitized to this issue during the dictatorship. The PJ’s unprecedented loss to the UCR catalyzed the push for change within the party. In a context of deindustrialization, the PJ’s renovation faction considered the party’s loss a result of its overreliance on a declining labor movement. Thus, it set out to attract independent voters by drastically reducing labor’s influence within the party. The increasing election of Peronists to public office facilitated the realization of this objective since it allowed party officials to substitute state resources for union resources, a precondition for the successful practice of patronage politics (Levitsky 2005, 192). In addition, a renovation-dominated party congress in 1987 succeeded in establishing a primary system for electing party officials and candidates, a reform that effectively ended the informal practice of allotting labor officials a third of these seats (el tercio or the third; Ibid., 193). As noted earlier, a number of large, strategically situated unions were able to continue to exercise their influence to receive side payments from the government. Nonetheless, the aforementioned changes substantially reduced union influence within the PJ. The decline of union influence in the party, in turn, set the stage for the party’s shift to the right as well as its conversion from labor-based to patronage politics. The party’s rightward shift was designed to attract middleand upper-middle-class support while the adoption of patronage politics facilitated continued support among the popular sectors despite the party’s subordination of organized labor. Both these strategies proved effective. The abandonment of the tercio system in favor of primaries shifted power from the unions to local party bosses or neighborhood brokers (punteros) who could deliver votes. Patronage networks increasingly replaced the role of unions in exchanging resources for political support among the party’s rank and file, particularly in poor urban neighborhoods (Ibid.). This shift to clientelist politics reinforced the decline of union influence within the party. In addition, it provided the PJ with a vital resource—the means to contain potential protests in the face of economic crisis—that was largely unavailable to opposition parties. The decline of union influence within the PJ, and the control patronage politics gave it over the popular sectors, freed the party to adopt economic and social policies that appealed to the middle and upper classes. This rightward shift facilitated Menem’s presidential victories in 1989 and 1995, allowing him to offset the loss of working-class support with increased support from the upper classes. However, by the 1999 presidential election, growing dissatisfaction with the negative impact of neoliberal policies— increasing rates of unemployment and poverty in particular—as well as numerous corruption scandals in the Peronist government, paved the way


for the victory of Fernando De la Rúa, the leader of the left-of-center Alianza por el Trabajo, la Educación y la Justicia (Alliance for Jobs, Justice and Education). The Alianza government, an alliance between the UCR and the Frente de Paz y Solidaridad (Peace and Solidarity Front, FREPASO), was elected on the basis of its promises to improve economic conditions and attack government corruption. Unfortunately, it failed to deliver on either promise. During its short time in office, poverty and unemployment remained high and its adoption of austerity measures to mitigate the economic crisis imposed increased hardship on the population. Moreover, public resentment against the De la Rúa government intensified in reaction to an August 2000 corruption scandal that involved government attempts to pass labor legislation by bribing opposition senators. Protests and riots led by unemployed workers erupted in response to Alianza’s failure to address either government corruption or the escalating economic crisis. In addition, voters demonstrated their anger through the ballot box with dramatically decreased party support and substantially increased rates of blank votes, spoiled ballots, and abstentions. While spoiled votes had fluctuated between 0.5 and 1.5 percent of votes cast between 1983 and 1999, in 2001 they reached 12.5 percent. Similarly, blank votes ranged from 2 to 4 percent between 1983 and 1999 but reached 9.4 percent in 2001. The increase in abstentionism was also substantial, reaching 27 percent in 2001, up from an average of 15 to 20 percent over the preceding sixteen-year period (Torre 2005, 177). The declines in party voting were even more dramatic. While all parties suffered as a consequence of the electorate’s anger at deteriorating economic conditions and pervasive political corruption, only the PJ was able to draw upon party loyalty and clientelist control to minimize the electoral fallout. Comparison of the 1999 and 2001 legislative elections illustrates this point well. Compared to its results in 1999, the UCR-FREPASO alliance lost 4.94 million votes, a 61 percent decline. The losses for the PJ were by contrast much smaller; the party lost 1.8 million votes, a 27 percent decline relative to 1999 (Ibid., 176). The demographics of electoral dissent demonstrate the fragility of Alianza’s electoral support and the more enduring support enjoyed by the Peronists; electoral dissent was common among the middle class, in urban and prosperous areas, and among nonPeronist voters (Ibid., 178). The October 2001 election results were an ominous harbinger of the demise of the De la Rúa government to come only two months later. In December, with the economy teetering on collapse, De la Rúa was forced out of office by massive public protests and rioting. Since De la Rúa’s vice president had previously resigned in protest over the government’s failure to address corruption charges, the Peronist-controlled Congress assumed


responsibility for appointing an interim president.3 As Levitsky (2003, 2005) notes, in the PJ’s internal struggle to designate an interim president, the lack of an effective authority structure or binding rules exacerbated intraparty factionalism and nearly led to the party’s disintegration. Ultimately, former PJ vice president and presidential candidate Eduardo Duhalde was appointed as interim president. He governed until May 2003, when Nestor Kirchner, a little-known Peronist governor from the small, southern province of Santa Cruz defeated former President Carlos Menem in his bid for a third term. Conclusion Since assuming office, Kirchner has moved the PJ and the government in a left-of-center direction, reforming or scaling back many of the neoliberal policies originally adopted by Menem. With respect to labor law, for example, the Kirchner administration and Peronist-controlled Congress adopted a new law in 2004 that restored many of the rights undermined by reforms adopted under Menem and De la Rúa. Among other things, the new law, Law 25877, expanded collective bargaining rights for unions and severance pay for dismissed workers (Cook 2007, 95–96, 98). Despite such reforms, the impact of structural reform and the party’s attempts to adjust to a radically altered class structure have transformed its linkages to the popular sectors. In the past, the PJ tied its political fortunes to organized labor. Yet, as economic liberalization and deindustrialization have increasingly eroded the strength of the labor movement, the party has shifted from labor-based to clientelist politics. This form of linkage negatively affects popular sector cohesion and autonomy as popular sector communities, particularly poor, urban neighborhoods, are forced to meet essential needs by exchanging political support for party-distributed state resources. Thus, the Peronists have skillfully used state resources as a means of containing and controlling the popular sectors. The collapse of a credible non-Peronist electoral option compounds the popular sectors’ dependence, limiting political competition and thus limiting the popular sectors’ ability to compel political parties and leaders to be responsive to their interests. Labor market forces and the manner in which the social welfare regime distributes resources exacerbate these circumstances. As noted above, economic liberalization has created de facto labor flexibilization, with high rates of un- and underemployment vitiating existing legal provisions intended to protect formal sector workers’ job security and collective bargaining rights. Argentina’s social welfare regime reinforces labor market stratification by conditioning access to benefits on the basis of individual economic means, an arrangement that undermines incentives for


intra- and interclass unity. Taken together, these conditions produce an environment that severely limits the popular sectors’ cohesion and their ability to compel political leaders to be accountable and responsive. Much like the Chilean case, neoliberal reform has been a significant factor in the creation of these conditions. As chapter 8 demonstrates, neoliberal reform has had a similarly negative impact on the quality of democracy in Mexico.

Ch a p t e r Eig h t Neol i be r a l i sm, D e mo c r ac y, a n d t h e Tr a nsfor m at ion of Stat e-S oc i e t y R e l at ions i n M e x ico

Introduction Though the particulars of the Mexican case differ from the Argentine, the general pattern with respect to popular sector cohesion and representation is the same. The dominant segments of Mexican capital have gained privileged access to policymakers; market pressures and economic crises have undermined formal labor code protections against labor flexibility; social welfare reforms reinforce stratification and thereby undermine popular sector cohesion; and the popular sectors lack an effective and reliable party ally to represent their interests in the electoral arena. Thus, in spite of differences in terms of historical precedents and the timing of reforms, we observe a pattern in Mexico much like what has occurred in Argentina and Chile. Neoliberal reform has transformed the embeddedness and structure of the state and the organization of society in a manner detrimental to the popular sectors’ cohesion and their ability to compel political leaders to be accountable and responsive. To develop this argument, the following analysis first examines the interaction between economic elites and state policymakers in instituting neoliberal reforms. Subsequently, it looks at changes in the labor code and labor markets as well as social welfare provision. Finally, it considers how the popular sectors have fared in terms of political representation via the party system. Technocrats, Business, and Neoliberal Reform The adoption of neoliberal reform in Mexico was initiated under President Miguel De la Madrid (1982–88). The Mexican state’s transition from ISI to neoliberal development under De la Madrid resulted from the coalescence of a number of key factors. These included the rise of technocrats within the PRI, the Debt Crisis of the early 1980s and Mexico’s subsequent


economic deterioration, the privileged position the government granted to dominant businessmen and private sector conglomerates, and the external influence of the International Monetary Fund (IMF) and World Bank. With his graduate training from an Ivy League university (masters in public administration from Harvard), De la Madrid embodied the ascension of a new, technocratic elite in the ruling PRI. This ascending group of technocrats typically shared in common graduate training at elite U.S. universities and a rejection of the traditional statism and populism that had evolved in Mexican politics since the revolution in favor of national development based on principles of market efficiency (Camp 2007). Before the 1982 debt crisis, this technocratic cohort’s efforts at market reform had been stymied by bureaucratic opposition from state ministries that supported the prevailing state-centric development model. However, the 1982 economic crisis, precipitated by a sharp decline in the international price of oil (Mexico’s main export), excessive government borrowing and spending, and increased interest rates, led to questioning of the prevailing development model and compelled the government to seek financial assistance from the IMF. The De la Madrid administration’s técnicos (technocrats) supported the IMF’s stabilization program, including severe austerity measures, since they believed that the economic crisis erupted primarily as a result of Mexico’s fiscal irresponsibility (Teichman 2001, 132). When economic conditions declined in 1985 in response to a renewed slump in oil prices, market reformers joined forces with the World Bank to develop and implement a number of liberalization measures. Tariff reduction, from a high of 100 percent to a new maximum of 20 percent, was central to this reform effort (Schamis 2002, 117). The reform process was characterized by several additional features, the combined effect of which was to consolidate the power and influence of large industrial and commercial conglomerates. First, the De la Madrid government gave considerable concessions to large firms engaged in exports, including input and credit subsidies as well as substantial protection of final products (Ibid.). Second, market reformers within the Salinas administration (1988–94) centralized government decision making over privatization and other reform policies while simultaneously granting top businessmen and economic conglomerates intimate access to policy makers. Business access to top level government officials was maintained through personal contacts and key business associations. These associations included the Mexican Council of Businessmen (CMHN), to which the country’s top thirty-seven businessmen belonged, the Coordinating Committee for Commercial Export Business Organizations (COECE), which represented Mexico’s most important industrial conglomerates (Teichman 2001, 144–145) and the Business Coordinating Council (Consejo Coordinador

State-Society Relations in Mexico / 179

Empresarial, CCE), which gave disproportionate influence to liquid asset sectors (Schamis 2002, 115). Finally, the government solidified the influence and predominance of the corporate interests these associations represented through the adoption of economic agreements and constitutional reforms that were designed to lock in market reforms. With respect to economic agreements, for example, government officials in the De la Madrid administration frequently requested that loans from the IMF or World Bank include conditions as a means of consolidating reforms (Teichman 2001, 138). Similarly, the government’s decision to join the North American Free Trade Agreement (NAFTA) appeared intended to demonstrate its long-term commitment to liberalization (Schamis 2002, 126). The Salinas administration’s constitutional reform of the ejido system, amending Article 27 to allow private ownership of rural ejido plots formerly owned by the state, was motivated by a similar intent as well as the desire to spur private investment in the countryside (Ibid., 123–124). In exchange for promoting their interests, the large economic conglomerates rewarded the PRI with substantial financial contributions. Moreover, the close ties between the government and business were reflected in the movement of government technocrats into prominent business positions upon leaving office (Teichman 2001, 145). Thus, as occurred in Argentina and Chile, personalistic channels between the most powerful members of the executive and leaders of the big conglomerates facilitated the market reform process. Business representatives heavily influenced policy reform, gaining highly preferential concessions in the process (Ibid., 157–158). Labor Reform The privileged role dominant business sectors played in the reform process stands in stark contrast with the subordinate role the government granted organized labor. While the PRI had maintained strong corporatist ties with the labor movement during state-led development, the preservation of such ties in the context of neoliberal reform was inconsistent with the logic of the new economic model. In contrast with state-led development, in which wages and other key concerns of organized labor were largely determined through collective bargaining and corporatist negotiations with the state, neoliberalism holds that the market should be the ultimate arbiter of such issues. In principle, Salinas, Zedillo, and other market reformers within the PRI accepted the neoliberal perspective. However, the espousal of this position put them at odds with organized labor, one of the PRI’s core constituencies. As a result, neoliberal advocates within the PRI confronted a situation not unlike that which Menem faced in Argentina. Pushing labor


reform too far too fast could alienate the labor movement, whose support (or at least quiescence) was necessary to facilitate implementation of other measures crucial to the realization of the market reform project. In this regard, market reformers in Mexico, like those in Argentina (but in contrast with Chile’s neoliberals), faced political pressures that constrained their policymaking prerogatives. Therefore, to maintain the PRI’s labor constituency and thus its electoral base, PRI governments conceded the preservation of the corporatist rights granted to labor under Mexico’s constitution. In exchange, the PRI expected labor leaders to acquiesce to market reforms in other areas and to help maintain social control in the face of the rank-and-file opposition. Though the preservation of labor’s corporatist rights was sufficient to facilitate the passage of key market reforms, most prominently the adoption of NAFTA, it failed to protect the labor movement from the deleterious effects of structural transformation. Indeed, labor’s acquiescence to many elements of the PRI’s liberalization project facilitated a dramatic decline in its economic and political influence. Thus, as occurred in Argentina, Mexican workers have experienced de facto flexibilization despite de jure protection of labor rights. In contrast with Argentina, however, labor flexibilization has resulted less from deindustrialization than from a shift in the form and geographic locus of manufacturing. Though economic liberalization in Mexico has produced declines in manufacturing and industrial employment, they have not been as drastic as those that occurred in Argentina or Chile. Instead, Mexico has experienced a spatial shift in manufacturing from Mexico City to maquiladora manufacturing along the U.S. border (Oliveira and García 1997, 225). This new form of manufacturing is export-oriented, low wage, and controlled by transnational corporations that have been effective at stymieing union organization. In addition, Mexico has experienced a substantial increase in informal employment. Therefore, though Mexico’s corporatist labor code has remained intact, economic restructuring has been deep and extensive, producing a profoundly negative impact on the strength and cohesion of the labor movement and the popular sectors more broadly. Ironically, the Mexican labor movement demonstrated little resistance to structural reforms—privatization, trade liberalization and the adoption of NAFTA—that have made its preservation of formal labor rights a hollow victory. There are a number of factors that explain this apparent contradiction. The costs of these reforms were borne unevenly across the labor movement. Thus to the extent that the reforms produced opposition, it was not unified or widespread. For example, union members working in the private sector had little to lose from privatization. Similarly, while unions operating in protected industries suffered severely as a result of trade liberalization, with many members losing their jobs in businesses that


failed in the face of stiff foreign competition, unions in the export sector benefited from trade liberalization. In addition, PRI governments in some cases pitted competing labor confederations against one another to ensure labor quiescence, for example, favoring the Confederación Revolucionaria de Obreros y Campesinos (CROC) over its rival Confederación de Trabajadores Mexicanos (CTM). In other cases, the government distributed side payments to unions to quell their opposition to liberalization policies, granting some unions the right to purchase shares in privatized companies (Madrid 2003, 80, 83). The government’s capacity to divide the labor movement in this fashion reflected its substantial control over unions and union leaders. Since unions traditionally received only 10 percent of union dues from members, they relied heavily on government financial subsidies as well as favored access to government benefits such as health care and housing. Moreover, the government’s power to regulate strike activity, and its role in setting wages and resolving labor disputes strengthened its leverage over unions. This leverage extended to labor leaders, who depended on the PRI for political appointments and for maintaining their power in the face of competition from independent unions or dissident leaders (Ibid., 79). By undermining the employment and economic security of workers, recurrent economic crises further contributed to disciplining labor. Both the Debt Crisis, which erupted in 1982 when Mexico defaulted on its foreign debt, and the 1994–95 Peso Crisis resulted in precipitous declines in real wages and formal sector employment. The loss of employment in particular weakened unions and made workers wary of challenging employers or government authority. These factors explain the Mexican labor movement’s reluctance, if not inability, to challenge the adoption of structural reforms that when taken as a whole were inimical to the interests of Mexican workers. Nonetheless, the relationship between the government and the labor movement was not one-sided. Given the increasingly competitive political context within which the PRI had to operate, it needed to accommodate organized labor’s interests during critical periods to maintain its base of support. Thus, in reaction to the controversy surrounding the 1988 presidential election, in which it was widely perceived that the PRI stole the election from Partido Revolucionario Democrático (PRD) candidate Cuauhtémoc Cárdenas, Salinas backed away from pushing labor reform to shore up political support for the party and his administration. Likewise, the Salinas government refrained from pushing labor reform during negotiation over NAFTA, counting as it did on CTM support for successful passage of the agreement. In gaining the support of the labor leadership for NAFTA as well as a number of social pacts that served to restrain


wage growth, the PRI recognized the value of existing legal arrangements that enabled official leadership to contain rank-and-file opposition. These circumstances weakened the government’s incentives to transform the existing labor code (Patroni 2001, 265). Indeed, despite President Zedillo’s avowed commitment to labor reform, his administration did not modify existing labor legislation. In the view of Viviana Patroni, Labor legislation that could have undermined the power of the CTM was not changed simply because the Confederation proved essential in increasing the viability of an economic policy course, including the “maquiladorization” of the country’s industrial structure, sustained on the backs of the poor . . . . [L]aws protecting key labor rights were not obstacles to their infringement, and in this the complicity of union officials was indispensable. (Ibid., 267)

Patroni’s assessment offers two fundamental insights into labor rights and economic reform in Mexico. First, the CTM leadership facilitated the PRI’s realization of its neoliberal development project through rights it exercised under the existing labor legislation. Therefore, PRI governments had little incentive to change the legislation. Second, existing labor laws provided workers little protection from market forces. A number of key indicators support this latter conclusion. Perhaps one of the most telling of such indicators is the gap between union and non-union wages. While at the beginning of the 1980s, union member salaries were 40 percent higher than the wages of nonunion members, by 1992 this gap had essentially disappeared—nonunion wages were 97 percent of union wages (OECD 1997, 89). This trend has been accompanied by a significant decline in the rate of unionization in Mexico. From 1992 to 2000, the percentage of Mexico’s economically active population belonging to unions declined from 13.6 to 9.8 (Herrera and Melgoza 2003, 326). The disappearance in the gap between union and nonunion wages may explain in part the significant decline in the rate of unionization in Mexico in recent years. This decline may be also attributable to the behavior of large firms such as those that make up the maquiladora industry in the northern part of the country. Many of these firms are union free or have sindicatos blancos (unions controlled by employers) (A. Cardoso 2004, 31). On the other hand, even where collective bargaining persists, it has become increasingly decentralized and less complex, indicating the growing capacity of employers to dictate the content of bargaining as well as the conditions under which it takes place (Ibid.). Of course, the majority of Mexican workers are prohibited from engaging in collective bargaining because they work in the informal sector. Indeed, while the rate of unionization in Mexico has declined, the


percentage of the economically active population working in the informal sector has increased. From 1990 to 2000, the percentage of Mexican workers laboring in the informal sector increased from 55.5 to 62 percent (Thomas 2002, 55; ILO 2002, 38). Evidence suggests that much of the increase in informal sector employment is the result of employer subversion of existing labor laws. As a recent International Labor Organization report indicates, a significant share of informal employment outside informal enterprises consists of a) disguised employee status whereby paid workers work off site on work supplied by firms/employers under sub-contracts; or b) temporary worker status whereby employees agree to renew their contracts with their employers every three to six months: thus becoming “perennial temporary workers.” Under both such arrangements, the employee is not entitled to a full range of labor benefits because a) the employer can disavow his/her responsibility to the employee; or the employee cannot accumulate a long enough period in the job to qualify for benefits. The employers prefer this arrangement because they have no other obligations to their “employees” beyond wage payments in cash. (ILO 2002, 39)

The ILO’s characterization of conditions related to informal employment in Mexico reveals the manner in which employers subvert the legal protections of job security established in Mexican law. Thus, despite legal protections to the contrary, de facto labor flexibilization is increasingly the norm in Mexico. In fact, the rate of informality in Mexico is higher than it is in either Argentina or Chile. Despite this high level of de facto flexibilization, President Vicente Fox of the pro-business Partido Acción Nacional (National Action Party, PAN), in alliance with employers, continued to push for pro-market changes in Mexican labor law throughout his sexenio (2000–06). Early in his administration Fox appeared to support reform of the Ley Federal de Trabajo (Federal Labor Law, or LFT), which if enacted would have given independent unions more clout and enhanced their autonomy.1 Ultimately, however, he backed away from this effort and focused instead on deepening pro-market reforms (Mayer 2006, 18, 27–28). These reform efforts were spearheaded by Fox’s secretary of labor, Carlos Abascal. As director of the Mexican Employers’ Association, Confederación Patronal de la República Mexicana (COPARAMEX) in the late 1980s, Abascal initiated the first attempt at comprehensive, market-oriented labor reform in Mexico. Under the Fox administration, the so-called Abascal Plan called for numerous pro-employer reforms such as (1) requiring workers attempting to organize a union or initiate collective bargaining to reveal their identities, thus subjecting them to discharge; (2) allowing employers to hire temporary


workers who could be fired at any time without penalty; and (3) allowing unions to continue to use the exclusion clause to expel union dissidents. In addition, under the Abascal Plan independent unions would have no rights, and official unions would be allowed to continue their monopoly in the public sector (LaBotz and Alexander 2005, 21). These last two provisions were clearly designed to perpetuate under the PAN the corporatist relationship between the government and officially sanctioned labor organizations such as the Congreso del Trabajo (Labor Congress, CT) and the CTM originally established under the PRI. In supporting the Abascal Plan, the CT and CTM leadership hoped to maintain their privileged position at the expense of the development of a more democratic and more autonomous labor movement (Ibid., 19). While the Fox administration failed to pass the Abascal Plan, the victory of PAN candidate Felipe Calderón in the 2006 presidential election suggests that government attempts to pass labor reform legislation that legally sanctions labor flexibilization will continue as will the privileged relationship between the government and the CT and the CTM. Thus, to date, the end of the PRI’s monopoly of power in Mexico has not facilitated democratization of the labor movement or labor reform that more effectively protects workers’ rights. Instead, the interplay of structural reforms and ineffective legal protections has led to de facto flexibilization in which workers are highly stratified and increasingly vulnerable to market forces. Social Welfare Reform As in the Argentine and Chilean cases, social welfare reform in Mexico has exacerbated the high level of market vulnerability and stratification neoliberal reform has produced in the labor market. This pattern is particularly troubling since before reform, social welfare coverage in Mexico was substantially lower than in either Argentina or Chile. For example, between 1988 and 1991, 54 percent of Mexico’s economically active population had pension, as well as disability and health coverage; in Argentina the comparable figure was 80 percent and in Chile 86 percent (Mesa-Lago 1997, 504). While Mexican social welfare and labor policies provide universal protection for those engaged in formal employment, there is little or no protection for workers engaged in subcontracted, part-time or informal sector labor (Bayon, Roberts, and Rojas 2002, 102). The labor movement was able to compel the Zedillo administration to modify its reform of the pension system and health care systems, but these modifications were of no benefit to subcontracted or informal sector workers. Instead, corporatist groups such as the union representing the workers in the Mexican Social Security Institute (Instituto Mexicano de Seguro Social, IMSS)


have been able to utilize their political clout to maintain important market protections while other, less organized segments of society have had to bear the brunt of reform. As a result, social welfare reform has imposed the greatest costs on the most poorly organized and least politically influential segments of Mexican society, reinforcing stratification and inequity. Targeted antipoverty programs such as the National Solidarity Program (Programa Nacional de Solidaridad, PRONASOL) and the Program for Education, Health, and Nutrition (Programa Educación, Salud y Alimentación, PROGRESA) have done little to address these problems. While PRONASOL received substantial state funding, it distributed resources in a manner designed to enhance the PRI’s political fortunes rather than alleviate poverty. As such, far from facilitating social solidarity, it functioned as a mechanism of clientelist control. Its successor, PROGRESA, is less subject to clientelist manipulation than was PRONASOL. However, it is woefully underfunded and its rigorous means testing reinforces social stratification. Thus, as in the Argentine and Chilean cases, social welfare reform in Mexico has reinforced, rather than alleviated, the stratification and inequity that increasingly characterize the Mexican labor market, militating against popular sector cohesion and collective action. The following analysis examines each of the preceding social welfare programs to substantiate this conclusion. Among the social welfare reforms adopted since Mexico’s move toward market-oriented development, pension reform stands out as the most prominent. Largely as a result of the hyperinflation and severe Debt Crisis of the 1980s, Mexico’s largest pension scheme, the Mexican Social Insurance Institute (Instituto Mexicano de Seguro Social, IMSS), had lost nearly all its reserves. Thus, the technocrats promoting neoliberalism gave precedence to pension reform because they feared that increasing fiscal deficits would force the government to bail out the pension system. However, the Salinas administration’s efforts to reform the pension system were met with staunch resistance from labor unions as well as the IMSS staff. Consequently, Salinas was unable to privatize the system and succeeded in enacting only modest reforms, which did not address the system’s severe fiscal disequilibria (Madrid 2003, 84; Mesa-Lago and Müller 2002, 698). Despite continued union resistance, President Zedillo’s efforts at pension reform met with much greater success. Zedillo succeeded at reform, in part, because he granted substantial concessions to public sector unions. For example, he intentionally omitted state employees from the reform, including federal civil servants, oil industry employees, and the military. In addition, the government excluded from privatization the state housing fund,


INFONAVIT, a traditional source of union patronage. Failure to include this fund in the pension privatization scheme threatened its viability since it deprived the new system of the 5 percent of workers’ wages diverted to INFONAVIT (Madrid 2003, 84). As an additional incentive to gain worker as well as employer support, the Zedillo reform did not raise employer or worker contributions; instead the government increased its contribution. Since the new scheme required all the insured to move to the new system, by 1999 virtually 100 percent of insured workers had transitioned to the privatized system. Under the new scheme, multiple entities— banks, unions, private companies as well as the IMSS—can function as Retirement Fund Administrators (AFORES, comparable to AFPs in Chile and AFJPs in Argentina), which administer individual retirement accounts (Mesa-Lago and Müller 2002, 699). What is most remarkable about the privatized pension system is its low level of coverage. Only 36 percent of the labor force is affiliated with the new system while only 23 percent of the labor force actively contributes (Mesa-Lago 2002, 1311). In other words, less than a quarter of the Mexican labor force is accumulating retirement resources in the private pension system, more than 30 percent below the rate of pension coverage in 1991. This exceptionally low level of coverage is no doubt explained in large measure by the significant decline of formal sector employment that has resulted from Mexico’s economic liberalization. Therefore, rather than afford a modicum of market protection, pension reform in Mexico has reinforced the level of vulnerability that workers experience in the labor market under neoliberal reform. In contrast with pension reform, the IMSS and related unions have had more success in opposing market-oriented health care reforms. As a result, health care reform in Mexico has been more modest and done less to exacerbate social stratification and market vulnerability. Nonetheless, increased inequities in the liberalized labor market exacerbate already high levels of inequity in the health care sector. In short, the IMSS and unions were successful in preserving elements of the status quo in health care provision that protect the benefits of formal sector workers. As this segment of the working population has steadily dwindled, however, more Mexicans must seek health care in the public health care system in which resources are inadequate and the quality of care poor. Thus, disparities have increased despite the ability of the IMSS and unions to preserve benefits for those in the formal sector. Neoliberal technocrats perceived health care reform to be a priority for the same reasons they were preoccupied with pension reform. They feared that inefficiencies and deficits in the IMSS-managed health insurance system would force the state to intervene to restore its solvency. Reformers sought to make the IMSS system more efficient through the introduction


of private competition. However, IMSS staff and union resistance forced both De la Madrid and Salinas to halt health care reform efforts. IMSS and union resistance centered primarily on the proposed contracting-out of services and opt-out option for employers. The opt-out option would allow employers to circumvent the IMSS by providing employees health care services through other providers. Similarly, the contracting-out option would introduce market competition by allowing IMSS services to be contracted out to other providers who could provide these services more efficiently. Opponents of these reforms viewed them as steps toward dismantling IMSS’s health services (Rossetti 2004, 78–79). Ultimately, though President Zedillo had more success in enacting health care reforms than did his predecessors, he was unable to implement opt-out and contracting-out policies. The broad base of support for the IMSS and the strength of the National Social Security Workers Union (SNTSS) along with their close ties to the PRI enabled them to block implementation of these reforms (Ibid., 85). The ability of the IMSS and the SNTSS to protect their interests in these areas illustrates the relevance of a political truism to understanding contemporary Mexican politics: organized segments of society are able to protect their interests while the unorganized remain excluded. While the IMSS and SNTSS were able to protect their interests, their success had little relevance for the majority of Mexicans. Over half of the Mexican population—more than 50 million citizens—has no health insurance. Moreover, substantial inequities in access to and quality of health care resources persist. Disparities in health status among diverse populations and geographic areas illustrate this point well. For example, the rate of infant mortality is 9 per 1000 live births in Mexico’s richest municipalities and 103 in the poorest. The infant mortality rate among indigenous communities is 58 percent higher and life expectancy five years lower than the national average (Barraza-Lloréns, Bertozzi, González-Pier, and Gutiérrez 2002, 48). Though neoliberal reform did not create such inequities, there is every reason to expect that they will intensify as labor flexibilization and informalization increase and fewer citizens have access to health insurance. Mexico’s poverty reduction programs have demonstrated little capacity to overcome the inequities illustrated in the preceding discussion of health care. Rather they appear to function as means to mitigate or preempt opposition to neoliberalism among marginalized populations without succumbing to populism’s pitfall of threatening macroeconomic stability. This latter goal is accomplished through the targeted, and thus limited, distribution of benefits among marginal groups. As seen in the examination of targeted subsidies in Chile, targeting can serve the dual purpose of cultivating political support for the government and minimizing fiscal


pressure on the state by subverting popular sector incentives and capacity for collective action. The first objective is accomplished by distributing benefits on the basis of political criteria. The second is achieved by strictly limiting the resources to be distributed and imposing means testing criteria that stratify disadvantaged populations on the basis of relative need, thereby limiting their demand-making incentives and capacity. These objectives are not mutually exclusive. However, in PRONASOL, established under Salinas, the emphasis on cultivation of political support for the government was substantially more prominent than appears to be the case under its successor, PROGRESA. The Salinas government established PRONASOL in response to the substantial protest vote the PRI confronted in the 1988 presidential election. On the basis of his opposition to neoliberal reform, PRD candidate Cuauhtémoc Cárdenas posed the greatest threat to PRI hegemony since it assumed power in the 1920s. Criticism of neoliberal reform held particular appeal among the popular sectors, which had experienced a dramatic decline in living standards as a consequence of structural adjustment. To counteract this mounting opposition while maintaining policies consistent with neoliberalism’s emphasis on limited government, Salinas developed PRONASOL. Unlike the populist programs that prevailed under ISI, PRONASOL was intended to promote economic growth and competitiveness by facilitating the integration of the poor into the market economy. However, while the Salinas government claimed that it distributed resources on the basis of economic need, many observers assert that it targeted resources at areas of left support to mitigate opposition to neoliberalism and recover electoral support lost to Cárdenas in 1988 (Molinar and Weldon 1994; Roberts and Escobar Latapí 1997). As Kathleen Bruhn notes in her analysis of the manner in which the government allocated Solidarity resources, “the striking fact that the strongest variables represented aspects of partisan competition suggests that political motives—and particularly the desire to undercut left support— counted in decision making” (1996, 160). Consistent with this critique, Bruhn observes that the Solidarity committees organized to carry out local development projects had little autonomy with respect to project formulation and administration and were connected to PRI activism rather than representing genuine grassroots participation. More broadly, PRONASOL was subject to direct control by the president (Ibid., 156). Thus, notwithstanding its allusions to promoting solidarity among disadvantaged populations, PRONASOL was a program the Salinas government clearly designed to promote the political objectives it shared with the PRI faction committed to neoliberal reform. In other words, in the context of shrinking state subsidies, declining real wages, and increasing economic inequity


resulting from neoliberal reform, PRONASOL’s primary purpose was not poverty alleviation but preservation of the PRI’s popular sector support. PROGRESA, the successor program to PRONASOL, has been less overtly political in resource distribution and more effective in delivering resources to the truly needy. While the Zedillo administration distributed PROGRESA resources to the truly needy, analysis of the pattern of resource distribution also reveals a political bias against the PAN (Menocal 2001, 533).2 In addition to this political bias, PROGRESA shares problems with the targeted social welfare programs examined in the Chilean case, namely, insufficient resources to meet the needs of target populations and the fragmentation of these populations through the utilization of stratifying means testing. With respect to insufficient resources, Augustín Escobar Latapí notes that despite being the government’s primary poverty alleviation program for millions of poor families, PROGRESA receives less than 1 percent of Mexico’s total social expenditure (2002, 219, 238). As with FOSIS and Chile’s housing program, national administrators determine to whom resources should be allocated based on the results of a local census. Moreover, as with the Chilean programs, target populations often perceive these determinations as arbitrary and unfair, the consequence of which is to undermine social cohesion. Indeed, a research project examining the impact of PROGRESA on community social relations, carried out under the auspices of the International Food Policy Research Institute, determined that “there are reports of new social divisions introduced by the fact that among people who generally see themselves as ‘all poor’ and ‘all in need’ of assistance, there are some who receive benefits and others who do not” (Adato 2000, iv). More broadly, PROGRESA shares a fundamental limitation with other targeted social welfare programs, namely, it is designed to help ameliorate the most extreme conditions of poverty rather than to address poverty’s underlying causes. In this sense, it may serve to make neoliberal development in Mexico politically sustainable without confronting the social inequality it has exacerbated. When examining Mexico’s social welfare reform as a whole, we see several broad trends. First, even some of the most influential segments of the labor movement have lost some of the privileges they enjoyed under stateled development, though in relative terms, formal sector workers continue to fare much better than workers engaged in subcontracted and informal sector employment. Second, while formal sector workers have been able to maintain some of the privileges, such as health insurance that they enjoyed under ISI, de facto flexibilization has produced a dramatic decline in the number of workers employed in the formal sector. As a result, the number of Mexicans who lack social security and health insurance, and thus who face increasing economic and social vulnerability, has substantially increased.


Finally, social welfare programs such as PRONASOL and PROGRESA provide insufficient resources to alleviate poverty. Instead, they function primarily as means of clientelist control and/or as means to help make neoliberal reform economically and politically sustainable by subverting incentives for collective action. The latter goal is achieved through the targeting of resources to the most needy on the basis of stratifying means testing. The effect of this means testing is to undermine popular sector cohesion and thereby limit demand-making, which in turn has the impact of limiting fiscal pressure on the state. The rationalization of social welfare resource distribution further diminishes fiscal pressure on the state by subverting incentives for popular participation and demand-making. In short, “by eliminating much of the discretionary power that parties, corporatist organizations, and politicians had in allocating benefits to their most loyal clients, it makes political participation irrelevant, if not irrational” (Holzner 2007, 104). Democratization and Popular Sector Representation To assess the quality of Mexican democracy it is essential to understand the interrelationship between the inequities in the labor market and social welfare provision described above and the representation of the popular sectors in the political arena. Scholars generally agree that the presidential election of Vincente Fox of the PAN in 2000 signaled Mexico’s transition to democracy, a decade after Chile’s transition and nearly two decades after Argentina’s. To some extent, the PRI’s adoption of neoliberal reforms was responsible for Mexico’s democratic transition since the negative repercussions of structural adjustment on the party’s core constituencies steadily undermined its electoral support and thus its hegemony. However, the increased political pluralism that has accompanied the PRI’s decline has, to date, not translated into more effective representation of popular sector interests or a more equitable distribution of the rewards and sacrifices entailed in neoliberal reform. Instead, entities in civil society that represent popular sector interests remain fragmented, and increased party competition has yet to yield the popular sectors a stable, effective political ally. Thus, neoliberal reform has acted as a double-edged sword on Mexican politics, helping to undermine the PRI’s hegemonic party rule while simultaneously fragmenting civil society, thereby impeding the organizational cohesion and strength necessary for effective popular sector political representation. As a result, there is little reason to expect a reduction of the inequities that characterize the labor market and social welfare provision.


The PRI’s adoption of neoliberal reforms exacerbated divisions within the party and fueled the rise of a new opposition party on the left, the PRD. Some of the PRD’s most prominent founding members, most notably 1988 presidential candidate Cuauhtémoc Cárdenas, defected from the PRI in response to its adoption of a neoliberal economic model and its unwillingness to democratize candidate selection within the party. Despite this challenge, or perhaps because of it, President Salinas continued the PRI’s traditional practice of manipulating electoral arrangements to ensure the party’s dominance while presenting the façade of competitive democratic elections. However, mounting opposition compelled President Zedillo to conclude that the party could no longer continue this practice without endangering the country’s political stability (Crespo 2004, 73). The eruption of guerrilla conflict in the southern state of Chiapas, led by the Ejército Zapatista Liberación Nacional (Zaptista National Liberation Army, EZLN) in opposition to NAFTA and neoliberal reform more generally, reinforced this conclusion. Under these circumstances, Zedillo adopted reforms designed to establish conditions for genuine multiparty competition. These included the establishment of a federal election authority that could not be manipulated by the governing party and a formula for constituting the federal Chamber of Deputies that would significantly reduce the PRI’s overrepresentation in that body (Ibid., 73–74). Under these new electoral circumstances, the demise of the PRI as a hegemonic political party was only a matter of time. In 1997 it lost its majority in the Chamber of Deputies and in 2000 it lost the presidency. Unfortunately, this newly competitive electoral environment has not resulted in more effective representation for the popular sectors. There are two primary reasons why the popular sectors have been unable to translate increased electoral competitiveness into more effective representation of their interests. First, popular sector actors remain fragmented and thus lack the organizational cohesion and strength that would compel the political system to be more responsive to their concerns. Second, and in part a product of the preceding condition, linkage between popular sector actors in civil society and political parties remains weak. Examination of the posttransition labor movement illustrates both these points well. There are a variety of factors that have impeded the development of a more autonomous, more representative, and more influential labor movement even under conditions of increased democratic competitiveness. Perhaps most importantly, the increased numbers of informal and subcontracted employees in the labor market as a result of structural reform make unionization increasingly difficult. Mexico’s signing of free


trade agreements means that economic liberalization is largely irreversible and thus labor flexibilization is likely to continue, if not increase, in the foreseeable future. Moreover, maquiladora firms have effectively circumvented unionization or have established sindicatos blancos, which serve to promote the interests of employers rather than those of workers. The efforts of traditional state-corporatist unions to suppress democratic alternatives compound these problems. The CTM in particular continues to renounce confrontation with employers, to the detriment of rank-and-file members, in exchange for government preservation of its unionization capacity and control over affiliates (Bensusán 2004, 278). The CTM’s strategy is supported by legal arrangements that allow the state to intervene to inhibit or repress labor conflicts and that preserve membership monopolies. Under these circumstances, workers who challenge entrenched labor leaders or seek to secede from established organizations pay high costs (Ibid., 281). Nonetheless, the increasing failure of the CTM to deliver benefits to the rank and file has provided the impetus for the development of an autonomous, democratic labor movement. The National Union of Workers (Unión Nacional de Trabajadores, UNT), for example, has attempted to strengthen the organizational capacity of independent unions in an effort to democratize the labor movement and provide workers with tangible economic gains and protections. However, the scarce resources of its affiliates have limited the UNT’s ability to increase its membership and strategic capacity (Ibid., 279–280). The impact of these organizational limitations on the UNT’s ability to represent the interests of the independent labor movement is magnified by its weak linkage with the party system. The PRD, the logical party to take up the cause of the independent labor movement, has shown little interest in promoting candidates from the independent labor movement (Ibid., 254). For its part, the PAN has generally supported the hegemonic position of the CTM (Ibid., 253). Other civil society organizations seeking greater input and influence have confronted similar problems. The perpetuation of corporatism while the PRI remained in power encouraged the PRD to develop clientelistic linkages with civil society, particularly in the south where the party is composed primarily of ex-PRI members and clienteles (Klesner 2005, 321). Such a strategy has caused internal divisions within the party and is rejected by social movements attempting to establish their autonomy. More recently, the PRD has continued to struggle to develop a coherent ideological message with mass appeal that will help it forge closer links with civil society. The party emerged relatively recently, at a time when leftist parties around the world were in decline and the Mexican labor movement was largely controlled by the state under the PRI (Levy and Bruhn 2001, 98). Given


these circumstances, its efforts at constructing a viable leftist alternative to the prevailing neoliberal development model have been particularly challenging. The presence of the EZLN has further complicated the PRD’s goal of constructing a viable left-wing electoral option. The EZLN has been successful in propelling Mexico’s democratization forward, presenting a powerful challenge to PRI dominance through armed insurrection and related efforts to democratize civil society (Gilbreth and Otero 2001). Yet it has a strained relationship with the PRD, given its suspicion that parties challenging the PRI’s hegemony will attempt to replace its state-corporatist system with a corporatist system of their own and ignore the needs of Mexico’s poor majority (Vadi 2001, 134). Thus the PRD has not been able to join forces with the EZLN to build its base of support. As a result, its electoral and legislative influence remains limited and large segments of the popular sectors remain without effective linkage to the party system. Conclusion The Mexican political system, therefore, offers a mixed picture in terms of prospects for enhanced popular sector representation. On one hand, the PRI’s fall from hegemony and its establishment of electoral safeguards have created an environment of party competition heretofore unknown in Mexican politics. Moreover, the end of one party control over the state and the decline of state control over the economy have opened space for greater pluralism and autonomy among actors in civil society. On the other hand, neoliberal reforms have severely fragmented labor markets, undermined the strength of organized labor, and produced social welfare reforms that reinforce labor market stratification and thereby undermine popular sector cohesion. The perpetuation of state-corporatist arrangements which privilege old guard entities such as the CTM, further impede the strength and autonomy of labor by stymieing the growth of a democratic and independent labor movement. Finally, the party system offers the popular sectors limited prospects for the effective representation of their interests. The PRI, still a powerful force in Mexican politics, continues to pursue traditional corporatist and clientelist linkages with civil society while the PAN has perpetuated corporatist ties with labor, retained its commitment to neoliberalism, and targeted its ideological appeals toward the middle and upper classes. Meanwhile, the PRD continues to struggle to develop an ideological message with mass appeal and to develop effective linkages to broad segments of the popular sectors that feel excluded from the political system. These conditions limit the capacity of the popular sectors to exercise their collective muscle in


a manner that would compel greater responsiveness and accountability on the part of the government and political parties. They indicate the constraints neoliberal reform has imposed on the quality of Mexican democracy. Chapter 9 considers the extent to which these constraints are consistent with the limits neoliberal reform has imposed on Chilean and Argentine democracy.

Ch a p t e r Ni n e Conc lusion

This analysis draws upon the prior theoretical insights of Evans, Migdal, Skocpol, and others to suggest that the manner in which the state is embedded in civil society—and the policies it adopts as a result—shapes the political opportunity structure for competing segments of the population. As the Chilean case illustrates, the state is reflective of conflicts and competing interests within civil society and also seeks to shape and manage the development and expressions of these interests through its policies and institutional mechanisms of control. The adoption and perpetuation of a neoliberal economic model in Chile, and the changes in state structure and policies that have accompanied it, have greatly enhanced the economic and political leverage of business elites in Chile while simultaneously erecting substantial impediments to popular sector collective action. Indeed, the transition from statism to neoliberalism in Chile has been characterized by structural and institutional reforms that have subjected the popular sectors to increasing degrees of commodification and stratification. Accordingly, this analysis contradicts the assumption prevalent in much of the political economy literature and promoted by advocates of market-oriented reform that the state under a market-based economy plays a minimal, if not neutral, role in structuring economic and political opportunities. On the contrary, the state’s actions are driven by dominant groups in civil society in alliance with technocrats and public officials. At critical junctures in national development, state managers and their allies in civil society are in a position to radically reshape the institutional structures of the state. Their aim is to reconfigure the state’s institutional structures in a manner conducive to the fulfillment of their particular ends and to thereby shift the balance of power among competing forces in society. In the process, they redraw the boundaries of debate on the proper structure of the state and the appropriate uses of state power and resources. The transition from state-led to market-oriented development in Chile must be understood in this light. The evolution of ISI in Chile, spurred on by external events such as the Great Depression, established a relatively privileged position for the Chilean


labor movement and the popular sectors more generally. The confluence of statist economic policies, a political regime that gave due recognition to leftist parties and a welfare regime that progressively expanded the provision of benefits created an environment that gave the popular sectors both the incentives and means to promote their collective interests. However, these conditions ultimately proved politically and economically unsustainable and provoked violent reaction from the right. Once in power, the military regime, with the technical expertise of neoliberal technocrats and support and input from the business community, radically redesigned the Chilean state in a manner intended to undermine the popular sectors propensity and capacity for collective action. Chile’s mode of transition to democracy, along with its new electoral regime, ensured that these state reforms would remain intact and that the business community would continue to have privileged access to policymakers and privileged influence over policy formation. Consequently, the state’s neoliberal policies and programs continue to perpetuate the subordination of workers to a labor market predicated on flexibilization. Labor market and social welfare policies exacerbate already high levels of social stratification, deprive the public of vital resources, reinforce workers’ vulnerability to the vagaries of the market, and undermine the popular sectors’ incentives for collective action. Moreover, structural reform has operated in synergistic fashion along with party renovation and the institutional constraints that have accompanied Chile’s democratic transition to severely restrict the representation of the popular sectors in the political arena. The privatization of functions and resources formerly controlled by the state has redrawn the lines between the public and private, leaving political parties with less capacity to attract supporters or address social inequities through their distributive control over economic resources. Under these circumstances, political elites within the Concertacíon have been reluctant to be more responsive to popular sector groups or to grant them a greater degree of political influence. Instead, the Concertación has sought to demobilize and depoliticize civil society, the result of which has been increasingly limited opportunities for the popular sectors to gain representation of their interests. These conditions are particularly evident at the local level of government, where institutional arrangements inherited from the military regime restrict the powers and influence of the neighborhood associations and communal advisory councils (CESCO), where indirect election of municipal council members weakens the nexus between constituents and elected leaders, and finally where local officials have little control over the distribution of social welfare resources in their communities. Taken together, these conditions have led to restricted representation, declining confidence in political parties, increased apathy,

Conclusion / 197

and declining electoral participation, all of which undermine political accountability and representativeness and thus compromise the quality of Chilean democracy. Thus analysis of the Chilean case indicates the importance of looking beyond the political regime at key elements of state structure and policy to accurately assess the popular sectors’ capacity for effective collective action. It conveys the importance of looking at labor and social welfare policy and their impact on popular participation in assessing the quality of democracy. If, as Diamond and Morlino (2004) suggest, participation can help strengthen democracy by building regime support among citizens through enhanced political accountability and representation, then clearly institutional and structural arrangements that impede or compromise such participation can have a deleterious impact on democracy. The foregoing analysis of the negative effects state structures and policies have had on popular sector organization and incentives for participation in Chile strongly support this conclusion. Recent public opinion polls and voting behavior indicate how these negative trends may be impacting Chilean democracy. Warning signs can be seen not only in the low public appraisal of economic institutions such as the AFPs and ISAPREs (29 and 20 percent respectively; CERC 2005, 2) and in the public’s view that there is an imbalance of power between business elites and unions (92 percent, Ibid.), but also in the extremely low opinion that the public holds of political parties and key political institutions. Only 22 percent of the public has confidence in the Chilean Senate, 20 percent in the judiciary, 18 percent in the Chamber of Deputies and an abysmally low 9 percent in political parties (Ibid.). The public’s exceptionally low estimation of political parties reflects the view of the overwhelming majority of Chilean citizens that the political parties do not share their concerns (85 percent) and only occupy themselves with the people at election time (92 percent) (CERC 2002b, 6). The public perceives a clear disjunction between its concerns and the state’s policies, with 83 percent indicating that the state allocates insufficient resources for health care, 70 percent holding the same view with respect to education, 67 percent with respect to public safety, and 60 percent with respect to housing (CERC 2002a, 2). More broadly, 67 percent consider social equality more important than individual liberty, a perspective clearly at odds with neoliberal ideology, political economy, and social policy as it has been adopted in Chile (CERC 2004, 3). Despite the public’s continuing support for egalitarian ideals and state intervention, the stratifying and fragmenting impact of neoliberal reforms appear to have weakened the trust that is the building block of social capital and essential for collective action. Only 9 percent of Chileans indicate that they trust most people, a decline


of 10 percent since 1988, while 90 percent express the view that “one can never be too careful in dealing with others,” an increase of 12 percent over the same period (CERC 2002b, 7). The public’s disenchantment with economic and political institutions, and political parties in particular, is having a negative impact on electoral politics in Chile. As noted in chapter 5, voter turnout and voter registration as percentages of the voting-age population have fallen significantly in the postauthoritarian period while the casting of spoiled or blank ballots, noncompliant abstention and nonregistration have become highly common. For example, in Chile’s 1997 legislative elections, 40 percent of Chileans decided to cast blank and spoiled ballots, to abstain, or not to register. Similarly, only 58 percent of eligible Chilean voters voted for a party in the 2001 legislative elections compared with 85 percent who did so in the 1989 legislative elections (see chapter 4, table 4.3). Among the most significant factors explaining these trends are distrust in institutions and political alienation, in which voters do not identify with any of the parties or ideological tendencies within the political system. In other words, many of those who shirk mandatory voting or spoil their ballots do so in protest against the system. Others do not vote or fail to even register to vote because they have not been motivated by a political party to do so (Carlin 2006, 243). This trend is consistent with Roberts’ (2002) argument that under neoliberalism, parties previously closely aligned with organized labor and engaged in grassroots mobilization efforts have distanced themselves from labor, retreated from ideological appeals, and eschewed the kind of mobilization efforts in which they had earlier engaged. Under these circumstances, voters who wish to protest the state’s policies or to support an alternative development model are left without attractive electoral options. To the extent that this trend pervades Chilean politics, it reflects the emergence of a vicious cycle that does not bode well for the quality of the nation’s young democracy. In essence, those citizens most in need of political representation are increasingly discouraged or impeded from taking the actions necessary to achieve it. The more they withdraw from the realm of electoral politics and the less they are capable of engaging in effective collective action, the less able they are to hold public officials accountable. And the less beholden these public officials feel to those alienated from the political system, the less likely they will be to enact policies that address their concerns. If this dynamic continues, policy will in all probability continue to be skewed in favor of the business community’s interests, leading to further alienation within the popular sectors and thus the likelihood of their increased electoral retreat. With the perpetuation of this pattern, the quality and legitimacy of Chilean democracy will rest on increasingly shaky ground.

Conclusion / 199

Only time will tell if this pattern will come to dominate Chilean politics. In the meantime, we see similar patterns at play in Argentina and Mexico. There are important differences among these cases. However, these differences make the similarities all the more striking. Among the most important differences evident in the comparison of the three cases is the extent to which governments, in the process of adopting neoliberal reforms, have granted concessions to organized labor. Such concessions were nonexistent in the Chilean case while Peronist governments in Argentina and PRI governments in Mexico granted important concessions to key segments of organized labor whose leaders sought to protect their corporatist privileges. As noted in chapter 7, these differences can be explained primarily by three factors: (1) the timing of reform (pre- or postauthoritarian); (2) regime legacies, such as the extent to which key social actors such as organized labor are tied to dominant political parties; and (3) the level of party competition and the nature of party ideology. Since in the Chilean case the military held power when the vast majority of neoliberal reforms were implemented, neoliberal technocrats had a much freer hand to adopt market-oriented reforms than was the case in either Argentina or Mexico. With the use of authoritarian force at its disposal, the Chilean military had little incentive to cater to organized labor. In Argentina, on the other hand, Menem granted concessions to the most powerful segments of organized labor because in the context of a competitive political environment, he needed their cooperation to pass his reform agenda. The PJ had long-standing ties to the labor movement that it could not afford to abandon entirely without suffering significant political consequences. Although Mexico’s political regime was not considered to be fully democratic until Vicente Fox’s 2000 presidential victory, increasing levels of political competition from the 1988 presidential election onward placed similar constraints on the PRI. Indeed, the PRI relied upon the corporatist-controlled labor movement to keep rank-and-file members and labor movement dissidents in check to facilitate the adoption of labor reforms that were ultimately detrimental to organized and unorganized workers alike. Thus, in labor reform we see notable differences among the three cases. In Mexico, governments that otherwise adopted significant market reforms (e.g., tariff reductions, NAFTA, privatization) implemented no significant labor reforms. Argentina, on the other hand, is an intermediate case. Menem instituted substantial labor reforms in his first term only to rescind some of the key elements of this reform legislation in his second term when his popularity had waned and he needed to restore support from organized labor. Finally, Chile is the most extreme case of neoliberal labor reform, since the Pinochet regime had a free hand to subvert prevailing labor norms and the


Concertación has made only modest reforms to the military regime’s labor code. Despite these differences, all three countries exhibit high degrees of labor flexibilization characterized by high rates of informality and subcontracting and low rates of unionization and collective bargaining. In other words, despite differences in legal protections for workers in Argentina, Chile and Mexico, economic liberalization in all three cases has led to high rates of commodification and stratification among workers. These striking similarities in the fragmentation of labor markets and workers in these three countries exist within political contexts that are quite distinct. In Argentina, the PJ is unrivaled in the political arena. In Chile, the Concertación has been the dominant political force in the posttransition period, though given the constraints imposed by the binomial electoral system, the ideological renovation of its members, and the strength of its right-wing opponents, it operates with much less ideological, and hence policymaking latitude than does the PJ. Finally, in contrast with both Argentina and Chile, the Mexican political system has become increasingly competitive. Indeed, Mexico’s political system may be the most competitive among the three countries, given the presence of three major, ideologically distinct parties, none of which is capable of dominating the electoral arena. Despite these significant differences, we once again confront an important similarity present in all three countries, namely, the dramatic decline in organized labor’s political clout. In Argentina, the PJ’s metamorphosis from a labor-based to a clientelist party was both a reaction to and a catalyst for the declining importance of organized labor in the context of an open economy. In contrast with leftist governments under state-led development, the center-left parties of Chile’s Concertación have kept the labor movement at arm’s length. Mexico diverges from the Argentine and Chilean cases in that the PRI and now the PAN have sought to maintain close ties with the organized labor movement. However, they have done so, not to promote workers’ rights or economic equity. Rather, they have attempted to utilize the existing corporatist framework to ensure control over a smaller, less influential labor movement and to thereby prevent the emergence of a more democratic and more autonomous labor movement. Therefore, despite significant differences among the three cases in terms of the timing and depth of reforms and the political contexts in which they have taken place, we see a similar pattern in all three. Labor markets and labor organization have been increasingly characterized by stratification and worker vulnerability to market forces as well as a diminished capacity to engage in effective collective action. These conditions are compounded by the popular sectors diminished political representation within the party system. In addition, there are other notable similarities among these three cases. In all three cases, business elites have gained privileged access to

Conclusion / 201

policymakers, which has facilitated the adoption and preservation of reforms favorable to their interests. Conversely, as already noted, workers have experienced increased labor flexibilization irrespective of existing legal protections. Finally, in all three cases, social welfare reform has reinforced the intensification of commodification and stratification in the labor market. In this regard, substantial disparities exist in these three countries between the level of social welfare coverage of formal sector workers on the one hand and informal sector and subcontracted workers on the other. Moreover, even within the formal sector, access to adequate health care and pension benefits is dependent upon the economic means of the individual worker, a condition that militates against working-class cohesion and collective action with respect to social welfare reform. Finally, targeting of social welfare benefits as practiced in Chile and Mexico has reinforced social stratification and vitiated social capital while serving to minimize fiscal pressure on the state. This comparative analysis suggests, then, that the association between neoliberalism and democracy in Chile, Argentina, and Mexico has not been a virtuous one when viewed from the perspective of the popular sectors’ capacity for organization and concerted action. Neoliberal reforms have intensified commodification and stratification among the popular sectors, undermining their collective strength and incentives for concerted action and thus undermining their ability to hold public officials accountable and to compel them to represent their interests. Under these circumstances, many among the popular sectors have been forced to find individual solutions to the all too common problems of meeting basic needs such as employment, food, shelter, and health care in a dignified and humane fashion. Additional research is needed to determine the extent to which this pattern prevails across the region and whether or not it represents a new state-society matrix. In the meantime, in light of the recent economic crisis in Argentina and the ever-present threat of the spread of economic contagion across the region, the gospel of neoliberalism is increasingly viewed as apocryphal among Latin America’s policymakers and citizens. Thus the notion of development—what it is and how it should best be achieved—may once again become a contested issue. In any event, we can be sure that no matter what models of development emerge to challenge the Washington Consensus, the state will play a key role in determining the capacity for meaningful political and economic participation of Latin America’s most vulnerable citizens.


No t e s

Chapter One Neoliberalism and the Quality of Democracy in Chile 1. In this regard, Garretón and Espinosa (1992) and Garretón (1994) refer to a disarticulation of the “sociopolitical matrix,” while Cavarozzi (1992) speaks of the dismantling of the state-centered matrix (SCM). In each case, the authors are referring to a mode of social organization predominant in Latin America from the Great Depression until the debt crisis of the 1980s in which the state assumed a primary role in organizing both economy and society. 2. It is generally agreed that a procedural minimum definition of democracy requires effective guarantees of civil liberties such as freedom of speech, assembly, and association and presumes free and fair contested elections. 3. This point is discussed in detail in chapter 4. 4. Chile experienced two periods of acute deindustrialization: (1) the recession of 1975, in which industrial activity declined by 25.5 percent; and (2) the recession of 1982, in which industry decelerated by 21 percent (Ominami 1988, 92, 102). 5. As Portes, Castells, and Benton have noted, “[H]eterogeneity is becoming the rule . . . .Thus, the more the informal economy expands, the more the class structure of each society becomes blurred, with horizontal fluid networks of activities substituting for vertical stable relationships of production and appropriation of the product and the actual social organization of these processes, there are so many mediations that the experience of labor and the emergence of stable class positions do not correspond to each other any more” (1989, 31). 6. The phrase is borrowed from Garretón (1989b, 274). 7. These issues are discussed in detail in chapter 3. 8. Given that Chile is the Latin American case in which neoliberal reform has arguably been the most extensive, it serves as a “heuristic case study” (H. Eckstein 1975, 104–105).

Chapter Two The State in Society: Conceptualizing Collective Action and Popular Participation in Latin America 1. Migdal does not use the term “embeddedness” as does Evans. Nonetheless, he asserts, “The autonomy of states, the slant of their policies, the preoccupying issues for their leaders, and their coherence are greatly influenced by the societies in which they operate” (2001, 56).

204 / Notes 2. In this sense, Christian Democracy in Latin America took on the anticommunist tenor that it had originally adopted in Europe. 3. In addition to Cornelius (1974), see regarding this point Goldrich (1970), Portes (1971), Landsberger and McDaniel (1976), and Castells (1983). 4. According to Olson (1982, 4), distributional coalitions are groups “oriented to struggles over the distribution of income and wealth rather than to the production of additional output.” Rents are profits gained by distributional coalitions in which freedom of market entry is curtailed to their advantage. 5. For examples of this argument, see Williamson (1990) and Krueger (1992). 6. In an analysis that reinforces Tarrow’s critique of Putnam’s argument, Fred Solt notes that “self-motivated political participation does not appear closely linked to patterns of social engagement built up across Italy by associations, newspapers and common endeavors over the last ten centuries” (2004, 7). Instead, he notes that the strongest and most consistent predictors of political participation are socioeconomic variables, and in particular, historical patterns of landholding. “Where more land was held in family farms rather than great estates and tiny peasant plots when democracy was established, the relative dispersion of economic resources facilitated the strengthening of autonomous political organizations such as the PCI (Partido Comunista Italiano) and discouraged the formation of patron-client networks; once in place, these institutions continued working to mobilize (or demobilize) self-motivated political participation decades later” (Ibid.). 7. A striking example of such a culturalist, if not ethnocentric, understanding of development is evident in Francis Fukuyama’s work on social capital and the global economy. He argues, for example, that “the most important distinctions between nations are no longer institutional but cultural: it is the character of their civil societies, the social and moral habits that underlie institutions, that differentiate them” (Fukuyama 1995, 103). In short, those societies that have high levels of social capital, such as Germany, Japan and the United States have, as a result, high levels of social trust, which ultimately leads to greater economic efficiency by reducing transaction costs. 8. Echoing Putnam, the World Bank defines social capital as “the institutions, relationships, and norms that shape the quality and quantity of a society’s social interactions” (World Bank Social Capital). 9. See Palley (2004) for a discussion of the distinctions between neoliberal and postKeynesian theory on aggregate employment creation and income distribution. 10. Note that in making this assessment, Bebbington and his coauthors are asserting that the neoliberal view is not the only understanding of social capital considered in discussions within the Bank. In other words, they argue that it is inaccurate to characterize the World Bank as a monolithic entity that espouses exclusively neoliberal thinking on development policy, and in particular, the creation of social capital. Nonetheless, they acknowledge that in the internal give and take, over which view would predominate, “efforts of the social development group to address the political economy underlying asset distribution failed, leaving such themes largely invisible” (2004, 50). 11. See Stephen Samuel Smith and Jessica Kulynych (2002) for an excellent discussion of the how the term “social capital” blurs such important analytic distinctions and as a consequence has a depoliticizing effect.

Notes / 205 12. For relevant examples of works that posit this notion of social capital, see Dasgupta and Serageldin (2000) and Fukuyama (1995).

Chapter Three Business, Labor, and the State: The Transformation of the State-Society Nexus 1. Gil (1966, 52) refers to this restricted development of a class of small entrepreneurs in Chile as the “proletarianization” of the Chilean middle class. 2. Private capital investment in industry declined from 260 million escudos in 1970 to approximately 21 million in 1973. The percentage of total investment in industry contributed by the private sector declined from 42.6 percent in 1970 to 10 percent in 1973. See Stallings (1978, 248). 3. See Edgardo Boeninger (1986) for one of the earliest expressions of this argument. Boeninger served as the coordinator of Political Relations and Government Programs for the pretransition Concertación de Partidos por la Democracia (1988–89), minister secretary general of the presidency under President Aylwin (1990–94), and finally as a designated senator in the Chilean Congress. 4. The bond was to be equal to four unidades de fomento, approximately 17,500 pesos or about $125.00 in 2006. 5. Informal sector employment is by definition noncontractual employment. The percentage of all employment that was informal in 1997 was 36.1; the rate in 2005 was 37.3 percent (Reinecke and Velasco 2006, 21). 6. Ley 16.744, Article 15 obligates employers to pay social security taxes of 0.9 to 4.3 percent of workers’ salaries to insure workers against injury. The higher rate is to cover workers in more dangerous occupations. 7. In 1990, formal sector employment comprised 65.9, and informal sector employment 34.1, percent of the Chilean labor market (Giovagnoli, Pizzolitto and Trías 2005, 46). In 2005, the respective figures were 62.7 and 37.3 percent (Reinecke and Velasco 2006, 21).

Chapter Four Democratization, Political Representation, and the Rise of Popular Dissatisfaction 1. The strength of the Chilean party system is well noted in the literature. See for example, works by Alexander (1973), Dix (1989), McDonald and Ruhl (1989), Mainwaring and Scully (1995), and Siavelis (2000). 2. On this point see Hagopian (1990, 1993), Karl (1986, 1990), Karl and Schmitter (1991), and J.S. Valenzuela (1992). 3. See Karl (1986) for development of this point. 4. I borrow this concept from J.S. Valenzuela (1992, 62–63). 5. See Lawson (1988) for a more extensive description of these types of partybase linkage. 6. Works dealing specifically with party politics in Chile, for example, A. Valenzuela (1989) and Garretón (1989a) emphasize the central role played by political parties in organizing civil society and public life.

206 / Notes 7. Arturo Valenzuela (1977) points out that in contrast to other Latin American countries such as Colombia and Brazil, clientelistic linkage was not the primary form of relation between party and base in Chile. Moreover, when it occurred, clientelism was present at the local, rather than the national, level of politics. 8. Inflation under the Unidad Popular government increased from 22.1 percent in 1971 to 323.6 percent in 1973 (A. Valenzuela 1978, 65). 9. The reform of local government and social welfare reform are discussed in greater detail in chapters 5 and 6 respectively. 10. For a more detailed account of these and other events related to the transformation of the Socialist Party under the dictatorship, see Roberts (1998) and Walker (1990). 11. The MIR was formed in 1965 by student leaders from the PS who renounced the electoralism of the traditional left in favor of armed struggle. 12. For a description of the strategic differences between the AD and the MDP, and how such differences played themselves out in events preceding the democratic transition, see Silva (1993). 13. See Silva (1993) and Boeninger (1986) for a more detailed description of the political calculations involved in this strategic move by the AD. 14. The FPMR, or Frente Patriotico Manuel Rodriguez, was the armed wing of the Communist Party, formed in December of 1983. 15. See Roberts (1998), chapter 5 and Walker (1990), chapter 5 for a detailed discussion of this reunification process. 16. For a discussion of the renovated Socialists philosophy, particularly with regard to what they considered to be the party’s proper relationship with civil society, see Arrate and Hidalgo (1989). 17. See Oxhorn (1995) for a detailed discussion of this process, particularly chapters 6 and 8. 18. The democratic opposition accepted the 1980 Constitution not because it shared the military’s vision of a restricted or tutelary democracy. Rather, the leaders of the democratic opposition accepted this constitution for several strategic reasons. First, given that they were unable to forcibly remove the Pinochet regime from power, they were compelled to negotiate a transition to democracy on the military regime’s terms, which included acceptance of its 1980 Constitution. Second, the democratic opposition wanted to create a new democratic regime that was based upon the rule of law. Attempting to transform the political system through existing constitutional principles was an important means of accomplishing this objective, even if the legitimacy of that constitution was subject to question. Finally, the democratic opposition attempted through negotiations to remove the most egregiously antidemocratic elements of the 1980 Constitution and viewed constitutional reform as part of the process of democratic transition. Thus it saw its acceptance of the military regime’s constitution as the beginning, not the end, of the establishment of a new democratic order in Chile. See Ensalaco (1994) for a detailed discussion of constitutional reform in Chile. 19. President Aylwin held office for four years and thus was ineligible to become a lifetime senator. However, this provision allowed President Eduardo Frei to

Notes / 207

20.

21. 22. 23. 24. 25. 26. 27.

28.

29.

assume a lifetime seat in the Senate upon ending his six-year presidential term in March of 2000. President Lagos would have had the same opportunity when he ended his term, which motivated the more moderate segments of the right (from RN) to agree to terminate this constitutional provision along with the practice of designating senators. This constitutional reform, along with a reduction of the presidential term from six to four years and the right of the president to appoint or retire commanders of the different branches of the armed forces, among others, went into effect on March 11, 2006. Interview with Juan Carlos Estay, PS militant in the municipality of Lo Hermida, Santiago, Chile on November 23, 1993. August 12, 1993 interview with Gregorio Cano, longtime Socialist Party grassroots organizer, PS headquarters, Santiago, Chile. Interview with the author, December 17, 1993, Santiago, Chile. Ibid. Interview with the author, September 24, 1993, municipality of La Granja, Santiago, Chile. September 3, 1993, interview with Oscar Peña, Political Secretary, Metropolitan Region, Communist Party of Chile. The relationship of the PC with the popular sectors is discussed in detail below. In this context, institutional legacy refers primarily to the military regime’s restructuring of local government, and in particular the neighborhood associations, in a way that limits the power and influence of the grass roots. Despite agreement among party and grassroots leaders on the negative effects of this institutional legacy, center and left base leaders often expressed doubt, if not outright distrust, over the Concertacíon’s commitment to institutional reforms that would bestow on local government more power and make it less subject to elite control. It is important to note that of the two major right-wing parties in Chile, RN and UDI, only the UDI is actively engaged in building a base of support in the shantytowns. Although RN has a modest following among shantytown dwellers, it has no formal organization or policy for building or maintaining such support. Consequently, it is not surprising that the grassroots representative from the RN who identified a split between the base and the elite of his party expressed this view. On the other hand, although the UDI is actively engaged in building a grassroots following, because it pursues this objective primarily through authoritarian and clientelistic practices, we should expect most party militants to demonstrate a high degree of party loyalty. Moreover, given that the UDI has assumed as its overt political mission the responsibility of keeping alive the authoritarian legacy left behind by Pinochet, one would be hard pressed to find a party member who would in any way be critical of this legacy. Since the RN has attempted to put distance between itself and the Pinochet legacy, it is natural to find among its followers a greater willingness to criticize the institutional arrangements bequeathed by the Pinochet regime. August 11, 1993 interview with Carlos Ramirez, affiliated with the PDC and President of the Junta de Vecinos in población Yungay in the municipality of La Granja, Santiago, Chile.

208 / Notes 30. November 23, 1993 interview with Clementina Marque, affiliated with the PPD and grassroots social leader in the población of La Pincoya in the municipality of Heuchuraba, Santiago, Chile. 31. As explained in the methodology section in chapter 1, the field research upon which this study is based involved interviewing grassroots leaders in three distinct shantytowns in Greater Santiago during the dictatorship demonstrated respectively high, medium, and low levels of organization and mobilization. My research revealed no significant distinction in these separate poblaciones in the levels of popular participation that have prevailed since the democratic transition. In short, despite their past differences all these communities can now be characterized as having equally low levels of grassroots involvement in politics. 32. The author conducted twenty-five interviews in June of 2001 and another twenty-five in January 2006 in the same three poblaciones investigated in 1993. However, with the exception of one concejal in the municipality of Heuchuraba, the 2001 interviewees were distinct from those interviewed in 1993. 33. June 16, 2001 interview with Anibal Musa, social leader associated with the local church in the población of Yungay, municipality of La Granja, Metropolitan Santiago. 34. June 19, 2001 interview with Maria Alfaro in población La Pincoya in the municipality of Heuchuraba, Metropolitan Santiago. 35. Author interview with Pedro Huerta in the población Yungay, municipality of La Granja, Metropolitan Santiago, June 18, 2001. 36. January 9, 2006 interview with Maribel Zuñiga, head of the Department of Stratification, in the municipality of La Granja, Santiago, Chile. 37. Author interview with Vilma Caroca, municipality of La Granja, Metropolitan Santiago, January 9, 2006. 38. January 6, 2006 interview with Viviana Oyarce in población La Pincoya in the municipality of Heuchuraba, Metropolitan Santiago.

Chatper Five Local Democracy and the Transformation of Popular Participation 1. I borrow this apt phrase from Garretón (1989b, 274). 2. According to Castells, each campamento was dominated by one political party; this political party determined the political direction of the campamento (1983, 207). Such partisan divisions at the grass roots both reflected and reinforced the ideological polarization among Chile’s center and left political parties (right-wing parties were equally polarized, if not more so, but were not engaged in grassroots organization at this time). 3. These figures are taken from Castells (1983, 200) and Stallings (1978, 115). 4. See chapter 6 for a detailed discussion of the military regime’s social welfare policy reforms and their impact on the popular sectors in terms of their propensity and capacity for collective action. 5. By 1988 fiscal spending devoted to education calculated as a percentage of GDP was 2.73, little more than half the average percentage of GDP devoted to education between 1970 and 1973 (Cox and Jara 1989, 6–8). In Santiago,

Notes / 209

6.

7.

8.

9. 10.

11. 12.

13.

the burden of sacrifice caused by the drop in fiscal expenditure on education appears to have been experienced almost exclusively by the poorer municipalities (Dockendorf 1990, 101). Rather than strictly forbidding municipal borrowing, statute requires a special law to authorize each loan. In the face of such a stringent requirement, only two such borrowing operations were recorded between 1979 and 1994 (Marcel 1994, 111). The municipal legislation passed by the military regime made municipal governments responsible for the provision of services related to, among other things, community sanitation and ornamentation, public assistance, public health, environmental protection, education and culture, job training and promotion, sports and recreation, tourism, public transit, and emergency assistance. See Ley 18.695, Ley Orgánica Constitucional de Municipalidades, Artículos 3–4 for a complete description of these responsibilities. As indicated in chapter 4, the democratic opposition accepted the 1980 Constitution not because it shared the military’s vision of a restricted or tutelary democracy. Rather, the leaders of the democratic opposition were forced to negotiate a transition to democracy on the military regime’s terms, which included acceptance of its 1980 Constitution. In addition, the democratic opposition wanted to create a new democratic regime that was based upon the rule of law. Attempting to transform the political system through existing constitutional principles was an important means of accomplishing this objective, even if the legitimacy of that constitution was subject to question. See Campero (1987), Oxhorn (1995), Roberts (1998), and Schneider (1995) for a description and analysis of party-base relations during the dictatorship. As previously noted, the Chilean Communist Party is an exception to this rule, but its exclusion from the ruling Concertación and its low level of electoral support substantially weaken the significance of its more aggressive grassroots organizational efforts. The Pinochet regime’s policies of spatial segregation and forced relocations of poorer citizens living in wealthier neighborhoods greatly exacerbated this tendency (Morales and Rojas 1987; Portes 1989, 21–22). The municipal electoral system implemented after the transition, a modified D’Hondt, is a proportional representation system. Citizens vote for individual candidates belonging to pacts rather than closed party or pact lists. To determine the number of candidates elected by each list, the Tribunal Electoral Regional totals the number of votes cast in favor of each candidate of the same list. The tribunal utilizes these sums to determine the electoral quotient according to the formula standard to D’Hondt electoral systems. It then employs this electoral quotient to determine the number of seats to which each pact or party is entitled. In the event that a pact has more candidates than council seats, the candidates receiving the highest number of votes within the pact are entitled to the council seat(s) awarded to the pact. See Artículos 109 through 114 of the Ley Orgánica Constitucional de Muncipalidades (González Moya 1996) for a detailed explanation of these procedures and stipulations. There are seven primary political parties—the PDC, PRSD, PPD, PS, PC, RN, and UDI—which typically field candidates in municipal elections as

210 / Notes

14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

24.

25. 26. 27.

28.

well as a number of smaller parties. In addition, a significant number of independents run for office. See Article 115 of the Ley Orgánica Constitucional de Muncipalidades (González Moya 1996) for a detailed explanation of these stipulations. See Eaton (2004, 227) for discussion of national party leaders’ control over candidate selection for subnational elections. June 11, 2001 interview with Juan Robles, PS member, CESCO representative, neighborhood association vice president in Población Yungay, La Granja municipality, Santiago. June 12, 2001 interview with Carmen Gloria Allende, PS member and concejal, Huechuraba municipality, Santiago. Interview with Sergio Guerra, RN member and council member in the municipality of Peñalolen, December 8, 1993. For these figures and an excellent historical analysis of popular organization and mobilization in Santiago, see Campero (1987). June 14, 2001 interview with Jorge Molina, social leader in población La Pincoya in the municipality of Huecheraba, Santiago, Chile. October 24, 1993 interview with Ateleo Gaete, longtime militant for the PC, in población Yungay, municipality of La Granja, Santiago, Chile. Interview with Juan Carlos Estay, PS militant in the municipality of Lo Hermida, Santiago, Chile on November 23, 1993. As Title V, Paragraph 1, Article 37 of Ley 19.048 indicates, “One or more neighborhood associations can exist in each neighborhood unit” (author’s translation). Article 40 stipulates the only restriction on the number of juntas that can be formed in a community or poblacíon, which relates to the number of members required to form a junta relative to the community population as a whole. The range is from a minimum of fifty members in communities with populations ranging from ten to thirty thousand to two hundred members in communities with populations exceeding one hundred thousand. In contrast to the law devised by the military regime, the new law makes reference to the role of the juntas in such things as promoting the defense of constitutional rights, the development of artistic and cultural expression, and the integration of community life. However, in light of the fact that the law does not grant the juntas any specific authority or powers to achieve these objectives, such statutory exhortations appear rather hollow. June 19, 2001 interview with Maria Alfaro in población La Pincoya in the municipality of Huechuraba, Metropolitan Santiago. Author interview with Yesna Salazar, resident of shantytown Yungay, January 13, 2006, in the municipality of La Granja, Santiago, Chile. The combined percentage of null and blank votes along with abstentions was 23.14 percent in 1996 and 20.46 percent in 2000 (Servicio Electoral Republica de Chile 1997 and 2001). While these numbers may not seem significant in comparison with rates of voter turnout for local elections in the United States, it is important to recognize that voting in municipal elections in Chile is legally mandatory and failure to do so is punishable by a substantial fine, nearly half the monthly minimum wage. The survey states that 48 percent of low- and middle-income respondents gave this response. The figure for low income respondents alone was 54.3 percent.

Notes / 211

29. 30. 31.

32. 33.

34. 35. 36. 37.

The second most frequent response among low- and middle-income respondents to the question, “What do you think is the primary problem affecting your community,” was “too much bureaucracy.” Less than 17 percent of lowand middle-income respondents indicated that too much bureaucracy was the primary problem in their municipalities. Thus, the failure of local political leaders to maintain contact with their communities was far and away the most significant problem identified by these respondents. June 19, 2001 interview with Luciano Valle, Chile Socialist Party national secretary of Social Organization, Santiago, Chile. June 14, 2001 interview with Anastasio Castillo, grassroots community leader affiliated with the PDC, Huechuraba municipality, Santiago, Chile. Of course, the irony that did not occur to Mr. Galdames when making these statements is that it was key figures from his own party who under the military regime pressed for structural reforms that severely reduced state funding in education, health care, and other social programs upon which poor communities such as Conchali are so dependent. June 8, 2001 interview with Alfredo Galdames, national director of UDI’s project to build among pobladores and then chief of staff for UDI mayor Pilar Urrutia in Conchali municipality, Santiago, Chile. This is essentially the same fiscal arrangement that existed before the coup with similar negative repercussions for local government. However, in the pre-coup period intense party competition as well as substantial state involvement in the economy gave local communities some significant leverage in translating their demands into resources from the central government. Today, competition among center-left parties as well as state involvement in the economy have both declined, leaving local communities with significantly diminished capacity for extracting state resources to meet their needs. Chilean local government possesses the lowest borrowing autonomy among the eighteen countries evaluated by the Inter-American Development Bank (1997, 176). June 15, 2001 interview with author in Santiago, Chile. June 19, 2001 interview with author in Santiago, Chile. June 6, 2001 interview with author in Santiago, Chile.

Chapter Six Social Welfare Reform and Impediments to Social Cohesion and Collective Action 1. For explication of these arguments, see Friedman (1962, 1978). 2. See Valdés (1995) for an excellent history of the adoption neoliberal ideas in Chile. 3. According to Kay, overall payroll taxes have declined about 10 percent in Chile (2000, 190). 4. See Decreto Ley 3.500, Artículo 75; also see the Superintendencia de Administradoras de Fondos de Pensiones, http://www.safp.cl/inf_estadistica/ index.html.

212 / Notes 5. See Ley 18.469, Atrículos 29 and 30. 6. See Ley 19.966, Régimen General de Garantías en Salud, particularly Articulo 2. 7. It may promote the “bonding” among members of the same small groups who apply for grant support but in so doing undermines the development of “bridging” associations that are connected to other organizations or groups and to the larger community. To the extent that this occurs, it undermines the development of social capital within popular sector communities. For a discussion of bridging and bonding associations see Putnam (2000, 22). 8. Pinochet’s remarks in this regard were quite telling: “The regional intendants are, as the law establishes, representatives of the President of the Republic in the Regions and not as some have the tendency to believe, the representatives of the Regions before the President” (quoted in Pozo 1986, 8; author’s translation). 9. November 19, 1993 interview with sociologist Marcelo Monsalves. 10. Interview with author, June 8, 2001. 11. Author interview with Mauricio Esquivel Alcaide, RN representative, June 9, 2001. 12. Author’s interview with Carlos Ramirez, June 19, 2001, in Yungay población, the municipality of La Granja, Santiago, Chile. 13. These state corporations included the Corporación de Servicios Habitacionales (CORHABIT), the Corporación de Vivienda (CORVI), and the Corporación de Mejoramiento Urbano (CORMU) (MINVU 2004, 129–130). 14. These figures are taken from Castells (1983, 200) and Stallings (1978, 115). 15. For a detailed account of this history, see Castells 1983 and Espinoza 1988. 16. The supports and services provided by the government included programs dealing with preschool education, nutrition, housing subsidies, and health care (Vergara 1990). 17. The Ficha CAS stratified the indigent population into levels 1 through 5, with 1 being the most critical. Municipal governments determined the poverty level of a given family based upon such criteria as the characteristics of the family’s home (urban or rural location, sanitary facilities, form of cooking fuel used, etc.), the level of education of the head(s) of household, and so on. Only those families that fell into levels 1 through 3 were eligible for state subsidies. 18. This was the average annual figure between 1974 and 1989. By comparison, the average annual figure between 1960 and 1973 was over 92 percent. See Raczynski (1994, 38, 83). 19. See Saball (1994) for a description of the different subsidy options available and the different requirements pobladores must meet to be eligible for these various subsidies. 20. The military regime introduced the original survey instrument in 1980 (Ficha CAS-1) and updated it in 1987 (Ficha CAS-2). The government is presently in the process of implementing a third generation of the survey, the Ficha CAS Familia. For a discussion of the historical background and present functioning of Ficha CAS-2, see Ministerio de Planificación (http://www. mideplan.cl) as well as Vegara (1990, 52–55).

Notes / 213 21. October 25, 1993 interview with Soledad Araos, Communist Party militant and president of the neighborhood association in población La Victoria in the municipality of San Miguel, Santiago, Chile. 22. Interview with author, June 23, 2001, in the municipality of Huechuraba, Santiago, Chile. Comites de Allegados, roughly translated as Committees of Friends and Relatives, are groups established to compete for housing subsidies. Their name originates from the practice, common in Chile, given the housing shortage, of multiple families living together in one small dwelling or those with dwellings taking in friends who would otherwise be homeless. 23. Author’s interview with Carlos Ramirez, June 19, 2001, in the municipality of La Granja, Santiago, Chile. 24. January 9, 2006 interview with Maribel Zuñiga, head of the Department of Stratification, in the municipality of La Granja, Santiago, Chile. 25. January 5, 2006 interview with Alejandro Rojas, director of the Housing Department in the municipality of Huechuraba, Santiago, Chile. 26. January 6, 2006 interview with author in población La Pincoya, municipality of Huechuraba, Santiago, Chile. 27. Ibid. 28. Author interview with Yesna Salazar, resident of shantytown Yungay, January 13, 2006, in the municipality of La Granja, Santiago, Chile. 29. Ibid.

Chapter Seven Neoliberalism, Democracy, and the Transformation of State-Society Relations in Argentina 1. Within a few years after Argentina’s return to democracy, the rate of unionization among all Argentine wage earners ranged from 48 to 56 percent (Drake 1996, 176). In contrast, unionization rates in Chile a few years after its democratic transition in 1990 scarcely exceeded 10 percent (see table 3.1, chapter 3). 2. In his second term in office, Menem responded to the problem of increasing numbers of unemployed, poor Argentines by creating the Trabajar program. Trabajar, which was financed with World Bank loans, was a targeted assistance public works program, which at its peak covered about 20 percent of Argentina’s unemployed poor (Weitz-Shapiro 2006, 125). 3. The corruption charges in question related to attempts by the De la Rúa administration to bribe senators to vote in favor of its labor reform bill in 2000. Though public outrage over this corruption scandal helped to precipitate De la Rúa’s ouster from office in 2001, his efforts at securing passage of the labor reform bill were successful.

Chapter Eight Neoliberalism, Democracy, and the Transformation of State-Society Relations in Mexico 1. Promulgated in 1931 by the Mexican Congress, the LFT gives the federal government exclusive control over labor legislation. This control includes

214 / Notes authority to grant or deny legal registration to unions, to determine whether a union can engage in collective bargaining, and to judge the legality of strikes (Mayer 2006, 15–16). 2. Alina Rocha Menocal notes, for example, that in contrast with states dominated by the PRI, “in states where the PAN did well in 1997 and where gubernatorial elections were scheduled for 2000, a significantly smaller proportion of households became Progresa beneficiaries in 1999 (20.162) (Menocal 2001, 533).

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I n de x

Abascal, Carlos, 183–84 Acceso Universal de Garantías Explícitas (AUGE), 135–36 AD (Alianza Democrática), 74–75, 206n12 Administrators of Pension Funds (AFPs), 129–33, 169 AFORES (Retirement Fund Administrators), 186 Alessandri, Jorge, 45 Alessandri Palma (Arturo) government, 39–41, 43 Alfaro, Maria, 92, 114, 208n34, 210n25 Alfonsín (Raúl) government, 163–64, 169, 172–73 Alianza (Alliance for Jobs, Justice and Education), 174–75 Alianza Democrática (AD), 74–75, 206n12 Allamand, Andrés, 82 Allende, Carmen Gloria, 112–13, 210n17 Allende (Salvador) government, 8, 34; election in 1970 of, 45; failures of, 73–78; housing policies of, 11, 143, 145; impact of Frei’s Promoción Popular on, 103–4, 143–45; inflation during, 70, 206n8; local-level organizing by, 97–98; organized labor under, 63; overthrow in 1973 of, 8, 37, 46, 72; rate of private investment during, 45–46, 205n2(Ch. 3);

use of Decreto Ley 520 by, 45–46 Alliance for Jobs, Justice and Education (Alianza), 174–75 Almeyda, Clodomiro, 74, 76 Altamirano, Carlos, 74 antipoverty programs, 185, 187–89, 214n2 Araos, Soledad, 150, 213n22 Argentina, 14–15, 159–76, 199–200; Alfonsín government, 163–64, 169, 172–73; De la Rúa government, 174–75, 213n3; economic crises in, 172; Employee Share Ownership Program (ESOP), 166; human rights movement in, 172; Kirchner government, 175; Malvinas (Falkland) Islands war, 163; Menem government, 160, 164–69, 173–75, 199–200, 213n2; military regime of, 161–63; neoliberal reforms in, 160–68, 176; Obras Sociales, 165, 169, 170–71; organized labor in, 161–68, 172, 175–76, 213n1(Ch. 7); Partido Justicialista (PJ), 160–61, 164–66, 172–75, 199–200; Peronist organizations in, 161, 163–66, 170, 173; political party participation in, 171–75; social welfare reforms in, 168–71, 213n2; statist reforms in, 162;

232 / Index Argentina—continued stratification and inequality in, 168–71; wages and income in, 168 Arrate, Jorge, 76 Assies, Willem, 26 Aylwin, Patricio, 206n19 Aylwin (Patricio) government: establishment of FOSIS by, 138; “growth with equity” goal of, 52, 205n3(Ch. 3); housing policies of, 149; labor reforms of, 51, 52–54 bargaining groups (grupos negociadoras), 51, 53–54, 57–58 Bates, Robert H., 27–28 Bebbington, Anthony, 204n10 Benton, Lauren A., 203n5 binomial electoral system, 78, 79–83, 117 Boeninger, Edgardo, 205n3(Ch. 3) Bruhn, Kathleen, 188 Business Coordinating Council (CCE), 178–79 business sector, 37–38, 195, 200–1; benefits of pension reform for, 130, 211n4; historical overview of, 38–50; influence in Concertación governments, 50, 52, 62–63; labor policies of, 52, 55–57; mining industry, 38–39, 41; relationship with Pinochet’s regime of, 47–49; role in local government of, 118–19. See also neoliberal reforms Calvinism, 20 Cano, Gregorio, 88, 207n22 Cárdenas, Cuauhtémoc, 181–82, 188, 191 Cardoso, Fernando Henrique, 23–24 Cardoso, Ruth, 26 Carlin, Ryan, 84

Caroca, Vilma, 93, 208n37 CAS surveys. See Communal Social Action Committees (CAS) surveys Castells, Manuel, 99–100, 203n5, 208n2 Castillo, Anastasio, 118, 211n30 Castro, Fidel, 42 Cavallo, Domingo, 164–65 Cavarozzi, Marcelo, 203n1(Ch. 1) Central of Argentine Workers (CTA), 166 Centro para el Desarollo Económico y Social de América Latina (DESAL), 21–22 CESCO. See Communal Advisory Councils CGT (General Federation of Labor), 166 Chicago Boys. See neoliberal reforms Chile, as case study, 12, 203n8 Christian Democratic Party (PDC), 41–45; approach to marginal sectors of, 21–23, 204n2; commitment to consensus of, 65–66; housing policies of, 143–45; in local-level elections, 109–11, 112t, 209n13; local-level organizing program of, 97–98, 101–3; during military regime, 76, 78; new grassroots organizing efforts of, 120–21; during precoup period, 42–45, 97–98, 101–3, 143–45; public opinion of, 89–93; role in Concertación movement of, 82; support of market economy by, 50 civil society. See collective political participation Claro, Juan, 57 class factors: in dependency theory, 23; emergence of the middle class, 39, 205n1(Ch. 3); heterogeneity of, 7, 203n5;

Index / 233 historical overview of, 38; in new social movement (NSM) theory, 25–26; in theories of marginality, 23, 25–26. See also business sector; popular sectors CMHN (Mexican Council of Businessmen), 178–79 CODECOS. See Communal Social Development Councils COECE (Coordinating Committee for Commercial Export Business Organizations), 178–79 collective bargaining rights, 160, 175; in Argentina, 165, 168; in Chile, 56–58; in Mexico, 182–83 collective political participation, 1–5, 13, 17–35, 37–38, 159–61, 195–201; in Argentina’s human rights movement, 172; depoliticization of civil society, 98–99, 101, 105, 117–18, 196–97; of elites groups, 40, 50, 52, 77–78, 159–60, 195; interrelatedness with states of, 18–19, 32–35, 203n1(Ch. 2); in new social movement (NSM) theory, 25; political opportunity structure approach, 32–35; theories of marginality in, 17–32. See also linkage of popular sectors with political parties; local government; organized labor; popular sectors combative poblaciónes, 10 commodification of labor, 33, 37–38, 58–63, 195. See also social stratification and inequality Communal Advisory Councils (CESCO), 11, 111–13, 121, 196–97 Communal Social Action Committees (CAS) surveys, 146–47, 149–52, 212nn17–18

Communal Social Development Councils (CODECOS), 105, 111, 139 Communist Party (PC), 63; assassination attempt against Pinochet by, 75–76, 206n14; decline of, 77; exclusion from Concertación of, 82, 95; formation of the MDP, 74–75; in local-level elections, 110t, 209n13; local-level organizing program of, 97–98, 209n10; opposition to market-based economy of, 95; during pre-coup period, 101–3; public opinion of, 90 Concertación governments, 38, 196–201; acceptance of the Constitution of 1980 by, 108, 209n8; Aylwin government, 51–54, 138, 149, 205n3(Ch. 3); depoliticization of civil society under, 98–99, 101, 117–18, 196–97; electoral system under, 50, 52, 78–83, 98–99; exclusion of far-left parties from, 82, 95, 209n10; Frei Ruiz-Tagle government, 51, 54, 149; Fund for Solidarity and Social Investment (FOSIS), 124, 136–42, 156–57, 212n8; health care reform under, 133, 134, 135–36; labor reforms of, 50–62, 65, 205nn3–7(Ch. 3); Lagos government, 51, 54–62, 133, 135–36, 206n19; local government reforms of, 90, 108–20, 196–97, 207n27; pacted transition to, 67–70; public opinion of, 91–94; renovation of parties in, 70–78, 108, 117; repeal of designated senators by, 79, 206n19; response to popular sectors by, 65–66; role of elites

234 / Index Concertación governments—continued and business sectors in, 50, 52, 62–63, 77–78, 108, 196–97; social welfare service policies of, 124–25, 128–29, 139–41, 148–57; support of (neoliberal) market economy by, 50, 95, 119. See also local government Confederación de la Producción y el Comercio (CPC), 48–49, 51–55, 63 Confederación de Trabajadores Mexicanos (CTM), 181, 182, 184, 192 Confederación Patronal de la República Mexicana (COPARAMEX), 182–83 Confederación Revolucionaria de Obreros y Campesinos (CROC), 181 Confederation of Workers (CUT), 41, 43, 51–57, 63 confidence in public institutions, 83–94 Congreso del Trabajo (CT), 184 Congress (of Chile): designated senators, 50, 52, 78–80, 206n19; oligarchic control of, 40. See also electoral system Conservative Party, 42 Constitutional Organic Law on Popular Elections and Vote Counting (Law 18,700), 80 Constitution of 1980, 78–83, 206n18; acceptance by Concertación of, 108, 209n8; binomial electoral system, 78, 79–83, 117; designated senators, 78–80, 206n19; reforms of 2006, 79, 207n20 contract work, 58–63, 160 Cook, María Lorena, 167 Coordinating Committee for Commercial Export Business

Organizations (COECE), 178–79 COPARAMEX (Confederación Patronal de la República Mexicana), 182–83 COREDES (Regional Development Councils), 139 CORFO (Corporation of Production Promotion), 41 Cornelius, Wayne, 99–100 Corporation of Production Promotion (CORFO), 41 corporatist welfare regimes, 125–27 coup of 1973, 8, 37, 46, 72. See also military dictatorship; pre-coup period CPC. See Confederación de la Producción y el Comercio CROC (Confederación Revolucionaria de Obreros y Campesinos), 181 CT (Congreso del Trabajo), 184 CTM. See Confederación de Trabajadores Mexicanos (CTM) Cuban revolution, 42 CUT. See Confederation of Workers decentralization, 13, 104–5, 138–39, 212n9 Decreto Ley 520, 45 deindustrialization, 7–8, 203n4 De la Madrid (Miguel) government, 177–79, 187 De la Rúa (Fernando) government, 174–75, 213n3 democracy, 198; accountability and shared interests in, 5; contradictions of neoliberal reforms with, 5–7, 15, 18–19, 195–201; at local level, 13, 14, 99–101; pacted transitions to, 67–70; qualitative dimensions of, 3–4, 203n2; relationship to decentralization of, 13; strengthening reforms of, 2–5,

Index / 235 203n1(Ch. 1). See also Concertación governments; electoral system dependency theory, 23–25 depoliticization of civil society, 98–99, 101, 105, 117–18, 196–97 DESAL (Centro para el Desarollo Económico y Social de América Latina), 21–22 designated senators, 50, 52, 78–80, 206n19 development models: asynchronous development, 137–38; dependency theory, 23–25; import substitution industrialization (ISI), 4, 8, 13, 19–20, 28, 41, 195–96; modernization theory, 19–23, 29, 137, 151; new social movement (NSM) theory, 25–26; political economy theory, 27–28, 204n6; political opportunity structure approach to, 32–35; social capital theory, 28–32, 204nn7–8; statecentered models, 4–5, 33–34, 41–42; structuralist theory, 25 D’Hondt electoral systems, 209n12 Diamond, Larry Jay, 3–4, 197 dictatorship. See military dictatorship distributional coalitions, 27, 204n4 Dockendorf, Eduardo, 10 Duhalde, Eduardo, 175 Eckstein, Susan, 99–100 economic factors: crises and recessions, 7–8, 43, 47–49, 72, 101, 104, 203n4, 206n8; historical overview of, 38–39, 43–48; informal economy, 2, 7–8, 23–25, 203n5; local-level fiscal burden, 106–9, 118–20, 208–9nn5–6, 211nn33–34; of pacted transitions, 69; poverty, 1–2, 20; tax system, 119–20;

wages and income inequality, 24–25, 61–62, 168, 182. See also development models; neoliberal reforms Effects of the 66 Percent Clause, 81–82t electoralist parties, 100 Electoral Participation in Chile, 1988–2005, 85t electoral system, 196–98; binomial electoral system, 78, 79–83, 117; designated senators, 50, 52, 78–80, 206n19; electoral lists, 82; Ley 19.737, 111; local-level party pacts, 109–10, 112t, 209nn12–13; in Mexico, 191; modern campaign techniques, 70–71; 66 percent majority clause, 80, 81–82t; political party identification, 84–94, 117–18; popular dissatisfaction with, 66–67, 117–18, 197–98; voter participation, 83–84, 85t, 117–18, 198, 210n27 embeddedness of states, 18–19, 32–35, 203n1(Ch. 2) Employee Share Ownership Program (ESOP), 166 employers. See business sector ESOP (Employee Share Ownership Program), 166 Esping-Andersen, Gøsta, 125–26, 128, 156 Espinosa, Malva, 203n1(Ch. 1) Esquivel Alcaide, Mauricio, 141, 212n12 Estay, Juan Carlos, 88, 116, 207n21, 210n22 Evans, Peter B., 195, 203n1(Ch. 2) Faletto, Enzo, 23–24 Falkland Islands war, 163 Federal Labor Law (LFT), 183, 213n1(Ch. 8) Ferreiro, Alejandro, 135

236 / Index Ficha CAS, 147, 149–52, 212n18, 212n21 FONASA (National Health Fund), 134, 135 Fondo Comunal Municipal, 106 formal sector employment, 25, 189–90, 201, 205n7(Ch. 3) Fox, Jonathan, 31 Fox (Vicente) government, 183–84, 190, 199 Frank, Volker, 53 Frei Montalvo (Eduardo) government, 8; election in 1964 of, 22, 42; housing policies of, 11, 143–45; Operación Sitio, 144–45; Promoción Popular of, 97, 103, 143–45; reform agenda of, 42–45, 97, 103; social welfare program of, 22 Frei Ruiz-Tagle, Eduardo, 136, 206n19 Frei Ruiz-Tagle (Eduardo) government, 51, 54, 149 Frente Patriotico Manuel Rodriguez (FPMR), 75–76, 206n14 FREPASO (Peace and Solidarity Front), 174 Friedman, Milton, 123 Fukuyama, Francis, 204n7 functionalist social science, 20, 22, 29 Fund for Solidarity and Social Investment (FOSIS), 124, 136–42; decentralization of, 139–41; funding of, 138; hierarchical structure of, 138–39; popular sector participation in, 140–41; promotion of social stratification by, 136–37, 156–57, 212n8; public opinion of, 141 Gaete, Ateleo, 115–16, 210n21 Galdames, Alfredo, 118–19, 141, 211nn31–32

Garretón, Manuel Antonio, 203n1(Ch. 1), 205n6(Ch. 4) gender factors: in employment stability, 60; in health care reform, 134–35; in pension reform, 131–32 General Federation of Labor (CGT), 166 Germani, Gino, 21, 23, 29, 137 Gershman, John, 31 Goldrich, Daniel, 99–100 governments. See states grassroots. See shantytowns grupos negociadoras (bargaining groups), 51, 53–54, 57–58 Guerra, Sergio, 114, 210n18 Guzman, Jaime, 80, 119 Hayek, Friederich von, 5–6 health care reform, 133–36, 201; in Argentina, 165, 168–71; funding of, 134, 136; under Lagos government, 133; maternity benefits, 135; in Mexico, 184, 186–87; privatization under ISAPREs, 133, 156; public health insurance system (FONASA), 133, 134; social stratification in, 134–35 health insurance, 72 Heller, Patrick, 32 historical overview of Chile, 195–96; Alessandri Palma government, 39–41; Allende government, 45–46; coup of 1973, 8, 37, 46, 72; Frei Montalva government, 42–45; of housing policies, 143–45; of local-level participation, 97–108; of military dictatorship, 46–50; of pre-coup populist state, 38–46; presidential election of 1964, 22, 42; presidential election of 1970, 45. See also collective political

Index / 237 participation; Concertación governments; local government; military dictatorship; names of specific presidents, e.g. Allende; neoliberal reforms housing policy reforms, 11, 142–55; CAS and Ficha CAS surveys, 146–47, 149–52, 212nn17–18, 212n21; under Concertación governments, 148–55; funding of, 147–48, 212n19; land seizures, 144–45, 149; local administration of, 142–43; under military regime, 146–48, 212n19; minimal savings requirement, 152–53; Ministerio de Viviendas y Urbanismo (MINVU), 144, 149; during pre-coup era, 143–45, 212n14; privatization, 146, 147–48, 149; Social Housing Program (SHP), 148; stratification in, 142–43, 146–50, 153–54, 156–57, 212n18, 212n20; subsidized and group housing, 143, 154 Houtzager, Peter P., 99–100 Huechuraba municipality, 10–11 Huerta, Pedro, 92–93, 208n35 human rights abuses, 1 human rights movement in Argentina, 172 Huntington, Samuel, 20–21 Ibáñez del Campo (Carlos) government, 43 Ideological Self-placement in Chile—1990–2005, 87t ILO (International Labor Organization), 183 IMF (International Monetary Fund), 178–79 import substitution industrialization (ISI), 4, 8, 28, 41, 195–96; grassroots organizing under, 13;

initiation of, 19–20; in Mexico, 177 IMSS (Mexican Social Security Institute), 184–87 inequality. See social stratification and inequality informal sector employment, 2, 7–8, 23–25, 160, 201, 205n5(Ch. 3); in Argentina, 167–68; gender differences in, 131–32; housing in, 153–54; job security in, 60–61, 205n6(Ch. 3); in Mexico, 180, 182–83, 191–92; pension reforms in, 131–32, 170; relationship with the formal sector, 25; social welfare services in, 184; subcontracting in, 58–63, 160; wages in, 24–25. See also labor Institutions of Provisional Health (ISAPREs), 133–36 Inter-American Development Bank, 13 International Food Policy Research Institute, 189 International Labor Organization (ILO), 183 International Monetary Fund (IMF), 178–79 interrelatedness of states and civil society, 18–19, 32–35, 203n1 (Ch. 2) ISAPREs (Institutions of Provisional Health), 133–36 Itzigsohn, José, 99–100 job security, 58–61, 62t, 205n6(Ch. 3) juntas de vecinos (neighborhood associations), 103, 111–17, 121, 144, 196–97, 210nn23–24 Karl, Terry Lynn, 69 Kirchner (Nestor) government, 175 Krueger, Anne O., 4, 27–28

238 / Index Kulynych, Jessica, 204n11 Kumlin, Staffan, 31–32 Kurtz, Marcus J., 99–100 labor, 2, 34; adjudication of workers’ complaints, 57–58; under Alessandri Palma government, 40–41; bargaining groups (grupos negociadoras), 51, 53–54, 57–58; collective bargaining rights, 56–58, 160, 165, 168, 175, 182–83; commodification and stratification of, 33, 37–38, 58–63, 129–30, 199–200; contract work, 58–63, 160; formal sector employment, 25, 189–90, 201, 205n7(Ch. 3); under Frei Montalvo government, 42–43, 44t; historical overview of, 38–62; job security, 58–61, 62t, 205n6(Ch. 3); in maquiladora manufacturing, 180, 182, 192; in the mining industry, 39, 41; pension reforms, 129–33; political engagement of, 7, 37–38; rates of strike activity, 58, 59t; reforms of Concertación governments of, 50–62, 65; replacement workers, 55–57, 58, 205n4(Ch. 3); severance pay, 175; strikes, 57, 58; vulnerability to market forces of, 12; wages and income inequality, 24–25, 61–62, 168, 182; work week reductions, 55. See also informal sector employment; organized labor Labor Code (Código del Trabajo), 60 Laclau, Ernesto, 25–26 Lagos, Ricardo, 80 Lagos (Ricardo) government: health care reforms of (Plan AUGE), 133, 135–36; labor reforms of,

51, 54–62; repeal of designated senator provision, 206n19 La Granja municipality, 10–11 La Pincoya población, 10 La Pintana municipality, 107 Levitsky, Steven, 175 Lewis, Oscar, 20 LFT (Federal Labor Law), 183, 213n1(Ch. 8) Liberal Alliance, 39–40 Liberal Party, 42 linkage of popular sectors with political parties, 13, 14, 65–66, 83–94, 196–200; in Argentina, 171–76; in Chile’s pacted transition, 67–70; clientelistic and directive linkages, 71–73, 100–4, 205–6nn6–7; under Concertación, 90, 108–22, 207n27; disappearance of classbasis of, 95; in electoralist parties, 100; grassroots opinions of, 87–94; impediments to, 78–83, 98–101, 121; at the local level, 97–122; in Mexico, 190–93; during the military regime, 90, 97–98, 101, 104–8, 207n27, 208n2; participatory linkage, 100; party renovations, 15, 71–78, 108, 117, 173; political party identification, 84–94, 117–18; during the pre-coup period, 97–104; public knowledge and awareness, 84, 87; right-wing interpretations of, 90–91, 98–99; voter participation, 83–84, 85t, 117–18, 198, 210n27 local government, 13, 14, 97–122; Communal Advisory Councils (CESCO), 11, 111–13, 121, 196–97; Communal Social Development Councils (CODECOS), 105, 111, 139;

Index / 239 Concertación reforms of, 90, 108–20, 196–97, 207n27; democracy in, 99–101; election of mayors in, 110–11; electoral pact system of, 109–10, 112t, 209nn12–13; eradications program of, 107–8, 209n11; fiscal burden of, 106–9, 119–20, 208–9nn5–6, 211nn33–34; Frei Montalvo’s Promoción Popular, 97, 103, 143–45; impediments to participation in, 98–101, 121; juntas de vecinos, 103, 111–17, 121, 144, 196–97, 210nn23–24; military regime reforms of, 90, 97–98, 101, 104–8, 113–14, 207n27; during the pre-coup period, 97–104, 114, 208n2; social welfare services of, 105, 121–22, 135, 138–43, 146–48, 209n7; structure of, 113f; tax system, 119–20; UDI influence in, 91, 109, 110t, 112t, 118–20, 207n28, 211nn31–32; voter participation in, 117–18, 210n27 Lo Hermida población, 10 low-level mobilization poblaciónes, 10 Mainwaring, Scott, 95 Making Democracy Work (Putnam), 28–29 Manhattan Institute, 119 maquiladora manufacturing, 180, 182, 192 marginality theories: asynchronous development, 137–38; Christian Democrat party approach to, 21–23, 143–44; dependency paradigms, 23–25; modernization paradigms, 19–23, 137, 151; new social movement (NSM) paradigms, 25–26; political economy theory, 27–28, 204n6; political

opportunity structure approach, 32–35; social assistance approach, 21–22; social capital theory, 28–32, 204nn7–8; structuralist paradigms, 25 market-based reforms. See neoliberal reforms Marque, Clementina, 91, 208n30 Martínez, Arturo, 54, 57 MDP (Movimiento Democrático Popular), 71–75, 206nn12–13 Menem (Carlos) government, 160, 164–69, 173–75, 199–200, 213n2 Mexican Council of Businessmen (CMHN), 178–79 Mexican Social Security Institute (IMSS), 184–87 Mexico, 14–15, 177–94, 199; Abascal Plan, 183–84; antipoverty programs in, 185, 187–89, 214n2; De la Madrid government, 177–79, 187; democratization in, 190–93; economic crises of 1980s and 1990s, 178, 181; ejido system reforms in, 179; Fox government, 183–84, 190, 199; health care reforms in, 184, 186–87; infant mortality rate in, 187; influence of elites in, 177–79; informal sector employment in, 180, 182–83, 191–92; maquiladora manufacturing in, 180, 182, 192; neoliberal reforms in, 160, 177–79; organized labor in, 161, 179–84, 192–93, 213n1(Ch. 8); participation in NAFTA of, 179–82, 191; Partido Acción Nacional (PAN), 183–84, 189, 190, 192–93, 214n2; Partido Revolucionario Democrático (PRD), 181–82, 191–93; Partido Revolucionario Institucional

240 / Index Mexico—Continued (PRI), 160–61, 177–82, 190–93; pension reform in, 184, 185–86; political competition in, 200; political party participation in, 190–93; Salinas government, 178–79, 181–82, 185, 188, 191; social stratification and inequality in, 184–90; social welfare reforms in, 184–90; World Bank lending in, 31; Zapatista National Liberation Army (EZLN), 191, 193; Zedillo government, 179, 182, 184–87, 191 Meza, Gonzalo, 89–90 MIDEPLAN (Planning Ministry), 138, 139–40, 141 Migdal, Joel S., 195, 203n1(Ch. 2) military dictatorship, 18–19, 46–50, 196; apolitical democracy policy of, 104–5, 123–24; Constitution of 1980, 78–83, 206n18; coup of 1973, 8, 37, 46, 72; decentralization goal of, 104–5, 138–39, 212n9; depoliticization of civil society under, 98–99, 101, 105; economic crisis of 1982–83, 47–49; electoral Laws 18,700 and 18,799, 80; eradications program of, 107–8, 209n11; housing policies of, 11; impact on political parties of, 66–67; labor reforms of, 51–52, 60, 72, 73; local-level reforms of, 90, 97–98, 101, 104–8, 113–14, 207n27; neoliberal restructuring by, 13–14, 34–35, 46–47, 72; opposition to, 65–78, 108, 117; organized labor under, 47, 49–50; Plan Laboral of, 51, 56, 58, 73; regional government reforms of, 138–39; repressive policies of, 8, 37–38, 49, 72, 97–98; role of business sector in, 47–49; state of

siege under, 75–76; transition to electoral politics of, 49, 67–70, 78. See also neoliberal reforms; social welfare services mining industry, 38–39, 41 Ministerio de Viviendas y Urbanismo (MINVU), 144, 149 MIR (Movimiento Izquierda Revolucionario), 74–75, 206n11 modernization theory, 19–23, 29, 137, 151 Mohan, Giles, 30–31 Molina, Jorge, 115, 210n20 Monsalves, Marcelo, 141, 212n10 Morlino, Leonardo, 3–4, 197 Mouffe, Chantal, 25–26 Movimiento Democrático Popular (MDP), 71–75, 206nn12–13 Movimiento Izquierda Revolucionario (MIR), 74–75, 206n11 Municipal Election Results, 1996–2004, 110t municipal government. See local government municipalization. See local government Musa, Anibal, 92, 208n33 NAFTA (North American Free Trade Agreement), 179–82, 191 National Council for Popular Promotion, 22 National Health Fund (FONASA), 134, 135 National Security Council of Chile, 78 National Social Security Workers Union (SNTSS), 187 National Solidarity Program (PRONASOL), 185, 188–90 National Union of Workers (UNT), 192 neighborhood associations. See juntas de vecinos neoliberal reforms, 2, 13–15, 18–19, 46–47, 72, 159–61, 195–201;

Index / 241 apolitical states in, 104–5, 123–24, 195; in Argentina, 160–68; broad-based acceptance of, 95; Concertación’s support of, 50, 95, 119; contradictions with democracy of, 5–7, 15, 195–201; depoliticization of civil society under, 98–99, 101, 105, 117–18, 196–97; liberal welfare regimes of, 125–26, 156; limitations on government intervention in, 27–28; manufacturing and export focus of, 47–49; market value of social capital in, 30–31, 204nn10–11; in Mexico, 160, 177–79; in political opportunity structure approach, 33–35; social stratification and inequality in, 1–3, 123–25, 196–201; the Washington Consensus, 25, 28, 201. See also labor; Mexico; social welfare services new social movements (NSMs), 17, 25–26 noncapitalist economy. See informal sector employment North American Free Trade Agreement (NAFTA), 179–82, 191 Nun, José, 23 Obras Sociales, 165, 169, 170–71 O’Donnell, Guillermo, 3, 68 Olson, Mancur, 4, 204n4 Operación Sitio, 144–45 opposition to the military dictatorship, 65–78; elitist nature of, 77–78, 108; emergence of the PPD, 77–78; mass mobilizations, 108; pacted transitions, 67–70; renovations of center and left-wing parties, 71–78, 108, 117. See also Concertación governments organized labor, 7–8, 34–35; in Argentina, 161–68, 172, 175–76,

213n1(Ch. 7); craft unions, 41; decline of, 50–52, 58, 62–63, 161, 166–67, 172, 180–82, 213n1(Ch. 7); directive linkage approach of, 100; growth under Frei Montalvo of, 43; in Mexico, 161, 179–84, 192–93; plant unions, 40–41; in political opportunity structure approach, 33–34; political party ties of, 15, 41–42, 160–61; rates of unionization, 1952–2004, 44t; repression of, 24, 37–38, 47, 49–50, 72, 73, 101, 162–63; work stoppage (paro) of 2003, 57. See also labor Oyarce, Raúl, 152 Oyarce, Viviana, 93, 208n37 pacted transitions, 67–71 Palma, Anibal, 88–89 Partido Acción Nacional (PAN), 183–84, 189, 190, 192–93, 214n2 Partido Comunista (PC). See Communist Party Partido Justicialista (PJ), 160–61, 164–66, 172–75, 199–200 Partido Por Democracia (PPD). See Party for Democracy Partido Radical Socialdemócrata (PRSD), 109, 110t, 112t, 209n13 Partido Revolucionario Democrático (PRD), 181–82, 191–93 Partido Revolucionario Institucional (PRI), 160–61, 177–82, 190–93 Partido Socialista (PS). See Socialist Party Party for Democracy (PPD), 9, 77–78; commitment to consensus of, 66; lack of grassroots organizing of, 121; in local-level elections, 109, 110t, 112t, 209n13; public opinion of, 89–93 Patroni, Viviana, 182

242 / Index PC (Partido Comunista). See Communist Party PDC (Partido Demócrata Cristiano). See Christian Democratic Party Peace and Solidarity Front (FREPASO), 174 Peña, Oscar, 207n26 Peñalolen municipality, 10–11 pension reform, 129–33, 201; in Argentina, 169–70; benefits for business sector of, 130; costs to the state of, 132; in Mexico, 184, 185–86; privatization under AFPs of, 129–30, 156, 169; stratification of workers under, 129–30, 131–32, 170; uncovered workers in, 131–32 Percentage of Workers without Contracts, 62t Pérez, Julio, 120 Peronist organizations, 161, 163–66, 170, 173 Perón (Juan) government, 169 Piñera, José, 48 Pinochet, Augusto: appointment of senators by, 79; assassination attempt against, 75–76; decentralization goals of, 212n9; defeat in 1988 plebiscite of, 80, 108. See also military dictatorship PJ (Partido Justicialista). See Partido Justicialista Plan AUGE (Acceso Universal de Garantías Explícitas), 135–36 Plan Laboral, 51, 56, 58, 73 Planning Ministry (MIDEPLAN), 138, 139, 141 poblaciónes. See shantytowns political economy theory, 27–28, 204n6 political opportunity structure, 32–35 political participation. See collective political participation

political parties, 13, 14, 34, 196–98; in Argentina, 171–75; clientelistic and directive roles of, 71–72, 100–4, 118, 172, 175, 192–93, 200, 205–6nn6–7; commitment to consensus of, 65–66; competition among, 200; electoralist parties, 100; facilitation of local participation by, 100–1; institutional stability of, 65–66, 205n1(Ch. 4); marginalization of leftist parties, 2, 82, 95, 209n10; in Mexico, 190–93; in political opportunity structure approach, 33–34; public dissatisfaction with, 66–67, 196–98; public identification and participation in, 63, 83–94, 117–18; response to military dictatorship of, 66, 71–78, 108, 117; role in social welfare reforms of, 132–33; ties with organized labor of, 15, 41–42, 160–61; transformations and renovations of, 15, 71–78, 108, 117, 173. See also linkage of popular sectors with political parties; names of specific parties, e.g. Christian Democratic Party Political Parties’ Methods of Selecting Candidates for Municipal Elections, 112t Political Party Identification in Chile, 1991–2005, 86t Popular Front alliance, 41 popular sectors, 13, 14, 65–66; analysis of engagement of, 7–9, 12–14; connections with Concertación governments of, 65–66; local level participation by, 99–101; loss of public participation in elections, 83–94. See also collective political participation; linkage of popular

Index / 243 sectors with political parties; local government Popular Unity government. See Allende (Salvador) government Portes, Alejandro, 24, 99–100, 203n5 PPD (Partido Por Democracia). See Party for Democracy PRD (Partido Revolucionario Democrático), 181–82, 191–93 pre-coup period, 38–46; Alessandri Palma government, 39–41; Allende government, 45–46; Frei Montalvo government, 42–45; popular participation during, 97–104, 114, 208n2; social welfare services during, 127–28, 143–45, 147 presidential appointments of senators, 78–79 PRI. See Partido Revolucionario Institucional privatization. See neoliberal reforms Providencia municipality, 107 Program for Education, Health, and Nutrition (PROGRESA), 185, 188–90 Promoción Popular, 97, 103, 143–45 PRONASOL (National Solidarity Program), 185, 188–90 The Protestant Ethic and the Spirit of Capitalism (Weber), 20 PRSD. See Partido Radical Socialdemócrata Przeworski, Adam, 2–3 PS-Almeyda, 74–78 PS (Partido Socialista). See Socialist Party public opinion, 196–98; of Christian Democratic Party (PDC), 89–93; of the Communist Party (PC), 90; of Concertación, 91–94; of FOSIS, 141; of local participation, 118–19, 210n28; of the Party for Democracy (PPD),

89–93; of political participation, 83–94; of the Socialist Party (PS), 88–89 Putnam, Robert, 28–29, 204n6 qualitative dimensions of democracy, 3–4, 203n2 Quijano, Anibal, 23 Radical Party, 42, 103 Ramirez, Carlos, 91, 141, 150, 207n29, 212n13, 213n24 Rate of Collective Bargaining— 1990–2004, 56t Rates of Strike Activity, 1959–2004, 58, 59t Rates of Unionization, 1952–2004, 44t Recabarren, Emilio, 38–39 redemocratization. See Concertación governments Regional Development Councils (COREDES), 139 Regional Ministerial Secretariats (SEREMI), 146 Regional Service of Housing and Urbanization (SERVIU), 146, 153 Renovación Nacional (RN), 9, 82, 90–91; grassroots organizing by, 91, 207n28; in local-level elections, 109, 110t, 112t, 209n13 Renovated Socialists, 76–77 rent seeking, 27, 204n4 replacement workers, 55–57, 58, 205n4(Ch. 3) research design: analysis of popular sector engagement, 7–9; choice of communities, 10–11; interviews with grassroots community leaders, 9–10, 92, 208nn31–32; interviews with party leaders, 9 Retirement Fund Administrators (AFORES), 186

244 / Index Reyes, Juan, 121 Riesco, Manuel, 131 RN. See Renovación Nacional Roberts, Kenneth M., 198 Robles, Juan, 112, 210n16 Rodriguez, Carlos, 114 Rojas, Alejandro, 151, 213n26 Rothstein, Bo, 31–32 Sabina (La Pincoya leader), 150 Salazar, Yesna, 116–17, 153–54, 210n26, 213nn29–30 Salinas (Carlos) government, 178–79, 181–82, 185, 188, 191 Schamis, Hector E., 4 Schmitter, Philippe C., 68 Schneider, Cathy, 10 senators. See designated senators SEREMI (Regional Ministerial Secretariats), 146 Service of Technical Cooperation (SERCOTEC), 141 SERVIU (Regional Service of Housing and Urbanization), 146, 153 severance pay, 175 shantytowns: analysis of political engagement in, 7–9; grassroots organizations in, 107–8; heterogeneous composition of, 7; housing distribution in, 11; housing reform in, 149–52; military regime eradications program in, 107–8, 209n11; opposition to military regime in, 8, 97–98, 108; political party linkage in, 87–94, 102; rightwing organizing in, 91, 207n28; Schneider’s categorization of, 10. See also local government 66 percent majority clause, 80, 81–82t Skocpol, Theda, 32–33, 195 Slater, David, 26 Smith, Stephen Samuel, 204n11

SNTSS (National Social Security Workers Union), 187 social capital theory, 28–32, 204n11; Fukuyama’s culturalist view of, 204n7; Putnam’s approach to, 28–29; World Bank’s approach to, 29–31, 204n8, 204n10 social concertation, 50. See also Concertación governments social democratic welfare regimes, 125–26 Social Housing Program (SHP), 148 Socialist Party (PS): Almeyda faction of, 74–78; commitment to consensus of, 65–66; grassroots organizing by, 118; local-level activities of, 97–98, 109, 110t, 112t, 209n13; new grassroots organizing efforts of, 120–21; pre-coup activities of, 101–3; public opinion of, 88–89; renovated socialist party, 76–77, 95, 206n16; role in Concertación of, 82; role of elites in, 77; support of market economy by, 50, 63 social security system, 72 social stratification and inequality, 1–5, 12–14, 125–26, 134–37, 196–201; in Argentina, 168–71; depoliticization of civil society, 98–99, 101, 105, 117–18, 196–97; income inequality, 61–62; of labor, 33, 37–38, 58–63, 129–30, 200; means testing, 2; in Mexico, 184–90; promotion by FOSIS of, 136–37, 156–57, 212n8; through health care policies, 134–35; through housing policies, 142–43, 146–50, 153–54, 156–57, 212n18, 212n20; through pension policies, 129–30, 170.

Index / 245 See also informal sector employment social welfare services, 8, 14, 34, 123–59; antipoverty programs, 185, 187–89, 214n2; in Argentina, 168–71, 213n2; of Concertación, 124–25, 128–29, 139–41, 148–57; decentralization and privatization of, 72–73, 105, 121–22, 127–28, 135, 138–41, 146–48, 154–55, 209n7; decommodification and access in, 125–26; Esping-Andersen’s model of regime types, 125–26, 128, 156; Fund for Solidarity and Social Investment (FOSIS), 124, 136–42, 156–57, 212n8; funding of, 132, 134, 136, 138; health care reforms, 133–36; housing policies, 142–55; liberal welfare regimes, 125–26, 156; in Mexico, 184–90; under military dictatorship, 2, 11–14, 31–32, 47, 105, 121–24, 142, 154–55, 208nn4–5; pension reform, 129–33; during the pre-coup era, 127–28, 143–45, 147; under statist development, 33–34; universal approaches to, 32. See also social stratification and inequality Socieded de Fomento Fabril (SOFAFA), 51 Solari, Ricardo, 55 Solidarity (PRONASOL). See National Solidarity Program Solt, Fred, 204n6 sporadically mobilized poblaciónes, 10 State Housing Fund (INFONAVIT), 185–86 state interventionist development models, 4 states: development of social capital in, 28–32; government corruption

in, 1; interrelatedness with civil society of, 18–19, 32–35, 203n1(Ch. 2); in neoliberal reform models, 27–32, 104–5, 123–24, 195; political opportunity structure approach, 32–35; repression of labor by, 24–25; state-centered development models, 4–5, 33–34, 41–42. See also names of specific states, e.g. Chile; neoliberal reforms Stokke, Kristian, 30–31 stratification and inequality. See social stratification and inequality Strike activity, 1959–2004, 58, 59t structuralist theory, 25 structural reforms, 2–3, 203n1(Ch. 1) Structure of Local Government in Chile, 113f Subsecretary of Regional and Administrative Development (SUBDERE), 138–39 Supreme Court appointment of senators, 78 Tarrow, Sidney, 29, 204n6 tax system, 119–20, 211n33 Teichman, Judith A., 4 Tilly, Charles, 32–33 Tomic, Rodomiro, 45 Torcal, Mariano, 95 traditional economy. See informal sector employment transaction mode of transition, 69 UCR (Unión Cívica Radical), 163–64, 172–74 UDI. See Unión Democrática Independiente Unidad Popular. See Allende (Salvador) government Unión Cívica Radical (UCR), 163–64, 172–74

246 / Index Unión Democrática Independiente (UDI), 90–91; grassroots organizing by, 91, 207n28; local influence of, 109, 110t, 112t, 118–20, 209n13, 211nn31–32; private sector access of, 119 unions. See organized labor UNT (National Union of Workers), 192 urban shantytowns. See shantytowns Urrutia, Pilar, 118–19, 211n32

Weber, Max, 20, 29 welfare reforms. See social welfare services Williamson, John, 27–28 workers. See labor World Bank, 13; approach to social capital of, 29–31, 137, 204n7, 204n10; liberalization projects in Argentina of, 171, 213n2; liberalization projects in Mexico of, 178–79

Valenzuela, Arturo, 205–6nn6–7 Valle, Luciano, 118, 120–21, 211n29 Vekemans, Roger, 21–22 voter participation, 83–84, 85t, 117–18, 198, 210n27

Yungay población, 10

Walton, John, 24 the Washington Consensus, 25, 28, 201

Zapatista National Liberation Army (EZLN), 191, 193 Zedillo (Ernesto) government, 179, 182, 184–87, 191 Zuñiga, Maribel, 93, 150–51, 208n36, 213n25

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