The State of Democracy in Latin America: Post-Transitional Conflicts in Argentina and Chile

The State of Democracy in Latin America

This book presents a critical analysis of the contemporary democratic state in Latin America. In a shift away from standard analyses of political change during the 1990s, the authors present a more state-centric perspective that seeks to explain why transitions to democracy have failed to provide more political and social stability in the region. The book provides a theoretical analysis of the democratic state in Latin America and then explores the economic, political and social processes that followed democratisation and the economic reforms in the 1980s and 1990s. In-depth discussions of the state in Argentina and Chile provide more specific cases for the analysis of the regional experience of neoliberal economic development and liberal democracy. Both countries have experienced different fortunes during the 1990s and the nature and role of the state in each case has been of critical importance. The conclusions that are reached offer insights into wider experiences of democratic capitalist states. Of interest to those studying regional politics and globalisation, The State of Democracy in Latin America is a valuable addition to research and teaching resources in this area. Laura Tedesco is Senior Lecturer in Politics at the School of Development Studies, University of East Anglia. Jonathan R. Barton is Lecturer in the Instituto de Estudios Urbanos y Territoriales, Pontificia Universidad Católica de Chile.

The State of Democracy in Latin America Post-transitional conflicts in Argentina and Chile Laura Tedesco and Jonathan R. Barton

First published 2004 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Avenue, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2004. “To purchase your own copy of this or any of Taylor &Francis or Routledge ’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.”

© 2004 Laura Tedesco and Jonathan R. Barton All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-33903-7 Master e-book ISBN

ISBN 0–415–34811–0 (Print Edition)

For Alex and Daniela

Contents

List of figures and tables Acknowledgements Introduction: The state of democracy A time of uncertainty 1 States as conflict 6 States in transition 8

ix x 1

1

Conceptualising the state The historical development of the state 14 The theoretical development of the state 19 The state in contemporary debates on Latin America 31

14

2

Perspectives on the Latin American state The roots of the contemporary state 45 The emergence and collapse of bureaucratic authoritarianism 54 The emergence of the New Liberal Consensus 62 The democratic state of the New Liberal Consensus 65 Economic and social consequences of the New Liberal Consensus 72

45

3

The unfolding of Argentina’s political collapse and social decay Transforming social relations during the Proceso 91 Governing after the military 95 The Menem years 104 Menem’s economic revolution 106 Political coalitions 118

91

viii The state of democracy in Latin America Sixteen years on . . . 124 The Alianza government: A political disaster 127 The legacy of the politics of informality 134 In search of the post-transitional Chilean state A transitional state or a neoliberal state? 146 The unholy alliance: The generals and the state 150 The form of the state: An alliance of the élites 155 The legacy of dictatorship and the challenge of transition 166 The 1999–2000 presidential elections: The battle for the centre ground 173 The state as social conscience 178 The Chilean state and the question of hegemony 183 A consolidated New Liberal Consensus 190

145

Reflections on the contemporary Latin American state

202

4

Bibliography Index

213 228

Figures and tables

Figures 1 2 3 4 5 6

The interrelated nature of the state Social expenditure as a percentage of GDP Open unemployment rates in urban areas, 1990–2000 Interest paid and outstanding (US$ millions) Total disbursed external debt (US$ millions) Net foreign direct investment (US$ millions)

29 73 75 77 78 79

Tables 1 2

3 4 5 6 7

Survey responses to statement: Democracy is preferable to any other kind of government Survey responses to statement: In certain circumstances, an authoritarian government can be preferable to a democratic one Annual growth rate in total GDP Income distribution Gini coefficient Income shares per decile: Household incomes per equivalent adult Social welfare regimes in Chile

67

68 76 82 83 161 162

Acknowledgements

We began discussing the idea of this book in 2000 in response to the growing disillusion with democratic regimes and neoliberal globalisation in the region. The social forum at Porto Alegre, opposition to trade integration, social movements demanding land reform and indigenous rights, the highlighting of political corruption, attempted coups, armed resistance in Chiapas, state failure in Colombia, and financial contagion would all be potent themes of debate during this and subsequent years. Our early exchanges benefited from the participation of Alfredo Saad Filho, who we would like to thank for his valuable input. We would also like to thank Alan Angell, Nicola Philips and Peter Lambert for their participation in the Latin American Studies Association 2001 panel we organised in Washington DC. Here we presented some preliminary ideas on the contemporary state with reference to Argentina and Chile. The School of Development Studies at the University of East Anglia supported us by providing sabbatical terms and funds to finance the organisation of meetings to discuss the argument of the book. The British Academy generously financed the travel for our LASA 2001 panellists and our fieldwork trips to Argentina and Chile. In Chile, the political science library of the Pontificia Universidad Católica de Chile proved to be a rich resource for Jonathan Barton’s work, while the Universidad Torcuato Di Tella in Buenos Aires provided an excellent base for Laura Tedesco’s research trip. We would like to thank those institutions and all the individuals who generously gave us their time, insightful comments and ideas during interviews and other formal and informal meetings. The Centre for Latin American Research and Documentation and the European Review of Latin American and Caribbean Studies generously gave permission to publish extracts from the article ‘The 1999 Elections in Argentina: Change in Style of Substance?’ by Laura Tedesco and published in 2001. Cambridge Review of International Affairs also gave permission to publish extracts from Laura Tedesco’s ‘Argentina’s Turmoil: The Politics of Informality and the Roots of Economic Meltdown’, published in 2002. Also we would like to thank Claudio Nicholls for his creative inputs into the figures and cover page, Meera Warrier for her editorial help, and

Acknowledgements xi Lisa Hyde and Sally Green from Frank Cass for their assistance and tolerance. Finally, and most importantly, we thank Richard and Nancy who gave us the most important ingredients for all undertakings such as this: time and patience. Without the generous provision of both, our ideas would not have reached the printing press.

Introduction: The state of democracy

A time of uncertainty Political crisis in Argentina and Venezuela, social mobilisation in Mexico, Brazil, Ecuador, Peru and Bolivia, and state failure in Colombia. This is the Latin American political landscape at the beginning of the twenty-first century. There are currently few countries in the region that can be described as increasingly stable; the cases of Chile, Costa Rica and Uruguay may be the exceptions that prove the rule in this regard, although they are not without their internal divisions and conflicts. This lack of stability can be explained to a large extent by the considerable social, political and economic upheaval that took place across the region during the last quarter of the twentieth century. Following a period of state-led agricultural transformation and industrialisation during the middle decades of the century, the continent was dominated by the strategies of militarism and economic neoliberalisation during the final decades. Both of these strategies gave rise to major reconfigurations in the social relations of Latin American societies. Rather than a period of certainty and stability, the last twenty years have witnessed new forms of organisation by state institutions and civil society and new sources of antagonism and unrest. The ideological challenges presented by the political and economic strategies imposed during this period were at their most dramatic following the debt crisis triggered by the Mexican default in 1982, and during the ‘lost decade’ of conflict in Central America during the 1980s. The debt crisis led to an intensive process of ‘opening-up’ of the economies and societies of the region, using the same formula that had been applied in Chile as early as 1975 under the Pinochet regime. The shifts away from authoritarianism to democracy, and from Import Substitution Industrialisation (ISI) to neoliberalisation have provided the dominant backdrop to Latin American social change since the 1970s. The authoritarian regimes in the region left deep scars on society, while the liberalisation process has been wide-ranging and dramatic in its impacts on the livelihoods of Latin Americans. Labour flexibilisation, privatisation

2 The state of democracy in Latin America of public enterprises, and low regulation environments have all contributed to new national and international migratory trends, new geographies of wealth and poverty, financial crises, and passive and armed resistance. The social structures of Latin American societies have adapted to these new realities, with different social groups being affected in quite distinct ways (whether broken down by class, income or identity), as the changes have been accommodated, challenged or resisted. It is in the realm of these changing social relations that the heart of Latin American development beats. It is also here that the political organisation of society and ideas about stability and crisis can be sought out; therefore it should not be surprising that here too lie the roots of the Latin American state. Beyond a reading of the state that focuses purely on formal institutions, such as government, bureaucracy, judiciary and the security forces, it is necessary to look at these institutions as manifestations of social processes. In this way they can be understood as being created and recreated by the underlying social relations of society. These social relations are themselves changed by the political and economic impacts of subnational, national and international shifts in ideologies, policies and activities. However, it must be recognised that this is a synergistic process rather than one that operates purely in a top-down manner. Social mobilisation is the clearest example of how bottom-up organisation can bring its weight to bear on political and socio-economic change. Social mobilisation and resulting social movements are, in most cases, products of changing social relations through which there is resistance to a dominant political or economic strategy, e.g. authoritarianism or neoliberalism. There has been strong social mobilisation across the region, not only in the process of destabilisation of the authoritarian regimes established during the 1960s and 1970s, but into the period of democracy, in opposition to many of the dominant features of neoliberal development and the inherent weaknesses of contemporary democratic regimes. Latin American social movements are operating not only at domestic levels, e.g. the streets of Caracas (against President Hugo Chávez) and Buenos Aires (against the corralito1 of banking accounts), but also through international organisations, e.g. the Porto Alegre Social Forum, which have become contemporary manifestations of disaffection with neoliberal economics and particular forms of liberal democracy. Many of these movements have demonstrated an increased tendency towards direct action. It is this that, on the one hand, gives voice and a profile to social groups that have been negatively impacted by recent changes in socio-economic conditions, yet also gives rise to uncertainty and instability since alternative means of expressing discontent with, or support for authority have become more mainstream (on the left and the right), challenging traditional political institutions and forms of ‘doing politics’. Much of this change can be explained by the failure of democratic state institutions to respond to changes within society and to move beyond the

Introduction 3 vestiges of authoritarian state organisation. For example, even those individuals who have pretended to be more socially progressive in their leadership have replicated the authoritarian methods of previous dictators and juntas. Peru’s former president Alberto Fujimori and Venezuela’s Hugo Chávez have both exercised extraordinary powers over the elected congress to push their agendas forward: in the case of Fujimori it was to overcome opposition in congress, while for Chávez it was to institute a new ‘revolutionary’ Bolivarian constitution. The authoritarian past has also been carried into democracy in a very apparent way. In some cases, military officers have been returned to power through the ballot box, such as Hugo Chávez himself (February 1999), Hugo Banzer in Bolivia (August 1997), and Lucio Gutiérrez in Ecuador (January 2003), while in Chile General Augusto Pinochet remained as Commander-in-Chief of the armed forces until 1998.2 While considerable optimism accompanied both the trends of democratic transition and economic liberalisation following the debt crisis, it is unclear whether either has led to an improved quality of life for the majority of Latin Americans. Some indices of poverty (the percentage of indigent poor, for example) have been reduced, yet there are more poor Latin Americans each year and inequalities remain the most severe in regional comparisons. Violence remains at critical levels despite the termination of many civil conflicts. Indicators of health and education have improved only slowly. Vulnerability to natural hazards remains high. Meanwhile, the spectres of political discontinuity and social unrest are as vivid now as they were twenty years ago. In the face of these grave concerns, this book engages with the nature of the Latin American state. The state and its role in social change has been marginalised as a theme of academic and political discussion in recent years since the analysis of the institutions of the state has been subject to a process of discursive and active technification. There is an explicit focus on state institutions as if they were enterprises. Modernisation, rationalisation, and efficiency have become the buzz-words of contemporary state reorganisation. What is missing from this perspective is a broader interpretation of the state, which takes us beyond institutional formations and functions. In the following chapters, we will develop an argument that stresses that contemporary Latin American development requires a shift away from functionalist and rationalist views of the state. The argument is based on a conceptualisation of the state as a multidimensional construction, and that an understanding of social change requires a more sensitive interpretation of the social relations that can be found in this construction. The dimensions of the state that are highlighted here are those of the state as an overarching ‘idea’ of social organisation, of the state as a ‘social contract’ that provides boundaries and defines practices within which social relations are shaped, and the state as ‘institutions’ of management

4 The state of democracy in Latin America and control. It is almost always the institutions that have provided the focus of recent studies of the Latin American state, yet it is almost impossible to interpret these structures without the context of the social relations and consequent power relations that lie behind them. It is the intention of this book to analyse the state as a totality that includes social relations, institutions, values and interests. Our aim is to bring the analysis of the nature of the state back into the debate on Latin America’s political, economic and social processes. Recently, this debate has been mainly focused on democracy as a political regime and its conflictive relationship with economic restructuring. The argument provided here is also an attempt to reassert the continuing dominant role of the state, despite arguments to the contrary. Effectively there has been an unproblematised understanding of the state in recent academic and political debates. Whereas the developmentalist Latin American state, inspired by structuralism in the mid-twentieth century, involved the pursuit of full employment and ownership and control over strategic sectors and utilities, the contemporary neoliberal state involved major privatisations and formal labour rationalisation and flexibilisation during the 1980s and 1990s. This situation has led to a starkly contrasting landscape of power and control over socio-economic change in 2000 as compared with 1970. This book provides a discussion of the nature of the state in the light of these intervening decades of economic restructuring, militarism and the returns to democracy. We argue that it is the state as an idea, a social contract and a set of institutions that provides the key to understanding the political and economic processes of change. In order to understand the consequences of the almost parallel processes of formal democracy and economic restructuring in Latin America, we need to look at the dynamics of social relations and their impact on the state form. With these objectives in mind, Chapter 1 provides a review of the theories that are relevant to our analysis of the state, followed by a discussion of the state as a form of social organisation (the idea of the state), as a social contract, and as a set of institutions. It is this three-dimensional view of the state that is central to the argument and the chapters that follow. Chapter 2 views twentieth-century Latin American development through the lens of the three-dimensional state, working towards an explanation of the current state of affairs in the region and the rise of what can be described as a New Liberal Consensus: the marriage of liberal democracy and economic neoliberalism following the end of the period of bureaucratic authoritarianism and dictatorship in the region. In Chapters 3 and 4, the cases of Argentina and Chile are presented to exemplify these changes since the end of authoritarianism. Both countries have experienced different trajectories during the 1980s and 1990s and they currently lie at opposing ends of the spectrum in terms of the perceived successes and failures of democratic capitalist states.

Introduction 5 Although Chile remains one of the most unequal societies in Latin America and suffered 17 years of violent repression, the vigorous process of neoliberalisation applied from the mid-1970s under the military regime and pursued under democratisation from 1990 has led to the country being hailed as the economic success story of Latin American development over the last 25 years. In contrast, Argentina experienced a process of democratisation and economic reform much earlier than Chile, from the end of the Malvinas/Falklands War in 1982. The governments of Raúl Alfonsín and Carlos Menem led to rapid economic and social change, yet there were underlying structural weaknesses that would be exposed in the late 1990s and lead to the decline and crisis beginning in 2000. The severity of the crisis is perhaps most graphically described through the demonstrations in the streets in Buenos Aires and the deaths, due to malnutrition, of children in Tucumán Province at the end of 2002. The two countries represent examples of success and failure, yet this is a simplistic reading of the situation since both exhibit similarities in that they are democratic capitalist states with high levels of socio-economic inequality, regional and urban-rural divisions, and recent experiences of repression and strong (if sometimes conflictual) relations between the political class and business élites. What these cases offer, in terms of the argument of the book, are different perspectives on the nature of the state and the existence of a New Liberal Consensus, and experiences of socioeconomic and political change that also resonate elsewhere in the region. The final chapter returns to the importance of the state in terms of understanding the current instabilities and vulnerabilities in the region, and highlights the need to take a different perspective on the state from the one that is currently most widely circulating in the region: the need for ‘good governance’ and the modernisation of state institutions through reforms aimed at delivering more efficient public services. The tridimensional state facilitates this broader understanding, and through its analysis it should be possible to identify more clearly the obstacles to democratising social relations in the region and moving towards a path of more egalitarian, inclusive development. The authoritarian legacy and weaknesses in establishing contemporary democratic states, as opposed to the institution of democratic state-institution regime types, explain the state of democracy. Democracy in Latin America has illusory qualities to the extent that it has failed to engender significant shifts in social relations in favour of socially excluded groups. Notwithstanding democratic transitions, there continues to be a dominant hegemonic bloc of political and economic interests at work in Latin American countries. The ideas and values of the élites are portrayed as national ideas and values, and democracy helps generate consent for the dominant development model and legitimacy for the élites managing and influencing the state-institution. At the same time, democracy holds out the illusion of transforming the social inequalities afflicting Latin American societies.

6 The state of democracy in Latin America The material presented in the book and the discussion that accompanies it is most closely focused on the experiences of the Southern Cone states, despite the fact that there are elements that are relevant throughout the region. The focus is very much linked to the notion of post-bureaucratic authoritarianism and the attempts to construct liberal democracies based on economic neoliberalism. The experiences of the Central American states are not dealt with at any length due to their different experiences during the 1980s in particular, but also during the 1990s, as efforts to move towards inclusive democracy were hampered by natural disasters, corruption and economic vulnerabilities. Chile and Argentina reflect the diversity of experience not only within the Southern Cone but across Latin America. Both countries have experienced very different political and economic impacts from the changes in recent decades. Social relations have changed significantly to adapt to the new realities in the labour market (formal and informal), in community life, and in the cultural sphere. Despite these differences, however, it is possible to formulate a more cohesive understanding of underlying features of these experiences from the perspective of the state and how it has been evolving and adapting since the 1970s. From this perspective, one can identify the factors that underlie the perpetuation of inequality, poverty and other social divisions, hence the vulnerability, insecurity and social cleavages that lead to instability and disaffection in Latin American societies. From the starting-point that most of the conflict within contemporary Latin American societies is a consequence of weak democratic forms and indiscriminate neoliberalisation, the book contributes to a growing and vital debate about the ideas and forms of the state that are relevant to inclusive and equitable development in the region in the twenty-first century.

States as conflict It is important to highlight the role of conflict in the shaping of states. These conflicts are born of struggles within the social relations that underpin these states. The struggles revolve around human rights and social discipline, labour rights and remuneration, property rights and resourceuse rights, the provision of basic needs and access to health and education, and interpersonal relations and crime. These numerous sources of conflict lie at the heart of societal (in)stability and may lead to negotiated or violent outcomes. They are a constant within societies and the outcomes may lead to greater or less stability, increased or reduced levels of marginalisation of particular social groups, and more or less polarisation along lines of economic and social opportunities. Latin America as a continent remains highly divided along many different axes; income, race and gender are those most commonly highlighted. With extremes of wealth and poverty, and a particularly resource-dependent

Introduction 7 insertion into the global economy that harks back to the colonial period, one can draw a line of continuity between the political economy of the twenty-first century and that implanted during the sixteenth century. Of particular interest is how many of the social divisions, thus social relations, have also been maintained alongside this economic development trajectory. An understanding of the democratic phase of late twentieth-century Latin American capitalism depends less on a reading of neoliberal economics and far more on the context and structure of social relations, and the state that manifests these relations and, in turn, shapes socio-economic relations and political opportunities and obstacles. Latin American independence from the early nineteenth century was characterised by its relations with the US and Europe, in particular the merchant houses and primary exporting companies that invested in the continent. A strong model of export-oriented capitalism was established and this was exemplified by the perpetuation of social relations of landowner and rural peasant class, mine owner and working class, etc. This dominant feudal then capitalist state formation continued into the twentieth century and was deepened and adapted in many aspects, such as with the urbanisation process linked to industrialisation, and agricultural modernisation and rationalisation in many areas. During the twentieth century, the model was challenged by left-leaning ideologies on the one-hand, in Cuba under Fidel Castro (1959–), Chile under Salvador Allende (1970–73), and Mexico under the Partido Revolucionario Institucional (PRI) (in the early decades), and by structuralist perspectives on the other, promoted by the economists of the Comisión Económica para América Latina y el Caribe (CEPAL), Raúl Prebisch in particular, and national interests focused on domestic market supply and protection from international trade and investment. The World Wars and the 1929 ‘Crash’ were key turning-points, as was the 1959 Cuban revolution and the US Alliance for Progress programme of the 1960s. Much of this thinking related to control over the state, as an idea of suitable structures for development, of equity and justice, of struggles between labour and capital, and over institutional control in particular, especially the role of the military and the exercise of social discipline over society. It was only during the middle decades of the twentieth century that a serious attempt was made to shift the socio-economic development of the continent away from the export-oriented model. The ISI model promoted by the structuralists of CEPAL attempted to broaden the economic base of the countries of the region and reduce the dependency on the manufacturing imports from developed economies which were giving rise to deteriorating terms of trade. What is important in terms of the ISI model and its ultimate failings during the 1950s and 1960s when the internationalisation of production led to a new dependence on multinational capital in sectors such as automobiles and pharmaceuticals, is that these economic changes were accompanied by deep-seated changes in Latin American

8 The state of democracy in Latin America societies. Social relations changed wholesale as rural-urban migration increased in the post-war period and new forms of working became commonplace, e.g., Fordist and Taylorist manufacturing systems and increased technification of agricultural systems. The politics of these changing economic models is also essential to understanding social relations and changing views on the nature and functions of the state. The state has been central to almost all of the pivotal political metatheories of development, whether capitalism, socialism, communism or religious governance. It has been viewed as central to all social actions, within command economies such as Cuba, or Chile under Allende for example, or problematic from an economic perspective (distorting markets through subsidies and other interventions) yet crucial from the perspective of social discipline to facilitate increased market liberalisation (minimising opposition to labour rationalisation and flexibilisation, for instance). The state adapted as a consequence of these changing social relations and the foreign direct investment that turned the newly industrialising Latin American economies back to more foreign- rather than domesticallygenerated growth. This would be further exacerbated by the changes provoked by neoliberalism that were piloted in Chile (from 1975) before becoming more mainstream under Reaganomics and Thatcherite economics, and within the thinking of the decision-makers of the Washington Consensus from the 1980s. Rather than the state-oriented development of the middle decades of the twentieth century, the ebb and flow of economic development thus social relations would become determined once again by international markets, and capital movements by agents external to the continent. A focus on social relations, rather than failing financial markets per se directs the observer towards issues of poverty, instability, social exclusion and violence in preference to broad macroeconomic variables. It is these issues that became more pervasive within the perceptions and realities of most Latin Americans during the late twentieth century.

States in transition It is apparent that the dominant development model applied across Latin America since the debt crisis has led to mixed fortunes. This model was grounded in neo-classical economic theory and was disseminated throughout the continent during the 1980s and 1990s through the activities of the international financial institutions – IMF, World Bank, InterAmerican Development Bank – globalising financial and commercial enterprises in the private sector, and through the encouragement of successive governments in the region. There was also a strong political dimension to this process, with US administrations in particular promoting this economic model most vigorously. The model has been termed

Introduction 9 neoliberalism and the organisations that encouraged its dissemination most actively became known as the Washington Consensus. The neoliberal model was based on the benefits accruing from market liberalisation, privatisation of state-owned assets, a rationalisation of state institutions, and a shift towards a culture of entrepreneurialism, individualism and competition. On a political regime level, a process of democratisation accompanied this model. During the 1980s, bureaucratic authoritarianism became less easy to sustain in the face of economic crises, international human rights activism and increased criticism of US foreign policy in the region: the Central American region was returned to a semblance of civilian government following the Esquípulas agreements in 1987, ending the so-called ‘lost decade’ of development; juntas and dictators were outsted in Argentina, Bolivia, Brazil, Chile, Uruguay and Paraguay; and democracy was hailed as the political model that would bring social and economic progress, and stability to the region. Over a decade later, there are many question marks remaining about the current state of Latin American affairs. What is clear is that neoliberalism and democracy have been embraced by Latin American governments, but that the fruits of development have been poorly distributed, and that the historical ills of Latin American societies – inequality; instability; the vulnerability of marginalised social groups; cultural homogenisation; and environmental degradation – remain as pervasive as ever. A reconceptualisation of the contemporary, democratic state in Latin America requires an historical perspective of change over time and a perspective on the state that presents a flexible rather than static picture. The idea of the state is the point of departure for this picture. Although the state has become central to understandings of modern societies, it became prominent in Latin America only from the sixteenth century through the administrative structures of the Vice-Royalties, Capitanias and Audiencias. These institutions were designed to represent the Spanish Crown on the continent. However, the distance between administrator and monarchy led to quite autonomous entitites developing, despite the sophistication of the bureaucratic apparatus. The chief administrators became effective heads of state in the regions where they operated. Prior to the colonial period, the pre-classic, classic and post-classic societies in the region were closely wedded to strong theocratic systems that, although they operated administrative systems, were subject to the overarching power exercised by the living deity that was the spiritual and political leader. Consequently, there was little independence of the administrative, bureaucratic system from the spiritual one. This was similar in many ways to the monarchic traditions of Europe at this time. It was with the expansion of empire that the ability of the monarch, and his or her courtiers and mandarins, to exercise absolute authority became jeopardized in many cases, surrendering a great deal of power to administrators operating at a distance.

10

The state of democracy in Latin America

The modern Latin American state dates from independence with the overthrow of the Iberian imperial system. Although many of the colonial traditions were continued in similar forms under the new creole élites, there was an attempt to construct a new reality that was considered to be sui generis rather than Iberian. The idea of the independent state was one that was devised by oligarchic interests that became prominent during the early nineteenth century. In most cases, the heroic figures of independence, such as Simón Bolívar, José de San Martín, Bernardo O’Higgins and José Artigas were soon forced from power by élite groups which had generated strong positions of power during the colonial period. What independence meant for these interest groups was that they could trade with different countries rather than be locked into commercial relations with Spain, or Portugal in the case of Brazil. In most cases, a small number of families in each country wielded considerable power through ownership of land and control over economic activities. Although they often came into conflict during the period of formation of the independent state, the idea of the state and the social relations that were created were very much representative of their élite interests. These social relations were a legacy of the colonial period, feudal in nature and based on a tradition of caudillismo.3 In turn, the social values that arose were those implanted by the colonial authorities, dictated by the Catholic Church, such as piety, conformity and respect for hierarchical authority. Although the institutions of the state clearly had to change in the absence of the colonial authorities, the structures remained similar in many ways and contemporary Latin American societies reflect all the traditions of Iberian colonialism. Over a hundred and fifty years of independence have given rise to changes of a transformative rather than transitional nature. The power of theocratic rulers or monarchs, and the oidores (commission members) of the Audiencias were replaced by the dynamic power relations between interest groups within society, broadly reflecting social relations based on class. The interplay of élite domestic interest groups and foreign capitalists would dominate the formation of the Latin American state during the nineteenth and early twentieth centuries. These élite groups dominated commercial and political affairs, leading to a further concentration of wealth in the hands of a limited number of families. Societies were highly unequal, with rural peasantry and (with growing urbanisation) the urban poor providing the labour for this mercantilist development model. The principal struggles to reorganise social structures and challenge the social inequalities came about following the proletarianisation of the work-force in the mining and manufacturing sectors. The rural poor had been closely tied to systems of tribute and other semi-feudal4 forms of employment, and through these social relations were embedded within clientelistic hierarchies and dependent on patronage. With the growth of a formal wage-earning labour force, these rural social relations (as the

Introduction 11 dominant social structure) were challenged. The organisation of the nascent working class and the links with European socialism and communism gave rise to a new political force in Latin America that would threaten the accumulation strategies of the domestic élites and foreign capitalists by arguing for greater inclusion and a more even wealth distribution. This led to the increased use of social discipline by the élites in their joint roles as commercial entrepreneurs and political class, in order to maintain control over labour and to reduce the threat to the extant social order. The development of security forces – army and police – for the defence of national borders and the maintenance of civil order meant that these élites were able to defend their interests against those who sought to challenge them. Throughout the twentieth century, the military arm of the state would be regularly employed to ensure the perpetuation of the élitist model of capital accumulation, implanted initially during the colonial period. However, the twentieth century would also witness a broadening of the political spectrum away from the traditional parties of liberalism and conservatism that had reflected different perspectives amongst the élites during the nineteenth century. Representation of working-class interests became more widespread through increased suffrage and nontraditional political parties, and political divisions would become increasingly marked by external events such as the Russian Revolution, European fascism, the Spanish civil war and the World wars. These extreme rightand left-wing ideologies would also take root in the continent during the Cold War, leading to the Cuban revolution and the rise of authoritarianism to counteract left-wing mobilisation elsewhere in the region. These political processes would shape social relations as strongly as the externally oriented accumulation strategy – neoliberalisation – that would supplant the weakening ISI development model of the 1950s and 1960s. The idea of the bureaucratic authoritarian state advocated by Guillermo O’Donnell in 19735 very much encapsulated a particular view of Latin American social change during the 1970s and 1980s. This state form involved the suspension of pluralist democracy in the face of growing mobilisation in favour of more egalitarian social relations organised along socialist and communist lines. In its place a regime form defined by military management of the economy and the exercise of social discipline was instituted in order to repress alternative political activities and to ensure the acquiescence of society in the face of rapid changes in the labour market through a lack of representation and information. This state model defined the period until militarism waned in favour of electoral democracies once again. The return to democracy was a marked feature of Latin American politics during the second half of the 1980s and 1990s and the literature that describes and analyses these changes emphasises the term ‘transition’.6 Initially the literature focused on the mechanisms by which the handingover of power took place and the drivers that led to these circumstances.

12

The state of democracy in Latin America

This was followed by discussions of the economic models that were instituted and how these could lead, or not, to the deepening of democracy and the (re)legitimisation of state structures tainted by the authoritarian legacy. A further phase of more recent analysis has turned its attentions to the failures of the new democracies to realise the hopes and expectations that much of civil society had invested in them. These discussions, relating to the quality of democracy, have put the new pluralist systems under the microscope in order to investigate the substance of democracy rather than the formal adoption of (electoral) democracy per se. This is particularly important when one reviews the wide-ranging experiences of democracy in Latin America during the 1990s, for instance, the Bonapartist populism of Alberto Fujimori in Peru, Carlos Menem’s personalism in Argentina, and the liberal reformist tendencies of Patricio Aylwin and Eduardo Frei in Chile and Fernando Henrique Cardoso in Brazil. Of particular importance are the ways in which these differing democratic administrations have managed social and political opposition, and how they have supported particular economic strategies and economic interests whilst in power. Alongside the trend towards democratisation, there has also been considerable mobilisation and political activity during the 1990s, although around largely different themes. Examples include the Movimento Sem Terra in Brazil in pursuit of land distribution, armed resistance in Chiapas, armed struggle in Colombia, an alliance of military and indigenous interests in Ecuador to topple the president in 2001, indigenous protest (the Mapuche) in Chile, and social opposition to privatisation and labour flexibilisation, e.g. water privatisation in Bolivia. Much of the discussion about these manifestations of democratic society has been analysed within the rubric of the relationship between political institutions and markets. Since neoliberalisation became the metanarrative of Latin American development from the early 1980s,7 it is not surprising that explanations of change should lie in the impacts of markets, issues of ownership and labour flexibilisation. However, while it is possible to explain much of this change by looking at the so-called Washington Consensus, and the policies encouraged in the region and their impacts, it is also necessary to engage with the historical social relations and state forms that have been adapting to the transition from authoritarianism to democracy. Rather than engage directly with the transition and democracy literature, this book takes a broader view of Latin American political economy and argues that the nature of government and institutions of the state cannot be understood in isolation since they reflect social relations within society and are thus embedded within society. Consequently, a better understanding of contemporary Latin American political economy can best be derived from analyses that address broader changes in society and the social sectors that influence, and are influenced by those changes. The state cannot be understood solely in terms of the actions taken by those

Introduction 13 who manage state institutions. There is a background to these actions in terms of the social relations present within society and within state structures, the ways in which civil society sanctions or opposes these actions, and in terms of in whose interests actions are taken. It is these issues that lead to conflict and the suppression of conflict, either by the promotion of consent (to legitimise the actions of the ‘authorities’) or by social discipline (the repression of opposition). What is clear is that an understanding of contemporary social and political change in Latin America requires much more than a brief engagement with notions of transition and uncritical assumptions about democracy. In the same way, political and social issues cannot be resolved solely with more efficient markets. This time of uncertainty requires an elaboration of the state: as idea, social contract, and institutions, and how they synergistically relate to one another. The objective of this book is to provoke a debate about the nature of the state in Latin America after twenty years of democracy. Has democracy, as a political regime, created a democratic social contract and, thus, a democratic state? Are social relations in Latin America democratic, or do they reflect the authoritarian past? Is conflict managed democratically by the institutions of the state? Is democracy embedded in the institutions of the state? These are some of the questions that motivate the discussion that follows.

Endnotes 1 At the end of 2001, bank account holders could not access their accounts to remove money, and could only look on as their deposits dropped in value as the Argentine peso crashed. 2 In 1998, Pinochet entered the Senate as a former president. The 1980 Constitution that guaranteed this position (senador vitalicio) was passed by referendum (in a climate of hostility) during the period of the Pinochet regime. 3 Caudillismo refers to the power of the local caudillo, usually a landowner, over a local population. This localisation of authority was important since most people referred to a local figure of authority rather than one that was representative of a state structure, with which an ordinary citizen would have little contact or knowledge. 4 Ian Roxborough discussed the perpetuation of what he called ‘semi-feudal, semi-capitalist’ social relations in Latin America’s rural areas well into the twentieth century. In many cases, these social relations have persisted into the twenty-first century. See Theories of Underdevelopment (London: Macmillan, 1979). 5 G. O’Donnell, Modernization and Bureaucratic Authoritarianism: Studies in South American Politics (Berkeley: University of California Press, 1973). 6 Much of the debate was triggered by the ideas in Guillermo O’Donnell, Philippe Schmitter (1986) volume: Transitions From Authoritarian Rule: Tentative Conclusions About Uncertain Democracies (Baltimore: Johns Hopkins University Press, 1986). 7 See D. Green, Silent Revolution: The Rise of Market Economics in Latin America (London: Latin America Bureau, 1995).

1

Conceptualising the state

In order to conceptualise the modern Latin American state it is necessary to place it in a historical and theoretical context. State theorisation has a long history in Western philosophy and political economy, and ideas from both are important for the interpretation of current state formations in the light of longer-term changes in capitalist societies. One central theme in state theorisation, especially in terms of understanding the origins of the impersonal state, has been the notion of the social contract. A discussion relating to the social contract and how it plays a part in interpreting contemporary Latin American states is developed further in the following pages. The social contract is, however, only one theme within the state theory literature and it should be borne in mind that we do not attempt to discuss the full range of state theories here or to engage in a broader discussion of state theory per se. The intention is to apply a particular view of the state to contemporary Latin American affairs, on the basis that this view provides a more useful interpretation of how Latin American societies and their states are conceived and operate. This chapter initially presents a brief historical description of the development of the state, which is followed by a theoretical analysis of the state that leads to the particular argument that illuminates our perspective on the Latin American state. The third section discusses some of the main features of the Latin American state and thus contributes to the current debate on directions in contemporary Latin American politics.

The historical development of the state The modern capitalist state is a product of several centuries of development and adaptation. This long evolution has led to the emergence of diverse state forms and a multitude of arrangements in contemporary capitalist state formations. These arrangements are a consequence of highly diverse social relations and levels of societal organisation and control, of different state functions and of different institutional development patterns. It can be argued that capitalist states, a term which defines all contemporary Latin American states except Cuba, have similarities based

Conceptualising the state

15

on historical materialism, whereby social relations are very much defined by the ownership of the means of production. However, the contemporary realities of these states suggest that the picture is a complex one and that class-based analysis has to be sensitive to these complexities. It is this complexity that leads to the emergence of diverse social relations and state forms, and contains partial explanations for the changes that have been witnessed in recent decades, e.g. the shift from bureaucratic authoritarianism to liberal democracy, and the rise in popular mobilisation. To move towards an understanding of these contemporary variations within the Latin American capitalist state, it is necessary to contextualise these modern experiences in light of state theory and the historical development of states. Since Latin American state formation is most closely aligned with European state patterns due to colonial influences from the fifteenth century to independence, it is to Western Europe that one needs to turn in order to uncover the roots of the nascent Latin American states from the early decades of the nineteenth century. Since these formations are recent in historical terms and are derived from Western European experiences, it is unnecessary to delve deeper into pre-state formation histories such as tribes without rulers, tribes with rulers (chiefdoms), city states, and early empires to establish a view of the Latin American state of the present day.1 Prior to the French revolution and the challenge that this generated for the European monarchic regimes, European society was dominated by social relations based on landed titles and an aristocratic élite that generated its wealth from a feudal system of production and social organisation. It is within this feudal system of monarchs and aristocracies that the origins of the modern state can be found since one of the first functions of the early state was to administrate on behalf of the monarchy. In essence, its raison d’être was to ensure the generation of wealth for the monarch. This wealth was managed in order to wage war and defend sovereign territory, but it was also destined for consumption, as can be seen in the elaborate architecture, furnishings and arts of the European royal families and their aristocratic allies. Two worlds co-existed at this time: a small élite bound by their landed wealth and blood ties, living in splendour; and the vast majority of the population working in conditions of poverty to create this splendour. However, the feudal system of patronage and the control over social discipline exercised by landowners led to a condition of acquiescence whereby there was little opposition to the social relations that were in place. There were examples of popular unrest throughout the continent. However, these were brutally suppressed for the most part, and it was not until the French revolution that a major shift in power relations between monarchy, aristocracy and civil2 society (defined in broad terms as the individuals or groups operating in the social space between the state and the family)

16

The state of democracy in Latin America

was achieved, leading to the development of a modern, post-monarchic state formation. The bureaucratic function of administration on behalf of the monarch or religious leader was enhanced rapidly from 1500 by the print revolution and the spread of literacy. Although literacy would remain socially exclusive for several centuries, the print revolution enabled more widespread communications of regional and national affairs. As such, it was important in extending the influence of those in power, by defining social organisation and notions of commonality, also as forms of social control, e.g. law and order. For example, Benedict Anderson3 emphasises that the invention of print technology helped to develop ideas of nationalism and shared identity within sovereign states; Martin van Creveld4 builds on this idea by pointing to the fact that the quantity of paperwork increased with this print revolution, and this in turn led to the development of a modern bureaucracy to manage it.5 These developments can be described as the emergence of the state as a set of institutions. The number of bureaucrats required to manage this paperwork on behalf of the monarchy transformed the concept of the monarch embodying the state and its will within a highly personalised state. Louis XIV immortalised this view with the statement: l’état c’est moi (I am the state). This growth of an administrative cadre to support the monarch’s management of society led to important changes in the balance of power within countries and by the 1700s, the state had became a more impersonal institution. This impersonal state was no longer fully dependent upon, or subject to the monarchy, and was no longer identified solely with the monarch.6 The objectives of the new state form would change to reflect this shift in character. While the early state had been created to defend the power of the monarch by exerting influence and authority internally and through war with external or internal opposition, the impersonal state began performing these functions in its own right, exerting a dominant influence over the sovereign territory and waging war in its own defence. This marked the end of a period when war was considered a personalised affair between monarchs and seigniorial élites. It was now carried out between nation-states, brought together through state structures of order and control, also bound by myths and iconographies of social cohesion emerging from early nationalism.7 The establishment of regular armed forces, the police and prisons followed this transformation in order to pursue these dual objectives of order and control. These tools of internal and external domination would become the earliest features of the exercise of state power and their maintenance would require the expansion of state functionaries beyond purely administrative roles. The key consideration here is that this process gave rise to the emergence of authority that was no longer exercised by the absolutism of a monarch. Individuals from civil society rather than royalty were becoming increasingly influential in

Conceptualising the state

17

terms of the exercise of power, particularly in terms of social control. This in itself marked a sea change in social relations. Rather than the marked clear division in social relations between the populus and the monarch, an intermediate tier of power began to emerge that would provide a link between the two poles. The evolution of this impersonalised state was still closely aligned with élite interests. For instance, the initial priorities of state activities were the defence of life and property, primarily of the monarch and aristocracy, secondly of the wider population. Nevertheless, over time the institutions that would be created to manage the impersonal state would become gradually more autonomous and a separation of powers would emerge between this state form and the monarch with his or her own personal bureaucracy. The most important aspect of this process was the shift in authority. Whereas the monarch or religious leader could traditionally be defined as the national figurehead and most powerful actor in domestic politics, the creation of state institutions at least partially independent from monarchy and religion would inevitably lead to conflicts in order to control those institutions and debates over rights of control and the role of the state itself. A consensus around control by right (conferred by deity or line of succession) had changed to a condition of conflict over state control by political, economic and social actors. The state was changing and was being socialised in the sense that it was no longer considered merely an extension of monarchic power. Civil society had become more organised within the political space provided by a more independent state, and was more active in the politics of it. This historical materialisation of the idea of the state reveals some of its most dynamic features. The early institution created to defend the monarch had gradually become a set of institutions that reflected the broader social relations within a territorial space at a particular moment in time. The values imparted by this impersonal state were also important in that they were less élitist than those of the monarchist regimes. Consequently, notions of citizenship, social inclusion and equality became recognised as significant themes around which the state could organise itself, and institutions would be created to advance these values. The historical development of this emerging state form has been analysed, at that time and more contemporarily, through the lens of the social contract – an unwritten agreement between those that manage the institutions of the state and civil society, effectively establishing the rights and duties of each party. The evolutionary process of the state as described above can be summarised as follows. The primary objective of the early state was to wage war, and this need to wage war helped to centralise power in the hands of the monarch (by establishing external threats to domestic security, and by facilitating the raising of revenues that were managed by the monarch). The impersonal state came to replace this monarchical power. Through a tautological process, this new state form established itself in order to be

18

The state of democracy in Latin America

able to defend its autonomy (from the monarchy and external threats). Through revenues and other forms of social control, it was able to generate the resources required to achieve this objective. The state created and developed elements or tools that facilitated the deepening of this process of state formation. These included the development of infrastructure and transport, communications and weaponry technologies. Although these had played an important part in the consolidation of monarchical regimes, the impersonal state became more proactive in developing these technologies since they facilitated the process of the construction of the nation-state. In contrast to the personalism of the monarchy, the impersonal state had to create sources of power and a social order that would be acceptable to social groups across civil society. The idea of nationalism, and the strong political movements associated with it, became pivotal elements of this process during the eighteenth century in particular. By acquiring an ethical rather than purely functional dimension, the state became gradually more multidimensional in form; administration and bureaucracy were combined with notions of identity, belonging and themes of social development. The nation-state sought to encourage consensus and unity across civil society through these activities, and through this process the state came to dominate within national spaces, replacing or at least competing with other sources of power such as the church, the monarch, and the landed and commercial élites. The ways in which the state was able to become dominant included the creation of new sets of values, interests, norms, institutions, rights and obligations. Although it can be argued that élite groups within society still controlled production through ownership, and thus exercised power over most of civil society through exploitative labour relations, there is a case to be made that the impersonal states did have a closer engagement with wider society than the monarchical regimes that preceded them, and that new political spaces were opened up to question and challenge existing social relations, particularly the most exploitative ones. The expansion of state education, the regulation of health and working conditions, and the public dimension of social welfare all point in this direction. Herein lies the debate about the nature of the capitalist state that had become the most prevalent form of the impersonal state by the midnineteenth century. Essentially, this process of change over time – the passage from the l’état c’est moi to the impersonal state – reveals the shift from the private power of the monarch to more expansive notions of the public sphere. This public sphere was managed increasingly by individuals from within civil society (although the legacy of élite involvement prevailed to a large degree) and the state would become increasingly important in peoples’ daily lives as institutions and activities spread across political, economic and social areas. This process of expansion, sustained by technological developments, was accompanied by a concentration of power in the hands of the managers of

Conceptualising the state

19

the institutions and the bureaucracy of the state. The need to organise state functions more centrally for reasons of decision-making, revenue-raising and national-social control led to this process of power concentration, yet civil society was still relatively poorly organised in political terms in order to create systems of checks and balances, or strong representation of diverse interests. Consequently, more functions were relegated to the institutions of the impersonal state: the defence of life and property against external and internal enemies; the administration of life and property through the imposition of law and order; and the provision of jobs, education and health care. The state as an institution increased its objectives and functions through the acquisitive power amassed through this process. At the same time, the social relations of the state were changing rapidly to reflect the impacts of new technologies in production, communications, transportation and weaponry. The social contracts of the state were changing to reflect this dynamic change in social relations. As such, rights and responsibilities were formulated and reformulated, both informally (through social norms and expectations) and formally (in the legal arena). While these changes meant that civil society was surrendering some functions to state institutions, it was also acquiring some rights in this process. These are highlighted in Thomas Marshall’s8 analysis of the development of the idea of citizenship and the ways in which citizenship impacts upon social relations and systems of authority, order and control. In light of these developments, the state can be viewed as an historical process of conflicts over the creation and transformation of rights and obligations and over the institutions that impose them.9 In different countries across the world, economic and social development from the seventeenth century onwards would reflect this conflictual process in all its diversity. These processes, linked to the values and beliefs embodied in catholicism and the economic and political interests of Spain and Portugal, provide the basis for understanding the idea of the state that would emerge in the post-independence Latin American nation-states from the early nineteenth century.10

The theoretical development of the state The historical discussion above provides an insight into the emergence of the impersonal state in Europe. It was this state that would become the dominant form of social organisation in Latin America as well. In essence, the evolution of the impersonal state was a struggle for power, initially between the monarch and civil society, and latterly between groups seeking to influence the values, formations and directions of the modern state. This struggle for power and the conflicts that arose can be interpreted in many ways, and state analysts have provided numerous theoretical frameworks since the seventeenth century. The fact that the modern state has been analysed in many different ways gives rise to

20

The state of democracy in Latin America

considerable complexity in understandings of the state as an idea of social organisation – over how it is constructed and who controls it, and in terms of what its functions are and should be.11 Consequently, theorists on the left and the right have attacked the state as a social institution. Many on the left of the political spectrum are critical of the state as an instrument of power exercised by élite interests for social control and the perpetuation of economic domination by the owners of the means of production. Many on the right, in contrast, criticise the state for its social and economic interventions, distorting markets and emphasise the role of the ‘invisible hand’ in shaping societies according to peoples’ abilities and their freedom to take risks, to create and innovate, and to pursue avenues of capital accumulation that lead to broader wealth creation. Despite these two views, the state persists and plays a central role in all modern societies. The central role of the state as an institution has even led some theorists to take a third position, claiming that it has power in its own right and that it is not necessarily swayed by economic interests or civil society. This view of a strong decision-making élite of state managers and the autonomy of the institution vis-à-vis other influential actors in society creates a sharp division between state and society, and leads to their analysis as distinct and separate entities.12 The argument developed here suggests that there is no division, and that managers in the state institutions do not act in an autonomous way. To move beyond these critical and polarised versions of the state debate, we advocate a conceptualisation of the state that is more sensitive to its contemporary manifestation in Latin America. Rather than focus on the state purely as a set of institutions, e.g. the executive, legislature, bureaucracy, judiciary and security forces, thus separating the state and civil society, our conceptualisation is multidimensional in scope. The state is understood here as a complex and dynamic trinity: an abstract idea (stateidea), a social contract (state-social contract), and as a set of institutions (state-institution). Each of these dimensions will be discussed in turn. However, it should be noted that they are interwoven. The state as a set of institutions is indivisible from the social relations that give rise to those institutions, which legitimise them through support (a social contract between civil society and those that manage them) or undermine them via various forms of opposition. Also, the state as an idea is the very startingpoint for the existence of state institutions. Why is there not a return to monarchical regimes or even tribal societies in Europe and the Americas for example? There is clearly an historical acceptance of the idea of the state as a form of social organisation.13 It is merely the case that individuals and social groups prioritise different elements of the state form as being a justification for its existence and its authority, whether to wage war, to promote social welfare, or to facilitate capital accumulation. It is for these reasons that the state-idea persists within modern societies, synergistically reflecting the social relations of the day through a set of institutions.

Conceptualising the state

21

The state-idea is the most abstract level of the conceptualisation of the state and is, as such, the point of departure for this discussion. The notion of the state as an idea refers to the Kantian concept of an idea whereby it exists as an ideal that does not necessarily have an historical manifestation in its pure form. Kant wrote: ‘The perfect state may never, indeed, come into being; none the less this does not affect the rightfulness of the Idea, which, in order to bring the legal organisation of mankind ever nearer to its greatest possible perfection, advances this maximum as an archetype.’14 The idea of the state might not materialise as an actual state, but the idea exists as a rational creation that can change over time. There has been, through the centuries, a transformation of this idea of the state as a result of the interaction between the rational creation and the historical manifestations of this ‘Idea’. This interaction is significant since it emphasises that the state is a social construction and that its existence need not be presumed. The resulting forms of this construction therefore follow from this idea and are based on historical precedents and newer rational views on how the state form can be adapted to ensure its effective operation according to goals or mandates that are established, e.g. those laid down in a constitution. These precedents and views can be devised both by those who manage the state institutions, and by civil society in terms of what they desire of the state institutions with regard to changes in social relations. The decisions regarding the outcomes of this process of devising the manifestations of the state (an on-going, dynamic affair) are very much conditioned by the relationship of civil society and the state-institution. This relationship is not one of dualism, however, but rather of permeability, with changes in one affecting changes in the other, in a fluid way. This is the case until the state-institution is ‘captured’ by particular interest groups and acts in an exclusive way, against the wider interests represented by civil society in its broadest conceptualisation. In the same way, it is possible for groups within civil society to organise themselves such that they are able to seize control over the state-institution in the interests of majoritarian interests, or alternatively to create a space within which negotiation and arbitration can take place in order to manage conflict and meet diverse social demands. The relationship that defines the possibility of particular outcomes is conditioned by the social contract that lies in place. This concept of a social contract refers to the specific historical manifestation of the stateidea. The state-social contract is a crystallisation of a social relation that is manifest in processes of emergence and breakdown of social, economic and political alliances. Through these processes, it relates the state-idea to the key themes of legitimacy, hegemony and consent that lend themselves to explanations of the connections between civil society and the state-institution.

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The state of democracy in Latin America

The hegemony–consent relation effectively defines legitimacy within the state form by establishing an acceptance of the activities of those interest groups that dominate as a hegemonic bloc. The importance of this relationship lies at the heart of Gramsci’s theorising about the state.15 Hegemony highlights the role of leadership and the exercise of power through institutions, by an élite alliance that dominates civil society. This dominance is not determined solely by control over the means of production. It is shaped by the ability to establish consent for ongoing control by these élite groups, effectively legitimising their activities. Gramsci refers to three levels of hegemony, effectively defined by the nature of consent by the masses: integral hegemony, which suggests unqualified commitment of the masses to the desires of the élites; decadent hegemony, which is more fragile; and minimal hegemony whereby the masses are effectively excluded and their leaders are ‘captured’ by the élites.16 The degree of hegemony is influenced by the levels of consent derived from the intellectual and moral leadership exercised through different media and activities, e.g. bias in the written and visual communications media, government information and censorship, educational curricula and commercial marketing. Gramsci argues that a ‘war of position’17 takes place, whereby there is a moral and cultural struggle for consent (from the masses within civil society) for the hegemonic project. Joe Femia discusses this war of position in the following terms: This strategy requires steady penetration and subversion of the complex and multiple mechanisms of ideological diffusion. The point of the struggle is to conquer one after another all the agencies of civil society (e.g. the schools, the universities, the publishing houses, the mass media, the trade unions).18 The power relations that work to define the nature of the social contract are highly influenced by the role of hegemony, the degree of consent that is established, and the legitimacy of state institutions and their activities that are based upon it. The social contract, therefore, is instrumental in shaping the state form. Values also play a part in this formation, as guided by the leadership provided by the hegemonic bloc. For example, in the case of the modern capitalist state, a dominant value that underpins the specific social contract is the defence of private property. State institutions are therefore oriented in this direction, through the activities of the security forces, the judiciary and the bureaucracy. The social contract must be seen as a form of the state-idea that helps to legitimise the social relations that shape the state. In this sense, the social contract expresses the idea of a dynamic institution that changes in accordance with transformations of values and interests amongst groups of people within a national territorial space at a particular moment in time. Moving beyond Kant’s argument that the state is basically an Idea,

Conceptualising the state

23

the inclusion of the notion of the social contract enables this idea to be realised through activities, such as social relations, and institutions, e.g. government. A physical social contract as such does not exist. It is a purely theoretically construction that facilitates the conceptualisation of the state-idea and its realisation in particular forms. The social contract is understood here as a rational concept that simultaneously describes, reflects, and emerges from existing social relations.19 It encapsulates the state as an historical process of conflicts for the creation and transformation of rights and obligations and of the institutions that manage them.20 These rights and obligations have been discussed at length by some of the leading political theorists of the past four hundred years. One of the earliest of these theorists was Thomas Hobbes, who is considered by many to be the father of the contemporary idea of the state. Hobbes’s view was two-fold. He believed that men were prepared to limit their personal freedom on a voluntary basis to avoid what he termed universal war. He also took the view that a contract was made between men rather than with authority. Authority would emerge from this social contract rather than define it or be a part of it. However, this authority would exercise considerable power over society once established. He remarked that ‘When the government has been chosen, the citizens lose all rights except such as the government may find it expedient to grant.’21 Hobbes’s theory considers the origin and legitimacy of political obligation rather than a grounding of morality in mutual consent. This is also a view that emerges from Greek philosophy. For example, in a debate with Socrates, Glaucon considered that the social contract benefited the weak at the expense of the strong. Consequently, he argued, it was irrational for the powerful to agree to constrain their behaviour.22 A contrasting view, however, reveals that the social contract can also be seen as a tool that can be exploited by the powerful to defend themselves and their property. In this case, it may well be a rational act to subscribe to a social contract. Hobbes’s theory contrasts with John Locke’s position in that Locke included the government as part of the social contract. It also contrasts with that of Jean-Jacques Rousseau who theorised that each person should submit himself or herself and their power to the general will.23 Locke theorised that government was the outcome of the need to punish individuals who acted against what he defined as moral law. Although government had limited powers, according to what civil society delegated to it, it was involved in reciprocal obligations with civil society and was subject to its wishes. These wishes could be categorised as the common good, and involved the defence of life, liberty and property. Liberty was also a theme of Rousseau’s work. Yet he also emphasised the importance of equality and justice as goals of a just society whereby politics and morality are indivisible. He regarded the social contract as one whereby each individual granted power to the direction of the general will, and as

24

The state of democracy in Latin America

such became an indivisible part of the body politic or state. In this role, individuals become citizens of the state since they share in sovereign power, but are also subjects since they are beholden to the rules of law of the state. In most theories of the state, the notion of a social contract between individuals, or between individuals and authority, is prevalent, yet the nature of this contract is highly variable, according to the political philosopher in question. For example, Immanuel Kant and John Rawls both used the social contract to discover the features of a form of political association. However, they stop short of attempting to explain the origin of political authority. In this sense, we follow them. The social contract as outlined here does not explain a bargaining situation. Instead, it is the political representation of the social relations that structure a group of individuals in a given time and space. Social relations, through the social contract, then give life to the state as an institution. What emerges from this situation is that the social contract represents a constraint on ruler and ruled in the light of existing social relations, through the determination of rights and responsibilities.24 In synthesis, the social contract is the manifestation of the state-idea in that it represents the will of citizens to live under the rule of the state. In most contemporary cases these social relations, and thus the stateinstitution, are based on capitalism. The contract is renewed constantly yet there are two critical moments: the first when it serves as the foundation for the creation of the state; and the second, once the state-institution has been constructed, when it serves to maintain it and legitimise it by reflecting existing social relations. The social contract implies that people agree to live together under rules that give them rights and obligations, and the authority of the state-institution enforces these rules. For the most part, within the capitalist state, these rules are focused on protecting people and their property from their compatriots, other states and even themselves. This contract is therefore based both on selfishness and solidarity, and there are collective and individual benefits to gain from participation. Every individual who supports the contract expects benefits, and these are the central reasons for ‘signing’ and conceding to the rule of the state. These benefits are generated through the chain of solidarity that is formed via the social contract,25 and they are protected to a great extent by the principles of justice that are created within a society as an important element of the contract, as Rawls argues.26 Historically, the idea of the social contract also helped the state to acquire legitimacy. This is important in the context of the argument presented here. Legitimacy in the modern state is generally established via the consent of the governed. However, consent may be derived in different ways, and therefore legitimacy may be subject to consistent questioning. Oppression and coercion are the most obvious forms of deriving consent that are not necessarily the result of free choice, as

Conceptualising the state

25

noted in the second of the following traditional definitions offered by Christine Buci-Glucksmann: Either consent creates force and refers to a civil society made up of isolated and atomised individuals who give their consent (mystifying the relations of exploitation and power in capitalist societies); or force creates consent by laws, norms, ideological values and forms of legitimation of power (leading to an underestimation of rights and liberties).27 The idea of consent is central to the social contract and the legitimacy of state forms, yet there are interpretations that differ from the two definitions presented above and which are more relevant to the argument presented here. The work of Antonio Gramsci was very much concerned with the superstructure of social and economic relations. Rather than arguing, in Marxist terms, that the structure of relations of production provided the explanation for exploitation, Gramsci believed that power relations were also established through the media, education and other forms by which a hegemonic vision of social change and morality could be communicated to the wider population. He argued: ‘The state is the entire complex of practical and theoretical activities with which the ruling class not only justifies and maintains its domination, but manages to win the active consent of those over whom it rules.’28 For Gramsci, the concepts of hegemony and consent are fundamental to understanding the legitimacy of the state. He also highlighted the role of values, noting that: Every State is ethical in as much as one of its most important functions is to raise the great mass of the population to a particular cultural and moral level, a level (or type) which corresponds to the needs of the productive forces for development, and hence to the interests of the ruling classes. The school as a positive educative function, and the courts as a repressive and negative educative function, are the most important State activities in this sense: but, in reality, a multitude of other so-called private initiatives and activities tend to the same end – initiatives and activities which form the apparatus of the political and cultural hegemony of the ruling classes.29 The state-social contract is bound together through the creation of different institutions that uphold particular values and reflect the hegemony– consent relation within society. In the case of the capitalist state, the core values and main interests are those of the preservation of life and property, and therefore the state-institution is most carefully designed in the fields of the protection of individual property rights and the promotion of political and civil rights. However the power relation established by the hegemony–consent framework is critical to establishing the extent of

26

The state of democracy in Latin America

these rights and the ways in which they are created, realised or neglected. The state-social contract also reflects changing values and interests, and reproduces the social relations that those values and interests engender. Historically, the state was formed to defend values defined by civil society (e.g. through the influence of the Church, or basic needs such as security) or the monarch at a particular moment in time. Since values change over time according to exogenous and endogenous influences, the state also changes to reflect these. As such, it can be described as both permeable and dynamic. While the state is dynamic, there are times at which changes are difficult to implement. The unwritten social contract is a never-ending negotiation between different social groups, reflecting the constant evolution of the hegemony–consent relation and these changing values. Within the state-institution there can be forces that oppose particular changes. However, this does not mean that the state loses its dynamic capacity. The state-social contract and state-institution are the products of the ongoing power struggles and conflicts between those seeking to maintain the status quo and those actively pursuing alternative strategies. The existence of the state is the outcome of a social contract that originates a social structure (but is also originated by a particular social structure), and is manifested through a set of institutions. Since this structure does not endure unchanged, a door is always open to crises and breakdowns, transitions and restructuring. The state-institution is dynamic since it is permanently restructuring, responding to the complex sets of relations that underpin its existence, and the real and potential conflicts that are inherent within it. The hegemony–consent relation is reflected in the structure of social relations, and is thus also reflected in the statesocial contract and the state-institution. The conceptualisation of the state as a set of institutions refers principally to the structures of law and order that express the social contract, and in particular the hegemony–consent relation. Since the state-institution emerges from the social contract, the government and other state institutions express the social relations established by the contract.30 In this sense, the state is a set of institutions that imposes a particular type of law and order that, in turn, recreates specific social relations that are then considered to be features of that state. This focus on law and order leads to a consideration of the strong relationship between the state-idea and themes of domination. This was noted by Hobbes who perceived the state as a system of concentration of power, and therefore, domination. Historically, despite the variations in state forms, domination remains an important feature of the state-institution and is expressed in different ways. Domination can be expressed through institutions, values, norms, laws and, principally, the imposition of specific social relations that are derived from the different power relations within society. The first four

Conceptualising the state

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of these elements of domination are expressed through the state-institution: the executive, the legislature, the judiciary, the public administration, and security forces (military and police). The final element – social relations – is shaped by social structures. The latter are the outcomes of the relationships of different groups to the production and distribution of wealth, the power derived from this relationship, and the means by which this production relationship is perpetuated.31 The perpetuation of the economic exploitation of labour is achieved through what can be described as intellectual and moral leadership.32 Intellectual and moral leadership lies at the heart of Gramsci’s ideas of hegemony and consent. When domination is achieved through consent, the social contract establishes a form of leadership whereby all social actors, or at least the majority of them, accept domination. In this case, domination is presented as a positive outcome of the social contract. The state dominates for the benefit of all, thus its domination may be considered to be legitimate. Norms, traditions and beliefs all lend themselves to the construction of this leadership and it is created, sustained and communicated by the institutions of the state. The legitimacy of this leadership is related to the autonomy of the state-institution. If the majority of the population considers the leadership legitimate, the state-institution has the capacity to exercise a high degree of autonomy with respect to non-state institutions and civil society. This degree of autonomy of the state-institution can also be reflected in the social contract, and is critical to accumulation strategies in the capitalist state. The intellectual and moral leadership is key to the acceptance and plausibility of the form of domination exercised by those groups that are most influential in the state-institution: the hegemonic bloc. The state-institution constitutes the system of domination through which society is organised. However, this can take many forms. The capitalist state in Latin America has assumed several different forms during the last fifty years. The most prevalent of these include developmentalist, corporatist, populist, bureaucratic-authoritarian and neoliberal state forms. Although contrasting in principle, the similarity between all these is that they are merely different forms of domination by which different social groups exercise their power through the state: the developmentalist state dominates through the concept of development from above and for all; the corporatist33 state functions through the state’s sanctioning of, and negotiation with non-competitive monopolies in different sectors of society and the economy; the populist34 state revolves around the clientelistic arrangements established by personalist politics and the cult of the individual; the bureaucratic-authoritarian state dominates through the idea of normalisation or the reimposition of order; and the neoliberal state dominates through the construction of the state as the guarantor of democracy, law and order, efficiency and stability. They are all designed to enable markets and individuals to flourish. All of these forms are

28

The state of democracy in Latin America

manifestations of the multidimensional and complex character of the modern capitalist state. In synthesis, it can be noted that different forms of the state reflect not only objective social structures but also cognitive norms, values and interests prevailing in a society at a given moment in time. Social relations, normative values and interests evolve, and this combination of changes underpins the emergence of new forms of the three dimensions of the state. The argument presented here provides a means of understanding this complexity and the unifying features of the state, as idea, social contract and set of institutions. What can be emphasised is the central role of social relations. The unwritten social contract is based on certain values and interests that reflect existing social relations, and these in turn are sustained by the state-institution. Therefore, a working definition of the state can be offered as follows: it is an historical process of conflict over the creation and transformation of rights and obligations and over the institutions that manage them, as a consequence of the social relations existing in specific territorial spaces at given moments in time. The state-institution reflects these social relations and hence the stateinstitution and the social relations (embodied in the social contract) are like two facing mirrors, each reflecting the other, although with the caveat that there can be distortions in these reflections due to the interference of strategies of intellectual and moral leadership. The state reflects a dynamic process of changing social relations and conflicts that arise from tensions in those social relations. The social contract that emerges is expressed in the state-institution. Through the state-social contract and state-institution, social relations are institutionalised to a large degree through law and order, and shaped by the economic mode of production and by the values and interests that prevail; the latter are shaped significantly by the leadership of the hegemonic bloc. In this sense, the social contract that sustains the capitalist state is based on specific values, interests, institutions, norms and order. Figure 1 provides an overview of the state theory that is presented here. The state-idea is the overarching view of this particular form of social organisation, in contrast to, say, tribalism or anarchism. Social relations are the ways in which individuals and groups relate to each other in a given time and space, shaped by the economic structure, the hegemony–consent relation and values. Social protection versus social discipline is also included as an important factor in the nature of these social relations since the state-institution can promote social protection, through increased welfare, but can also restrict freedom, create limits to welfare, and use extra-legal means to minimise opposition to its activities. Social relations form the state-social contract and the state-institution. The state-social contract is shaped by the elements that structure social relations, and this in turn shapes the state-institution. The state-institution then has a role in influencing the state-social contract (e.g., its re-writing

Figure 1 The interrelated nature of the state.

STATE-INSTITUTION institutional structures that reflect the social contract and dominant social relations; influential in the rewriting of the social contract; subject to the power relations established by the hegemonic bloc

economic structure hegemony–consent relation values social protection v. social discipline

organisation of SOCIAL RELATIONS

STATE-IDEA the raison d'être of collective organisation across a territorial space

STATE-SOCIAL CONTRACT unwritten agreement establishing the rights and obligations of the state-institution and civil society; established by consent or coercion; legitimisation of the actions of the state-institution

30

The state of democracy in Latin America

following ruptures or crises, or through hegemonic controls). Since social relations influence both the state-social contract and state institutions and these then affect the nature of social relations, there is a dynamic interrelation between all three features. States, as dynamic processes, will be naturally diverse and complex. Consequently, there are many state forms under the umbrella of the capitalist state. They alter either because a traditional modus operandi is no longer sustainable or simply because values or interests change. Both of these situations generate crises in the state and are driven by social groups that challenge the dominant state paradigm by questioning the values that are perpetuated by the state-institution. These crises give rise to the emergence of new social relations that most often reflect a different set of values. However, values are neither unified nor established sets of beliefs accepted by all members of a society. Rather, they are dynamic: derived, accepted, disseminated, questioned, dismissed, recalled and/or rejected. Interests also change over time, whether they are material objectives, or ideological, cultural or religious goals.35 The different historical manifestations that the state-idea assumes are all founded on different values, interests and principles that reflect social relations. As these change, new social relations are constructed and different frameworks for specific policy actions are formulated. Apart from analysing the state domestically, which is the principal focus of this book, it must also be recognised that states interact with other states. Consequently, there are external as well as internal factors that influence the development of the state. Values, institutions, norms, rights, obligations, benefits, types of domination, political regimes and modes of production are shaped as much by international factors as they are by national ones. For example, the role of external forces was particularly powerful in shaping the development of states beyond Europe, during the colonial expansionist period in the nineteenth and twentieth centuries. More recently, the ideological conflicts of the Cold War period have given rise to a hegemonic post-Cold War consensus that is embodied in new state forms, reflecting a new unwritten social contract.36 The bipolar structuring of the Cold War period and the restructuring of postCold War economic globalisation have been critical in shaping an international consensus on the reforms of the state. The reforms – primarily economic, but also political – have reshaped social structures. Hence new social relations have established themselves and a new state form has emerged. They are based on new (or at least recast) values, a state form to reflect these new values, and a new state rationality that ‘activates’ those values. Through a snowball effect, institutions, norms, forms of domination, and the structures of law and order have been transformed to take into account this new social contract. These transformations are critical to an understanding of contemporary socio-economic developments in Latin America.

Conceptualising the state

31

The state in contemporary debates on Latin America In the recent analysis of political developments in Latin America, considerable debate has been focused on the transition processes from authoritarian rule, the consolidation of democratic regimes and the quality of the re-emerging democracies.37 Prior to this debate, Latin American political science and political economy had been preoccupied by issues relating to structures, classes and political institutions.38 This shift in focus is significant since the objects of study and the theoretical positions that dominate have been influenced by the changing global political economy, particularly the role of the Washington Consensus and the expansion of economic neoliberalism. Within the transition framework there are several different approaches: from the study of political actors, to analyses that include economic and social structures, to studies of political institutions, to debates on political leaders, and to work that looks at social class, class power and state power.39 This last area of activity has closer links to the discussions and debates about the state that pre-existed the rise of neoliberalism, particularly those regarding bureaucratic authoritarianism. The thrust of this book relates to this literature and is influenced by the significant contribution of Dietrich Rueschemeyer and others.40 However, while these authors focus ‘on power relations in society and between civil society and the state, and on the effects of economic development and of transnational studies of power on these internal power relations’,41 we start from the basis of social relations42 that are institutionalised through a social contract that gives life to the specific state form. By conceptualising the Latin American state, we provide an argument that is in stark contrast to much of the literature of recent years that has concentrated on the causes of the emergence of democracy in the region and the nature of the new democratic regimes that have become established. While Rueschemeyer et al. point out that the economic power base of élites, the strength of civil society, the balance of class power and the political articulation of civil society were originally shaped by the structure of the economy and the state, we argue that the form of the state is also shaped by these same factors. There are interactive pathways between social relations, the social contract and the institutions of the state. A further difference includes the fact that these authors explain how social relations transformed the social contract from authoritarian regimes to democracy. They developed the idea of historical sequences to achieve this,43 and this perspective is also crucial to our analysis since we see the state as a dynamic institution. However, while they focused on class structure to analyse the emergence and breakdown of democratic regimes, we are attempting to conceptualise the state. Finally, while taking into account social relations, we also look at values and interests as essential parts of the state-social contract and state-institution. Indeed, while they

32

The state of democracy in Latin America

considered the structure of the economy and the resulting class structure as key to the formation of political institutions, we add the values and interests that are present in a society at a given time as shapers of the state-institution. An assumption lying behind the argument presented here is that the state in Latin America has been undergoing a protracted and prolonged crisis. This crisis cannot be explained purely in terms of changes in political regime. Its roots lie more deeply in considerations of underlying social relations and the hegemony–consent relation within the context of capitalism. The transition from authoritarian rule has been traumatic for the majority of Latin American countries. For instance, while Argentina underwent a difficult transition after the collapse of the military regime, Brazil’s transition was longer, organised and controlled by the military, Uruguay’s transition was based mainly on pacts between the military and the traditional political parties, and Chile’s transition was the result of a plebiscite and was tightly controlled by the regime. The replacement of authoritarianism with democracy entailed a rewriting of the social contract based on new social relations. Following the breakdown of the equilibrium established by the dictatorships, for reasons as diverse as global recession, human rights activism, inter-state conflicts and the collapse of an economic strategy that had been in place since the 1950s, different values emerged within these societies that threatened the continuation of authoritarian rule. The legitimacy of the regimes was increasingly questioned and the machinery that maintained the dictatorships began to disintegrate. The first elements that needed to be rewritten were the civil-military relations and the role of the armed forces in future democratic regimes. At this stage, there were significant differences between Latin American countries, since the rewriting of the social contract was based on the historical circumstances of each case. Nevertheless, transitions were conflictive processes for all of them, involving a fundamental questioning of values that had been understood as traditional.44 The combination of these processes – changing economic strategies and values – ensured that the transitions involved a crisis of the state in all its three dimensions: as idea, as social contract, and as a set of institutions. Parallel to the transition to democracy in terms of regime change, essential values re-emerged that had a significant impact on the state-idea. Democratic values became more firmly established, while there was a questioning of populism, developmentalism and state intervention in the economy. This questioning refuted the legitimacy of the prevailing state-idea, state-social contract, and state-institution. Due to their interconnectedness, the questioning of one of these elements provoked the breakdown of the status quo of the three dimensions. These processes are considered here as different parts of a single transformation: the transformation of the state, seen as the reflection of social relations that are institutionalised through

Conceptualising the state

33

a social contract, and of the institutions that emerged from that contract. This is significant since the transition to democracy was not purely a change of political regime. Instead, it was a far-reaching transformation of the state-social contract and the state-institution. The recent debate on democracy in Latin America implies a rather unproblematic understanding of the state. Here we argue that there is a need to re-focus the debate and to ‘rethink’ the state. There has been a general lack of critical analyses of the state. The focus has, instead, been on the adjectivisation of democracy in an attempt to identify the reasons that explain the functioning of democracy. There has been a proliferation of studies that distinguish among different degrees of democracy, and others that distinguish between different types of democracy. Likewise, there have been analyses of low-intensity democracy, delegative democracy, low-quality democracy, protected democracy, and restricted democracy.45 We argue that, after many years of studying democratic transitions, democratic consolidation, and the quality of democracy, it seems appropriate to move forward and focus more attention on the state, since it is this formation that provides avenues for understanding the political, economic and social structures on which democracy is based and functions as a political regime. During the 1970s, considerable political debate concentrated on democracy as a political regime and a set of political procedures. The first wave of this debate focused on the manner in which political transitions from authoritarian regimes were likely to occur, with an emphasis on political factors such as political agency, shifting coalitions, pact-building and élite leadership strategies.46 While transitions were occurring in Latin America in the 1980s, economic factors and the role of civil society began to be considered more in the literature, supplementing these other factors. This second wave of the debate was mainly focused on the relationship between democracy and the structural economic reforms and the input of civil society into the democratisation process.47 A final, third wave of the debate became more focused on the quality of democracy and therefore began to look at the institutions of the state – the relation between the executive, the legislature and the judiciary; the role of security forces; electoral systems; and the reform of the administration of the state – and also to the outcomes of democratic governments, assessing their efficiency in socio-economic terms.48 These waves of debate led to reconsiderations of the idea of democracy in the Latin American context and new conceptualisations emerged that would be carried into the transition period.49 The political science factors of civil-military relations and power transfers that preoccupied analysts in the immediate transition process were soon accompanied by critical factors relating to the relationship between democracy and economic reforms. In this vein, Adam Przeworski focused his work on the uncertain outcomes of democracy. He pointed out that ‘democracy is a system of processing conflicts in which outcomes depend

34

The state of democracy in Latin America

on what participants do but no single force controls what occurs’.50 Democracy is viewed as organised uncertainty that ‘can mean that actors do not know what can happen, that they know what is possible but not what is likely, or that they know what is possible and likely but not what will happen’.51 While theoretically this assumption would appear to be valid, in practice in most of the Latin American countries this uncertainty is not so evident. Indeed, the degree of uncertainty is not very high since a small proportion of the population has its interests protected while the majority has not. The reasons for this lie in the institutions of the democratic state that emerged from the transitions and that have proved ill-equipped to manage social conflicts within a democratic political environment.52 One of the main weaknesses of the state has been its incapacity to establish equality before the law.53 Crucially, Przeworski notes that ‘the decisive step toward democracy is the devolution of power from a group of people to a set of rules’.54 This has not happened in Latin America where it seems that a proportion of the population is still beyond the rules due to widespread corruption, the implicit acceptance of tax evasion or capital flight, and the use and abuse of contacts with, for instance, the political class or high-ranking state employees to further personal ambitions. The uncertainty of democracy and the structural dependence of capital55 can be ameliorated by rules and institutions, since both give actors the possibility to achieve their objectives even if, in the short-run, they have to deal with unfavourable situations or outcomes. Defeats can be accepted if the institutional framework provides a potential future success.56 The state-institution that emerged in Latin America does not provide this balance between defeats and successes since it has been unable to establish equality before the law for all its citizens, and also because horizontal accountability is weak.57 Some analysts believe that the reforms that have taken place under democracy were politically destabilising.58 The first challenge that governments had to encounter, according to Przeworski, was the decision between ‘involving a broad range of political forces in the shaping of reforms, thus compromising their economic soundness, or (. . .) trying to undermine all opposition to the program’.59 Argentina, Mexico, Brazil, Chile, Peru and Bolivia applied the structural economic reforms following the naming of technocrats as finance ministers or on the close advice of foreign economists, such as Jeffrey Sachs in the case of Bolivia.60 Most of the governments chose to isolate the implementation of economic reforms from political debates. The discourse was designed around the ideas of the need for reforms to solve the crisis, the emergency of the crisis, and the belief that there was no alternative to the reforms. By attempting to isolate the implementation of the reforms, governments tended to treat political, economic and social issues as watertight compartments, and the political class generally tried to minimise the

Conceptualising the state

35

political and social consequences of the economic reforms. One can generalise this situation by noting that during the 1980s, some leaders (namely Alan García, Raúl Alfonsín and José Sarney) took the view that economics should serve politics. Their successors however took the contrary view, regarding politics as being subservient to economic priorities. While both perspectives are oversimplistic, the latter had the perverse effect of undermining the building of the state-institution and its rules in order to either speed-up the reforms or avoid confrontation. Indeed, the end result was the apparent absence of conflict and a predominant understanding of the transition processes as clean, straight lines, with a point of departure at the end of authoritarianism and an end-point at the establishment of democracy. While the literature implicitly conveyed the uncertainties of the process, it was also flooded by lineal analysis: the liberalisation or ‘opening-up’ period would take the country towards the consolidation of democracy. Also, in economic terms, these processes were analysed through the lens of first-generation and secondgeneration reforms of the state, both of which were intended to ‘free-up’ the market.61 It has been argued that the Washington Consensus was only the first step in the reformist path. The first-generation reforms (designed to achieve macroeconomic stability) should have been followed by the secondgeneration reforms (microeconomic reforms together with complex institutional transformations at the national, provincial and local level) that were more related to the institutions of the state.62 This conception of two different sets of reforms to be applied sequentially was poorly conceived. First, these reforms could not be separated temporally since both were redefining social relations and thus the social contract and the institutions of the state. Second, the conception was extremely optimistic since it assumed the success of first-generation reforms and ignored the conflicts that would be derived as a consequence of them. While the first generation reforms were being applied, the state institutions were not prepared to control social conflicts. The legacy of authoritarian social discipline still prevailed in the democratic period and hence the techniques exercised to manage social unrest were distinctly authoritarian rather than democratic (based on negotiated outcomes and compromise) in character. The reforms of the state-institution came too late. Once new social relations had been established, the old institutions of the state (which had been impoverished in the process) had to deal with new social conflicts. It has been argued that strong social elements and regulatory frameworks should be present during the first generation of reforms to make them viable and successful. However, these were weak compared with the far-reaching macroeconomic reforms that were implemented.63 As a consequence, the state-social contract and the state-institution were being redefined and transformed by these first-generation reforms in a chaotic

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The state of democracy in Latin America

and conflictive way, without considering the manner in which impoverished and rationalised state institutions would be able to deal with the social conflicts that would arise. An example of this can be found in the privatisation process whereby the government’s capacity to negotiate with the business sector and the trade unions was undermined by the empowerment of business and the transfer of public monopolies into private monopolies. Further examples include the slow reform of the judicial system and the unresolved problem of access to justice, especially for the majority of the poor population, also the problems with the security forces such as excessive repression of the poor population, human rights violations, and the lack of accountability of the institutions of the state and state officials. It was apparent that the first-generation reforms curtailed and distorted the capacity of the institutions of the state to manage social conflict. The problem of the relationship between democracy and economic reforms was the idea of sequencing – dealing first with the military, then with the economy and finally with the institutions of the state and the quality of democracy. In other words, the problem was derived from applying first-generation reforms (dealing with macroeconomic imbalances), and later second-generation reforms (by restructuring state institutions). This division of politics and economics was an outcome of the minimisation of the role of the state-institution in organising both the private and the public life of social groups and citizens. Effectively the process underestimated the importance of the state-institution and its grounding in social relations through the social contract. The state-institution provides the legal framework which rules the exercise of citizenship and manages social conflicts and conflicts of interests; it ensures the provision of basic services; it monopolises the use of legitimate force; it defends its citizens from external threats; it administrates public wealth by collecting taxes, mobilising savings, and allocating resources; and it preserves territorial integrity. During the economic reforms, the state-institution was rationalised in order to meet the macroeconomic goals of state expenditure. Instead of restructuring the state according to the new social relations that were emerging as a consequence of democratisation and economic restructuring, the pre-authoritarian state, liquidated through the years of authoritarianism, was being further reduced in its capacity to respond to the ills that the intervention of the state in the economy had supposedly caused. The imperative of using the state-institution democratically in the formulation and implementation of economic reforms was, in most countries, ignored.64 With the first-generation reforms in place, the debate moved towards defining democracy. The relation that the second wave of the debate established between democracy and economic efficiency pointed to the need for this definition, yet there was a clear lack of consensus on the meaning of democracy. The proliferation of adjectives to conceptualise democracy

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proved to be unhelpful. After finding 550 subtypes of democracy, Collier and Levistky called for an end to the implicit competition ‘to see who can come up with the next famous concept’,65 arguing that conceptual refinements can easily become conceptual confusion. Democracy is a political regime that provides certain tools to stateinstitutions to fulfil certain values. Features of liberal democracy, for example, would include: elected officials; horizontal accountability; freedom of association; cultural, ethnic and religious tolerance; freedom of the press; freedom of belief, opinion, discussion, speech, publication, assembly, demonstration and petition for all individuals; equality before the law; an independent judiciary; and legal protection of individuals against unjustified detention, exile, terror and torture.66 These are the values that underpin liberal democracy. However, it is crucial to highlight the fact that democracy is a political process with the ultimate objective that all individuals are able to exercise the rights and obligations derived from the aforementioned values. This political process is, of course, influenced by conflicts of interest and, as such, remains dynamic. The debate over the definition of democracy attempted to include economic and social factors alongside the political tools. The low-intensity democracy perspective became crucial in this respect, with Barry Gills and others arguing that democracy was incompatible ‘with societies characterised by extreme concentration of wealth in the hands of a tiny elite’.67 Proponents of this perspective argued that the hegemonic rule of conservatives brings general apathy to the electorate since individuals realise that votes are powerless. They concluded that no matter how democratic in form, without changes in the balance of power relations within society, democracy would simply mirror non-democratic regime types. While we partially agree with this perspective, here we emphasise the potential capabilities that democracy brings for changing economic, political and social structures. Likewise, low-intensity democracy does not necessarily produce apathy, as the Argentine case shows. Our view of democracy is a positive one, understanding it as a set of political values that can act as the pillars to transform the social relations of the state. Without a minimal degree of democracy, the possibilities to transform political, economic and social structures become almost non-existent. Of course, it is also valid to point out that political democracy cannot cohabit, in the long term, with social authoritarianism, economic exclusion, and the restrictions of civil liberties. Polyarchy and the unrule of law are incompatible.68 Thus, despite the shortcomings of democracy, one can make the case that it is the best political alternative in town. Taking this as a point of departure, our argument moves towards the main debate – rethinking the Latin American state. Recently, an interesting debate which criticises the idea of sequencing, arose around the transition paradigm.69 One of Thomas Carothers’s criticisms of the transition paradigm, used by academics and democracy

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The state of democracy in Latin America

promoters alike, was that they (mainly the latter) considered state-building as part of the transition process since ‘they assumed that democracybuilding and state-building would be mutually reinforcing endeavors or even two sides of the same coin’.70 One of the main difficulties of the paradigm was, according to Carothers, the existence of an assumed democratisation sequence: an opening, a breakthrough, and a consolidation period.71 Although it is true that most of the analysis assumed the uncertainty of the outcomes of the transition processes,72 the way in which the debate was being developed responded, in many ways, to an assumed sequence: after the analysis of political factors and the consideration of transitions from above and/or below, the debate moved on to analyse the economic reforms and their impact on the consolidation of democracy, which turned later to the quality of democracy by analysing the institutions of the state and the social consequences of the economic reforms. Unfortunately, this implicit sequence was also followed in practical terms by most of the Latin American countries involved in transition. Thus, the building of the democratic state was considered predominantly through economic lenses; but did this then mean that democratic consolidation is dependent on economic stability? This is now a matter of debate, since at the beginning of the twenty-first century, Latin American countries have faced a new economic crisis that has come to challenge the democratic regime developments of the 1990s, and the period of economic transformation. While democracy has showed many significant shortcomings, all the countries have been dealing with the crisis in a democratic fashion (in that there has not been a return to authoritarianism). Whether the regimes will break-down or will be deeply distorted by the emergence of autocratic leaders, or whether the economic transformation of the 1990s will be deepened or reversed due to the crisis, remain open questions. Analysing the state-form can help us to present some alternative interpretations of this crisis and possible ways forward.

Endnotes 1 M. van Creveld, The Rise and Decline of the State (Cambridge: Cambridge University Press, 1999), p. 2. 2 The term ‘civil’ society may be inappropriate for this period since the notion of citizenship would emerge alongside revolutionary ideals in the late eighteenth and early nineteenth centuries. However, it should be noted that records of individuals managed by the Church were in existence. Therefore, it can be argued that bureaucratic arrangements documenting the structure and organisation of society were already in place and that non-élite society was formally recognised. 3 B. Anderson, Imagined Communities: Reflections on the Origins and Spread of Nationalism (London: Verso, 1983). 4 See van Creveld, The Rise. 5 There is an important relationship that is established at this time between state and sovereignty that is brought forward and becomes dominant in political

Conceptualising the state

6 7 8 9 10

11

12

13

14 15

39

theory from this point. The city-states of Italy provided an alternative view of the geographical extent of a state structure at this time. See A. Harding, ‘The Origins of the Concept of the State’, History of Political Thought, 15, 1 (1994), pp. 57–72. See van Creveld, The Rise, p. 137. For examples of the iconography and constructions of nationhood, see E. Hobsbawn and T. Ranger (eds), The Invention of Tradition (Cambridge: Cambridge University Press, 1983). T.H. Marshall, Citizenship and Social Class, and Other Essays (Cambridge: Cambridge University Press, 1950). The importance of historical features and their evolution to state forms has been termed ‘path-dependent’ state development. See J. Dunkerley (ed.), Studies in the Formation of the Nation State in Latin America (London: ILAS, 2002); and A. McFarlane and E. Posada-Carbo (eds), Independence and Revolution in Spanish America: Perspectives and Problems (London: ILAS, 1998). The bibliography on state theories is rather extensive. See, for instance, B. Jessop, State Theory: Putting Capitalist States in their Place (Cambridge: Polity Press, 1990) and ‘Bringing the State Back In (Yet Again): Reviews, Revisions, Rejections and Redirections’, International Review of Sociology, 11, 2 (2001), pp. 149–73; E. Cohen, ‘Globalisation and the Boundaries of the State: A Framework for Analysing the Changing Practice of Sovereignty’, Governance, 14, 1 (2001), pp. 75–98; J. Dunn, Contemporary Crisis of the Nation State? (Oxford: Basil Blackwell, 1995); and The Cunning of Unreason: Making Sense of Politics (London: Harper Collins, 2000); T. Ertman, Birth of the Leviathan: Building States and Regimes in Medieval and Early Modern Europe (Cambridge: Cambridge University Press, 1997); P. Evans, D. Rueschemeyer and T. Skocpol (eds), Bringing the State Back In (Cambridge: Cambridge University Press, 1985); J. Hampton, Hobbes and the Social Contract Tradition (Cambridge: Cambridge University Press, 1986); T. Henriksen, ‘The Rise and Decline of Rogue States’, Journal of International Affairs, 54, 2 (2001), pp. 349–73; S. Krasner, Defending the National Interest (Princeton: Princeton University Press, 1978); R. Miliband, The State in Capitalist Society (London: Weidenfeld & Nicholson, 1969) and ‘The Capitalist State: Reply to Nicos Poulantzas’, in J. Urry and J. Wakeford, Power in Britain (London: Heinemann, 1973); N. Poulantzas, ‘The Problem of the Capitalist State’, in J. Urry and J. Wakeford, Power in Britain (London: Heinemann, 1973) and ‘Towards a Democratic Socialism’, New Left Review, 109 (1978), pp. 75–87; and van Creveld, The Rise. See T. Skocpol, ‘Bringing the State Back In: Strategies of Analysis in Current Research’, in P. Evans, D. Rueschemeyer and T. Skocpol (eds), Bringing the State Back In (Cambridge: Cambridge University Press, 1985), pp. 3–37, and E. Nordlinger, The Autonomy of the Democratic State (Cambridge: Harvard University Press, 1981). This acceptance is widespread. However, there is an interesting paradox that is highlighted by Bob Jessop: ‘On the one hand, it is just one institutional ensemble among others within a social formation; on the other, it is peculiarly charged with overall responsibility for maintaining the social cohesion of the social formation of which it is a part.’ See Jessop, ‘Bringing the State Back In (Yet Again)’, p. 167. I. Kant, The Metaphysical Elements of Justice, Part I of the Metaphysics of Morals (New York: The Bobbs-Merrill Company, Inc, 1965), p. xxviii. Bob Jessop notes that Gramsci is one of the only Marxist state theorists to be critically acclaimed in the 1990s. This is very much due to his focus on state power as a complex social relation, and attention to the modalities of

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The state of democracy in Latin America state power as opposed to generalised capitalist state theorisation. Jessop, ‘Bringing the State’, p. 151. See J. Femia, Gramsci’s Political Thought: Hegemony, Consciousness and the Revolutionary Process (Oxford: Clarendon, 1981). Gramsci uses the term ‘war’ in a figurative, strategic sense rather than one of physical combat. Femia, Gramsci’s Political Thought, p. 52. H. Williams, ‘Kant on the Social Contract’, in D. Boucher and P. Kelly (eds), The Social Contract from Hobbes to Rawls (London: Routledge, 1994), pp. 132–47. The roots of the social contract date back to moral ideas based in pre-modern European culture. These ideas, of fidelity, promise, oath and contract, were important not only within feudal relationships but also in the organisation of city authorities, guilds and some villages. A. Black, ‘The Juristic Origins of Social Contract Theory’, History of Political Thought, 14, 1 (1993), p. 59. B. Russell, History of Western Philosophy (London: Routledge, 2000), p. 535. D. Boucher and P. Kelly, ‘The Social Contract and its Critics. An Overview’, in D. Boucher and P. Kelly (eds), The Social Contract from Hobbes to Rawls (London: Routledge, 1994), pp. 1–35. In T. Hobbes, The Leviathan, edited by R. Tuck (Cambridge: Cambridge University Press, 1991), J. Locke, Two Treatises of Government (London: Everyman, 1995) and J.-J. Rousseau, The Social Contract or Principles of Political Right (Cambridge: Cambridge University Press, 1997). D. Boucher and P. Kelly, The Social Contract, pp. 1–35. The best example of this chain of benefits and solidarity is, in the modern state, the tax system. J. Rawls, A Theory of Justice (Oxford: Oxford University Press, 1971), p. 11. C. Buci-Glucksmann, ‘Hegemony and Consent: A Political Strategy’, in A. Showstack Sasoon (ed.), Approaches to Gramsci (London: Writers and Readers, 1982), p. 117. A. Gramsci, Selections from the Prison Notebooks (London: Lawrence & Wishart, 1971), p. 244. Emphasis added. Ibid., p. 258. There are, as stated, different periods in the life of social contracts. The social contract, which creates the state, establishes the legal, ideological, political and economic framework for the social relations within a given territory. In a democracy, elections represent a moment when the social contract can be rewritten or reaffirmed. Revolutions and reforms are also tools of modification of the social contract. The class structure has changed dramatically in capitalist societies during recent decades. It is impossible now to understand class structure as a clear division between the bourgeoisie and the proletariat. The development of the capitalist system meant, especially in the most developed countries: the transnationalisation of part of the bourgeoisie; the emergence of new social groups that cannot be considered as either pure bourgeoisie or pure proletariat; the shrinking of the domestic bourgeoisie; the increase in the number of underemployed and unemployed; the decrease in the number of industrial workers and the increase of tertiary workers; and the gradual decomposition of the proletariat as a social class. The increasing mobility of capital alters the domestic social balance and, most importantly, the character of social classes. See D. Coates, Models of Capitalism (Cambridge: Polity Press, 2000), p. 256. B. Jessop, State Theory, p. 42. Philippe Schmitter makes a separation between societal corporatism (more common in Europe) and state corporatism (more common in Latin America). The former is more closely associated with voluntaristic arrangements of

Conceptualising the state

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interest group representation and relations with the state-institution emerging from within liberal democracies; the latter is characterised by force rather than consensus. See P. Schmitter, Corporatism and Public Policy in Authoritarian Portugal (Beverley Hills: Sage, 1975), also P. Schmitter and G. Lehmbruch (eds), Patterns of Corporatist Policy-Making (London: Sage, 1982). Howard Wiarda provides an analysis of the influence of corporatism in Corporatism and National Development in Latin America (Boulder: Westview Press, 1981). Recent experiences of populism are discussed on a country-by-country basis in J. Demmers et al. (eds), Miraculous Metamorphoses: The Neoliberalisation of Latin American Populism (London: Zed, 2001), while earlier populism is covered in M. Conniff (ed.), Latin American Populism in Comparative Perspective (Albuquerque, University of New Mexico Press, 1982). S. Krasner, Defending the National Interest, p. 11. For an analysis of the Cold War, Post-Cold War orders, and globalisation see S. Amin, Capitalism in the Age of Globalisation (London: Zed Books, 1997); R. Brenner, ‘The Economics of Global Turbulence: A Special Report on the World Economy 1950–1998’, New Left Review, 229 (1998), pp. 1–265; R. Cox and T. Sinclair, Approaches to World Order (Cambridge: Cambridge University Press, 1996); F. Fukuyama, The End of History and the Last Man (New York: Free Press, 1992); I. Gilmour, Dancing with Dogma: Britain under Thatcherism (London: Simon & Schuster, 1992); R. Gilpin, The Political Economy of International Relations (Princeton: Princeton University Press, 1987); P. Hall, The Political Power of Economic Ideas: Keynesianism across Nations (Princeton: Princeton University Press, 1989); D. Held and A. McGrew, ‘The End of the Old Order? Globalisation and the Prospects for World Order’, Review of International Studies, 24 (1998), pp. 219–43; S. Huntington, The Clash of Civilisations and the Remaking of World Order (London: Simon & Schuster, 1997); R. Keohane and J. Nye, ‘Globalisation: What’s New? What’s Not? (And So What?)’, Foreign Policy, 118 (2000), pp. 104–25; M. Kramer, ‘Ideology and the Cold War’, Review of International Studies, 25 (1999), pp. 539–76; G. Thompson and P. Hirst, Globalisation in Question (London: Polity Press, 1996); R. Tucker, ‘Alone or With Others: The Temptations of Post-Cold War Power’, Foreign Affairs, 78, 6 (1999), pp. 15–25; and W. Wholforth, ‘Ideology and the Cold War’, Review of International Studies, 26 (2000), pp. 327–31. For transitions to democracy see G. O’Donnell, P. Schmitter and L. Whitehead, Transitions from Authoritarian Rule: Tentative Conclusions about Uncertain Democracies (Baltimore: Johns Hopkins University Press, 1986); J. Malloy and M. Seligson (eds), Authoritarians and Democrats: Regime Transition in Latin America (Pittsburgh: University of Pittsburgh Press, 1987). For the analysis on consolidation of democracy see S. Mainwaring, G. O’Donnell and J.S. Valenzuela (eds), Issues in Democratic Consolidation: The New South American Democracies in Comparative Perspective (Notre Dame: University of Notre Dame Press, 1992); L. Diamond, ‘Democracy in Latin America. Degrees, Illusions, and Directions for Consolidation’, in T. Farer (ed.), Beyond Sovereignty. Collectively Defending Democracy in the Americas (Baltimore: Johns Hopkins University Press, 1996), pp. 52–104; J. Linz and A. Stepan, Problems of Democratic Consolidation (Baltimore: Johns Hopkins University Press, 1996); J. Linz and A. Stepan, ‘Toward Consolidated Democracies’, Journal of Democracy, 7, 2 (1996), pp. 14–33; G. O’Donnell, ‘Illusions about Consolidation’, Journal of Democracy, 5, 1 (1996), pp. 34–51. For analyses on the quality of democracy see P. Oxhorn and G. Ducantenzelier, What Kind of Democracy? What Kind of Market? (Pennsylvania: Pennsylvania University Press, 1998); F. Aguero and J. Stark (eds), Fault Lines of Democracy in Post-Transition Latin America (Miami: North-South Center Press, 1998); L. Diamond and M. Plattner (eds), The

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The state of democracy in Latin America Global Resurgence of Democracy (Baltimore: Johns Hopkins University Press, 1996); G. O’Donnell, ‘Delegative Democracy’, Journal of Democracy, 5, 1 (1994), pp. 55–69; J. Méndez, G. O’Donnell and P.S. Pinheiro, The (Un)Rule of Law and the Underprivileged in Latin America (Notre Dame: University of Notre Dame Press, 1999); and J. Domínguez, Democratic Politics in Latin America and the Caribbean (Baltimore: Johns Hopkins University Press, 1998). For instance, see G. O’Donnell, ‘States and Alliances in Argentina, 1956–1976’, Journal of Development Studies, 15, 1 (1978), pp. 3–33; G. O’Donnell, Modernization and Bureaucratic Authoritarianism (Berkeley: University of California Press, 1973); F.H. Cardoso and E. Faletto, Dependency and Development in Latin America (Berkeley: University of California Press, 1979); L. Linz and A. Stepan (eds), The Breakdown of Democratic Regimes: Latin America (Baltimore: Johns Hopkins University Press, 1978). See G. O’Donnell, Schmitter and Whitehead, Transitions; J. Linz, The Breakdown of Democratic Regimes: Crisis, Breakdown, and Reequilibration (Baltimore: Johns Hopkins University Press, 1987); A. Przeworski, Democracy and the Market (Cambridge: Cambridge University Press, 1991); A. Przeworski, Sustainable Democracy (Cambridge: Cambridge University Press, 1995); J. Linz and A. Valenzuela, The Failure of Presidential Democracy (Baltimore: Johns Hopkins University Press, 1994); S. Mainwaring and T. Scully (eds), Building Democratic Institutions: Party Systems in Latin America (Stanford: Stanford University Press, 1995); W. Smith and R. Korzeniewicz (eds), Politics, Social Change, and Economic Restructuring in Latin America (Miami: North-South Center Press, 1996). D. Rueschemeyer, E.H. Stephens and J.D. Stephens, Capitalist Development and Democracy (Cambridge: Polity Press, 1992). Ibid., p. 155. We understand social relations as the manner in which individuals relate to each other in a given time and space. This is, of course, partially but not only determined by the economic structure; values and interests also play a crucial role in the development of social relations. Rueschemeyer et al., Capitalist, p. 165. It is important to remember that during authoritarianism, a proportion of the population was fighting in different ways to re-establish democratic values. However, democracy was not the only game in town. See Linz and Stepan, Problems of Democratic Transition. See D. Collier and S. Levitsky, ‘Democracy with Adjectives. Conceptual Innovation in Comparative Research’, World Politics, 49 (1997), pp. 430–51. O’Donnell, Schmitter and Whitehead, Transitions. For analysis of the relationship between democracy and the structural economic reforms, see Przeworski, Democracy and Sustainable Democracy; J. Nelson (ed.), Fragile Coalitions: The Politics of Economic Adjustment (New Brunswick: Transaction Books, 1989); S. Haggard and R. Kaufman (eds), The Politics of Economic Adjustment (Princeton: Princeton University Press, 1992); S. Haggard and R. Kaufman, The Political Economy of Democratic Transitions (Princeton: Princeton University Press, 1995). For analysis of the input of civil society on the democratisation process see L. Diamond, ‘Toward Democratic Consolidation’, in L. Diamond and M. Plattner (eds), The Global Resurgence of Democracy (Baltimore: John Hopkins University Press, 1996), pp. 227–41; J. Pearce, ‘Civil Society, the Market and Democracy in Latin America’, Democratisation, 4, 2 (1997), pp. 65–76; R. Fine and S. Rai (eds), Civil Society: Democratic Perspectives (London: Frank Cass, 1997); M. Monshipouri, ‘State Prerogatives, Civil Society and Liberalization: The Paradoxes of the Late Twentieth Century in the Third World’, Ethics and International Affairs, 11 (1997), pp. 232–51.

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48 For the political analysis of institutions, see Linz and Valenzuela, The Failure; S. Mainwaring and A. Valenzuela (eds), Politics, Society, and Democracy (Boulder: Westview Press, 1998); J. Nelson, ‘Linkages between Politics and Economics’, Journal of Democracy, 5, 4 (1994), pp. 49–62; Méndez, O’Donnell and Pinheiro, The (Un)Rule; A. Schedler, L. Diamond and M. Plattner (eds), The Self-Restraining State (Boulder: Lynne Rienner, 1999); P. Domingo and R. Sieder (eds), Rule of Law in Latin America (London: ILAS, 2001); R. Snyder and D. Samuels, ‘Devaluing the Vote in Latin America’, Journal of Democracy, 12, 1 (2001), pp. 146–59; L. Whitehead, ‘The Drama of Democratization’, Journal of Democracy, 10, 4 (1999), pp. 84–98. For analysis of the economic outputs see V. Tokman and G. O’Donnell (eds), Poverty and Inequality in Latin America (Notre Dame: University of Notre Dame Press, 1998); F. Fukuyama and S. Marwah, ‘Dimensions of Development’, Journal of Democracy, 11, 4 (2000), pp. 80–94; and D. Chalmers (ed.), The New Politics of Inequality in Latin America (Oxford: Oxford University Press, 1997). 49 See Collier and Levitsky, ‘Democracy with Adjectives’; M. Plattner, ‘From Liberalism to Liberal Democracy’, Journal of Democracy, 10, 3 (1999), pp. 121–33; and P. Schmitter and T.L. Karl, ‘What Democracy is . . . and is not’, Journal of Democracy, 2, 3 (1991), pp. 75–88. 50 See Przeworski, Democracy and the Market, p. 12. 51 Ibid. 52 See J. Grugel, ‘State and Business in Neo-Liberal Democracies in Latin America’, in H. Smith, Democracy and International Relations (London: Macmillan, 2000), pp. 108–26. 53 Joe Foweraker and Roman Krznaric undertook an analysis of the new democracies and identified the lack of civil and minority rights, due to the ongoing dominance of oligarchic power and clientelistic practices. In ‘The Uneven Performance of Third Wave Democracies: Electoral Politics and the Imperfect Rule of Law in Latin America’, Latin American Politics and Society, 44, 3 (1999), pp. 29–60. 54 Przeworski, Democracy and the Market, p. 14. 55 Ibid. and A. Przeworski and M. Wallerstein, ‘Structural Dependence of the State on Capital’, American Political Science Review, 88, (1988), pp. 11–31. 56 Przeworski, Democracy and the Market, p. 19. 57 Horizontal accountability refers ‘to the capacity of state institutions to check abuses by other public agencies and branches of government’. It complements vertical accountability, ‘through which citizens, mass media and civil associations seek to enforce standards of good conduct on public officials’. See Schedler, Diamond and Plattner (eds), The Self-Restraining State, p. 3, and Guillermo O’Donnell, ‘Horizontal Accountability in New Democracies’, in A. Schedler, L. Diamond and M. Plattner, (eds), The Self-Restraining State, pp. 29–53. 58 Przeworski, Democracy and the Market, p. 181. 59 Ibid., p. 183. 60 Domínguez’ Democratic Politics, pp. 100–42 analyses the role of the technocrats in Argentina, Brazil, Mexico and Chile. 61 See M. Pastor and C. Wise, ‘The Politics of Second-Generation Reforms’, Journal of Democracy, 10, 3 (1999), pp. 34–48. 62 See R. Korzeniewicz and W. Smith, ‘Pobreza, desigualdad y crecimiento en América Latina: en búsqueda del camino superior a la globalización’, in Desarrollo Económico, 40, 159 (2000), pp. 387–425; V. Bulmer-Thomas (ed.), The New Economic Model in Latin America and its Impact on Income Distribution and Poverty (London: ILAS, 1996).

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63 A. Foxley, ‘Preface’, in V. Bulmer-Thomas (ed.), The New Economic Model, pp. 3–6. 64 Not only did Carlos Menem and Alberto Fujimori abused the power of the executive to speed-up or implement reforms also Fernando Henrique Cardoso legislated urgent matters by decree. 65 Collier and Levitsky, ‘Democracy with Adjectives’. 66 L. Diamond, Developing Democracy. Toward Consolidation (Baltimore: The Johns Hopkins University Press, 1999). 67 B. Gills, J. Rocamora and R. Wilson, Low Intensity Democracy (London: Pluto Press, 1993), p. 21. 68 See L. Diamond, Developing Democracy, and Méndez, O’Donnell and Pinheiro, The (Un)Rule. 69 See T. Carothers, ‘The End of the Transition Paradigm’, Journal of Democracy, 13, 1 (2002), pp. 5–21 and the responses by G. O’Donnell, G. Nodia, K. Wollack, G. Hyman and T. Carothers himself in Journal of Democracy, 13, 3 (2002), pp. 6–38. 70 T. Carothers, ‘The End’, p. 9. 71 G. O’Donnell, ‘In Partial Defense of an Evanescent Paradigm’, Journal of Democracy, 13, 3 (2002), pp. 5–11. 72 As O’Donnell points out in his response to Carothers, the volumes on Transitions from Authoritarianism do note the uncertainty of the transitions; Przeworski also emphasises the degree of uncertainty in the process of transition. See Przeworski, Democracy and the Market.

2

Perspectives on the Latin American state

The state as the outcome of a process of conflict has to be analysed from an historical perspective. This particular view is discussed in the following pages with regard to the historical development of the Latin American state, emphasising the changes in social relations and the modifications of the social contract that have taken place by looking at both the economic structures that have been established and the values that have emerged. The chapter presents a brief historical context drawn from the experiences of pre-Columbian societies and Iberian colonialism, followed by a discussion of the Import Substitution Industrialisation (ISI) strategy applied from the mid-twentieth century. This is followed by a critical analysis of the influence of bureaucratic authoritarianism and the recent emphasis on democratisation. The economic and social performance of some Latin American countries during the 1980s and 1990s is highlighted in order to reveal some of the tendencies and weaknesses of the contemporary Latin American state.

The roots of the contemporary state The contemporary features of the Latin American state are related to both exogenous and endogenous factors. A historical materialist perspective reveals the importance of domestic modes of production and the ways in which these interact with international commercial and financial networks. In the case of Latin America, this international linkage is particularly important in view of the export-oriented development that has dominated in the continent since independence. This model was originally implanted during the colonial period of Spanish and Portuguese occupation, and the roots of the modern state can be found in the social relations established at this time. The pre-Columbian societies that dominated in Latin America prior to the expansion of colonialism during the sixteenth century had many features of modern states but had closer connections with the pre-modern structures that one can associate with European monarchic regimes and the power relations that were formed as a consequence. For the most

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part, indigenous peoples were organised along tribal lines. However, the most advanced forms of social organisation emerged in Mesoamerica and the Andean region during the period from 1000 BC to 1500 AD. During this period, from the pre-classic Olmec and Chavín societies, to the classic Maya, Nazca, Zapotec and Mixtec, and post-classic Toltec, Chibcha, Aztec and Inca, one can identify the predominance of theocratic forms of governance, based around millenarian belief systems.1 The undisputed authority of tribal leaders, as absolute divine rulers, and their religious leaders, led to a strong hierarchy through which social position and status were defined. Social relations were determined for the most part by productive activities and the organisation of the population for internal security and waging war. In the case of the more advanced societies, an aristocracy of warriors, priests and administrators emerged as regional empires were established through aggressive expansionist actions. The need for a larger bureaucracy to manage this empire, to facilitate infrastructural development and tribute payments (the mita2 system of the Incas for example), led to administrators achieving a status almost equal to priests and warriors. However, unlike the European experience, an impersonal state derived from a larger bureaucracy did not develop here. Colonial occupation may have prevented such an outcome. This, however, is pure speculation since the greatest threat to the theocratic regimes prior to conquest was the problem of succession. In the case of the Inca, Atahualpa and Huascar had fought a war following the death of their father Huayna Kapac, which had reduced the cohesion of the Inca empire and left it considerably weakened by the time of the arrival of the conquistadors.3 Although the colonialisation by the forces of Spain and Portugal following conquest led to the replacement of theocratic forms of social organisation with monarchical regimes (also with a strong religious basis), the conditions for the emergence of the impersonal state were present. However, it was not until the struggles for independence in the early nineteenth century that a modern state form would be introduced into the continent; a formative framework for this state was present in the political and administrative systems that were implanted during the colonial period. The principal difference between the classic Amerindian empires of the continent and the Iberian empires was the obvious one of distance, and also of control. By virtue of the limitations of the transport and communications technologies of the period, the influence of the monarchs in the affairs of the Latinised Americas was greatly reduced. The administrators charged with exercising authority in the region attained a great deal of autonomy. Initially, the principal administrative divisions of the kingdom of Tierra Firme were established by Charles II (1516–56). These royal audiences (audiencias) had four members (oidores) who arbitrated civil and ecclesiastical matters on behalf of the Council of the Indies based in Spain. The audiencias were established to

Perspectives on the Latin American state 47 cover different regions, based in Panama (1538), Lima (1544), Quito (1563) and New Granada (1550), and subdivisions were created where appropriate.4 This framework of imperial organisation created institutions that oversaw social organisation managed for the expropriation of mineral wealth and food production. The encomienda system of labour organisation facilitated this process and provided the basis for social relations under colonialism. This system shifted ownership from indigenous communities to the conquistadors and colonialists, and the Amerindian populations were forced to work on this land and pay tribute to the Spanish crown. Apart from this particular mode of production, religion and racism were also to play an important part in defining social relations. The characterisation of non-Europeans as idolatrous, barbarian, ignorant and indolent, and the drive to evangelise them was significant in terms of identifying which social groups were recognised, and treated more humanely, and which were not, and hence exploited.5 As the Iberian empire became more consolidated and increased its reach within the continent, the structure of empire also changed. Under the Bourbon monarchy from the early seventeenth century, the Americas were administered along different political-territorial lines. In 1717, vice-royalties were created for Mexico and Central America (New Spain), the northern Andes (New Granada), and the southern Andes (New Castile); the River Plate vice-royalty was created later in 1776. Smaller subdivisions, captaincies, were organised to attend to the affairs of Cuba, Guatemala and Chile.6 In the case of Brazil, the structure of administration was organised around donatory-captaincies, which were royal gifts or donations of land to selected colonists with court connections.7 The expansion in the number and powers of these administrative subdivisions of the empire in the continent led to the growth in the influence of regional bureaucracies. To a great extent, these administrators exhibited attributes of the impersonal state since their links to the monarch’s personal bureaucracy and the Council of the Indies were remote and slow. Within the territorial spaces in which they exercised their authority, these administrators exercised oligarchic powers. The legacy of the powers invested in individuals and oligarchies, and their acceptance by civil society, would persist into the independence period and play an important part in the political culture and regime types of the later twentieth century.8 The formation of the modern state in Latin America had strong links with similar changes in Europe at the end of the eighteenth century. The French Revolution and its effect on civil society and anti-monarchical sentiment throughout Europe led to difficulties in maintaining the extensive reach of the Spanish empire in particular. The Peninsula War of 1808–14 would exacerbate this situation and provide the moment for independence struggles to emerge. By 1830, the campaigns waged by Simón Bolívar and José de San Martín, in particular, had led to independence for most

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of Latin America. The nascent republics took the territorial forms of the vice-royalties and captaincies for the most part although considerable reorganisation would take place in northern Latin America (the current states of Colombia, Venezuela and Ecuador) and Central America (the United Provinces of Central America fragmented into the current sovereign entities in 1838) in the decades that followed.9 Despite the end of empire and the termination of a long period of monarchic rule, one has to question the extent to which the new state form that emerged with independence signified a major shift in social relations within the new Latin American nation-states. The state-idea of these new formations was closely aligned with that in Europe due to the influence of criollo élites and the involvement of merchants from non-Iberian Europe and the United States. In many ways there was a strong continuity between the two forms of social organisation in the sense that élite interests rather than popular interests became central to the ways in which the independent state-institution functioned. Republicanism was not an inclusive process, and labour relations through an export-oriented colonial mode of production persisted into the nineteenth century. The close relationship between economic and political élites and foreign commercial interests came to define the Latin American state during this period. By the mid-nineteenth century, the ‘liberators’ of the independence struggles had been discredited or forced into exile by this new hegemonic bloc and its vested interests. International trade in minerals and agricultural products would determine the social relations of Latin America under independence, as it had done under colonialism. Large mining ventures, plantations, latifundios and haciendas were the principal sources of employment prior to early industrialisation during the later decades of the nineteenth century, in the same way that mines and the encomienda system had performed similar functions under colonialism. Values were also those that had been implanted under colonialism, such as those of the Catholic Church in the social and cultural spheres, and the defence of private property in the economic and legal spheres. Although the rule of law was beginning to replace the absolutism of the monarch and his regional administrators, it took a long time to establish penal codes and judicial systems that would operate on a national basis. Indeed, one can argue that equality before the law has been an ongoing challenge in this respect. Modern state functions such as enfranchisement and citizenship, as well as public education and public health, were likewise slow to develop. However, they revealed a process of more positive social change (reformist rather than emancipatory) compared with the more exploitative practices of the colonial period. The hegemonic bloc that was established soon after independence in most Latin American countries would remain in place well into the twentieth century. The financial power wielded by the productive and

Perspectives on the Latin American state 49 commercial élites that constituted the bloc enabled them to control political and legal affairs to such a high degree that a chasm existed between their life-styles and those of the rest of civil society. Conflicts within and amongst elements within these blocs were always to the fore, in terms of competition between those in favour of presidentialism versus parliamentarism, free trade versus tariff protection, and modernising versus traditional tendencies. However, there was comparatively little notion of inclusive national development. The social relations established by the hegemony–consent relation of this period led to strong social differentiation, in terms of income and access to basic needs and opportunities, resulting in the perpetuation of rural poverty and social inequality. The philanthropic voices advocating social welfare among these élites were exceptional rather than widespread, and it was only with the large-scale European immigration of the late nineteenth and twentieth centuries, accompanied by industrialisation, urbanisation and labour organisation, that social relations began to alter, driven by the emergent urban proletariat and the political organisation of workers in mines and manufacturing enterprises. Considerable economic and social change accompanied the shocks to the Latin American economies as a consequence of the First World War and the 1929 financial Crash.10 It is clear that the Latin American economies suffered during the war and in the ensuing decade from the dependent capitalist structures that were in place in 1914.11 Even before the war had started, the limitations of their mining and agriculturallivestock export-led economies had become evident throughout the region. The war served only to exacerbate these limitations and bring to light the extent of the peripheral role that these countries were playing in the international economy. However, the economic structure of these countries remained relatively unchanged until the 1930s and the drastic measures imposed after the 1929 Crash.12 During the 1920s, despite some growth in manufacturing, there was very little real movement from an export-oriented model to an autonomous industrialisation model. The social relations based on the social contract established by the nineteenthcentury export-oriented economy would remain in place until the late 1930s in some cases and into the post-war decades in others. Export orientation and commercial relations dependent on demand in the more advanced economies of the US and Europe had exposed the considerable vulnerability of such an economic strategy. The reaction led to support for increased self-sufficiency in the manufactures that had been historically imported in exchange for commodity exports.13 However, for this very same reason industrialisation was a problem since access to certain imported raw material inputs and capital goods was difficult. The crux of the pro-industrialisation argument which developed most vigorously after the Second World War was the hypothesis that as per capita incomes rose in the industrial centres, which customarily purchased

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primary commodity exports, demand for these exports would rise less than proportionally.14 It was argued by Raúl Prebisch15 and the structuralists of the Economic Commission for Latin America (ECLA/CEPAL) that the rate of growth in incomes obtainable from traditional exports would lag increasingly behind the corresponding rate of growth in the industrial centres of the world. ISI was critical to the change in social relations from the late 1930s, thus the state form.16 By putting the state-institution centre-stage in the management of the economy and wrenching considerable economic power from the traditional élites of the hegemonic bloc, the notion of the public sector and social inclusion through this public sector came to the fore. Social relations had been overhauled by the strong labour organisation that accompanied the processes of industrialisation and urbanisation,17 while at the same time the crises in the traditional agricultural and commodity export sectors had provided a significant blow to the socio-economic and political status quo ante. The social contract was effectively rewritten during this period of movement from desarrollo hacia afuera (outward-looking development) to desarrollo hacia adentro (inwardlooking development). In the case of Chile for example, ISI led to the creation of a national development corporation – Corporación de Fomento de la Producción (CORFO),18 which oversaw major industrial changes such as the construction of a steel company, petroleum refinery, the national electricity company and a cement company. Chemicals production also increased 50 per cent between 1946 and 1954.19 Also at this time, the left-leaning Frente Popular took power and the country began a process of orientation defined by a self-styled estado empresarial (entrepreneurial state) under the presidency of Pedro Aguirre Cerda. Multiparty governments leading multiclass alliances and following policies of industrial growth and social reform would dominate Chilean politics until 1952, operating within the ISI framework. Argentina experienced a similar process. The cornerstone of the ISI strategy in Argentina was the Instituto Argentino de Promoción del Intercambio (IAPI) which was created to control external trade and was the focal point of all productive activity until Juan Perón lost power in 1955.20 The ISI process had to start with the production of those goods that were most easily manufactured without large-scale investment and massive importation of capital equipment, such as processed foods, footwear and clothing. Intermediate and capital goods would follow in a later, second stage of industrialisation. The use of multiple exchange rates and quantitative restrictions on imports were the most common measures to protect these activities since they discriminated against goods that were regarded as non-essential, resulting in a movement of resources out of the traditional primary export and export processing sectors and into other areas such as manufacturing. Priority, on the whole, went to those products that constituted the bulk of imports: textiles, metallurgical products, machine

Perspectives on the Latin American state 51 and tool production, chemicals, and materials for transport and food production. However, the process was fraught with problems. The criticism of the ISI policy that emerged after the mid-1960s was that in order to develop industry it was inevitable that foreign capital goods would be required and that the dependent linkage would be transformed, not reduced.21 The counter-argument is that the replacement of consumer goods is the obvious starting-point for industrialisation since technological requirements are not as great as in capital goods. Once this level has been attained, another stage of replacement can be pursued. It was the latter theory that prevailed during the 1930s. The theory of gradual replacement, beginning in the least technological sectors, would appear to be a logical progression. In the 1930s it was perhaps the only feasible way for countries to diversify their economies and reduce their dependence on links with the US and European economies. CEPAL estimated that 50 per cent of the increase in industrial production experienced in Chile from the early 1930s to the 1960s could be attributed to ISI policy since it related to the replacement of imported consumer goods.22 It has been argued that the policies resulting from the 1929 Crash not only failed to reduce the dependent situation of countries in the region but also served to strengthen them.23 One argument is that, within ISI, there is a necessary large investment in capital and intermediate imports since the net import substitution, the value added domestically, is relatively small. This reinforces external vulnerability since the required imports are of such a strategic nature in the process of production that a failure to maintain them at appropriate levels would cause severe dislocations in the economy. For ISI to be successful there is also a requirement for a higher level of exports, a capital inflow, or a reduction in spending; these must also be accompanied by growth in other sectors. It is these problems, amongst others, associated with the establishment of these aligned factors, that led to the questioning of ISI policy by, among others, Carlos Diaz Alejandro, Vittorio Corbo and Patricio Meller.24 The counterISI argument concedes that the import element of the investment is likely to diminish relatively as industrialisation progresses, but notes that this may be offset by a falling output to capital ratio as more capital-intensive stages are reached. Towards the end of the 1950s, ISI in the Southern Cone had been exhausted. Larger markets were required for the producer goods industries that were to form the backbone of the second phase of the process; this was especially pertinent in the case of Uruguay. With such industries there are economies of scale that make unit costs rational only with high output; this demanded larger markets. Regional integration was proposed by the economists of CEPAL to provide this, resulting in the creation of the Latin American Free Trade Association (LAFTA) in June 1961. It was hoped that more regional integration would also check the economic crises in the region that had become apparent during the mid-1950s.

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These economic crises were the legacy of the post-war spending of foreign exchange and the lack of long-term policies to accommodate industrialisation programmes that had been developed during the 1920s and 1930s, and then with little competition during the early 1940s. The post-war international environment was hostile for these protected industries, and difficult for mining, agricultural and livestock export activities that had experienced relatively high prices during the late 1930s and the war years. Alongside the difficulties of import substitution in the 1950s there had been a marked change in the orientation of most economies with the entry of international corporations into the region to bypass the problems of ‘protected’ industrialisation. Foreign direct investment became more significant from the end of the Second World War as it shifted towards the manufacturing sectors in the continent and recovered control of public utility and transport companies that it had lost under economic nationalism. In the case of Perón’s administration, for example, the lion’s share of this new capital was North American. Most Latin American governments did not oppose this trend, believing that by opening up international markets for exports with their transnational commercial relations, distribution channels and marketing methods, international companies would, on balance, be positive for national industrial development. However, most of these firms were producing for internal domestic demand or the demand of neighbouring countries. In many ways this was a reversion to the dependence that the policy of ISI had attempted to eradicate. By the end of the 1950s, foreign capital was strongly located in the most dynamic sectors of the Latin American economies, specifically those that required the most advanced technology. These years thus saw a considerable increase in foreign ownership relative to the rest of the domestically owned economy as new plants were established or old ones sold to foreign interests; the auto-industries in Brazil and Mexico are the most striking examples of this trend. There was also an increase in sales of associated and affiliated firms of foreign corporations relative to local industrial sector firms. Taking a broader picture of events, Latin America had returned to its historically dependent model of development. The main change was that foreign capital was now also interested in manufacturing, mining, agriculture, livestock and transport. The industrialisation process favoured the creation of a political alliance between the national and foreign industrial bourgeoisie, the middle class and the industrial working classes, which (in many countries) would displace the old coalition between landlords, the agro-mineral foreign bourgeoisie, and the traditional import-export commercial class, from their powerful positions. The ISI period gave the institutions of the state more autonomy from the old actors that used to form the economically dominant class since the new groups, mainly the working class, were able to challenge these traditional power relations.25 The new alliance took a variety of forms and became stronger at different periods. For

Perspectives on the Latin American state 53 instance, while some Southern Cone countries struggled during the 1950s, Colombia, Bolivia and Peru experienced economic growth promoted by foreign capital. Politically the regimes became more inclusive but not necessarily more democratic during this time, as the regimes of Getulio Vargas and Juan Perón illustrate. A national populist and developmentalist ideology emerged out of this alliance, which favoured an industrialisation strategy geared towards the national market. However, the economic failures of ISI caused the collapse of this political alliance and gave rise to the breakdown of democratic regimes around the region. Democracies, initially tolerated by élites in the context of ISI, were undermined where economic élites began to perceive that their interests were inadequately protected through the party political system.26 Foreign direct investment would now play a key role in the Latin American economies once again, as it had done prior to 1914. Also, as during the nineteenth century, the support of foreign capital for the élite interest groups within the country became more influential. This support was enhanced considerably by the perceived threat from communism following the Cuban revolution in 1959. Foreign capital sought to defend its interests, as it had done in Guatemala in 1954, for example, through US administration and CIA backing for the United Fruit Company in the face of President Jacobo Arbenz’s land reform programme. Since its interests, such as protection of investments, particularly property, were similar to those of the domestic élites, the alliance was strengthened. The US Alliance for Progress, set up in 1961, was also designed to back this coalition of foreign and domestic capital, by minimising the opportunities for the emergence of left-wing political movements. The military became an additional important actor at this time as it became more supportive of the defence of capital, mainly due to its ideological differences with communism. Since the ISI period had given rise to a strengthening of civil society through public sector employment and improved formal work opportunities in other protected industries, the demands placed on governments during the 1950s and 1960s were difficult to manage, especially in view of the financial position of most Latin American states at this time. It was this imbalance between expectations and the ability of elected governments (to the centre and left in particular) to deliver these within a short time-frame that gave rise to social unrest and the golpes de estado (coups) that were to become such key features of the 1960s and 1970s. The collapse of the João Goulart presidency in Brazil in 1964 was the first notable example, with the military using the argument of national security to take power; this National Security doctrine would be employed by other bureaucratic authoritarian administrations soon afterwards. The Brazilian military coup was staged by a civilian-military conspiracy. Not only was the golpe connected to the growing popular mobilisation associated with the state’s inability to meet different sectorial demands within the political

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alliance, it was also part of a growing internationalised response to the rise of communism, a product of the ideological ordering of the Cold War. The economic plans of the military administration increased the economic role of the public sector, reorganised the production and the productivity of major state corporations, and promoted free enterprise. The underlying principle was to govern state structures more effectively while at the same time promoting private sector involvement in the economy. The coup signalled the collapse of the political alliance of ISI and the social contract that had been formed by it. It was also the antecedent of bureaucratic authoritarianism. Southern Cone states in particular would be transformed as a consequence. ISI was no longer sustainable on account of structural obstacles, therefore the consensus around it began to disintegrate and conflicts arose. These conflicts were mainly related to the new role of the working class together with social movements that were questioning the capitalist nature of the state. The response to these conflicts was the breakdown of democratic regimes and a long period of instability during which there was an exacerbation of political activism and armed struggle.

The emergence and collapse of bureaucratic authoritarianism Politics is, above all, a matter of power and its distribution. Democratisation represents an increase in political equality and therefore the breakdown of democratic regimes a decrease in political equality. It is power relations founded upon social relations that determine whether democracy can emerge, stabilise, and maintain itself. Therefore, in a given historical case, one has to examine the structure of social relations such as class coalitions and the relative power of different classes to understand how the balance of class power affects the possibilities for democracy. In Latin American twentieth-century political history, it has been argued, the working class was the most consistently pro-democratic force.27 Exceptions to the prodemocratic posture of the working class occurred where the class was initially mobilised by a charismatic but authoritarian leader or a hegemonic party manipulating the state apparatus, as in the case, for instance, of Peronism in Argentina. The landed élites, who were dependent on a large supply of cheap labour, have been the most consistently anti-democratic force. Democratisation for them posed the possibility of losing access to this labour supply, and also a potential threat to their extensive properties. The bourgeoisie was generally supportive of constitutional and representative government, but opposed to extending political inclusion to the lower classes due to this fear of democratisation of social relations (as opposed to a purely political regime democratisation). The middle classes have played an ambiguous role: they pushed for their own inclusion as they became a stronger social grouping over time, but their attitude

Perspectives on the Latin American state 55 towards inclusion of the lower classes depended on the need for, and possibilities of an alliance with the working class. Middle classes have been most in favour of fuller democratisation of society where they have been confronted with intransigent dominant classes and have had the option of allying with a sizeable working class. However, if they started to feel threatened by popular pressures under a democratic regime, they turned to support the imposition of an authoritarian alternative.28 Although the above provides a broad generalisation of social relations in twentiethcentury Latin America, these are the predominant tendencies that have influenced the pursuit of democratisation and its suppression. During the mid-twentieth century, ISI had expanded the urban middle and working classes and brought to power populist coalitions, which deliberately activated popular forces, particularly through labour organisation, and included them in the political process. The growth of ISI had also enlarged the number and range of technocratic roles in the public and private sectors. Prominent in the minds of these technocrats was the deepening of the industrialisation process, even if this was mainly focused on agro-business and efficiencies in the rural sector (in the cases of the less-developed economies of the region). However, the successful execution of this strategy demanded a reduction of popular consumption in order to generate higher domestic investment levels (as taxation of the wealthier sectors was not considered to be a realistic alternative). Consequently, militant labour movements and populist politicians pressed the case for alternative means and methods with which to manage the economy. There was also a reconsideration of values within society and the state-institution. In this process of challenging the dominant development vision, democracy was not regarded as the foremost objective or value and it was certainly not the only political game in town.29 The unrest associated with the collapse of ISI led to a consolidation of a new constellation of interests among civilian and military technocrats and the upper bourgeoisie. The coalitions that emerged would provide the ammunition for insurrection and the military coups of the 1960s and 1970s. These interest coalitions discarded democracy as being incompatible with further economic development and they installed bureaucratic authoritarian regimes in place of the previous regime models. These new regimes would insulate economic policy-makers from popular pressures by deactivating labour unions, left-wing political parties and critical media. The process by which this was carried out was bloody for the most part, and intimidating and threatening when not. The bureaucratic authoritarian regimes that emerged from these new interest coalitions and their formulation as a hegemonic bloc was a strong, exclusionary form of capitalist state. A new social contract would emerge as a consequence. In this case the social contract, rather than reflecting new social relations, was established as a means of transforming social relations by domination and oppression. Guillermo O’Donnell points out that this state was the guarantor not of

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the immediate interests of the bourgeoisie, but of ‘the ensemble of social relations that establish the bourgeoisie as the dominant class’.30 It was a capitalist state, not a state of the bourgeoisie per se. According to O’Donnell, the precursors to the bureaucratic authoritarian state were the political activation of the popular sectors and the transnationalisation of society. By political activation of the popular sectors, he refers to the political and economic inclusion of the pueblo – people – understood to be the least-favoured members of the nation-state. And by the transnationalisation of society, he refers to the post-Second World War changes in trading relations between Latin America and the world market as commodity exports became increasingly subordinated to the operations of transnational corporations due to the collapse of ISI. This transnational capital had become increasingly influential in supplying the domestic market via foreign direct investment in local branch plants in particular. The specificity of the bureaucratic authoritarian state in relation to other authoritarian states lies in the defensive reaction by the dominant classes and their allies to crises involving a popular sector that has been politically activated and is increasingly autonomous with respect to the dominant classes and the apparatus of the state-institution. This reaction includes an agreement among those who implant and support the bureaucratic authoritarian state that its main tasks should be the subordination and strict control of the popular sector, a sharp reversal of the tendency toward autonomy of its class organisations, and the elimination of the capacity of the popular sector to express itself in the political arena. For instance, in Argentina the main objective of the 1976 military dictatorship was the imposition of disciplinamiento social (social discipline) – the attempt to discipline society through subordinating the working class in both the political and the economic spheres. This disciplinamiento social was imposed through economic structural reform and state terrorism.31 Other societies experienced similar social disciplining as a consequence of the discourse of national security and the perceived and real threats from Marxist-Leninist political movements. The raison d’être of the bureaucratic authoritarian state noted above suggests that it is a form of authoritarian state which is constructed to defend the interests of its dominant social constituency: the upper bourgeoisie.32 Specialists in coercion, who are also engaged in the active political exclusion of the previously activated popular sector, dominate the state-institution that is constructed. The suppression of citizenship and political democracy (e.g., the closure of democratic channels of access to government) are two of the most important tools for this end. This political exclusion is accompanied by, and itself facilitates (due to the suppression of critical voices), the pursuit of a system of economic exclusion of the popular sector, since the pattern of capital accumulation that is encouraged is biased in favour of large, oligopolistic units of private capital and allied state

Perspectives on the Latin American state 57 institutions. O’Donnell considers these features to be necessary in order to carry out the main tasks of the controlling élites. The ultimate objective of the bureaucratic authoritarian state was to protect a society whose continuity based on capitalism was perceived as being threatened by a process of social democratisation and inclusion emanating from the ISI process of economic development and its accompanying growth in public sector labour organisation and social mobilisation towards national economic and social goals. In the context of the Cold War, the popular sectors were considered to be potential breeding grounds for communism, and democracy was not considered to be worthy of protection in the ideological war to reassert capitalism. The bureaucratic authoritarian states were the Latin American manifestations of this dominant international political order of the post-war decades. Although the bureaucratic authoritarian state is constructed for the defence of élite interests, its most notable feature is that it is the security forces33 of the state-institution that assume the power required to restructure society and the state-institution (rather than a single general or colonel who imposes a personal order by decrees); it is oligarchical rather than personalistic. It is different from fascism since it aspires to produce apathy among the masses. The restructuring of the state-institution involves the reorganisation of power relations in favour of the executive, with a concomitant elimination or sharp reduction in the role of the legislature and an increasing control over the judiciary. Some authors disagree with the features defined above, believing that the task of the bureaucratic authoritarian state was to reorganise capital and to reconstitute the political hegemony of the bourgeoisie.34 This focuses less on the subordinate classes and more on the dominant classes themselves. The attempt to pursue the reorganisation of capital (from above) and of the bourgeoisie may be expected to provoke serious conflicts between the state-institution and sectors of the dominant classes. Consequently, the closing down of the political system involves the exclusion of the representatives of these classes as well as the representatives of labour and radical opponents of the system. One may therefore look beyond the threat from the left as a sole explanation for the rise of the bureaucratic authoritarian state. Equally, the task of economic reconstruction cannot be reduced to the need to attract foreign investment and hence the demobilisation of the working class in order to provide the required environment for investment. One must focus upon the struggle between fractions of capital to establish the dominance of particular forms of production and the role played by the state in that context. A further criticism of O’Donnell’s conceptualisation of the bureaucratic authoritarian state is that it may only help to understand the Brazilian dictatorship and the Argentine regime of 1966, rather than wider experiences of authoritarian states across Latin America. Here, we consider that it is an important attempt at theorising the authoritarian regimes that emerged in Latin

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America. It provides a typology of authoritarian regimes that serves as a point of departure for the analysis of the economic, social and political causes for the rise of élite interest coalitions, and their enduring ability to suppress the popular sectors in order to enable them to accumulate and concentrate capital. Despite their apparent dominance over many years, it is the case that social relations change as different economic and political factors impinge on the organisation of production, consumption and culture. Social relations are dynamic, therefore it should have come as little surprise that the bureaucratic authoritarian state began to collapse as opposition to its élitist interests became consolidated. As stated at the beginning of this section, democratisation is a question of power relations. For different reasons, the authoritarian regimes, of the Southern Cone in particular, gave way to democratic ones during the 1980s as external and internal factors shaped the so-called regime transitions. This transition process was either one of collapse, a pact between the old regime and the political parties, or a gradual political liberalisation controlled by the military regime. Although internal factors were important to these explanations of transition, there were also critical, overarching events that shaped the changes from an international relations perspective. The first event which can be taken into account was that, from 1976, US Congress limited US economic and military aid to any country that engaged in a consistent pattern of gross violations of internationally recognised human rights; the US Congress took this decision following evidence of US administration and CIA involvement in the 1973 coup in Chile. Unlike his predecessors, President Jimmy Carter adopted a stronger human rights basis for foreign policy, which meant that US political and economic support for military regimes became far more conditional. This is the first factor that undermined the political coalitions of the military regimes in the region. As US support dried up, the security forces managing the stateinstitution became more isolated from the domestic élites who began to seek alternative means of protecting their interests. These domestic élites were effectively a broad alliance of the transnationalised bourgeoisie, some sectors of the middle classes (those who believed that the political activation of the working class was a threat to their personal ambitions), and those in the popular sectors less aligned with the formal working class. A further factor in the collapse of bureaucratic authoritarianism was the changing relationship between the power of the state-institution and the power of civil society. In the case of bureaucratic authoritarianism, the social movements (mainly ignored in the bibliography on transitions to democracy) played a significant role in undermining the power of the military regimes.35 This provoked a change in power relations. The middle classes were more concerned with human rights abuses than the upper bourgeoisie, and the former became more likely to favour human rights

Perspectives on the Latin American state 59 organisations. Besides, with the exception of Chile, the military regimes were not successful in stabilising their economies following the international recession in the early 1980s and the increasingly conditional support of the US. These two dominant factors – one external, one internal but with links through the human rights dimension – led to the undermining of the dominant political coalitions in the countries of the region. As soon as these flaws became apparent, demands from civil society (through political parties or social movements) for a return to democracy became more vociferous, persistent and difficult for the security forces to suppress.36 In Peru and Bolivia, extreme economic difficulties put an end to military regimes in 1979, while in Brazil the breakdown of the authoritarian regime came about after a long process of political ‘opening’. The Uruguayan experience had more similarities with the Chilean experience. In Uruguay a pact between the military and the political parties after the regime was defeated in the 1980 referendum opened the doors to democracy and established the rules of the transition. The success of the Concertación por el No in the 1988 plebiscite in Chile marked the end of the Pinochet era. In Paraguay an old dictator (Alfredo Stroessner, in power 1954–89) together with regional pressure catalysed the return to democracy, while Argentina’s transition was prompted as a consequence of the 1982 war with Britain. Once democratic values re-emerged within the social contract and state-institution following the first elections (the initial act of democratic regime change), societies became immersed in debates about the state-social contract and state-institution. The debate over the state-institution was mainly conducted on economic terms, as the majority of the countries underwent, or were already undergoing, problematic processes of market liberalisation. In these processes, the influence of neoliberalism37 within the global political economy was crucial in modifying the state-social contract. The return to democracy did not signal a return to the preauthoritarian state models under ISI, nor did they mirror the stronger welfare elements of the experiences of other advanced capitalist countries, such as those in Scandanavia. The experiences of Latin American democratisation were partial for the most part: some were more democratic, some involved more social solidarity, but most of them operated within a context of strong economic and social inequalities. Historically, inequalities have been more marked in Latin America than anywhere else in the world. Attempts to modify this inequality have been violent for the most part, involving repression by the security forces of the state-institution. As democratic values began to regain pre-eminence in Latin America, these unequal social relations remained in place. The processes of democratisation began and were followed by economic transformations that maintained, or in some cases deepened, these inequalities. The countries implemented political democracy while downgrading the idea of solidarity that underpinned their weak welfare states. Not

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surprisingly, there have been declining levels of interpersonal trust in most Latin American countries, constituting an obstacle to the accumulation of social capital. Years of democracy have, paradoxically, undermined social networks.38 These networks had been usually established during the ISI phase with the promotion of attitudes of social responsibility towards the poor and the strengthening of public services. For example, the idea that an increased supply of skilled labour was necessary for industrialisation justified more spending on education. The stronger voices of union activists helped to establish at least some minimal social security programmes; and greater expectations were placed on governments to provide infrastructure to support industrialisation. It was during this time that the working class became not only an economic actor but also a social and political actor, leading to strong popular (particularly urban) interests being converted into policies that reflected the needs for social welfare under populist and developmentalist regimes throughout the region. Most of the literature on the contemporary politics of Latin America has distinguished between two main transitions: the first, from the previous authoritarian regime to a democratic government, and the second, a transition from one accumulation strategy to another. Following the political transitions in most countries, there was an economic transition as an inward-oriented economic strategy was replaced by an outward-oriented one. These two transitions gave rise to the rewriting of the social contract that had been so rapidly and savagely constructed through violence and exclusion by the forces of authoritarianism following the coups. The rewriting of the social contract of democratisation would take place over a longer period of time, permeated by negotiations and conflicts among the main political, economic and social actors. This rewriting was influenced by the many differences between the military regimes that would in turn affect the periodisation of transition. Some of the military regimes were economically destructive and highly repressive such as in Argentina, Bolivia and Uruguay. Both the Argentinian and Bolivian regimes collapsed due to internal conflicts, leading to transitions in which the authoritarian rulers were unable to control the agenda of issues that were to be negotiated with the political parties that would replace them. The legacy of this type of transition was a combination of economic problems, a mobilised civil society, particularly trade unions which demanded social and economic compensation, and the problem of human rights violations and what to do with those charged with the violations. Brazil and Chile were more successful in economic terms and the repression was less extensive and systematic than in the other cases. These military regimes retained considerable support from many groups within society and were able to exert a high degree of control over the agenda of the transition and beyond. The caution with which President

Perspectives on the Latin American state 61 José Sarney in Brazil and President Patricio Aylwin in Chile acted with respect to human rights abuses and asserting renewed democratic control over the security forces is testament to this continuing authoritarian influence in the democratisation period. An element that was common to all the transition processes was the fear of a coup. The military was influential in generating this insecurity among the population since it enabled them to manage their exit from control over the state-institution and to protect themselves from legal recriminations. This fear was essential in the redefinition of civil-military relations and the long (in most cases unfinished) process that would be required to achieve this. The loss of prestige, or not, of the military institutions involved was also an influential part of the process. Uruguay and Argentina redefined their civil-military relations to the point whereby it can be said that the new civilian governments were partially able to control the military institution. However, in the Brazilian case, there were six generals in the first democratic cabinet of thirteen ministries; and in Chile, it was not until Pinochet was arrested in London in 1998 that his influence over Chilean society and the transition process began to disintegrate. The fear of a coup during these transitions also limited the room for manoeuvre for the democratic governments in relation to economic policy. Since military coups were seen as a reaction to social mobilisations, the new democratic governments went out of their way to avoid the exacerbation of social demands. It can be said that the first post-authoritarian administrations were more concerned with their relations with the armed forces than with the institution of alternatives to the political and economic models applied under bureaucratic authoritarianism. Despite this preoccupation however, new rules of engagement between the state-institution and civil society had to be established. This process, which entailed the rewriting of the social contract, mainly took place during the early years of transition, which explains why the first democratic governments were not successful in terms of wider achievements. In the cases of Argentina, Uruguay and Brazil, the spectre of the external debt crisis would also play a pivotal role in determining political options. In view of these constraints and the hopes that many groups in civil society had vested in the immediate returns from the democratisation process, social unrest ensued. The external debt meant that redistribution policies were not possible, yet these policies were expected not only by the trade unions but also by most sectors of society that had endured hardships during the final years of bureaucratic authoritarian rule. The external debt crisis of the 1980s meant that democracy could not fulfil all expectations, but this situation arose at the same time that people were keen to exercise their political rights again after years of repression. Strikes, labour conflicts and social mobilisation became part of everyday life. These activities were part and parcel of the restructuring of social relations.

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The rewriting of the social contract in the context of democratisation and the external debt crisis was conflictive and chaotic. There was clearly a crisis of the state in these transition periods. The new democratic administrations (in Argentina, Brazil, Bolivia and Peru) witnessed the struggle between labour movements and the international creditors allied with the transnationalised bourgeoisie, and sided with the latter to curb military re-intervention. New political coalitions were being formed through the exacerbation of the external debt crisis and the ongoing struggle for income distribution in the framework of political democratisation. The democratisation period could have been seen as a blank sheet that needed to be filled in via the outcome of the power struggles and interest conflicts that were taking place during transition. However, this reading of the situation suggests that the break between the authoritarian past and the democratic present was a clean one. It was not, and the sheet already had important markings on it since the process of democratisation and the formation of a democratic state had as its basis its authoritarian predecessor.

The emergence of the New Liberal Consensus During the 1980s two contradictory processes were apparent. On the one hand, the military dictatorships began to fall. On the other, from 1982, the external debt crisis emerged. At that time most scholars and politicians agreed that debt threatened democratic consolidation. However, military dictatorships like those of the 1960s and 1970s did not emerge during this crisis and, while the external debt clearly limited economic policy choices, it did not reverse the process of democratisation. During the early 1980s, the international creditors – principally the IMF and commercial banks – and the US administration became more important actors in the economic policy-making process. The debt crisis led to economic restructuring in order to meet interest payments. Yet no Latin American government was able to undertake significant economic changes without deference to Washington and the consensus that was constructed to exert a new international hegemony–consent relationship with the countries in the region. The consensus has been defined as the pursuit of macroeconomic stability, outward orientation and domestic liberalisation, and was a shared view of various Washington-based institutions: the IMF, World Bank, the US government, the Inter-American Development Bank, and members of the US Congress involved in Latin American politics and economic affairs. The main policy instruments that were employed to meet these three objectives were fiscal discipline, tax reform, market-determined interest rates, competitive exchange rates, import liberalisation, the promotion of foreign direct investment, privatisation, deregulation and new laws regarding property rights.

Perspectives on the Latin American state 63 The debt was a problem of resource reallocation. Under pressure to achieve greater macroeconomic stability, the multilateral lending institutions put pressure on Latin American governments to promote export activities and to use this foreign exchange to repay debt rather than to invest in domestic production or public services provision. This economic prescription lay at the heart of the Washington Consensus, and was laid down as a template for all Latin American countries, despite their structural heterogeneity.39 The hegemony–consent relationship established by the consensus considerably reduced the autonomy of Latin American stateinstitutions to define their own strategies, leading to internal tensions and conflicts within the region since many groups within Latin American civil society felt that the state institutions were responding to the external hegemony–consent relationship, which in turn was determining the internal structuring of the domestic social contract.40 The philosophy41 behind the Washington Consensus was that internal structural reforms were necessary to stabilise Latin American economies and enable them to gradually pay off the external debt. The experiences of adjustment showed that the consensus, in promoting stabilisation, restricted rather than fostered economic growth. This was notably the case in Bolivia where the New Political Economy, considered as an orthodox adjustment programme and applied in 1985 by President Víctor Paz Estenssoro, stabilised the economy but also produced a deep economic recession. Needless to say, the consensus did not take into account the political constraints of economic reforms (such as the fear of a coup, the learning of the new rules of the democratic ‘game’, or the formation of new political coalitions). The consensus became key to the rewriting of the social contract because it would radically transform social relations. It became, together with the establishment of formal democracy, the second pillar of the new social contract and, as such, would influence the values and interests of the state-institution. Despite the overwhelming influence of the Washington Consensus, in the 1980s there was still room for heterodox economic plans in countries that were following the dominant neoliberal trend by attempting to meet the demands of the Consensus through liberalisation and state-institution rationalisation (through privatisation, for example). They were defined as heterodox since, contrary to the market-oriented IMF strategy, the government retained a central role in economic management. This was the case, for example, with the Austral Plan in Argentina, the Cruzado Plan in Brazil, the Inti Plan in Peru, and the Solidarity Pact in Mexico. This level of government intervention was closely associated with growing demands from civil society for an increased share in national income and improved basic needs. In Argentina, Peru and Brazil, the restoration of electoral politics was linked to this increase in distributive claims on the state and explains a shift towards expansionist policies. Demands from civil society, organised groups such as trade unions, and political parties

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The state of democracy in Latin America

were incompatible with demands from the international creditors to repay the debt and its interest. In this sense, external debt can be seen as a problem of reallocation of resources related directly to income distribution. Conflicts around this situation inevitably arose, including food riots in many countries.42 The so-called heterodox plans were attempts to reduce high inflation and the fiscal deficit. However, the principal flaws of these plans were that they were launched without the support of domestic political actors (trade unions, business organisations) and domestically they satisfied few people by attempting to satisfy everyone. The plans were supported by international creditors despite the fact that were not perfectly in tune with the market-driven view of economic change of the consensus, as in the case of Chile, for example. When it was evident that the plans would not be successful in facilitating debt repayments at the high levels expected, the international creditors exerted their influence and coerced the economies in question by refusing to provide new credits without a commitment to the orthodox strategy outlined by Washington. After the collapse of these heterodox experiments, the Washington Consensus appeared to be the only alternative available for debtor countries in Latin America in terms of economic strategy. Governments were trapped between the need to meet social demands through public expenditure, yet without the access to international capital markets to generate credit to carry them out. In this sense, these governments, as the focal point of the state-institution, were neither submitting to the needs of civil society (which gave it legitimacy) or to the hegemony–consent relation established between them and Washington. Eventually, access to credit outweighed domestic social demands, since it was perceived that these demands could be suppressed by utilising the security forces where necessary, thus (theoretically) buying time for market measures to provide new labour opportunities and the growth required to facilitate increased public spending. The explicit or implicit acceptance of the consensus view of economic management by Latin American political parties involved in the democracies of the post-authoritarian era gave rise to economic plans with political support from diverse sources, from right to left. As such, a new consensus was formed within the Southern Cone states, and across Latin America more generally, whereby formal liberal democracy was to marry with liberalisation of the economy as defined by the Washington Consensus. This marriage can be labelled the New Liberal Consensus. It exhibited the following features: the retreat of the state in almost all economic areas; the political demobilisation of the working class and of trade unions; flexibilisation of the labour market; liberalisation of trade; increased foreign capital investment; high concentrations of capital; and macroeconomic balance as the ultimate objective of economic and political management. One can also identify outcomes such as: a strong dependence on

Perspectives on the Latin American state 65 international finance and credit; rising labour informality and underemployment; relative reductions in wages increases; increased vulnerability of socially excluded groups such as indigenous peoples, the elderly, and children; and rising levels of crime and violence. This marriage between liberal democracy and neoliberal economics that accompanied democratisation led to the convergence of a state-idea around the principals of electoral democracy, stability through economic liberalisation and deregulation, and the retreat of the state. Of course, the marriage would exhibit particular tendencies in different countries, provoking contrasting consequences.43 However, it had an overbearing impact on policy-making in the state institutions of the region, similar to the impact that the debt crisis had from the early 1980s. While the social contract was written nationally, social relations were increasingly influenced by the process of insertion of the national economy into the global economy. Export orientation became a key weapon in the economic arsenal, consolidating a return to the commodity dependence of the pre-ISI period. It is crucial to highlight that the previous democratic experiences of each country influenced the form of the new democratic regime that provided the political arm of the New Liberal Consensus. The rewriting of the social contract is historically influenced by old patterns and norms, therefore the political and economic coalitions that emerged during the democratic transitions were shaped by social relations that were in place under authoritarianism and were in the process of adaptation. The new democratic processes thus required the redemocratisation of the authoritarian state and were, as such, influenced by the reasons that had led to the emergence of authoritarianism in each country. The point of departure of the 1980s democratic state in Latin America was the authoritarian experience of the 1970s. Whether the new political and economic coalition of democratisation would be able to accompany the transformation of social relations in each country was to be highly influenced by the reaction of the élites who would judge the process in terms of the protection of their interests. All of these factors contribute to an understanding of the development of the New Liberal Consensus in Latin America from the 1980s.

The democratic state of the New Liberal Consensus Democracy is a process that implies political equality and has the potential to achieve social equality and equity through economic prosperity. This is, of course, a broad definition of democracy. Other definitions identify a political regime or a body of rules, norms and procedures, while the Schumpetarian tradition reduces democracy to its formalistic and procedural elements. Recently, and especially with respect to Latin America, democracy has been analysed from diverse perspectives. It has been

66

The state of democracy in Latin America

discussed as a political regime and a particular mode of relationship between the state and its citizens, ‘and among citizens themselves, under a kind of rule of law that, in addition to political citizenship, upholds civil citizenship and a full network of accountability’ in the words of Guillermo O’Donnell.44 It has also been considered by David Becker in terms of an ‘idea about the societal distribution of power (which denotes) a society where power is in the hands of the people at large’.45 Likewise, it has been defined by Schmitter and Karl as ‘a system of governance in which rulers are held accountable for their actions in the public realm by citizens, acting indirectly through the competition and cooperation of their elected representatives’.46 In these definitions, distribution of power and accountability seem to prevail, in contrast to Adam Przeworski’s emphasis on the uncertainty of democracy.47 Adding to these features, we understand democracy as a process towards political equality, which has the potential of achieving social equality and economic prosperity. Democracy will not necessarily bring social equity and economic prosperity.48 In recent decades, the pursuit of democracy, as a value, has given rise to numerous conflicts. Historical examples include the experiences of El Salvador and Guatemala, which reveal that democracy is often the outcome of an armed struggle. In contrast to these Central American processes, South American countries have witnessed the re-emergence of democracy as more of a bargaining process.49 Also, they have pegged the future of democracy to the success of economic strategies since the democratisation processes were accompanied by economic restructuring following the 1982 external debt crisis. While this is a valid approach, since political processes of transformation cannot be separated from economic processes of change, it did create some confusion over perceptions of democracy. It is not democracy in itself. Rather, it is the state-social contract and state-institution that are deeply connected to the economy since they reflect the given social relations. Democracy is one feature of this state, in the same way that this state is also a capitalist state. Democratisation has also been a trend running alongside the processes of globalisation of the international economy. The principal discourse of the globalisation debate is that there is some inevitability to the economic liberalisation that underpins it.50 Consequently, globalisation will define the direction of national economic strategies. This projected fait accompli in many ways undermined support for democracy in certain instances since a dominant perception was that democracy was being delivered in a highly superficial manner, through discourses around governance and efficiency within the state-institution rather than democratisation of the social relations of the state. Given that the economic strategy was regarded as immutable, it was democracy that came to be questioned more vigorously. There has been a sharp decline in public support for democracy in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay,

Perspectives on the Latin American state 67 while in Venezuela, Peru and Uruguay the decline has been less marked in recent years.51 Even Costa Rica, regarded by most as a model of liberal democracy, revealed a decline! One can also observe that there are a large number of respondents willing to see a return to authoritarianism if that regime type is capable of delivering socio-economic benefits for them; it is likely that those in favour of authoritarianism are those who gained from the repression and social discipline of the earlier period (see Tables 1 and 2). It is also apparent that across the region generally, the armed forces and police are held in higher regard – in terms of confidence in the institution – than political parties, while the Church retains its position as the most respected institution in Latin American society.52 This situation clearly presents problems in terms of governance by politicians with strong allegiance to these ill-respected parties. Democracy was expected to resolve the legacies of the authoritarian states while at the same time facilitating an economic restructuring that deepened the social relations partially established during the authoritarian period.53 The democracy of the 1980s and 1990s was the outcome of the bargaining process with the authoritarian state élites and it is crucial to highlight that some of the experiences of authoritarianism, such as the bureaucratic authoritarian states, can be viewed as a defensive reaction of the élites to protect their interests. Therefore, the reasons that led to the emergence of authoritarianism can also help us to understand the shortcomings Table 1 Survey responses to statement: Democracy is preferable to any other kind of government (% in agreement)* Country

1995

1996

1997

1998

2000

2001

Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguay Venezuela

76 na 41 52 na na na na na na 49 na na 52 52 80 60

71 64 50 54 60 80 52 56 51 42 53 59 75 59 63 80 62

75 66 50 61 69 83 41 66 48 63 52 68 71 44 60 86 64

73 55 48 53 55 69 57 79 54 57 51 72 71 51 63 80 60

71 62 39 57 50 83 54 63 45 64 45 64 62 48 64 84 61

58 54 30 45 36 71 40 25 33 57 46 43 34 35 62 79 57

* Not including those who answered ‘it doesn’t matter’ and don’t know. na = not available. Source: Latinobarómetro, Informe de Prensa – various (Santiago, Latinobarómetro, 2002).

68

The state of democracy in Latin America

Table 2 Survey responses to statement: In certain circumstances, an authoritarian government can be preferable to a democratic one (% in agreement)* Country

1995

1996

1997

1998

2000

2001

Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Uruguay Venezuela

11 na 21 19 na na na na na na 15 na na 20 23 8 21

15 17 24 19 20 7 18 12 21 14 23 14 10 26 13 9 19

15 16 19 16 13 9 23 13 26 17 31 19 10 42 16 7 17

16 22 18 16 17 21 19 10 29 9 28 9 8 36 12 9 25

16 13 24 19 23 6 12 10 21 15 34 6 18 39 13 9 24

21 17 18 19 16 8 23 10 21 8 35 22 23 43 12 10 20

* Not including those who answered ‘it doesn’t matter’ and don’t knows. na = not available. Source: Latinobarómetro, Informe de Prensa – various (Santiago, Latinobarómetro, 2002).

of the current democracies, since their departure point was the military regimes themselves. The transformation of the 1980s had the potential to change the statesocial contract and state-institution. However, as emphasised above, these changes also had to correspond to changes in social relations. We argue that democracy per se cannot be the key element of the debate. The key is in fact the state and the contradictory social contract that deepened economic and social inequalities under the legitimising umbrella of political equality. Democracy is functioning in Latin America but it is problematic and the traditional contradictions of capitalism that gave rise to particular forms of democratisation and economic restructuring have led to a social contract that is inegalitarian and exploitative. However, to point out the traditional contradictions of capitalism as the forces underlying the current condition of Latin American societies is insufficient since the Latin American capitalist state has quite distinctive features. The democratic-inegalitarian state-social contract is the historical legacy of the authoritarian state and posed a challenge for the transitional period in most countries.54 For instance, authoritarian states eliminated or dramatically reduced the role of the legislature and the judiciary such that a significant number of Latin American countries still suffer from this lack of an independent judiciary, an efficient congress and a strong executive.

Perspectives on the Latin American state 69 This historical legacy of the authoritarian state provided the framework for the redefinition of the social contract from the 1980s. The authoritarianism of the 1970s was diverse: there were pure bureaucratic authoritarian states as defined by O’Donnell, and variations of military regimes. There were personalistic dictatorships such as in Paraguay with Alfredo Stroessner, Bolivia with Hugo Banzer, and Chile with Augusto Pinochet. Argentina and Brazil were institutional dictatorships administered by the armed forces. In Peru, Bolivia (from 1964 to 1971) and Ecuador, the military dictatorships adopted a populist approach and challenged the power of the old traditional élites. The government of Juan Velasco in Peru (1968–75) is an interesting case in point, where a military junta seized US oil interests, nationalised selected industries and implemented a programme of agrarian reform. The end of the authoritarian regimes should also be considered to help us understand the new form of the state. The regimes in Uruguay and Chile ended after popular consultations: there was a pact between the military and the traditional political parties in Uruguay; and an implicit pact that controlled the transition to democracy and the role of the armed forces in Chile. Both countries maintained their traditional political parties, welcomed newcomers and established political coalitions that have secured a high degree of political governability and stability since the moment of regime transfer. However, it should also be noted that both were also models of democratic stability and governance prior to the breakdown of the pre-authoritarian democratic process. The experience of Bolivia was different in that the political élites began to fragment in the 1980s, provoking the need for pacts between political parties after each presidential election in order to meet constitutional requirements.55 It is only with the collapse of the radical left in the country that these coalitions have had more success in achieving political stability, but threats remain and the country lacks the balance of coalitions that predominate in Chile and Uruguay, for example. The Ecuadorian case mirrors more historical precedents of patronage and clientelism. The transition was not based on a pact between the military and political parties, and the lack of party institutionalisation led to the predominance of movements organised around personalities. Argentina’s dictatorship collapsed after the 1982 military defeat and the traditional political parties were soon engaged in electoral competition without any attempt to establish a pact with the military regime or a coalition among themselves. It was not until Menem took power in 1990 that a degree of stability would be put in place, but this personalism would also mask these underlying problems in the balance of power between parties and interest groups. Brazil provides a contrast to the Argentinian experience since a long transition facilitated the emergence of coalitions amongst parties. However, the role of strong leaders remained, and thus there are parallels with Argentina and other countries in the region.

70

The state of democracy in Latin America

Although each country underwent a different process in terms of duration, relations between different political, economic and social actors, and reactions to the process, it can be noted that the pre-authoritarian structures of political party systems tended to predominate in the transition to democracy, alongside the critical role of personalistic politics. It was the case therefore that these more traditional actors, who had been party to the breakdown of the former democratic regimes and often responsible for military intervention, became the main protagonists of the new wave of democratisation and the restructuring of the economy. The case of the Partido por la Democracia (PPD) in Chile, which was established purely for the purpose of the transitional electoral process, was an exception rather than the norm. Whether the traditional political class, or its renovated version, was up to the job of transforming the legacy of authoritarianism as also, and most crucially, the main features of the pre-authoritarian state, is an open question but one which is partially being answered twenty years later with the crisis of representation that Latin American democracies are currently experiencing.56 The networks of political representation through the activities of political parties suffered a process of significant decay in the years immediately following transition. Most importantly, they had not been replaced by viable alternatives in order to challenge the manifestations of the New Liberal Consensus. It was only later in the transition period that new parties began to emerge and challenge some of the traditional political formations. Brazil witnessed the emergence of the Partido dos Trabalhadores (PT) and Argentina the Unión del Centro Democrático, Movimiento por la Dignidad y la Independencia (MODIN), and Frente del País Solidario. While the PT in Brazil won elections at the local level and eventually seized the presidency in October 2002 following three close-run previous national elections, Argentina’s new parties (after winning elections at the local or provincial level or for the legislature) entered into coalitions with Radicalism and/or Peronism and were, in the end, co-opted by them. The Frente Amplio in Uruguay, the Causa R in Venezuela, the Partido Revolucionario Democrático in Mexico and the Alianza Democrática in Colombia, all injected new forms of political representation into systems which had not been very competitive in the past. However the newcomers, together with the older players, were undermined by the emergence of populist alternatives such as Fernando Collor de Melo in Brazil, Carlos Menem in Argentina, Alberto Fujimori in Peru and Hugo Chávez in Venezuela. The ways in which these populists consolidated their power over the political parties – with the exception of Menem – was often dramatic. For example, in 1992 (following his election in 1990), Fujimori used the argument of the war against Sendero Luminoso to dismiss congress, suspend the constitution and dismiss half of the Supreme Court judges in what would be defined as an autogolpe; in 1995, following his re-election, he announced the death of the partidocracia in Peru, effectively centralising power in his own hands.57

Perspectives on the Latin American state 71 This challenge to the traditional parties came not only from populist leaders but also from the electorate. In the Peruvian 1985 presidential elections, Acción Popular won only 7.3 per cent of the vote while support for the Alianza Popular Revolucionaria Americana, which won these elections with 53.1 per cent would also fall dramatically, to 22.5 per cent in 1990. By 1995, these two traditional parties, combined, received less than 6 per cent of the national ballot.58 In Brazil, the two parties that took José Sarney to the presidency in 1986 (Partido do Movimiento Democrático Brasileiro and Partido da Frente Liberal) could only secure 5 per cent of the vote in 1989. Likewise, the Argentine Radical Party, which won the 1983 elections with 52 per cent of the vote, would receive 17 per cent in the 1995 presidential elections and only 2 per cent in the 2003 presidential elections. Perhaps the greatest fall from grace was in Venezuela where Acción Democrática and Partido Social Cristiano de Venezuela (COPEI), could generate only 9 per cent and 2.1 per cent of the vote respectively in 2000, compared with 52.8 per cent and 40.3 per cent in 1988. This lack of confidence in the traditional parties led to incumbent political parties being defeated in presidential elections, at least once, in Argentina, Uruguay, Brazil, Bolivia, Peru, Ecuador and Venezuela during the late 1980s and early 1990s.59 Although some scholars60 have defined this situation as a crisis of representation, it is important to highlight that the party political system in most countries has proved to be able to protect the democratic rules established by the transition. Between 1990 and 2001, eight presidents were forced out of office: in Brazil in 1992; Venezuela in 1993 (and almost in 2002); Ecuador in 1997; Paraguay in 1999; Ecuador and Peru in 1990; and in Argentina in 2001 and 2002. While the military played a role in some of the cases (Ecuador in 1997 and the attempt in 2000, Venezuela’s attempt in 2002, Peru in 2000 and Paraguay in 1990), the social unrest that prevailed at these times was mainly expressed by civil society through protests and was resolved by democratic means. The respective congresses played key roles in the resolution of these crises, for instance, in Paraguay in 1990, Brazil in 1992, Venezuela in 1993, Ecuador in 1997, Ecuador and Peru in 2000 and Argentina in 2001 and 2002. There is an ongoing transformation of the perception of the role of the political leadership, whereby the self-serving approach of a large element of the political class is being challenged by civil society. While allegations of corruption forced out four presidents and helped to disintegrate the power of traditional political parties, other leaders or parties collapsed because of their inability to govern in the face of opposition. It is true that in some cases, such as Venezuela and Peru, the events that followed transition undermined democratic procedures. However, the political class, new and old, has been able to avoid the breakdown of democracy and a return to authoritarianism.61 Therefore, despite all its shortcomings, political democracy at the regime level has proven (so far) to be able to

72

The state of democracy in Latin America

establish and maintain its formal procedure and to survive and manage political crises within the framework of these rules. Of course, in many cases democracy has been damaged by particular actions and public support has subsequently waned. Nevertheless, it seems that democracy is still the only game in town at the present time.

Economic and social consequences of the New Liberal Consensus While in political terms, and given the historical antecedents and circumstances, Latin American democracies could be considered success stories, their potential to achieve social equality through economic prosperity, and to shift values in favour of the more marginalised sectors of society, has not been fulfilled. Since democratisation was accompanied by the restructuring of the economy, it has been judged mostly in terms of the pursuit of economic goals such as macroeconomic growth variables. To take a broader perspective that is socially inclusive rather than exclusive it is necessary to understand that the social relations that emerged as a consequence of the responses to the external debt crisis produced a certain type of social contract. This contract, although democratic in form, contributed to the deepening of the features of the authoritarian state within the context of liberal democratic political regimes. To delve into the social experiences of the period of democratisation in Latin America and how societies were affected in general, it is necessary to review some of the statistical indicators that provide an overview of national level changes across the region. Although these national data sets mask many of the more problematic features within Latin American societies, such as differences according to race and ethnicity, gender, age and other identity criteria, and rural, urban and regional variations, they facilitate broad comparisons between countries. It may not be surprising that most social indicators have followed a longer-term trend towards improvement. For example, in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela, mortality rates fell between 1980–85 and 1995–2000, life expectancy rose, and illiteracy in the population aged 15 years was reduced.62 During the 1990s, public expenditure on social issues increased per capita by 50 per cent in Latin America, although the rise in terms of GDP was far less marked and reveals the low levels of support provided under authoritarianism and the early democracies established by the late 1980s (see Figure 2).63 Across the region, with the exception of Honduras and Venezuela, social expenditure against GDP (as a percentage) rose during the 1990s. At the end of the decade, Argentina was also spending considerably more on education than at the beginning of the 1990s, while Brazil spent considerably more on social security but less on housing and water. Chile also increased its expenditure on social security, but with reductions in

Perspectives on the Latin American state 73 25.0

20.0

15.0

10.0

5.0

a

y

uel

gua

nez

Uru

Ve

ru

blic

Pe

Do

min

ica

nR

epu

uay

a nam

rag

Pa

Pa

o

gua

ras

xic

ara

Nic

Me

Ho

ndu

la

r Gu

ate

ma

a

ado alv

Ric

El S

bia

sta Co

zil

ile

lom Co

Ch

Bra

livia Bo

Arg

ent

ina

0.0

1990–1991

1994–1995

1998–1999

Figure 2* Social expenditure as a percentage of GDP. * There are no data available for Ecuador. Source: Based on CEPAL data, Panorama Social de América Latina 2001–02 (Santiago: UN).

health and housing. In terms of health, Colombia registered the highest expenditure increase while in Mexico the rate of increase came down. Paraguay and Venezuela decreased expenditures on housing, while Uruguay increased its expenditure, mainly on social security. Taking these variations into account, and recognising the shifting nature of priorities within the social policies and sectoral allocations, it is possible to conclude that the countries under consideration increased their level of social expenditure in real terms during the 1990s.64 The case of education provides one dimension of these changes. Reflecting on changes since the 1980s, public expenditure on education rose in Argentina, Colombia, and Brazil from 1980 to 1997, in Bolivia and Mexico from 1980 to 2000, in Paraguay from 1980 to 1998 and in

74

The state of democracy in Latin America

Venezuela from 1980 to 1995. However, this expenditure fell in Chile, Peru and Ecuador from 1980 to 1997.65 Governments have recognised the need to prioritise spending on primary education rather than on tertiary, shifting the balance away from higher level concentrations, such as in Brazil where public universities receive 2 per cent of all students yet receive 25 per cent of all the funds destined for the educational system. At the 2001 Summit of the Americas, governments committed themselves to achieving universal primary education by 2010 while also ensuring that 75 per cent of the children in each country would complete secondary education by the same year. In 2002, two thirds of Latin American children received some secondary education, compared with only half in the mid-1980s; Mexico, Argentina and Brazil all improved their school enrolments during the 1990s.66 Despite these positive signs, however, there are still huge disparities between countries and within them. For example, in some rural areas of Mexico the illiteracy rate reaches 21 per cent of the population, which is double the national average. Perhaps the starkest differences are those that can be categorised as income-related discrepancies. In Mexico as a whole, the wealthiest 10 per cent of society spends 12 years at school, compared with only two years for the poorest 10 per cent.67 As for education, public expenditure on health increased across South America, with the exception of Ecuador, from the 1980s to the end of the 1990s.68 While all these improvements can be regarded as quite modest when discussed in the light of the macroeconomic variables of the period, it is important to emphasise that these indicators reveal that the decade of the 1990s was a period of social progress rather than deterioration. In view of these positive developments, one must question why there is little perception that major, positive transformations are taking place. The problems lie in the deep-rooted constraints to social development through the social relations established under authoritarianism. Labour flexibilisation persisted into the democratic period, having been promoted under the authoritarian regimes to facilitate commercial strategies in the private sector. Consequently, unemployment rates (the most reliable data referring to urban areas) reveal trends that would appear to counter the advances made in public social expenditure, or at least emphasise how necessary these social interventions are in reducing social mobilisation and potential conflicts.69 These unemployment rates rose within the context of economic growth, suggesting that growth did little to fuel a rise in formal employment opportunities (see Figure 3). South American countries experienced a decline in growth during the later 1990s as a consequence of the 1998 financial crisis and contagion that swept through most of the developing regions of the world. The contrast between the early and late 1990s may also be based in the recovery that was taking place in the economies following the recession of the early 1980s and the debt crisis which had been important factors in destabilising

Perspectives on the Latin American state 75 20 18 16 14 12 10 8 6 4 2

1990

1994

1997

a nez

uel

y Ve

Uru

gua

ru Pe

uay rag Pa

co Me xi

r ado Ecu

mb ia Co lo

Ch ile

zil Bra

livia Bo

Arg

ent

ina

0

2000

Figure 3 Open unemployment rates in urban areas,* 1990–2000.** Note: 1990 and 1994 data for Peru unavailable. * In the case of Argentina the data relates to Greater Buenos Aires, in Paraguay it is based on Asunción, and in Venezuela it is a total of rural and urban areas. ** The figures used for Brazil, Colombia, Paraguay and Peru in 2000 are from 1999 data. Source: Based on CEPAL data, Panorama Social de América Latina 2001–02 (Santiago: UN).

the authoritarian regimes in many instances (see Table 3). While economic growth remained steady between 1970 and 1980, all the countries considered here experienced significant declines between 1980 and 1985. During the later 1980s, the performance of the economies varied more widely as countries tried to accommodate the external debt crisis and apply new economic strategies to meet challenges of high inflation and large fiscal deficits. These strategies were either domestically formulated heterodox plans or plans styled by the Washington international financial institutions. This period marked the definitive collapse of the inwardlooking growth model (desarrollo hacia adentro) and the strengthening of the export-oriented model through more intensive liberalisation. Initial improvements at the macroeconomic level are registered in the early 1990s data. However, the external vulnerability that ISI had been designed to overcome would return in the later 1990s as a consequence of the increased external dependency of desarrollo hacia afuera. One of the principal aims of the 1990s economic restructuring process was to reverse high inflation rates. While Colombia sustained a two-digit figure until 1999 when inflation fell to 9.2 per cent, then 8.8 per cent in the following year, Ecuador failed to lower its rate (it rose from 22.9 per cent in 1995, to 40.8 per cent in 1998 and 96.1 per cent in 2000). Mexico

2.6 3.9 8.6 5.4 2.5 9.7 6.5 8.7 3.9 2.7 1.8

−2.5 −1.9 1.1 2.5 −0.3 2.6 1.9 2.4 −0.3 −3.2 −2.0

6.1 −2.5 7.6 6.9 5.7 3.4 −3.8 −0.3 8.7 8.3 6.6

2.1 2.6 3.4 5.6 5.7 −9.5 1.8 4.5 8.0 7.9 3.8

−2.8 3.0 0.1 4.2 7.4 14.3 1.4 6.7 −8.4 −0.2 5.9

70/80 80/85 1986 1987 1988 −4.6 2.8 3.2 3.5 9.8 0.1 3.1 5.9 −11.4 0.6 −7.8

1989 −0.2 10.6 2.6 5.4 −3.8 1.0 4.2 7.3 2.0 1.8 2.5 5.0 3.9 4.2 3.1 2.5 −4.9 2.7 0.8 3.7 5.8 10.5 9.6 1.7 −0.3 10.9 3.7 3.0 3.7 1.7 −0.4 8.3 7.0

5.9 4.3 4.5 6.6 4.6 2.2 1.8 4.0 4.8 3.5 −0.4

5.8 4.8 6.2 5.1 6.1 4.4 4.4 3.0 12.8 7.0 −3.7

−2.9 4.7 4.2 9.0 5.2 3.0 −6.1 4.5 8.6 −2.3 5.9 5.5 4.5 2.5 6.9 2.1 2.3 5.4 1.1 2.5 5.0 −0.4

8.0 4.9 3.1 6.8 3.4 3.9 6.8 2.4 6.8 5.4 7.4

1990 1991 1992 1993 1994 1995 1996 1997

Source: CEPAL, Anuario Estadístico de América Latina y el Caribe 2002 (Santiago: UN).

* 1970–90: Percentages based on values at constant market prices; 1991–2001: percentages based on values at 1995 prices.

Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela

Country

Table 3 Annual growth rate in total GDP*

3.8 5.2 0.1 3.6 0.5 1.0 5.1 −0.6 −0.5 4.4 0.7

−3.4 0.4 0.7 −0.1 −4.1 −9.5 3.7 −0.1 0.9 −2.9 −5.8

−0.6 1.8 4.5 4.9 2.7 2.8 7.0 −0.6 3.0 −1.5 4.0

−3.8 0 1.7 3.0 1.5 5.0 −0.1 1.5 −0.5 −2.5 2.8

1998 1999 2000 2001

Perspectives on the Latin American state 77 experienced a different trend from that of Ecuador as its rate gradually declined over the period, reaching single digits of 9.5 per cent in 2000. Venezuela reveals the greatest success in this field, bringing down runaway inflation of 99.9 per cent in 1996 to 35.7 per cent in 1998 and 15.7 per cent in 2000. Apart from these more marked experiences, the other countries (Argentina, Bolivia, Brazil, Chile, Paraguay, Peru and Uruguay) all achieved a significant decrease from their high inflation rates of the 1980s.70 With the exception of Colombia, Ecuador, Peru, Uruguay and Venezuela, the economies of the region also saw their international reserves fall at the end of the 1990s. The most dramatic of these declines were in Argentina, Brazil and Mexico.71 This process of decapitalisation of the economies is, without doubt, related to the interest payments of the external debt and the vagaries of the financial contagion that threatened the stability of these economies (see Figure 4). Having experienced grave financial crises during the mid-1990s – the Mexico tequila crisis and Argentina’s tango crisis – the damage to the economies from the repercussions of the 1998 downturn

250,000

200,000

150,000

100,000

50,000

1990

1995

2000

uel

a

y

nez Ve

gua Uru

ru Pe

uay rag Pa

co Me xi

Ecu

ado

r

bia Co

lom

Ch ile

zil Bra

livia Bo

Arg

ent

ina

0

2002

Figure 4 Interest paid and outstanding (US$ millions).* * Includes interest payments made, as well as interest due but not paid. Source: Based on CEPAL data, Anuario Estadístico de América Latina y el Caribe 2002 (Santiago: UN).

78

The state of democracy in Latin America

35,000 30,000 25,000 20,000 15,000 10,000 5,000

1992

1994

1998

2000

y

uel a nez Ve

Uru

gua

ru Pe

rag

uay

o

1996

Pa

xic Me

Ecu

ado

r

bia Co

lom

ile Ch

zil Bra

livia Bo

Arg

ent

ina

0

2001

Figure 5 Total disbursed external debt (US$ millions). Note: 2002 figures are preliminary. Source: Based on CEPAL data, Anuario Estadístico de América Latina y el Caribe 2002 (Santiago: UN).

was more difficult to mitigate. Argentina’s ability to maintain its dollar-peso parity was questioned and this would provide the seeds of doubt that would flourish in 2000. Brazil was forced to devalue the real in January 1999, and Mexico is having to become ever more closely dependent on the US to maintain its economic stability. The burden of debt repayment also remains as a spectre of previous administrations (mostly authoritarian) and their financial prof ligacy. Following the Baker Plan of 1985, the Brady Plan of 1989,72 and the 1990s economic reforms, most Latin American countries saw their interest payments increase dramatically. From 1985 to 2000, Argentina’s interest payments increased by 130 per cent, Colombia’s by 110 per cent, Uruguay’s by 70 per cent, Peru’s by 63 per cent, Brazil’s by 54 per cent, Mexico’s by 50 per cent, Ecuador’s by 41 per cent, and Paraguay’s by 16 per cent. Although Bolivia (−37 per cent), Chile (−9 per cent) and Venezuela (−26 per cent) were able to decrease their interest payments, it was only Venezuela that was actually able to reduce its overall debt (by 18 per cent, due to its oil revenues). All the other countries saw their total debt increase (see Figure 5): Argentina by 128 per cent; Colombia by 113 per cent; Chile by 99 per cent; Brazil by 83 per cent; Paraguay by 46 per cent; Mexico by 43 per cent; Peru by 41 per cent; Uruguay by 28 per cent; Bolivia by 18 per cent; and Ecuador by 10 per cent. To meet these payments and increase international reserves, the response from most countries was to liberalise their economies as much

Perspectives on the Latin American state 79 35,000 30,000 25,000 20,000 15,000 10,000 5,000

1992

1994

1996

1998

2000

nez

uel

a

y Ve

Uru

gua

ru Pe

uay Pa

rag

co Me xi

r ado Ecu

mb ia Co lo

Ch ile

zil Bra

livia Bo

Arg

ent

ina

0

2001

Figure 6 Net foreign direct investment (US$ millions). Source: Based on CEPAL data, Anuario Estadístico de América Latina y el Caribe 2002 (Santiago: UN).

as possible. A major part of the promotion of export orientation involved the participation of foreign capital. The privatisation processes (that would gradually shift from productive activities to services and utilities as opportunities in the former became exhausted73) would also attract this capital.74 Foreign Direct Investment (FDI) in the region has been concentrated in the largest economies (Mexico 35 per cent, Brazil 32 per cent, Chile 6 per cent and Argentina 4 per cent in 2001 – see Figure 6) but there are also vulnerabilities associated with dependency on such investments. The regional downturn and the gradual exhaustion of national assets for privatisation has led to a fall in FDI, from US$105 millions in 1999 to only US$80 millions in 2000, and the cut-throat nature of emerging economies portfolio investment combined with FDI can have a sharp impact on individual countries. Argentina has been the latest to suffer from the footloose nature of this capital, seeing its total foreign direct investment dropping from US$11,665 millions in 2000 to US$3,181 millions in 2001.75 The end of the 1990s saw a decline in the economic performance of most of the countries in the region and a questioning of the New Liberal Consensus, with benefits from economic liberalisation being scrutinised and liberal democracy failing to appeal to civil societies undergoing economic hardships as a consequence of economic restructuring to meet external financial obligations and reorient economies to international markets.76 The national experiences of the New Liberal Consensus are noted below, and they reveal the ongoing struggles and conflicts that are present in these economies as a result of the tensions between external

80

The state of democracy in Latin America

relations and the domestic social relations that have emerged during the 1990s under the process of democratisation through liberalisation. The case of Argentina and its impacts on other countries in the Southern Cone reveals the worst-case scenario of how the recent model can be destabilised, resulting in major social unrest and dramatic increases in poverty. Argentina’s crisis was, without any doubt, the most important event of the beginning of the 2000s in the region. In one decade Argentina has experienced its fastest rates of economic growth followed by its most far-reaching economic melt-down. The following data77 tell the story of this crisis. The economy grew an impressive 8.1 per cent in 1997, before contracting by 3.4 per cent in 1999. In 2001 the economy shrank at an even faster rate of 4.5 per cent. By May 2002, 40.1 per cent of the total work-force was either unemployed (21.5 per cent – the highest rate in the country’s history) or underemployed (18.6 per cent). While in May 2001, 28.9 per cent of the Buenos Aires population was living below the poverty line, this figure had jumped to 49.7 per cent one year later. At the same time, between 1991 and 1999 Argentina’s external debt climbed from US$57 billion to US$144.6 billion, with the external debt-to-GDP ratio rising from 28.4 to 51 per cent. This drove up the debt service from an average 73 per cent of exports between 1996 and 1998, to 97 per cent of exports in 1999. In the year 2000, the public sector deficit was 2.4 per cent of GDP, which was close to US$7 billion. Between the onset of recession in 1998 and 2001, GDP fell by 10 per cent, investment by 30 per cent, and consumption by 15 per cent. As early as March 2001, Argentina witnessed the greatest disbursements of bank deposits in its history: US$5,543 million in one month. The financial collapse culminated in the largest-ever debt default anywhere in the world, as Argentina withheld repayments on its US$155 billion debt in December 2001.78 With such critical financial problems, Argentina provides a warning to other Latin American countries in terms of how to engage with international finance, also in terms of the ways in which domestic economic strategies and political regimes are able to manage crises under highly dependent conditions. Both Uruguay and Brazil have suffered from the fall-out from the Argentine crisis, affecting their ability to recover from the financial contagion of the 1998/99 period. Uruguay has experienced declining GDP, increased unemployment (13.6 per cent in 2000), increased domestic and external borrowing, a devaluation in 2002 and an increase in the country’s risk index, while Brazil retains problems with short-term borrowing, rising imports and falling levels of FDI. Consequently, unemployment has been rising and in São Paulo it has registered its highest rate since 1982. External demand has become the key factor in the health of the Latin American economies as a result of the liberalisation process, and activities in this area have revealed the greatest dynamism in most cases. However, dependency and vulnerability to international market tendencies suggests

Perspectives on the Latin American state 81 that shocks like those of the 1994 tequila crisis and the recent Argentine crisis will be more, rather than less likely over the next decade. This vulnerability can be seen in the Latin American currencies.79 Uncertainties in the international economy are now projected into the domestic economies in a dramatic way, through depreciations and also through country risk ratings that have a marked effect on future FDI and portfolio investment opportunities. What is essential to establish in terms of the changing state-social contract is how civil society has been affected by these economic variables. The ideological and intellectual leadership of the New Liberal Consensus has revolved around a discourse that makes it clear that economic liberalisation and liberal democracy are the most appropriate forms of economic and social organisation for the welfare of society. However, the benefits of this marriage have become less than clear, and one must question the capacity of this discourse to satisfy social groups and generate consent for the development orientation and legitimacy for the political model. In terms of status, compared with other countries in the international system, it is apparent that Bolivia, Colombia, Ecuador, Paraguay and Peru are lower middle-income countries and Argentina, Brazil, Chile, Mexico, Uruguay and Venezuela are regarded as upper middle-income countries.80 However, since the region is the most unequal in terms of income and opportunities, there is dramatic polarisation within these countries. For example, in terms of people living in poverty (according to international financial institution parameters for the late 1990s, those in receipt of less than US$1 per day), there are 20.2 per cent in Ecuador (1998); 19.7 per cent in Colombia (1998); 19.5 per cent in Paraguay (1998); 15.9 per cent in Mexico (1998); 15.5 per cent in Peru (1996); 14.4 per cent in Bolivia (1999); 11.6 per cent in Brazil (1998); 2 per cent in Chile (1998).81 Although from 1997 to 1999, the number of poor grew in Latin America from 204 to 211 million, the percentage of poor households and poor population remained constant.82 Nevertheless, in 1999, 35 per cent of households in the region were still considered to be poor while 14 per cent were classified as indigent.83 Of course, these regional figures mask important disparities between the countries of the region, and shorterand longer-term variations. For example, in 1999, Argentina, Brazil and Colombia all registered an increase in poverty while Mexico witnessed a reduction. However, in analysing the decade of the 1990s, it can be noted that Brazil registered a 10 per cent decline in poverty levels, as did Chile. Beyond the data for those who struggle to meet their daily needs, there are more worrying trends in terms of income distribution generally. With the exception of Uruguay, in all the countries considered the richest 10 per cent of households receive more than 30 per cent of national income. In the majority of the countries (with the exception of Venezuela), the percentage is more than 35 per cent and in Brazil it is more than

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The state of democracy in Latin America

45 per cent.84 In contrast, the poorest 40 per cent of households receive between 9 and 15 per cent of total income (with the exception of Uruguay with 22 per cent of income). These trends in distribution are presented in Table 4, while the Gini coefficient – a measure of income inequality based on these decile variations – is shown in Table 5. In Latin America as a whole, the wealthiest 1 per cent earned 237 times more than the poorest 1 per cent of the population in 1980, while in 1995 the gap had increased to 417 times.85 At least half of the increase in poverty can be explained by the deterioration of income distribution in the region. While the rich are able to protect themselves from the social impacts of recurrent economic crises, the poor cannot.86 The number of poor households and poor people increased after the financial crisis of 1998 as the figures for the period between 1997 and 1999 show, demonstrating the extent of the dependency that the region has acquired following the implementation of neoliberalism.87 Table 4 Income distribution Participation in total income of: Poorest

Argentina* Bolivia Brazil Chile Colombia Ecuador*** Mexico Paraguay Uruguay*** Venezuela

Richest

Year

40%

30%

20%

10%

1990 1999 1989** 1999 1990 1999 1990 2000 1994 1999 1990 1999 1989 1998 1990**** 1999*** 1990 1999 1990 1999

14.9 15.4 12.1 9.2 9.5 10.1 13.2 13.8 10.0 12.3 17.1 14.1 15.8 15.1 18.6 13.1 20.1 21.6 16.7 14.6

23.6 21.6 22.0 24.0 18.6 17.3 20.8 20.8 21.3 21.6 25.4 22.8 22.5 22.7 25.7 23.0 24.6 25.5 25.7 25.1

26.7 26.1 27.9 29.6 28.0 25.5 25.4 25.1 26.9 26.0 27.0 26.5 25.1 25.6 26.9 27.8 24.1 25.9 28.9 29.0

34.8 37.0 38.2 37.2 43.9 47.1 40.7 40.3 41.8 40.1 30.5 36.6 36.6 36.7 28.9 36.2 31.2 27.0 28.7 31.4

* Greater Buenos Aires. ** Eight cities and El Alto. *** Total Urban (Ecuador, Paraguay 1999, and Uruguay). **** Asunción. Source: CEPAL, Panorama Social de América Latina 2000–01 (Santiago: UN).

Perspectives on the Latin American state 83 Table 5 Gini coefficient Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela

1990 1999 1989 1999 1990 1999 1990 2000 1994 1999 1990 1999 1989 1998 1990 1999 1997 1999 1990 2000 1990 1999

0.501 0.542 0.538 0.586 0.627 0.640 0.554 0.559 0.601 0.572 0.461 0.521 0.536 0.539 0.447 0.565 0.532 0.545 0.492 0.440 0.471 0.498

Note: Argentina data refers to Greater Buenos Aires; Bolivia data refers to eight cities and El Alto; Ecuador data refers to all urban areas; and Paraguay refers to Asunción. Source: CEPAL, Panorama Social de América Latina 2000–01 (Santiago: UN).

The main conclusion that one can derive from these figures is that, between the periods of economic growth of the late 1980s and early 1990s and the downturn at the end of the 1990s, there has been little change in income distribution. Argentina and Chile, which had a better income distribution in relative terms during the 1960s, have now joined the main trend in the region. Uruguay presents a more egalitarian distribution, and Venezuela, despite all its economic travails, is the least unequal society. Despite the better economic performance of the region during the 1990s, the unequal income distribution has not changed in a significant way. While the state-social contract and state-institution have changed due to democratisation, the impacts on social relations (measured here in terms of benefits received from the economic model) have changed little. The same divisions within society that became rooted during the authoritarian period have persisted into the democratic era, sustained by the hegemonic bloc that fosters the New Liberal Consensus and the ideological and intellectual leadership that generates consent for it. Considering the state-social contract as a reflection of social relations facilitates an understanding of the reasons why the democratic state-institution has been at odds with the social relations that it should reflect.

84

The state of democracy in Latin America

Despite democratisation and economic liberalisation, which were hailed by the Washington Consensus and domestic élites within Latin America as the essential packages for growth and consequent social development during the late twentieth century, poverty and inequality remain pervasive elements in Latin American societies. Although there have been positive trends in some countries in terms of the relative numbers of people in poverty and some indicators of public spending, the total number of poor Latin Americans grows and the case of Argentina reveals that vulnerability to massive increases in poverty, with all its concomitant features related to mortality, morbidity and violence, remains a grave threat. A new Latin American state emerged from the marriage between democracy and the ideas of the Washington Consensus. One of its main features has been the dismantling of the networks of social solidarity that characterised the state of the ISI phase. There was an undermining of the idea of solidarity at the societal level, which has been replaced by individualism. Values and economic structures have been changing alongside each other during this period. Democratic values were positively revalued together with individualism and political demobilisation. Likewise, flexibilisation of the labour market, liberalisation of trade, and the economic retreat of the state became the pillars of the economic reforms. The marriage between liberal democracy and neoliberal economics shaped the form of the state, with the authoritarian experience of the 1970s providing the departure point for the 1980s democratic state. The emergent state would therefore be influenced by democratic values, neoliberal arguments and the legacy of authoritarian regimes. The case studies of Argentina and Chile that follow offer insights into how the new, formally democratic state would be shaped by the outcome of the tensions between these democratic values, neoliberal recipes, authoritarian legacies and international influences.

Endnotes 1 See J. Williamson, The Penguin History of Latin America (London: Penguin, 1992). 2 The population of the Inca empire was estimated at between 10 and 30 million people, most of whom were non-Incas producing for their Inca overlords. The varying estimates are presented in W.M. Denevan (ed.), The Native Population of the Americas in 1492 (Madison: University of Wisconsin Press, 1976). 3 J. Hemming, The Conquest of the Incas (London: Harvester, 1970), and Williamson, Penguin History. 4 J.R. Barton, A Political Geography of Latin America (London: Routledge, 1997), pp. 30–51. 5 The Dominican Bishop of Chiapas, Bartolomé de las Casas, was the earliest critic of the exploitative social relations established at this time in the name of the Spanish crown and Christianity. B. de las Casas, In Defense of the Indians (De Kalb: Northern Illinois University, 1974).

Perspectives on the Latin American state 85 6 R. Gwynne, ‘Regional Integration in Latin America: The Revival of a Concept?’, in R. Gibb and W. Michalak, Continental Trading Blocs: The Growth of Regionalism in the World Economy (New York: Wiley, 1994), pp. 189–208. 7 H.B. Johnson, ‘Portuguese Settlement’, in L. Bethell, Colonial Brazil (Cambridge: Cambridge University Press, 1987), pp. 1–39. 8 These roots of the modern Latin American state can be linked to what Terrie Groth terms ‘historical-cultural corporatism’: the influence of colonial history and tradition; the role of Catholic social thought; and Iberian institutional patterns. T. Groth, ‘Theories of the Latin American State and Comparative Democratization Studies’, Paper presented at the 52nd Annual Conference of the Political Studies Association, Aberdeen, April 2002, p. 2. 9 See J. Lynch, The Spanish American Revolutions, 1808–1826 (New York: W.W. Norton, 1973). 10 See B. Albert, South America and the World Economy from Independence to 1930 (London: Macmillan, 1983) and South America and the First World War: The Impact of the War on Brazil, Argentina, Peru and Chile (Cambridge: Cambridge University Press, 1988). For the key repercussions of the Crash, see P. Fearon, The Origins and Nature of the Great Slump, 1929–1932 (London: Macmillan, 1979), pp. 43–4. The Latin American governments’ responses to the crisis are outlined by C. Diaz Alejandro, ‘Latin America in the 1930s’, in R. Thorp, Latin America in the 1930s: The Role of the Periphery in the World Crisis (London: Macmillan, 1984), pp. 17–49. 11 The 1920s had already witnessed a 40 per cent fall in the average international price of most traded primary commodities; this was exacerbated by the Crash. Between 1928 and 1933 there was an average drop in the prices of the region’s exports of 70 per cent. R.L. Ground, ‘The Genesis of Import Substitution in Latin America’, CEPAL Review, 36 (1988), p. 180. 12 Politically, the effects of the Crash were devastating. President Hipólito Yrigoyen fell from power in Argentina in 1930, Carlos Ibañez was overthrown in Chile in 1931 and Gabriel Terra came to power in Uruguay after a coup in 1933. This period of political instability was accompanied by major changes in economic policy. The political and economic structures in the Southern Cone suffered such an onslaught between 1929 and 1935 that they would barely regain stability by 1939 and the commercial reorientations demanded by the Second World War. The profundity of the damage and confusion imposed by the Crash and deepened by the Second World War was to be evident twenty years later in the economic problems of the mid-1950s. 13 See Ground, ‘The Genesis’. The sharp decline in export revenues following the financial crash provided considerable ammunition for the protectionists in the domestically oriented manufacturing and agricultural sectors. They were supported in this by the urban labour force which had become an important new force in political affairs. See also W. Baer, ‘Import Substitution and Industrialization in Latin America: Experiences and Interpretations’, Latin American Research Review, 7, 1 (1972), pp. 95–122. 14 See C. Kay, Latin American Theories of Development and Underdevelopment (London, 1989), pp. 25–57, and R. Prebisch, ‘Notes on Trade from the Standpoint of the Periphery’, CEPAL Review, 28 (1986), pp. 195–206. 15 The line of the ECLA structuralists was explicit: ‘Substitution . . . is not a doctrinaire whim but a response to objective conditions implicit in the realities of our relations with the centres.’ Prebisch, ‘Notes from the Standpoint’, p. 205. 16 C. Abel and C.M. Lewis provide a succinct overview of the industrialisation debate, in Abel and Lewis, Latin America: Economic Imperialism and the State (London: Athlone Press, 1991), pp. 283–7.

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The state of democracy in Latin America

17 Much domestic industrialisation was facilitated by the rapidly developing rail network, reducing food freights, introducing wage labour to rural areas and increasing disposable incomes. C.M. Lewis, ‘Railways and Industrialisation: Argentina and Brazil, 1870–1929’, in Abel and Lewis, Latin America, p. 223. 18 The creation of CORFO marked the end of ‘spontaneous industrial increase’ and the consolidation of ‘industrial consciousness’. See O. Muñoz Goma et al., Chile y su Industrialización: pasado, crisis y opciones (Santiago: Corporación de Investigaciones Económicas para Latinoamérica [CIEPLAN], 1986), pp. 72, 183. 19 O. Muñoz Goma and A.M. Arriagada, Orígenes Políticos y Económicos del Estado Empresarial en Chile (Santiago: CIEPLAN, 1977), pp. 49–50. 20 E. Domenech, Política Comercial Exterior de la Argentina (Resistencia: Universidad Nacional del Nordeste, 1961), p. 21. 21 S. Macario, ‘Protectionism and Industrialisation in Latin America’, Economic Bulletin for Latin America, 9, 1 (1964), p. 61; CEPAL, Simposio Latinoamericano de Industrialización (Santiago: CEPAL, 1966), pp. 29–34. 22 CEPAL, El Proceso de Industrialización en América Latina (Santiago: CEPAL, 1965), p. 35. 23 Corbo and Meller outline four facets that question the efficacy of ISI: (1) ISI strategy brings itself to a point of exhaustion once the easy step based on the local production of consumer goods had been completed; (2) ISI produces an inefficient use of resources; (3) After over thirty years of ISI, the Latin American economies were more vulnerable to the vicissitudes of the external sector; (4) ISI is responsible for the creation of sources of unemployment and the increasing concentration in the distribution of wealth observed in Latin America from the 1960s. V. Corbo and P. Meller, ‘Sustitución de importaciones, promoción de exportaciones y empleo: el caso Chileno’, Estudios CIEPLAN, 15 (1977), pp. 10–11. 24 Diaz Alejandro notes that, with the development of a capital goods industry, there will be a rise in per capita income but that the short run marginal propensity to import will be greater than the average propensity to import due to the dependence on, and cyclical demand for, imported capital goods, C.F. Diaz Alejandro, ‘On the Import Intensity of Import Substitution’, Kyklos, 18 (1965), p. 509. 25 Rueschemeyer et al., Capitalist, p. 156. 26 Ibid., p. 169. 27 Ibid. 28 Ibid. 29 J. Linz and A. Stepan, Problems of Democratic. 30 See O’Donnell, Modernization and Bureaucratic Authoritarianism. 31 A. Canitrot, ‘Teoría y Práctica del liberalismo. Política antiinflacionaria y apertura económica en la Argentina, 1976–1981’, Desarrollo Económico, 21 (1981), pp. 131–89. 32 The upper bourgeoisie is composed of the larger and more powerful (monopolistic or oligopolistic) fractions of urban private capital, both national and transnational. 33 The military institution assumes power, but as soon as the system reaches stability, the armed forces as such do not get involved in state-institution policies but they retain the veto power. This is one of the reasons why tensions arise within bureaucratic authoritarianism – because of the differences between the military-as-an-institution and the military-as-a-government. 34 See D. Collier (ed.), The New Authoritarianism in Latin America (Princeton: Princeton University Press, 1979). 35 Many social movements were related to human rights issues and opposed the regimes from the very beginning.

Perspectives on the Latin American state 87 36 In their classification of regime types during the second half of the twentieth century, Mainwaring and others show that 1975 marked the year of most authoritarianism in the region, after which time semi-authoritarian and democratic regimes slowly began to emerge. S. Mainwaring, D. Brinks and A. Pérez-Liñán, ‘Classifying Political Regimes in Latin America, 1945–1999’, Studies in Comparative International Development, 36, 1 (2001), p. 58. 37 This process was heavily influenced by the situation of the debt crisis, also the models of economic change in the US and the UK; these would become known as Thatcherite economics and Reaganomics. Both strategies were based on economic theories most closely associated with Friedrich von Hayek and Milton Friedman. 38 M. Lagos, ‘Between Stability and Crisis in Latin America’, Journal of Democracy, 12, 2 (2001), pp. 137–45. 39 See J. Williamson, Latin American Adjustment: How Much Has Happened? (Washington: Institute of International Economics, 1990). 40 See W. Robinson, ‘Latin America in the Age of Inequality: Confronting the New “Utopia” ’, International Studies Review, 1, 3 (1999), pp. 41–67. 41 Ha-Joon Chang quite rightly points out some of the contradictions in this philosophy: the neoliberal discourse and the differences between its principal influences, neoclassical economics and the Austrian-libertarian tradition. He describes it as an ‘unholy alliance’ of the analytical tools of the former and the political and moral philosophy of the latter. The constructions of the market and the weaknesses of the state emerging from both sides are often contradictory. H.-A. Chang, ‘Breaking the Mould: An Institutionalist Political Economy Alternative to the Neo-Liberal Theory of the Market and the State’, Cambridge Journal of Economics, 26 (2002), pp. 539–59. 42 The manifestations of popular discontent were common not only to Latin America, since the neoliberalism of the Washington Consensus was also being exported to other developing regions, through World Bank structural adjustment programmes in particular. See D. Seddon and J. Walton, Free Markets and Food Riots: The Politics of Global Adjustment (Oxford: Blackwell, 1994). Discontent has persisted through the period of the neoliberal influence over the global political economy. More recent experiences are documented in D. Seddon and P. Dwyer, Food Riots, Past and Present: Globalisation and Contemporary Popular Protest. Paper presented at the conference, Making Social Movements: The British Marxist Historians and the Study of Social Movements, June 2002, pp. 1–26. 43 George Philip provides some initial observations along these lines by, highlighting the importance of domestic institutions in achieving compatible outcomes. See, ‘The New Economic Liberalism and Democracy in Latin America: Friends or Enemies?’, Third World Quarterly, 14, 3 (1993), pp. 555–71. 44 G. O’Donnell, ‘Polyarchies and the (Un)Rule of Law in Latin America; A Partial Conclusion’, in J. Méndez, G. O’Donnell and P.S. Pinheiro, The (Un)Rule of Law and the Underprivileged in Latin America (Indiana: University of Notre Dame Press), p. 321. 45 See A. Becker, ‘Latin America: Beyond Democratic Consolidation’, Journal of Democracy, 10, 2 (1999), p. 140. 46 Schmitter and Karl, ‘What Democracy’, p. 76. 47 Przeworski, Democracy and the Market. 48 Terrie Groth highlights the difference between democracy-as-process and democracy-as-result. The former is regarded as a collection of rules through which participation takes place, and Groth argues that this is a liberal formulation that predominates in Latin American political science. The alternative measures democracy in terms of the achievement of ‘substantive conditions of

88

49 50

51

52 53

54 55

56 57

58 59 60 61

The state of democracy in Latin America equality as the desired end of the process’ (p. 15). He also separates the vision of state-as-artefact (a static view of a neutral instrument, separated from civil society) from the alternative view of the state-as-relation (an understanding of the state in terms of objective interests and struggles among social classes). See T. Groth, ‘Theories of the Latin American State’. A. Przeworski, Democracy and the Market, p. 80. Despite this emphasis on market mechanisms during the 1980s and 1990s, there is increasing awareness of the role of governance and the state in these mechanisms, especially in terms of moving towards social justice. See R. Devetak and R. Higgott, ‘Justice Unbound: Globalization, States and the Transformation of the Social Bond’, International Affairs, 75, 3 (1999), pp. 483–98. Compared with other regions of the world (Western Europe, Africa, Asia), only the new democracies of East and Central Europe register less support for, and less satisfaction with democracy than Latin America. Latinobarómetro, Informes de Prensa 2002 (www.latinobarometro.org; accessed March 2003). See Latinobarómetro, Informes de Prensa 2002. Many governments saw their political success as being tied to their economic success, for instance, the neopopulists Carlos Menem and Alberto Fujimori. Fernando H. Cardoso’s government also became dependent on the success of his economic strategy. See A. de Souza, ‘Cardoso and the Struggle for Reform in Brazil’, Journal of Democracy, 10, 3 (1999), pp. 49–63. F. Aguero, ‘Conflicting Assessments of Democratization: Exploring the Fault Lines’, in F. Aguero and J. Stark, Fault Lines of Democracy in Post-Transition Latin America (Miami: North-South Center Press, 1998), pp. 1–21. In August 2002, Gonzalo Sánchez de Losada, leader of the centre-right Nationalist Revolutionary Movement (MNR), was named president by the Congress. This was because the July elections had not given a clear majority to any of the candidates. Sánchez de Losada gained the vote of the Congress after securing a deal with Jaime Paz Zamora from the Leftist Revolutionary Movement. Politicians consistently rank poorly in surveys that generate data on public confidence in different professions in Latin America. The strengthening of direct democracy, against representative democracy, can lead to inclusion of previously excluded groups but can also lead to presidents bypassing the legislature. A discussion of direct democratic instruments and their inclusion in, and exclusion from Latin American constitutions, is provided in M. Barczak, ‘Representation by Consultation? The Rise of Direct Democracy in Latin America’, Latin American Politics and Society, 43, 3 (2001), pp. 37–59. F. Hagopian, ‘Democracy and Political Representation in Latin America in the 1990s: Pause, Reorganization, or Decline?’, in Aguero and Stark, Fault Lines, pp. 99–145. See J. Domínguez, Democratic Politics in Latin America, p. 63. See Aguero and Stark, Fault Lines, pp. 99–145. For Venezuela, see J. McCoy, ‘Chávez and the End of Partyarchy in Venezuela’, Journal of Democracy, 10, 3 (1999), pp. 64–77; L. Dávila, ‘Nuevos Tiempos, Viejos Procedimientos: Elecciones y desarrollo político en Venezuela’, European Review of Latin American and the Caribbean Studies, 70 (April 2001), pp. 89–99; M. Naím, ‘The Real Story Behind Venezuela’s Woes’, Journal of Democracy, 12, 1 (2001), pp. 17–31; C. Arnson (ed.), The Crisis of Democratic Governance in the Andes (Washington: Woodrow Wilson International Center for Scholars, 2001).

Perspectives on the Latin American state 89

62 63 64 65 66 67 68 69 70 71 72

73

74

75 76 77 78

79

80 81 82 83

For Peru see S. Levitsky, ‘Fujimori and Post-Party Politics in Peru’, Journal of Democracy, 10, 1 (1999), pp. 78–92; and L. Taylor, ‘Alberto Fujimori’s Peripeteia: From Re-Reelección to Regime Collapse’, European Review of Latin American and the Caribbean Studies, 70 (April 2001), pp. 3–25. CEPAL, Anuario Estadístico de América Latina y el Caribe (Santiago: UN, 2001). CEPAL, Panorama Social de América Latina (Santiago: UN, 2001). It includes Central America. See CEPAL, Panorama, Cuadro IV 7, p. 144. CEPAL, Anuario, p. 49. The Economist, 11–17 May 2002, p. 63. It includes Central America. The Economist, 11–17 May 2002, p. 63. CEPAL, Anuario, p. 56. CEPAL, Anuario, p. 39. CEPAL, Anuario, pp. 94–5. See CEPAL, Anuario, p. 169. In 1985, James Baker (US Treasury Secretary) proposed new loans from the World Bank and private banks to debtor countries that applied free market policies. Neither side embraced the proposal and the plan collapsed. In 1989, his successor Nicholas Brady asked banks to forgive parts of the loans in exchange for limited guarantees of repayment, financed by the World Bank and the IMF. The plan contemplated new loans from the banks to fund economic growth and the implementation by debtor countries of economic reforms. See E. Cardoso and A. Helwege, Latin America’s Economy. Diversity, Trends, and Conflicts (Cambridge, MA: MIT Press, 1995). In their analysis of public perceptions of reform, Welsch and Carrasquero identify that there was initial support for privatisation of manufacturing firms, but less so for utilities, and very little support for privatisation of social services. See F. Welsch and J. Carrasquero, ‘Perceptions of State Reform in Latin America’, International Social Science Journal, 163 (2000), p. 35. Chile was the first country to set a privatisation process in motion. By 1990, all but 19 of the 500 state-owned companies of the Allende period had been sold off. P. Yotopoulos, ‘The (Rip)Tide of Privatization: Lessons from Chile’, World Development, 17, 5 (1989), pp. 683–702. El País, 23 June 2002, ‘Negocios’, p. 20. CEPAL, Economic Survey of Latin America and the Caribbean (Santiago: UN, 2001); El País, Financial Times and The Economist, various issues. The data is derived from CEPAL sources. CEPAL, Economic, pp. 97–107, La Nación On Line, www.lanacion.com.ar, December 2001–February 2002, various issues; and data from the National Institute of Statistics and Census, www.indec.mecon.gov.ar, see Información Estadística. The Brazilian real depreciated by 18 per cent in the first six months of 2002, Chile’s peso by 6.26 per cent, Uruguay’s peso by 26.83 per cent, Paraguay’s by 15.3 per cent, Bolivia’s by 4.6 per cent, Venezuela’s bolívar by 41.4 per cent, Mexico’s peso by 7.25 per cent and Argentina’s peso by 74 per cent. The World Bank, World Development Indicators (Washington: The World Bank, 2002). The World Bank, World Development, pp. 68–9. There was no data for Argentina. CEPAL, Panorama. It includes Central America. A poor household lacks the resources to satisfy basic needs, and an indigent household does not have enough income to buy a basic basket of food.

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84 CEPAL, Panorama, pp. 65–84. 85 J. Ryan, ‘“Painful Exit” Electoral Abstention and Neoliberal Reform in Latin America’, Paper presented at the 2001 meeting of the Latin American Studies Association, Washington DC. 86 P. Korzeniewicz and W. Smith, Pobreza, p. 391. 87 Ibid., p. 392.

3

The unfolding of Argentina’s political collapse and social decay

This chapter analyses Argentina’s transition to democratic rule, the impact of the military regime in the building of the new political regime, the policies of the democratic governments, and the crisis of the 2000s. It explores changes in social relations, the rewriting of the social contract and the building of a democratic state-institution. Five sections provide the framework for the chapter. The first analyses the military regime and outlines its legacy in order to discover the influence that it had in the transition to democracy and the performance of the first democratic government. The second studies Raúl Alfonsín’s government and looks at the economic policy and the politics of rebuilding democracy. This is followed by a review of the Menem years, emphasising the economic revolution of the 1990s, the new social relations, and the role of the state-institution. These two sections help us to develop the concept of the politics of informality that captures the essence of the process of building democracy. The fourth section provides an examination of the Alianza government and the main trends that explain the crisis of the 2000s. The chapter concludes with an assessment of whether twenty years of democratic rule in Argentina brought social relations, a state-social contract and a state-institution that extended beyond the mere transformation of a political regime.

Transforming social relations during the Proceso The emergence of Peronism in the 1940s transformed Argentina’s state. Peronism involved a rewriting of the social contract since it transformed the social relations and the values of the time. The full incorporation of the working class as a political, economic and social actor restructured social relations, the state-social contract and consequently the state-institution. Peronism also meant a reconsideration of values: the role of the leader and his wife Eva as benefactors of the workers; the use of the state-institution to provide benefits; the implementation of a redistribution of income that benefited the workers; the powerful role assigned to the trade unions;

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the neutralisation of political opposition; the expansion of the economic role of the state-institution; the nationalisation of public services and trade; and the perception of the need to restructure Argentina’s international alliances. All these factors shaped the state-social contract and transformed the state-institution. They also exacerbated the polarisation of Argentine society. In effect, the emergence of the working class as a political, economic and social actor made the existing social divisions more apparent. Two main actors became the political representatives of these divisions: the armed forces, which in general terms became deeply anti-Peronist, and the trade unions which, also in general terms, supported Peronism wholeheartedly. From 1946 onwards, and especially after the 1955 military coup, the armed forces and the trade unions would replace the political parties and would establish a perverse game: the reciprocal negation of legitimacy.1 From 1955 to 1976, the armed forces made several attempts to restructure social relations, and thus the state-social contract. However, all these attempts failed. The underlying problem was that although the Peronist state was no longer dominant, there was no alternative to replace it due to the logic of the reciprocal negation of legitimacy. During the military governments, the trade unions fought to maintain the goals achieved during Peronism and to undermine the scarce legitimacy of the governments. During the democratic interludes, the armed forces blocked any political opening that included Peronism, and attempted to control the power of the trade unions and the governments themselves. The trade unions became, during these democratic periods, the political representatives of the working class but also of Juan Domingo Perón who, until 1973, remained in exile. Argentine society was deeply divided and unable to produce a social contract that satisfied the majority of the population. A dominant force was unable to emerge from this deeply divided society.2 Domination was mainly exercised by repression but even this was undermined by events such as the Cordobazo in 1969 or the Viborazo in 1971. These two events, together with the kidnapping of former President Lt.-Gen. Pedro Aramburu, marked the end of the 1966 military dictatorship and the beginning of an armed struggle between the security forces and urban guerrillas from Peronist and Marxist organisations.3 In 1976, following the return of Perón, his death, and his wife’s chaotic government, the armed forces seized power once again. However, this time the situation seemed to be different. The official objective of the Proceso de Reorganización Nacional was the establishment of a new order – in other words, a new social contract – through Christian values, national security and justice. In reality, its main objectives were the defeat of the armed urban guerrillas and a disciplinamiento social.4 The latter would be pursued by two different policies: the establishment of state terrorism and economic structural reform.

Argentina’s political collapse and social decay 93 State terrorism was imposed by kidnapping, torture and the assassination of thousands of people. Politicians, journalists, trade unionists, workers, intellectuals, students, nuns, priests and members of the armed urban guerrilla forces were tortured and killed or ‘disappeared’. State terrorism was utilised to achieve the defeat of the armed urban guerrillas and also as a tool to demobilise the working class, since 30 per cent of those who ‘disappeared’ were workers (the largest single group).5 The economic structural reform was applied mainly from 1976 to 1981, during José Alfredo Martínez de Hoz’s period as Minister of Economy, and it was oriented towards the liberalisation and modernisation of the economy. It favoured a short-term capital market with high liquidity through the liberalisation of capital flows and deregulation of the financial system (achieved through the 1977 financial reform). The reforms also established the liberalisation of prices, the opening-up of domestic markets to foreign capital, the liberalisation of exports and imports through the elimination of tariffs, the elimination of subsidised prices, the freezing of wages, and a taxation reform that broadened the value added tax. The consequences of the economic reforms for industrial wages were felt immediately due to the freezing of wages. If in 1974 the real wage of an industrial worker was 159 pesos, in 1976 it was 100. During the same period the inflation rate went from 40 to 394 per cent. Thus, as inflation increased 772.5 per cent, the real wage of an industrial worker decreased by 37 per cent during the same period.6 Industry also felt the consequences of the reforms. Industrial production fell by 20 per cent between 1975 and 1982. During those years the share of the industrial sector in GDP declined from 28 to 22 per cent. While 20 per cent of the biggest companies closed, the share of industrial workers in the national income fell from 49 per cent in 1975 to 32.5 per cent in 1982. The first blow to the industrial sector was given by the 1977 financial reform due to the high interest rates, which promoted short-term transactions. All the benefits won through the reduction of labour costs – mainly the reduction of wages by almost 40 per cent – were lost in extra financial costs. There was also a restructuring of manufacturing sectors; while paper production, chemicals and steel were promoted, capital goods and the car industry were discriminated against.7 Regarding the privatisation process, the government, in many cases, decided to close the company rather than to sell it; this was the case, for example, of the steel company Industrias Mecánicas del Estado. There was also a process of peripheral privatisation, which meant the signing of a contract between a public and a private company according to which the former delegated some of its activities to the latter. These changes signified a massive restructuring of the industrial sector. The consequences were a concentration of capital in the largest national corporations vis-à-vis small- and medium-sized companies (SMEs). The SMEs had constituted

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the so-called domestic bourgeoisie which, allied with the working class, had supported Peronism. An analysis of the situation of the 100 largest companies (according to sales) between 1975 and 1981 reveals that 33 companies are not present in the 1981 list. From this 33, 20 fell down the ranking and 13 disappeared. The analysis of the changes shows that six companies were absorbed by others and 15 changed ownership. These data reflect the trend towards concentration of big economic groups that diversified their activities to minimise risks. The Grupos Económicos Nacionales (GEN) that increased their economic and political power during the dictatorship were connected to the agricultural, financial and construction sectors. There were 30 GEN in 1973 that controlled 277 companies, 33 in 1983 with 586 companies, and 31 in 1986 with 655 companies. Generally speaking, the GEN were oligopolies: Celulosa Argentina and Massuh controlled paper production; Garovaglio y Zorraquín and Perez Companc controlled the major national banks (Perez Companc also controlled petrochemical and metallurgical production); and Bunge y Born controlled the biggest company in the foodstuffs sector. The industrial promotion strategy applied by the military dictatorship further accelerated the centralisation and concentration of capital in the GEN and transnational companies.8 The GEN were also able to access foreign credits. Of the private external debt, 68 per cent was accounted for by GEN and the transnational companies. This debt was transferred to the state in 1982, a decision of the president of the Central Bank at that time, Domingo Cavallo. The financial sector, together with the largest firms of the Pampeana bourgeoisie, was the other beneficiary of Martínez de Hoz’s policy. The latter was able to invest its profit in the financial sector without losing productivity.9 Martínez de Hoz’s objective was to modernise the industrial, agricultural and financial sectors, and to strengthen the industrial sector through competitiveness.10 The outcomes of his policies (between 1976 and 1981) were: a fall in GDP from –0.5 to –7.0 per cent; a rising fiscal deficit, from 11.7 to 13.3 per cent; and a drop in inflation from 349 to 131.2 per cent. Public debt increased by 407.5 per cent and private debt by 364.5 per cent (1976–82); industrial production fell by 20 per cent (1975–82); and industrial employment declined by 26 per cent (1975–80).11 In the industrial labour market, workers’ real wages decreased 49 per cent between 1974 and 1978, while the number of industrial workers fell 36 per cent, from 1,165,000 in 1975 to 740,000 in 1982. The share of wage-earners in the national income fell from 50.5 per cent in 1974 to 32.5 per cent in 1981.12 Poverty also increased. The pauperizados, defined as working-class families that had been pushed into living in conditions attributed to the structurally poor, increased 775 per cent from 1974 to 1982, and the structurally poor, defined as those with severe problems of housing and social infrastructure, and unable to cover basic needs, rose by 49 per cent during the same period.13 While the price of a staple basket of food stuffs was 100 pesos in 1976, it rose to 7,276

Argentina’s political collapse and social decay 95 pesos in 1981; the real wage of an industrial worker was 100 in 1976 and 114.2 pesos in 1981.14 The impoverishment was overwhelming. Following Martínez de Hoz’s departure, different economic programmes were applied but all failed to stabilise the economy. The legacy of the dictatorship would be a huge external debt, a concentration of capital and the impoverishment of the working class. The external debt became a fiscal problem since the government had to buy the external surplus from the private sector and could only do so by either reducing its expenditure or raising taxes. Both measures tend to depress economic activity.15 With respect to the concentration of capital, the GEN operated in oligopolistic markets with high inflation which gave them the capacity to set prices above the average for the economy. They became influential through the determination of prices, and powerful through their connections to international financial markets. The consequence of the impoverishment of the working class would be that, with the return to democracy, workers and trade unions expected social, economic and political compensation for the hardships experienced during the earlier period. The first democratic government had to deal with this economic legacy as well as with the consequences of human rights violations. Additionally, it had to rewrite the social contract so as to be able to democratise the state-institution. The economic legacy proved to be difficult to manage and transform in the middle of such a grave external debt crisis. Despite the abrupt collapse of the dictatorship, the regime had been able to achieve disciplinamiento social by making impossible a return to the past through the ‘destruction of the economic bases which in the past had made possible the cyclical re-emergence of defensive alliances between organised labour and the subordinate factions of capital’.16 The dictatorship transformed Argentina’s social relations through the dismantling of the industrial sector, especially that related to the domestic bourgeoisie, and small and medium-sized companies, and the restructuring of the industrial working class. The concentration of capital in the GEN, the transnational companies, the powerful financial sector, and the largest firms of the Pampeana bourgeoisie, had made them the main actors in the economically dominant class. Thus, despite the defeat in the Malvinas/Falklands conflict, high inflation rates, and the horrors of human rights violations, the military dictatorship was partially successful since it had been able to transform Argentina’s social relations. It was on the basis of these social relations that the new social contract had to be rewritten in a democratic fashion.

Governing after the military Following the 1982 military defeat, the beginning of the transition to democracy was abrupt since the armed forces were no longer able to govern the country. Despite the collapse of the authoritarian regime, the process of transition lasted for 16 months, during which time the armed

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forces struggled to control the process while traditional political parties, principally the Peronist and Radical parties, competed against each other in order to win the October 1983 elections. The economic chaos, human rights violations, and the Malvinas/ Falklands defeat influenced civil-military relations during and after the transition period. Moreover, the armed forces were undergoing a critical moment marked by mutual accusations among the forces regarding the military defeat as well as human rights violations. In this context of internal unrest, the armed forces eventually proved to be unable to exert control over the transition process and political parties and human rights organisations became central actors. The Peronist and the Radical parties were undergoing a transition process themselves. The Peronist Party was still coming to terms with its chaotic government of 1973–76, and Juan D. Perón’s death. The Radical Party’s leader, Ricardo Balbín, had also died, in 1981. While Perón’s death was traumatic for Peronism, Balbín’s death unleashed a process of change within Radicalism. There was, however, a clear lack of consensusbuilding and co-operation among the main political parties and this feature of the transition process would be present during the first democratic government. Indeed, the historical rivalry between Radicalism and Peronism prevented them from arriving at any kind of consensus that could have improved governability in the transition process and in the first democratic government. Human rights organisations became increasingly important at this time. They were the first to organise demonstrations to exert pressure for investigations into human rights violations. Since 1977 the Madres de Plaza de Mayo have been a pillar of this struggle for human rights. The Madres and other groups, such as the Asamblea Permanente por los Derechos Humanos, formed a significant opposition to the military dictatorship. These organisations would maintain their high profile during the first democratic government, putting pressure on the authorities to bring to trial those responsible for human rights violations. It was while Argentina was undergoing this complex transition process that Mexico declared it had defaulted on its external debt. This event unleashed the external debt crisis of the 1980s, and in July 1982, Argentina began to renegotiate its external debt with the International Monetary Fund (IMF). As the 1983 general elections approached, the country bore the burden of the legacy of a military defeat, international isolation, 30,000 ‘disappeared’ people and an activated civil society keen to know the truth and to bring the guilty to trial, an economy in disarray, and traditional political parties that, in the past, had not displayed strong democratic credentials.17 Raúl Alfonsín, leader of the Radical Party, won the elections. His administration’s main preoccupation was the reconstruction of civilmilitary relations and the question of what to do with the guilty? In order to

Argentina’s political collapse and social decay 97 re-establish democratic values, the government had to transform the repressive elements of the state that had helped maintain the dictatorship. This required the transformation of not only the armed forces but also the judicial system that had been the accomplice, either by action or omission, of authoritarianism. The reform, therefore, implied the transformation of the institutions of the state that undertook or ignored the violations of human rights.18 However, since Alfonsín approached the issue of human rights violations from a judicial point of view, he also needed this same judiciary to support the reconstruction of civil-military relations. The main objective of Alfonsín’s policies towards the armed forces was to weaken their political power. His most important policy was the proposal to abolish the amnesty law sanctioned during the dictatorship. He also ordered the prosecution of all the members of the Juntas Militares, and set up the Comisión Nacional sobre Desaparición de Personas (CONADEP). The CONADEP was created to accept evidence of human rights violations and forward it to the judiciary. By taking this particular route, Alfonsín could not manage his policy towards the armed forces without undermining the judiciary’s independence. In fact, Alfonsín’s respect for judicial independence helped him to achieve his most significant historical legacy: on 9 December 1985 the Federal Chamber of Justice sentenced the members of the Juntas Militares.19 However, when Alfonsín tried to modify its human rights policies, the judiciary did not support it. Following the decision of the Federal Chamber, Alfonsín tried different strategies to stop a cascade of prosecutions against military personnel, retired or still on active duty. The Instrucciones al Fiscal General del Consejo Supremo de las Fuerzas Armadas unleashed a crisis within the judiciary: the Federal Chamber and the General Prosecutor threatened to resign. The Instrucciones, which established a scale of responsibility that favoured low-ranking military personnel, were seen as an intrusion into the executive power of the judiciary.20 Alfonsín’s second strategy was to send a proposal to the Congress that became known as the Punto Final law. Its objective was to end the trials by establishing a deadline for starting court enquiries against military officials accused of human rights violations. The law established a 60-day deadline from its decision at the end of December 1986. Although January is a holiday month for the judiciary, several provincial Federal Chambers suspended the holiday and by February, 487 cases had been presented to the courts against over 300 officials, 30 per cent of whom were on active duty. Finally, after the first military insurrection in 1987, the due obedience law was sanctioned. This law had the effect of exonerating all officials at the rank of lieutenant-colonel or below who were charged with human rights offences, whether or not they had committed violations, also more senior officers who were not key decision-makers.21 Judicial independence meant that any form of intimidation from either the executive or the armed forces could be ignored and the trials

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against the Juntas could be completed. The outcome was a major political victory for Alfonsín. However, judicial independence meant that Alfonsín was not totally in control over the policy towards human rights violations. He left the courts to act in the expectation that they would interpret the law according to his objectives, but when they were obstructive he was able to subvert their actions through different channels, i.e., the Instrucciones and the Punto Final law.22 Under Alfonsín’s government, the judiciary recovered a large degree of independence and was able to distance itself from the military dictatorship by becoming the institution that implemented the law against human rights violators. Although the executive interfered with the actions of the courts under duress from the armed forces and the threat of further insurrections, over time the military gradually lost its political power.23 It is well known that Alfonsín’s government ended in chaos,24 and there are multiple reasons to explain that chaotic end. In addition to the confrontation with the armed forces, Alfonsín’s government was also opposed by the Peronist trade unions. The government argued that the trade unions needed to be ‘democratised’. In fact, this democratisation of trade unions meant their desperonización, the breaking down of the historical alliance between the trade union movement and Peronism. Naturally, the movement fought endlessly against Alfonsín’s strategy. This confrontation with the government was manifested in different ways, most evidently with thirteen general strikes organised by the Confederación General del Trabajo (CGT) against the government’s economic and labour policies. However, the government was able to establish short-lived alliances with different factions of the trade unions, most notably with the Grupo de los Quince; this alliance led to the naming of a Peronist trade unionist as Minister for Labour in 1987.25 The relationship with business organisations was also difficult. During the transition to democracy, a group of businessmen had organised themselves under the label of the Grupo de los Nueve to oppose the Consejo Empresario Argentino and the Unión Industrial Argentina, organisations which had been closely associated with the military dictatorship and economic liberalism. The Grupo was the antecedent of the Capitanes de la Industria. The main objective of the Capitanes was to organise a new association that would be able to influence the democratic government. Essentially, they wanted to change their image as a bourgeoisie that needed an authoritarian regime to protect its interests. Alfonsín wanted to include the business sector in the democratisation process and he modified the historical perception that democracy was opposed to business interests. Consequently, these ad hoc groupings were promoted by a sector of the bourgeoisie and welcomed by the government.26 Other groups followed and became the interlocutors of the government at different moments, i.e., the Grupo de los Once and the Grupo de los Ocho. Despite all these attempts to form associations and establish fluid communication with the government, the

Argentina’s political collapse and social decay 99 business sector would play a crucial role in Alfonsín’s resignation. Indeed, when the Unión Industrial Argentina and the Cámara Argentina de Comercio withdrew their support for the Primavera Plan in 1988, the government was dramatically weakened. Moreover, a confrontation with exporters further isolated the government, provoking the collapse of its economic strategy and leading to the President’s resignation. The economic failure of the government is perceived to be the main reason for its chaotic end. The government applied different strategies towards the external debt: from confrontation to reluctant co-operation with international creditors. In the beginning, Alfonsín attempted to treat the external debt as a political issue. There were two reasons for this. According to Alfonsín, the debt was illegitimate since it was a product of capital flight. He also considered the debt to be a political feature since the crisis had emerged simultaneously with the democratisation process; Alfonsín expected that international creditors would show their support for the process of democratisation by not pressing for repayment of the debt. However, not one of these lines of reasoning was successful and the government soon found itself under pressure from international creditors. In spite of these pressures, the government attempted to pursue different economic strategies to avoid the implementation of the economic package of the Washington Consensus. On taking office, the government had declared a unilateral moratorium of six months to be able to investigate the total amount of the external debt. Domestically, demand was stimulated through an increase in real wages, and inflation was managed by setting it at 10 per cent of the monthly increase of prices and wages, together with a larger adjustment for public services tariffs and the exchange rate.27 This policy, however, was unsuccessful in managing inflation, leading to a change in strategy. In June 1985, the Austral Plan was launched and it was supported by the IMF since its central objective was the fight against inflation. The plan had four main pillars: a general wage and price freeze; a reduction of the fiscal deficit through increases in the prices of public services and export tax; improvements in the collection of direct taxes and the implementation of a compulsory savings scheme; and the establishment of a new currency – the austral. As early as October, political measures had begun to undermine the plan. In April, the three Juntas Militares had been put on trial for human rights violations, and Alfonsín had suggested a wage increase for the military to his economic team as a means of placating the discontent of the armed forces. The government decided to increase the pensions and wages of military personnel by 15 per cent and by 25 per cent respectively. To avoid presenting these increases as a concession to pressures, there was a general wage increase of 5 per cent and of 25 per cent for teachers. These increases were also a major element of the political campaign ahead of the legislative elections of November.

100 The state of democracy in Latin America The increases contradicted the fundamental propositions of the plan: they fuelled inflation and pushed up government expenditure and the fiscal deficit. They also became the perfect excuse for the IMF to withdraw its support, and an ideological battle between the government and the IMF ensued. While the latter advocated less government intervention in the economy, the former wanted to maintain its historical Keynesian approach. Alfonsín’s priorities were to preserve political stability and achieve democratic consolidation, and he was prepared to sacrifice economic stability to achieve these political goals. While the government felt that it needed to regulate the economy further, the IMF was promoting deregulation and liberalisation. By the beginning of 1986, both inflation and private sector wages were increasing and the exchange rate had appreciated against the dollar by more than 20 per cent. All these factors revealed the weaknesses of the plan. A second phase of the Austral Plan followed but it failed to curb these trends and, in 1987, the Australito was implemented with a new price and wage freeze. In the September 1987 legislative and provincial elections, the Radical Party obtained 37.4 per cent and the Peronist Party, 41.4 per cent of the vote. The government lost its majority in the Chamber of Deputies and seven governorships, including that of Buenos Aires. In response to this defeat, the government adopted a range of different economic measures prior to launching the Primavera Plan in August 1988. The most important measure was the suspension of interest payments on the external debt due to the low level of international reserves (only US$1 billion); in 1984, the government had undertaken a similar measure as a means of building up its reserves. Within six months of the new suspension, international reserves had increased to US$3.5 billion. The Primavera plan was based on a price agreement with the Unión Industrial Argentina (UIA) and the Cámara Argentina de Comercio (CAC). It included a price agreement for 180 days, a devaluation of the austral against the dollar by 11.4 per cent, an increase in public services, and a reduction of VAT from 18 to 15 per cent. The exchange market was organised in such a way that imports could be paid by the free market, while the proceeds from agricultural exports and 50 per cent of the proceeds from industrial exports would be paid for by the official market. The Central Bank would use monetary policy to maintain the gap between the two dollars at 25 per cent. The exchange rate meant that there was effectively a tax on agricultural exports which was collected by the Central Bank by buying dollars at the official rate and selling them in the free market. The confrontation with agricultural exporters that ensued contributed to the collapse of the government. The overvaluation of the austral was to become the main focus of criticism by agricultural exporters since they had to manage a low value dollar compared with its blackmarket equivalent.

Argentina’s political collapse and social decay 101 The plan obtained the support of the World Bank, which subsequently approved US$1.25 billion in new loans in September 1988. This proved to be highly controversial since the loans were approved before the government had reached an agreement with the IMF. The World Bank’s support was considered to be unusual since Argentina could be classified as a bad borrower, having rescheduled its debt three times since 1982 and taken US$7.7 billion in new loans from the banks. The World Bank’s new loans were given only on the promise to reduce the fiscal deficit from 4.6 to 2.4 per cent in 1989.28 Four months after the loan approval, the World Bank announced that it would not disburse the new loans since Argentina was unable to meet the fiscal deficit target. Without international support, the perception was that the Central Bank would be unable to maintain the exchange rate mechanism, and a run on the austral began. The price agreement with the UIA and CAC was broken; prices began to rise as well as the price of the dollar. The economic team resigned and the new team modified the exchange rate: 50 per cent of goods transactions would operate in the free market, which resulted in a devaluation for agricultural products, and import and goods prices were tied to the daily oscillations of the dollar. Inflation accelerated, and prior to the elections the exchange rate market was unified and liberalised. The May 1989 elections gave the Peronist candidate, Carlos Menem, 41 per cent of the total vote cast, against 37 per cent for Eduardo Angeloz, the Radical candidate. After the elections, the government attempted to reach an agreement with the Peronist Party to accelerate the presidential change-over, planned for 10 December. These negotiations failed. Despite new exchange rate controls, the dollar continued its rise, hyperinflation was at its peak, and looting began in Rosario, Córdoba, Mendoza and Greater Buenos Aires. It was suggested in some quarters that this chaos was an opportunity for Argentina. The Economist published the following: At first sight it seems ridiculous to argue that it might do a country good to have, like Argentina, a collapsing currency and a monthly inflation rate of more than 40 per cent. That is equivalent to an annual rate of 6000 per cent, high enough to satisfy the most stringent definition of hyperinflation . . . . High-but-stable inflation, though extremely damaging is tolerable . . . . Hyperinflation, on the other hand, is intolerable. At the limit, money ceases to mean anything and transactions are conducted in foreign currency, or by barter. As the economy opts out of the domestic monetary system the government has a chance to start afresh. In the midst of a real crisis (as opposed to the countless phoney crises that preceded it), the government is more likely to be believed. If an election and a change of government is in the offing at just the right time, so much the better.29

102 The state of democracy in Latin America After many failed attempts to control hyperinflation and to negotiate with the Peronist Party, Alfonsín resigned on 30 June 1989. His economic legacy was negatively impressive. During his government GDP had fallen, fluctuating between −5.8 in 1985 to 6.1 in 1986 and −4.6 in 1989.30 The inflation rate was 433.6 per cent in 1983 and 4,923.3 per cent in 1989. The annual average variation in the real wages of industrial workers was 22.8 per cent in 1983 and −27.9 per cent in 1989. The external debt increased from US$45,069 million in 1983 to US$63,314 million in 1989. Taking 1986 as an index (100), the purchasing power for the private sector was 101.62 in 1984 and 64.63 in 1989, and for the public sector it was 105.29 in 1984 and 67.95 in 1989. During the last period of the government, the price of the dollar rose by 3,069 per cent. The interest rate was 84.36 per month.31 As a result of three military insurrections, one guerrilla attack,32 thirteen general strikes,33 thousands of labour conflicts, and the failure of the economic strategy, Alfonsín’s government crumbled. The government did not have any support from political or economic actors, nor did it have any support from civil society, which was exhausted by the endless confrontations between the government, trade unions and the armed forces, and also the government’s economic failure. Encouraged by the 1983 and 1985 electoral victories, the government had not attempted to create any long-term coalition. In fact, it had attempted to form a hegemonic bloc by promoting projects such as the Tercer Movimiento Histórico. The temporary coalitions that the government established with sectors of the trade union movement and business helped to create many, and simultaneous, zero-sum games of losers and winners, which provided the government with temporary friends and bitter enemies. The lack of consensus and co-operation that characterised the transition process was a crucial feature of the first democratic government and helps to explain its chaotic end. Indeed, the Radical government did not attempt to build a political and economic consensus. On the contrary, it promoted a pendulum strategy, swinging from confrontation to co-operation. This strategy created temporary allies and enemies so that it had nowhere to turn when it had lost its electoral majority after the 1987 elections. Moreover, the strategy helped to establish a de-institutionalised style of political negotiation (the politics of informality) by promoting informal forms of decision-making and consensus-building processes. The Alfonsín government was unable to transform the historical features of the Radical Party. The history of the Radical Party shows that its emergence in the 1890s, according to Paula Alonso, ‘laid the foundation of a long-lasting tradition in Argentina in which cooperation and conciliation between government and opposition among different political parties became, if not virtually impossible, at least remarkably difficult’.34 The 1980s renovation of Radicalism did nothing to transform the tendency to

Argentina’s political collapse and social decay 103 deny the legitimacy of its opponents. This reproduced the perverse logic of confrontation between the armed forces and the trade unions that had predominated in Argentine politics since the 1950s: the reciprocal negation of legitimacy.35 Rather than explaining the chaotic end of the government only in terms of the economic crisis, here it is understood as a result of the combination of different variables. The pendulum strategy, swinging from confrontation to co-operation, was applied to the armed forces (from the Juicio a las Juntas to the due obedience law); the trade unions (from the policy of desperonización and the attempt to control union elections to the inclusion of a Peronist unionist in the Cabinet); the business sector (from close relations with the Capitanes de la Industria to the difficult relationship after the Primavera Plan’s collapse); and international creditors (from the 1984 unilateral moratorium and the Austral Plan, to the 1988 unilateral moratorium). The policy towards the armed forces provided the government its greatest achievement (the Juicio), but it also weakened it due to military insurrections and the concessions that were made. The confrontation with the unions also undermined the power of the government. The relation with the business sector was ambiguous. Finally, the pendulum strategy worked at its best with the international creditors, with the government looking for their support or dismissing it according to its domestic strategic convenience. This pendulum strategy is crucial to understanding Alfonsín’s end and his legacy. Rather than building consensus or promoting coalitions, Alfonsín attempted to govern using his charismatic figure (an idea which emerged after the 1983 electoral triumph). Following a trend in Argentina’s political history, he concentrated power in the executive and attempted to undermine opposition, even within the Radical Party (especially regarding economic strategy). This style provided him with the opportunity of establishing the pendulum strategy. While, in the short term, it seemed to allow him to establish convenient coalitions according to his immediate needs, in the long term it isolated him since the shifting of positions was perceived as a policy which lacked consistency, negatively affecting trust in the government. This style of governance helped to establish a de-institutionalised style of political negotiations. A politics of informality emerged that revolved around the fluctuating and tactically motivated decision-making strategies pursued by the executive. This took precedence over the promotion of any significant institutionalised or horizontal mechanisms of accountability. The Radical government sought to impose itself through confrontation, interference and the delegitimisation of its opponents, and then promoted conciliation each time this approach failed. The Menem years that followed witnessed a deepening of this politics of informality and of the perverse logic of confrontation.

104 The state of democracy in Latin America

The Menem years After the failure of the Alfonsín government, it was clear that some type of consensus needed to be built and coalitions needed to be created. The 1990s reforms to remedy this situation were, without any doubt, revolutionary in character. They transformed Argentina’s social contract in many senses. First of all, the size of the government was reduced by the privatisation of public enterprises, and by a reduction in the number of agencies and employees in the public administration. Second, the relationship between the national government and provincial and municipal governments was transformed by means of decentralisation. Third, the legal framework was modified through the constitutional reform of 1994. All these changes transformed the functions of the state-institution and, thus, the relationship between the state-institution and wider society. The consequences of these reforms gradually created a new set of social relations in Argentina. Carlos Menem formed a hegemonic power bloc by building political consensus between the economic right and the working class. Following Alfonsín’s chaotic departure, Menem was able to structure a discourse around the idea of an emergency that required drastic measures. In this context, he sought both the support of the business community and the trade unions. In 1991, when Domingo Cavallo’s convertibility plan brought economic stability, the Menem–Cavallo team generated support from almost every sector of civil society. Most importantly, Menem, as a Peronist president, had working-class support while Cavallo, a liberal economist, had the support of the business community and the economic right. Menem also had support from the Congress. A Peronist majority controlled the Senate, and in the Chamber of Deputies the largest bloc was Peronist. Additionally, Menem was also able to control the main political districts such as Buenos Aires and Santa Fé through politicians generally loyal to his authority. This powerful situation would be used and abused by the government. The principal abuse was through the judiciary. Taking advantage of the Senate’s majority, Menem reformed the Supreme Court of Justice (in order to make it menemista) by increasing the number of members from five to nine. This expansion ensured that his political appointees would constitute the majority. When the enlargement of the Court was sanctioned, Menem appointed a former partner in his law office and a close friend of his brother (a Peronist who declared that he had only two bosses: Perón and Menem), two former advisors, and the brother-in-law of two of his closest advisers. Menem also fired the Procurator General, who supervised the investigative and trial functions of the judiciary, and secured the resignation of four of the five members of the Tribunal de Cuentas, which controls government expenditures. These initiatives, alongside increasing the number of federal judges suspected of complicity with the executive,

Argentina’s political collapse and social decay 105 undermined the credibility, independence and accountability of the judiciary. Indeed, the majority of the Senate allowed Menem to control the appointment of allies at different levels of the judiciary. This abuse of the judiciary opened the door for government impunity. Indeed, there were many corruption cases which were popularly known about but ignored by the government and the judiciary, such as the sudden increase in living standards of politicians or trade unionists close to the executive, and the construction of a runway near Anillaco, a small town where Menem lived, in La Rioja province. Most dramatically, the Menem years witnessed two terrorist attacks on Jewish institutions and the emergence of mafia-type crime. The case of the bombing of the Israeli Embassy ended up in the Supreme Court, which has been endlessly accused by the victims’ families of being uninterested in establishing the truth. The bombing of the Asociación Mutual Israelita Argentina (AMIA) unveiled a network of corruption within the Buenos Aires police, and the victims’ families accused the executive of obstructing the course of justice.36 The murder of José Luis Cabezas, a journalist, also supported the view of a network of corruption within the Buenos Aires police. Moreover, the instigator of the murder was, apparently, Alfredo Yabrán, a powerful businessman who was close to Peronist and Radical politicians and was received by the Minister of the Interior when he was under suspicion of ordering the murder of Cabezas. He finally committed suicide when the police entered one of his properties to arrest him. Another case of corruption has been the illegal arms trade to Croatia and Ecuador that has been under investigation in recent years.37 In 1994 Menem achieved one of his most sought-after objectives: the reform of the Constitution that allowed him to be re-elected. He achieved this following an agreement with Alfonsín known as the Pacto de Olivos. The constitutional reform included the establishment of the direct election of the president, senators and the mayor of the Buenos Aires city. It also included a clause by which one third of all parties’ legislative lists should be women candidates. With regard to the judiciary, the reforms included the creation of the Consejo de la Magistratura ( Judiciary Council), the establishment of Jurado de Enjuiciamiento, and the declaration of the Public Ministry as an independent institution. The Council would play a key role in the selection of federal judges and it was supposed to start working one year later, though it only became operational in 1999. The Jurado de Enjuiciamiento, responsible for removing national judges, has also been slow in its development.38 Despite Menem’s control of the judiciary and the high level of corruption, it is fair to say that the reform of the Constitution offered welcome developments in terms of formal democracy, such as the establishment of direct elections, the inclusion of women candidates and the reforms to the judiciary. Moreover, all elections at this time were fair, and basic civil and political rights and press freedoms were respected.39

106 The state of democracy in Latin America Finally Menem, following a military uprising, was able to increase his control over the armed forces, and he cut their budget from 2.6 to 1.7 per cent of GDP. His politics of national reconciliation seemed to work since the Commander-in-Chief of the Army, Martín Balza, made a public recognition of the army’s mistakes during the authoritarian regime.40 These numerous political initiatives enabled Menem to build a consensus. This consensus was based on economic stability and the transformation of social relations through revolutionary economic reforms, and the concentration of power through control over Congress and the judiciary, and it facilitated a rewriting of the social contract. During the 1990s, it appeared that the Menem government was able to successfully consolidate a certain type of democratic regime alongside the implementation of a far-reaching economic strategy.

Menem’s economic revolution As soon as Menem took office, two laws were approved by Congress: the Reform of the State (17 August 1989) and Economic Emergency (1 September 1989). Together they provided the legal framework for the economic reforms, namely the privatisation of public enterprises, the liberalisation of capital markets and trade, and the renegotiation of the external debt within the framework of the Brady Plan. Revolution in practice: The privatisation process and its consequences In 1990 the process of privatisation began. This included television stations, petrochemicals firms, the national airline, the national telecommunications company, national road infrastructure, and some oil wells. In the following year, there were more privatisations of oil reserves and railway networks and, in 1992, a steel company, the electricity generation and distribution firms (the electricity sector privatisation would continue to 1995), the national water company, the national gas company, the Buenos Aires city underground, and more oil wells were privatised. In 1993 the state oil company, Yacimientos Petrolíferos Fiscales (YPF), was sold off, together with hydroelectric dams and more railway networks. During 1994 and 1995, the focus on infrastructure, energy and utilities shifted to social provision as the national pension system was privatised, and in 1996 provincial banks were privatised. Finally during 1997 and 1998, the mail, airports, nuclear sites and the Banco Hipotecario Nacional (National Mortgage Bank) were transferred to private hands.41 The privatisation of the telecommunications company (ENTEL) became a notorious case in this process. There was a fixed time period to complete the privatisation of the company, and this short time-frame clearly favoured foreign creditors. As public companies were offered as guarantees for the

Argentina’s political collapse and social decay 107 repayment of the external debt, a waiver had to be issued by creditors before the sale. The creditors waited until the last minute to grant the required waiver and in the case of ENTEL, ‘after the auctions and once all formal decisions about how to hand over these enterprises to the final winners had been made’.42 ENTEL’s privatisation resulted in an association of foreign telephone companies, creditors (in order to exchange the company for debt) and national partners. The new owners received a concession for telephone services with a monopoly for ten years and high rates for the provision of the service. Thus, as Jorge Schvarzer notes, ‘creditors exchanged their claims on debt, whose repayment was doubtful (as was evident from their low price in the secondary market) for shares in a monopolistic enterprise whose returns were guaranteed.’43 The ENTEL case reveals that there were no previous, detailed rules for the process; any condition could be negotiated so long as the company was sold.44 Soon it became evident that the firms interested in the privatisation process were concerned about the lack of rules and these ad hoc procedures. Indeed, although they could gain benefits in the short term, they found themselves unable to design their future plans. This was one of the reasons why Bell Atlantic withdrew its bid for ENTEL. The privatisation process was embedded within the politics of informality. The government needed to be seen to be more committed to the restructuring of the economy in order to create a credible image for external investment. It chose to do this by speeding up the process of the reforms, by making concessions to creditors and foreign firms, and by ignoring existing rules or the need to establish new regulatory frameworks. Congress had formed a Bicameral Commission to control the process, though its power to influence the process was very limited. Its main achievement was to make public the executive’s mistakes and the degree of improvisation. The privatisation process was crudely described by one of the government ministers when he observed: Every document has an unwritten clause, which we have not written down out of national shame, that is the degree of dependence that our country has, that it does not even have dignity, in order to be able to sell what must be sold. A country that has no control over its riches, a country that is internationally inhibited, on bended knee, in shame . . . . We are being monitored in absolutely everything.45 Naturally, such a statement made headlines. However, whether the political class was monitored in absolutely everything remains an open question since the privatisation process was always suspected of giving opportunities to politicians to enrich themselves through bribes.46 The executive used, and abused, all its power in order to complete these privatisations. A Peronist deputy tried to block the national airline

108 The state of democracy in Latin America privatisation through recourse to the judiciary. He presented an acción de amparo to object to the procedures and the judge decided to stop the bidding process until the objections had been clarified. However, the Minister of Public Works appealed to the Supreme Court and they overruled the judge’s decision. This was the first time in Argentina’s history that the per saltum mechanism was used. It is important to remember that the Supreme Court had been expanded to make it menemista and its actions can be explained by this reform. Likewise, when the gas privatisation bill was being discussed in the Congress, the pressure exercised by the executive on the Peronist bloc became evident. The law had to be approved by 26 March 1992 and as the necessary quorum proved impossible to achieve, someone took the place of a deputy in order to make up the required number. This diputrucho (spurious deputy) was discovered by journalists and the law could not be approved that night. The executive was forced to use all of its resources in the Supreme Court and Congress in order to complete the privatisation process. The two events noted above reveal the degree of informality – even illegality – of the privatisation process. This is particularly important since privatisations signified transfers from the public to the private sector that would dramatically restructure the latter. Indeed, as a consequence of the privatisations, new actors emerged through the associations between domestic and foreign firms. These new actors also included the state in some instances (which often retained some shares), national and international banks, investment funds, transnational companies, and shareholders. Gradually the GEN began to lose the powerful position that they had held during the 1980s. Indeed, the associations formed through the privatisation process were becoming more powerful in economic and in political terms. It has been argued that the performance of the privatised firms during the 1990s meant that the largest firms became independent of the economic cycle, which was one of the GEN’s main features during the 1980s. In 1997, the commercial surplus of the largest firms was more than US$8,000 million while the commercial deficit of the country reached US$4,000 million.47 The private sector benefited principally from the low prices of the firms that were sold, as well as the generous concessions that accompanied them. Three years after buying 5.2 per cent of the shares in Cointel (the firm that owned 60 per cent of Telefónica de Argentina) for US$18 million (1990), the economic group Soldati sold them for US$85 millions. In 1996, Techint sold 8.3 per cent of its Cointel shares for US$240 millions, having bought them in 1990 for only US$43 million.48 The new associations operated in monopoly markets and with rules established by the government that clearly benefited their performance such as the high price levels for services provided. Most significantly, many privatised firms

Argentina’s political collapse and social decay 109 had a captive market and their activities were poorly regulated or not regulated at all. During the 1990s, due to the privatisation process, there was a terciarización of the largest firms through which there was an increase in the provision of services (the production of non-tradable goods) to the detriment of the production of tradable goods. This process was the result of the intervention of the government since privatisation benefited a group of firms that, due to their operations in monopoly markets, have since become central players in Argentina’s economy. Industry was no longer the dynamic nucleus of the economy. The undermining of local production was also an aspect of this process since many firms began to assemble products with imported materials rather than produce the required materials locally.49 During the 1990s, services grew faster than any other sector: between 1990 and 1996 financial operations increased by 140 per cent; communications by 88 per cent; construction by 78 per cent; and electricity, gas and water provision by 52 per cent. By 1996, 71 per cent of the economically active population was employed in the service sector.50 The privatisation process had dramatically transformed the business sector. Although the GEN were important at the beginning of the process, since they had local knowledge and financial power, it was the role of the international banks and financial institutions (participating mainly to recover their losses due to the non-payment of the external debt) that became more influential. Representatives of the financial sector argued that they did not benefit greatly from the transactions of the period since they were only recovering past losses, contrary to criticism from industrial and agricultural quarters.51 The privatisation of public enterprises signified a change in the social contract. The government was no longer seen as a provider of services or as an economic producer. Instead, the values associated with minimal government intervention in the economy prevailed. This would be reflected in the social relations that were being formed, in the social contract and in the state-institution. Indeed, the new associations and the terciarización of Argentina’s economy became key features of the new social relations of the 1990s; the values and interests behind these new social relations would be imprinted in the social contract and state-institution. The associations between domestic and foreign firms helped to change the attitude of some local companies; there was a restructuring of business perspectives, and new generations of employees absorbed the new rules of the market. The period must also be understood as a period of transition with many actors still finding it hard to accommodate to the new rules. Representatives of the financial sector emphasised that not only businessmen, but even most politicians were unable to understand and accept the new rules that had emerged with the privatised firms and the new associations. They also emphasised that the financial sector benefited little, although they

110 The state of democracy in Latin America recognised that some bankers benefited a great deal.52 Privatisation transformed Argentina’s economy. This transformation occurred with a high degree of informality and a low degree of horizontal accountability. Thus, there was room for corruption, improvisation and discretion. In the short term, the actors involved gained considerable benefits, but in the long term this lack of accountability and regulation would highlight the vulnerabilities of the reforms. The revolution’s central pillar: Convertibility The convertibility plan applied in 1991 had five main pillars: monetary reform; fiscal reform; state reform; pension reform; and trade reform. The monetary reform involved the peso being pegged to the US dollar on a 1:1 level and the Central Bank maintaining a level of reserves of at least 80 per cent of the monetary base; the remaining 20 per cent could be kept in public bonds. The Central Bank, which became independent, had to maintain the existing rate between reserves and the monetary base. The fiscal reform meant a restructuring of the tax system, while the state reform was implemented principally through the privatisation programme. Pension reform involved a system of capitalisation managed by the private sector, and the trade reform oversaw the elimination of tariffs and the signing of the Mercosur agreement. The international context was favourable to these reforms due to the availability of credit to emerging markets and the increase in international prices of Argentina’s exports. Argentina’s trade was also transformed by Mercosur, which generated more resources for the domestic economy. All of these changes influenced the attitudes of economic actors. Economic stability (mainly price stability), foreign investment, access to new markets such as those of the Mercosur bloc, and the privatisation process, opened up new opportunities to the private sector. After three years of negative growth, Argentina’s GDP grew by 10.6 per cent in 1991, by 9.6 per cent in 1992, by 5.9 per cent in 1993, and by 5.8 per cent in 1994. Foreign direct investment of US$3,218 million in 1992 rose to US$2,480 million in 1994.53 From 1990 to 1998, US$24,000 million was received via the privatisation process and this contributed to the total capital generated in the country during this period of US$90,000 million.54 In 1999, the government received US$23,986 million (mainly from selling YPF to Repsol); in 2000 it received US$11,672 millions, and in 2001 US$3,181 millions.55 The inflow of capital helped to finance a credit boom that was crucial to the real growth experienced from 1991. A significant proportion of this inflow involved the repatriation of capital by Argentines, which, from 1991 to 1993, represented half of the total inflow.56 It was clear at this time that Argentina’s economy was gaining the confidence of national and international investors.

Argentina’s political collapse and social decay 111 Materialising the revolution Under the umbrella of convertibility, numerous reforms were instituted. The banking system was restructured, with the increased participation of foreign banks vis-à-vis public banks (since foreign institutions bought a large number of local banks). Between 1996 and 1998 foreign investment in the banking sector was US$4,000 million, which was 20 per cent of the total foreign investment received during that period.57 Bank accounts increased: from US$8 million in 1990, to US$10.5 million in 1997, and 13 million in 1999. Deposits also increased from 10.300 million pesos to 83.600 million pesos between 1990 and 1999. Likewise, there was an increase in the number of approved credits: from 1.8 million in 1990 to 9.5 million at the end of the decade.58 While the Mexican crisis of 1995 did not seem to have a significant effect on this financial sector growth, the contagion effect became evident when the Hong Kong market lost confidence (since its monetary system of conversion was quite similar to that in Argentina). At this point, interest rates started to increase while international reserves decreased. 59 The labour market was also transformed. From 1991, new rules were set up to establish labour contracts with fewer restrictions on dismissals and less taxes. The new regime included labour contracts for one or two years for training young people without any obligation to pay compensation at the end of the contract or in the event of dismissal. In 1995, the probation period was also modified: there was no need to give notice in case of dismissal and the probation period could be extended up to six months. But in 1998, a new law reversed this situation and reduced the probation period to one month.60 Also in 1991 an unemployment benefit was established, though its impact was limited due to the restrictions imposed on it, such as the criterion that there should have been no just cause for dismissal from work. The labour market reform proved difficult to apply. On the one hand, the opposition from Peronist unions made the government more cautious in the implementation of the reform. On the other, there was a perception that economic growth could mitigate the effects of the economic restructuring in the labour market. Indeed, the government was projecting an expansion of employment by 3 per cent per year between 1992 and 1995.61 Therefore, the most important reforms were effectively a reaction to an increase in the unemployment rate in 1993. This can also explain the inconsistency of the reform. Indeed, difficult negotiations with the unions and the business sector, together with the urge to respond to the increase in unemployment, help to explain the erratic behaviour in the implementation of the labour reform. The main discussion revolved around labour costs such as those related to pension contributions, dismissal, extra hours, holidays, accidents and health funds. One of the most important measures was to reduce the

112 The state of democracy in Latin America cost of employer’s payments to social security by 30 and 80 per cent depending on the location of the establishment. Regarding new contracts, the most important innovation was the suspension of the probation period in training contracts and the fact that the employer was not obliged to pay labour costs during that period. With respect to accidents, traditionally employers would cover all the costs of the accident. However, the new legislation contemplated a reduction in the maximum compensation for death and an obligation on the employer to join an insurance company (Aseguradoras de Riesgo del Trabajo – ART) that would manage compensation; the worker, rather than getting a lump sum, would receive monthly payments. Holidays were also reformed. While in the past, holidays were facilitated between October and March, the new legislation stipulated that they could be made available at any time throughout the year. The employers’ contribution to health funds was a difficult point of negotiation between the government, the unions and the business sector. Finally, after two years of negotiation, the contribution was reduced by only one point.62 The Congress persistently blocked each of these labour reforms during this period. While the executive achieved the approval of Congress for nine of the ten privatisation proposals sent between 1989 and 1995, only eight of the twenty labour reform proposals were approved.63 The trade reform focused on tariff reductions. Prior to 1991, there was a uniform tariff of approximately 20 per cent but this was reduced under convertibility to zero for primary products, 11 per cent for intermediate goods, and 22 per cent for manufactured products.64 Imports increased by 103 per cent in 1991, 80 per cent in 1992, and 13 per cent in 1993, while imports of capital goods in particular grew by 126 per cent in 1991, 115 per cent in 1992, and 33 per cent in 1993. In the same period, exports fell by 3 per cent in 1991, and increased by only 2.2 per cent in 1992 and 7 per cent in 1993.65 This balance of trade revealed the strong domestic demand in the country but the export sectors were soon activated by convertibility and increased 86.52 per cent from the third trimester of 1990 to the same period in 1996; export values increased 22.74 per cent while the volume rose by 51.89 per cent.66 The fiscal reform included a range of initiatives such as the suspension of subsidies for industrial promotion; privatisation of public enterprises; generalisation of VAT; reduction of the rate of income tax; an agreement between national and provincial governments; updating of debts in the pension system; and new legislation to restructure the pension system. This pension restructuring was designed to change the old distributional system (sistema de reparto) that was near collapse due to high rates of contributions evasion; in 1992, evasion was almost 48 per cent of total contributions. Independent workers were most culpable, with 75 per cent not contributing to the system.67 Under the new legislation there would be a mixed system: a public system that retained the idea of reparto, and a new

Argentina’s political collapse and social decay 113 regime based on private funds created through private contributions. All contributors would have to choose one system or the other. The Administradoras de Fondos de Jubilaciones y Pensiones (AFJPs) would be created by different economic agents, including the unions. Private banks also participated in the creation of AFJPs such as Banco Santander Central Hispano and Citibank. From 1995 the resources transferred from the public sector to the AFJPs accounted for 73 per cent of the public deficit. Sectoral changes The economic revolution was also experienced in the agricultural and industrial sectors. The agricultural sector took advantage of credit availability and of the opening-up of the economy to gain access to fertilizers, machinery, and agrochemical products, but the most important measure was the suspension of export taxes in 1991. In 1995, these changes were boosted by increasing international prices for export staples, but this was followed by a downturn from 1998. Despite the increased availability of credit, representatives of the sector still argue that the sector is constituted mainly by small- and medium-sized operations which lack access to credit. They believe that a national, public bank should provide credit to those types of businesses, on the basis that the sector is the most efficient in Argentina and remains dynamic as a consequence of the diversification carried out in recent decades. During the 1990s, the agricultural representatives believed that the sector restructured extensively: small producers sold land to larger firms, leading to an exodus from rural to urban areas where these agricultural workers found themselves excluded from work as a consequence of their low levels of education and skills.68 During the 1990s the industrial sector underwent important changes: agro-industrial production expanded due to Brazilian demand; wine production also increased in response to external demand; and oil production rose as a consequence of the privatisation of the national company, YPF. Fisheries and mining also increased their output. In general terms, the industrial trends can be summarised as follows. A nucleus of larger companies (with the participation of foreign capital in single or joint ownership arrangements) adopted expansive policies based on the exploitation of raw materials or existing competitive manufacturing production (for instance, the paper industry, steel and some chemicals). They expanded on the basis of export opportunities in regional and international markets, and benefited from large new capital investments. Another group of companies (including SMEs as well as some large firms) had to face significant competition as a consequence of the liberalisation of trade. This group adapted by decreasing the work-force and/or by replacing some of the local production with imported inputs. This was the case with textiles and toy production, for instance. In some

114 The state of democracy in Latin America cases, firms closed down or were bought out by larger enterprises.69 Other firms, such as those in the paper, plastics and basic metallurgical branches, increased their production by 10 per cent between 1990 and 1998, while the automobile industry’s production increased by 20 per cent, but these are associated with increased domestic demand rather than external drivers. Three significant patterns emerged during the period. First, the activities that had a high level of foreign investment tended to increase their production at higher levels than those with little or no foreign investment. Second, large firms increased their production at rates three times higher than SMEs. Finally, traditional goods and commodities production increased at average rates, while the metallurgical sector decreased its output. In contrast, the automobile sector increased by a rate five times higher than average, due to certain advantages accruing from the Mercosur agreement.70 These patterns meant that the industrial sector was, once again, restructured, this time definitively ending the import substitution model. The new specialisation profile was concentrated in the production of industrial goods with intensive use of raw materials (steel, petrochemicals, paper and vegetable oils), and was achieved via the opening-up of the economy, the privatisation process, market deregulation, and Mercosur. This restructuring process led to winners and losers. The winners were the sectors producing cars, pharmaceuticals, oils and dairy products, plastics, non-alcoholic drinks, cleaning goods, journals and magazines, printed goods, cigarettes, and paper products. Most of these products do not require high levels of technology, and were oriented towards domestic demand. The losers were the textile, metallurgical, wood, basic chemicals and foodstuffs sectors.71 The performance of domestic demand was crucial in driving increases in manufacturing production – this despite convertibility supposedly aimed primarily at export-led growth. Another of the features of the manufacturing industry at this time was its high level of concentration. Indeed, 43.1 per cent of production was generated by sectors in which the eight largest firms represented more than 50 per cent of total production.72 These firms accounted for 28.9 per cent of industrial workers and 39.8 per cent of total industrial wages. In the more competitive sectors, 42.8 per cent of the industrial work-force generated only 34.7 per cent of total industrial wages. The concentrated sectors, which acted as effective oligopolies, produced almost 85 per cent of total industrial production. These oligopolistic firms (with more than 300 workers) produced 27.8 per cent of total industrial production although, according to the 1994 census, they represented only 0.2 per cent of the total number of firms.73 The concentration is also evident in that one thousand firms produced 62.6 per cent of total industrial production. There was also a significant degree of concentration in terms of sectoral contributions to total output. Industries producing foodstuffs, drinks and cigarettes

Argentina’s political collapse and social decay 115 represented 29 per cent of total production (5 points more than during the 1980s) and petroleum, chemicals and plastics represented 22.8 per cent. Between them they accounted for over 50 per cent of total industrial production. According to the 1994 census, 10,000 firms disappeared during the 1990s and 15,000 firms since 1973. From 1984 to 1994 the majority of firms that disappeared were those with more than 100 workers. This can also be seen through the redundancy of workers: more than 360,000 industrial workers lost their jobs during the 1990s.74 The agricultural and industrial sectors both underwent considerable restructuring during the 1990s. The agricultural sector benefited from the opening-up of the economy and suspension of export taxes, though the benefits accrued to particular product branches and scales of enterprise. It is estimated that around 70,000 agricultural establishments closed during the 1990s, mainly because the sector remained based on SMEs with limited access to easy credit. Although the representatives of the sector praised traditional liberalism, they also complained about the government’s indifference towards their problems. They argued that this was due to the fact that they contribute little to electoral campaigns compared with industrial companies. They perceived the sector as relatively autonomous since it is mainly based on exports, but they also emphasised their role as losers in negotiations with the government. Finally, they praised the diversification of the sector but also complained about the fact that the traditional feature of the sector – Argentina consumes the same range of products as it exports – could not be changed.75 The industrial sector lost its role as the most dynamic sector of the Argentine economy during this period. The restructuring of the sector resulted from the privatisation process, the Mercosur agreement, the performance of domestic demand and other policies implemented by the government. The principal feature was the concentration of capital and production in larger firms to the detriment of SMEs, itself a continuation of a trend established under the military regime. The larger companies increased their efficiency and consolidated themselves in a capital-intensive and concentrated way while the SMEs, historically at the heart of the industrial sector, continued to lack access to technology, credit and market information, which undermined their capacity to adapt to the new market rules. These factors are critical in explaining the increase in unemployment and the new social relations that emerged during this period.76 The impact of privatisation on the structure of the Argentine economy and on industrial production cannot be underestimated. By the later 1990s, industrial influence had declined significantly and the service sector had become more predominant, continuing a trend that had emerged during the 1970s. Despite its restructuring, the industrial sector had retained its traditional features as a producer of low value-added goods. Low value-added natural resource exports increased from 25 per cent of total

116 The state of democracy in Latin America exports in 1989 to 34 per cent in 1994, revealing, according to Pastor and Wise, ‘the limited progress that has been made in shifting to the kinds of high value-added exports necessary for triggering future income and job growth’.77 Old habits die hard: Increasing the debt and capital flight In 1992, Argentina signed the Brady Plan, which restructured and guaranteed the payment of the external debt. This helped Argentina gain access to international credit, which had a high level of liquidity at that time, but this would merely provoke a new cycle of increased external debt.78 The external debt increased by 12.5 per cent cumulatively between 1991 and 1997, while from 1991 to 2001 it increased by 128 per cent: from US$62,223 million to US$142,300 million. During the period 1985–2000, the interest payments increased by 130 per cent.79 Between 1991 and 1997, the private sector’s debt increased from US$8,600 million to US$49,500 million, while the public sector debt climbed from US$52,700 million in 1991 to US$74,800 millions in 1997. The private sector debt increased mainly as a consequence of the activities of the GEN, foreign firms and the largest domestic banks. It is significant that from 1990 to 1992 the external debt did not increase dramatically (from US$61,800 to US$62,8000 million) and there was an important repatriation of capital (Argentine capital abroad decreased from US$58,500 million to US$53,600 million). However, from 1993 both figures expanded, reaching US$124,300 million and US$96,400 million respectively in 1997. An analysis of the FDI inflows and capital flight reveal that, although Argentina’s economy was restructured, stabilised and growing, there was a net capital flight of more than US$18,000 million between 1991 and 1997, prior to the impacts of the 1998 recession.80 The capital flight of the 1970s and 1980s had continued in the 1990s despite the economic revolution and the brief period of capital repatriation at the beginning of the Menem administration. 1995: The end of a dream Although, at the time, it appeared that the Mexican peso crisis did not have a dramatic impact on the Argentine economy, in hindsight the event marked the beginning of the end of the prosperous 1990s. In 1994 the current savings account of the national government decreased as a consequence of falling income due to the impact of the pension reform and to the lack of agreement with the IMF (which fuelled further uncertainty in the domestic economy). Meanwhile, the crisis in Mexico erupted, increasing the lack of confidence in the region as a whole. In the third trimester of 1995 GDP fell by 10 per cent, due mainly to a fall in domestic demand (9.5 per cent between the fourth trimester of 1994

Argentina’s political collapse and social decay 117 and the third trimester of 1995), and investment fell by 30 per cent.81 This was mainly related to increases in financial costs and a reduction in international credit and liquidity. In 1995 Argentina’s GDP fell by −2.5 per cent. The recession would hit Argentina more dramatically in 1998, following the Asian, Russian and Brazilian crises. A combination of factors was involved. After the financial crises, international investors became more reluctant to risk their assets in emerging markets. Nevertheless, net foreign direct investment in Argentina remained high between 1997 and 2000, so other factors must have also played a role. Following the Asian crisis, the impact on Argentina’s economy included a temporary increase in domestic interest rates, a decrease in peso deposits, and a fall in international reserves. The cost of indebtedness was undoubtedly influenced by the crisis. However, according to reports from the Ministry of Economy, the Asian crisis did not affect the real economy and its impact was lower than that of the Mexican crisis.82 Tax revenues increased by 12.7 per cent with respect to 1996, and represented 15.4 per cent of GDP. Likewise, the degree of monetisation of the economy (M3) was 27.7 per cent higher than that in December 1996. International revenues increased by 26 per cent with respect to December 1996. Finally, public income as well as public spending increased. While tax revenues increased, the level of spending also increased, specifically on consumption, and on interest payments on internal and external debts, and federal transfers to the provinces. Savings were negative and the fiscal deficit stood at −4,276.6 million pesos. It is important to highlight here that the fiscal balance became negative in 1994; the widest range in this deficit is that of 1995 (−1,373.3 million pesos) against the figure for 1996 (−5,264.4 million pesos). This growing deficit can be accounted for by the fall in social security contributions at a time of increased federal transfers to the provinces and interest payments on the external debt. In 1998, after the Russian default, the scenario changed. International investors reacted by leaving emerging markets. There was also a fall in international prices, which together with fiscal problems in Brazil, aggravated Argentina’s situation. Despite these external factors, Argentina’s GDP grew by 8 per cent in 1997 and by 3.8 per cent in 1998; the recession began during the third trimester of 1998. During the second half of the year there was an increase in domestic interest rates, a major substitution of peso deposits for dollar deposits, and a fall in international reserves. The same trend in public spending of the previous years and the large fiscal deficit (−4,073.5 million pesos in 1998) further aggravated the situation at the end of the year. In 1999, following Brazil’s devaluation, the fiscal problem became greater. Due to the fall in GDP growth, tax revenues decreased but higher international interest rates made debt repayments more complicated. The problem was aggravated by a deterioration in the terms of trade as

118 The state of democracy in Latin America export prices fell by 11.2 per cent against only a 5.6 per cent for imports. Deducting income from privatisation, the public accounts showed a US$7,156 billion deficit. Driving this shortfall was the combination of a steady increase in spending during the 1990s against a decline in tax revenues. Compared with 1988, the deficit had risen 86.9 per cent by 1999, equivalent to 2.5 per cent of GDP. International events had also had a significant impact in triggering the recession: the financial crises influenced the market selections of international investors; Brazil’s devaluation shook the region; a strong US dollar persisted; and the fall in international prices was significant. During the years of economic growth there was no implementation of rules to control fiscal deficits. Political factors lay behind this decision. Carlos Menem needed provincial support for achieving his political objectives: his re-election in 1995 and then again in 1999. Consequently, federal transfers to the provinces increased steadily throughout the decade while most of the provinces failed to adjust and restructure their economies in the light of other economic changes. The external debt also grew steadily during the decade, despite capital inflows. The new debt corresponded to the costs of financing the privatisation of pensions through which the public sector lost contributions but retained beneficiaries, and the restructuring of the banking system. Thus, despite the worsening international scenario, the Menem government maintained, or even increased, its level of expenditure. Although Menem was re-elected in 1995 and the international scenario was still quite favourable, he lost all sense of fiscal prudence when it came to running for the 1999 elections. There was also no room for planned reforms, such as the revenue-sharing system between the federal government and the provinces. Fiscal prudence was no longer an issue at the federal or at the provincial levels. Eduardo Duhalde, governor of the Province of Buenos Aires and a strong opponent to Menem’s re-election, expanded the fiscal deficit in his province from an average fiscal deficit of 7 per cent of current revenues in 1996 to 25 per cent in 1999.83 This domestic condition of overspending could not be contained in the new international scenario of financial contagion and the loss of confidence in emerging markets. After ten years of economic stability and a political discourse that revelled in the country’s positioning in the First World, it became clear that Argentina had been building castles in the sand.

Political coalitions There is an extensive literature analysing the ability of the Menem government to construct ‘reformist coalitions’ in its consensus-building process.84 Most of these publications analyse sectoral coalitions related to specific reforms. Such sectoral analysis of ‘reformist coalitions’ uncovers a lot about the decision-making process during the implementation of

Argentina’s political collapse and social decay 119 the reforms. For example, it reveals the actors involved, the capacity of the government in the negotiation process, the level of its autonomy, the redistribution of power, and the capacity of different political, economic and social actors in the policy-making process. The question addressed here is whether the 1990s reforms involved a rational strategy to create a new social contract that would recreate the state-institution, based on new social relations that were democratic, capitalist and aimed at creating economic growth to improve the quality of life of all Argentine citizens; or whether they were an ad hoc solution for a chaotic situation. Seducing old enemies President Menem’s first political move was to establish an alliance with Peronism’s old enemy, the transnational Bunge y Born, and to divide the trade union movement by creating allies and enemies within the movement. The alliance with Bunge y Born was short lived but had a great impact in the short term. It made it clear that the government was planning to establish alliances with economically powerful groups within the nationally active bourgeoisie. However, in the long term, the impact of this alliance was not great. The Bunge y Born alliance was based mainly on a personal reconciliation between Jorge Born and Carlos Menem. It was perceived as an opportunity to reveal the extent of Peronism’s transformation. Bunge y Born had been, in old Peronism folklore, the ‘incarnation of evil’. Moreover, the Montoneros had kidnapped Jorge and Juan Born; Jorge remained in their hands for nine months until a payment of US$60 million secured his release. The relationship between Jorge Born and Menem was an attempt to leave the past behind and to trigger a fresh start for Menem’s new brand of Peronism. However, the alliance soon collapsed and by the time Domingo Cavallo was named Minister of Economy in January 1991, the relationship between Jorge Born and the Menem administration was distant once again. Rapprochement with key private sector figures was very much encouraged by the Menem administration. Many businessmen were proud to point out that ‘the doors of Casa Rosada and Olivos were open for me’ or ‘a Cavallo lo tuteo’ (i.e., the use of the personal rather than the formal for of address). In contrast, those who were actively engaged in the Unión Industrial Argentina recognised that the organisation had little influence. The Menem administration cultivated a model of government alliances based on personal relations. Most important within the reforms package was the privatisation process, and it provided the government with a powerful tool for negotiation: the companies themselves. The process implied a profound redistribution of resources between the government and the private sector and, in this sense, the public companies were used by the government to establish a more powerful position in the negotiation process, as well as to persuade

120 The state of democracy in Latin America businessmen to accept reforms that may have been detrimental to their sectors. The public companies became the carrot while the government used a stick in other policy areas. It was a policy of toma y daca, mutual concessions and log rolling. While some analysts perceived the reforms and the privatisation process as a rational strategy implemented by the government, here the lack of rationality in the reforms is emphasised.85 The business community was divided between different sectors. To the usual industry/agricultural divisions, one had to add the interests of the SMEs, the GEN, the international companies, and public versus private companies. It is significant that Argentine businessmen perceive themselves as being ‘watertight compartments’, disengaging the interests of their companies from the economic sector in which they operate and from their sectoral bodies of representation, such as the UIA. They also make remarkable comments about their Brazilian or Chilean counterparts, referring to them with envy for their nationalism and patriotism. They seem theoretically concerned by the lack of common objectives within the industrial sector, by their own inability to achieve mutual concessions within the sector, and by the fierce competition that can erupt within the industrial sector or against the financial and/or agricultural sectors. However, neither during the Menem administration nor later on do they appear, in practice, to have been willing to tackle these issues. While they formed associations parallel to their main representative bodies, these associations were temporary and formed around very short-term goals.86 Moreover, individually they find it very difficult to describe the national economic and political effects of their roles as businessmen. In traditional Marxist terms, they do not have class-consciousness and, by envying their Brazilian and Chilean colleagues, they seem to long for this. This is, of course, an old feature of the Argentine bourgeoisie.87 Finally, while the majority of the business community define themselves as liberal, they still expect the government to protect their interests. They have an unstable relationship with economic liberalism, supporting it only in specific circumstances when it suits them, and displaying protectionist ideas in their discourse at other times.88 They describe their relationship with the Menem government in very personal terms but they quickly try to disengage themselves from any accusations of corruption, as well as from any situation in which the closed, personal relationship could have been used to obtain economic benefits. Although they generally agreed with the 1990s reforms, they have a very negative picture of the general economic situation in Argentina. This is crucial. The business sector did not see itself as a key actor in Argentina’s economy, ignoring the impact that their decisions have in the economy through a ‘multiplier effect’. Society and the reproduction of the economic system depend on the allocation of scarce resources that are owned privately. Investment decisions have a long-term impact on society since they determine economic production, employment and consumption.

Argentina’s political collapse and social decay 121 Argentine businessmen seem to ignore the role they play in the economic system, and appear to be able to disengage themselves from the broader picture of Argentina’s economy. The business sector was profoundly restructured during the Menem administration. The privatisation process was, of course, the vehicle for this restructuring since it transformed the existing boundaries between the public and private sectors, enabling the private sector to establish itself in public services and utilities such as railways, telecommunications, gas and electricity provision, oil companies and water supply. In this new context, the domestic private sector became, in many cases, associated with foreign companies and it grew as a consequence. It is important to recognise that the Argentine business sector did not act collectively whilst undergoing this restructuring. On the contrary, to manage their future role they relied on risky and unstable personal relations. These risky relations were, for some, very beneficial, but highly detrimental for others. The business sector was plunged into a Hobbesian state of nature. Following other political theory constructions, the logic of collective action and Prisoner’s Dilemma explain the significance of co-operation for upgrading universally enjoyed benefits: benefits foregone by the individualistic, ad hoc strategies adopted by the Argentine private sector. Argentine businessmen tried to transfer the transitional costs of the reforms to other companies. Rather than sharing the costs and the benefits of the 1990s reforms, they exercised a logic of individual action: a rapacious and predatory dynamic. Rejecting old friends Analysis of the trade unions reveals a similar reaction. The government implemented structural reforms in the labour market, which impinged on trade unions. The laws of Emergencia Administrativa y Reforma del Estado (23696) and Emergencia Económica (23697) introduced changes to job security and the wages of public employees. The privatisation of public companies also affected public employees, while the Ley de Empleo (24013) modified the legal framework of the labour market, as did the Ley de Accidentes de Trabajo (24028). Decrees were also issued, banning wage increases unrelated to productivity and limiting strikes. As has been well documented, the trade union movement was restructured during the Menem administration.89 Three months after Menem took office, the Confederación General del Trabajo (CGT) split into two different bodies: a Menem-friendly CGT San Martín and an opposition CGT Azopardo. This division of the umbrella organisation then spread to individual unions such as those in telecommunications. In the 1989 elections, the candidate who opposed privatisation defeated the then Sub-Secretary of Communications who supported the privatisation plan.

122 The state of democracy in Latin America The first years of the administration witnessed a reaccommodation of unions within the two CGTs and many labour conflicts. In 1991, the CGT Azopardo was abandoned by, among others, the ATE (public employees), the CTERA (teachers), the UTA (public transport) and naval workers, all of which became more confrontational in their positions. Later that year, other unions such as the Federación de Trabajadores de la Industria Alimentaria (Foodstuffs Workers) and La Fraternidad also deserted the CGT Azopardo. By the end of the year, ATE, CTERA and UOM Villa Constitución (Unión Obrera Metalúrgica – Metallurgical Workers) had formed a new group that would later become known as the CTA (Central de los Trabajadores Argentinos). Despite these divisions, in 1992 the two CGTs united to oppose the government’s reform to health funds (Obras Sociales). Nevertheless, from the outset, the government and the trade unions showed a strong willingness to negotiate. The unions’ reactions were diverse. As María Victoria Murillo notes, they developed three main strategies: opposition, loyalty and organisational autonomy.90 While some unionists opposed the reforms on principle, others perceived them as vehicles to improve their personal or organisational positions of power. In the latter group, it was evident that both government and unionists pursued a toma y daca dynamic. The opposition unions groups, although also divided,91 maintained their confrontational strategy, working together in organising demonstrations, and gaining a significant influence in the provinces. In this sense, although they failed to influence the government, they followed a strategy more closely based on collective co-operation.92 The relationship between the negotiating unions and the government was a complex one. The government presented its reforms as a wideranging package giving the unionists the possibility to ‘pick and choose’ between different elements of the proposed reform. This happened after the government had given some unionists important government posts. For instance, Luis Barrionuevo (Catering Workers) was appointed Director of the Administración Nacional del Seguro de Salud (ANSSAL) that controlled health funds, and Jorge Triaca (Plastics Workers) was named Labour Minister. It is important to remember that the combative strategy of Saúl Ubaldini’s CGT during Raúl Alfonsín’s government was not supported by Carlos Menem and it had become gradually unpopular following the 1980s. The thirteen general strikes of this period did not lead to government policy changes and merely created widespread chaos. With this legacy, it was easy for Menem to discredit the more combative factions and, thus, undermine the resources of the unions. The government was also able to deal harshly with labour conflicts. Menem’s slogan was the phrase: ramal que para, ramal que cierra (a reference to a hardline stance adopted against railway workers).93 The government took advantage of the privileged relation between the unions and the Peronist Party. The unions, for their part, have a tradition

Argentina’s political collapse and social decay 123 of negotiating with most forms of government in Argentina; during military dictatorships and radical governments a number of unionists were always willing to support government policies. Therefore, a closer relationship between the unionists and a Peronist government was to be expected. The politics of ‘pick and choose’ was broadly welcomed by the unions. The government appeared to be firm in its presentation of the full package of reforms, but it gave the supportive unionists the possibility of rejecting some elements of the package that they could present to their members as concessions made by the government. For instance, after the sanctioning of the Ley Nacional de Empleo and Ley de Accidentes de Trabajo, the government announced that it was preparing a decree to cancel workers’ obligatory payments to welfare funds. This decree was soon abandoned and replaced by a proposal that was sent to Congress. Besides, by presenting the Ley Nacional de Empleo and Accidentes de Trabajo as a package, the former seemed to be a lesser evil and was thus accepted by the unions. The government’s strategy was to accelerate, then reverse; to propose such far-reaching measures that concessions could be granted to the unions to serve the latter’s acquiescence to a sufficient proportion of the government’s main proposal. Health fund reforms, for instance, were reversed in order to accelerate labour market flexibilisation.94 Likewise, when the government needed the unions’ support for Menem’s re-election, it attempted to deepen divisions by including the CGT in an agreement with industrialists while excluding the CTA and the Movimiento de Trabajadores (MTA). A strong group within the CGT supported the constitutional reform and Menem’s re-election; these supportive unionists formed a group which became known as the circle of friends (Club de Amigos). While some unionists were mainly loyal to the government to maintain their personal positions, some of them used their loyalty to modernise or marketise, as Murillo suggests, their unions. This marketisation included ‘purchasing firms in their sectors; creating retirement funds to participate in the privatisation of social security; establishing firms that provide services to privatised enterprises and jobs to former employees of those companies; reorganising welfare funds to compete for health care provision; and managing the employee-owned stock of privatised state enterprises’.95 Former Labour Minister, Armando Caro Figueroa, points out that some unionists, understanding the situation, tried to organise, the best they could, the restructuring of their unions, the sacking of workers, redundancy conditions, and the maintenance of the union’s power within the sector. By dividing and exacerbating the divisions in the unions, the Menem government achieved what had been so eagerly, but unsuccessfully, sought by his predecessor: the control of the unions. By allowing the government to divide them and to exacerbate their divisions, unionists achieved partial, short-term objectives related to institutional organisation rather

124 The state of democracy in Latin America than to workers’ rights. They encouraged the spread of zero-sum games, producing winners and losers, creating deep divisions within the workers’ organisations and, therefore, undermining the unions’ very existence.

Sixteen years on . . . Carlos Menem’s government restructured Argentina’s social relations but failed to institutionalise them through the rewriting of a social contract or the creation of a state-institution able to sustain the new social relations. Instead, his government deepened the politics of informality, undermining horizontal accountability. Menem was able to build consensus by achieving economic stability, though he simultaneously concentrated power in the executive through his management of the Congress and the judiciary. The Menem government became widely known as one of the most acute cases of the influential concept of ‘delegative democracy’ – that is, a polity based in large part upon a supposed preference for direct vertical accountability between the president and the electorate, as opposed to horizontal mechanisms of accountability between the different institutional sites of a democratic system.96 While similar in many respects, the concept of ‘informal politics’ favoured here enables us better to capture the nature of Menem’s consensus-building and to appreciate how this deepened a policy-making style that had already begun to take shape under Alfonsín. Although formal democracy was maintained and respected, Menem deepened the de-institutionalisation of politics that Alfonsín began. Menem abused the power of the executive, the Peronist majority in the Congress and the judiciary. Horizontal accountability was incrementally undermined. Menem’s coalitions were informal and personal, and he established ad hoc solutions and alliances to implement one of the most revolutionary reform packages in Argentina’s history. He was able to do this as a consequence of the economic growth and stability that existed: civil society expressed no strong objections to this increasingly insidious politics of informality, as long as it appeared to facilitate their ability to secure new loans to buy a house, a new car or a new TV set. In short, the majority of civil society had accepted an implicit pact with its political class: economic stability and growth in return for impunity. The significance of this was seen most dramatically in 1995, when Argentines re-elected a government universally perceived as corrupt, a president whose personalistic fief-building politics was already recognised, even as unemployment crept up to over 18 per cent.97 Menem had not been punished for his dismantling of horizontal mechanisms of democratic accountability, and consequently he became even more assertive during his second term. It would soon be evident that the implicit pact that underlay the Menem administration had not constituted a stable, durable basis for governance: as the tides of

Argentina’s political collapse and social decay 125 economic and political crisis began to rise, Argentina’s castles in the sand began to crumble. This foray into the politics of Argentina’s democratic consolidation helps shed light on, and structure the way we think about, the country’s problems at the beginning of the 2000s. The transition to democracy as a far-reaching transformation of the state is a complex process that can unleash or exacerbate internal conflicts, institutional and policy paralysis, social unrest and/or political decay. While some Latin American countries such as Chile and Uruguay have been successfully able to manage risks and conflicts associated with transition, crisis-hit Argentina has exhibited worrying signs of fundamental political decay, social disintegration and a comprehensive failure of the state-institution. Crucially, at its most fundamental level, Argentina’s 2001 crisis reflected a failure to establish a new social contract within a democratic context, as well as a failure to create specific institutional forms of the state that could channel democratic political competition, participation and representation. The crisis therefore revealed weaknesses in both the institutional configurations of Argentina’s democratic state and the form of social contract underpinning the perceived legitimacy of the state’s basic democratic role. While Alfonsín was urged to tackle the issue of human rights violations, Menem’s priority was to find a solution to the economic crisis. During the 1980s Alfonsín’s interference with the judiciary was considered as essential to the maintenance and strengthening of democracy. His government focused overwhelmingly on political issues and gave insufficient attention to understanding the linkages between the political and economic spheres. Where linkages were made it was largely in one direction, with economics at the service of political priorities. For example, Alfonsín undermined his own economic austerity plan to increase wages for the armed forces, to assuage the latter in their declining role and in the shadow of the human rights trials. After Alfonsín’s chaotic departure, Menem was urged to concentrate on the economic crisis. He structured his discourse around the idea of an economic emergency. The emergency meant – this discourse suggested – that the priority was to implement measures rapidly and decisively. Executive decrees were preferred to laws. The Congress and the judiciary were expected to follow the executive’s decisions, and were accused of obstructing the necessary economic reforms if they did not. In order to implement the restructuring of the state and the economic reforms, the executive concentrated power and undermined horizontal accountability. Reversing the logic of the first democratic government, Menem sought to put politics directly at the service of economic priorities. Indeed, after the hyperinflation and lootings of the 1980s, economic stabilisation was itself presented as the most important means of safeguarding democracy. However, when the 1995 re-election became possible and the attempt to achieve re-election in 1999 became an option, economics served politics,

126 The state of democracy in Latin America sowing the seeds of the 2001 crisis. Menem’s second term succeeded in undermining most of the goals achieved through the economic reforms of the early 1990s. Both the Alfonsín and Menem administrations failed to understand that economics and democratic politics are integrally intertwined. Each sacrificed one to the other, failing to realise the necessary symbiotic linkages between them. Crucially, both men appeared genuinely to conceive of their respective strategies as being necessary to enhance and protect democracy itself. Their respective objectives – political and economic – were taken to constitute an end that justified the means, namely a politics of informality. Both Alfonsín and Menem used exceptional means in their attempts to construct a democratically based social contract. In doing so, they helped to establish an informal system of implementing policies, forming coalitions, and arriving at decisions that undermined the working of the stateinstitution as a set of formalised institutional procedures. The reformist coalitions lacked any considered rationality in terms of creating a new social contract that would recreate the state form and its institutions. They were, instead, merely ad hoc solutions. Critically, and for a long time, such informality appeared not to be entirely lacking in legitimacy. Although there were voices of discontent, the majority of Argentina’s population accepted and, in many senses, took advantage of the politics of informality. This type of informality spread, with different degrees and forms, to everyday life. Moreover, the economic growth of the early 1990s, together with the economic stability achieved via the convertibility plan, could be interpreted as the success of the politics of informality. While criticism increasingly emerged of the corruption of the Menem administration, concerns over the broader systemic weaknesses of Argentina’s basic democratic culture were relatively limited. Critics began to predict dire consequences from the failure of many new democracies to use democratic institutions in the design and implementation of economic policy. Analysts came to argue that, particularly in fragile post-transition societies, policy styles mattered rather more than had been realised. It was suggested that consultation and tripartite dialogue, far from being a constraint, could improve the technical quality of reform programmes. Crucially, the use of pluralistic, non-technocratic processes was essential in building political bases of sustainable support behind economic reforms.98 A perverse and vicious circle took hold in Argentina: the economic crisis gave the political leadership the perfect excuse to implement the politics of informality; in turn, this same informality facilitated the emergence of a self-serving democratic political class, deepening the crisis and justifying even higher doses of exceptional policy-making. It is this paucity of the country’s underlying democratic culture that came home to roost amidst the saga of 2001. The politics of informality had promoted a rapacious and predatory political dynamic that persisted

Argentina’s political collapse and social decay 127 after the 1999 elections, proving to be more strongly rooted and embedded than the new government’s nominal commitment to a more transparent and institutionalised style of politics. The political logic of a generation of politicians collapsed like a house of cards: self-serving became selfdestructive. This political class had pursued the development of Argentina’s new democracy, but did so in a way that precluded the emergence of any pervasive or cognitively rooted democratic culture. When the apparent benefits of informality dissipated, the government was left with nothing to maintain its legitimacy: no underlying conceptual social contract had been established able to impart credibility to the efforts made by the government to resolve the crisis. In this sense, the Alianza government had its death foretold.

The Alianza government: A political disaster The result of the 1999 elections produced fundamental changes in Argentine politics. After the elections, a Peronist government, for the first time in history, transferred power democratically to an opposition party. In addition, the new government was the first coalition government in Argentina’s modern democratic history. Last, but not least, the elections produced a fragmentation of power after ten years of hegemonic power exerted by the Menem administration. The 1999 elections brought this hegemonic power to an end, as voting produced a fragmentation of power. This can be seen in the following results:

For President and Vice-President: Fernando de la Rúa-Carlos Álvarez (Alianza)99 Eduardo Duhalde-Ramón Ortega (Partido Justicialista) Domingo Cavallo-A. Caro Figueroa (Acción Republicana) Others

9,039,892

48.5%

7,100,678

38.1%

1,881,417

10.1%

775,129

3.3%

For Chamber of Deputies: (130 seats available) Seats won in Total number of seats the elections Alianza 63 127 Partido Justicialista 50 101 Acción Republicana 9 12 Provincial parties 8 17 Total number of seats 257; 129 needed for quorum.

128 The state of democracy in Latin America Following the 1997 legislative elections, there were 39 Peronist Party Senators, 20 from the Radical Party, 1 from FrePaSo (Frente País Solidario) and 9 from provincial parties. In Congress in 1999, the Alianza fell short of winning a majority by only a small margin in the Chamber of Deputies, but by a significant margin in the Senate. Fourteen out of 24 provinces elected a Peronist governor, seven an Alianza governor, one a Radical candidate and the rest, candidates from provincial parties. The composition of the Supreme Court was not modified by the new government either, therefore it remained menemista. In this context, two new words became part of Argentina’s political vocabulary: cohabitation and consensus. For the first time in Argentina’s recent democratic history, building political consensus became essential for governing and governability. It was important for President de la Rúa to create political consensus not only with the opposition but also within the Alianza itself. Consensus with the Peronists was problematic however since ten years of Menem’s100 hegemony had led to fragmentation. There were at least three governors who were willing to succeed Carlos Menem, namely Carlos Ruckauf from Buenos Aires province, Carlos Reutemann from Santa Fé and José Manuel de la Sota from Córdoba, therefore de la Rúa was faced with an opposition deeply divided by power struggles. This could be used by de la Rúa to establish his power base to the extent that Ruckauf, de la Sota and Reutemann needed to consolidate their positions within their provinces and the Peronist Party. In the case of Buenos Aires, executive power was in the hands of the Peronist Party while the Chamber of Deputies and the Senate were in the hands of the Alianza. This provoked a political rapprochement between de la Rúa and Governor Carlos Ruckauf. De la Sota and Reutemann were in a different situation, since they had a Peronist majority in both chambers of the provincial legislative power. However, the three governors needed to consolidate their national position in order to be able to win the Peronist leadership and to become the Peronist presidential candidate for 2003. In this campaign, they would come face to face with Carlos Menem who had declared his intention to run again for the presidency. With 2003 in mind these three needed to be involved in the decision-making process at the national level, and thus to negotiate with de la Rúa. Most importantly, they needed to show their commitment to economic and political stability, not only within their provinces but also at the national level. De la Rúa could use the governors’ fragile positions within the Peronist Party and their strong situation within their provinces to build some consensus around difficult issues. Indeed, this was partially done in the December 1999 budget negotiations. While de la Rúa needed a working relationship with Peronism, perhaps more importantly he needed to embark on a consensus-building process within the Alianza itself. The Alianza was a new political actor. It was born in 1997, not just as an electoral coalition but with the intention of becoming

Argentina’s political collapse and social decay 129 a real alternative to Menem’s hegemonic power. The birth of the Alianza marked the end of a long process of electoral decline for the Radical Party and the emergence of FrePaSo. The decline of the Radicals between 1987 and 1995 was dramatic. In the 1995 presidential elections the Radical Party won only 17 per cent of the total vote cast and only 22 per cent in the legislative elections. Moreover, the Radicals achieved only third place in the provinces of Buenos Aires and Santa Fé and second place in Buenos Aires City. In 1994, FrePaSo was formed around the charismatic leadership of Carlos ‘Chacho’ Alvarez and Graciela Fernández Meijide. Its members came mainly from the Peronist left and left of centre parties. While FrePaSo was electorally successful in Buenos Aires City and other cities, it was not represented in most of the provinces. So, by the mid-1990s, Argentina had three main political parties: the Peronist Party which seemed to be the only viable party of government; the Radical Party, which was in decline; and FrePaso, which was emerging as a powerful urban political actor. What was clear from this political scenario was that neither the Radical Party nor FrePaSo would be able to defeat the Peronist Party. Against this background, there were legislative elections in October 1997. Raúl Alfonsín, the Radical Party’s candidate for Buenos Aires province, was lying in third place according to the opinion polls. A divided opposition was the perfect scenario for the Menem administration since it could improve its chances of winning the presidential elections due in 1999. In order to avoid this scenario, Alfonsín decided to establish an alliance with FrePaSo and to resign his own candidature.101 The Alianza was established first in Buenos Aires province and City, and then in 13 provinces, but failed to establish itself in ten other provinces. The Alianza was a heterogeneous actor. Its electorate was also a diverse group that did not represent any particular social group and, most importantly, did not feel loyal to the Alianza. This proved to be the Alianza’s main weakness, which would compromise governability. Moreover, in contrast to the Menem administration, the Alianza did not have a strong link with either the business sector or the trade unions. Its 1999 electoral triumph was due mainly to its public commitment to follow Menem’s economic strategy, while fighting against corruption and unemployment, facilitating judicial independence and emphasising social issues. Three years after its birth and after nine months in office, the Alianza was seriously wounded. During the first months in office, the public faces of the Alianza were de la Rúa and Alvarez. Carlos ‘Chacho’ Alvarez, the Vice-President, was the most important politician in FrePaSo, especially following Graciela Fernández Meijide’s political decline.102 Alvarez was a charismatic leader who proved to have the necessary patience to make the transformation from a rebel Peronist deputy to leader of a new political party and, finally, to Vice-President. Historically, the role of the Vice-President has been minimal. S/he is the President of the Senate but

130 The state of democracy in Latin America remains a low-profile figure in the Casa Rosada. From the very beginning, it was evident that Alvarez would transform the post’s low profile. During the electoral campaign, Alvarez’s attitude of almost unconditional support for de la Rúa brought him into confrontation with most of the FrePaSo deputies, though in the long term this attitude seemed to be positive for consensus-building. During the first nine months in office, the relationship between the President and his Vice was good and the public image was of understanding, essential to a coalition government. Their relationship was crucial for governability since it was the key to maintaining a united Alianza. In October 2000 their relationship collapsed, however. Argentina was shocked by revelations of bribes given by the government to Peronist Senators. Money was handed over to senators to secure their approval of the labour reform. Following these revelations, Vice-President Carlos Alvarez promoted a cleansing of the Senate, which could help not only uncover the people involved but also change the way in which politics was conducted by traditional parties. Others, however, especially those senators with the support of the Peronist and the Radical parties, fought to maintain the status quo and its privileges. Turnover in personnel in traditional parties has always been low, and the Peronist and the Radical parties were still immersed in clientelism, especially in the provinces. Most of their leaders have been around for many years and lack a strong democratic attitude towards the policy-making process. In the short term, the outcome was the resignation of Carlos Alvarez. The Senate case damaged the relationship between de la Rúa and Alvarez. While the President took a more cautious attitude, the Vice-President led the demands for investigating the Senators. After a Cabinet reshuffle in which the President promoted some of the ministers suspected of handing the money over to the Senators, Alvarez resigned. Another short-term outcome was the weakening of the Alianza. De la Rúa faced criticism from FrePaSo and the Radical Party after the resignation, and the Peronist Party was also divided: while Carlos Menem supported de la Rúa, Eduardo Duhalde supported Alvarez. More resignations followed and, by mid-October 2000, de la Rúa had appointed a new Cabinet with a mixture of Radicales and Frepasistas in a clear attempt to rebuild the Alianza. In the long term the damage was greater. It showed that Argentina needed to rebuild its democratic institutions. The Congress was a crucial sticking-point. Deputies and senators were discredited, among other things for failing to control the executive. If the bribery issues were not resolved, the Congress would be permanently suspected of corruption. It was therefore clear that in order to be able to govern, de la Rúa needed to build consensus not only within the Alianza but also with Peronism and other political parties such as Cavallo’s Acción por la República.103 He also needed to build consensus with other political and economic actors, especially the trade unions, the business sector, and civil society.

Argentina’s political collapse and social decay 131 De la Rúa was faced with the challenge of crafting, through consensusbuilding dynamics, an efficient policy-making capacity within a fragmented structure of power. However, the October 2000 crisis seemed to prove that, in practice, rather than building consensus De la Rúa was more willing to attempt to concentrate political power in his hands and ignore the fragmentation of power brought about by the 1999 elections. This strategy was soon proved wrong. De la Rúa was politically isolated as he surrounded himself with family and friends (who of course were not elected), and was economically trapped by his failure to end the recession. After Alvarez’s resignation, FrePaSo – heavily reliant on their high profile and popular leader – gradually abandoned government. This fundamentally altered the coalitional nature of the government for which Argentines had voted. Critics charged Alvarez with irresponsibility for so impetuously abandoning the government, depriving it of the central pillar of its popular legitimacy. De la Rúa tried desperately to build a new coalition, including bringing Domingo Cavallo into his government. Ironically Cavallo had been Menem’s finance minister and was the man most emblematically associated with the very socials ills whose tempering was the central tenet of the Alianza platform! These changes together left the government structured in a fundamentally different way from that which had been voted in on a ticket of democratic renewal. Economically, during the year 2000 it was more difficult to get access to international credit. By the end of the year, the government managed to structure a significant amount of credit (blindaje) which would stop speculation about a default. (The blindaje was a three-year programme of assistance totalling US$39,700 million.) Domestically the government attempted various sets of measures to stimulate the economy such as the competitiveness law, the delegation of legislative faculties to the executive to deal with the economic crisis, and the reduction of tariffs for products originating outside the Mercosur bloc. However, none of these measures improved national economic performance: GDP fell by −0.6 per cent, having contracted by 3.4 per cent during 1999. During the fourth trimester of 2000, construction fell by −13.4 per cent and the manufacturing industry by −4.5 per cent. At the same time, poverty increased. While in 1999, 18.9 per cent of households were under the poverty line in Buenos Aires City and Greater Buenos Aires, in 2000 the figure was 20.8 per cent. This percentage represented 300,000 people. The second half of the year witnessed a deepening of the crisis. The government was able to obtain assistance for US$8,000 million from the IMF and it sanctioned the zero-deficit law. Despite this support, however, there was a significant decrease in international reserves and deposits. Between 1991 and 1999 Argentina’s external debt had risen from US$57 billion to US$144,6 billion, with the external debt-toGDP ratio rising from 28.4 to 51 per cent. This drove up the debt service from an average 73 per cent of exports between 1996 and 1998

132 The state of democracy in Latin America to 97 per cent of exports in 1999. Most importantly, there was a large proportion of this debt scheduled to be paid in the short term. Between 2001 and 2003, the government had to pay US$75,300 million, which represented 27 per cent of GDP and 322 per cent of the revenues received through exports. Approximately 80 per cent of the debt was medium or long term: 56.7 per cent of it carried fixed exchange rates of interest. Bonds accounted for 71.3 per cent of the total debt, while loans represented a further 20 per cent. Of the outstanding balance, 63.9 per cent was owed to international institutions, 17.3 per cent to official agencies, 15.2 per cent to commercial banks, and 3.6 per cent to other creditors. Between the beginning of the recession in 1998 and 2001, GDP had fallen by 10 per cent, investment by 30 per cent, and consumption by 15 per cent. As early as March 2001, Argentina had witnessed the greatest outflow of bank deposits in its history: US$5,543 million in one month. The financial collapse that ensued culminated in the largest international debt default, as Argentina withheld repayments on its US$155 billion debt in December 2001. In October 2001, Argentines had shown their dissatisfaction with the political class by failing to vote in the legislative elections, despite voting being compulsory. More than ten million Argentines did not vote, which represented 41 per cent of the total electorate. The Alianza lost seats in the Chamber of Deputies, down from 102 seats to 91 seats, while the Radical Party held 74 and FrePaSo 17. The Peronist Party increased its representation by 14 seats to 113 seats. In the Senate, the Peronist Party won one seat and the Alianza three seats (all from the Radical Party). The outcome of these voting patterns was that, for the first time, the President of the Chamber of Deputies would be from the opposition party. These political and economic dynamics fused dramatically at the end of 2001. By this time, the de la Rúa government was seen to have betrayed the economic, political and social elements of its electoral manifesto: the alliance with FrePaSo had disintegrated. Far from abating, economic recession had deepened and basic economic stability was increasingly precarious; corruption had also remained unchallenged. The government had lost power, support and, most importantly, direction. As the political crisis that provoked Alvarez’s resignation undermined confidence in the government, this compounded the failure to stem the gathering economic crisis. When the government attempted to shore up the banking system by restricting withdrawals, civil society took to the streets in a spontaneous, disorganised manner and forced the resignation of the government. In January another President was forced out. Finally, the Congress elected the Peronist Eduardo Duhalde to the presidency. He was the candidate who had been heavily defeated in the 1999 elections! Rather than call new elections to re-establish the

Argentina’s political collapse and social decay 133 legitimacy of the government, Duhalde announced his decision to retain the presidency until 2003. His government was able to manage the crisis and to achieve a precarious stability that, although unable to become the platform for a new economic cycle, was able to transcend the chaotic situation of 2001. In July 2002 industrial production showed a decline of 13.2 per cent compared with July 2001. In the first seven months of 2002, industrial production declined by 16.6 per cent compared with the same period in 2001.104 By May 2001, 31 per cent of the total work-force was either unemployed or underemployed and 28.9 per cent of the Buenos Aires population was living below the poverty line. A year later, 40.1 per cent of the total work-force was either unemployed (21.5 per cent) or underemployed (18.6 per cent). By 2002, an extra 1.5 million Argentines had joined the ranks of those in poverty, and the share of the capital’s population surviving below the poverty line had risen to 49.7 per cent. This deterioration followed a decade of dramatically widening income inequalities. While in 1990 the share of total income received by the poorest 40 per cent of the population was 14.9, in 1999 it was 15.4. Meanwhile, the share taken by the richest 10 per cent of the population rose from 34.8 to 37 per cent. In Buenos Aires, the highest per capita income region in the country, the income gap between these two groups increased by 172 per cent during the 1990s. The April 2003 elections showed the fragmentation of the traditional political parties with three Peronist candidates, two former members of the Radical Party, and one candidate from the Radical Party standing. Carlos Menem won the first round with 24 per cent of the total vote followed by Néstor Kirchner who was President Duhalde’s candidate. Menem decided to withdraw his candidacy from the second round when he realised that defeat was inevitable. Thus Kirchner became President. Although he has a strong alliance with Duhalde, he represents a new generation of politicians and could generate changes if he is able to form a government that can achieve governability. In some ways, the December 2001 crisis revealed that Argentina’s democracy was not in a completely unhealthy state. Unlike on similar previous occasions, the crisis did not provoke a military coup. Argentina has not fallen prey to a Chávez- or Fujimori-style populist democracy and the 2001 crisis was handled more or less within constitutional boundaries. The crisis came about because of a more vibrant reaction on the part of civil society, after years of passive support. The strengthening of such vertical accountability, in the form of spontaneous social protest, is to be welcomed. However, it has been this very predominance of vertical over horizontal accountability that explains why Argentina lurches from one crisis to the next. Rather than having a smooth and gradual deliberation and readjustment of policy parameters, it alternates between periods of adulatory populism and near anarchy.

134 The state of democracy in Latin America

The legacy of the politics of informality Argentina’s social relations have changed. The changes began gradually under the 1976 military dictatorship and were deepened by the revolutionary reforms of the 1990s. The principal change was the undermining of the economic role of SMEs and the new role of the larger enterprises associated with foreign capital, operating in oligopolies or captive markets mainly related to the service sector. The dictatorship had transformed Argentina’s social relations through the dismantling of the industrial sector, especially that related to the domestic bourgeoisie, and the SMEs, and through the restructuring of the industrial working class. The concentration of capital in the GEN, the transnational companies, the powerful financial sector, and the biggest firms of the Pampeana bourgeoisie, had led to them becoming the leading actors of the dominant economic class. The 1990s restructuring of the economy did not differ in substance to that partially undertaken by the 1976 military regime. The differences lie in the impact of the privatisation process and the sectors that benefited from governmental policies such as the trade reform or the Mercosur agreement. Further differences include the fact that the 1990s reforms achieved a higher level of internationalisation of the economy, and that economic growth was mainly achieved and sustained by buoyant domestic demand. Not only did some businesses benefit from the reforms, the workers in those businesses benefited as well. There was also an expansion of firms related to the newly privatised areas that offered employment to young graduates. As the financial sector also expanded through the lending of foreign banks and the creation of AFJPs and ARTs, more employment was created for urban skilled workers. However, despite some positive employment opportunities, the general picture was one of increased unemployment due to the restructuring of the industrial sector, the reduction in public employees, and the closure of SMEs both in the agricultural and the industrial sectors. The new social relations map included, in the active economy, concentrated sectors of activities relating to services, finance, and certain industrial and agricultural sectors. Those excluded were a significant number of workers in the public sector, less favoured industrial sectors, and employers and workers from SMEs both in the agricultural and industrial sectors. This new map affected not only the old traditional working class but also the historically powerful middle class tied to the ownership of small- and medium-size companies, to public employment, and to independent professions (since the shrinking of the SME sector affected their client base). A social deterioration took root while, at the same time, there was a clear process of modernisation of selected economic sectors that helped to improve the standard of living of particular social groups. The stability of the early 1990s decreased inequality. However, this tendency was

Argentina’s political collapse and social decay 135 short lived and by 1994 the Gini Coefficient was 15 per cent higher than in 1986 and 21 per cent higher than 1980.105 In 1990 the Gini was 0.501 and in 1999 0.542.106 Between 1974 and 1997 the gap between the top and bottom quintiles in the metropolitan area of Buenos Aires increased by 80 per cent. Argentina followed the Latin American trend in this regard, with the economic growth of the 1990s having little impact on the distribution of income. Income distribution data shows that the middle sectors decreased their participation while the 10 per cent richest increased from 34.8 per cent in 1990 to 37 per cent in 1999. It was the richest decile that promoted and enjoyed the process of modernisation. This idea of modernisation helped to change values related to work ethics. The Menem government imposed an idea of swift returns relating to the accumulation of large amounts of money over a short period of time. Money, success and power became the pillars of the Menem era. The stabilisation of prices and the easy access to credit meant that the majority of Argentines could improve their standard of living. Of course, for some this meant a new car or a new TV set while for others it meant much more. After years of deprivation due to high inflation, the consumerism of the 1990s could have been expected. However, this consumerism, together with low saving rates and the spread of corruption and the politics of informality, was gradually creating a bubble that would explode sooner rather than later. The Menem government was deepening the social restructuring started by the 1976 military dictatorship and promoting new values that related success with money and money with power. The defining mark of the Menem administration was that the means through which wealth was accumulated seemed to count for so little. Indeed, the more audacious one’s enrichment the higher the status bestowed by society. It was this that informed and underpinned the indulgence of the incipient politics of informality. There were significant features of Menem politics that help us to understand the collapse in 2001. First, the winners from the economic reforms did not establish a collective voice to maintain the new policy regime. They did not attempt to form associations or a political party that could channel their demands through a democratic framework. The business sector and the trade unions that benefited from the reforms established, alongside the government, a politics of informality by forming temporary coalitions in order to achieve their objectives or to fight against certain policies. There were no reformist coalitions formed around the implementation of the reforms that could help to maintain them or deepen them over time. The business sector, the trade unions and the government pursued a predatory logic with a rent-seeking dynamic. Second, the economic reforms did not transform the historical features of Argentina’s economy, the main exports still being wage goods. This feature meant, historically, that democracy was the outcome

136 The state of democracy in Latin America of coalitions between the urban bourgeoisie and the urban masses. This led to a situation whereby, according to Adam Przeworski: Governments that result from this alliance overvalue the currency in order to direct consumption to the domestic market. After some time, this policy results in balance-of-payments crises and induces the urban bourgeoisie to ally itself with the landowning bourgeoisie, resulting in a bourgeois-bourgeois coalition. This coalition seeks to reduce popular consumption and needs authoritarianism to do so. But after a while the urban bourgeoisie finds itself without a market and shifts alliances again, this time back to democracy.107 Thus, democracy was historically a transitional solution. While this particular feature of the economic structure did not change through the reforms, the December 2001 crisis showed that authoritarianism was not seen as an option for the resolution of the crisis. The 1990 coalition had formed between the urban bourgeoisie and urban masses but collapsed without being replaced by a bourgeois-bourgeois coalition with authoritarian elements. There were three main reasons to explain the lack of a new coalition with authoritarian elements. First, the political power of the military had been dramatically reduced since the return to democracy. Second, the international and regional context remained opposed to the establishment of an authoritarian regime.108 Third, although discredited, democracy seemed to be the best alternative in town. Indeed, support for democracy in Argentina rose from 58 per cent in 2001 to 65 per cent in 2002. Although this still represented a fall from 1996 and 2000 when the figure was 71 per cent, it highlighted an improvement, in spite of the economic situation. Only 17 per cent believed that in certain circumstances an authoritarian government could be preferable to a democratic one. In 2001 this figure had been 21 per cent.109 Fourth, domestic demand had been crucial for the winners of the 1990s reforms, thus a bourgeoisbourgeois coalition to reduce popular consumption was unthinkable for the new associations emerging out of the privatisations or the banking sector. It seems that, as Grasmsci noted, the old order is dead, but the new order cannot yet be born. During the 1990s, new social relations emerged that replaced the old social relations surviving from the Import Substitution Industrialisation period and authoritarianism. However, the rewriting of the social contract in democratic terms was incomplete due to the lack of the institutionalisation of new social relations and the new social contract through the state-institution. The absence of horizontal accountability and the predominance of the politics of informality undermined the institutionalisation of democracy. While social relations have changed, the rewriting of the state-social contract and the building of the state-institution have yet to be completed. Consequently, although democracy is working in Argentina and is providing solutions to political

Argentina’s political collapse and social decay 137 crises, the state-institution has failed to institutionalise and incorporate the new political regime within the context of the new social relations. The values of the democratic years were promoted by political parties that were lacking in strong democratic credentials. Indeed, Radicalism and Peronism contributed to the constant fluctuation between weak democracies and authoritarian governments. Historical trends were repeated by the governments of Alfonsín and Menem: the promotion of a strong executive always ready to interfere with the actions of the Courts or the Congress; the attempt to form a hegemonic power; and the negation of legitimacy to the opposition. In view of these historical legacies, it perhaps should not have come as a surprise that the return to democracy in Argentina meant a return to the old traditions that were unable to establish a democratic state. The main difference that may have provided a glimmer of hope was the political demobilisation of the armed forces. The consensus around the marriage between democracy and neoliberal reforms was short lived. The political class, together with the economically dominant class, was unable to create a long-term political and economic consensus around the new rules of the game after the 1990s reforms. Indeed, the politics of informality undermined the creation of a new order such as the New Liberal Consensus that would be found elsewhere. According to representatives from the agricultural sector, a new order could not be born because the political class in Argentina was incompatible with capitalism and unable to establish long-term alliances with agriculturalists or industrialists. In a similar vein, representatives from domestic industry associated with foreign capital argue that Menem opened the doors of the Casa Rosada but a sustainable coalition was not formed. Most of these representatives emphasise that there was no coalition either with the government or among themselves. The UIA did not have a common objective and was unable to carry out a common strategy. The industrial sector is seen by its representatives as a quite heterogeneous group with different interests; this heterogeneity blocked the formation of an internal coalition or long-term consensus. While industrialists perceived the agricultural sector as a homogenous block able to structure its common interests, they also see themselves as unable to form an internal, sustainable coalition. This situation vis-à-vis consensus-building and coalitions reinforces our argument that during the revolutionary reforms the industrialists, rather than building coalitions to promote and sustain the reforms, applied a predatory logic that followed the government’s politics of informality and the creation of many and simultaneous zero-sum games. Thus, while the 1990s reforms produced a certain degree of consensus, they did not create more than temporary coalitions. The most significant coalition was broken when Domingo Cavallo left the Menem administration: the equilibrium achieved between the interests of the economic right,

138 The state of democracy in Latin America apparently represented by Cavallo, and of the working class, apparently represented, or better said contained, by a Peronist president, collapsed. The new social relations that emerged from the reforms and the establishment of political democracy were not institutionalised. The state-social contract and state-institution that gradually should have followed and represented the new social relations within a democratic context failed to incorporate the social relations and to institutionalise democracy. Therefore, in Argentina there was a cohabitation of new social relations with a formally democratic social contract embedded in non-democratic values and a state-institution characterised by the cohabitation of poor or non-existent horizontal accountability, the politics of informality, authoritarian elements and corruption. In the Argentine case it is probably more correct to say that while the new order was not yet born, the old order was still dying. The economic crisis of the 1980s and the economic growth of the 1990s had masked the need to restructure the state politically. The December 2001 crisis and its long irresolution made it evident that formal democracy can survive economic chaos. However, while democracy was formally developed from 1983, a more pervasive democratic culture failed to take root. Despite all its shortcomings Argentina has a democratic regime, but is lacking a democratic state.

Endnotes 1 T. Halperín Donghi, La larga agonía de la Argentina peronista (Buenos Aires: Ariel, 1994). 2 This can be analysed in terms of an empate (draw) between political and social actors in Argentina. It relates to the Gramscian idea of a hegemonic crisis. See J.C. Portantiero, ‘Clases dominantes y crisis política en la Argentina’, O. Braun (ed.), El capitalismo argentino en crisis (Buenos Aires: Siglo XXI, 1973), pp. 73–118. 3 For detailed accounts of this period of Argentina’s history see M. Bonasso, El Presidente que no fue (Buenos Aires: Planeta, 1997); L. De Riz, Retorno y Derrumbe. El ultimo gobierno peronista (Buenos Aires: Hyspamérica, 1981); R. Gillespie, Soldiers of Perón, Argentina’s Montoneros (Oxford: Clarendon, 1982); D. James, Resistance and Integration. Peronism and the Argentine Working Class, 1946–1976 (Cambridge: Cambridge University Press, 1988); R. Potash, El Ejército y la política en la Argentina (Buenos Aires: Sudamericana, 1971); A. Rouquié, Poder militar y sociedad política en la Argentina (Buenos Aires: EMECE, 1983). 4 A. Canitrot captured quite accurately the objective of the military dictatorship, by pointing out that the 1976–81 economic programme had a political objective: disciplinamiento social (social discipline), which means the weakening of the working class that had become politically powerful. See A. Canitrot, ‘Teoría y práctica del liberalismo. Política antiinflacionaria y apertura económica en la Argentina, 1976–1981’, Desarrollo Económico, 82 (1981), pp. 131–89. 5 Comisión Nacional sobre Desaparición de Personas (CONADEP) Nunca más (Buenos Aires: EUDEBA, 1986). 6 See L. Tedesco, Democracy in Argentina. Hope and Disillusion (London: Frank Cass, 1999). For a detailed account of the economic policy of the military dictatorship

Argentina’s political collapse and social decay 139

7 8

9 10 11

12 13 14 15 16

17

18 19

20 21 22 23

see J. Schvarzer, La Política Económica de Martínez de Hoz (Buenos Aires: Hyspamérica, 1986). D. Cavallo and J. Cottani, ‘Argentina’, in D. Papageorgiou, M. Michaely and A. Choski (eds), Liberalizing Foreign Trade (Oxford: Basil Blackwell, 1991), pp. 1–169. For a detailed account of the GEN and the transnational companies during the dictatorship see E. Basualdo and D. Azpiazu, Cara y contracara de los grupos económicos (Buenos Aires: Cántaro, 1990); E. Basualdo, Deuda Externa y poder económico en la Argentina (Buenos Aires: Nueva América, 1987); E. Basualdo and M. Khavisse, El nuevo poder terrateniente (Buenos Aires: Planeta, 1993); M. Acevedo, E. Basualdo and M. Khavisse, Quién es quién? Los dueños del poder económico (Argentina 1973–1987) (Buenos Aires: Editora/12 and Pensamiento Jurídico Editora, 1990); and D. Azpiazu, M. Khavisse and E. Basualdo, El nuevo poder económico (Buenos Aires: Hyspamérica, 1986). J. Schvarzer, La política económica. G. Di Tella and C. Rodríguez Braun, Argentina 1946–1983. The Economic Ministers Speak (London: Macmillan, 1990). Data from A. Canitrot, ‘Teoría y práctica’; B. Kosacoff, ‘Desarrollo industrial e inestabilidad macroeconómica. La experiencia argentina reciente’, in D. Azpiazu and B. Kosacoff, La industria argentina: desarrollo y cambios estructurales (Buenos Aires: CEPAL and Centro Editor de América Latina, 1989); and R. Frenkel, J. Fanelli and J. Sommer, ‘El proceso de endeudamiento externo argentino’, Documento CEDES/2 (Buenos Aires: Centro para el Estudio del Estado y la Sociedad [CEDES], 1988). Data from Azpiazu and Kosacoff, La industria argentina, and from CEPAL, La desarticulación del pacto fiscal (Buenos Aires: CEPAL, 1990). Tedesco, Democracy in Argentina, p. 41. Ibid., p. 56. J. Fanelli and R. Frenkel, ‘Argentina’s Medium Term: Problems and Prospects’, Documentos CEDES/28 (Buenos Aires: CEDES, 1989). W. Smith, ‘Reflections on the Political Economy of Authoritarian Rule and Capitalist Reorganization in Contemporary Argentina’, in P. O’Brien and P. Cammack (eds), Generals in Retreat (Manchester: Manchester University Press, 1985), p. 74. While the Peronist Party was mainly controlled by Juan Domingo Perón to such an extent that the elections of party officials or candidates was his personal decision (dedocracia, which refers to the power of Perón’s fingers), the Radical Party was, in many cases, supportive of military coups that overthrew Peronist governments. M. Garretón, ‘Human Rights in Processes of Democratisation’, Journal of Latin American Studies, 26 (1994), pp. 221–34. Lt.-Gen. Jorge Videla and Admiral Emilio Massera were given life sentences, Lt.-Gen. Roberto Viola was given seventeen years, Adm. Armando Lambruschini eight years, and Brig. Orlando Agosti four and a half years. Brig. Omar Graffigna, Lt.-Gen. Leopoldo Galtieri, Adm. Jorge Anaya and Brig. Basilio Lami Dozo were acquitted. The last three remained in prison awaiting the outcome of the trial over the management of the Malvinas/Falklands conflict. See Tedesco Democracy in Argentina, pp. 122–3. Ibid., p. 126. This argument is well developed by D. Pion-Berlin, Through Corridors of Power (University Park: Pennsylvania State University Press, 1997), p. 102. In Easter week 1987, the first military insurrection took place. The main demands of the rebels – known as carapintadas (painted faces) – were for a political solution to human rights trials, a change in the hierarchy of the

140 The state of democracy in Latin America

24

25

26 27 28 29 30 31 32

33

army, and their own pardons. Alfonsín himself ended the insurrection by meeting the rebels in the Campo de Mayo regiment. Alfonsín returned to the Plaza de Mayo and gave a speech in which he made the mistake of calling the rebels the heroes of the Malvinas War. Because of this statement, it was perceived that he had negotiated with the rebels, a perception that seemed confirmed when a month later Alfonsín sent his due obedience proposal to the Congress. In January 1988 a second military insurrection took place when Aldo Rico, leader of the first rebellion, refused to accept a detention imposed by a military judge. After four days, Rico surrendered unconditionally. In December 1988, Col. Mohamed Ali Seineldin began an insurrection because of the army’s refusal to promote him to the rank of general. Seineldín was supposed to be the moral leader of the carapintadas and so the refusal was seen as a measure to neutralise the movement within the army. The rebellion ended with a meeting between Seineldin and the leader of the repression, General Isidro Cáceres. The insurrections broke down the hierarchy of the army and revealed its internal divisions. They also destabilised the already weakened government and undermined the goals achieved by the Juicio a las Juntas. On the other hand, the positive outcome was that they did not attempt to break the democratic regime. For a detailed account of the military insurrections, see Tedesco, Democracy in Argentina; C. Acuña and C. Smulovitz, ‘Ni Olvido ni Perdón? Derechos Humanos y tensiones cívico-militares en la transición’, CEDES Documentos de Trabajo (Buenos Aires: CEDES, 1991); A. Brysk, The Politics of Human Rights in Argentina (Stanford CA: Stanford University Press, 1994); and D. Pion-Berlin, Through Corridors. For a detailed account of the Alfonsín’s government, see Tedesco, Democracy in Argentina; M. Acuña, Alfonsín y el poder económico (Buenos Aires: Corregidor, 1995); R. Alfonsín, Alfonsín responde (Buenos Aires: Tiempo de Ideas, 1992); C. Acuña, ‘Intereses empresarios, dictadura y democracia en la Argentina actual’, CEDES Documentos de Trabajo (Buenos Aires: CEDES, 1990); P. Ostiguy, Los Capitanes de la Industria. Grandes empresarios, política y economía en la Argentina de los años 80 (Buenos Aires: Legasa, 1990). Throughout the Alfonsín years the trade unions assumed the main opposition role while the Peronist Party was undergoing a period of transition and transformation after its 1983 electoral defeat. For the first time in its history, in July 1988, Peronism nominated its presidential candidate by direct primary election. Carlos Menen obtained 53 per cent of the total vote cast. The Capitanes represented, mainly, the Grupos Económicos Nacionales (GEN). For a detailed account of the Capitanes see P. Ostiguy, Los Capitanes. J.L. Machinea, ‘Stabilization under Alfonsín’s Government: A Frustrated Attempt’, Documento CEDES/42 (Buenos Aires, CEDES, 1990). The Economist, 11 March 1989, p. 20. The Economist, 13 May 1989, p. 95. Data taken from Table 3, Growth of Gross Domestic Product, percentages based on values at constant market prices, average annual rates. Data taken from Tedesco, Democracy in Argentina, pp. 181–8. In January 1989 an armed group occupied La Tablada regiment. The real objective of the attack was never clarified; it was led by the Movimiento Todos por la Patria whose members were involved in the defence of human rights. The real victor in the attack was the army that defended the regimental base. See Tedesco, Democracy in Argentina; and D. Pion-Berlin, ‘Between Confrontation and Accommodation: Military and Government Policy in Democratic Argentina’, Journal of Latin America Studies, 23 (1991), pp. 543–71. For a detailed account of the relations between the radical government and the Peronist trade unions see R. Gaudio and A. Thompson, Sindicalismo Peronista/

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34 35 36 37

38 39 40 41

42 43 44 45 46 47 48 49 50 51

52 53 54 55

Gobierno Radical. Los años de Alfonsín (Buenos Aires: Fundación F. Ebert and Folios Ediciones, 1990). P. Alonso, Between Revolution and the Ballot Box (Cambridge: Cambridge University Press, 2000), p. 212. Halperín Donghi, La larga agonía. The bombing of the embassy was in 1991 and of AMIA in 1994. Both cases remain unresolved. Carlos Menem, his brother-in-law Emir Yoma, the former Head of the Army, Martín Balza, the former Ministers of Defence, Antonio Erman González and Oscar Camilión, and former Minister of Economy, Domingo Cavallo are all under investigation and some of them have been in jail. See E. Skaar ‘Judicial Independence and Human Rights Policies in Argentina and Chile’, Working Paper Chr. Michelsen Institute, 15 (2001), pp. 11–15. There were cases of attacks or threats on journalists but, in general terms, the freedom of the press was respected. Although Menem had pardoned all the crimes committed under the military dictatorship, some members of the armed forces are still being tried, due to the cases of kidnapping of children under military rule. M. Llanos, Privatisation and Democracy in Argentina (London: Palgrave, 2002); and D. Heymann, ‘Políticas de reforma y comportamiento macroeconómico’, in D. Heymann and B. Kosacoff (eds), La Argentina de los noventa (Buenos Aires: EUDEBA/CEPAL, 2000), pp. 37–177. J. Schvarzer ‘Economic Reform in Argentina’, in P. Oxhorn and G. Ducantenzeiler, What Kind of Democracy? what kind of Market? (Pennsylvania: Pennsylvania State University Press, 1998), pp. 61–89. J. Schvarzer, ‘Economic Reform’, p. 75. M. Llanos, Privatization, p. 100. Quoted by J. Schvarzer, ‘Economic Reform’, p. 78. María Julia Alsogaray who was in charge of the ENTEL privatisation is being investigated on suspicion of illegal enrichment. E. Basualdo, Concentración y centralización del capital en la Argentina durante la década del noventa (Buenos Aires: Universidad Nacional de Quilmes/FLACSO/ IDEP, 2000), p. 18. Ibid., p. 198. Ibid., p. 145. One of the businessmen interviewed narrated a meeting where Domingo Cavallo told an industrialist to close down his factory and open up an import firm. Interview, Buenos Aires, March 2001. J. Marchetti ‘El comercio de servicios en la Argentina’, Boletin Informativo de Techint, 300 (1999), pp. 33–52. Interviews with managers from international banks, Buenos Aires, March, 2001. A series of interviews was conducted in Buenos Aires between February and April 2001. We have chosen to keep the identities of interviewees anonymous as requested. We interviewed businessmen from SMEs, domestic transnational companies, foreign companies with participation in the privatisation process, bankers from national and international banks, representatives of the industrial and the agricultural sectors, academics, and trade unionists from the three main current tendencies within the movement. Interviews with managers from international banks, Buenos Aires, March 2001. Data from Table 3 and Figure 6. D. Heymann, ‘Políticas de reforma’. CEPAL, La inversion extranjera en América Latina y el Caribe (Santiago: Naciones Unidas, 2002), pp. 57–98.

142 The state of democracy in Latin America 56 C. Rodríguez, ‘Implicancias macroeconómicas del plan de convertibilidad’, in J. Avila, A. Almansi and C. Rodríguez (eds), Convertibilidad. Fundamentación y funcionamiento (Buenos Aires: CEMA, 1997), pp. 111–25. 57 L. Bleger, ‘El proceso de concentración y extranjerización del sistema bancario argentino durante los 90’, Boletín Informativo de Techint, 301 (2000), pp. 21–39. 58 Heymann, ‘Políticas de reforma’, p. 89. 59 Ibid., p. 100. 60 Ibid., p. 81. 61 O. Altimir and L. Becaria, ‘El mercado de trabajo bajo el nuevo régimen económico en Argentina’, in D. Heymann and B. Kosacoff (eds), La Argentina de los noventa (Buenos Aires: EUDEBA/CEPAL, 2000), pp. 331–404. 62 See S. Etchemendy and V. Palermo, ‘Conflicto y concertación. Gobierno, Congreso y organizaciones de interés en la reforma laboral del primer gobierno de Menem’, UTDT Working Paper 41 (Buenos Aires: Universidad Torcuato Di Tella [UTDT], 1997). 63 Etchemendy and Palermo, ‘Conflicto y concertación’, p. 12. 64 C. Rodríguez, ‘La reforma comercial’, in J. Avila, A. Almansi and C. Rodríguez (eds), Convertilibad, Fundamentación y funcionamiento (Buenos Aires: CEMA, 1997), pp. 179–204. 65 Ibid., pp. 179–204. 66 F. Coll Cárdenas and J. Gonzalez, ‘Derribando mitos. Las exportaciones argentinas en los años 90’, Boletín Informativo de Techint, 289 (1997), pp. 49–56. 67 E. Isuani and J. San Martino, ‘El nuevo sistema previsional argentino’, Boletín Informativo de Techint, 281 (1995), pp. 41–57. 68 Series of interviews with representatives from the Sociedad Rural Argentina and its Centre of Studies, Buenos Aires, March 2001. 69 Heyman, ‘Políticas de reforma’, pp. 109–10. 70 B. Kosacoff (ed.), El desempeño industrial argentino (Buenos Aires: CEPAL, 2000). 71 Kosacoff, El desempeño. 72 D. Azpiazu, La concentración en la industria argentina a mediados de los años noventa (Buenos Aires: FLACSO/EUDEBA, 1998). 73 Ibid. 74 Ibid. 75 Series of interviews with representatives from the Sociedad Rural Argentina and its Centre of Studies, Buenos Aires, March 2001. 76 M. Pastor Jr and C. Wise, ‘Stabilization and its Discontents: Argentina’s Economic Restructuring in the 1990s, World Development, 27, 3 (1999), pp. 477–503, and B. Kosacoff, ‘Estrategias empresariales en la transformación industrial argentina’, Boletín Informativo de Techint, 288 (1996), pp. 25–47. 77 See Pastor Jr and Wise, ‘Stabilization’. 78 J.L. Maia, ‘El ingreso argentino al Plan Brady’, Boletín Informativo de Techint, 274 (1993), pp. 57–68. 79 Data from Basualdo, Concentración. 80 Ibid., p. 248. 81 Heymann ‘Políticas de reforma’, p. 126. 82 This section is mainly based on annual reports of Argentina’s economy prepared by the Ministry of Economy. See www.mecon.gov.ar, Informe Económico 1997, 1998, 1999, 2000 and 2001. 83 J. Corrales, ‘Killing Me Softly with Each Shock: Argentina’s Economic Crash’, World Policy Journal, Fall 2002. 84 See, for instance, S. Etchemendy, ‘Construir coaliciones reformistas: la política de las compensaciones en el camino argentino hacia la liberalización económica’, Desarrollo Económico, 160 (2001), pp. 675–705; S. Etchemendy

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85 86 87 88

89

90 91

92

93 94 95 96 97 98 99 100

and V. Palermo, ‘Conflicto y concertación’; E. Gibson and E. Calvo, ‘Electoral Coalitions and Market Reforms: Evidence from Argentina’, World Politics, 49 (1997), pp. 339–70; S. Sénen González and F. Bosoer, El sindicalismo en tiempos de Menem (Buenos Aires: Corregidor, 1999). For instance, Etchemendy ‘Construir coaliciones’. For instance, the Grupo de los 8, which in August 1994 signed, together with Antonio Cassia’s CGT, the Acuerdo Marco para el Empleo, la Productividad y la Equidad Social. See J. Sábato, La clase dominante en la Argentina moderna (Buenos Aires: CISEA/GEL, 1988). Sidicaro states, ‘For many years the business sector had shared liberal ideas as a diffuse but useful ideology in order to criticize those aspects of state action that did not favour them. However, in fact, they were not always speaking about the same problem when they objected to the state’s action. The liberalism of businessmen was an ideological position of circumstantial and defensive convergence and not an effective unity of criteria and interests.’ See R. Sidicaro, ‘Poder político, liberalismo económico y sectores populares, 1989–1995’, in A. Boron (comp.), Peronismo y Menemismo. Los avatares del populismo en la Argentina (Buenos Aires: Ediciones El Cielo por Asalto, 1995); and M. Peralta Ramos, ‘Economic Policy and Distributional Conflict among Business Groups in Argentina: From Alfonsín to Menem’, in E. Epstein (ed.), The New Argentine Democracy (Westport: Praeger Publishers, 1992). See M.V. Murillo, ‘Union Politics, Market-Oriented Reforms, and the Reshaping of Argentine Corporatism’, in D. Chalmers (ed.), The New Politics of Inequality in Latin America (Oxford: Oxford University Press, 1997), pp. 72–95; Sénen González and Bosoer El sindicalismo, and Etchemendy ‘Construir coaliciones’. Murillo, ‘Union Politics’. The CTA began its meetings in December 1991 after the Burzaco Declaration. It was finally constituted in November 1992. In 1994, the Unión General de Trabajadores del Transporte (UGT) abandoned the CGT and formed the Movimiento de Trabajadores Argentinos (MTA) together with Camioneros (Transport Workers) and Cerveceros (Brewery Workers). This strategy was not effective for many reasons: first, and most importantly, due to the divisions in the trade union movement in general and the opposition union groups in particular; second, because of the memories of the chaotic impact of the CGT’s confrontational policy towards Raúl Alfonsín; and finally, the CTA and the MTA were new organisations that needed time to organise themselves. Over the years, they have become more effective in influencing government policies though they still remain divided. Carlos Menem confronted the railway strike organised by La Fraternindad union with this expression in 1991. The expression means that any line adhering to the strike would be closed. Sénen González and Bosoer, El sindicalismo, describe these negotiations. Murillo, ‘Union Politics’, p. 86. G. O’Donnell, ‘Delegative Democracy’. There were, of course, voices of discontent and new social movements that actively opposed the economic policy, such as los piqueteros (those on the road blocks). A. Przeworski, Sustainable Democracy, pp. 36 and 82. The coalition was called Alianza por el trabajo, la justicia y la educación (Alliance for Employment, Justice and Education). In October 2000, Carlos Menem still held the Presidency of the Peronist Party.

144 The state of democracy in Latin America 101 For more details on the birth of FrePaSo and the Alliance see M. Jones, ‘Argentina: Questioning Menem’s Way’, Current History, 97, 616 (1998), pp. 71–5, and R. Gargarella, ‘La nueva Alianza opositora en la Argentina’, Leviatan, 69 (1997), pp. 63–7. 102 After losing the elections in the Buenos Aires province, Fernández Meijide was named Minister of Social Development. Her position was undermined when, in April 1999, her brother-in-law, Angel Tonietto, was forced to resign from his position in PAMI (the national healthcare programme for the elderly) accused of using his post to favour his wife’s private business. 103 In September 2000, de la Rúa inaugurated a series of meetings with leaders of political parties such as Carlos Menem and Domingo Cavallo to establish a political dialogue. 104 Data from the National Institute of Statistics and Census (INDEC), www.indec.mecon.gov.ar, see Información Estadística (2002), La Nación On Line, and Clarín Digital. 105 See N. Altimir and L. Becaria, ‘Distribución del ingreso en la Argentina’, in D. Heymann and B. Kosacoff (eds), La Argentina de los noventa (Buenos Aires: EUDEBA/CEPAL, 2000), pp. 331–404. 106 See Table 5 in the previous chapter. 107 Przeworski, Democracy and the Market, p. 54. 108 The recent military coup attempt in Venezuela showed that the US policy might be changing, however the regional reaction was of condemnation of the coup despite doubts about Hugo Chávez’ democratic credentials. 109 The Economist, 17–23 August 2002, pp. 39–41.

4

In search of the post-transitional Chilean state

Chile’s experience of democracy is quite distinct from that of Argentina. In contrast to Argentina, the principal debates at the end of authoritarianism and into the democratic period were not as closely related to the economy. Since labour had been harshly repressed under authoritarianism and the economic blueprint of liberalisation had guided the structuring of social relations, the need to build an alliance with labour was not a factor in the Chilean experience. Instead, the major issues that dominated the politics of transition were those of civil-military relations and the nature of the transition process. In this sense there are some similarities with the challenges faced by the Alfonsín government. Over the last three decades, Chile has been widely regarded as the most successful Latin American economy, exhibiting steady annual GDP growth. Despite the vagaries of the transition to democracy, growth has continued and was especially strong in the initial years of the process (7.8 per cent, 1991–95; 4.1 per cent, 1996–20001). Although the country was hit hard by the international recession of the early 1980s with its extreme exposure to external change (leading to an unemployment rate of 34.6 per cent at one point in 1983), it has performed well in macroeconomic terms since the implementation of the neoliberal economic model in 1975. The other side of the coin, however, presents a different story. Chile remains one of the most inequitable societies in Latin America, measured in terms of income distribution. The neoliberal model has polarised society to a considerable extent and those who have benefited less from the model remain marginalised, living on the poverty line or just below it. If Chile is compared with its Southern Cone neighbours, the successes of the development model can be emphasised, in terms of stability and growth. However, one also has to pose questions regarding the economic model and its sustainability, responsibilities for reducing poverty and promoting equity, and issues relating to values and democracy. All of these themes revolve around the conceptualisation and realisation of the Chilean state and how it has been changing during and since the dramatic political events of the 1970–73 period. The argument developed

146 The state of democracy in Latin America in the following pages is that a strong New Liberal Consensus has been established during the 1990s and that there has been a perpetuation of the social relations established during the repression of the authoritarian period. The social contract of the 1990s has not been overhauled as a consequence of the democratisation of the political regime, hence inequalities and social divisions persist and democratisation of the state form remains incomplete. The chapter is comprised of eight sections, which explore the events of the 1990s and the changing power relations within Chilean society. The first section contextualises the central argument. This is followed by a discussion of the civil-military rapprochement, the increasingly dominant role of the private sector in Chilean development, the nature of the transition process, and cultural values and the legacy of human rights violations. The final three sections focus on the homogenisation of party politics, the role of the governing Concertación, and the strength of the New Liberal Consensus that has been established.

A transitional state or a neoliberal state? For most of the 1973–2000 period, Chileans lived in the shadow of an authoritarian regime. At the end of the 1980s, this regime was replaced by a democratic administration. However, the nature of the contemporary, democratic Chilean state remains a highly contested issue. Values and morality, democracy and rights, the constitution and electoral system, and the independence and powers of state institutions have all been fervently debated over the last decade. The role of the former dictator during the years of transition, and the deepening of the neoliberal economic model, have been particularly strong areas of contestation. In terms of politics, much of the discussion has taken place under the umbrella of ‘transition’ – the shift from authoritarianism to democracy, and the nature of contemporary democracy in Chile. However, the nature and role of the post-transitional state is an underdeveloped theme. In this context, the post-transitional state refers to the Chilean state beyond its capitalist authoritarian construction of the late 1970s and 1980s. For example, is it possible to argue that the Chilean state has remained relatively intact from the late 1980s through to the late 1990s? Or is it the case that democracy has brought with it a fundamental restructuring of values, social relations and institutions that we associate with the concept of the state? Discussions of democracy and transition have very much suppressed engagement with questions of this nature. The importance of the civil-military transition cannot be underestimated. However, Augusto Pinochet’s retreat from public life and a complete decade of democratic politics provides a suitable opportunity for reflection and an assessment of the nature and functions of the Chilean state in the new

In search of the post-transitional Chilean state 147 millennium. An interesting point of departure for this discussion is offered by the most recent presidential elections. The closely fought presidential elections over two rounds that dominated the months of December 1999 and January 2000 were important milestones in Chile’s political history. The elections took place ten years after the transition from General Pinochet’s outgoing authoritarian administration to Patricio Aylwin’s democratic government. The political landscape of the 1999–2000 elections was markedly different from that which had prevailed during the period of power transfer between 1988 and 1990.2 However, although the institutionalisation of liberal democracy that had taken place with Aylwin’s presidency was celebrating its tenth birthday, the wider question of what democracy had really signified for different social groups in Chilean society remained essentially unanswered. The nature of the democratic capitalist state as compared with the authoritarian capitalist state was not an issue of great debate or discussion.3 This was due to the fact that the politics of transition, particularly the ongoing prominence of General – later Senator – Pinochet, dominated political affairs. The struggle for a peaceful transition and the perpetuation of the economic model put in place during the mid-1970s took precedence over questions of the form of democratic social relations, the values that would shape them, and the nature of the institutions that would give the ensuing social contract its structure. Most of the features of the authoritarian state were carried over into the democratic period. It was less of a transition and more of a transformation in the role and power relations of the Chilean state.4 The 1988 plebiscite on whether General Pinochet should continue in power beyond 1990, and the calculated, conditional hand-over of the greater part of the state institutions by the military to the centre-left coalition is now contemporary history, yet its legacy in terms of the baggage of authoritarianism and the manner of transition remains highly influential. The outcome is an uncertain balance of power between the military, the president and the parliament that has provoked criticisms about the nature of democracy and transition.5 The role of civil society in the political transition and the current democratic state, beyond voting preferences, is also unclear. Two tendencies appear to have underpinned the legacy. One is the historical development of the state institutions since 1970. The second is the connection between the state and the economic growth model on the one hand, and with an increasingly polarised society on the other.6 These tendencies have dominated the form of the Chilean state since the 1970s, particularly the social relations that give it meaning and legitimacy. They have also been critical in terms of the values that lie at the heart of Chilean society, whether relating to democracy or to social norms in general. What this chapter argues is that there has been a ‘hollowing out’ and redefinition of the social and institutional structure of the state by the

148 The state of democracy in Latin America New Liberal Consensus that was constructed in the early years of democratic transition. This has led to an intensification of capitalist development and a shift of responsibilities and powers from the public to the private sector. The outcome has been a weakening of the state as a mechanism of distribution and organisation, which in turn has reduced the capacity of the government to manage social and economic change. Explanations for the actions of the New Liberal Consensus take us back to the changing social relations that emerged after 1973, with the violent suppression of opposition to the development of an authoritarian capitalist state which was, and has remained, one of the most economically liberal in the world. The democratic Chile of the new millennium is closely tied to the authoritarian Chile of the 1970s and 1980s through these social relations and the power relations that were created within and between state institutions during the authoritarian period. Although the democratic political administrations of the 1990s have made some headway in challenging some of the so-called enclaves of the authoritarian period that persisted into the democratic years, the nature of the state remains closely aligned with the events and power relations of authoritarianism. This has less to do with transition, which refers to transfers of power between administrations for the most part, and more to do with the ways in which capitalism and the state relate to one another and how continuity is promoted or challenged. The political economy of Chile since 1975 is well documented and can be summarised as economic growth via liberalisation and social discipline from 1975 to 1989, and liberalisation and democratic transition during the 1990s. Those writers who justify the economic model, its methods and consequences, can be juxtaposed with those who condemn it. The outcome is a polarisation of scholarship, with different writers highlighting different aspects of the period to support their cases, for instance by highlighting strong macroeconomic variables to the exclusion of social violence, or by focusing on human rights violations to the exclusion of economic development. This chapter treads a middle road between these poles of thought. Rather than criticise private actors and the market per se, or state terror, it focuses on the role of the state during the 1990s in maintaining the economic model that polarised Chilean society during the 1975–89 period. It discusses the emphasis placed on markets and the liberalisation of society to enable the functioning of these markets, whether through labour flexibility or the revamping of social security, and how the state has been critical to this process and its persistence during the 1990s. The chapter also drives towards an explanation of how and why the economic model continued into the democratic period, and even deepened, despite its failure to impact positively in areas of equity and social justice. The explanation lies within the alliance of those determining the role and

In search of the post-transitional Chilean state 149 influence of the state, the political élites, and the business élites that had become so powerful under authoritarianism. The authoritarian period consolidated the emergence of a militarypolitical right-business nexus that would rapidly become a hegemonic formation during these years and ensure the perpetuation of a particular form of the capitalist state into the democratic period. While the dominance of the hegemonic bloc would be assured predominantly via social discipline – more then less intensely – during the 1973–90 period, the 1990s witnessed a shift towards greater consent-building under democratisation and an increase in the rhetoric and optimism of transition. While the military remained an important player in the hegemonic bloc, with its influence in the Senate and its grip over society in general, it would be the political right and the business sector, particularly the grupos económicos,7 that would drive forward the agenda of capitalist development during the 1990s. The civil-military stand-off served to further complicate this situation for the democratic administrations since the bloc remained influential within the formal political system, as well as in terms of the perpetuation of social relations based on a weak labour code and strong support for liberalisation, entrepreneurialism and the business sector more widely. Consequently, the capitalist development agenda applied during the authoritarian period would be sanctioned by the Concertación of centre-left parties. The Concertación acquiesced since it was more intent on negotiating shifts in the civil-military balance of power (particularly institutional ones, such as the composition of the Senate and the National Security Council, and the powers of the president vis-à-vis the chiefs of the armed forces) and securing the transition to liberal democracy, rather than challenging the core values and social relations established under the dictatorship. The voracious nature of the neoliberal economic model that was driving Chilean capitalism demanded a model of the state that was peripheral and non-interventionist in the commercial sphere, yet active in its regulation of society and management of civil opposition to the dominant economic paradigm. This was achieved. The questions that currently need to be answered relate to the weaknesses and fracture lines that are emerging within Chilean society and the outcomes associated with the economic growth model itself. It is apparent that the postauthoritarian period has witnessed a consolidation of a neoliberal development model designed and managed by a hegemonic bloc of political and economic interest groups that became predominant during the 1970s and 1980s and have reaped great rewards. In contrast to their exitismo,8 a large number of Chileans have only slowly been elevated to the fringe of poverty or remain below the ‘line’.9 The answers to these issues of power relations and equity are to be found in an examination of the contemporary Chilean state and how it has been shaped in recent decades.

150 The state of democracy in Latin America

The unholy alliance: The generals and the state Contemporary Chilean politics and the role of the state cannot be understood without reflecting on the highly state-centred administration of Salvador Allende (1970–73) and the 11 September 1973 coup that ended it. Much of the transitional politics of the 1990s remains embedded in the traumatic years of the 1970s and the power relations derived from the social discipline imposed after the coup. The model of the stateinstitution organised by the military junta provided a sharp contrast to the state form contrived by Allende and the Popular Unity administration. In the space of five years, the Chilean state was transformed from a highly centralised and hierarchical redistributive apparatus, to a support structure for the promotion of private sector-oriented, liberalised economic growth. The civil-military separation of powers that was established by the military soon after the 1973 coup has yet to be renegotiated and returned to the status quo ante of the Frei (1964–70) and Allende (1970–73) administrations.10 A major obstacle to this renegotiation is the constitutional heritage of authoritarianism, in particular the 1980 constitution pushed through during a period of violent repression.11 Until the core components of this constitutional change are challenged, such as the ‘designated’ senators who skew the balance of the Senate to the right and act as a brake on the legislative efforts of the President and Chamber of Deputies, the power struggle for the reins of the state-institution will remain. The relationship of president, government and military is a central issue defining the current Chilean state and its opportunities for development and change.12 Tomás Moulian makes the case that this very much defines the nature of contemporary democracy in Chile: The characteristics of Chilean democracy, with its designated senators and the group of institutions that act as technical counter-weights, are neither accidental nor contingent. In reality they belong to the essence of the neoliberal capitalist state. Through these resources and others the state can achieve its prime objective, to ensure the reproduction of the socio-economic order created by authoritarianism.13 The outcome of the processes of civil-military antagonism since the early 1980s and the ‘economic miracle’14 has been a radical rethinking of the role of the state in Chile, as also the social relations that underpin it. The state’s functions are now widely perceived as being two-fold: regulator and facilitator, although there are voices that promote the inclusion of a form of estado social (social state) to run alongside the state as regulator and promoter of growth.15 The regulatory role is an attempt to oversee the diverse private sector operations across the primary to quaternary sectors of the economy. The role of facilitator is that of promoting

In search of the post-transitional Chilean state 151 export-led development, the generation of new export opportunities, and the minimisation of obstacles to export-oriented firms and inward investment.16 However, during the 1973–90 period, these functions (with their commercial and economic orientations) worked in tandem with the social discipline applied by the state-institution, controlled as they were by the military. Oscar Godoy employs the term ‘militarytechnocratic alliance’ to describe this phenomenon. This military influence was carried over into democracy since the armed forces were able to have a voice in the Senate through the ‘designated’ senators and they are supported on the whole by the two parties to the right – Renovación Nacional (RN) and Unión Demócrata Independiente (UDI). This influence also filters down to internal security such as the police force, which was aligned with the military during the authoritarian period, and also (to a different extent) the judiciary, which underwent extensive democratisation during the late 1990s to reduce the role and influence of those judges selected during the authoritarian period and who supported the application of emergency measures and the summary justice of the dictatorship.17 What is important to highlight in the process of neoliberal economic development under dictatorship is the way in which a particular alliance of interests was created that would become central to the Chilean state throughout the authoritarian period and into democracy. This alliance was effectively a consensus around which a set of values and orientations implicit to a particular view of Chilean development could be established. It is this consensus, which would shift and adapt over time, that has shaped social relations and also the state-institution from the coup to the present. Sergio Marras describes the key axis of values under democracy as retaining many of the features of the authoritarian period.18 It was one of ‘fear-success’, rather than the axis ‘confidence-solidarity-quality of material and mental life’ that many had hoped for. The central pillars of Chilean values during the 1990s, according to Marras, have been freedom of expression and thought (although debate remains conciliatory and often ambiguous); conservative family values; confidence in the economic ‘miracle’ and exitismo; the uncritical acceptance of globalisation; the antivalue of politics (i.e., low esteem for politicians and the political process); the value of disinformation (due to the concentration of media ownership); uncertainty and insecurity (which he describes as a value of adrenalin); and narcissistic individualism: The values of authoritarianism still dominate the spectrum of the political-economic elite and are not much different from those of nine years ago [written in 1999]. The difference is perhaps cosmetic. Today the masks have deteriorated and lost their paint, and are ready to fall, to be replaced with other masks and others in masks.19

152 The state of democracy in Latin America The argument that the Chilean state remained quite similar in its form and values under democracy to that which had existed under authoritarianism has to be contextualised to be fully understood. This requires an explanation of the construction of the consensus that developed around the neoliberal economic model and which strove to ensure its continuity under quite different political formations. The ‘neoliberal-authoritarian consensus’ in Chile evolved during the late 1970s with the consolidation of the authoritarian regime and the imposition of the economic model devised by the free-market technocrats known as the ‘Chicago Boys’.20 During the intervening twenty-five years, the consensus has changed as alliances have altered and different groups have moved to centre-stage or to the wings. Clearly the most important shifts in alliances occurred during two phases: the economic crisis of the early 1980s, and the transition from authoritarianism to democracy from the late 1980s. The latter would involve the substitution of a consensus around a neoliberal economic model imposed within a framework of authoritarianism, to a New Liberal Consensus characterised by neoliberalism delivered alongside political democracy. In the first phase, the model of the ‘Chicago Boys’ brought together various political and business élites within a powerful alliance that would determine the direction of the Chilean economy until the early 1980s. Amongst the common objectives of this neoliberal-authoritarian consensus were: the introduction of a ‘model’ free-market; the suppression of political opposition, labour and critical media in order to both support the model’s operation and also to crush the Chilean left; and the creation of an individualistic, consumer-based, entrepreneurial culture diametrically opposed to the collectivist nature of the Allende administration.21 The strength of the consensus around these objectives lay in the division of power that was created. The military guaranteed a stable environment via its political and labour repression; the business élites were provided with a carte blanche to purchase undervalued privatised enterprises and to exploit the natural resource base and labour within a weak regulatory framework; and the political parties to the right and their supporters (across society, from the élite groups to right-wing pobladores22) facilitated an attempt to legitimise the authoritarian state. This legitimisation involved the construction of an argument that the military had saved the nation from the ‘Marxist cancer’ (General Pinochet’s description of left-wing ideology, and the programme of the Popular Unity government in particular), and was acting in the interests of national security. During the 1970–73 and 1973–88 periods, two distinct models were established. The former was the socialist ‘experiment’ of Salvador Allende and the Popular Unity government, with its heavy focus on the state and centrally planned development in favour of majoritarian interests, particularly the urban and rural poor. The model that replaced it was its antithesis. The socialist state would be diminished in favour of private

In search of the post-transitional Chilean state 153 sector economic management and the role of the market in allocating resources and basic needs. Although one can argue that the state was heavily pruned under authoritarianism, as a result of the privatisations and the central role of the private sector in economic development, the state-institution remained highly influential in the economic as well as social sphere and maintained several statist enclaves, the pride of place belonging to the state copper mining company, Codelco. The neoliberalisation of the economy took place according to the ‘Chicago Boys’ blueprint as long as it realised the interests of the military. The military, particularly General Pinochet, enjoyed the power of political control while the business élites enjoyed the opportunities to capitalise on the privatisation of state assets and market liberalisation more generally. For as long as the business élites were happy for the military to govern, and the military was happy to impose itself on society in its pursuit of eradicating the memory and legacy of the Popular Unity years, this alliance would be self-serving and difficult to challenge for those opposed to it. Eventually it would be international concerns over human rights abuses during the 1980s and the loss of support from countries that had endorsed the dictatorship in 1973 that would put pressure on Pinochet and his advisers to rethink the nature of the authoritarian-capitalist state that had been constructed. The clause in the 1980 constitution, that stated he would seek public support through a ballot to extend his term of office,23 enabled him to do this as if he himself was initiating the process. By this time, it was no longer in the interests of the business élites to support the dictatorship. The nature of the authoritarian model was having negative impacts on exports and on Chilean foreign and commercial relations generally. The ending of the Cold War was also significant. The business élites turned towards the parties on the right, and the right of the Concertación, to carry the same economic model through into a democratic transition. Such was the commercial success of the post-1982 years for the business élites via a concerted export-led business strategy, that their international ties had become more significant and valuable than the security of the social discipline wielded by the military authorities. The social relations that had been established by labour repression had been in place for so many years by this time that organised labour and demands for improved wages and labour conditions remained marginal to mainstream economic activities. In fact, it would not be until Ricardo Lagos took office in 2000 that the labour code implemented under General Pinochet would be subject to pressures for reform, leading to new legislation at the end of 2001. If one diminishes the civil-military difficulties of the transition process, which was impossible at the time but can now be done in hindsight, it is possible to expose the formation of a new alliance of interests that would supersede the military-business élites alliance that had shaped the activities

154 The state of democracy in Latin America of the state and the Chilean political economy from 1975 to the late 1980s. The transitional administration of Patricio Aylwin was intent on maintaining economic stability so as not to jeopardise the transition process, but by the time the administration of Eduardo Frei Ruiz-Tagle had taken office in 1994, the New Liberal Consensus that had been constructed between the business élites, the political class from centre to right, and those in civil society in favour of the individualism and entrepreneurialism that had been represented and encouraged through the education system and the media throughout the 1980s, had been consolidated.24 Alternatives to the neoliberal model were not offered by any major political party. Instead, democratic transition had been supplemented by economic continuity. The faith in the market had not waivered during the shift of power from authoritarianism to democracy, and the social relations and values imparted by the capitalist development process of the late 1970s and 1980s remained intact. Returning to the theoretical underpinnings of the state, it is necessary to explain how the state was central to the development model of the authoritarian period. In many ways, the explanation lies precisely in the nature of the model. Guillermo O’Donnell quite rightly characterised the military administrations of the Southern Cone as manifesting bureaucratic as well as authoritarian qualities, although Chile did not exhibit as many of these tendencies as the Argentine and Brazilian regimes. The authoritarianism was apparent in the use of the security forces and military in social control, human rights abuses and the creation of a climate of fear (both by exaggerating the threat from the left, ‘hunting down’, ‘disappearing’ and internally and externally exiling voices of opposition, and manipulating channels of communication). In terms of bureaucratic influences, the diffusion of military officers throughout the public sector to oversee and direct other state institutions, from the judiciary to education and health, was important in converting these institutions from entities that responded to civil society needs and demands, to a situation by which the military effectively controlled them in order to pursue its own aims of economic liberalisation and social discipline. At the same time, these institutions and agencies were made ripe for privatisation in order to take any residual power away from administrators who were associated with the Frei Montalva and Allende years of interventionism. At a more structural level of analysis, the authoritarian state vested a degree of legitimacy on the polarised social relations that had characterised the Allende administration. These social relations were founded on the socialist ‘experiment’ that Allende had put in place but cannot be explained solely in terms of the economic base. There are many political explanations to set against economic reductionism. These relate to US geopolitical interests, the cultural politics of international alignment (towards Western Europe and North America), and the domestic competition between the party political development of socialism, Christian

In search of the post-transitional Chilean state 155 Democracy and conservatism. The political economy of the periods involved can be explained by understanding the relations between actors and institutions of the state, market and civil society, understood as an interrelated web rather than as separate entities. The military authoritarianism of Pinochet was founded on support from those élite interest groups and their supporters that had been disadvantaged by the property, agricultural and industrial reforms and seizures that had taken place during the Popular Unity years. These groups included the Christian Democrat party headed by Patricio Aylwin, which supported the coup in order to reverse the socialist experiment and return to the Frei Montalva model of economic growth accompanied by strong social interventionism, particularly in terms of land ownership and housing. They were unprepared for the military’s desire to stay in control and identify their own textbook development model. Chile’s experience of authoritarianism was a brutal one. It was clear that Allende’s administration was in crisis throughout its time in office, pushed to extremes from within the left and challenged by right-wing forces within the country and beyond. The institutions of government and the presidency struggled to keep the conflicting social forces in check, hence the need to turn to the military for assistance.25 General René Schneider became the linchpin in the relationship between Allende and the armed forces. However, right-wing opposition to Popular Unity led to his assassination in October 1970.26 General Carlos Prats took over the post of Commander-in-Chief and Defence Minister but by mid-1973 the failure of the government and its supporters to control the widespread disruptions across the country led to his resignation and the emergence of General Pinochet as Allende’s most senior military official. Pinochet’s support for the coup and his rise to the top within the junta following the coup (assuming the presidency in 1974) was a clear reflection of the aims of a group of influential officers in all three cadres of the armed forces to topple the Popular Unity government. Support for their undermining of democracy would come from the US administration and the business élites, entrepreneurs and right-wing supporters (including the terrorist group Patria y Libertad) of Chile. For the majority of Chileans, however, Allende had been struggling to promote social justice in the country against a powerful opposition of national élites, international capital and the US administration.27 Popular Unity had in fact increased its share of the vote in the 1971 municipal elections to over 50 per cent of the vote, compared with only 36 per cent in the 1970 presidential elections.

The form of the state: An alliance of the élites Popular Unity reorganised the state in order for it to have a centralised redistributing function. This marked a sea change in the history of the

156 The state of democracy in Latin America redistributive Chilean state since independence. For 150 years, the state had represented the interests of domestic élite groups and international capitalists for the most part: during the nineteenth century those in the landowning, agrarian sector; during the late nineteenth to mid-twentieth centuries those in the mining and manufacturing sectors; and in the later twentieth century the larger business organisations which are now the backbone of the Chilean economy – the grupos económicos. A strong characteristic of all these periods was the international linkages that were established. In the first period, the influence of European and US merchant houses was followed, in the second, by the activities of the early US and European multinationals (particularly strong in the nitrate and copper sectors), and finally the export-orientation of the leading Chilean businesses and strong inward international investment since the early 1980s. The alliance of national and international élites has been central to an understanding of the ways in which the state has developed. Apart from the industrialising, developmentalist state that was so influential from the end of the 1930s until the early 1950s, and the Allende administration, one can say that international influences have been critical to the development of the domestic élites which have been so important in shaping the social relations of the Chilean state. For example, it was international support for the coup that provided the junta with the legitimacy to press ahead with the social discipline and economic model prescribed by the ‘Chicago Boys’ during the mid-1970s. The emergence of domestic business élites in Chile during the 1970s and 1980s was not a new phenomenon, although the nature of their development and their origins was different from previous periods. Until the ISI decades of more autonomous development shaped by CORFO28, the Chilean economy had been dominated by three particular interest groups or élites (defined as such due to their organisation and operations in favour of their own, élitist interests): domestic landowning élites; international commercial and investment élites; and domestic industrial and financial entrepreneurs. These had dominated from as early as the 1830s when the conservatives had established control over the political system, particularly through the influential figure of Diego Portales,29 and created the 1833 constitution which was highly presidentialist and centralist in nature. Silver and copper deposits were being worked in the Norte Chico region by the 1830s and Chile could already be designated as an externally oriented mercantilist economy. As well as the mining activities, wheat exports were also important, supplying the increased demand during the gold rushes in California and Australia in the 1850s, prior to generating a more stable trade with Britain.30 The domestic landowning élites that had flourished under the political independence of the mid-nineteenth century had not only dominated the economic landscape of the country but were also dominant in the political sphere, creating an effectively oligarchic democracy.31 During

In search of the post-transitional Chilean state 157 the nineteenth century, the social élite in Chile remained small and revolved around a few select families. These families controlled vast swathes of the country and became closely tied to the import-export merchant houses, operated by North Americans and Europeans, which facilitated access for Chilean wheat and nitrate exports to northern markets as well as offering new manufactures, financing opportunities and other commercial services in situ. The merchant houses of Balfour Williamson, Duncan Fox and Gibbs became highly influential in national economic and financial planning at this time, proving themselves to be pivotal in the process of the insertion of Chile into the international economy as an export-oriented country. As such, the well being of the landowning élites was also tied to the successes of the merchant houses. This would change during the latter decades of the century when Chile would embark on its long-term association with, and dependence on a single commodity: nitrates, and later copper. The nitrate boom from the 1880s introduced new investment into the Chilean economy and shifted the economy away from agricultural exports to minerals. Nitrate earnings rapidly replaced the importance of agricultural earnings and these new investors, predominantly English, began to supersede the alliance of traditional domestic élites and merchant houses. During the late nineteenth century, the post-independence period of mercantilism would be replaced by liberalism with its focus on economic performance to the exclusion of national development priorities. Peter Smith notes the significance of this development: Instead of seeking to enhance the power of the state, liberalism sought to facilitate the performance of the economy. Turning mercantilist logic on end, the liberal state placed its efforts and resources at the service of the economy – and of dominant economic forces in society.32 By the turn of the century, nascent domestic industrialisation and the internationalisation of production of US and European manufacturing had also reduced the influence of the dominant nineteenth-century economic alliance of merchants and landowning wealth. The industrial sector organisation – Sociedad de Fomento Fabril (SOFOFA) – had been established in 1883 to further the interests of manufacturing, and it would flourish as a new wave of European immigrant labour pushed forward the interests of industry and radicalised the urban working class. Over the two decades prior to 1914, Chilean social change became more determined by the minerals and urban-industrial sectors rather than the traditional agricultural base. When the First World War began, mineral interests were firmly in the ascendancy, followed by industrial and agricultural interests. The economy could also be characterised by the extent of foreign control, epitomised by the powerful Guggenheim and

158 The state of democracy in Latin America Kennecott Anaconda mining operations. The principal benefits to the Chilean economy were derived from employment and export tariffs, but economic policy would be determined by the needs of foreign capitalists rather than domestic interests. The nitrate sector would be rendered uneconomic by synthetic substitutes developed during the war but the copper sector would replace it to become the new pivot of the economy. This remains the case; copper products accounted for 36.6 per cent of exports by value in 2001. The First World War also had a dramatic effect on European commercial interests in the country, leaving the US production and commercial élites to become the dominant foreign economic partners. The firms in question included the American Locomotive Sales Corp, Anaconda Copper Mining Co. (including Andes Copper Mining Co., Chile Copper Co., Chile Exploration Co., Chile Steamship Co., Santiago Mining Co.), Bethlehem Chile Iron Mines Co., Blair & Co., Inc, Ingersoll-Rand Co., International General Electric Co., J.P. Morgan & Co, National City Bank, Westinghouse Electric International Corp.33 This situation of US economic influence would remain unchallenged until the drive for industrialisation and greater economic autonomy of the Frente Popular government from 1938. The work of CORFO, such as the creation of key strategic industries and its ability to establish a coherent industrialisation strategy, marked a significant shift in the development of the Chilean economy. Domestic firms were promoted in this atmosphere of greater autonomy, and the emergence of a new domestic entrepreneurial élite followed during the 1950s and 1960s. For the first time since independence, there were now three important interest groups: the foreign capitalists; the domestic urban-industrial entrepreneurs; and the traditional landowning élites. Although the state was seeking to manage economic change and could be described as developmentalist throughout the 1938–73 period, the foreign capitalists still retained the whip hand due to their technological and commercial advantages and would fight for greater liberalisation and less intervention in the face of support for domestic industrialists. The collapse of ISI from the mid-1950s played into the foreign capitalists’ hands as the overriding need to organise debt repayments led to liberalisation and reduced protection for domestic producers. This situation would remain until the Allende administration sought to dramatically reorganise the national economy in favour of domestic producers and against foreign capital. The nationalisation of the copper sector, the commercial reorientation towards China and the Comecon countries, the land reforms and labour take-over of firms all worked to the detriment of the three branches of Chilean capitalism. It came as no surprise that they would align their interests in the struggle to supplant the socialist model. With the support of the political parties to the right and centre,34 the US government and the military, the business élites were able to

In search of the post-transitional Chilean state 159 destabilise the Popular Unity government and create the optimal conditions for the coup and a return to the status quo ante that they so desired. In fact, the social control of the military and the plan of the neoliberal economic theory acolytes created a scenario which would go beyond the economic model under President Frei Montalva and establish the perfect business environment for capital accumulation and opportunities for further concentration of capital. While the landowning élites could rest in the knowledge that the land reforms of Frei and Allende would be discontinued, the domestic entrepreneurs seized on the opportunities presented by privatisation and trade liberalisation, and the foreign capitalists came to regard Chile as a safe haven once more for large fixed capital investments and trade. The authoritarian state and the business élites (rather than business per se) had created a mutually reinforcing and self-serving condition for capital accumulation, anti-left-wing politics and social control. The neoliberal plan would disadvantage those domestic producers unable to compete with cheaper imports, also the small and mediumsized farmers and manufacturers who would struggle to compete with the economies of scale of larger operators. Over time the size and reach of the larger domestic economic groups and foreign firms would increase. Although many of the changes played against domestic producers who accounted for most of the membership of the powerful manufacturing association, the Sociedad de Fomento Fabril (SFF), and the agricultural Sociedad Nacional de Agricultura (SNA), these organisations did not oppose the military strategy since it was committed to the overarching value of private property protection, the very value that the Allende administration had challenged. This commitment to the defence of private property would push the SFF and other employer associations closer to the far right UDI party during the years of transition. However, it was not these older institutions that would act as the pivotal organisation for employers’ interests under authoritarianism and into democracy. This would be the role of the Confederación de la Producción y Comercio (CPC), especially in the changed economic orientation following the crisis of 1982–83. Under democracy, the CPC would become more closely aligned with the RN party, and together, they would take a more pragmatic line in their dealings with the Concertación.35 Despite a major crisis in the early 1980s, an overheating in the early 1990s and a slow-down in 1999, the economic model has changed little since the years of dictatorship and the state has merely been ‘modernised’ in order to facilitate market development.36 Liberalisation of Chile’s domestic markets for foreign direct and portfolio investment, changes in capital market controls, and a national policy emphasis on export-led development has led to ever-increasing flexibilisation of Chilean socioeconomic conditions. This framework has been continued and deepened by a succession of centrist democratic coalition governments, and an

160 The state of democracy in Latin America important part of this process has been a reconceptualisation of the role of the state. The state was deemed to be a burden in terms of market liberalisation. State-institution interventions led to market distortions according to free market logic. Hence its activities should be pruned and reduced to a basic subsidiary and regulatory role, functioning alongside the business community rather than in opposition to it.37 This view also conformed with demands from the multilateral funding agencies for the rationalisation of the public sector. The ideological view of the state, which had been so central to the thinking of the Chicago economists in 1975, was as strong within the Concertación governments after 1990. According to Norbert Lechner, it was the continuation of a ‘market society’ in which conduct, expectations and preferences were determined by the market, and the concept of economic modernisation through private maximisation dominated over political democracy guided by a notion of ‘common good’, e.g., collective security (inseparable from individual security) and the state as the producer and reproducer of society.38 Against this backdrop of a ‘hollowing out’ of the state was a deep-seated ambiguity. Although all but a handful of Chile’s public sector firms were privatised in two phases during the late 1970s and mid-1980s, Codelco (the state copper mining company) was retained within the public sector.39 As the principal foreign exchange generator of the Chilean economy, and as a direct contributor to the military budget (via a legal amendment during the authoritarian period – nine per cent of its profits are committed to the military budget), Codelco is the jewel in the crown of the Chilean economy and has run against the tide of state rationalisation. Apart from Codelco, the state’s presence in the productive sectors is one of regulator rather than owner, and the same is increasingly true across a range of other areas, particularly services and infrastructure. The faith in the market as the determinant of Chilean development has persisted during the transition from authoritarianism to democracy, with a consensus having formed between international and larger national capitalists (the business élites) and the political élites within the upper echelons of the party political system and the legislature. By constructing a hegemony around an unshakable belief in an economic theory and model that has had questionable successes and considerable failures, but which has enabled those party to the consensus to sustain their positions within Chilean society, it is possible to identify the key ingredient in a recipe that has shifted Chilean development from models of growth with equity and state socialism prior to 1973 to one that can be identified by its consequence of socio-economic polarisation. This is the ‘twin-track’ society of contemporary Chile: marginalisation and exclusion on the one hand, élitism and capital concentration on the other. Eduardo García suggested that two economies were in place in Chile by the late 1980s: the upper class barrio economy which was modern, hi-tech and profitable, and the

In search of the post-transitional Chilean state 161 marginal barrio economy which could be characterised as retarded, with high unemployment, underemployment and precarious living conditions.40 Through the identification of the emergence of a New Liberal Consensus in Chile from 1989 to replace the authoritarian-business alliance of the 1973–89 period, it is possible to explain why Chilean society remains divided (socially, economically and culturally), why poverty, discontentment and a lack of social justice persist,41 and why there should not be optimism about the future for those in Chilean society (the majority) who are not aligned with the interests of the élite consensus. The data on socio-economic changes in Chilean society across authoritarian and democratic periods reveals a large fall in the numbers of those living in poverty, from a particularly high-point during the mid-1980s, yet inequality remains the most critical issue and a theme that most likely underlies some of the impacts of social dislocation and disaffection, such as crime, violence and drug culture. Following a rise in inequality from the 1960s, bar a decline under Popular Unity from 1970 to 1973, it levelled out from 1987 and has remained steady throughout the 1990s.42 Within these inequality data, there are clear divisions in terms of salary inequality, with an increasing polarisation in remuneration according to education and skill levels.43 Other factors that require the attention of policy-makers include the low participation of women in the salaried work-force, particularly women in the lower income deciles, also the fact that for each employed person in the lowest income quintile there are many more mouths to feed (3.4) than for those in the highest income quintile (1.0) (Table 6).44 One of the impacts of this poor distribution of income is that, in times of economic downturn (e.g., 1992–94 and 1999–2002), it is the people in the lowest income deciles of the population who suffer most as they face unemployment and may fall back into poverty or even indigence. Their

Table 6 Income shares per decile: Household incomes per equivalent adult Decile

1987

1990

1992

1994

1996

1998

1 2 3 4 5 6 7 8 9 10 Top 1 per cent

1.34 2.41 3.17 3.97 4.88 6.04 7.66 10.24 15.71 44.58 12.02

1.39 2.57 3.33 4.19 5.14 6.28 7.92 10.39 15.51 43.28 12.35

1.52 2.60 3.38 4.16 5.04 6.16 7.73 10.16 14.82 44.43 13.68

1.43 2.57 3.36 4.18 5.14 6.33 7.93 10.55 15.76 42.73 12.41

1.40 2.44 3.25 4.07 5.01 6.17 7.80 10.38 15.45 44.05 12.70

1.30 2.37 3.18 4.02 4.95 6.12 7.79 10.32 15.50 44.43 13.22

Source: Contreras et al. (2001), based on Caracterización Socioeconómica Nacional (CASEN) data, 1987–98.

162 The state of democracy in Latin America ability to ride economic shocks is less than that of the top deciles, resulting in coping strategies that mirror marginal social groups in much poorer Latin American countries. It would appear that educational levels are closely aligned with the breakdown of inequality between social groups and that social policies carried out by the democratic administrations have been effective in reducing inequality if one incorporates the in-kind transfers made to households via health, education and housing programmes.45 Therefore, social policies, allied with economic growth, account for poverty declines over the period, with higher social policy spending being a critical factor.46 For example, Dante Contreras and others report that the subsidy component of social programmes increased from 4,486 pesos per capita in 1990 to 10,225 in 1998 (at 1998 pesos). However, despite the successes of increased social spending, the fall in inequality is not significant, and the nature of social welfare regimes under post-authoritarianism has not been as focused on redistribution and equity considerations as social policy prior to authoritarianism (see Table 7). In fact, social policy has focused on family allowance and means-tested welfare transfers which tend to favour urban rather than rural recipients. Meanwhile, the social development fund (FOSIS) set up under the Aylwin administration encourages mainly training, micro-entrepreneurialism and infrastructure projects.47 Many of the most successful initiatives that specifically target the poorest social groups are generated by civil society organisations. One can highlight the work of the Hogar de Cristo (a Church-based social organisation) and the Fundación para la Superación de la Pobreza (National Foundation for Overcoming Poverty) in this regard. For those in work, it is clear that further liberalisation of the Chilean economy in the 1990s has not led to more secure job opportunities. With Table 7 Social welfare regimes in Chile

Incentives for parties to bid for support with social policy (competitiveness) Capacity of lower class groups to demand social policy (organisation) Incorporation of poor into multiclass Reformist coalition (alliance structure) Development model Social welfare outcome

Source: Kurtz (2002).

Chile, 1964–73

Chile, 1989–2000

High

Low

High

Low

High

High

Import substitution Universalistic consumption support coupled with asset redistribution

Neoliberal Quasi-universal consumption support with limited market access effort

In search of the post-transitional Chilean state 163 much of the export-oriented sectoral growth from the mid-1980s taking place in agri-business, there is still a considerable seasonality to work, and migration to rural areas at harvest time remains an economic necessity for many poorer people, especially women.48 In their study on Chilean labour issues and the impacts of globalisation, Reinecke and Torres are keen to point out that although 1.5 million jobs have been created since the mid-1980s, most include little or no employment or social protection, with less than two-thirds of salaried workers having a written employment contract with adequate social protection coverage.49 Much of this labour vulnerability is linked to the weakness of collective bargaining institutions due to low levels of union participation and mobilisation following the repression of trade unionism in the 1970s and 1980s. Although the total number of salaried workers who are members of a trade union has increased during the transition, and the total number of unions has increased, the percentage of salaried workers in unions increased only 2 per cent between 1986 and 1997, from 14.2 to 16.3 per cent.50 There are two readings of the events of the 1975–89 period in terms of the political economy of the authoritarian regime. One highlights the neoliberalisation of the economy and the ways in which the role of the public sector was diminished in favour of the business élites, while the other notes that the neoliberalisation process was only possible with the military control over society and the creation of an environment in which business could flourish, e.g., undervaluation of public assets in the privatisation process, and a de-unionisation of the labour force and a labour code which eradicated opposition in the workplace.51 This chapter supports the latter interpretation. To focus on the economic events of the authoritarian years, such as the macroeconomic variables and growth rates, leads to a reading of national development that highlights the Chilean ‘miracle’.52 On the basis of these economic data, the Chilean economy was defined as the Latin American ‘jaguar’ to mirror the Asian ‘tigers’ and provided a model for other Latin American economies. It was also highlighted as a model for developed societies in terms of its social security and health privatisations. What this reading tends to ignore or minimise is the strong role of the state in enabling these changes. In many ways, the comparison with the Asian ‘tigers’ is relevant, but in terms of the high levels of state intervention rather than the reverse.53 The decisions to control wages and prices at different times, to privatise (albeit selectively in the first instance), to impose social discipline in favour of capital accumulation, and to liberalise trade through tariff reductions and trade promotion (e.g., agreements and the work of ProChile) were all necessary to facilitate the shift to the private sector. The second reading of the period highlights the work of military control over the institutions of state and the social controls that were in place. Beyond a theoretical analysis of the social relations that underpin the social contract and state-institution, it is possible to identify several examples

164 The state of democracy in Latin America of how the neoliberalisation of the economy was state-administered rather than market-driven: privatisation yet maintenance of Codelco in the public sector; state intervention during the 1982–83 economic crisis to shore up the financial sector; the shift towards non-traditional exports in the early 1980s; and most importantly, the social discipline of the authoritarian model, with respect to formal democratic politics as much as labour. The model of capital accumulation that the ‘Chicago Boys’ introduced favoured those in control of capital (domestic and foreign) and enabled them to build on this capital on the assumption that growth would benefit not only capital but also labour, as success in international markets and new foreign direct investment would raise wages and living standards. In practice, labour restrictions and wage and price controls effectively denied labour the benefits of the model in favour of an intensification of capital accumulation and concentration. The most important characteristics of the capital accumulation model of the military period were the two phases of privatisation either side of the 1982–83 recession. Privatisation of undervalued state assets provided the strongest shift of power from public to private hands. Not only did the privatisations move capital directly into the pockets of the largest economic groups in the country but it also shifted control over labour from the public to private sector, increasing the vulnerability of tens of thousands of workers who were then subject to heavy firm rationalisation and their own redundancy, or increased flexibilisation under the conditions of the 1979 Plan Laboral (Labour Plan), e.g., changed working practices, re-employment on less secure contracts, and lower wages. Much of the unemployment during the 1975–88 period was disguised by the job creation programmes: PEM (Programa de Empleo Mínimo) and POJH (Programa Ocupacional para Jefes de Hogar), which absorbed over 400,000 workers a year at their height. The privatisation process was founded on the theory that the state was an inefficient producer and resource allocator since it sought to integrate multiple functions into these activities, such as regional development, economic planning, employment and poverty alleviation. The market, it was considered, could do all of these more effectively. If this theory was accepted in principle, the decision to keep Codelco as a public entity (having been nationalised by Allende and cross-party support) is difficult to explain. The fact that copper is the key to the Chilean economy is one explanation, but the most likely explanation is the military budget support that was derived from legislation in the 1980 constitution. It was a clear example of the military taking geopolitical and self-interested decisions, rather than ones based on market theory. The experience of Codelco is the exception that proves the rule that the military was not intent on neoliberalising the Chilean economy as a priority and that it wanted to strengthen its broader control over Chilean society and facilitate

In search of the post-transitional Chilean state 165 capital accumulation for the business élites (that had sought military intervention and were happy for Pinochet to retain power). The alliance between the military, and its control over the state-institution and the business élites as the forces of capital accumulation, thus national development, had been cemented by 1975 and would continue to be mutually reinforcing throughout the 1975–89 period. The authoritarian state would provide a highly regulated society and work-force, in contrast to an underregulated business environment, in return for backing from domestic and foreign business élites. This relationship would be most clearly seen during the 1982–83 economic crisis when the state bailed out the financial sector in order to create a semblance of economic stability. It was the action of a state administration driven by the alliance of interests rather than one willing to see the market itself deal with market failure. Although two of the leading economic groups of the time – Cruzat-Larraín and Vial – would perish during the crisis, others would be strengthened, such as Claro, Said and Angelini, and there were new groups and entrepreneurs that would rapidly fill the gaps as the financial sector was stabilised and returned to the market, leaving the treasury purse light. It was the most dramatic example of the role of the public sector in shifting the balance of economic power to the private business sector, particularly the larger economic groups and foreign investors.54 Chilean society had effectively paid for the failure of the private sector and paid again for national financial stability to be returned to private interests once more. While the grupos económicos capitalised on this state intervention, it was the wage labourers and unemployed who would carry the burden of the collapse as average incomes declined over the 1982–86 period and would not recover until the 1990s.55 In order to mitigate the problems of national economic vulnerability due to high levels of dependence on copper earnings, the 1980s marked a reorientation towards non-traditional exports.56 Fruit and wine, wood products and salmon all became important export-oriented sectors, capitalising on the natural resource base, good environmental and geographical conditions and counter-seasonality for northern markets. This was not a business-led shift in national economic planning. The roots of the fruit, viticulture and forest products sectors lay in the economic thinking of the Frei Montalva government, while it was the Japanese development agency (JICA) and the state quango Fundación Chile which initiated the salmon aquaculture industry.57 The successes of early projects ensured the interest of the economic groups and foreign capital but there is little to the argument that this was diversification by the business élites alone.58 The state since the mid-1960s had been instrumental in the development of non-traditional sectors, particularly with a view to promoting regional development and rural employment, and the seeds sown at this time would be reaped during the later 1980s and

166 The state of democracy in Latin America 1990s.59 Once again, this is an example of the state supporting the business élites, effectively capitalising the risk elements of economic diversification, albeit still natural resource-dependent. These economic shifts from public to private could be brought about only in an environment of suppression of opposition. The military-business élites’ alliance that was consolidated by the mid-1970s, and the economic growth that nourished it, was dependent on the ability of the state to suppress opposition on all fronts. The radical left was suppressed most violently for dogmatic ideological reasons, the trades unions were suppressed in order to destabilise organised labour and facilitate a process of flexibilisation, the opposition media were silenced, critical intellectuals ‘disappeared’ or were exiled, and the rule of military law left wider society with few opportunities to voice its discontent. Only during the 1982–83 crisis would opposition voices be heard once more and demonstrations return, creating a platform for trades unionists and politicians to speak out against the regime. Despite a slow increase in organised opposition during the 1980s, culminating in the 1988 plebiscite, it was the authoritarian social discipline imposed by the security forces that most characterised the 1973–89 period and the model of the authoritarian capitalist state.

The legacy of dictatorship and the challenge of transition The term ‘transition’ has been used extensively in political science since the early 1980s. It has been used to describe the transitions from authoritarianism to democracy throughout Latin America, to describe the events and outcomes of the collapse of the Berlin Wall and the changes in the former Soviet Union and Eastern and Central Europe, and in the context of the shift from apartheid to inclusive elections in South Africa.60 The theme that binds these experiences together is that all have experienced a dramatic change in control of the state and a movement away from authoritarian rule to democratic rule and open elections. If one is to follow this common theme through to its logical conclusion, the actual hand-over of power, such as the ANC victory in the elections in South Africa in 1994 or the Velvet Revolution in Czechoslovakia is the defining moment of transition. However, this is too simplistic in most cases since the legacy of the past does not evaporate overnight and institutions and organisations, and the people that managed them, do not simply disappear. Transition is a process that often has a long period of germination and an equally long period of change and finally closure. So, transition is not merely the hand-over of power but a return to a democratic rule of law, an institutionalisation that is representative rather than repressive in nature, and a widespread confidence in the apparatus of the state-institution and political processes. Transition is

In search of the post-transitional Chilean state 167 therefore complex, and has to be considered as a historical process as well as in terms of values and ideals. Both Camilo Escalona and Tomás Moulian provide critical perspectives on the Chilean transition in terms of the legacy of authoritarianism and the changes in consumption patterns, encouraged by the increasingly influential role of market actors in shaping social values. Additionally, Escalona makes the essencialist point that the issue at the heart of democracy is that the interests of the majority should prevail relative to the minority, and not the inverse as at present.61 What is clear is that the unchanging state structure through transition has not facilitated the realisation of majority interests. Instead, minority interests are pursued while the majority are encouraged to accept a neoliberal vision of growth with ‘equity’ through the means of communication dominated by those same minority interests. In Chile, many different perspectives on transition have been forthcoming from the late 1980s to the present. Political scientists and sociologists have speculated as to the key ingredients of transition, its duration and what is required in terms of leadership, processes and institutions to achieve a successful transition. It is this depth of discussion and debate around the theme that has also been part and parcel of the concept of transition and how it has been used during this period. By creating a discursive mechanism to explain the events and processes of the shift in power from authoritarianism to democracy, it has been possible to reflect on the abuses of the past and desirable outcomes for a stronger and more participatory democracy in the country. What can be said with some confidence is that there is little agreement on what actually constitutes transition in Chile. Different authors have focused on different features, and politicians have used the discursive mechanism to their advantage by explaining chains of events as part of a longer process that can only be of benefit to Chileans. By using transition as a way of reducing pressures on government to respond rapidly to social and political demands, politicians in government have been able to delay certain policy measures, especially those that are considered to be areas of potential conflict, such as constitutional change. Although politicians have used the term with little clarity, there are many authors who have tried to imbue it with some sort of meaning. The need to flesh out the concept of transition is necessary in order to determine its longevity and content. If countries move through a process of transition from authoritarianism to democracy, it is important to understand what the factors of the transition are. Does it exist in its own right, with its own processes and structures? Or does it merely represent a period of fluidity during which time institutions can be transformed and society can adapt to a new political reality? To respond to these questions it is necessary to define some terms a little more clearly and to be explicit about what is taking place in politics and in society more generally.

168 The state of democracy in Latin America An important starting-point is the separation of the terms democracy or democratisation, and transition. Are these one and the same? And if so, why are they used in conjunction? In Chile, most discussions of political change during the 1990s have discussed the two themes side by side. Transition is generally understood to be a framework within which there is a democratisation of institutions and processes that had been organised for different purposes during the authoritarian period. By understanding transition as an umbrella for not only political change, but also social and even psychological changes, it is possible to use both terms in conjunction but it does not help to define what transition actually constitutes. For instance, what constitutes a government of transition, or a transitional period? Without a definition, it is not clear if a government of transition could in fact be authoritarian rather than democratic. To take this proposition a step further, could it be argued that the authoritarian regime was in fact a transitional administration from 1980, since the constitution approved by a plebiscite in that year determined that a national vote had to take place in 1988? It is unlikely that many people would consider that Pinochet, or even Gorbachev or Botha, were planning or expecting a transition to open elections and democracy from a starting-point many years prior to the events that took place. In the case of Pinochet, the decision to organise a plebiscite in 1988 was based on an assumption that he would win, that the whole period of the military regime would be legitimated, and that he would be hailed as the saviour of the country from communism and terrorism. Rather than taking transition back to 1980, it is more credible to argue that transition was in fact being planned by the military from the mid-1980s. Aware of the need to fulfil the obligations of their own constitution, the military had to prepare for the plebiscite in order to ensure its successful outcome. If one accepts that a plebiscite is a democratic mechanism for deciding political change, it is clear that this was indeed a transitional process. The two features of the plebiscite that complicate this picture are that it was carried out within an atmosphere of military repression and control – a similar atmosphere that had guaranteed the constitutional plebiscite victory in 1980 – and that it was not organised to transfer power, but rather with the intention of consolidating power by legitimising the regime. If transition is understood in purely civil-military terms, it ended during the 1998–2000 period. Pinochet’s ill health and his retirement from public life has been critical to Chilean political economy and considerations of the state. Without its neopatrimonial icon, the military has changed considerably.62 Under the leadership of General Izurieta (1998–2002), it adopted a lower profile than that of the early and mid-1990s and involved itself in a human rights dialogue – the Mesa de Diálogo (Dialogue Round-table) – from August 1999. Further evidence of the end of civilmilitary transition can be found in the string of judicial cases pertaining

In search of the post-transitional Chilean state 169 to the authoritarian period. While Pinochet was Commander-in-Chief, the military was regarded as untouchable, defended by the 1978 Amnesty Law. However US pressure led to the Letelier case trials, and international pressure, such as that generated by the human rights accusations of Judge Baltazar Garzón against Pinochet in Europe, reveals that this impunity is being challenged. Until the end of General Pinochet’s tenure as Commander-in-Chief of the armed forces in 1998, the legacy of the past was still present in an official and powerful capacity within the state apparatus. His personal transition to senator and, more importantly, the subsequent judicial proceedings in the UK (which removed him from Chilean political affairs for 16 months) were influential in ending the transition. Pinochet is a figure who divides the nation, between those who supported the coup, the junta and its methods, and those who opposed it; the 1988 plebisicite epitomised this, with a vote for his continuation or departure. Effectively the political arena has been similarly divided during the 1990s, along the lines of the Concertación versus RN and UDI. The absence of Pinochet from the Concertación primary in May 1999 and the presidential campaign and elections 1999–2000 are significant. For the first time since 1973, he was not influential in the political process; el caso Pinochet played only a minor role in the elections, with both candidates stressing the judicial rather than political nature of the matter. There are many interpretations of the Chilean transition, each focusing on a different element and with it establishing an argument for the stability and comprehensiveness of Chilean democracy during the 1990s. To take two extremes, for example, Enrique Cañas Kirby argues that the transition was organised carefully by the military63 since it was embedded in the 1980 constitution, and that it was a model transition since the hand-over of power was an orderly process and fulfilled the terms of the constitution. However, this argument sanctions the role of the military in the events of the 1973–90 period and justifies the lack of readjustment in civil-military power relations. In contrast to Cañas Kirby, the position of Petras and Leiva is one that points to the weaknesses of the incoming democratic administration in its negotiations with the military. It reveals the strong influence that the military exercised throughout the period of the hand-over and the perpetuation of this power into the democratic period, which Petras and Leiva describe as an ‘authoritarian elitist institutional matrix’.64 A more sympathetic reading of the situation is that of Oscar Godoy who notes that the transition was ‘pacted’ in that there was little opportunity for change and that Aylwin’s hands were effectively tied. As such, the years of the Aylwin administration were more ‘protected’ than ‘representative’; ‘tutelary’ and ‘guardian’ are also terms that have been widely employed for the Aylwin administration.65 Felipe Portales writes that 1990 did not mark the end of authoritarianism; rather it marked the

170 The state of democracy in Latin America institution of a tutelary democracy which effectively subordinated the democratic administration to the will of the forces of authoritarianism in relation to issues relating to their sources of power, such as control over the replacement of armed forces chiefs, the composition of the National Security Council, and the designated senators.66 It was nothing more than the first phase of a long process of democratic consolidation. In contrast, Carlos Huneeus argues that the actual transition was the shift in power from the authoritarian administration to the democratic one, effectively the passing of the sash from one president to another, and that the 1990s has been a period of consolidation, of not only democracy but the post-authoritarian political system. Rather than the transition representing a hand-over of power, it can also be argued that the transition was embodied in a particular way. One can make the case that Pinochet embodied the authoritarian period and that his presence as Commander-in-Chief of the armed forces until 1998, then as senator, gave the authoritarian capitalist state some momentum beyond the 1989 elections, well into the democratic period. Following this argument, his imprisonment in England in 1999–2000 was critical to ending the transition period.67 His return to Chile was characterised by on-going legal processes and his eventual retirement from public life on the grounds of poor mental health. This poor mental health gives him immunity from standing trial for the hundreds of claims made against him for human rights violations during the authoritarian period. One can say that democratic consolidation continues in Chile via constitutional reforms and other mechanisms though the transition ended in 1999 when Pinochet became physically distant from Chilean politics. He personified the dictatorship, therefore the movement away from dictatorship and its traumas could only effectively be achieved by his removal from public life, regardless of the electoral and legal instruments that suggested that transition had taken place through the ballot box and the handing over of a sash. Having made the point that the transition was embodied in the former dictator, one can also identify the process by which power was transferred from an authoritarian regime to a democratic one. The 1988 plebiscite which took place according to the timetable outlined in the 1980 constitution gave voters the choice of retaining Pinochet as president for a further eight years (the ‘Yes’ vote) or calling for multiparty elections (the ‘No’ vote). The ‘No’ vote carried the day by 54.7 to 43 per cent and a process of negotiations began between the military and the likely democratic administration around issues of continuity within the state apparatus, such as the constitution and civil service positions within state institutions. These so-called ‘binding laws’ would be presented at a referendum in 1989 and provide a framework for the democratic hand-over and the options available to the new administration. Camilo Escalona is highly

In search of the post-transitional Chilean state 171 critical of this legacy of authoritarianism and how this transformed itself into a ‘two-faced transition’, whereby contemporary Chile showed both its democratic and older, non-democratic faces.68 The elections returned the Christian Democrat Patricio Aylwin at the head of a coalition of centre and left parties (Concertación) with 55.17 per cent. The Chilean right was split between Pinochet’s unwilling surrogate, Hernan Büchi (29.4 per cent) and the populist entrepreneur Francisco Javier Errázuriz (15.43 per cent). As Pinochet left power, he declared that it was a ‘Mission Accomplished’, as if 17 years of dictatorship had been leading to pluralist democracy throughout. He also stated that the state of the law would be over if even one military official was prosecuted. This point was emphasised to the point that no one should be left with any doubts about the repercussions of human rights recriminations. It was clear that a pivotal element of the democratic hand-over was that the military would remain free from prosecution for human rights crimes during the authoritarian period. The persistence of the 1978 Amnesty Law, which effectively closed cases on all offences carried out during the 1973–78 period, was an important element of this ‘pacted’ hand-over.69 Subject to these conditions (principally no trials for human rights abuses and the perpetuation of the neoliberal economic model), President Aylwin trod carefully during his administration.70 To appease national and international calls to investigate human rights issues, the Chilean National Commission of Truth and Reconciliation was set up in April 1990 and its chair, Raúl Rettig, presented its findings in February 1991. Abuses were recorded but offenders were not identified or cases pursued as part of the pact. Some information was sent to the courts and particular cases were reopened but they did not threaten the military hierarchy. The process was essentially an information compilation exercise and it culminated in the official recognition of those who had been murdered by forces of the state, and to a lesser extent by armed opposition groups. The Commission reported 2,279 identified deaths and 957 disappearances; 2,115 of the deaths were classified as victims of human rights violations (the others as victims of political violence).71 A national corporation was established by the Commission to rehabilitate victims and family survivors and to provide material compensation for them and the exonerados (those who had been ousted from their jobs by the military). The National Office for Returning People was also established to assist those returning from exile. Additionally a monument to the 4,000 who ‘disappeared’ or were murdered was inaugurated at the Santiago General Cementery in February 1994. Despite a return to democracy, the military remained influential in politics and the army took to the streets in a show of force – the so-called boinazo72 of December 1990 – while President Aylwin was in Europe on

172 The state of democracy in Latin America an official visit. The perceived need to flex the military’s muscle was not in response to human rights issues nor the economic model at this time. Instead, it was a response to charges of corruption relating to the Pinochet family. In December 1990, the Congress had pursued accusations of illicit payments from the army to Pinochet’s son in what became known as the ‘Pinocheques’ case.73 This is an example of the central role of Pinochet in the transfer of power and the individual interests that were exercised in the process. Not only had he negotiated a prosecution-free transfer, but as Commander-in-Chief of the armed forces he could mobilise the military to defend a range of other interests, in defence of acts committed under authoritarianism, in order to sustain military and right-wing positions under democracy, and even to protect personal financial dealings. The transition in Chile was a shift from authoritarianism to democracy, defined as a shift from dictatorship to a system characterised by political and individual liberties, an operative elected legislature and executive, and an independent judiciary. This has been achieved during the 1990s although remnants of the past remain, i.e., the legacy of authoritarianism in the 1980 constitution, such as the ‘designated’ senators, the binomial electoral system favouring minority parties to the right,74 and the strong military bias of the National Security Council.75 It is these tenets of the authoritarian past that have defined the evolution of civil-military relations under democracy. While Aylwin adopted a ‘non-co-operative strategy’ in his dealings with the military, confronting human rights issues but not the 1980 constitution, Frei assumed a ‘strategy of engagement’ by encouraging discussions between civilian and military officials to develop a new defence policy. Lagos would adopt yet another strategy, moving towards a ‘division of spheres’ approach, stressing that human rights violations were a judicial issue, not a political one (this was particularly important with reference to the Pinochet case).76 Despite this simple reading of transition, the concept in Chile has taken on a mythical status and commentators have discussed a range of issues and themes associated with it and which give meaning to it. It is this complexity surrounding the term that makes it difficult to define its beginning, middle and end. The common threads, however, are the relationship between the authoritarian regime, the break with the past (the 1988 plebiscite and 1989 presidential elections), and the re-establishment of the democratic system (elections, legislature, presidential authority). Clearly there are many features of the democratic system that are problematic and undermine the legitimacy of the system, as noted in the previous paragraph, but in the context of Latin America the Chilean political system functions well, i.e., there is no tradition of corruption,77 and elections are well managed and peaceful. The fact that political representatives receive a low rating in opinion polls compared with other professionals is not a reflection of the system, but the activities of politicians and their party organisations.

In search of the post-transitional Chilean state 173 A preoccupation with transition and democracy has certainly been an important factor in distracting attention away from discussions about the post-transitional state. As such, the state model implanted in the mid-1970s continues in a form that runs in favour of domestic and foreign capital interests. The state has the characteristics of democracy, in that social discipline has been replaced by the generation of consent via communications media and values that are promoted through the educational system and consumption patterns. However, the differences between the values, social relations and institutions established under authoritarian capitalist development and those perpetuated under democratic capitalist development are not as great as one might expect from a major regime change. Jean Grugel uses the term ‘hollow democracy’ to describe this rise in democratic administrations throughout the South and the lack of substantive change in the political sphere beyond electoral features: . . . an electoralist conceptualisation of democracy fails to analyse the significance of the gulf between the formal structures of the political system and the cultures and practices which shape political activity on the ground . . . it ignores the reproduction of authoritarian cultures and the retention of authoritarian enclaves after the formal process of democratic transition; it fails to deal with the authoritarian manipulation of elections, the political agenda and the state by elites; it does not address social relationships – within families, localities, the workplace – which remain dependent on cartels or oppression; and it bypasses a discussion of the impact of economic resources (or a lack of them) upon the operation of the political system.78 This reveals the importance of looking beyond the politics of government to the politics of society more widely and how values, social relations and institutions change with shifts in power relations. Regime change is one manifestation of these shifts but not the only one. Therefore a closer examination of changing attitudes and values, to relations of capital and labour, formal and informal working arrangements, and changing institutional structures is a necessary step towards determining the significance of different regime types and state formations. The persistence of a particularly strong consensus around a set of values and social relations can be seen in the most recent presidential elections.

The 1999–2000 presidential elections: The battle for the centre ground On 12 December 1999, Chileans voted for their third president of the democratic period. Without the strong ideological reference points of the 1970s and 1980s, the elections of the 1990s involved less political ideology and more debate around political ‘justice’ and economic

174 The state of democracy in Latin America consistency, with one side (the Concertación and those further left) seeking recognition of abuses carried out in the name of internal security and economic continuity, and the other (the military and parties to the right) seeking recognition of their role in the construction of the so-called economic ‘miracle’ put in place from 1975. The elections of 1999 were significant in that the military and human rights issues that had dominated electioneering in other elections of the 1990s were minimised compared with other issues, such as social and ethical policies. This is not to say that the civil-military issue and the human rights issue no longer have electoral impact, but that they have been joined by other political and social issues on the main stage. The elections were important events in terms of revealing changes in Chilean society and its social relations, also in the nature of contemporary politics. Throughout the 1940–70 period, Chilean politics had been characterised by a three-way split in terms of voting behaviour: leftcentre-right. The Concertación governments of the 1990s had successfully reproduced themselves by securing an alliance of left and centre parties against the RN and UDI to the right. However, the 1999–2000 elections revealed a shift from a three-way split to a binary division.79 A decade of democracy had effectively strengthened the position of the right vis-à-vis the centre-left, in congressional and municipal elections through the period. The most likely explanation for this shift is that those on the right-wing of the Christian Democrats were defecting to right-wing parties due to dissatisfaction with the alignment with the socialist party (PS) and the Party for Democracy (PPD).80 In fact, there is a strong argument that the whole political tradition of a three-way political split across society had been eroded during the 1990s as a result of the authoritarian-democratic alignment.81 The political agenda has changed a great deal during the 1990s as the civil-military transition and questions about the constitution and the role of Pinochet have dissipated slightly in favour of issues of further market liberalisation, privatisation of public services, and social policy, e.g., to combat delinquency and drug-related problems. In terms of economic and social policy there is more common ground between left-centre and right now than at the beginning of the 1990s, and the 1999–2000 elections were waged over some of the details of these issues. Consequently, the outcome was a closely fought election of two rounds. Instead of the civil-military and modernisation discourses of Aylwin and Frei, the candidates in the 1999 elections focused their efforts on ‘third way’ politics and right-wing populism. Ricardo Lagos, the candidate of the Concertación, had been very much influenced by European centrist politics and advocated a social democratic agenda allied to a deepening of the neoliberal economic model, in particular the promotion of public-private initiatives such as infrastructure projects, the revision of labour laws and improved social programmes.

In search of the post-transitional Chilean state 175 Effectively there was little different in the manifesto from the Christian Democrat-dominated administrations of Aylwin and Frei. Whereas Frei had committed himself ‘to eradicate extreme poverty’ in 1993, Lagos proposed the eradication of campamentos (shanty settlements) and the provision of more and better formal housing. Joaquin Lavín, the representative of the Alianza por Chile (an RN-UDI alliance), generated his support from the traditional business and social élites that had upheld the values and activities of the authoritarian state, and he sought to win new votes from those disaffected with the Concertación, particularly those Christian Democrats opposed to a socialist candidate. Lavín’s conservative consensus focused on individual rather than collective opportunities to reduce poverty, e.g. through micro-entrepreneurialism; however, the social programmes of both candidates were not strikingly different, and the economic model remained unquestioned by both. Polls prior to the elections had seen the strength of Ricardo Lagos, which had been established in the May primaries for the Concertación candidate,82 wane in the face of a highly populist campaign by Joaquin Lavín. With considerable financial backing from the business sector, Lavín generated a great deal of visual propaganda and established a 60-point plan which offered commitments to a range of policies. Much of Lavín’s campaigning involved a technification of social problems and this reflected his own economics and business background, as well as his activities during the mayorship of the wealthy Las Condes comuna of Santiago (1992–99). The reduction of a wide range of political themes to technocratic problems, and the vision of the electorate as clients and consumers of policies and services leads Patricio Silva to describe the ‘Lavín phenomenon’ as more about a technocratisation of mass politics rather than a shift towards populism or neopopulism.83 Of particular interest was Lavín’s offer of one million new jobs, although how this would be done alongside ongoing market liberalisation was not made explicit. An issue that emerged from the management of his campaign was that of campaign funding and whether restrictions should be established. It was estimated that Lavín’s budget exceeded that of Lagos by a factor of 6; this was evident in the streets of Santiago where Lavín’s publicity machine – posters, flags and paid campaigners – was highly visible. This competition for the middle ground on socio-economic issues, and the desire to leave traditional electoral concerns of dictatorship and human rights to one side, characterised the elections.84 With little to choose between the policies of the candidates and an economy experiencing its first major downturn since the early 1980s, the floating electorate sided with change and the Lavín vote registered a much higher percentage than expected in the polls. The narrow margin of victory for Lagos in the December 1999 elections (47.96 per cent to Lavín’s 47.52 per cent) triggered a second round of voting in January 2000 (since neither candidate

176 The state of democracy in Latin America won 50 per cent of the vote). Of the remaining votes cast in the first round, 3.19 per cent were for the communist party candidate Gladys Marín, and although she instructed communist voters not to vote in the second round, it is likely that their support and the emergence of Concertación voters who had not expected a close election and did not vote, were significant in Lagos increasing his lead in the second round and winning the presidency (51.31 per cent to Lavín’s 48.69 per cent).85 With such a small margin between the leading candidates, the voting behaviour of those people who had voted for neither principal candidate was highlighted. Between 12 December and the second round on 16 January 2000, the support of the retiring candidates for Lagos or Lavín became important, in terms of guiding voters. The close vote in the first round led to renewed efforts on both sides in order to capture any floating voters and the votes from the previous candidates. The victory margin of over 300,000 votes suggests that more Lagos supporters went to the polling booths who might have stayed at home in December, believing in a straightforward Lagos victory. Also there appeared to be a shift of votes to Lagos from the other candidates, particularly Gladys Marín’s communists. Writing in 1990 following the victory of Patricio Aylwin in the 1989 presidential elections, Alan Angell and Benny Pollack discussed the beginnings of a transition to democracy. The presidential elections of 1999 marked the end of this transition. With both candidates fighting for the centre ground, Ricardo Lagos on a platform of coalition politics incorporating Socialists and Christian Democrats, and Joaquin Lavín representing the parties to the right, the differences between the candidates in terms of economic policy could be seen to be discursive rather than substantive. In terms of social and cultural perspectives, the gaps were considerably wider however, and the elections were not fought along these lines. Rather than expand on their differences, both candidates sought to capture opposition votes in a closely fought campaign. The result was a battle for the centre-ground. Lagos’s victory in the second round in January 2000 is significant for three reasons. The first is the end of transition. The transitional politics of the 1990s was a complex affair but its centre-piece was a restructuring of civil-military relations. The 1999 elections were not fought on debates around the role of the military or the return of Senator Pinochet from the UK. Although the spectre of the past (dictatorship and the trauma of repression) remains embedded in Chilean society, it was not central to these elections. Chile can no longer be defined as being ‘in transition’, in terms of the military’s impact on politics and elections. The second issue is that of the emergence of a two-way political split in society, to replace the traditional three-way split that dominated Chilean politics until 1970. Chilean society is now firmly polarised into those who support the neoliberal project of market liberalisation put in place in

In search of the post-transitional Chilean state 177 1975 by the military and their ‘Chicago Boys’ economic advisers, and those who oppose it, either in principal or in terms of what it can deliver in its current form. The 1999 presidential elections were fought on some of the issues relating to economic growth, though the model itself was not questioned. With both candidates supporting neoliberalism, it was the adjustments vis-à-vis its ‘human face’ (the social policies that should accompany it) which were most seriously debated. In terms of transition, the extensification and intensification of neoliberalism (apart from the early 1980s crisis) over 25 years reveals that the nature of economic development has not been transitional and that this is no longer contested by politicians, excepting the few who represent humanist, communist and traditional socialist groups. The final issue of significance is the social and cultural shift in Chilean society that has accompanied neoliberalism and that now provides a space for political debate. Rather than the civil-military and constitutional issues that dominated political discussion in the early and mid-1990s, the emphasis is now on the values, ethics and ideals associated with contemporary Chilean development. With each presidential candidate representing a different perspective on these issues, the elections also revealed the tensions in society about how liberal or conservative it is and should be. These three issues reveal that the politics of the 1990s is set to change considerably into the decade 2000–2010, and that the values within Chilean society are changing a great deal, despite the fact that social relations remain locked into an authoritarian economic development model. Although still latent in Chilean society, the politics of the civil-military relationship is no longer the key to understanding Chilean politics, as it was in the early 1990s. The persistence of neoliberal policies under the Concertación administrations of Aylwin and Frei has ensured the economic status quo, and elections are returning to the politics of Western liberal democracy (voting individualistically in favour of economic well-being rather than along ideological or class lines). Chilean politics is now dominated by discussions about how society should evolve alongside the economy. Although there are critics of neoliberalism and critics of cultural conservatism, there is a consensus of centre-right politics founded on market liberalisation. The values that emerge from this consensus provide the basis for the moral and ideological leadership of the current development model. Chile is no longer transitional in terms of its politics (it never was in terms of economics). Democratic politics, despite the persistence of an electoral system favouring minority parties and the ‘designated’ senators that skew the Senate towards the right, is well established and Chilean society has followed the political class into a broad acceptance of a politics of economic individualism and political pragmatism. Even the style of politics is changing, with the introduction of primaries, more subtle use

178 The state of democracy in Latin America of means of communication and ‘branding’ of party politics (particularly the use of television and images, sound-bites, and messages rather than policies), and the emergence of concerns about electoral financing. Eugenio Tironi and Felipe Agüero write about the potentially damaging effects that this shift could have on a population already largely disaffected by the political system: Disaffection might also induce an increasing personalization and rationalization of politics, that in turn could lead to increasing volatility, with electors choosing people in a similar way to consumers selecting items in the market, right at the edge of any kind of adhesion or wider and longer term loyalty.86 In many ways the battle for the centre ground of the 1999–2000 elections reflects a 1990s trend in Chilean politics, economics and society. The electorate has shifted from a traditional three-pronged division to a binary one. The separation of Socialists, Christian Democrats and right-wingers (RN and UDI) remains, but this political affiliation is not as significant as the simpler division between those who support a neoliberal model of market economics and compliant social democracy, and those who favour stronger state intervention within a model of neostructural political economy. Views on how society is structured, who benefits from economic growth and to what extent, and how social programmes and policies should be organised and funded are all intrinsic to how the state is conceived, since values and social relations lie at the heart of the matter. It is only with more vibrant debate around these issues and the political alternatives to pursue that a new democratic social contract could be constructed.

The state as social conscience Chile is increasingly polarised between those connected with the fruits of the export-led model and those sufficiently remote from it to receive little or no ‘trickle-down’.87 These latter groups look to the government and its management of the state institutions to proactively redistribute some of the benefits that are so widely publicised as the national ‘economic miracle’, to defend them from the negative aspects of the free market model, such as labour flexibility, and to provide good access to welfare provision. They also desire an effective regulatory state, to balance national and social interests against business interests, and a state that functions according to the rule of law and within which all state institutions follow presidential instructions and democratic processes. During the transition period, the approach to social development has been marketoriented, e.g., the privatisation of pensions and health care. The impact is further aggravated by the privatisation of basic needs, such as energy and water.

In search of the post-transitional Chilean state 179 Since the economic ‘miracle’ has been based around privatisation, market liberalisation and export-oriented development, it has been a tremendously powerful phenomenon in terms of shaping Chilean social and cultural development. A minority of the population has adopted many of the icons and tastes of North America which have been imported via the media, and in terms of youth culture the impact has been highly significant. This imported US culture is distinctly urban and consumptionoriented. Against this homogenisation along ‘American’ lines, one can contrast the cultural tradition of Chile which is influenced most strongly by the Catholic Church and the morals and values projected by that church. An extension of this cultural heritage is the influence of a rural past, of huasos88 and livelihoods derived from working the land, which permeates national celebrations. These traditional cultural roots are juxtaposed against external influences in Chilean daily life and there is a battle to change (on the one hand) and safeguard (on the other) particular values. For example, issues of divorce and abortion were particularly important during the primary within the Concertación in 1999, since these social issues proved to represent the greatest division between renovated Socialists and Christian Democrats. Chile’s socially and culturally conservative interests hold great sway within society and their control of the media leads to careful censorship and the persistence of strong Catholic values. These conservative interests are also those of the business élites and the political right. The influence of the ultra-conservative Catholic movement ‘Opus Dei’ within the Chilean right has been noted by several commentators, especially since Joaquin Lavín is a follower. In terms of values and the role and responsibilities of the Chilean state-institution, and despite the importance of discussions around the nature of consumption89 and the role of Catholic values (also, and increasingly, the influence of evangelism), there has been no more defining issue during the 1990s than that of human rights and the struggle to clarify and finalise the abuses carried out under dictatorship. Although impunity had been largely secured for the military by the 1978 Amnesty Law and the negotiated nature of the democratic hand-over, this security did not last throughout the 1990s. The detention of the dictator himself by the end of 1998 was the clearest example of this weakening position. The human rights abuses committed during the military period have remained a bone of contention across Chilean society. Two principal axes emerge. The first is that between the supporters of the military and the means they employed, although some might argue that they did not know about the military’s covert activities due to the suppression and control of information, and those who opposed them. The ends justified the means for most Pinochetistas and they remain unrepentant for the human rights abuses, in the belief that the ‘Marxist cancer’ threatened their livelihoods and lives. They were very much in tune with the

180 The state of democracy in Latin America message conveyed by the military-business-right wing hegemonic bloc of authoritarian capitalism. This message presented an image of Allende and the Popular Unity period as one of chaos and ideological perversity. It labelled all military and economic opponents as supporters of this ideology and as threats to the dominant interests of the nation-state, as defined by the bloc. As such, they could be pursued, incarcerated, exiled or murdered by the armed forces of the state. Consent at this time was not achieved through coercion, but through violence and repression. Consent was not actively generated, rather it was acquired by silencing the voices of those that did not accept the status quo. Another axis vis-à-vis human rights abuses would emerge during the 1990s amongst those who had been incarcerated and tortured or whose family members were detenidos desaparecidos. For all, there could be no reconciliation without truth, and for many there could be no truth without convictions. They demanded that the murderers be brought to trial, including those who had given the orders for state-sanctioned murders to be carried out, thus implicating high-ranking officers across the armed forces. Others, however, argued for more information but without the prerequisite of achieving justice. This was very much part of the discourse of the democratic governments of the 1990s – to look forward and not live in the past, to forgive but not forget. This position is currently epitomised by the Minister of Defence, Michelle Bachelet, whose father was an air force general and was murdered for his opposition to the coup. These divergent positions would be played out quite vigorously during the Mesa de Diálogo organised by President Lagos to bring different parties together to seek a form of closure on the human rights issue.90 Almost instantly after the coup and the first evidence of state terror, the Church became an important actor in reducing abuses by acting as a witness, through documentation, representation and by opening up legal processes. Two formal committees of the Catholic and evangelist churches were established. One was for refugees in Chile from other countries under dictatorship.91 The other was set up to assist Chileans and became the Pro Paz Commission, supported by the Archbishopric of Santiago in January 1976 when it changed its name to the Vicariate of Solidarity. The role of Archbishop Raúl Silva was central to the ability of these church institutions to carry out their activities. He had to tread a fine line since the Vatican was less supportive of these actions.92 The importance of the Chilean Church in maintaining a high profile for human rights abuses was that all other organisations were effectively blocked in this regard. For instance, a visit by an ad hoc group of the UN Human Rights Committee in July 1978 was accepted but when they left they were not permitted to return. The earliest organised eradication of opposition groups, carried out to suppress opposition as well as to influence those within the military who were not supporters of the coup and the tools of repression exercised in

In search of the post-transitional Chilean state 181 its aftermath, was the so-called ‘Caravan of Death’. During October 1973, 75 people were killed in the north of Chile in different locations as summary executions were carried out under the direction of officers sent from Santiago by the military high command. Also in late 1973 (November) the DINA was established (later changing its name to the CNI). This national intelligence unit would become synonymous with kidnappings, torture and murder not only within Chile but also in other countries. The DINA is linked to the killings of Orlando Letelier in Washington (1976), General Carlos Prats in Buenos Aires (1974), the attempted murder of politician Bernard Leighton in Rome (1975), and the murder of the trade union leader Tucapel Jiménez (1982). The ability of the military and paramilitary forces to evade prosecution started to unravel during the mid-1990s. Although the military still retained a strong presence in the country through the figure of Pinochet and the trauma of the recent past, it was external forces that let the genie out of the bottle. The Orlando Letelier murder in Washington DC had come to a head with the confessions of Michael Townley, one of those involved in the bombing. His information led to the arrest of General Manuel Contreras and his deputy Pablo Espinoza (both of the DINA) for the murder. Although the Amnesty Law would have protected them, US pressure to resolve the matter gave the Frei government the leeway it needed to prosecute the DINA operatives in the face of military opposition. It was the first case of the security forces being tried and found guilty for actions carried out during the dictatorship. Another landmark case was the claim made by the Chilean Communist Party leader, Gladys Marín, in January 1998 against the kidnapping and murder of her husband, Jorge Muñoz. This was the first case made directly against Pinochet, and it opened the floodgates. When Pinochet retired as Commander-in-Chief of the Armed Forces and entered Congress as a Lifelong Senator (according to the 1980 constitution) in March 1998, his stranglehold over the military also dissipated slightly. However, the most influential moment was his arrest in London on charges brought by the Spanish judge Baltazar Garzón in October of the same year. Pinochet’s absence from Chile and the more moderate line adopted by his successor General Izurieta opened up the political landscape for further legal claims against human rights abuses, and a new atmosphere of Chilean politics without the overbearing figure of the dictator (an ever-present spectre for 25 years). His absence facilitated the creation of the Mesa de Diálogo which was established by the government in August 1999 to bring together those who had suffered human rights abuses (victims and families), the military and other individuals from a broad range of organisations and professions. The main purpose of the exercise was for the military to be encouraged to divulge more information about the detenidos desaparecidos and to reveal the location of bodies. However, many victims’ families groups refused to co-operate, believing the

182 The state of democracy in Latin America Round-table to be another means of exempting the military from judicial processes. Another opportunity derived from Pinochet’s absence was that he did not become a factor in the elections of 1999–2000. Both principal candidates – Ricardo Lagos and Joaquin Lavín – argued that the Pinochet case was a purely legal one, not political. As such, they sidelined the events in Europe, both in the knowledge that to support or oppose Pinochet would fan the flames of the election and probably take a large part of public voting behaviour back to the plebiscite of 1988. In March 2000, Pinochet returned to Santiago having avoided extradition to Spain on health grounds and, following a series of claims regarding his health by his defence team and appeals by public prosecutors and other voices in civil society, he was found to be incapable of standing trial due to dementia in July 2001. By this time, over 250 cases were pending against him in the courts.93 It was not until the Mesa de Diálogo reported in January 2001 that there was greater knowledge of the military’s activities during the authoritarian period, beyond the case-by-case approach of the Rettig Commission. The presidential address to the nation on the findings of the Mesa de Diálogo detailed the cases of 200 desaparecidos. Of this number, 120 were reportedly thrown into the sea, thus denying their families the opportunity to recover their bodies and bury them with dignity.94 The importance of the human rights issue cannot be underestimated in terms of the values and the institutions of the Chilean state. Since state-sanctioned terror and murder had been the hallmark of the authoritarian period, the relationship between state institutions and civil society had derived a particular form that would be difficult to change during the 1990s, principally as a consequence of the continuing role of General Pinochet at the head of the armed forces and the weak position of the democratic administrations vis-à-vis the military and the composition of the Senate. Under the authoritarian regime, a strong set of values had been established along the lines of political and economic ideologies. These lines had divided Chilean society in a stark way, to the extent that political beliefs could equate to life or death, exile or torture, in certain circumstances. The military was active in its use of the media to present those on the left, or any opponents of the regime, as threats to national security. It constructed itself as the defender of national security and stability in the face of socialist anarchy. By increasing the perceived level of threat to society in general through its use of the media, the military attempted to legitimise its extreme forms of social discipline and perpetuate its role as guarantor of social order. It was not surprising therefore that themes of truth, justice and reconciliation would become so important in the 1990s as a way of trying to clarify truths and falsehoods during the dictatorship

In search of the post-transitional Chilean state 183 and to establish more accurate information about individuals and events. The Mesa de Diálogo was an important step in the direction of revealing more information. However, the values that accompany democracy and an idea of the state that is inclusive and transparent lead one to suggest that the process is on-going and that legal and moral issues in the human rights debate will continue to be important in establishing the nature of the post-transitional state.

The Chilean state and the question of hegemony In terms of the shape of the Chilean state and how it has evolved in the post-authoritarian decade, one has to question to what extent the state is now a servant of neoliberalism rather than Chilean society (in its broadest sense), despite the cloak of good governance and political democracy that has been hung over the ‘Chicago Boys’ economic model. The power of economic groups, the underlying power (or threat) of the military, and the weaknesses of successive governments run by a coalition of Socialists, Christian Democrats and parties designed for the 1988 plebiscite rather than a decade of government, has led to a state formation that has been ‘hollowed out’ in many senses. Its powers have been siphoned off into the private sector, for example, as employer and welfare provider. The anomaly of Codelco is the exception that proves the rule. In terms of social relations and institutions, rather than the state of mass participation, representation and organisation of the Allende period, what currently exists is a technocratic, managerial structure that has been organised around sustaining the New Liberal Consensus. It is not representative of diverse national interest groups. Instead, it is a social structure that has been constructed through nearly 30 years of authoritarianism and democratic transition to convey the message of neoliberal economic development and, more contemporarily, a style of liberal democracy characterised by structures and processes rather than participation. Jean Grugel encapsulates the problem: Democratisation is thus, rather paradoxically, frequently an exclusionary form of government which serves to strengthen elitism and privilege, and to fence off the government from popular pressures which might otherwise prove unsustainable.95 The shape that a more participatory, post-New Liberal Consensus model of the Chilean state would take requires an assessment of the changing social, economic and political patterns, and a re-evaluation of what is and should be the role of the state, what activities should fall within the remit of the state-institution, and most importantly, how social relations can be recast and a new social contract established. One can argue that this assessment has not taken place for reasons of economic expediency and

184 The state of democracy in Latin America political insecurity. For the term ‘transition’ to be completely relegated to the past, a new state must be designed. This state will be transformed at the institutional level by constitutional reforms, by a new civil-military engagement, and by a reallocation of productive, service and infrastructural responsibilities and safeguards. Rather than the state-institution being regarded as a burden, it can be seen as a mechanism to protect wider and more diverse interest groups, to reallocate wealth and promote greater equity, to widen access to education and employment opportunities, and to secure rights and basic needs. The Chilean transition to democracy that began with the plebiscite in 1988 must not be understood as a victory of democracy over authoritarianism. The shift from one political model to another was not marked by rupture. It was a negotiated settlement that took place between 1989 and 1990, ending with the ‘binding laws’ that constrained the Aylwin administration in constitutional and electoral areas. Pinochet’s personal transition from a civil and military leader to military only was a key feature of the settlement and is the clearest example of the absence of a clean break in 1990. The transition from an authoritarian state to a democratic one with the same Commander-in-Chief of the Armed Forces belies the democratisation process and rightly brought criticism that this was a tutelary, delegative, partial or guardian democracy. Of paramount importance for all those engaged in the political transition was the civil-military balance of power in the country. The alignment of all but the most extreme parties of the centre and left to form a coalition against the regime to fight the 1988 plebiscite and 1989 election indicated the supremacy of the desire to return the country to democracy. However, the economic thinking within this bloc had traditionally been quite diverse, on a spectrum from the more liberal economists of the Christian Democrats to the more radical Socialists. Nevertheless, to oust the military from power, these economic traditions were not fully debated. An end to human rights abuses and a return to democracy at any cost held sway. The consequence of this unified approach to the plebiscite and electoral campaign of 1989 was that economic change was not highlighted, therefore neither were the dominant social relations established under authoritarianism. It was political themes that dominated discourses and the thoughts of the electorate. By not daring to engage in economic debate, there was a complicit arrangement to maintain the economic status quo. The aim of the Aylwin administration to ensure stability at all costs meant that the government wanted neither to challenge the military nor the business élites. Furthermore, many Christian Democrats and ‘renovated’ Socialists wanted to establish a strong link with the business élite in the pursuit of further economic growth along the same lines. Whether the struggle for democracy had left a vacuum for alternative economic thinking in the political centre and left, or whether the globalisation of neoliberalism

In search of the post-transitional Chilean state 185 had led to a sense of fait accompli is unclear. What is clear, however, is that a challenge to the ‘Chicago Boy’ model was unforthcoming in the early 1990s and this remains the case today. The formation of a New Liberal Consensus – a marriage between liberal political democracy and economic neoliberalism – was advanced during the early and mid-1990s as the political class which had effectively overthrown authoritarianism in the country allied itself with the parties of the right and the international and national business élites to establish a consensus around the fusion of economic continuity and democracy. The Christian Democrats who were centre-stage in the Concertación were able to ensure that the coalition did not fragment during the first transitional administration by emphasising the importance of unity, stability and consistency; the PPD was also instrumental in this unity since its raison d’être was a successful transition. It was to be left to the second administration to make inroads into the authoritarian enclaves that had been established during the negotiated settlement. Although debates around constitutional issues were forthcoming, the economic strategy that Alejandro Foxley and his team had constructed for the Aylwin administration was continued into the Frei administration by Eduardo Aninat and Alvaro García. The sense of euphoria within centre-left political circles, and across most of society over the fact that the country had been returned to democracy, paved the way for the on-going laissez-faire approach to the economy. Whereas voters may have expected a more reformist Christian Democratic agenda along the lines of the 1964–70 Frei administration, or a more radical agenda for social change proposed by the Socialists who had been associated with the Allende administration or who had struggled over a long period to undo the dictatorship, or a synthesis of the two, the outcome was quite different. Explanations as to how the Concertación has maintained its unity despite its apparent political divisions fall into three camps. The first explanation relates to the changing ideologies and political stances of centre-left politics world-wide following the end of the Cold War during the last years of the 1980s; the centre and moderate left are now fighting over similar ground and the rise of Third Way politics in Western Europe has parallels with the attempts of Presidents Frei and Lagos to court the domestic and foreign business élites alongside economic liberalism and support for the development of civil society. The second relates to the key individuals and the make-up of the parties that comprised the Concertación and were influential in leading it through three successive presidential campaigns. The age, memories of the coup, and years of political exile or silence of some of the key actors may have been significant in their decisions to shift to more moderate politics and policies, favouring stability and pragmatism over ideology and principle. The final explanation may be found in the shift of Chilean party politics from its separation

186 The state of democracy in Latin America into three blocs during the 1950s and 1960s: right-centre-left, to a more binary system of right-centre politics around two ‘macro-parties’,96 each representing broad interests across almost one half of the political spectrum. The left is clearly in crisis due to the centralising tendencies of key socialists, including Ricardo Lagos, as well as the collapse of the far left.97 The 1999–2000 presidential elections encapsulated this binary division as the two candidates waged a campaign with few key policy differences in order to consolidate control over the political centre. There may be elements of all three explanations in the Chilean experience, though the relationship between the politicians of the Concertación and the business élites have been instrumental in the development of an alliance between the political managers of the state-institution (executive and legislature) and the business élites. On the economic front, the neoliberalisation of the Pinochet period has been deepened rather than eased and it is clear that, in contrast with the authoritarian period, there is no desire to affirm a strong role for the state in the national development strategy. Instead of the strong state involved in social control and business promotion during the late 1970s and 1980s, there has been a shift towards a weak regulatory state. The importance of the description of events and how they came to pass, noted in the previous sections, lies in the theoretical framework that can be constructed in the light of the decade of transition and democracy. The two polarised arguments that seek to explain the roles of the state, markets and civil society during the 1990s are as follows. Those in favour of the neoliberal development model expound the virtues of the macroeconomic variables, the stability of the Chilean economy vis-à-vis other Latin American economies (despite the Tequila, Tango and Asian contagion financial crises), the country’s rising profile in international trade through agreements and levels of commercial activity, increased wealth creation and the emergence of élitist consumption patterns and edifices. They praise the light-handedness of the state-institution during the 1990s, and the way in which it facilitated the continuation of economic growth, managed the civil-military rapprochement and constitutional problems without reducing political thus economic stability, and which regulated the economy and society in favour of economic growth rather than socio-economic equity. The counter-argument is one that highlights the socio-economic disparities that are evident across Chilean society and which neoliberal development has failed to ameliorate. It prioritises business aims and objectives to the detriment of civil society more widely and the absence of an inclusive national development programme. The argument finds fault with the theory and applications of neoliberalism and cites numerous examples of how it has contributed to maintaining polarisation rather than reversing the trend. At this point it is well worth noting that it is not absolute poverty measures that are paramount in this argument but

In search of the post-transitional Chilean state 187 relative measures. Chile has consistently produced wealth and social development improvements since independence, based on its agricultural, mineral and currently its non-traditional products sectors. It is the distribution of this wealth that should be at the centre of socio-economic development in the country, not the ‘relief ’ of the poorest of the poor via targeted programmes, as occurred under Pinochet and persists through the FOSIS. The spectrum of opinions from those who advocated, implemented and reaped rewards from the neoliberal model, to those who have become more marginalised and disillusioned by it, is broad. However, rather than focusing purely on neoliberalism per se and market actors in the sense of business agents, there is more to be gained from a deeper analysis of the central role the state has played in the neoliberalisation of Chilean social relations from the mid-1970s, and how the transition from 1988 facilitated the continuation of the authoritarian economic model into the 1990s and its consolidation under political democracy. For an assessment of the role of the state in the Chilean neoliberalisation experience, it is necessary to unpack the relationships in Chilean society. The ways in which the state is understood are determined by how it is constructed and defined. If one is to understand Chilean society in terms of civil society, the state and the market, it will be difficult to establish which of these domains exerts most power or is subject to it over time. Understanding is also complicated by the fact that these domains are neither cohesive, e.g., military and executive in the state-institution, the economic groups and small-scale farmers in the market domain, and the élite consumers of La Dehesa and the Mapuche of rural Araucania, nor exclusive, e.g., actors can be both workers and voters, members of social movements and supporters of authoritarianism. To move beyond the arbitrary divisions across society according to a separation of polity, economy and society, it is possible to understand development as a struggle between different interests. These interests may be class-based, ideological or religious, self-motivated by individuals or small groups, local and regional, and/or historical in some way, e.g., Mapuche property rights. Traditionally, Marxist analyses of the state focused on the capitalist mode of production and understandings based on class formations and historical materialism. However, a late twentiethcentury interpretation reveals less of a class-based alignment across Chilean society. With a large rural labour force, and isolated but highly organised minerals workers, there has been little development of a strong urban-industrial proletariat. There is little solidarity across labour, especially between formal labour (that is well organised and better paid, particularly the copper sector workers) and the seasonal migrant labour of the agricultural sector (highly flexible and predominantly female). It can be argued that it is a lack of consciousness of the similar plights of labour that is at fault here and that capital has been effective in

188 The state of democracy in Latin America fragmenting and controlling labour (enabled by the state violence of the Pinochet regime), however there can be little doubt that Chilean labour does not act cohesively and that it has been transformed since its high-point during the Popular Unity years. For the same reasons, capital is also not unified. The agricultural export business élites have successfully defeated the interests of traditional agriculture, for example through associated membership of Mercosur and other agreements. The interests of the export-oriented economic groups and foreign capitalists operating in Chile are also difficult to equate with those of the domestic-oriented SMEs (Pymes). Class-based analysis may be too reductionist and less valuable in view of the heterogeneity of actors and interests across Chilean society. There are clearly labour and capital issues that persist, such as Piñera’s authoritarian labour code which was so important in underpinning the Chilean growth ‘miracle’ and was only mildly reformed by Lagos. Nevertheless, this separation does not help in determining the role and influence of the state during the period under review. An assumption based on this binary division created by the capitalist mode of production, and the state as a derivative of this mode of production – an epiphenomenon – creates a purely instrumentalist understanding of the state. The state can only be understood as being controlled by capital or labour, and is likely to be a tool of repression in both cases. A more subtle understanding would suggest that the state is an outcome of a set of social relations that are manifested in a set of institutions. In this interpretation, the state is not an epiphenomenon or superstructural feature of the economic base; rather, it is also political. For instance, it is difficult to explain the coup purely in terms of the economic base and the interests of capital. The Cold War context of the coup and the ideologies of the time revolved around capitalism and communism as competing metanarratives on the organisation of social relations. However, the actions of the military in creating the national security doctrine suggests a more politicised set of activities, albeit wrapped up in a global struggle to determine the nature of the international economic base. A separation of the political and the economic is unhelpful here due to the overlaps that exist, therefore any separation of state and market as autonomous entities is also rather artificial. Civil society is also inseparable from the state and the market, since individuals are voters, workers (in the public and private sectors and security forces) and benefit from, or are subject to the legal powers of the state and the supply and pricing powers of the market. As such, civil society can be best placed as part of, rather than separate from, contemporary political economy; the influence of the Church provides an important example of the need to include civil society actors in political analysis. If one accepts these assumptions, the state can be understood as a reflection of the social relations that are bound up in the political economy, as part

In search of the post-transitional Chilean state 189 of a dialectical and dynamic process. As such, the state cannot be interpreted in a purely instrumentalist way. The basis for understanding social change and development therefore shifts to the political economy and the dominant discourses or metanarratives that shape it, whether ideological or cultural. Out of this comes the notion of hegemony and consensus whereby there is a shared interest in pursuing and consolidating a particular development model. Hegemony, following Gramsci, involves a unification of the capitalist bourgeoisie and the state in maintaining cohesion. The forms of organisation and representation of this hegemony, most often embodied in the state-institution, are critical to the health of the hegemony. Its health is also dependent on the disorganisation of those who are dominated by the hegemon.98 For the purposes of this chapter, one can therefore identify a Chilean hegemony during the 1990s that can be labelled as a New Liberal Consensus. This consensus around political democracy and economic neoliberalism has replaced the authoritarian-business élites alliance of the Pinochet period, yet it mirrors much of the exclusiveness and exploitation of its predecessor. The social relations that define the contemporary state were put in place during the authoritarian period as the ‘Chicago Boys’ and the business élites were facilitated in their imposition of the neoliberal model by state violence and human rights abuses. The privatisation of public sector productive and service activities, the weakening of the trades unions and critical opposition (the intelligentsia and media), social discipline and the complicity of international capitalism all contributed to the firm footings of the neoliberal model. Clearly the 1988 plebiscite and 1989 election victories for the anti-authoritarian opposition created an opportunity to break from these processes of social disciplining and élitist capital accumulation. The democratic administrations of Aylwin and Frei would manage the civil-military and constitutional obstacles to the transition process, although constrained by the leyes de amarre (the binding laws agreed prior to the hand-over of power), and would moderate the social discipline while not making a break with the violent past and public distrust of the police force: nevertheless, the privatisation and market liberalisation would continue unabated. The rationale behind the continuity of the economic model and its deepening during the 1990s is three-fold. The first reason is that the Concertación administrations of Aylwin and Frei were dominated by the same Christian Democrats who had opposed the socialism of Allende, and who were opposed to the authoritarianism of the Pinochet period but not the model of capital accumulation; it is not clear that the ‘renovated’ Socialists of the PS and PPD were opposed to further market liberalisation either. The policy choices of Ricardo Lagos, as Minister of Public Works under Frei and currently as President, would appear to confirm this observation. The second reason relates to the national and international

190 The state of democracy in Latin America commercial and political pressures exerted as a consequence of Chile’s insertion into the global economy. External vulnerability, as experienced during the international recessions of 1929 and 1982, had been accentuated rather than diminished during the authoritarian period. There was clearly a feeling of vulnerability to the external shocks that could be created by overturning the neoliberal model, even if this strategy had been favoured by the groups at the heart of the Concertación. A final rationale is that the political and economic élites, i.e. the political class from left to right which coalesced around a similar polity and economic philosophy, and the economic élites, particularly the grupos económicos and foreign capitalists which dominate most productive sectors and services, were keen to pursue the model because of mutual interests derived from a healthy economy (with the term economy understood purely in terms of capital accumulation), regardless of the wider social consequences of that accumulation process. All of these factors played a role in the continuity of neoliberalism into the democratic transition.

A consolidated New Liberal Consensus It was the national and international political and economic élites that emerged from the authoritarian period, and were happy to pursue the same economic model within a democratic framework (essentially a rethinking of the methods of social discipline), that created the hegemony that is the New Liberal Consensus. The foundations of the hegemony in terms of the representation of the neoliberal model, as benefiting all groups within society via entrepreneurialism, freedom of choice and the removal of state controls, were put in place under Pinochet and were facilitated by control over the media and academia. The organisational elements were also put in place through the 1980 constitution, e.g., the designated senators and binomial electoral system, to shift the balance of power in both houses of congress in favour of the consensus, and the creation of the National Security Council (the ‘big stick’ of social discipline). There were also the bureaucratic elements of the authoritarian state such as the militarisation of the judiciary and the direction of public sector institutions. Over ten years of democracy have given rise to gradual changes in terms of the organisational features but representation remains similar and is achieved through less constrained media and new patterns of consumption. The social relations of the neoliberal model that were imposed through force are now entrenched, and thus the Chilean state is a reflection of these relations and the values of the hegemonic bloc. The ways in which the New Liberal Consensus then manages the state-institution in support of the neoliberal model are justified. Chilean society has on the whole been captured by the individualism and entrepreneurialism, materialism and consumption patterns, flexibility and insecurity of a liberalised

In search of the post-transitional Chilean state 191 socio-economy, and these values now embody the state. Under the Lagos administration, the weaknesses in the labour reform of the end of 2001 (which received a co-ordinated response from the CPC, Sociedad de Fomento Fabril and the parties to the right) and opposition to higher levels of taxation, are examples of the strength of the dominant forces within the hegemomic bloc and their ability to reduce the impacts of new public policy and fiscal initiatives in order to maintain the values intrinsic to market liberalisation: private property protection, and a commitment to minimal regulation and its associated costs. In its final version, the labour reform was full of compromises, and the corporate income tax increased only two points, from 15 to 17 per cent.99 The lack of alternative development strategies emerging from within the country since 1975 can be explained once again by state repression of opposition – hegemonic domination through social discipline – to 1990, and more recently by the technification and functional orientation of higher education (particularly private universities) and the ownership and diversity in the newspapers, which are controlled predominantly by two groups (Edwards, which operates El Mercurio, and Copesa, La Tercera), leading to hegemonic domination through consent-building. In fact, there were far fewer newspapers and weekly political magazines at the end of the 1990s than there were at the end of the 1980s, as a dominant centre-right view of liberal democracy and economic neoliberalism has become almost the lone perspective presented in the written media.100 The contemporary hegemonic bloc is a highly cohesive one that has been constructed over a considerable time, with adaptations to different shocks and stimuli. Its ability to shape the Chilean state according to its own needs and values has been a determining factor in Chilean political economy and social development for almost thirty years. The continuing inequalities across Chilean society, the lack of economic diversification, and high natural resource dependence, are the clearest signals of the negative impacts that are generated by the strength of this bloc and the obstacles to wealth distribution and social justice that it constructs. Whether the democratic transition changed anything apart from a shift in regime type and a reduction in social discipline is contestable. Norbert Lechner makes the case succinctly: ‘. . . in Chile we discovered that governing democratically is different from having democracy.’101 Despite the fact that President Lagos has overseen a neoliberal economy and has experienced the strong influence of grupos económicos and other business actors (such as the CPC and sectoral associations) in public policy areas, there are opportunities for transforming social relations and the creation of a post-authoritarian Chilean state. There are political avenues open to achieve greater equality and to move towards economic reforms that put growth at the service of social development and poverty alleviation. However, one has to pose the question whether the existing political class desires these goals and is prepared to challenge the current hegemonic

192 The state of democracy in Latin America position that it currently shares. It will not be enough for renovated socialists102 to seek social justice through neoliberalism and a ‘profoundly renovated state’, as Lagos coined it.103 The changes will have to be more deep-rooted in order to counteract the hegemonic bloc that has been constructed since the 1970s. It is only within a context whereby this bloc does not wield the economic influence and moral and ideological leadership than it does at present that Lagos’s views on an appropriate state form dating back to the early post-authoritarian years can begin to take shape, and a post-transitional Chilean state that operates on behalf of the majority rather than the minority can be constructed. In 1993, he wrote: The new state must be generated by the Chilean society of today. It must respond to its structure, values and interests. A corollary to this is that the state [state-institution] must stop confronting society, since it must integrate itself with citizens, and delegate functions to civil society, the private sector and social groups.104 Ten years on, this view would appear to be a long way from being realised. In the meantime, social relations remain skewed towards the interests of capital, particularly within the hegemonic bloc. For the post-transitional Chilean state to become democratic will require a great deal more than the consolidation of a model of pluralist, electoral democracy. It is the social relations that underpin the state that will have to be democratised, and this can only be achieved through their reconstruction along more egalitarian lines and the forging of a new social contract. As with all significant changes in social relations, this is most likely to emerge from a process of conflict.

Endnotes 1 The data is drawn from CEPAL, Anuario Estadístico de América Latina y el Caribe (Santiago: UN, 2002). 2 A. Angell and B. Pollack, ‘The Chilean Presidential Elections of 1999–2000 and Democratic Consolidation’, Bulletin of Latin American Research, 19, 3 (2000), pp. 357–78, discuss the contrasting political arena of the 1999–2000 elections, as compared with those of the early transition period and the election victories of Presidents Aylwin and Frei. 3 Tomás Moulian makes precisely the same point in his Chile Actual: anatomía de un mito (LOM/ARCIS, 1997), whereby neoliberalism can adopt democratic and authoritarian forms. He argues that the neoliberal state’s success resides in its ability to suppress effective labour organization, and the minimisation of competitive politics by uniting political élites around a forward-looking state of triumphal modernity. 4 Jorge Nef presents a similar argument in, ‘Contradicciones en el “Modelo Chileno” ’, in A. Menéndez-Carrión and A. Joignant (eds), La Caja de Pandora (Santiago: Planeta, 1999), pp. 89–124. He writes about a pact of the élites and

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5

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10 11 12

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a democracy without the people, based on the neoliberal project and what he describes as the double ideological fetish of modernization and governability (p. 119). See for example the collections edited by A. Menéndez-Carrión and A. Joignant (eds), La Caja de Pandora: el retorno de la transición chilena (Santiago: Planeta, 1999); and P. Drake and I. Jaksic (eds), El Modelo Chileno: democracia y desarrollo en los noventa (Santiago: LOM, 1999). These issues are well documented in the works of J.A. Fontaine, ‘Transición Económica y Política en Chile: 1970–1990’, Estudios Públicos, 50 (1993), pp. 229–79; L. Oppenheim, Politics in Chile: Democracy, Authoritarianism, and the Search for Development (Boulder: Westview Press, 1993); and J. Martínez and A. Díaz, Chile: The Great Transformation (Geneva: UN Research Institute for Social Development/Brooking Institution, 1996) The large business groups in Chile ( grupos económicos), e.g., Angelini, Luksic, Matte, became dominant during the 1980s following privatisations and military support for private sector business development. Fazio ranks the top private Chilean companies by capital and shows that the majority shareholders in eight of the leading twelve are one of the following: Grupo Angelini, Grupo Matte, Grupo Luksic. See J. Collins and J. Lear, Chile’s Free-Market Miracle: A Second Look (Oakland: Food First Books, 1995); and H. Fazio, La Transnacionalización de la Economía Chilena (Santiago: LOM, 2000). There is a powerful culture of ‘success’ (exitismo) in Chile, suggesting a level playing field for entrepreneurs and opportunities for those who are prepared to do battle in the market-place. It is closely linked to the so-called Chilean economic ‘miracle’ and the liberalisation of the economy under dictatorship, and has defined the entrepreneurial culture of the 1990s. As an idea, and in terms of values, it has been an important element of the discourse of the neoliberal model, creating the notion that there are few obstacles to selfaggrandisement. However, Chilean society remains highly segmented according to a range of racial, gendered and socio-economic criteria and the degree of social mobility has not changed a great deal in the last decade. Most poverty line studies undertaken by the world’s development agencies, e.g., the World Bank and Inter-American Development Bank, focus on those living on less than US$1 a day. In most cases, a differentiation is made between indigent or extreme poverty, and others regarded as living in poverty. See G. Munck, ‘Authoritarianism, Modernisation, and Democracy in Chile’, Latin American Research Review, 29, 2 (1994), pp. 188–212. A referendum was held and the constitution was accepted by a majority of votes. However, the climate of fear reigning in Chile at the time was a significant factor in the outcome. The civil-military struggle, during the early 1990s in particular, is presented concisely in R. Rabkin, ‘The Aylwin Government and “Tutelary” Democracy: A Concept in Search of a Case?’, Journal of Inter-American Studies and World Affairs, 34, 4 (1992), pp. 119–94; and D. Richards, ‘The Political Economy of the Chilean Miracle’, Latin American Research Review, 32, 1 (1997), pp. 139–59. Moulian, Chile Actual, p. 46. The macroeconomic indicators revealed by the Chilean economy prior to its ‘crash’ in 1982–83, then its resurgence during the mid- to late 1980s led to the term ‘miracle’ being applied. The costs of the ‘miracle’, such as repression and violence by state institutions, are deliberately ignored by those who favour a narrow economic reading of the condition of a society. For the most part, they are the same people who supported the coup and the social discipline that it applied.

194 The state of democracy in Latin America 15 For example, Gonzalo Martner, Gobernar el Mercado: las nuevas fronteras del Estado en el Siglo XXI (Santiago: LOM, 1999). Martner describes a state that is focused on reducing inequalities and diminishing poverty, alongside economic growth, arguing that although the market is an effective allocator of resources under certain conditions, it can also be inefficient without selective government interventions, and can destroy social, territorial and ecosystem cohesion. The ‘estado social’ he defines has three pillars: a recognition and provision of minimum social needs; recognition and coverage of social risks; and the pursuit of greater equality in terms of dignity, rights and opportunities. 16 The wider impacts of neoliberal policy in Latin America are presented in D. Green, Silent Revolution: The Rise of Market Economics in Latin America (London: Latin America Bureau, 1995). The specific impacts in Chile are covered by Collins and Lear, Chile’s Free-Market Miracle. 17 The considerable changes that took place in the judiciary during the late 1990s were apparent in the judgement of the Supreme Court (on Senator Pinochet’s return to Chile in 2000) on whether he should lose his senatorial immunity from prosecution. The 14 to 6 decision to remove immunity revealed the depth of the change in allegiance and orientation of the judiciary by this time. 18 See S. Marras, ‘Chile, El Mercado del Disimulo (los valores en la década de los noventa)’, in P. Drake and I. Jaksic (eds), El Modelo Chileno: democracia y desarrollo en los noventa (Santiago: LOM, 1999), pp. 501–25. 19 Marras, ‘Chile, El Mercado del Disimulo’, p. 525. 20 The term relates to the influence of the Chicago School of Economics in the change of economic model after the 1973 coup. There had been institutional ties between the economics departments of the University of Chicago and the Universidad Católica de Chile prior to the coup, and the ideas of the Chicago economists Milton Friedman and Arnold Harberger had developed a following among groups of Chilean economists, as they had done around the world. Strong liberalisation lay at the heart of the model and the social discipline applied by the military facilitated the application of this economic model in its purest form. 21 Max Koch refers to this individualisation in terms of the changing social structure. He notes that although wage labourers struggled under the increased flexibilisation and deregulation of labour under authoritarianism, the response was greater competition rather than greater solidarity. The class-based politics of the 1960s and 1970s had been replaced by what he defines as a flexible and pluralist class society. See M. Koch (1999), ‘Changes in Chilean Social Structure: Class Structure and Income Distribution Between 1972 and 1994’, European Review of Latin American and Caribbean Studies, 66, pp. 5–18. 22 The term poblador refers to those who live in the poblaciones. These are the poorer settlements of Santiago characterised by low levels of income, social marginalisation, and often substandard housing and services. 23 It should be borne in mind that General Pinochet had proclaimed himself president and was never formally voted in, therefore the extension of his term of office refers only to the 1980 constitution in which he had presented himself as Head of State. 24 Jean Grugel makes a similar point in the wider context of neoliberal economics and formal democracy in Latin America, also using Chile for illustration. See ‘Development and Democratic Political Change in the South’, Journal of International Relations and Development, 2, 4 (1999), pp. 403–14. 25 Samuel Huntington’s concept of praetorian society and the inability of weak state institutions to meet wide-ranging social demands, thus leading to military

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28 29

30 31 32 33 34

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take-overs supposedly to guarantee social order, is an appropriate one in the case of Chile in 1973. Operatives of the right-wing terrorist group Patria y Libertad were the most likely perpetrators of this murder. US Secretary of State Henry Kissinger was a vigorous opponent of left-wing politics in Latin America and he was a key figure in shaping US actions in Chile to undermine the Allende government. By starving Allende of economic assistance, US policy was to make the Chilean economy ‘scream’ in order to foment social disorder leading to the downfall of the Allende administration. The Chilean Development Corporation was established in 1938. Portales wrote in a letter to Joaquin Tocornal, 16 July 1832, that social order in Chile was ‘maintained by the weight of the night’, which effectively meant the influence of tradition and inertia, according to S. Collier and W.F. Sater (1997) A History of Chile, 1808–1994 (Cambridge: Cambridge University Press, 1997), p. 54. The phrase has been used a great deal by authors to refer to authority and social order since that time, most recently by Alfredo Jocelyn-Holt in his commentary on contemporary political history, El Peso de la Noche (Santiago: Ariel, 1997). Collier and Sater, A History of Chile. P.H. Smith, Modern Latin America (New York: Oxford University Press, 1992). Ibid., p. 34. J.R. Barton, ‘Struggling against Decline: British Business in Chile, 1919–33’, Journal of Latin American Studies, 32, 1 (2000), pp. 235–64. One of the arguments put forward by Carlos Huneeus about the difficulties faced by the political parties in the process of redemocratisation was that some were closely associated with the coup. Other explanations he cites include internal problems of leadership, organisation and programme renovation (the parties are quite ‘closed’, micro-managed by leaders and militants), as also the problem of technocracy (the rise in technical approaches to political issues). See C. Huneeus, ‘Problemas de Institutionalización de los Partidos Políticos en una Nueva Democracia’, Revista de Ciencia Política, 20, 1 (1999), pp. 31–60. See E. Silva, ‘Capital and the Lagos Presidency: Business as Usual?’, Bulletin of Latin American Research, 21, 3 (2002), pp. 339–57. Also E. Silva, The State and Capital in Chile: Business Elites, Technocrats, and Market Economies (Boulder: Westview Press, 1996). The support provided to Chilean business is documented in C. Montero, La Revolución Empresarial Chilena (Santiago: Dolmen, 1997). Alfredo Rehren writes about two groups of leaders in the country: government and entrepreneurs, and the frequent capitulation of the former to the latter in the contemporary competitive, pluralist public policy arena. A. Rehren, ‘Empresarios, Transición y Consolidación Democrática en Chile’, Revista de Ciencia Política, 17, 1–2 (1995), p. 59. See N. Lechner, ‘Modernización y Democratización: un dilemma del desarrollo chileno’, Estudios Públicos, 70 (1998), pp. 231–42. It is important to note that the nationalisation of the copper mining sector was a widely supported policy of the Allende administration. The lack of political will to privatise the entity following the coup reveals a lack of ideological consistency on the part of the authoritarian administration. It was also a clearly self-serving strategy due to the constitutional transfer of a percentage of Codelco funds directly to the armed forces. E. García, ‘El Estado y El Desarrollo Nacional’, in G. Martner (ed.), Chile: Hacia el 2000, Tomo I (Caracas: Editorial Nueva Sociedad, 1988), p. 38.

196 The state of democracy in Latin America 41 The word that has most often been employed in the literature during the 1990s to describe this condition is malestar. Discontentment is perhaps the most appropriate translation. 42 Inequality increased dramatically compared with earlier figures. Gonzalo Martner reports that the lowest income deciles, 40 per cent in 1969, consumed 19.4 per cent of available goods and services, a figure which declined to 14.5 per cent in 1978 and 12.6 per cent in 1988 (Gobernar el Mercado, p. 145). 43 See H. Beyer, P. Rojas and R. Vergara, ‘Apertura Comercial y Desigualdad Salarial en Chile’, Estudios Públicos, 77 (2000), pp. 69–96; and K. Cowan and J. de Gregorio, ‘Distribución y Pobreza en Chile: ¿Estamos mal? ¿Ha habido progresos? ¿Hemos retrocedido?’, Estudios Públicos, 64 (1996), pp. 27–56. Both sets of authors emphasise the role of education and other skills. 44 P. Meller, ‘Pobreza y Distribución del Ingreso en Chile (Decada de los Noventa)’, in P. Drake and I. Jaksic (eds), El Modelo Chileno: democracia y desarrollo en los noventa (Santiago: LOM, 1999), pp. 58–62. 45 Although social spending increased between 1990 and 1997: by 112 per cent in education, 104 per cent in health, 68 per cent in housing, and 48 per cent in pensions, this only represented an increase from 12.9 per cent of GDP in 1990 to 14.1 per cent in 1997. Martner, Gobernar el Mercado, p. 146. 46 See the discussion on poverty and inequality by F.H.G. Ferreira and J.A. Litchfield (1999) ‘Calm after the Storms: Income Distribution and Welfare in Chile, 1987–94’, The World Bank Economic Review, 13, 3 (1999), pp. 509–38. This is brought up to date in D. Contreras et al., ‘Poverty and Income Distribution in Chile 1987–1998. New Evidence’, Cuadernos de Economía, 38, 114 (2001), pp. 191–208. Contreras et al. argue that the fall in income inequality is higher when social subsidy payments are taken into account, but one might also argue (based on an extension of the criteria for measurement) that the highest deciles accrue revenues from other sources, whether property or other investments, that could counteract this trend. The influence of education on poverty levels has to be considered alongside the other significant variables such as household demographics, employment, geographic location, migration and ethnicity, as noted in Q. Wodon et al., ‘Poverty in Latin America: Trends (1986–1998) and Determinants’, Cuadernos de Economía, 38, 114 (2001), pp. 127–53. Ethnicity and geographical location are particularly relevant in the Chilean case in terms of the Mapuche and the poverty incidences in Regions VIII and IX. 47 Kurtz, M., ‘Understanding the Third World Welfare State after Neoliberalism: The Politics of Social Provision in Chile and Mexico’, Comparative Politics, 34, 3 (2002), pp. 293–313. 48 The situation of women workers is more unstable, entails higher risk (e.g., in agricultural work) and they are less well paid than their male counterparts (40 per cent less on average). Much of the increase in labour has been in the form of women’s participation, yet this type of employment is often associated with less employment protection. See G. Reinecke and R. Torres, Studies on the Social Dimensions of Globalization: Chile (Geneva: ILO, 2001). 49 See Reinecke and Torres, Studies; and H. Henríquez, ‘Las Relaciones Laborales en Chile: ¿Un sistema colectivo o un amplio espacio para la dispersión?’, in P. Drake and I. Jaksic (eds), El Modelo Chileno: democracia y desarrollo en los noventa (Santiago: LOM, 1999), pp. 93–124. 50 Henríquez, Las Relaciones Laborales, pp. 118–20. 51 See Collins and Lear, Chile’s Free-Market Miracle, for details of these impacts. 52 Details of the measures applied and the outcomes, also the context of Chilean economic development over a longer time horizon, are provided in Patricio

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53 54

55 56

57 58

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Meller, Un Siglo de Economía Política Chilena (1890–1990) (Santiago, Andrés Bello, 1996). See R. Jenkins, ‘Learning from the Gang – Are there Lessons for Latin America from East Asia’, Bulletin of Latin American Research, 10, 1 (1991), pp. 37–54. The whole period was marked by easy entry-easy exit for business entities, with the largest firms becoming more consolidated over time. Between 1958 and the mid-1990s, 40 of the largest grupos had disappeared. C. Sapelli, ‘Concentración y Grupos Económicos en Chile’, Estudios Públicos, 88 (2002), p. 70. See Koch, ‘Changes in Chilean Social Structure’. The rise and role of these new products and the firms producing them are discussed in historical context in Cecilia Montero’s, La Revolución Empresarial Chilena (Santiago: Dolmen/CIEPLAN, 1997) and, by sector, in Patricio Meller and Raúl Sáez (eds), Auge Exportador Chileno: lecciones y desafios futuros (Santiago: Dolmen/CIEPLAN, 1997). See Collins and Lear, Chile’s Free-Market Miracle, and J.R. Barton, ‘Revolución Azul?: El Impacto Regional de la Acuicultura del Salmón en Chile’, Revista Latinoamericana de Estudios Urbano Regionales (EURE), 22, 68 (1997), pp. 78–99. The role of the state in economic diversification is also discussed by M.J. Kurtz, ‘State Developmentalism without a Developmental State: The Public Foundations of the Free Market Miracle in Chile’, Latin American Politics and Society, 43, 2 (2001), pp. 1–28. The role of the state as facilitator, and the importance of factors beyond macroeconomic reforms, such as learning processes, transfers of know-how and technologies, and business networks, are all highlighted as being important to the development of non-traditional sectors during the 1980s and 1990s. See P. Perez-Aleman, ‘Learning, Adjustment and Economic Development: Transforming Firms, the State and Associations in Chile’, World Development, 28, 1 (2000), pp. 41–55. See G. O’Donnell, P. Schmitter and L. Whitehead, Transitions from Authoritarian Rule: Tentative Conclusions about Uncertain Democracies (Baltimore: Johns Hopkins University Press, 1986). Camilo Escalona, Una Transición de dos Caras: crónica crítica y autocrítica (Santiago: LOM, 1999), and Moulian, Chile Actual. Agustín Squella makes the relevant point that many of the important political figures of the authoritarian period held democracy and the predominance of majority interests in low regard and that this view has persisted into the transition period, thus limiting the development process. A. Squella, ‘La democracia que tenemos no es la democracia a que aspiramos’, in A. Squella and O. Sunkel (eds), Democratizar la Democracia: reformas pendientes (Santiago: LOM/Universidad de Chile, 2000), pp. 29–44. Karen Remmer used the term ‘neopatrimonial’ to describe Pinochet’s gradual concentration of military institutional power into his own hands. This perspective is brought up to date by Gregory Weeks who uses the analogy of Cincinnatus, who was called upon by the Roman Senate to save the empire at a time of crisis and who exercised dictatorial powers. See G. Weeks, ‘Waiting for Cincinnatus: The Role of Pinochet in Post-Authoritarian Chile’, Third World Quarterly, 21, 5 (2000), pp. 725–38; and K. Remmer, ‘Neopatrimonialism: The Politics of Military Rule in Chile’, Comparative Politics, 21, 2 (1989), pp. 160–76. Harold Blakemore makes a useful insight into the corporate versus personal nature of military intervention (prior to transition) in ‘Back to the Barracks: The Chilean Case’, Third World Quarterly, 7, 1 (1986), p. 62: ‘Military intervention seems to me to be usually a corporate action: the circumstances of military withdrawal much more an individual one. In the case of contemporary Chile of this I have little doubt.’

198 The state of democracy in Latin America 63 A particularly important figure in the strategy of the authoritarian administration was the lawyer and UDI Senator Jaime Guzmán; he was regarded as the architect of the 1980 constitution. In April 1991 he was murdered by operatives of the Manuel Rodriguez Patriotic Front. A month earlier they had ‘executed’ an army officer accused of involvement in torture. 64 J. Petras and F. Leiva, Democracy and Poverty in Chile: The Limits to Electoral Politics (Boulder: Westview Press, 1994). 65 Rabkin, ‘The Aylwin Government’ and Oppenheim, Politics in Chile, both refer to it in these terms. See also, O. Godoy, ‘La Transición Chilena a la Democracia: pactada’, Estudios Públicos, 54 (1999), pp. 79–106. Pinochet had described his own regime as an authoritarian, protected democracy in his Chacarillas speech of July 1997, and this view was embedded in the notion of ‘institutional democracy’ written into the 1980 constitution whereby the military became the self-acclaimed guarantor and arbiter of democracy. See C. Huneeus, ‘La Autodisolución de la “Democracia Protegida” en Chile. Cambios Institutionales y el Fin del Regimen del General Pinochet’, Revista de Ciencia Política, 19, 1 (1997), pp. 61–86, and O. Godoy, ‘¿Pueden la Fuerzas Armadas ser Garantes de la Democracia?’, Estudios Públicos, 61 (1996), pp. 269–308. 66 Portales is broadly critical of the failure of the Concertación administrations to engage with the authoritarian enclaves and to manage the human rights cases effectively. See F. Portales, Chile: Una Democracia Tutelada (Santiago: Editorial Sudamericana, 2000). Wendy Hunter points to the positive developments of this time, such as Aylwin’s rejection of Pinochet’s army promotions proposals, returning control of the police to the Ministry of the Interior, and opposition to an army proposal for the creation of an anti-terrorist programme. W. Hunter, ‘Continuity or Change? Civil-Military Relations in Democratic Argentina, Chile and Peru’, Political Science Quarterly, 112, 3 (1997), pp. 453–75. 67 See J.R. Barton, ‘State Continuismo and Pinochetismo: The Keys to the Chilean Transition’, Bulletin of Latin American Research, 21, 3 (2002), pp. 358–74, for an expansion of this position vis-à-vis the Chilean transition process. 68 See Escalona, Una Transición de dos Caras. 69 The Amnesty Law of April 1978 guaranteed immunity to crimes committed by state forces during the period of ‘state of siege’. At the same time, political prisoners were released, with most leaving the country. In August 1990, a court ruled that the Amnesty Law was constitutional and could not be challenged. 70 This period of ‘hand-over’ and the constraints faced by the Aylwin administration, particularly relating to the 1980 constitution and the positioning of the military post-dictatorship, are presented in detail by Brian Loveman, ‘Misión Cumplida? Civil Military Relations and the Chilean Political Transition’, Journal of Interamerican Studies and World Affairs, 33, 3 (1991), pp. 35–74. 71 Cases of torture not ending in death were left out (as many as 200,000). A legal loophole that was exploited by the human rights lawyers was that, while no body could be presented, the case remained a kidnapping, which was not covered by the Amnesty Law. 72 The term boinazo refers to the boinas (berets) of the military. 73 The details of the events of the transition period, and the events of the military period also, are reported by Ascanio Cavallo and others based principally on press sources, in A. Cavallo, M. Salazar and O. Sepúlveda, La Historia Oculta del Régimen Militar: memoria de una época, 1973–1988 (Santiago: Grijalbo/ Mondadori, 1997); and A. Cavallo, La Historia Oculta de la Transición (Santiago: Grijalbo, 1998). 74 The impact of the ‘electoral engineering’ manufactured by the military prior to the hand-over of power and the nature of democracy is explored by

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Gideon Rahat and Mario Sznajder (1998), ‘Electoral Engineering in Chile: The Electoral System and Limited Democracy’, Electoral Studies, 17, 4 (1998), pp. 429–42. The authors highlight the importance of the bias towards the right-wing parties, and how this advantage – combined with the designated Senators and the majorities required for constitutional amendments – enables the right to block constitutional changes and the programme of the Concertación. The binomial electoral system guarantees one of two parliamentary seats in an electoral area to a party with 34 per cent of the vote, despite the fact that another party may have 66 per cent. The ‘designated’ senators serve for eight-year terms: four are former high-ranking officers in each of the armed forces (including the police) selected by the military; three are former Supreme Court judges and controllers-general, selected by the Supreme Court; the President may select a former university rector and a former minister. This typology is proposed by Claudio Fuentes in, ‘After Pinochet: Civilian Policies towards the Military in the 1990s Chilean Democracy’, Journal of Interamerican Studies and World Affairs, 43, 3 (2000), pp. 111–42. Patricio Silva uses a similar approach in, ‘Searching for Civilian Supremacy: The Concertación Governments and the Military in Chile’, Bulletin of Latin American Research, 21, 3 (2002), pp. 375–95. Despite the apparently limited corruption of the 1990s, cases emerging at the end of 2002 and into 2003 have threatened the credibility of the Lagos administration and bring into question the extent of illegal practices by public officials. These include irregularities in Ministry of Public Works concessions (caso GATE), payments to parliamentarians for political favours (caso Coimas), and additional payments to government officials and consultants (sobresueldos). J. Grugel, ‘Development and Democratic Political Change’, contrasts this more multidimensional understanding of democracy with the more instrumentalist views in Shumpeter’s empirical democratic theory and Dahl’s polyarchy. The current system contrasts with that of the 1952–73 period when party politics was characterised by polarisation and fragmentation, in particular the near collapse of the right-wing parties in the early 1960s. Patrick Barrett argues that the Christian Democrats play a key role in the centrist politics of the post-authoritarian period: ‘Much like the Radical Party in the late 1930s and early 1940s, today’s Partido Demócrata Cristiano de Chile (PDC) has entered into a de facto accommodationist alliance with big business and the Right, while its alliance with the Left has become largely a pragmatic vehicle for retaining power.’ P.S. Barrett, ‘Chile’s Transformed Party System and the Future of Democratic Stability’, Journal of Interamerican Studies and World Affairs, 42, 3 (2000), p. 24. Christian Democrat election results have worsened during the 1990s: from 30.57 per cent (1989) to 20.04 per cent (2001) in Senate elections; 24.67 per cent (1989) to 16.52 per cent (2001) in elections for Deputies; 28.95 per cent (1992) to 19.87 per cent (2000) in municipal elections. In contrast, the UDI vote has increased from 4.85 to 13.32 per cent (Senate), 9.32 to 22.0 per cent (Deputies), and 10.19 to 14.67 per cent (municipal). Although RN increased their strength in the Senate, from 10.22 to 17.32 per cent, they appear to have lost ground to the UDI in the lower house, with a decrease in Deputy representation, from 17.36 to 12.02 per cent (Servicio Electoral de Chile, www.servel.cl; accessed November 2002). Tironi and Agüero describe this alignment as a central, expanding fissure ( fisura generativa fundamental). See E. Tironi and F. Agüero, ‘¿Sobrevivirá el

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Nuevo Paisaje Político Chileno?’, Estudios Públicos, 74 (1999), pp. 151–68. In a different publication, Tironi writes that more important than political cleavages are the ‘double agenda’, the competing views on the future: ‘. . . one centred on the dramas and frustrations of poverty and archaic systems, the other focused on the tragedies and anxieties of modernity.’ E. Tironi, La Irrupción de las Masas y el Malestar de las Elites (Santiago: Grijalbo, 1999), p. 225. Lagos, the Socialist candidate, defeated the Christian Democrat candidate Andres Zaldívar by winning 71.3 per cent of the vote in the primaries (the first of their kind in Chile). The extent of the winning margin stamped the superiority of Lagos as the Concertación candidate. The difficulty that then beset the Concertación candidate was the defection of right-wing Christian Democrats to Lavín, despite appeals by Zaldívar for solidarity. P. Silva, ‘Towards Technocratic Mass Politics in Chile: The 1999–2000 Elections and the “Lavín Phenomenon”’, European Review of Latin American and Caribbean Studies, 70 (2001), pp. 25–39. Eugenio Tironi refers to the ‘electoral marketing’ of the campaign and the way that candidates were sold to the electorate like products in the market. Tironi, La Irrupción de las Masas. Lagos was keen not to create fractures within the Concertación by raising civil-military issues, while Lavín was keen to avoid any potentially damaging reference to his previous links with the Pinochet administration. First round votes totalled 7,055,116. This figure increased to 7,161,951 in round two. E. Tironi and F. Agüero, ‘¿Sobrevivirá el Nuevo Paisaje Político Chileno?’, p. 167. This concern for formal politics is also communicated by Manuel Antonio Garretón, who makes the point that if political parties fail to engage with the social ‘energy’ in the country, there is a likelihood that formal politics will be eroded, and will become banal and irrelevant. See M.A. Garretón, ‘Balance y Perspectivas de la Democratización Política Chilena’, in A. MenéndezCarrión and A. Joignant (eds), La Caja de Pandora (Santiago: Planeta, 1999), pp. 49–88. Petras and Leiva, Democracy and Poverty. Huaso refers to a rural inhabitant who maintains the traditions of life in the countryside. Comparisons can be made with the Argentinian gaucho. Eugenio Tironi suggests that while the state was the protagonist in society during the 1970s, this role shifted to firms in the 1980s, and consumers in the 1990s. Tironi, La Irrupción de las Masas. A critical perspective on the Mesa de Diálogo is presented in M.I. Aguilar, ‘The Disappeared and the Mesa de Diálogo in Chile 1999–2001: Searching for Those Who Never Grow Old’, Bulletin of Latin American Research, 21, 3 (2002), pp. 413–24. A more descriptive assessment is provided by one of the members of the Mesa who was also a member of Rettig’s Truth and Reconciliation Committee, José Zalaquett: ‘La Mesa de Diálogo sobre Derechos Humanos y el Proceso de Transición Política en Chile’, Estudios Públicos, 79 (2000), pp. 5–30. It later became known as CONAR (National Committee of Assistance to Refugees) but was discontinued at the end of 1974 to be replaced by Fundación de Ayuda Social de las Iglesias Cristianas (FASIC) early in 1975. The military government’s Decree 504 allowed for imprisonment to be converted to exile; FASIC worked to help people leave the country under this Decree. FASIC was supported by UNHCR – the UN High Commissioner for Refugees, also the World Churches Council; the UNHCR created a Programme of Family Reunification to bring together former prisoners with their families in exile. The highly conservative Catholic Opus Dei movement has a strong presence in Chile and one can argue that it was influential in shaping Vatican policy towards the dictatorship, and bringing pressure to bear on Archbishop Silva.

In search of the post-transitional Chilean state 201 93 Dementia and madness are the only grounds for not standing trial in Chile. 94 Question marks remain over this information offered by the military. For example, one of those individuals named as having been thrown into the sea was Carlos Berger, a victim of the so-called ‘Caravan of Death’. In May 2003, bone fragments found in 1990 in the desert near Calama were identified as those of Berger. This discovery brings into question the information presented at the Mesa de Diálogo. El Mercurio, 19 May 2003. 95 Grugel, ‘Development and Democratic Political Change’, p. 412. 96 A term employed by Tironi and Agüero, in ‘¿Sobrevivirá el Nuevo Paisaje Político Chileno?’, pp. 151–68. 97 The crisis in the political left can be captured in the meagre 3.19 per cent vote gained by the Communist Party in the 1999 presidential elections. 98 B. Jessop, State Theory: Putting Capitalist States in Their Place (Oxford: Blackwell, 1990); and J. Femia, Gramsci’s Political Thought: Hegemony, Consciousness and the Revolutionary Process (Oxford: Clarendon, 1981). 99 Both inward-oriented and export-oriented firms, SMEs and large, were pushing in the same direction on these issues, challenging the Lagos administration which they viewed as being potentially the most damaging to business (compared with Aylwin and Frei) due to his socialist origins. Most opposition was focused on the reforms proposing a strengthening of unions, such as mandatory membership, job security arrangements, and dues from non-union employees benefiting from union contracts, and improved collective bargaining capabilities, such as strikes beyond individual firms. In the tax reform, the government sought to increase corporate income taxation and reduce corporate tax evasion. Silva, ‘Capital and the Lagos Presidency’, p. 351. 100 The following newspapers and weekly political magazines all folded during the 1990s: Fortín Mapocho, La Época, Análisis, Apsi, Cauce and Hoy. The dominant television channels – of the Universidad Católica and the state-owned Televisión Nacional – remain relatively uncritical in terms of political and economic affairs. Portales, Chile. 101 Lechner, ‘Modernización y Democratización’, p. 242. 102 This is the term used for those Socialists who have moved to the centre and favour ‘Third Way’ social democratic policies in favour of socialist ones. 103 Lagos, R., Después de la Transición (Santiago: Editorial Zeta, 1993), p. 184. 104 Ibid., p. 181.

Reflections on the contemporary Latin American state

The return to democracy has engendered new challenges for Latin America. In the preceding chapters we have analysed the challenges faced by the state as a complex and dynamic trinity: as an idea, a social contract and a set of institutions. This perspective enabled us to discuss to what extent the return to democracy meant a far-reaching transformation of social relations in Latin America, and thus of the state, or merely a change in the formality of the political regime. In the reflections that follow, we present some views on the contemporary Latin American state after more than twenty years from the beginning of the end of authoritarianism. We define the state as a dynamic, historical process of conflicts. The state reflects conflicts in terms of social relations, which are shaped by the economic structure, values, and interests of a given society at a given time. The form of the state is represented in the theoretical construction of a social contract, which is a rational concept that simultaneously describes, reflects, and emerges from the given social relations. This social contract can be regarded as the political representation of the social relations that organise a group of individuals in a given time and space. The state-social contract is bound together through the creation of different institutions that uphold particular values and interests. It reflects those values and interests while also reproducing the social relations that those values and interests entail. Consequently, the social contract is a never-ending negotiation between different social groups. The state as a social contract and as a set of institutions is the product of these on-going power struggles between different groups in society. The history of the Latin American state reflects these struggles as well as their outcomes. It also reveals the complexity of external and internal influences in the shaping of the social contract and the state-institution. The role of external influences in orienting economic policies and shaping social relations was to return as strongly in the early 1980s as it had been prior to the period of ISI – the attempt to break with some of the dependent and uneven external linkages of the past and to shift towards a more autonomous development path.

Reflections on the contemporary Latin American state 203 The transition from authoritarianism to democracy gave rise to a transformation of the state in all three of its manifestations. The debate on democracy in Latin America presented an unproblematic understanding of the state as an entity, restricting it to the formal mechanisms of institutions and norms. Processes of transition were regarded as a sequence of stages that would end with the consolidation of democracy. There was an apparent absence of conflict during these transitions. Here we emphasise the transition to democracy as part of a transformation of the state as an historical process of conflict. The transition process witnessed conflicts of interests and values. The outcomes of these conflicts were gradually shaping the state as a social contract and as a set of institutions. Most of the early democratic governments in the region became fiery battlegrounds over which these conflicts were waged. The outcomes would, of course, influence the rewriting of the social contract and thus the institutions of the state. Gradually the region was moving towards neoliberalism and a new form of domination was starting to take shape. The state began to be perceived as the guarantor of democracy, law and order, efficiency and stability, with its principal objective being to enable markets and individuals to flourish. While the new form of domination and the new state were taking shape, the external debt crisis loomed large on the political and economic horizon of the region. The economic situation became central to decision-making, and political and social issues came to be viewed through economic lenses. The imperative of using the state-institution democratically in the formulation and implementation of economic reforms was, in most countries, ignored. Consequently, social relations were gradually transformed in light of the changes in economic structure and the expression of dominant values. These transformations were not always implemented through democratic means, and the end results were hybrid regime types: formal democracy cohabitating with different degrees of undemocratic rule; social authoritarianism; economic exclusion; and de facto restrictions on civil liberties. The main features of the contemporary Latin American state after the return to democracy can be summarised as follows: historical inequality in social relations remained relatively unchanged following the neoliberal reforms; the perpetuation of the notion that this inequality is inevitable and almost necessary; the spread of economic exclusion; the de facto restrictions of civil liberties for those economically excluded; the persistence of important degrees of social and political authoritarianism; the injustices of the judicial systems; and unresolved ethnic and racial issues. All of these features are reflected in the social contract and the stateinstitution as inequality before the law. While, under authoritarianism, the excluded were fighting to become citizens, under democracy they are fighting for social-economic and legal justice. It should be stated quite clearly that social relations in the region are still characterised by exclusion

204 The state of democracy in Latin America rather than inclusion. The recent decades and years to come will tell us ‘how much exclusion’ Latin American societies are willing to accept and for how long formal democracy can survive amidst such transparent economic and social exclusion. A journey through the region reveals the challenges that political democracy is currently facing. Mexico is experiencing an economic downturn, and the stand-off in Chiapas provides motivation for other movements demanding greater autonomy and equity throughout the region. The country’s social relations have become very much defined by the relationship with the US, through production (e.g., the maquiladoras), trade and migration. The predominance of trade with the US and the role of US investment is also a determining factor in the social relations of the countries of Central America. Despite the peace settlements that put an end to the ‘lost decade’ of conflict in the region during the 1980s, considerable levels of poverty and indigence remain and inequality persists as a feature of the agro-export economies that have prevailed since independence. More recently, the growth in manufactured exports from processing zones around the region bears witness to the rise of a new kind of low-labour-cost activity to compare with traditional exports. It is unclear where the social advantages of these types of economic strategies lie, apart from a perpetuation of the concentration of capital in the hands of the owners of these enterprises, since flexible, low-wage labour and high levels of informal activity continue to characterise social relations in this subregion. It is only through large influxes of foreign development assistance that poverty levels do not fall still further. For many people, the only viable coping strategy that remains is for one or several members of the family to work in the US and to live from the remittances that are sent home. These self-help strategies reduce the levels of indigence in the populations, but they lead to social fragmentation and are merely forms of survival. The state institutions in Venezuela and Colombia would appear to be under the greatest threat in the region. Colombia has struggled with decades of guerrilla warfare (the FARC – Revolutionary Armed Forces of Colombia, and ELN – National Liberation Army) and paramilitarism (e.g., the AUC – United Self-Defence Groups of Colombia), leading to a situation whereby the state has become shaped as much by this conflict as by the social relations created by its export-oriented economy (oil, coal and coffee). It should come as no surprise that Colombia is currently considered as one of the principal examples of state failure. In Venezuela, the Bolivarian revolution led by President Hugo Chávez (re-elected in July 2000 with 60 per cent of the vote) has challenged the traditional politicking of the Acción Democrática and Partido Social Cristiano de Venezuela (COPEI) parties. This stirring of the status quo led to massive social disorder organised by opposition parties in 2002–03. It also meant an exacerbation of the already deep polarisation of Venezuelan society. While the Chávez

Reflections on the contemporary Latin American state 205 administration attempts to transform the traditional social relations in the country, it has also clearly damaged democracy since it encouraged the perception that certain degrees of authoritarianism (either from the left or from the right) are required to transform social relations. The history of the region shows how dangerous this tendency can be. Here, we emphasise that democracy, as a political regime, has the potential to transform social relations. As such, Chávez’s Bolivarian revolution should be considered as more of a threat to democracy rather than a solution for social inequalities. Ecuador, Peru and Bolivia would appear to be close to the state of disorder of their northern neighbours. The indigenous issue in Ecuador has provided a constant source of tension in the country, and led to the military-indigenous alliance that overthrew President Jamil Mahuad in January 2000. As with Chávez, and also similar in terms of his military background, the current president Lucio Gutiérrez is seeking to make significant inroads into ameliorating the country’s social polarisation and its external vulnerabilities. Despite its exports of oil, bananas and shrimps, half the country remains as poor as it was prior to liberalisation, especially for those indigenous groups of the rural highlands and Amazonian interior. Peru has had a different trajectory during the 1990s. The autogolpe of President Alberto Fujimori in the early 1990s enabled him to control the state-institution for his own interests and those of his closest economic supporters. The social unrest of the long-running guerrilla warfare of the Sendero Luminoso and the Tupac Amaru Revolutionary Movement (MRTA) provided him with a (weak) justification for concentrating more power in his own hands. The corruption that this power generated was exposed and Fujimori fled to Japan in November 2000. Alejandro Toledo took over the presidency in July 2001 after winning 36.51 per cent of the vote in the April elections. Although Peru’s economy is growing (5.2 per cent in 2002), there is a climate of political unrest and Toledo’s economic strategy remains unpopular. He has confronted Congress on legislation relating to tariffs, and public sector workers who demanded a salary increase. The more traditional political parties in the country are still recovering from Fujimori’s decade as president and his attempts to undermine them. Bolivia has experienced a different development path from most other countries in the region because of the strong intervention of the multilateral and bilateral development agencies. As the poorest country in South America, it has become aid-dependent during the 1980s and 1990s, despite various economic reactivation programmes. The majority of the indigenous population remains indigent (60 per cent in 1999) and successive governments have been ill equipped to break the vicious circle of external dependency and poverty. The country’s financial crisis was highlighted in February 2003 by the street-battle between police officers, reacting to an IMF-led taxation-increase proposal, and the armed forces called in to

206 The state of democracy in Latin America subdue the demonstration. When students and other demonstrators also joined forces to condemn the proposal, there was a real threat to the stability of the presidency and the proposal was withdrawn. Opposition to external involvement in the provision of public utilities had previously been illustrated by the stand of civil society organisations against international water companies in early 2000, in what became known as the Cochabamba water crisis. Both of these experiences reveal the extent of civil opposition to the New Liberal Consensus established in the country. These high levels of social mobilisation, operating increasingly via direct action (in addition to the ballot-box), would appear to be characteristic of many social groups within Latin American society who oppose the domestic hegemonic blocs and their alignment with international capital. Direct action in the case of Brazilian land reform – the Movimento Sem Terra in particular – has been a notable feature of domestic politics in the 1990s. Through economic shocks such as the Plan Real and the real depreciation of 1999, the governments of Itamar Franco and Fernando Henrique Cardoso tried to revitalise the Brazilian economy but the country’s high levels of income inequality and social exclusion remain obstacles to broad-based development in the country. While the cities of the south reveal the types of social relations characteristic of newly industrialising countries around the world, other states exhibit almost feudal landholding systems and social relations that have changed little since independence. The failures of the social democratic methods of the governments of the 1990s brought the socialist leader Luiz Inacio Lula da Silva to the presidency in October 2002 with 62 per cent of the vote. The challenges that lie ahead in Brazil are to break the traditional élite alliances of the rural landowners and industrial entrepreneurs, and to move towards more egalitarian development – as proposed at the Porto Alegre World Social Forums for example. With 37.5 per cent (1999) of the population living below the poverty line, there is clearly a demand to reconsider the development strategy and to draw up a new social contract that reconstructs and democratises existing power relations. Lula’s election provides a strong example of the transformative role that democracy is able to play. Political rights were essential for the election of a party such as the Workers’ Party, which envisages the transformation of the Brazilian state into a democratic state within which social relations are embedded with greater income equality, all citizens are equal before the law, and the state-social contract and state-institution reflect the new social relations. Despite the shortcomings of formal democracy, the existence of its different forms, such as delegative or low intensity democracy, the 2002 Brazilian elections reveal the potential of formal democracy in terms of being able to bring about political and socio-economic changes. Paraguay and Uruguay, despite their involvement with their powerful neighbours – Brazil and Argentina – as full members of Mercosur, retain problems associated with their size and agricultural dependency (over

Reflections on the contemporary Latin American state 207 a third of Paraguay’s exports are comprised of soya beans, while livestock and their by-products comprise the same share for Uruguay). As agricultureoriented economies, they retain many of the traditional social relations of rural societies in the region. Uruguay has performed better both economically and socially than Paraguay, due to its close commercial relations with its neighbours and its good relations with other international trading nations, yet its vulnerability to external shocks remains a feature of the economy, as exemplified by the contagion from the crisis in Argentina in 2001–02. The legacy of the Stroessner dictatorship in Paraguay, which ended in 1989, and the lack of confidence in the political system due to the infighting of the ruling Colorado party, has led to the country falling further and further towards the development levels of Bolivia under recent liberalisation policies; half the population now lives beneath the poverty line. Although the poverty line is a useful indicator of the well-being of Latin American society, it is only a partial reflection of the state of affairs because of the complex nature of the power relations that exist and determine opportunities, equalities and livelihoods, and also due to the dynamics of informal, seasonal, and domestic work, kinship networks, remittances, and access to basic needs at different times of the year. Despite the return to democracy, Latin Americans are still facing their most challenging issue: inequality. The transition from authoritarianism to democracy gave birth to a combination of formal political democracy in a context of economic and social exclusion, social authoritarianism, and de facto inequality before the law. Latin Americans still need to transform the values that underpin contemporary political life. How democratic do they regard the societies in which they live when a significant proportion of individuals (in some cases more than half of the total population) live in poverty? How democratic do they see themselves as they live in closed barrios with heavy security, using private pensions, health, and education, or in other words, living with First World standards in Third World societies? Conversely, how democratic do they regard their societies as they struggle to meet their basic needs in inadequate housing, with poor sanitation and insufficient income? For how long can Latin America’s political and economic élites, and upper and middle classes ignore the plight of their compatriots? Indeed, can democracy be fully exercised and enjoyed in the context of such inequality? There is some hope but there is also fear. While Brazil is embarking in what could be a successful challenge to the problems noted here, Venezuela seems to be taking a step backwards by attempting left-wing authoritarianism to transform social relations. Peru, Ecuador, Bolivia and Paraguay are still immersed in the processes of conflict which precede the emergence of new social relations and new state forms. Mexico, Central America and Uruguay, despite important differences, are strongly influenced by external actors, and their domestic problems have to be understood in terms of this external domination.

208 The state of democracy in Latin America Argentina and Chile exemplify the hopes and fears of the region. While Chile is experiencing – not without challenges and unresolved issues – a significant degree of stability in economic and political terms, which could lead to a transformation of social relations, Argentina is immersed in a crisis that involves the state in all of its three dimensions. The very idea of the state is being challenged since the objective of the state, thus its raison d’être, is quite unclear for the majority of the population. While a minority excludes itself from the state by using private health, education, legal representation, and security, the majority is excluded. This is because the institutions of the state are unable – by being profoundly inefficient and under-resourced – to provide these effectively. Despite the problems that are being faced by the countries in the region, democracy is still in place and recent crises have been resolved through democratic means. Gramsci’s observation that, ‘the old order is dead but the new order cannot yet be born’ seems appropriate. What we have called the New Liberal Consensus has been struggling to perpetuate its interests and it may prove to be more short-lived and fragile that it appeared during the 1990s. The old order is almost dead, the new order is still unborn, and the struggle goes on. The political class in the region is now faced with the challenge of transforming the social relations of the old order and creating a new form of state that reflects the new social relations. While some countries seem to be moving forwards, others are falling backwards and the majority still have a rocky path ahead. As we have shown, Argentina and Chile present two very different trajectories. Argentina has been transformed. During the 1990s a new alliance emerged. The majority of the population supported the economic reforms but, specifically, the Menem–Cavallo administration was supported by the economic right and the working class. The reforms enabled the emergence of a new bourgeoisie related to the GEN, and the associations between them and foreign companies in the privatisation process. This privatisation process was key to the transformation of Argentina’s economy and its social relations. New firms were created, mostly related to the service sector, which became the most dynamic area of the economy. Gradually, a new alliance took shape between owners and shareholders of these new firms. The main beneficiaries of the economic reforms were the industrialists in favoured sectors, such as the auto industry and finance, urban skilled workers, young professionals, technocrats, and politicians. The Pampeana bourgeoisie seemed to be more cautious in its approach to the reforms and was prepared to withdraw its support as soon as measures were no longer clearly advantageous to itself. The alliance was short-lived. Although it seemed to be based ideologically on the New Liberal Consensus, it proved to be more focused on rentseeking than on ideological principles. It collapsed because it was unable to create political alternatives; indeed the alliance was closely related to

Reflections on the contemporary Latin American state 209 the Menem–Cavallo team. As such, it reproduced the personalistic traditions of Argentina’s politics. Since the return to democracy, Argentina has been unable to transform most of the characteristics of the pre-authoritarian state. Peronism and Radicalism are still the main political streams. Recently, new political parties have emerged but they have swiftly been co-opted by the main parties. Both Peronism and Radicalism maintain undemocratic traditions such as personalism and clientelism, and both tend to produce, and function around, strong personalities such as Raúl Alfonsín or Carlos Menem. Both parties also attempt to perpetuate themselves in power. They maintain corrupt politicians in their ranks and act in a corporatist manner if their members are accused of wrong-doing. Both have also recreated, and maintain, the politics of informality, which leads to the undermining of democracy in the name of democracy. As a consequence of all these factors, both parties are historically responsible for the dramatic crisis of Argentina at the turn of the millennium. At the beginning of the twentieth century Argentina was a modern society with high levels of education, a strong degree of organisation in civil society, and a population which maintained the expectations and aspirations of more advanced European societies. With the emergence of Peronism and the inclusion of the working class as an economic, political and social actor, those aspirations and expectations, including social mobility, became generalised. However, the emergence of Peronism also polarised and exacerbated conflicts within civil society and produced a perverse political game between Peronists and anti-Peronists, with the armed forces and armed urban guerrillas becoming key players. More than fifty years after the emergence of Peronism, the political game in Argentina is still very much played out between Peronists and anti-Peronists. The 2003 election results gave first and second places to two Peronist candidates. Menem’s withdrawal from the second-round ballotage avoided an impossible situation for those anti-Peronists deeply reluctant to choose between two Peronist candidates. The problem in Argentina is that historically neither Peronism nor Radicalism has been deeply democratic. Consequently, the return to democracy in the 1980s was conducted by political actors essentially, and historically, contaminated with undemocratic practices. As such, the political game is embedded in the undemocratic practices of the traditional political parties that have dominated Argentina through the turbulent years that saw the country fall from its place as an emergent modern society to an authoritarian repressive society. In this sense, the rewriting of the social contract after the transition to democracy was punctuated by authoritarianism. While social relations were transformed as a result of the economic reforms of the 1990s, authoritarian values and undemocratic practices persisted and shaped the new statesocial contract and state-institution. The economic reforms transformed

210 The state of democracy in Latin America social relations by socially and economically excluding a significant number of Argentines. New values did emerge, mainly those relating to the basic principles of liberal democracy, but they were condemned to cohabit with authoritarian practices. The crisis of 2001 showed that the state-social contract and state-institution that emerged with the return to democracy were questioned by Argentina’s civil society. The slogan que se vayan todos, que no quede ni uno solo (all of them [politicians] must go, none of them should stay), demonstrated that Argentines were finally repudiating the traditional, corrupt practices of political parties. The building of a new social contract and new state institutions that reflect democratic social relations are still required if contemporary Argentine democracy is expected to be more than merely a formal political regime. Nevertheless, it should be pointed out that, as the crisis of 2001 revealed, formal democracy is currently working in Argentina, despite the absence of a democratic state. Chile, as the leading ‘model’ of neoliberal Latin American development, offers a different scenario from that experienced in Argentina. The anticipation of the democratic transition in Chile and the desire to move beyond authoritarianism enabled the social relations of the economic model, and the structures of the state-institution to be maintained with little modification. Although the arrival of democratic government hailed a victory for those who had opposed Pinochet for seventeen years, the failure to make inroads into the inegalitarian social contract established under repressive social discipline during the 1970s and the power relations embedded in the hegemonic bloc controlling the state-institution (facilitated by the designated senators and the binominal parliamentary system which favours the right-wing vote), have given rise to both discontent and rising antipathy towards party politics within civil society and the population at large. The social relations established under the social contract during the 1970s were predicated upon neoliberalism in the economic sphere and military violence and intimidation in the social sphere. For example, the banning of trade unions and the suppression of the independent media were particularly important tools in flexibilising the labour force to suit the needs of international and domestic capital. Information was managed such that it provided the rationale of national security for the repressive social order that was created. The hegemonic bloc that was established aligned economic élites with the military in a self-serving capital accumulation strategy. However, the control over the media and the fear of repression facilitated the creation of the discourse of the Chilean economic ‘miracle’ and the benefits of the neoliberal experiment. This discourse was not only for external consumption. Many Chileans were seduced by the desires of increased individualism, entrepreneurialism, credit and consumption, especially those in poorer social groups who regarded these as new opportunities for social mobility.

Reflections on the contemporary Latin American state 211 Despite the financial crisis of 1982–83 and the increasingly open opposition to the authoritarian administration during the 1980s, leading to the formation of the coalition of groups for the ‘No’ campaign of 1988, the prioritisation of ending the Pinochet dictatorship took precedence over the changing of the socio-economic order, and the social contract that underpinned that order. It might have been expected that the democratic administration of the 1990s would have attempted to democratise society by challenging the inequitable power relations embedded under authoritarianism. However, the transition involved the handing-over of power, from the military to a civilian government, rather than the defeat of authoritarianism. The ‘binding laws’ introduced to smooth the transition from the point of view of the military, the continuation of Pinochet as Commander-in-Chief of the Armed Forces, the persistence of the authoritarian 1980 Constitution, and the continuity of the previous economic model, all served to maintain the inequitable social relations of the former period. It may only have been since the demise of the influence of Pinochet in the political arena, from July 2001, that there has been a political space within which the civilian government has been able to confront these obstacles. However, since the current political class is closely aligned with the business élites, and has itself become a strong partner in the new hegemonic bloc of the New Liberal Consensus, there has been less urgency in confronting these obstacles. Indeed, the neoliberal economic model in particular has been deepened under the Concertación administrations. Unlike Argentina, Chile reveals the strength of the New Liberal Consensus, the alliance of the political class preaching liberal democracy and the business élites preaching more liberalised trade and less state intervention in the economy. Although the country posted enviable macroeconomic data (in the Latin American context) during the 1990s, it remains one of the most inegalitarian societies in the world. Until the social contract, established under dictatorship and managed so effectively under democracy by the New Liberal Consensus, is rewritten and the hegemonic bloc that dominates the state-institution is challenged, Chile will remain a twin-track country in which considerable wealth is juxtaposed against widespread poor living standards. Argentina and Chile present two different realities. While Argentina, after reaching an apparent social contract in the 1990s, collapsed due to a combination of economic and political factors that had impeded the establishment of consensus, Chile shows signs of economic and political stability, despite social inequalities, that demonstrate a significant degree of consensus among the most powerful actors in society. The essential difference between the two countries can be said to be the nature of the political class. While Argentina maintained all the vices of its traditional political class and a political game played out between Peronism and anti-Peronist forces, with a focus on caudillistic leaders, Chile’s politicians

212 The state of democracy in Latin America have been able to create a significant degree of consensus. Despite the fact that Chile remains an unequal and uneven society, it is further ahead along the path towards the establishment of a democratic state compared with Argentina, which is still immersed in a process of conflict. At the beginning of the new millennium, Latin American countries present several different realities. All of them reveal the benefits that democracy, as a political regime, can bring to Latin Americans. However, democracy has not been a panacea. It has patently failed to resolve many of Latin America’s most pressing problems in a definitive manner. In many countries, its fragility still gives cause for concern. Yet, behind the familiar litany of failings, the democratic seed has also been nurtured and its roots have taken a hold. Democracy’s future harvest might prove to be more bountiful than many observers expect, but this will only be the case if, or when, democratic values (not merely democracy as a regime type) become the building blocks of the contemporary Latin American state: as a form, or idea, of social organisation; as a social contract; and as a set of institutions.

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Index

Acción Democrática 71, 204 Acción Popular 71 Alfonsín, Raúl 5, 96–9, 102, 104, 105, 124–6, 129, 209 Alianza Democrática 70 Alianza Popular Revolucionaria Americana 71 Allende, Salvador 7, 8, 150, 152, 154, 155, 158, 159, 189 Alliance for Progress 7, 53 Alonso, Paula 102 Alvarez, Carlos 129–30 Anderson, Benedict 16 Angell, Alan 176 Aninat, Eduardo 185 Aramburu, Lt.-Gen. Pedro 92 Arbenz, Jacobo 53 Argentina 4, 5, 6, 91; agricultural/ industrial reform in 115–16; Alianza government 127–33; alliances with old enemies 118–21; anti-semitism in 105; Austral Plan 63; Bunge y Born alliance 119; business relations 98–9, 120–1; collapse of 211; consensus/co-operation in 102–3, 104, 137; convertibility plan 110; death of children in 5; demonstrations in 5; dictatorship in 69; economic reforms in 93, 135–6; economic revolution under Menem 106–18; economic/ financial crisis in 80, 96, 99, 116; end of a dream 116–18; fiscal reform in 112–13; governing after the military 95–103; imposition of disciplinamiento social 56; inflation/ wages 100, 102; ISI strategy in 50–1; judiciary in 97–8, 104–5; labour reform in 111–12, 121; materialising the

revolution 111–13; Menem years 104–6; pendulum strategy in 103; political coalitions 118–24; and politics of informality 126, 134–8; post-Menem years 124–7; price agreements 100–1; privatisation in 93–4, 106–10, 115; problems/ challenges 208, 209–10; Punto Final law 97–8; reform of Constitution in 104–5; rejecting old friends 121–4; revolution in practice 106–10; sectoral changes 113–16; social relations during the Proceso 91–5; state terrorism in 92–3; trade reform in 112; trade unions in 121–4; transformation in 208–9; transition process 96 Argentine Radical party 71 Asian crisis 117 authoritarianism 4, 31; destabilisation of 74–5; emergence of 67–8; legacy of 5, 10, 68–9, 147, 148, 172, 203; military 149, 155, 172; move away from 1, 60, 154; neoliberal consensus 152; pre-authoritarian structures 70; and social relations 154–5; see also bureaucratic authoritarianism Aylwin, Patricio 61, 147, 154, 169, 171–2, 175, 176, 185, 189 Bachelet, Michelle 180 Balbín, Ricardo 96 Balza, Martín 106 Banzer, Hugo 3, 69 Becker, David 66 Bolívar, Simón 47 Bolivia 205–6 Born, Jorge 119

Index Brady Plan 116 Brazil 206, 207 Büchi, Hernan 171 Buci-Glucksmann, Christine 25 bureaucratic authoritarianism 4, 9, 11, 27, 31, 69, 154; as defence of élite interests 57; defensive reaction 56; disagreements concerning 57–8; emergence/ collapse 54–62; objective of 57; post-bureaucratic 6; precursors of 56; raison d’être 56–7; see also authoritarianism Cabezas, José Luis 105 Cañas Kirby, Enrique 169 capitalism 7, 57, 68 Cardoso, Fernando Henrique 12, 206 Carothers, Thomas 37–8 Carter, Jimmy 58 Castro, Fidel 7 Causa R 70 Cavallo, Domingo 94, 104, 137, 209 Central Intelligence Agency (CIA) 53, 58 Chávez, Hugo 3, 70, 204–5 Chiapas 12 Chicago Boys model 152–3, 156, 160, 164, 183, 185, 189 Chile 4–5, 6, 208; Amnesty Law in 171; as Latin American ‘jaguar’ 163; as Latin American model 210; authoritarian/ democratic link 148; authoritarianism in 154–5; background 145–6; binding laws in 170, 184, 211; capital accumulation model 164–5; Caravan of Death in 181; central values of 151–2; challenge of transition 166–73; Chicago Boys model in 152–3, 156, 183, 185, 189; civil-military balance 149; civil state in 188–9; class-based analysis 187–8; commercial success in 153; Concertación administrations 185–6, 189–90, 211; Concertación por el No 59; consensus in 212; consolidated New Liberal Consensus 190–2; diversity of newsprint in 191; domestic élites in 156–8; economic framework 159–60; economic growth in 145; economic miracle

229

in 174, 179; economic vulnerability of 165–6; education in 162, 191; élites alliance 155–66; eradication of opposition groups in 180–1; financial crisis in 211; foreign interest/influence in 157–8; generals/state alliance 150–5; hollowing out/redefinition of social/ institutional structure 147–8, 160; human rights in 153, 168, 169, 171, 179–82; inequalities/inequities in 145–6, 191, 211, 212; influence of Church in 180, 188; influence of Opus Dei in 179; ISI strategy in 50–1; legacy of dictatorship 166–73; Mesa de Diálogo in 182–3; military-business élites alliance 151, 153–4; national/ international linkages 156; neoliberal-authoritarian consensus in 152; neoliberalism in 159, 163, 186–7; nitrate boom 157–8; political changes in 174, 176–8; political economy of 148, 191; poverty in 145, 161–2, 191; preoccupation with transition in 172–3; presidential elections (1999–2000) 147, 173–8; privatisation in 153, 164–5, 178; and question of hegemony 184–90; return to democracy 171–2; role of civil society in 147; role of state in 160, 163, 165–6, 187–90; security in 151, 154; social relations in 210; social/cultural shift in 177; socialist experiment in 152; socio-economic issues in 161–3, 175–6, 186–7; stability in 211; state as social conscience 178–83; transition in 170–1, 211; transitional-neoliberal state dichotomy 146–9; and unification of plebiscite/electoral campaign (1989) 184; values 179 Chilean National Commission of Truth and Reconciliation 171 civil society 53, 58–9, 60, 63, 64, 81, 147, 188–9 class 31, 188; see also middle class; working class Cochabamba water crisis 206 Codelco 160, 183 Cold War 30, 57, 153

230 Index Collier, David 37 Collor de Melo, Fernando 70 colonialism 45–6 Comisión Económica para América Latina y el Caribe (CEPAL) 7 Comisión Nacional sobre Desaparición de Personas (CONADEP) 97 communism 54 Confederación de la Producción y Comercio (CPC) 159 Confederación General del Trabajo (CGT) 98, 121–3 conflict 6–8, 45, 54, 66 Contreras, General Manuel 181 Corbo, Vittorio 51 Corporación de Fomento de la Producción (CORFO) 50, 156, 158 coups 53–4, 61, 92 Creveld, Martin van 16 Cruzado Plan 63 Cuba 7, 53 de la Sota, José Manuel 128 democracy 11–13, 136–7; adjectivisation of 33; as problematic 68; benefits of 212; definition of 37; and destabilisation 34; different views of 65–6; economic/social factors 36–7; and élites 54; expectations of 67–8; and globalisation 66; hollow 173; and idea of sequencing 37–8; and interest coalitions 55; legacy of authoritarianism 68–9; low-intensity 37; political aspects 33, 37, 65, 71–2; potential capabilities of 37; and power relations 58–9; in practice 207; pursuit of 66; re-emergence of 59–62; reformist path 35–7; and social networks 60; state as conflict 6–8; and state institutions 33; and structural economic reform 33; support for 66–7; time of uncertainty 1–6; transition to 8–13, 32–5, 69, 172, 184, 202, 207; uncertain outcomes of 33–4, 35; undermining of 53; and undermining of social networks 60; see also transition process deregulation 62 Diaz Alejandro, Carlos 51

dictators 69, 95, 151; legacy of 166–73 Duhalde, Eduardo 130, 132–3 Economic Commission for Latin America (ECLA/CEPAL) 50, 51 economies, challenges to 7; and debt repayment 78–9; debt/financial crisis 1, 3, 8, 61–2, 64, 74–5, 80, 96, 99, 116, 211; decapitalisation process 77–8; export-oriented 7, 49, 204; Fordist/Taylorist 8; and globalisation 66, 163; growth patterns 74–5; income discrepancies 81–3; inflation rates 75, 77; internal/external tensions 60, 75, 79–81; and ISI 1, 7; management of 63–5; and multinationalism 7–8; neoliberal 8–9; political 8; Reaganomics/Thatcherite 8; restructuring process 72–84 education 73–4, 162, 191 élite groups 5, 10–11, 18, 22, 31; alliances of 151, 153–4, 158–66; as anti-democratic 54; and bureaucratic authoritarianism 57; criollo 48–9; domestic 156–8; and foreign capital 53; military-business 151, 153–4; monarch–aristocracy 15–16, 18; and transition process 10 ENTEL 106–7 Errázuriz, Francisco Javier 171 Escalona, Camilo 167, 170 Espinoza, Pablo 181 Esquipulas agreement (1987) 9 Estenssoro, Víctor Paz 63 Femia, Joe 22 Fernández Meijide, Graciela 129 Figueroa, Armando Caro 123 foreign direct investment (FDI) 52, 53, 62, 79 Foxley, Alejandro 185 Franco, Itamar 206 Frei Ruiz-Tagle, Eduardo 12, 154, 175, 185, 189 Frente Amplio 70 Frente del País Solidario 70 FrePaSo 129–30 Frei Montalva, Eduardo 154, 159 Fujimori, Alberto 3, 12, 70, 205 Fundación para la Superación de la Pobreza 162

Index

231

García, Alvaro 185 Garzón, Baltazar 181 Gills, Barry 37 Godoy, Oscar 151, 169 Goulart, João 53 Gramsci, Antonio 22, 25, 27, 136, 189, 208 Grugel, Jean 173, 183 Grupos Económicos Nacionales (GEN) 94, 95, 108, 109, 120, 134, 156, 208 Gutiérrez, Lucio 3, 205

Latin American Free Trade Association (LAFTA) 51–2 Lavín, Joaquin 175–6, 179, 182 Lechner, Norbert 160, 191 Leighton, Bernard 181 Leiva, Fernando Ignacio 169 Letelier, Orlando 181 Levitsky, Steve 37 liberalism 1, 93, 120 Locke, John 23 lost decade 1, 9, 204 Lula da Silva, Luiz Inácio 206

hegemony–consent relationship 21–2, 25–6, 27, 32, 49, 62, 63 heterodox plans 64 Hobbes, Thomas 23, 26 Hogar de Cristo 162 human rights 9, 58–9, 60, 61, 96, 99, 153, 168, 169, 171, 179–82 Huneeus, Carlos 170

Mahuad, Jamil 205 Malvinas/Falklands 5, 96 Marín, Gladys 176, 181 Marras, Sergio 151 Martínez de Hoz, José Alfredo 93, 94, 95 Marxism 25, 120, 187 Meller, Patricio 51 Menem, Carlos 5, 12, 69, 70, 101, 209; see under Argentina Mercosur 134, 188, 206 Mexico 116–17 middle class 54–5 military regimes 4, 7, 11, 12, 53, 54, 92; and control over transition 60–1; ending of 59; fall of 62; insecurities under 61; populist approach 69; and stabilisation of economies 59; support for 60; and transition to democracy 69; and US support 58 Moulian, Tomás 150, 167 Movimiento por la Dignidad y la Independencia (MODIN) 70 Movimento Sem Terra 12, 206 Muñoz, Jorge 181

Import Substitution Industrialisation (ISI) 1, 7, 50–7, 59, 60, 84, 136, 156, 158, 202 independence movements 47–8 industrialisation 49–50, 52–3, 55, 60 institution see state-institution Instituto Argentino de Promoción del Intercambio (IAPI) 50 Inter-American Development Bank 8, 62 International Monetary Fund (IMF) 8, 62, 96, 99, 100, 101 Inti Plan 63 Izurieta, General Ricardo 168, 181 Jiménez, Tucapel

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Kant, Immanuel 22, 24 Karl, Terry L. 66 Kirchner, Néstor 133 labour 6, 10–11, 60, 187–8; encomienda system 47, 48; female participation in 161; flexibilisation of 1, 8, 12, 74, 84, 204; and globalisation 163; insecurities of 162–3; militant 55; public sector employment 53; transformation of 111–12; unemployment 74 Lagos, Ricardo 153, 174–6, 180, 182, 189, 191–2

National Security doctrine 53 neoliberalism 11, 27, 137, 146–9, 151, 159, 163, 186–7, 190, 203, 211 New Liberal Consensus 5, 149; consolidated 190–2; democratic state of 65–72; development of 4, 152, 154; economic/social consequences of 72–84; emergence of 62–5; opposition to 206; and politics of informality 137; in practice 189; strength of 211; survival of 208; sustaining 183 New Political Economy 63

232 Index O’Donnell, Guillermo 11, 55–6, 57, 66, 154 Paraguay 206–7 Partido dos Trabalhadores (PT) 70 Partido por la Democracia (PPD) 70 Partido Revolucionario Democrático 70 Partido Revolucionario Institucional (PRI) 7 Partido Social Cristiano de Venezuela (COPEI) 71, 204 Perón, Juan 50, 52, 53, 92, 96 Peronism 91, 96, 100, 104, 128, 129, 137, 209, 211 Petras, James 169 Pinocheques case 172 Pinochet, Augusto 3, 59, 61, 69, 146, 147, 152, 153, 168, 169, 170, 171, 174, 176, 181, 182, 184, 189 Plan Real 206 Pollack, Benny 176 Portales, Felipe 169 Porto Alegre Social Forum 2 poverty 3, 6, 10, 81–2, 84, 94–5, 145, 149, 161–2, 186–7, 191, 204, 207 Prats, General Carlos 155, 181 pre-Columbian societies 45–6 Prebisch, Raúl 7, 50 Primavera Plan 100–1 privatisation 1–2, 12, 62, 63, 106–10, 115, 153, 164–5, 178 property rights 62 Przeworski, Adam 33–4, 66 public sector 5, 53, 60 Rawls, John 24 Reinecke, Gerhard 163 Rettig, Raúl 171 Reutemann, Carlos 128 Rousseau, Jean-Jacques 23 Rúa, Fernando de la 128, 129–32 Ruckauf, Carlos 128 Rueschemeyer, Dietrich 31 Sachs, Jeffrey 34 San Martín, José de 47 Sarney, José 61, 71 Schmitter, Philippe 66 Schneider, General René 155 security issues 11, 53, 58, 151, 154 Sendero Luminoso 70, 205 Silva, Archbishop Raúl 180

Silva, Patricio 175 Smith, Peter 157 social change 3–4 social contract see state-social contract social expenditure 72–3 social mobilisation 2 social organisation 4; and criollo élites 48–9; effect of First World War on 49; imperial 46–7; republican 48; theocratic 46 social relations 6, 8, 10–11, 46; as dynamic 58; challenges to 204, 210; effect of elections on 173–8; exclusions 203–4; new alliances 52–3; restructuring of 61; transformation of 203 social unrest 53–4 Sociedad de Fomento Fabril (SOFOFA) 157, 159, 191 Sociedad Nacional de Agricultura (SNA) 159 Solidarity Pact 63 state, colonial legacy 10; as complex/dynamic trinity 5, 20–30; as social conscience 178–83; conceptualising 14–38; in contemporary debates 31–8; criticism of 20; definition of 202; developmentalist 4; domestic focus 30; entrepreneurial 50; European model 15; feudal system 15–16; functionalist/ rationalist view 3; and good governance 5; historical 9, 14–19; impersonal 16–18, 46, 47; interaction with other states 30; main features of 203; modern 10; monarch/élite basis 15–16, 18; and question of hegemony 183–90; regulatory environment 2; role in social change 3–4; roots of contemporary 45–54; theoretical development 19–30; in transition 8–13, 32–3; and war of position 22 state-idea 21, 22–3, 28, 48 state-institution 3, 4, 5, 31–2, 203, 212; administrative 16; as centre-stage 50; as system of domination 26–8; autonomy of 27; challenges to 210; colonial legacy 10; concentration of power in 18–19, 20; debates

Index concerning 59; democratic 36, 37, 66; and impersonal state 17; increased autonomy of 52; rationalisation of 63; and rewriting of social contract 61; shapers of 31–2; state as set of 16, 17, 18–19, 20, 26–8; threats to 204–7 state-social contract 14, 19, 21–6, 35–6, 212; as reflection of social relations 85; continuation of 49; debates concerning 59; and democracy 66; domination/ oppression 55–6; outward-looking/ inward-looking change 50; in practice 202; redefinition of 69; restructuring 92; rewriting of 32, 60, 61–2, 63, 136, 209 Stroessner, Alfredo 59, 69, 207 Toledo, Alejandro 205 Torres, Raymond 163 Townley, Michael 181 trade unions 60, 63, 91, 92, 102, 103, 121–4 transition process 184; as traumatic/ conflictive 32; challenge of 70–1, 166–73; civil-military 146–9; concept of 166–7; and conflicts of interest 203; controlled 69; and élites 10; and fear of coups 61; imperial/colonial legacy 9–10; key ingredients of 167; literature on 11–13; longevity/

233

contents of 167–9; military control over 60–1; mythical view of 172–3; neo-liberal 8–9; peaceful 147; post-transitional state 146–9; in practice 207; pre-authoritarian structures 70; preoccupation with 172–3; process of 203; and rewriting of social contract 60; and security 11; and social inequalities 10–11; three dimensional 32–8; two-faced 170–1 transnational corporations 56 Tupac Amaru Revolutionary Movement (MRTA) 205 UN Human Rights Committee 180 Unión del Centro Democrático 70 United Fruit Company 53 Uruguay 59, 206–7 Vargas, Getulio 53 Velasco, Juan 69 Venezuela 207 Washington Consensus 8, 31, 35, 62, 63–4, 84 working class 11, 52, 54, 55, 60 World Bank 8, 62, 101 Yabrán, Alfredo 105