Evolution of Opportunity at National Level
5.2 ISI inward-oriented development (1932-1976)
The early 1930s mark a major rupture in Chile’s political economy and development of industrial relations, as the milieu of political, economic and social adjustments known as inward-oriented development began to consolidate on the basis of three pillars: import- substituting industrialisation, the 1925 Constitution, and the 1931 Labour Code. Economically, Chile became the worst casualty of the world’s Great Depression with exports and imports decreasing 78.3% and 83.5% respectively between 1929 and 1932. In comparison, the world economy contracted ‘only’ by 25% (Pinto and Salazar, 2002). As elsewhere, the Great Depression abruptly ended Chile’s long affair with free market outward-oriented economics. In a few years, the Popular Front -a coalition of centrist ‘radicals’ and communists elected in 1938- led the introduction of import-substituting industrialisation, a strategy designed to ‘developing industries oriented toward the domestic market by using trade restrictions such as tariffs and quotas to encourage the replacement of imported manufactures by domestic products’ (Krugman and Obstfeld, 2003: 258).
Politically, the 1925 Constitution came into force in 1932 replacing a corrupted pseudo-parliamentary system with a presidential system. Most importantly, the new Constitution provided the broad political framework that would back the interventionist state and sustain the industrial relations legal framework contained in the 1931 Labour Code (Lucena and Covarrubias, 2006).
The 1931 Labour Code explicitly recognised the power imbalance between labour and capital, and ‘reflected the belief that the state should intervene to protect the individual worker against employers’ (Cook, 1998: 313). Individual legislation in this period has been characterised as protective as well as extensive, highly detailed and containing numerous special norms (Cook, 1998; Mizala and Romaguera, 2001; Walker, 2002). Protective legislation was evident in norms such as minimum wages regulating certain occupations (tarifados) and regulations governing dismissal, which from 1966 was not allowed without just cause.
With regard to collective regulation, the Code was restrictive subjecting unions to the supervision of the state and instituted fragmented collective bargaining as the norm (Córdova, 1996). The code recognised two types of workers: blue- and white-collar workers (obreros and empleados) who were forbidden to join the same union, but had to organise in separate industrial and professional unions respectively. Separate social security schemes were created for different categories of workers. Public sector workers were not allowed to form unions or to negotiate although bargaining took place in practice. State intervention was particularly evident in the Ministry of Labour’s role in collective bargaining, from which unions had to secure permission before negotiating, supervised their finances, and run an obligatory conciliation service, which in turn, sanctioned the legality or illegality of strikes. No strike funds were allowed.
For employers, these broad economic and social changes were experienced as a ‘first major scare’ (Arriagada, 2004). The Great Depression eroded the basis of Chile’s laissez-faire pattern of accumulation and for the first time upper classes began losing control of the state apparatus, which would became the preserve of middle class professionals and a major employer on its own right. Moreover, the likely expansion of unionisation -and inspections by state officials particularly in the countryside- threatened centuries-old privileges and were not to be tolerated.
Arriagada (2004) argues that employers reacted to their first major scare in three different ways. First, employers transformed their original ‘humanist’ organisations (organizaciones de fomento) into associations (gremios), aiming to represent their interests before the state and other actors, and not simply to promote the development of their sectors. Second, they established in 1934 the Confederation of Commerce and Production (Confederación de la Producción y del Comercio, henceforth CPC), as top employers association uniting industry (SOFOFA) and agriculture employers (SNA). Third, the SNA founded a short-lived ‘Agrarian Party’ in view of the limited effectiveness of traditional oligarchic political parties -Liberals and Conservatives- to defend the interests of capitalists and landowners in Congress.
But the united front between industrialists and landowners was largely artificial and as a result, the CPC was to play no major role throughout this period. Indeed, it became soon apparent that SOFOFA and SNA were to pursue very different courses of action. The conservative and powerful SNA chose to isolate the agricultural sector from social changes that, in their view, pertained exclusively to the cities. Between 1924 and 1967 for example, the SNA was remarkably successful in impeding the extension of trade union legislation -and indeed of social legislation in general- onto the agricultural sector and the countryside. SOFOFA on the other hand, had close links with the Liberals, and the association’s 1933 Plan de Fomento de la Producción reads like an early import- substituting industrialisation manifesto in which industrialists ask for direct support of the state –through guaranteeing loans- to develop a domestic private industry. Unsurprisingly, the state related with each of these organisations separately and as a result the state and SOFOFA became natural allies while the SNA excluded itself from the transformations that were taking place.
For the labour movement, adapting to its new ‘regulated’ condition was a remarkable challenge. On the one hand, Socialists and Communists identified with the Popular Front coalition and participated in government between 1938 and 1948. They formed the Workers Confederation of Chile (Confederación de Trabajadores de Chile, henceforth CTCH), soon to became Chile’s main labour confederation and committed to abide by the collective bargaining institutions of the 1931 Labour Code and observe ‘social peace’ while in government. As a result, the new system of industrial relations began to settle and industrial conflict decreased considerably throughout the decade. The few strikes that had national resonance were denounced by the CTCH as the product of
anarchist desperation. ‘Trotskyites manoeuvres which, just like capitalists, try to drive workers to strike in order to unleash confusion, let sabotage loose, and favour unpatriotic plans’ (Barría, 1970: 12).
On the other hand, anarchists were largely ineffective in avoiding the consolidation of their rivals’ ‘legal Marxist unionism’ as the dominant force within the labour movement. Anarchists created the Workers General Confederation (Confederación General de Trabajadores, CGT) to compete with the CTCH but by the early 1950s, the influence of the anarchist movement had nearly vanished from national-level organisations. Indeed, the CGT backed up the formation of the United Workers Central in 1953 (Central Única de Trabajadores, henceforth CUT), effectively a merging of all major confederations after the dissolution of the CTCH (Ulloa, 2003).
The main characteristics of the labour movement’s ‘classic strategy’ (‘classic unionism’ or ‘legal Marxist unionism’) began to crystallise after the formation of CUT. Organised labour’s ‘classic strategy’ was largely confrontational in relation with employers and favoured organisation at higher levels. Achieving a unified labour movement was a widely shared objective among workers and unions as channelling grievances through federations and confederations had socio-political visibility and helped to overcome weak bargaining power at company-level.
Political parties performed an intermediary role between unions and the state in control of the industrial relations system. The diffuse differentiation between political parties and trade unions resulted in a loss of autonomy of the latter in relation to the former. For some commentators these actions represented an expression of class struggle, but limited to economic grievances and subordinated to political parties, resulting in a weak ‘autonomous politisation’ of the labour movement in contrast to the highly militant politisation of its leadership. For others, that labour strategies developed in this way was a mere consequence of legal restrictions, and the resulting overlapping of interests with parties of the left (Rojas and Aravena, 1999).
That these and other characteristics are widely considered to represent the labour movement in this period should not obscure the fact that, as ever, the labour movement is neither a unified nor a static entity. Indeed, it has been argued that the restrictive character of the 1931 Labour Code ‘ultimately forced most of Chile’s labour movement into legally
differentiated boxes, bargaining under different preconditions and with different institutional horizons’ (Roddick, 1989: 203). Campero and Cortázar (1985) for example, characterise union strategies in the period 1932-73 based on two groups of economic sectors. On the one hand, small-and-medium enterprise sectors included manufacturing, construction, retail as well as the public sector. Trade union action in these sectors conformed largely to the classic strategy described above. In general, unions in these sectors aimed at establishing minimum working conditions, the observance of labour law, and a greater role of the state in the economy and labour relations. Political parties became, in turn, the backbone of this type of trade unionism.
On the other hand, modern-monopolistic sectors included state enterprises (copper, steel, oil), public utilities (electricity, telecommunications, air and maritime transport), and some large private companies that developed as a consequence of import-substituting industrialisation. In these sectors, unions grouped about one third of total union members and tended to operate at the level of the firm, where their main objective was to improve pay and conditions of employment, as well as to influence work organisation and decision-making. Unions were ‘corporatist’ in the sense that they functioned well integrated to the firm’s bureaucracy, were moderated politically, and engaged with societal projects that included the modernisation of economic and democratic systems as pathways to social mobility (Campero and Cortázar, 1985). This was generally possible as these firms were modern, capital-intensive, operated in a protected market, and their labour force was highly skilled. Workers in these sectors enjoyed high bargaining power, had privileged access to the state apparatus, and partly as a consequence, did not tend to establish links with higher-level union organisations (Figure 5.1).
Despite legally induced fragmentation, unions’ traditional indicators of union power as well as their participation in the polity increased throughout the period of inward- oriented development. Union density grew from 21% in 1940 to its 29% historical peak in 1973 (Table 5.1). Likewise, collective bargaining coverage rose to an average of 13.4% of the occupied workforce between 1965 and 1970, decreasing slightly to 11.3% between 1971 and 1973 (Mizala and Romaguera, 2001). Likewise, the restrictions governing strikes were not obstacle for union mobilisation, as illegal industrial conflict increased heavily in the run up to Allende’s election. Between 1963 and 1973 the total number of strikes rose from 676 to 2230 and, the number of legal to illegal strikes in the private
sector (all public sector strikes were illegal) rose from 64 legal to 369 in 1963, to 21 legal to 1230 illegal in 1973 (Armstrong, 1979).
Figure 5.1: Logics of union action in Chile, 1938-1973
Modern-Monopolistic SMEs, public sector, retail, and CUT
Dominant logic of union action Firm-level industrial relations Federative trends with reference to sector and national policies
Dominant union
orientation/objectives
Professional and socio-economic mobility
Struggle to establish minimum working conditions, and improving life standards with reference to state action
Union-employer relations Integration Exclusion and confrontation
Union-political system Direct relations and with political
parties Federations, confederations, CUT, and political parties
Political parties Centre and left, both moderate Left, few centre, radicalism
Global social projects (Union- society)
Social changes with emphasis on the modernisation of the economic system, and increasing social mobility
Social changes with emphasis on substantive democratisation and with presence of strong anti- capitalist trends
Source: adapted from Campero and Cortázar (1985: 17, table 14, my translation).
Table 5.1: Union Membership and Density in Chile, 1932-1972 (Selected years)
Industrial unions Professional unions Agricultural unions Total
Year
Unions Members Unions Members Unions Members Unions Members Size
1932 168 29442 253 25359 * * 421 54801 130 1938 333 78989 599 46983 * * 932 125972 135 1942 602 122408 991 71641 * * 1593 194049 122 1946 591 148276 1115 103498 * * 1706 251774 148 1952 639 155054 1343 128329 * * 1982 283383 143 1958 781 161751 1547 143329 28 2030 2356 307110 130 1964 644 148368 1236 128960 24 1652 1904 278980 147 1970 1420 197196 2581 287326 580 143142 4581 627644 137 1971 1585 211892 2890 338442 737 232160 5212 782494 150 1972 1764 224664 3517 403831 837 226909 6118 855404 140 Source: Frías (1993: 265)
CUT played a decisive role in national politics particularly since 1964, when formally decided to support Salvador Allende’s bid to the presidency. The democratic election of Marxist President Allende and the Popular Unity coalition led by the Socialist
and Communist parties in 1970 represented the culmination of the political, economic and social adjustments that had developed since the 1930s. Popular Unity were committed to the so-called ‘Chilean Road to Socialism’ which involved an ambitious economic and social programme that included the creation of ‘social’ and ‘mixed’ areas of the economy alongside private enterprise, the nationalisation of copper mining, and the deepening of agrarian reform (Zapata, 2007).
For employers, Allende’s ‘workers’ government’ quickly became their ‘second major scare’ (Arriagada, 2004). At first, large employers vociferously opposed Allende’s policies but did not effectively resist the reforms. Effective opposition to Allende came in turn, and in a far stronger fashion from small entrepreneurs (lorry drivers, taxi, buses, shop keepers). But as reforms deepened, a coalition of landowners, middle classes, as well as American corporations in Chile began a series of destabilising activities and an economic blockade (US Department of State, 2000; US Senate, 1975). Political polarisation and social conflict escalated rapidly ending in the coup d’état of 11 September 1973. In this way, Chile’s ruling groups abandoned Latin America’s longest and strongest democracy and bid instead for a dictatorship that would ‘put an end to their insecurity regarding property rights, to discipline social movements, to end the “dictatorship of numbers” (the power of the masses), and to terminate a “democracy” that had crushed the essential liberties of creation, production, and accumulation of wealth, in the name of universal suffrage’ (Arriagada, 2004: 133, my translation, emphasis in original).