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The political economy of development
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By Cathy Schneider (1993)

Cathy Schneider teaches at Cornell University. This article is
adapted from her forthcoming book "Shantytown Protest in
Pinochet's Chile" (Temple University Press)

The Chilean Economic Miracle has received a great deal of press
over the last decade. Governments as far away as Prague and
Moscow have sought the advice of Chilean economists on matters
ranging from privatization and economic restructuring, to
unemployment and poverty. The Chileans point proudly to almost
a decade of the highest growth rates in South America (averaging
over 5% yearly), low inflation (averaging about 20% a year), and
unemployment rates that are lower than those of the United States
(unemployment fell below 5% this year). The ability of the
Chilean economy to yield consistently high rates of economic
growth has helped forge a new consensus among Chile's formerly
antagonistic political parties. But for most of Chile's working
poor, the economic model has been anything but miraculous.

Poverty and income inequality which grew by colossal proportions
during the years of the Pinochet dictatorship have scarcely been
addressed by the new democratic regime. In 1969, four years
before the military coup, 28.5% of Chileans lived in poverty.
Urban poverty was a major campaign issue in the 1970 election of
the socialist Salvador Allende. In 1979, however, six years of
military rule had increased poverty levels to 36%. By 1989, 42%
of Chileans were living in poverty, and over 12%, compared with
to 8% in 1969, were destitute (unable to pay even rent). Caloric
intake for those Chileans in the bottom 20% had dropped by more
than 23% since 1969 (from an average of 1,925 calories to 1,474
in 1989).

The situation is even more dramatic in the capital city of
Santiago, home to almost half of Chile's population. In 1969, 28%
of Santiago's residents lived in poverty. By 1976, a year and a
half after the coup, poverty in Santiago had increased to 57%.
Despite the current government's large increases in spending on
health care, education and social services, over 49% of
Santiago's residents still live in poverty,

The relative inequality of income between the top and bottom
fifths of the population has also increased dramatically since
the implementation of the new economic model. In 1969 the income
share of the wealthiest fifth of the population was 44.5% as
compared with 7.6% for the poorest fifth. By 1988 that ratio was
54.6% to 4.4%.

Although unemployment rates have fallen, underemployment and
casual employment rates have swelled. The rapid growth of 
raw-material exports in such areas as fruit, seafood and lumber has
coincided with the collapse of large industry in sectors such as
textiles and construction. The number of unionized workers, as
a percentage of the overall labour force, has fallen from 41% in
1972 to fewer than 13% today. At the same time, the number of
Chileans who are self-employed -who work alone or own firms with
fewer than four employees- has rapidly grown. The ratio of
workers to employers is half what it was in 1960. The growth in
self-employment is reflected in the explosive development of
microempresas (micro-enterprises) which contract out to large
conglomerates, or service the industrial sector in areas such as
information, publicity, marketing, security systems, repairs and
maintenance. These now employ over 45% of the current work force.
The sharp drop in the size of the average firm has severely
weakened labour's clout.

The owners of such small enterprises often live on the verge of
poverty, dependent on temporary contracts from large
conglomerates called AFPs (Asociaciones de Fondos Provisionales,
or Mutual Funds). They are thus neither willing nor able to give
permanent contracts to their employees. Current labour
legislation encourages this "flexible" use of labour. While the
10 richest families in Chile control the AFPs, workers in
microempresas are paid salaries barely above subsistence, without
fringe benefits or job security. Irregular hours, unstable
employment, and low caloric intake have increased levels of
physical and mental exhaustion. The number of serious injuries
in the workplace tripled between 1980 and 1990.

The change in work patterns has had a significant impact on
social relations. Economist Alvario Diaz notes: "There has been
a displacement from the neighbourhood and the street to the
workplace; from relationships with neighbours to relationships
with clients; from a relationship with the administrator of the
emergency employment program to one with a private entrepreneur.
Work hours have been changed, family relations modified, and the
quantity of social interactions has multiplied". The
fragmentation of the social relations of the workplace has
obscured the sense of collective fate and identity among Chile's
working class.

Poor salaries have also forced women to enter the labour force
in large numbers. Women made up 34.6% of the labour force in
1985, up from 27.6% in 1976. Most working women toil in the
lowest wage, least organised sectors of the economy. Over 25% are
employed in domestic service alone. New employment opportunities
in seasonal agriculture, for instance, have been filled largely
by women, who work for minimal wage, and have no organisational
representation and no history or familiarity with labour

The transformation of the workplace has been complemented by the
transformation of the political system. Chile's multiparty system
based on proportional representation has been supplanted by a
two-party system in which the governing coalition includes 17
political parties, ranging from left to centre. The current
government's concern with economic stability and political
cooperation from the military and the political right has
dissuaded all 17 governing parties from organising among the
urban poor. The powerful right-wing Renovacion Nacional party is
regularly consulted on policymaking, due to its control of the
Senate (a consequence of Pinochet's new electoral law, and his
nine 'designated' senators), while the once powerful Chilean
Communist party has virtually disappeared. The Socialist Party,
the second largest in the governing coalition after the Christian
Democrates, has embraced the free market, leaving, ironically,
only the neo-fascist Independent Democratic Union (UDI) with an
incentive -which it vociferously pursues- to mobilise from below.

The church has also withdrawn from political activity, hoping to
re-establish spiritual unity within its ranks and to defuse some
of the more radical Marxist and feminist organizations nurtured
on its doorstep. Foreign governments and non-governmental
organisations have cut funding to popular organisations, while
the Chilean government provides funds only to those popular
organisations willing to convert into small businesses. Many soup
kitchens, for example, have become private bakeries, groceries
or restaurants with government support. The entrepreneur is
encouraged, the political organizer is repressed.

The transformation of the economic and political system has had
a profound impact on the world view of the typical Chilean, Most
Chileans today, whether they own a small, precarious business or
subcontract their labour on a temporary basis, work alone. They
are dependent on their own initiative and the expansion of the
economy. They have little contact with other workers or with
neighbours, and only limited time with their family. Their
exposure to political or labour organizers is minimal, and with
the exception of some important public service sectors, such as
health care, they lack either the resources or the disposition
to confront the state.

The fragmentation of the opposition communities has accomplished
what brute military repression could not. It has transformed
Chile, both culturally and politically, from a country of active,
participatory grassroots communities, to a land of disconnected,
apolitical individuals. The cumulative impact of this change is
such that we are unlikely to see any concerted challenge to the
current ideology in the near future.
source: REPORT ON THE AMERICAS, Volume XXVI, Number 4( February
RRojas Research Unit/1994