In the plebiscite held in Chile in October 1988, the attention of the international press focused overwhelmingly on the exposed position of the ageing head of the dictatorship, Augusto Pinochet. For the new power bloc, however, comprising the armed forces, the capitalist class, bankers and technocrats, the primary concern has been not the plebiscite as such but the need to safeguard the accumulation regime established over the past fifteen years. footnote1 The Pinochet regime served a number of invaluable historical purposes: destruction of the Popular Unity government and of the socialist movements; consolidation of the military and civilian bureaucracies; integration of Chile into international financial, commercial and agricultural circuits; relocation of political debate on the terrain of private market discourse; and the elimination of most anti-imperialist intellectual currents. In the process of realizing these aims, however, the dictatorship incurred numerous enemies, provoked large-scale, sustained opposition, and eventually became an obstacle to the reproduction and legitimation of the new economic and institutional order. Fifteen years of terror and free market exploitation are not an appropriate basis for winning plebiscites. And the opposition political class, with a critical discourse, is capable of eliciting popular support and subordinating the mass of the population to a political pact with the power bloc—although this bloc itself is demanding stiff terms and setting very narrow margins for mainly legal–political reform.

The Reagan–Bush administration, a key player in the ‘transition’, has provided economic aid and military collaboration to strategic groups in the New Order, while taking its distance from the figure and regime of the General. The cohabitation of an elected government with a powerful presence of the armed forces would ensure Washington’s essential economic and strategic interests, and Pinochet’s acceptance of the plebiscite result confirms the thesis that his essential role in history was as a soldier of the marketplace not as a personal dictator. As Washington and Chilean elites sought to deflect and subordinate the massive popular mobilizations of 1983–86, the plebiscite emerged as the basic instrument for channelling discontent into an electoral framework controlled by the traditional political class and compatible with the overall system.

The New Economic Order (neo), as the regime itself has dubbed it, has thus installed a new set of social actors, created a new axis for capital accumulation and imposed a new relationship between the state and the international marketplace. footnote2 Its basic mechanism has been a shift toward export of primary products (agriculture, forestry, fishing, minerals) and specialized manufactures. The state, through a series of measures, intervened on a massive scale to reverse the peasant-based agrarian reform programmes of the 1960s and 1970s and replaced them with a new set of agri-business enterprises linked to overseas markets. footnote3 Business farmers now own and control the basic units of production: they exploit a small core of permanent labourers, as well as a much larger seasonal labour force. Under contract to local and foreign agricultural exporters, they invest heavily in pesticides, fertilizers and other modern inputs to increase the size and quality of their yields. In place of the traditional pattern of landlords and tenant farmers, today’s agricultural class structure is characterized by a hierarchy of agri-business firms (suppliers and exporters), medium-sized capitalist farmers and a mass of superexploited seasonal workers. The transformation of agriculture has produced a very uneven pattern of development: exports of certain fruit crops are expanding rapidly, while overall agricultural production has been stagnating. Expropriations have converted the peasantry into seasonal wage-workers and reduced their living standards, while concentrating income among business farmers and exporters.

In other sectors the New Economic Order has deepened and extended the patterns of uneven growth. In the regime’s first decade, hypertrophy of finance, commerce and speculative activity was followed by the financial crash of 1981–82 and a period of massive state intervention in which much of the private debt was taken over; footnote4 eventually private control was restored over finance, minus the presence of certain illicit actors. Manufacturing industry has undergone a general decline, accompanied by privatization, re-concentration and centralization of capital. footnote5 However, ‘deindustrialization’ has not been a linear and constant process. On the contrary, certain industries have in recent years demonstrated a capacity to modernize and recover market shares. Thus, the performance of the neo does not fit either the regime’s image of a dynamic, expanding inclusive pattern of growth, or the picture painted by its critics of a stagnant, exclusive crisis-ridden system on the verge of collapse. footnote6 What we have is a very contradictory process, highly susceptible to sharp cyclical variations with deeply polarized sectors and classes embedded in or excluded from the political-economic apparatus.

Pinochet’s first success has been the dramatic shift in the relationship between public and private sector, achieved through massive transfers and sales of public enterprises. At the same time, industry has moved toward greater concentration and centralization, while the networks of distributors have polarized between, on the one hand, modern supermarkets and giant retail outlets and, on the other, an army of small vendors recruited from the mass of unemployed factory workers. In terms of both income and the social relations of production, the neo has demolished all institutional and labour constraints on the authority of capital, atomizing the labour force and sharply limiting its capacity for organization. footnote7 Pinochet has effected a vast ‘income counter-revolution’, sharply increasing profits at the expense of wages and salaries. Chile today has one of the lowest wage/value-added ratios in all of Latin America (17 per cent of the cost of a product is attributable to labour) and the highest rate of profit. footnote8 In the countryside, the dominance of capitalist agriculture over the latifundia and cooperatives is based on the new chain of production and commercialization linking agri-business to the repressive apparatus of the state. The result is an unprecedented concentration of income in the hands of property-owners as against rural wage-labourers. This restructuring of the economy has been accompanied by a seemingly contradictory process whereby global decision-making, with all the means of allocative coercion, has been centralized in the state while the responsibility for the management of areas like health, education and local affairs has been decentralized to subordinate organs with scant resources. footnote9 In the context of ‘privatization’, then, the scope of local authorities has been further restricted.

Powerful linkages to the international market were a major element in the restructuring of the Chilean economy, facilitating the large-scale financial flows and impelling the decision to privatize the public sector and to shift production from manufacturing for the local market toward agricultural and mineral specialization for the export market. Soaring debt payments and international competition subsequently imposed a long-term need to secure foreign currency and to finance the inputs to sustain export growth. footnote10 The relative decline of the internal market, together with the exigencies of external competitiveness, have contributed to the income counter-revolution and the development of a seasonal or ‘self-employed’ labour force—labour witout social overhead costs for capital. The concentration of political and economic power in the dictatorial state has allowed it to weather the abrupt cyclical downturns that have accompanied the process of internationalization and restructuring and the rather unfavourable overall economic performance.

The patterns of crisis and recovery are evident in the progression of industrial employment from 554,000 in 1972 (prior to Pinochet) to 450,000 in 1975, 567,000 in 1981 and 374,000 in 1982, with the latest recovery bringing it back to 575,000 in 1987. footnote11 With the highest per capita debt in Latin America, Chile’s economy today depends more precariously than ever on outside funding and external markets—both of which in turn require wage levels to be kept below those of mining and agricultural competitors in the Third World. footnote12 The new social configuration which has taken shape in the Pinochet years links influential financial sectors, agri-business, medium-sized capitalist farmers and modernizing industrialists to overseas financial and multinational export sectors. This power bloc is backed by an army of civil and military functionaries dispensing regime patronage to marginal vulnerable groups. footnote13