Capitalist Regime Loyalties and Redemocratization in Chile

Capitalist Regime Loyalties and Redemocratization in ChileAuthor(s): Eduardo SilvaSource: Journal of Interamerican Studies and World Affairs, Vol. 34, No. 4 (Winter, 1992-1993), pp. 77-117Published by: Center for Latin American Studies at the University of MiamiStable URL: http://www.jstor.org/stable/165807 .

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Capitalist Regime Loyalties and Redemocratization

in Chile Eduardo Silva*

CHILE IS OFTEN portrayed as an exceptional case among recent transitions from authoritarian rule for a number of

reasons. It was the last of the "bureaucratic authoritarian" regimes to democratize; the transition followed the timetable and conditions set by the military more closely than in Argentina and

Uruguay; the prognosis for economic and political stability seems

optimistic relative to the rest of the region. An important reason for Chilean exceptionality was the fact that, unlike in other cases, Chile's business and landowning elites supported the military government to the end. Why did they do so?

Most studies frame the question of Chilean upper class

loyalty to General Augusto Pinochet in the following manner. In other countries, economic elites became ambivalent about authoritarianism (or even turned against it) for three main reasons. They were (1) shut out of the policymaking process, (2) buffeted by economic restructuring, and (3) hurt by economic crisis associated with structural adjustment. Although

Eduardo Silva is Assistant Professor of Political Science and a Fellow at the Center for International Studies at the University of Missouri-St. Louis. He is co-editor (with Paul W. Drake) of ELECTIONS AND DEMOCRATIZA- TION IN LATIN AMERICA (San Diego: Institute of the Americas, 1986) and author of scholarly articles on the politics of economic change in Chile. His current research interests include social equity in Latin American democracies and the political economy of rainforest conservation and sustainlable development.

'Research for this article was supported by grants from Fulbright-Hays, the Social Science Research Council, and the University of Missouri-St. Louis. I am debted to Paul Drake, William C. Smith, Catherine Conaghan and the anonymous reviewers of the JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS for their commentary on earlier drafts. I alone, of course, am responsible for the contents of this article.









































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78 JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS 78 JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS 78 JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS 78 JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS 78 JOURNAL OF INTERAMERICAN STUDIES AND WORLD AFFAIRS

the Chilean bourgeoisie also suffered from the same problems, studies of Chile's upper class conclude that they feared resurgent socialism more than Pinochet's imposition of economic change.

This article argues that although fear of resurgent socialism was indeed a matter of concern, this view takes the upper classes' rhetoric too much at face value. More important was the fact that, in 1983, Chile's business and landowning groups forged a cohesive alliance - the pragmatic neoliberal coalition - around a specific set of policy proposals, and that Pinochet responded favorably to its demands. By the same token, the threat from below was considerably weaker than touted, especially after the transformation - or renovation - of the Left.

The success of the pragmatic coalition carried three important consequences for Chile's transition from authoritarianism between 1983 and 1988. First, the inclusion of all major capitalist groups in the economic policy coalition, their exclusive access to the policymaking process, and policy concessions on the part of the military government worked to cement the relationship between the capitalists and Pinochet for the plebiscite of 1988. As a result, no capitalist or landowning group was available for alliance with the main opposition group seeking an end to Pinochet's dictatorship: Alianza Democratzca (AD).

Second, the absence of a multi-class movement for political democratization that included important capitalist and landowning groups significantly influenced the process of Chile's shift from an authoritarian to a democratic form of government.' It made it possible for the military government to adhere to the timetable and conditions for political liberalization set forth in the 1980 Constitution.2 Moreover, the institutional conditions that ensured a "protected" democracy - one in which the military retained veto power over civilian authorities, and that built in a conservative bias to economic policymaking - remained intact (Loveman, 1991).

The success of the pragmatic coalition and the failure of the AD to win over business elites had a third consequence.























SILVA: CAPITALIST REGIME LOYALTIES IN CHILE SILVA: CAPITALIST REGIME LOYALTIES IN CHILE SILVA: CAPITALIST REGIME LOYALTIES IN CHILE SILVA: CAPITALIST REGIME LOYALTIES IN CHILE SILVA: CAPITALIST REGIME LOYALTIES IN CHILE

Between 1985 and 1988, in its efforts to allay capitalist fears of democratization, the Alianza Democrcatca - which was dominated by Christian Democrats and included the reformed Left- continued to moderate its economic policy platform. As the plebiscite drew nearer, it became increasingly apparent that capitalists' rejection of AD had more to do with their aversion to even mild social democratic reform than to any real fear of revolutionary socialism. This suggests that when AD failed to draw capitalists into an explicit political coalition to change the regime, it joined them in an implicit conservative economic compact to assure democratization. In other words, AD committed itself to the economic model of the pragmatic neoliberal coalition in exchange for acquiescence to political change on the part of capitalists and landowners.

Within the context of Chile's new political institutions, this compromise favors the economic interests of conservative forces. Their interests are further strengthened by the fact that the compromise encouraged collaboration between government and the private sector in economic and social policymaking during Patricio Aylwin's administration. As a result of these developments, reformers will find it difficult to formulate and pass policies designed to address the issue of social equity in Chile. For, although the Right agreed that a little more attention to equity was desirable, its stance on taxation and labor laws makes it difficult to enact substantive welfare policies, or to allow blue-collar workers to benefit from the fruits of increased productivity.

BUSINESSMEN AND LANDOWNERS IN TRANSITIONS FROM AUTHORITARIANISM IN LATIN AMERICA

A SIGNIFICANT body of writing suggests that political change - especially reforms such as political liberaliza-

tion and democratization - often begins with splits at the top (Skocpol, 1979; O'Donnell and Schmitter, 1986; Mosca, 1938). Under what circumstances do cleavages among the elites turn





















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into conflict? The literature on authoritarianism argues that the inclusion or exclusion of significant large-scale business and landowning groups in dominant economic-policy coalitions colors their support for such regimes (Chalmers and Robinson, 1982; O'Donnell, 1979). Where they are included in the policy coalition, have access to the policymaking process and can defend themselves against measures that threaten their funda- mental interests - property and profits - upper-class elites remain loyal to a regime.

Put another way, for businessmen and landowners, these factors provide a measure of the reliability of an authoritarian regime (Kaufman, 1986; Frieden, 1989). This means that when the opposite holds true, a regime is unreliable, and excluded capitalist and landowning groups may turn against it. Dis- gruntled members of the upper class may prefer a more democratic form of government because such regimes offer more points of access and influence in policymaking (Chalmers and Robinson, 1982). They also encourage more open and diverse sources of information, which is often crucial to decision-making in business.

Nevertheless, the regime loyalties of capitalists and landowners also depend on economic performance (Frieden, 1989; Chalmers and Robinson, 1982). Upper-class groups shut out of policymaking may not oppose an authoritarian regime during good economic times; but during prolonged, deep economic downturns, they may well cast about for alternatives. However, whether or not they do so may hinge on the character of emerging political party systems (Kaufman, 1986, Frieden, 1989, Epstein, 1984). Capitalists are more likely to support political liberalization and democratization when Leftist, socialist, and populist political parties are weak.

A considerable empirical literature supports such views. Research on Ecuador, Peru, Bolivia, and the Dominican Republic showed that business elites supported a shift from authoritarianism to more democratic rule because they believed they would have greater access to the economic policymaking process under conditions in which the perceived




















threat from below was low (Conaghan, Malloy and Abugattas, 1990; Conaghan and Espinal, 1990). Similar evidence exists for the cases of Argentina, Brazil, Mexico, and Venezuela (Smith, 1989; Cardoso, 1986; Maxfield, 1989; Millan, 1988, Frieden, 1991). Capitalists turned to democracy due to varying combi- nations of the following factors: their exclusion from economic policymaking, poor economic performance under authoritarianism, and low salience of the threat from below.

This brings the discussion back to the issue of Chilean exceptionality. Most studies argue that Chilean large-scale businessmen and landowners chafed under the same unfavorable conditions as their peers elsewhere in Latin America: they were excluded from economic policymaking and suffered deeply during severe economic crises. Nevertheless, they continued to support Pinochet because they feared resurgent socialism in the wake of the 1983-84 economic debacle. In other words, according to these studies, the main difference between Chile and the other cases lay in the degree of threat from below.

This article argues that the crucial differences between Chile and the other Latin American cases lay elsewhere. Chilean capitalists supported Pinochet because they were included, rather than excluded, from economic policymaking under conditions in which the threat from below was far from overwhelming, especially after the taming of the Left. More- over, the Chilean bourgeoisie accepted Pinochet's defeat in the October 1988 plebiscite because the opposition had committed itself to retain their economic model, because the economy had continued to grow from 1985 onwards, and because the constitution ensured protection of their privileges.3

BUSINESSMEN, LANDOWNERS, PRAGMATIC NEOLIBERALISM AND MASS MOBILIZATION: 1983-85

THE CHILEAN military government was at its weakest during the economic crisis of 1983-85. It faced both an entrepre-

neurial revolt against extreme free-market policies and mass

























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mobilization demanding democratization. During this crucial period, the opposition tried to wrest control of the pace and nature of political change away from Pinochet, but it failed in that attempt due its inability to forge a cross-class coalition which included the disaffected capitalists. To build such an alliance, the opposition would have had to convert that conflict over economic policy between the business/ landowning sector and the regime into support for rapid democratization. However, Pinochet managed to regain the undivided loyalty of the bourgeoisie, thereby foiling his political opposition. To point out just how this transpired, the following sections will outline the military regime's economic and political project; the economic policy differences between capitalists and the regime; how the opposition tried to capitalize on these differences, and what Pinochet did to recover the situation.

Backdrop to Crisis

Between 1973 and 1977, after the overthrow of Salvador Allende and the demobilization of society, Chile's military government developed two goals for its economic and political agenda. It wanted to replace democratic politics with authoritarian rule and economic policies that gave a central role to the state with ones based on the free-market.4 To that end, Pinochet consolidated the state under one-man rule and sponsored a cadre of neoliberal technocrats - the so-called "Chicago boys," in reference to the fact that many of them had studied neoclassical economics at the University of Chicago - to design and implement extreme laissez-faire economic policies (Constable and Valenzuela, 1991; Valdes, 1989; Edwards and Cox-Edwards, 1987; Silva, 1993).

Pinochet insulated the Chicago boys from the pressure of those groups in society that protested his economic restructuring, including businessmen and landowners (Campero, 1984). It should be recognized, however, that those policies garnered considerable support from a limited number of conglomerates


Backdrop to Crisis




Backdrop to Crisis




Backdrop to Crisis




Backdrop to Crisis






that expanded rapidly under the new economic policies. Those conglomerates concentrated their assets in the very economic sectors favored by economic restructuring: nontraditional exports, imported consumer goods, and foreign loan interme- diation (Dahse, 1979; Sanfuentes, 1984). Between 1977 and 1981 the Chilean economy boomed, so that, by 1979, the peak associations made up of big businessmen and landowners were solidly behind the Pinochet economic and political model.

In 1980, at the height of the economic boom, the military government legalized its project for political change by initiat- ing, and ratifying, a new constitution. According to the government, the Constitution of 1980 was approved by 67% of the voters. However, the plebiscite on the constitution was noncompetitive and offered no safeguards for the opposition. The new constitution extended Pinochet's authority to the year 1988, at which time another noncompetitive plebiscite would be held to determine whether he would continue in office until at least 1997. Permanent articles of the constitution were designed to ensure a "protected" democracy, one in which the military would continue to exercise a tutelary role over civilian governments in the future through a National Security Council (Drake andJaksic, 1991; Loveman, 1991).

The early successes, and resulting euphoria, of the Pinochet regime came to an abrupt end with collapse of the domestic economy in 1982-83. Faith in the military regime's acumen was shattered, and support for its policies dwindled; between 1983 and 1985 confidence in the government reached its lowest point. The conglomerates, which had formed the core of the government's support, disintegrated; entrepreneurial groups rejected the ultra-neoliberalism they had formerly embraced as they sought relief from ruin; and the middle and lower classes (who had suffered most under the extremities of laissez-faire) joined with resurgent parties in the political opposition to swell a mass mobilization movement that chal- lenged Pinochet's rule.













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Businessmen, the Opposition and Pinochet: 1983

Prior to 1983, Pinochet had been a firm supporter of radical, neoliberal economic policies.5 His government im- posed, and clung to, low real exchange rates (indeed, a fixed rate between 1979-82), high interest rates, low customs tariffs (10%) across the board with little non-tariff protection, defla- tionary monetary policies, and a general disinterest in either government-sponsored debt relief or sectoral policies.6 In addition, the formulation of economic policy pointedly excluded any input from business organizations or their peak associations.

During the boom years, firms and individuals could - and did - borrow extensively for purposes of investment, consumption, and navigating financial difficulties. In 1982, however, the flood of foreign lending began to dry up, and economic hard times set in with a vengeance. The peak business associations had to learn how to respond to debt- induced bankruptcies, lack of credit (due to restrictive monetary policies), stiff competition from imports, and an overval- ued currency that hampered exports. By mid-1983, Chile's associations of big business and big landowners had formed a coalition sponsoring an alternative program for recovery based on an explicitly "pragmatic" neoliberal economic policy. The coalition was still sufficiently neoliberal to prefer market mechanisms to regulation by the state, but it was also sufficiently pragmatic to recognize that it was time for the state to assume a larger role in managing the economy than had been the case up til then.

The coalition in favor of a pragmatic neoliberal policy emerged as the result of negotiations on the part of Chile's six major peak business associations. These negotiations took place under the aegis of the Confederation of Production and Commerce (CPC), an umbrella organization of the six, which published its plan for economic recovery, entitled "Recuperaci6n econ6mica: Analisisyproposiciones, "in July 1983. The report called for a number of measures to deal with the crisis: (1) high real exchange rates to stimulate exports and protect against




















imports, (2) higher across-the-board tariffs with protection against unfair competition, (3) a reflationary monetary policy, (4) low interest rates, (5) debt relief, and (6) policies that targeted specific sectors (such as export promotion, construction projects, agricultural development, and so on). The CPC and its affiliates also demanded not only that they be included in the policymaking process but that such a role for input from the private sector be institutionalized. Pinochet largely ignored these pleas for help from an increasingly desperate business community (Silva, 1991).

As the business community stepped up its criticism of the government's economic policy, the working and middle classes, also suffering from the recession, were becoming increasingly restive as well. In May 1983, their resentment erupted into a national day of protest, initiated and directed by the copper workers union but far surpassing their wildest expectations. The massive demonstration gave graphic indication of the depth of public unrest and opposition to Pinochet and shook the regime to its core.

A coalition of parties from the Center and Center-Left, dominated by the Christian Democrats, quickly took control of the principal opposition movement - Alianza Democratica (AD) - and began staging monthly protests (Garreton, 1989 and 1987). The goal of the Alianza was to turn the 1980 Constitution's limited political liberalization into full-fledged democratization. AD demanded free, competitive elections with full citizen participation and civil guarantees by 1985. That meant stripping Pinochet of his power, abrogating the per- petual state of emergency, rescinding the restrictions on political party activity, allowing exiles to return, and restoring political rights to Marxist parties.

Meanwhile, more radical parties of the Left (mainly the Communist Party and a faction of the Socialist Party) formed a much smaller bloc of the opposition called the Movimiento Democrtitco Popular(MDP). Although they too participated in the monthly protests, the leadership of the Alianza Democratica made every effort to distance itself from the MDP, rejecting all

















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offers of working together. With the destruction of the Commu- nist Party and the "domestication" of most of the socialist Left after 1986, AD was unquestionably the majority opposition group.

Alianza Democratica realized that a smooth, rapid transition to democratic rule would require negotiating with the military and with conservatives - but without Pinochet. AD also knew that if it were to accomplish that goal it would have to broaden the base of its organization and enlist the support of one or more of the groups made up of the big business or large landowning interests. To do so, AD sought to make political capital out of the dissension between big business and government over economic policy and turn it to its own advantage, hopefully by convincing the nation's capitalist class of the need for regime change. All throughout 1983, both the PartidoDemocratico Cristiano(PDC) and Alianza Democratica sought to create an implicit alliance with capitalist and conservative political parties based on a moderate economic program tailored to the demands of the pragmatic neoliberal business/ landowning coalition. The attempt to forge an alliance was implied in that AD sought to secure their backing by endorsing an economic policy that would cater to their interests rather than by entering into negotiations with the business associations directly.

Seeking to diminish any anxiety the business/landowning class might harbor regarding political change, AD quickly adopted, and publicized its commitment to, the capitalist road to economic development early in 1983. Within the context of a mixed economy, AD pledged itself to respect private property on the one hand, as well as to continue prudent macro- economic and foreign debt management on the other. It also announced its support of sectoral economic policies (especially industrial policy and debt relief), a rapid re-activation of the economy, and taking a tougher stance with the Interna- tional Monetary Fund (IMF) in negotiations to acquire the resources needed to recharge the economy without incurring the risk of steep inflation (Foxley, 1982; CIEPLAN, 1983; Que
















Pasa, 1982, 1983a, 1983c). In other words, the AD tried to assuage the fears of both the military and entrepreneurial class that transition to democracy, including substantial revision of the 1980 Constitution, would not mean return to the kind of socialism associated with the Unidad Popular(UP).

This move on the part of AD offers strong evidence that any threat that democratization would inevitably involve radical economic and social change was somewhat overdrawn, to say the least. After all, AD indicated not only its support of a moderate economic program, but also its willingness to work with both military and conservative forces, in order to unite a majority of the polity behind a negotiated transition to democracy. Not incidentally, that strategy would have effectively isolated the Marxist opposition movement, the Movimiento Democratico Popular (MDP).

Nevertheless, despite these assurances of both AD and the PDC, the forces favoring redemocratization - e.g., an early transition to democracy under less restrictive institutional conditions - were unable to secure the support of the big business/landowning groups. To the dismay of the opposition, the fierce criticism directed against the government's economic policy began to abate sometime late in the September of 1983. This shift carried serious implications for opposition hopes because the 1983 rift between economic elites and the military government had offered the AD its only chance to win the support of that influential class and place it squarely behind its political program. When the differences between economic elite and military regime diminished, so did AD prospects for early democratization.

The time that elapsed between the eruption of mass protest (May 1983) and the softening of capitalist rhetoric and stance regarding the government's economic policy (Septem- ber-October 1983) lends force to the argument that the threat of civic unrest was not in itself sufficient to explain the return of dissident business and landowning groups to the authoritarian fold. Indeed, it was that very dissidence which had fed AD hopes of constructing a broad cross-class alliance to thwart the

















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dictatorship. Moreover, it was that very rift which had initially fueled, and legitimized, the opposition movement. Thus, if it was fear of the masses (including the "socialist" AD) which prompted the capitalist forces to close ranks with the military government, why had they not done so sooner, immediately following the "national day of protest?"

It is significant that the Confederation of Production and Commerce (CPC) did not begin to relax its posture toward the military government until after thefifth day of national protest had taken place, almost half a year later. Not only that, but when the first mass protests were instituted, the CPC and its affiliates stepped up their complaints and escalated their demands. They presented their economic recovery plan to the government inJuly 1983 and lobbied hard for it both in private and in public. Ominously, the business and landowner coalition, frustrated by the goverment's failure to respond, began to intimate that it was considering making common cause with the growing political opposition.7 During the month of September 1983 (just before and after the fifth day of protest), the capitalist groups pressed Pinochet to replace the ministers of finance and economy with men who favored reflationary policies.

In short, though Chile's big business and landowning classes may have been concerned about the political consequences of the mass mobilizations, they seized upon these events to step up, rather than downplay, their differences over economic policies. The CPC coalition must have had some degree of confidence that the downfall of the regime would not necessarily involve a complete reversal of the neoliberal experiment. Otherwise, the strategy that they did pursue - hedging bets to extract concessions from both government and opposition - would have been far too risky. At the very least, the capitalist class must not have perceived the mass unrest as so threatening to their interests as to preclude capitalizing upon it to gain leverage in their negotiations with Pinochet and his "Chicago boys."

What happened at the end of September and the beginning of October 1983 that persuaded these capitalist groups to temper their anti-government rhetoric and censure? Faced




















with massive public demonstrations, on a monthly basis, and the organization of medium-to-small scale entrepreneurs to protest its policies, the government needed to recapture the support of Chile's large-scale business/landowning class. The defection of a major element from this important coalition to either of those areas of the opposition would have added significantly to the momentum of the latter. With this prospect in mind, the military government finally found it expedient to open negotiations on economic reform in accord with the suggestions of the Recuperaci6n econromca in return for a toning down of some of its more militant attacks on its policies (Que Pasa, 1983g and 1983h). In other words, by threatening to join in a multi-class coalition opposed to the military government, the capitalist hierarchy was able to gain the leverage it needed to force consideration of its neoliberal economic reform program and even translate it into policy.

In August 1983, the government began to make concessions to the CPC and its affiliates that fell into two general categories: cabinet change and policy change. Cabinet changes held out the promise of real negotiations in keeping with CPC proposals, and the first set of cabinet changes took place in August when Sergio O. Jarpa was appointed Minister of the Interior and Modesto Collados made Minister of Public Works. Both appoint- ments held out the promise of policy change for a variety of interests, including not only the capitalists but also medium and small businessmen and others in the opposition. The regime also began to act upon the policy changes recommended in Recuperaci6n econ6mica. For instance, Minister Jarpa was a strong advocate of expanding the monetary system to re-activate the economy and, to that end, agreed with the CPC on the need to replace Finance Minister Caceres with someone more in line with CPC sentiment. Because Jarpa also wanted to broaden political liberalization in order to defuse a potential uprising, he quickly opened talks with Alianza Democr(itica in hopes of being able to negotiate a political settlement between the regime and the political opposition. At the same time, there was also an effort to exclude the Left (MDP) from the dialogue and any potential political pact.









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From the point of view of the CPC, the appointment of Modesto Collados as Minister of Public Works also represented a significant step. As president of the Cdmara de ConstrucciBn, he had been a contributor to the policy recommendations of Recuperaci6n econ6mica. As a condition for accepting the post, he demanded, and received, a commitment to increase the spending on public works as a measure to help revive the economy (Araya, 1989). Finally, even Minister of the Economy Passicot, long a partisan of the "Chicago boys," fell into line by announcing that his ministry would assume a more active role in managing the economy (Que Pasa, 1983h).

Another long-standing demand of the CPC coalition was to increase its access to the policymaking process, ensuring, to the extent possible, that change in economic policy would take place. Consequently, despite the fact that Pinochet did not remove Finance Minister Caceres from his post, he did agree to meet more frequently with the CPC leadership (CPC, 1983). In addition, how long Caceres would remain as Finance Minister remained uncertain, thus raising the coalition's hopes for a change. Pinochet even set up a "shadow cabinet" made up of men whose views coincided more with the views of the CPC than of Caceres - Luis Escobar and former Minister of Economy Manuel Martin - to accompany Caceres to the United States on his trip to renegotiate the debt (Hoy, 1983d). Escobar was known to favor a policy of reflation, and Martin, as noted, had close ties to the authors of Recuperaci6n econ6mica. It was commonly believed that one of them was being groomed for the Caceres position. Of course, business leaders also had easy access toJarpa. Finally, in mid-September 1983, the military government acceded to another CPC demand by agreeing to the establishment of an Economic and Social Council (Hoy, 1983b; Que Pasa, 1983d).

Granting real concessions to the pragmatic neoliberal coalition lent credibility to the regime's promise of policy change. In September 1983, the CPC concentrated its lobbying efforts on the issue of deficit spending (Hoy, 1983c). It reiterated the demand, set forth in Recuperaci6n econ6mica, that such outlays should reach 4% of the gross domestic
















product (GDP). A month later, Caceres complied: deficit spending for 1984 would be around 50/ of GDP (Que Pasa, 1983h; Hoy, 1983e). The CPC also praised Caceres for advanc- ing on another sensitive policy issue, i.e., lower real rates of interest (CPC, 1983). Overall, these fell from 35% in 1982 to 16% in 1983. In addition to these measures, the government quickly expanded housing and public works programs, as expected given the appointment of Collados to the Ministry of Public Works (Que Pasa, 1983h).8 Last but not least, the CPC had long advocated (since 1982) that taxes on business be cut as a way of stimulating the economy. Finance Minister Caceres committed himself to do so and even brought the peak business associations into the process of drafting revisions to the tax code.9

Although the CPC toned down its barrage of criticism once the government authorities began to negotiate in earnest, it did not lift all pressure. Essentially, the CPC ceased its demands for the resignations of Finance Minister Caceres and Minister of the Economy Passicot (Que Pasa, 1983h). At the same time, it continued to press for a purge of the "Chicago boys" who still held mid-level positions in ministries and government agencies. It was generally feared that they would try to obstruct implementation of the reforms (Hoy, 1983c; Que Pasa, 1983e). Furthermore, the CPC continued to lobby the policy changes outlined in Recuperaci6n econ6mica which had not yet been addressed by the government (Hoy, 1983c; Que Pasa, 1983h). For example, the CPC pressed for a broader bill that would renegotiate domestic debt at interest rates lower than those prevailing on the market (5% over UF, an inflation- adjusted measure of value). Moreover, business consistently used this report as the basis for its lobbying in meetings with government officials. Thus, if business appeared less strident in presenting its demands after September 1983, its actual commitment to, and pursuit of, them did not diminish. Further- more, as will be seen, the military government continued to make concessions on the recommendations of that report as the price of regaining social support and in an effort to defuse political opposition to the regime.









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For the capitalist coalition, then, negotiation proved to be a fruitful alternative to confrontation, especially under conditions in which Pinochet needed to be able to rely on a firm support base if he hoped to keep political liberalization within the narrow confines of the 1980 Constitution. The bloc of big businessmen and large landowners renewed its support of the regime once it appeared to have gained its ends and the ear of government policymakers, as evidenced by the adoption of its policy suggestions and seeing its representatives placed in key ministries. Access to the economic policymaking process, excluding all other social groups, cemented its dominant position.

The Social Pact Option: 1984

By October of 1983 AD had lost the edge in its efforts to promote rapid and substantial political liberalization (Que Pasa, 1983f; Hoy, 1983d and 1983e). Pinochet had broken off the "dialogue" with AD, and the renegacde capitalists had returned to the fold. Thus, in 1984, after the strategy of an "implied" alliance had fizzled out, AD next attempted to arrive at an explicit social pact between capital and labor in order to, if not win capital over, at least prevent it from opposing a transition to democracy (Proyecto alternativo, 1984). The regime's political opponents hoped that such a pact - Concertaci6n Social - would allay capitalist fears regarding their future in a democratic regime. To this end, the PDC sponsored a series of workshops in late 1984 to enable the two sides to enter into a dialogue (CED, 1985). Capitalists expressed concern over property rights and wanted ironclad commit- ments against expropriation and competition from state enter- prises. They also worried about changes in the labor code that might strengthen the labor movement (Leniz, 1985; Ojeda, 1985; Feliu, 1985). Workers, on the other hand, wanted changes in the labor code to facilitate collective bargaining, better working conditions, and higher wages (Perez, 1985; Thayer, 1984; Ruiz di Giorgio and Ruiz dos Santos, 1985; Diaz, 1985).
















However the big business interests had no incentive to join the concertaclon project and every incentive to reject it. They were getting what they wanted anyhow. Throughout 1984, the neoliberal coalition continued to consolidate its position vis-a-vis the government as evidenced by the number of concessions it was granted in the area of economic policy. For example, an expansionary economic policy was clearly in place as measured by deficit spending, reduction in unemploy- ment, and lower interest rates. A more satisfactory debt rescheduling scheme had been introduced. Moreover, the pragmatic coalition's access to, and participation in, the economic policymaking process had increased significantly. As of April 1984, the ministries responsible for the economy were headed by "their" ministers (many of whom had been part of Jorge Alessandri's conservative presidency in the late 1950s and early 1960s), and many of the "Chicago boys" continued to be removed from their administrative positions. In addition, businessmen and landowners took part in formulating the government's Plan Trienal, a 3-year sectoral development plan that had been sponsored by Collados when he was the chairman of the construction industry's association in 1983 (Fontaine, 1989; Araya, 1989). Finally, the Economic and Social Council, a government agency with advisory functions in economic and social matters, had begun operation. Dominated by members of nation's top business associations, it provided an additional forum for discussion and channel by which to commu- nicate with government officials.10 These were significant gains compared to the situation which had obtained up to mid-1983 (Silva, 1991). There was no need for the leaders of the CPC coalition to enter into any social pact with labor."

By 1985, capitalists had largely weathered the economic storm, now under control, and had developed a more or less stable relationship with the military government. As a result, the pragmatic neoliberal coalition began to maneuver to extract economic policy concessions from AlianzaDemocratica. It was now time for the capitalist coalition, having entrenched their interests with the government in power, to seek to establish for themselves and their interests a similar impreg-









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nable position with the pro-democratic opposition by ensuring that their pragmatic neoliberal economic model would become an "untouchable" issue for any political regime that might emerge in the future.

THE TRIUMPH OF PRAGMATIC NEOLIBERALISM AND THE OPPOSITION'S RESPONSE, 1986-88

D URING THIS period, the CPC coalition sought to consolidate its gains. The military government had, to a

large extent, adopted the economic model sponsored by the coalition and had given it exclusive access to the policymaking process. In 1986, the government had further enhanced their role in (and opportunity to influence) economic policymaking by creating two agencies in the Ministry of Economy, both a National Commission for Commerce and the National Commis- sion for Industry. These commissions were essentially working groups for the formulation of policy, in which the CPC and its member associations had formal status, both in terms of proposing policy (draw-backs, for example) and in revising decree drafts (Ramdohr, 1988; Fontaine, 1989; Ale, 1988; Ward, 1988; Chile, 1986). Moreover, economic recovery and sus- tained growth validated the terms of the agreement that held the pragmatic neoliberal coalition together. All members of the big business/large landowner groups prospered.

Given these successes, in 1986 the capitalist coalition initiated a campaign designed to preserve and protect their neoliberal economic model in the future as well. Not only did they oppose socialism, but also most government regulation or action which might vitiate pragmatic neoliberalism in any way. Growth with austerity was their slogan. They sought to defend a model in which sectoral interests could lobby for protection and subsidies within a framework of macroeconomic stability. The latter, of course, required fiscal austerity in order to maintain the privileges of the former.
























The Sociedad de Fomento Fabril (SFF) spearheaded the public debate. Throughout 1986 it bluntly stated that the pragmatic neoliberal model represented their and, of course, Chile's best interests. Major alteration would lead only to disaster. The SFF demanded absolute respect for private property. Capitalists opposed renewed state participation in production, as well as joint ventures between state and private entrepreneurs. In other words, they rejected AD's version of a mixed economy and fervently supported privatization to reduce public sector competition. Moreover, Chile should maintain an open and free economy, both nationally and internationally. This meant low across-the-board tariffs with high real exchange rates, protection against unfair competition when indicated, and no controls on prices or foreign exchange. Tax structures, present provisions for state welfare, and labor market arrangements should remain basically unaltered. (SFF, 1986a, 1986b, 1986c, 1986d; also 1985/86, 1986/87; Que Pasa, 1986).

From 1987 til October 1988 (when plebiscite was held), the Confederaci6n de la Producci6n y Comercio (CPC), the Sociedad Nacional de Agricultura (SNA) and the Camara Nacional de Comercio (CNC) echoed the pronouncements of the Sociedad de Fomento Fabril (SFF) and declared their allegiance to Pinochet in the transition process (El Campesino, 1987a, 1987c; CNC, 1988).12 With the formation of so-called Civic Committees (Comites Cyvicos) in 1987, the array of capitalist leaders and economic elites began to campaign for the military regime in the coming plebiscite. The CPC came out openly for Pinochet at the beginning of 1988 (El Campesino, 1988a, 1988b).

Recognizing the unwavering adherence of these groups to their economic program, the Alianza Democrdtica advocated an economic platform that became increasingly conservative as time passed. The political opposition also shifted its stance because the economy was improving and the program was gaining international prestige. AD hoped to assure capitalists and Right-wing parties that it did not represent a threat to













95 95 95 95 95




established order and that it was a legitimate participant in what should be a negotiated transition to democracy. Under the circumstances prevailing in Chile, that meant bargaining over the terms of the 1988 plebiscite and various anti-democratic clauses of the 1980 Constitution. In short, AD gambled that, by moderating its economic position, it could attract the support necessary to negotiate a transition from Pinochet's authoritarian regime to a one more democratic than that permitted under the 1980 Constitution. Thus, regime opponents decided to concentrate on political change - e.g., democratization - rather than economic change.

Although AD has been fairly consistent in its support of a moderate economic program, up til September 1985 it was still advocating a greater degree of state participation in production than was palatable to the large-scale economic interests.13 However, as the capitalist coalition strengthened its organization and consolidated its position, and as the economy itself showed signs of relative improvement, the AD softened its position on state enterprise. By 1988, the opposition, though continuing to praise a mixed economy, had redefined the term to apply essentially to industrial policy (targeting growth industries, supplying tax incentives for investment, allocating special credits, etc.). It no longer mentioned state enterprise as such (Estrategia, 1988; La Epoca, 1988; Tironi, 1989: chapters 2 and 5; Larrain, 1988b). Thus the opposition limited itself to a discussion of distributional issues within the limits of the neoliberal model (Tironi, 1987; Garcia, 1987; Molina 1987).

In response to the gradual softening of the AD position, by early 1987 the capitalist groups had begun to concede that there was no longer any reason to fear for their property rights, acknowledging that not much would change regardless of who won the plebiscite (Que Pasa, 1987). Their only real concern was that government intervention in markets might lead to economic instability (Ale, 1982; Prieto, 1982; De la Cuadra, 1982; El Campesino, 1988c; CNC, 1988: 8-11; SFF, 1988: 6-8). However, the Confederacion de la Producci6ny Comercio (CPC) opposed even moderate economic reform in the interests of social
















justice.'4 Given their satisfaction with Pinochet's adoption of the pragmatic neoliberal model, and their inclusion in the policymaking process, the CPC and its affiliates continued to support Pinochet in the plebiscite because he shielded them from even the mildest economic change.

THE PRAGMATIC NEOLIBERAL COALITION AND CHILE'S TRANSITION TO DEMOCRACY, 1983-91

THE RISE OF the pragmatic neoliberal coalition between large-scale businessmen and landowners (which was domi-

nated by producers for international markets within the CPC but included domestic market producers as well), its consolidation, and the relative success of its economic model had several important consequences for Chile's political transition. First, the formation of the pragmatic neoliberal coalition robbed the opposition movement, led by AD, of securing a major ally from within the capitalist/landowning class, and it strengthened the social base of the military government at its very core. This gave the regime the fortitude to resist opposition demands for a more rapid transition to full political democracy. Pinochet and his supporters could bide their time and insist on a political transition within the institutional confines of the 1980 constitution: i.e. a plebiscite in 1989, with Pinochet virtually assured of his candidacy; full elections in 1990 or 1997, depending on the outcome of the plebiscite; election laws promulgated without any input from the opposition (with all of the attendant opportunity for gerrymander- ing); and full institution of the pragmatic neoliberal economic model without regard for social equity.'5

The consolidation of the pragmatic neoliberal coalition and the success of its economic model between 1986 and 1988 had a second major effect. The opposition was induced to relinquish, or modify, much of its economic program. The Concertacion de Partidospor el NO emphasized, in no uncertain terms, not only that it wholly accepted the pragmatic





















97 97 97 97 97




neoliberal economic model, but that distributional issues would be addressed solely within its confines. The Concertacion further demonstrated its commitment to this watered-down version of its original platform by stressing the need for social and political reconciliation in a deeply divided and traumatized polity, rather than the need to avenge abuses committed during 16 years of arbitrary rule (LASA, 1989).

These concessions helped to assure a smooth political transition as stipulated by the 1980 Constitution. Since the projection of pragmatic neoliberalism was no longer at issue, the opposition minimized the risk that the transition process might be reversed.16 This allowed the opposition to press for a clean election in 1988, to assure recognition of its victory, and to set the stage for a constitutional change, negotiated with conservative political parties, after the plebiscite.

Events bore out the Concelac6in's hopes. Although the Concertaci6n had little influence on the rules governing political parties, electoral districting, and Congressional representation (majoritarian versus proportional), it did establish the right to monitor how ballots were counted at the voting booths (LASA, 1988). Moreover, during the ballot count on the night of 5 October 1988, when many worried that Pinochet might attempt to invalidate what appeared to be an opposition victory, leaders from Renovacion Nacional - the largest conservative party - and Junta members Ferando Matthei (Air Force) and Rodolfo Stange (Carabineros) conceded that the Concetaci6n seemed to be winning. Thus, they undercut any intention Pinochet might have had of annulling the results of the plebiscite.17 The "No" campaign won by a comfortable margin: 54.7% of the vote to 43%' for the "Si" supporters (LASA, 1989). Presidential and congressional elections were scheduled for 14 December 1989, and the transfer of office was set for 11 March 1990.

These results set the stage for Chile's first presidential election since 1970. The president of the Christian Democratic Party, Patricio Aylwin, was the presidential candidate of Concertact6n; former Pinochet Minister of Finance Hernan Bichi ran on behalf of the conservatives (Democracia y




















Progreso was a coalition of conservative political parties that included Renovaci6n Nacional and Union Democratica

Independiente); and banker-businessman-populist Francisco Javier Errazuriz campaigned on an independent ticket. Aylwin received 55.2% of the vote to Buchi's 29.4% and Errazuriz's 15.4%. Of the Senate's 38 elected seats, parties in the Concertaci6n won 22 while those of Democracia y Progreso took 16.18 In the Chamber of Deputies, the Aylwin coalition garnered 69 seats compared to the 48 won by the conservative alliance. The Left-wing Lista Partido Amplio de Izquierda Socialista (PAIS) obtained two seats and the independents only one (La Epoca, 1989; Brager 1990). Basically, the Concertacl6n ran its presidential campaign on pretty much the same platform as it had employed for the "No" crusade, (Que Pasa, 1989a; Hoy, 1989; Business Latin America, 1989a and 1989b); whereas Democracia y Progreso emphasized a neoliberal/libertarian platform.19

The Concertacion 'sconcessions to the pragmatic neoliberal coalition had a third important consequence: within the context of Chile's new political institutions, the Concertacion now favors the economic interests of the conservatives and places reformers at a disadvantage because, in essence, the democratic opposition traded away broad economic reform in return for political democratization. At the heart of the pact was the fact that reformist political parties - representing the middle class and some sectors of labor - explicitly committed themselves to pragmatic neoliberalism. In return, businessmen, landowners and conservative political parties accepted limited political change. Stretching the narrow limits of this constraining political bargain has proved difficult for reformers.

Three factors allow conservatives to dominate. First, questions of social equity are subordinated to the relatively unfettered play of market forces; thus, the emphasis is on social reform within the confines of the pragmatic neoliberal model.20 Second, Chile's transition from authoritarianism took place within the confines of the 1980 Constitution, a charter with numerous features designed to protect conservative interests

















99 99 99 99 99




from reform. Since it is still the law of the land, the structure of current political institutions is not fully democratic, which leaves reform-minded Christian Democrats and Social Demo- crats at a disadvantage (Loveman, 1991). In the first place, the staunchly conservative military is significantly independent of civilian control. As a result, civilian governments must continu- ously gauge the reaction of the armed forces toward public policies. Moreover, the Senate is still a bastion of the Right- wing, with the power to block, or water down, reformist laws. This is due to the fact that 9 of the Senate seats are subject to appointment by Pinochet, and that the rules governing selec- tion are slanted in favor of conservatives.21 Third, the system of collaboration between government and the private sector developed to assuage capitalist fears of arbitrary policy and to insure steady investment - significantly benefits business elites. It gives capitalists privileged access to top policymakers in key ministries, providing them with ample opportunity to modify proposed policy initiatives.22

These constraints clearly hampered Aylwin's attempt to pass legislation on tax and labor code reform - the corner- stones of his mild social reform project. With respect to labor, the administration favored a wage policy that tied raises to productivity gains (Larrain, 1991). This, in theory, satisfied neoliberal demands for wage restraint to control inflation, yet did not wholly abandon the government's pledge to address long-postponed labor grievances. However, achievement of that goal required legislation to strengthen unions, a key demand of the labor movement.

The government proposed a bill designed to reform three key aspects of the old labor code. First, the administration's proposals sought to make it more difficult, and more expen- sive, to fire workers. The old code allowed employers to let workers go without showing cause and to hire replacements for strikers. Second, the Aylwin-backed bill permitted unions to negotiate contracts by economic sector rather than on a company-by-company basis. Unions would gain the right to negotiate health benefits and job security clauses. Third, the
















draft legislation mandated that non-union employees would have to pay union fees if they benefitted from union-negotiated contracts. This stopped short of the key demand by the Central Unica de Trabajadores(CUT) for mandatory union enrollment (Business Latin America, 1990c).

Chilean capitalists, represented by the Confederacidn de Produccion y Comercio (CPC) and such conservative political parties as Renovacion Nacional (RN), consistently opposed all of these measures. The appointive seats in the Senate provided conservative forces with a majority in that chamber of the legislature, which forced the administration to negotiate the bill for labor reform with RN point by point (Que Pasa, 1990b). The legislation soon bogged down (Business Latin America, 1990d). Moreover, business leaders took advantage of their preferential access to the executive branch to lobby against the bill directly (Ale, 1992; Lizana, 1992; Garcia, 1992; Mujica, 1992; Guzman, 1992). The upshot of these efforts was to gut the proposed reforms, which represented the bare minimum of the labor agenda, and, along with them, labor's ability to capture wages based on the increase in productivity (CIASI, 1990).

The fate of attempts to reform the tax code provides another example of how the retention of authoritarian political institutions in Chile's new democratic phase hampers attention to social issues. In the interests of social equity, Aylwin's presidential campaign platform committed his administration to the improvement of education and health services, the provision of loans and technical assistance to start small businesses, the expansion of nutritional programs for infants and pregnant women, and the introduction of programs to aid the indigent (Larrain, 1991).

Because delivery of these programs was contingent upon higher levels of government spending, the Aylwin government introduced legislation to increase taxes on business. Although the tax-reform bill passed, Renovacion Nacional managed to keep the tax increase well within the bounds of what the CPC considered acceptable (from 10% to 15% of earnings). Once again, the conservative majority in the Senate (due to Pinochet

















101 101 101 101 101




appointees), in conjunction with the direct access to government officials enjoyed by conservatives and their business allies, assured that the interests of big business could (and did) prevail.23 However their victories were not uniform. For example, the CPC proved unable to block the abolition of levies on estimated income for the agriculture, mining and transportation sectors in favor of actual earnings. And the government gained additional revenue (1) by raising, albeit temporarily, the regressive value-added tax (VAT) from 160/o to 18%, and (2) by managing to transfer some resources obtained by cutting the military's budget (Que Pasa, 1989b and 1990a; Business Latin America, 1990b and 19900).

However, these partial, painstakingly negotiated ad- vances in tax reform are vulnerable to another legacy from the authoritarian period: an autonomous Central Bank. This institution serves to re-inforce the commitment to pragmatic, neoliberal, economic policies which place a higher value on macro-economic stability than on social betterment (Business Latin America, 1990a). The bank's policies drain resources which might otherwise go to social programs by allocating part of the revenues obtained through tax reform to maintaining a balanced budget and fighting inflation.24 It is ironic that, though the administration employs a tight monetary policy to demon- strate its commitment to the neoliberal model, big business and its landowner allies view the most meager increases in social spending by the government as detrimental to the private sector.25

A glance at the record of the Aylwin government's first years confirms the expectation that the tacit alliance between Concertaci6n and the pragmatic neoliberal coalition strongly reduced chances for even mild economic reform. The pragmatic neoliberal development model is based on a highly unequal distribution of wealth. A commitment to that economic model largely locks Centrist political parties and moderate socialists into retaining skewed distributional patterns despite their best intentions. Chile's current political institu-
















tions reinforce that tendency. Very mild adjustments and symbolic gestures, however, are still possible.

The compromise between economic elites and the Concertaci6n in Chile's transition to democracy not only gives verbal guarantees to businessmen and landowners, it also gives them strong institutional means with which to defend their interests, which center on a very broad definition of property rights, particularly the view that most taxation constitutes state confiscation of profits.26 These are the conditions under which Chilean capitalists and landowners have come to tolerate democracy. So far, they have demonstrated their general satisfaction by occasionally defending the Aylwin government when it comes under attack from political forces impatient for economic and social reform (La Epoca, 1991). This suggests that the government's emphasis on moderation and negotiation seems to augur well for political stability. Whether that will translate into more political democratization, however, re- mains to be seen. Deepening political democracy in Chile requires reducing military prerogatives, which the armed forces resist, and removing the 1980 constitution's authoritarian features, which may also prove difficult (Stepan, 1988; Loveman, 1991). Moreover, it is an open question whether Chilean business elites would remain as committed to democracy if they were faced with a change in their circumstances, such as diminished institutional veto power and the resurgence of reform policies along the lines of an active Scandinavian- type social democracy.









103 103 103 103 103




NOTES

1. Political democratization takes place when an authoritarian regime gives way to a system that allows dissenting elites to alternate in power. Representative democracy requires fully competitive elections with universal participation. Voters should be able to choose, by secret ballot, among candidates who hold differing views on public policy. Representative democracy also calls for guarantees of civil rights, such as freedom of political organization and expres- sion, and requires, as well, institutions that keep policynmakers responsive to the citizenry. Such institutions include effective legis- latures and political parties, as well as interest group organizations. For this definition, see Drake and Silva (1986) and O'Donnell and Schmitter (1986).

2. Political liberalization takes place when dictators expand political participation by relaxing repression and introducing some civil liberties. In contrast to political democratization, it does not involve increased competition for the transfer of power to contending groups. During political liberalization, elections may be held that are only semi-competitive in order to authenticate an authoritarian regime at home and abroad, although the party of government invariably dominates such processes (see Drake and Silva, 1986; O'Donnell and Schmitter, 1986).

3. This state of affairs strongly cautions against overestimating the commitment to democracy of the Chilean Right. The implication is that Chilean capitalists will tolerate democracy only so long as their economic model is not threatened by social democratic policies, even in a mild form, and as long as their constitutional privileges are not reformed or rescinded.

4. The political project was not formalized until as late as 1980 when the design for the new constitution was finalized.

5. The extent to which these policies can be considered radical can be measured in terms of the degree of freedom enjoyed by market forces and the zeal with which these policies were pursued, particularly compared to other countries at the time, such as Argentina and Uruguay. However, it must be recognized that this zeal did not preclude occasional subsidies, tax credits, price guarantees, and other "illiberal" policies. Among the most notable among the latter were policies favoring the forestry industry.

NOTES






NOTES






NOTES






NOTES









6. For a description of neoliberal policies during this period see Foxley (1983) and Ramos (1986).

7. For example, when the CPC distributed its economic recovery plan to government ministers, the Sociedad de Fomento Fabril (SFF or Society for Industrial Development) cautioned that though the private sector had no wish to break with the government, it might be forced into opposition (Que Pasa, 1983b). In the same spirit, CPC President Jorge Fontaine declared that business only sought confrontation with government when its survival was at stake. The authorities should realize, continued Fontaine, that adherence to orthodox deflation would lead to perdition (Hoy, 1983a).

8. Author's personal interviews with CPC officials reinforced the conclusion that the government was progressively implementing the CPC economic program.

9. Que Pasa (1983d) reported that the Tax Reform bill was virtually ready to clear the legislative commission in charge of economic affairs. Business associations had ample access to the policymaking process through the legislative commissions (CNC, 1983).

10. For Chile's Economic and Social Council, see Lecaros (1989) and Urenda (1989).

11. Ramdohr (1988), who participated in the Concertaci6n dialogues, shared this view of capital's refusal to enter into such pacts.

12. For the SNA position on agrarian reform, see El Campesino (1986a, 1986b); for CPC support of the SNA, see El Campesino (1987b).

13. For the program of the Alianza Democrdtica, see Hoy (1985).

14. This was evident in a statement loaded with neoliberal code- words that appeared in El Campesino (1988a).

15. The pro-Pinochet campaign for the October 1988 plebiscite (the "Si") reflected officialdom's resurgent triumphllism. Its campaign advertisements stridently extolled economic gains since 1984 and compared Chile's relatively stable, growing economy to the economic disarray of fledgling democracies in neighboring Argen- tina, Peru and Bolivia. Their ads also revealed a heavy-handed effort to equate the anti-Pinochet position (the "NO" position) with the violence and chaos of the Allende years.









































105 105 105 105 105




16. The opposition's strategic choice was consistent with the prescriptions advocated by O'Donnell and Schmitter (1986).

17. For events during the night of 5 October 1988, when the plebiscite was held, see Que Pasa (1988) and the work by Cavallo, Salazar and Sepuilveda (1988: chapter 53).

18. The Senate also has nine designated seats. One is reserved for former presidents of the republic for life, and the others are nominated by the outgoing president for one term.

19. Btichi emphasized that his candidacy symbolized Chile's liberation from the deleterious political style of the past which had led to the collapse of democracy: political freedom without economic freedom. His platform, Democracia y Progreso, stressed four points: (1) decentralization of power (a weaker presidency and more autonomy for administrative regions); (2) the promise to create in Chile an "opportunity society," characterized by more employment, better wages, health and housing, zero inflation, and low taxation; (3) "education for liberty," with subsidies for the poor; and (4) the need for Chile to strengthen economic ties with its neighbors (Que Pasa, 1989a, 1989c, 1989d).

20. For example, in addition to arms-length government intervention in the economy and support for free trade, the Aylwin administration has clearly committed itself to a policy of wage restraint, as prescribed by pragmatic neoliberalism (see Larrain, 1991).

21. The military hold 4 out of the 9 appointed Senate seats. Pinochet is guaranteed an appointment-for-life to the Senate as well, and the remaining appointive seats also tend to favor conservatives. For further details, see Loveman (1991: 65).

22. In interviews with the author, business leaders confirmed that easy access to the executive branch bolstered their confidence in the Concertacion 's assertion that it intended to adhere to the main tenets of pragmatic neoliberalism. The interviewees also acknowl- edged that this system allowed them to alter proposed legislation in ways that favored their interests (Guzman, 1992; Felii, 1992; Lizana, 1992; Garcia, 1992; Mujica, 1992;). Molina (1992) blamed the government's difficulties in addressing the issue of social equity on this system of collaboration.

23. Feliu (1992) described the process as an "agreed-upon negotiation" (negociacion pactadca) between government and business.



































SILVA: CAPITALIST REGIME LOYALTIES IN CHILE 107

24. For budget woes, see Business Latin America (1990b, 1990f). For commitment to macro-economic stability, see Business Latin America (1990a). For recent inflation in Chile, see Business Latin America (1990e) and the Latin American Regional Report- Southern Cone (1990: 3).

25. An article by Biichi (1990) illustrates this point nicely.

26. Capitalists enjoy specific guarantees regarding property. However, the political institutions of post-authoritarian Chile give them ample means by which they can defend themselves from infringements on their profits which might come from either taxation, redefining the welfare state to favor an activist social democracy (Esping-Andersen, 1991), or substantial reform of the labor laws.




















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GARCIA, R. (1992) Author interview with Rafl Garcia of the Sociedad Nacional de Agricultura (SNA), 24 June, Santiago de Chile.

GARRETON, M.A. (1989) The Chilean Political Process. Boston, MA: Unwin Hyman Publishers.

(1987) Reconstruir la politica: Transici6n y consolidacion democratica en Chile. Santiago, Chile: Editorial Andante.

GUZMAN, J. (1992) Author interview with Jose Antonio Guzman, then president (at time of interview) of the Confederaci6n de Producci6n y Comercio (CPC), 15 June, Santiago de Chile.

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LIZIANA, P. (1992) Author interview with Pedro Liziana, member of the Sociedad de Fomento Fabril (SFF) Executive Council, Santiago (Chile), 10 June.

LOVEMAN, B. (1991) "gMision Cumplida?Civil-Military Relations and the Chilean Political Transition." Journal of Interamerican Studies and World Affairs 33, 3 (Fall): 35-74.

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MOLINA, S. (1992) Statement of Minister of Planning and Development Sergio Molina at symposium centered on themes of the 1992 UN Human Development Report, held in former Congreso Nacional building in Santiago de Chile, 16 July.

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MUJICA, A. (1992) Author interview with Alfonso Mujica, former Vice-President (at time of interview) of the Cimara Nacional de Comercio (CNC), 16 June, Santiago de Chile.

















































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PEREZ, G. (1985) "Sindicalismo y redemocratizacion: posibilidades y alcances de la concertacion social," pp. 80-10() in CED (ed.) Concertaci6n social y democracia. Santiago, Chile: Centro de Estudios del Desarrollo (CED).

PRIETO, H. (1988) Author interview with Humberto Prieto, Secretary- General (at time of interview) of the Caimara Nacional de Comercio (CNC), 16 October, Santiago de Chile.

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RAMDOHR, G. (1988) Author interview with Gustavo Ramdohr, past president of the Asociacion de Industriales Metalurgicos (ASIMET) and president (at time of interview) of the Asociacion de Exportadores de Manufacturas no Tradicionales (ASEXMA), who had participated in Concertacin dialogues, 25 August, Santiago de Chile.

RAMOS, J. (1986) Neoconservative Economics in the Southern Cone of LatinAmerica, 1973-1983. Baltimore, MD: TheJohns Hopkins University Press.

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(1991) "Capitalist Coalitions and Economic Policymaking in Authoritarian Chile, 1973-1988." Ph.D. dissertation, University of California-San Diego.

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(1986/87) "Carta del presidente." SFF Memoria. Santiago, Chile: SFF.

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STEPAN, A. (1988) Rethinking Military Politics: Brazil and the Southern Cone. Princeton, NJ: Princeton University Press.

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(1987) "Democracia y mejoramiento de remuneraciones" (Materiales para Discusion 178, July). Santiago, Chile: Centro de Estudios del Desarrollo (CED).

URENDA, B. (1989) Author interview with Beltrian Urenda, Chairman (at time of interview) of the Economic and Social Council, 31 May, Santiago de Chile.

VALDES, J. G. (1989) La escuela de Chicago: Operaci6n Chile. Buenos Aires, Argentina: Editorial Zeta.

WARD, L. (1988) Author interview with Lee Ward, Director of the National Commission for Foreign Trade (Ministry of the Economy), 13 December, Santiago de Chile.























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