Securing “Democracy” and the Market in Chile: 1973-1989

Securing “Democracy” and the Market in Chile: 1973-1989

US relations with Chile during the 1980s were shaped by the overthrow of a popularly-elected government headed by self-declared socialist and Marxist Salvador Allende in 1973. The US was complicit in his overthrow and embraced the subsequent military dictatorship of General Augusto Pinochet. The regime reversed major measures that ran counter to the interests of US transnational corporations operating in Chile while repressing the working class, the poor, and the left. However, downturns in regional and international markets in the early 1980s had severe impact on the country’s middle and lower classes. A popular resurgence of protests against the regime soon followed, and the regime responded by using brutal force. By the mid-1980s, figures in the US and Chile feared that the protest movement would advantage the Chilean left and set the stage for what US foreign policy makers described as “another Nicaragua” (where the left had overthrown the US-backed dictatorship of Anastasio Somoza Debayle) unless Pinochet stepped down and held elections.

In examining US-Chilean relations, I wish to explore the reasons why US foreign policy makers lost confidence in the Pinochet regime and believed that an electoral transition could head off a revolution from below. I argue that this shift was not only necessary for preventing revolutionaries from once again taking power in Chile but also secured a socioeconomic model that was in line with the political and economic interests of the US. My thesis is that the US consistently sought to secure the market in Chile by crafting and renovating forms of social control. From 1973 to 1986, the US generally backed dictatorships in Chile and elsewhere in Latin America as a form of social control that could protect and advance foreign and domestic business interests. The protests of the mid-1980s in Chile led US foreign policy makers to rethink US security doctrine in Latin America and advocate the return of civilian-elected regimes. The fundamental objective of these new measures was to advance a new form of social control (touted by foreign policy makers as “democracy”) where the old form (dictatorship) had failed.

Globalization and the US Imperial State

This paper both develops and challenges perspectives on the 1989 Chilean transition advanced by William Robinson and Morris Morley, James Petras, and Ignacio Leiva. In Promoting Polyarcy, Robinson explanation of the 1989 transition is part of a larger effort to examine the “transnational” elite class with an economic project (neoliberalism) and a political project (polyarchy). These two projects promote the integration of economic and political structures and, in the process, shift decision making power to “global” (above and outside the nation-state) rather than “national” (within the nation-state) centers. “Polyarchy” (a term Robinson uses to avoid conceptual confusion with democracy) reflects a new age in the maturation of capitalism, which requires transformation of political structures for the consolidation of neoliberalism. The promotion of polyarchy is predicated on permitting political transitions to civilian-elected forms of government while simultaneously preserving fundamental socioeconomic structures that enable capitalist production. Robinson views this shift as one from coercive to consensual forms of domination, in which polyarchy is purported to be more stable than dictatorships.[1]

Robinson further suggests that the nation-state is not an adequate unit of analysis for understanding the political transitions that took place in Chile and elsewhere during the 1980s and 1990s. Instead, Robinson asserts that our focus should be on the correspondence between the political transitions leading to “polyarchy” and the consolidation of the neoliberalism as an exercise of the transnational capitalists class’ global hegemonic power. He, therefore, observes the development of US policies and instruments supportive of polyarchy (e.g., the US-funded National Endowment for Democracy) and acknowledges similar efforts in international organizations (e.g., the United Nations) to infer this as a victory for the transnational elite agenda. [2] Concrete US foreign policy processes are ignored since it is assumed that outcomes ultimately reflect preestablished imperatives of the ruling class which excercises its power globally. US hegemony, then, is irrelevant because “analysis based on the nation-state is outdated and obscures our understanding of transnational dynamics in the new era.”[3]

James Petras and Morris Morley have provided an alternative approach to the subject by developing a heurisitic that conceptualizes the US as an “imperial state.” The imperial state functions in order to meet the interests and demands of capitalists seeking to pursue accumulation on a global level; it is “outward-looking” in that its primary concerns – broadly understood as facilitating accumulation and maintaining social order – are located external to its borders. By its reach, it sets up rules of statehood which influence and shape the behavior of all other states in the interstate system.[4] In the postwar years, the US attempt to establish a new international order was reflected in the further expansion of the US military’s operational capacities, the creation of the Central Intelligence Agency (CIA) and the National Security Council (NSC), and the development of other foreign policy agencies, such as the State Department. The objectives were to establish and sustain military and economic alliances or bilateral ties between the US and governmental institutions abroad as the basis for the post-World War II global political economy. The imperial state, consequently, functions through these local intermediaries to maintain this system.[5]

Capitalist social relations, according to Petras and Morley, constitute the fundamentals of the system. The linkages benefit factions of the ruling class in each country in that the US imperial state supplies - through its military capacities - the means to enforce a social order conducive to capital accumulation. Direct military and covert operations thwart threats – real or imagined – against the existing social order. The power and capabilities of an external force (i.e., the US imperial state), therefore, partially cements a transnational relationship between factions of the capitalist class. Furthermore, the institutional foundations of this relationship within imperialized states are the expressed through the “state” and “regime.” The institutions – e.g.: the military, the police, key financial ministries or departments – comprising the state represent permanent and long-term class interests that defend a particular set of social relations and method of accumulation. The regime represents the daily policy decisions that can modify or negotiate the permanent interests, but never forsake them. Hence, regimes are subject to replacement more readily than the state.[6]

The imperial state can be viewed in terms of three operation lines: economic, coercive, and ideological. Some agencies are designated according to specific operational activities (e.g., the Department of Commerce is economic, the CIA and the military are coercive, and the USIA is ideological), and others assume overlapping and multiple functions (e.g., the State Department). While the imperial state stresses acknowledges differences and competition between foreign policy agencies, it is distinct from the bureaucratic politics approach advanced by Graham Allison. In the latter model, policy outcomes reflect competition and compromise among competing agencies, each having a distince bureaucratic and organizational culture that shapes their analyses and prescriptions in a given situation.[7]

Indeed the differences are important; however, they cannot be understood in terms of each agency operating in its own universe. As Morley argues,

Policy is not the outcome of several decision making centers with personnel of each acting at cross purposes with one another. On the contrary, policy manifests itself in the mobilization of resources (physical, economic, political, military, and covert) acting in concert to achieve goals that remain constant.[8]

The central point of the imperial state, as a concept, is that varying and competing strategies have in common the purpose of defending the US political economy, specifically, and the world capitalist system, generally. The objectives are, therefore, constant whereas strategies vary. The imperial state, then, is responsible for maintaining the long-term relations between markets and individual states.

I argue that the shift in US policy in Chile by 1989 was reflective of deep rifts and competition among agencies within the imperial state. The source of tensions was diverging differences in strategies aimed at restoring declining US influence in world affairs due to US economic downturns and defeats in Vietnam and Latin America. From the Eisenhower administration to the Nixon administration, policy makers quarreled over US support for democracy in the region. On one hand, one perspective argued that political liberalization and civilian-elected regimes in the region might provide leftists an opportunity to come to power and break from the world capitalist system; democracy was simply too costly given overriding security concerns. Others believed that principled and consistent US support for civilian-elected regimes could provide long-term political stability and secure markets in the region. The former perspective dominated from the 1950s to the 1980s. Washington repeatedly opted for dictatorships over civilian-elected governments due to fears that civilian-elected regimes were vulnerable to leftist domination or takeover. By the Reagan administration, however, the pattern changed. As I will show below, the prevalent US foreign policy making perspective in 1973 held that it was necessary to contain the left and secure the market in Chile by backing the military overthrow of Allende and the Pinochet dictatorship. By 1989, US foreign policy makers were now arguing that Chile’s left could be contained by promoting elections and supporting pro-US candidates. These advocates prevailed because they were able to convince the president and Congress that the policies of covert operations and support for military dictatorships had been unsuccessful in securing the market in Chile and only a return to civilian rule could do so.

The US, Allende, and the Pinochet Dictatorship

Even before Allende had expropriated any private property, the US saw him as a threat. US contempt for Allende was due to his radical socioeconomic agenda that sought to improve the lives of the Chilean working class by nationalizing key industries (e.g.: the foreign dominated copper industry) in the country. The US had taken steps to contain him and other Chilean radicals by covertly assisting in the victory of the centrist Christian Democratic Party (PDC) – which was backed by Chilean conservatives – in the 1964 elections. Measures were once taken again to prevent Allende from winning the 1970 elections.

A comment by President Nixon’s National Security Advisor Henry Kissinger well illustrates the attitude of the US towards Allende and the Chilean people: “I don’t see why we need to stand by and watch a country go communist because of the irresponsibility of its own people.”[9] In the eyes of the US, if Chileans voted for Allende, they had irresponsibly and unacceptably practiced democracy. Despite US efforts, Allende won a plurality of the votes (36 percent) on September 4 by forming an electoral front among leftists parties – Popular Unidad (UP). A cable to the State Department from the US embassy in Santiago demonstrated Ambassador Edward Korry’s displeasure with the results and his assessment of the problem:

Chile voted calmly to have a Marxist-Leninist State. The first nation in the world to make this choice freely and knowingly. …with inflation and unemployment (as) the rock-bottom electoral issues, it is truly surprising that only 36 percent voted for him. (…) Allende and his Socialist Party and the PCCh (Communist Party of Chile) have a revolutionary program that is the product of a lengthy evolution in the country. They have the conviction, the organization and the power base. (…) The bureaucracy of Chile is statist-minded and the majority of Congress is very amenable to further state control. (…) Proposals to nationalize foreign enterprises and the critical banking and insurance sector will not encounter serious opposition.[10]

US political operations in Chile immediately confronted the problems posed by Allende’s “conviction, organization, and power base” and the “statist-minded” bureaucracy. A recent CIA report on its activities in Chile reveals that the agency penetrated the country and encouraged protests against the regime. The CIA also made extensive contacts with Chilean politicians to convince them of the dangers of Allende’s socioeconomic agenda. Amidst an ongoing economic crisis (which started before the elections), the Nixon administration continued the suspension of economic aid and discouraged private creditors from extending credit or approving loans to Chile after Allende took office.[11] The stated purpose was to create such overwhelming discontent that military intervention would be invited.[12] By summer 1971, a series of strikes and protests against the deteriorating economic conditions took place with CIA assistance.[13]

This direct penetration of Chilean society was a response to growing mass mobilization in support of Allende’s promises to carry out radical socioeconomic reforms that would institute programs for housing, food, and employment. Allende’s programs hinged on the nationalization of key industries vital to the Chilean economy. When Allende announced the expropriation of property owned by ITT and copper mines owned by Kennecott and Anaconda in fall 1971, US reaction was predictably swift and fierce. The Nixon administration condemned the Allende’s actions and took a firm position against expropriations in general.[14]

Following the Chilean government’s announcement that Anaconda and Kennecot would receive no compensation for the expropriated mines, the two companies and ITT met with US Secretary of State William Rogers.[15] In these meetings ITT put forth a set of recommendations that not only entailed the continuation of economic force on the Allende government but also advocated contacting “reliable sources within the Chilean military.”[16] By the end of 1972, the US had cut off all aid to Chile, except military assistance. In December of that year, the US granted a $10 million credit to the Chilean military.[17]

It is still not clear how and if this aid and CIA operations in Chile directly encouraged the coup in September 1973. Washington quickly moved to repair relations with Chile after Allende’s overthrow. The junta government reached agreements with Kennecott and Anaconda on compensation for their former properties.[18] From 1973 to 1989, the Pinochet regime repressed the left and organized workers in an attempt to secure the country from “communism.” Pinochet’s Chile embarked on a succession of economic programs that reversed the popular socioeconomic trajectory of the Allende project and flooded the country with foreign capital and technology. A host of technical economic experts who advocated free market policies were brought in to the government.

Backing Pinochet and the Return to Civilian-Elected Government

The post-coup government headed by Augusto Pinochet was fully backed by the Nixon administration 1973 military. In 1972 military aid was about 6 million dollars. In 1973 and 1974, military aid leaped to an astounding 14.8 million and 79 million respectively.[19] Under the Carter administration, however, relations between the US and the Chilean dictatorship soured. By 1978, Congress and the administration took steps to ban direct military and economic assistance to Chile due to a series of human rights violations that culminated in the Chilean national security agency – the Directorate of National Intelligence (DINA) – assassination of Orlando Letelier (Allende’s former ambassador to the US and well-known anti-Pinochet dissident) and his American assistant Ronnie Moffitt in Washington, DC. US governmental sanctions were limited to a cutoff of military aid and the cancellation of Export-Import Bank (EXIM) credits to Chile. US corporations, nevertheless, increased investments and expanded operations considerably from 1976-1980. Despite US governmental disapproval of the regime, US businesses continued to view Chile as a lucrative site for investment. (SOURCES?)

Just barely a month after taking office the Reagan administration announced its intention of lifting the Carter administration’s suspension of Chile’s EXIM credits and inviting the Chilean Navy to join in the US military in training exercises in the Pacific Ocean. A request was then made to Congress to repeal the law restricting military assistance to Chile. The announcement and request was seen by some in Congress as an unwarranted warming of diplomatic and military ties with Chile and led to joint hearings by the House subcommittees on International Economic Policy and Inter-American Affairs.[20]

Congressional reservations aside, the administration was itself divided on the subject. Several members of the Reagan foreign policy bureaucracy were opposed to attempts to recertify Chile. The most vocal opponent was Assistant Secretary of State for Human Rights and Humanitarian Affairs Elliot Abrams. Abrams believed that unquestioning support for Pinochet would be seen by Congress as inconsistent with the Reagan administration’s purported policies of promoting democracy in Central America against left-wing Sandinistas and the right-wing Salvadoran military and oligarchy. Those supporting the policy, such as US ambassador to Chile James Theberge and Assistant Secretary of State for Inter-American Affairs Langhorne Motley, argued that a continuing communist threat necessitated new military aid to Chile. [21] The question, however, was if the US did not support Pinochet and pressured for a transition, who or what would follow?

This vexing question was posed again in late spring 1983 when an incipient opposition movement in Chile staged a string of protests. The Chilean dictatorship responded with overwhelming force, shooting into unarmed crowds and arresting thousands and declaring a state of siege.[22] When Gabriel Valdes, head of the Christian Democratic Party (PDC), and others were arrested for planning another protest, the State Department responded by sending a communiqué to the Chilean government that urged restraint and the need to establish a basic consensus on a transition to democracy.[23] That same month, members of the PDC were invited to the US embassy for Independence Day festivities. At the same time, however, Theberge attended a commemoration of the 1973 coup just two months later. Later that year, Theberge worked with the Reagan administration which circumvented the prohibitions on military sales and secured replacement parts for Chilean aircraft carriers.[24]

The protest movement had emerged during an economic crisis from 1980 to 1983. In mid-1983, the labor unions and community-based organizations (called “poblaciones”) made plans to organize a series of protests against the Pinochet regime. The first protest on June 11 was remarkably large, considering the massive repression that had occurred in the early 1970s. By July, the protests had become widespread, and parties – such as the Christian Democratic Party (PDC) – that had been inactive since the coup were now involved. The PDC, sections of the Socialist Party, and others centrist parties formed Alianza Democratica (AD) as a basis for uniting opposition forces that sought to open dialogue with the regime. Also emerging out of the protests was the creation of the National Workers Command (CNT) – a federation of Chilean workers, and the Popular Democratic Movement (MDP) – a coalition of leftist parties that rejected dialogue with Pinochet and emphasized mass mobilization and insurrection to rid the country of the regime. Despite the orientational differences between the AD and the MDP, the two organizations developed a tactical unity that culminated in another wave of protests until fall 1983.

Strategic and ideological tensions between the two coalitions strained this merger throughout the summer and fall. The AD intended to use the protests as a means of pressuring the regime into bargaining while the leftists associated with the MDP were training residents for insurrection.[25] Pinochet took advantage of the schism by targeting organizers and suspected sympathizers in the poblaciones while ordering Minister of Interior Sergio Onafre Jarpa to lure the AD into dialogue.[26] In September, the MDP called for four day protest; the AD insisted on limiting it to a day. The protests went on for a four days while the AD and Jarpa arranged talks. Another protest planned for October 11 to 13 took place without an AD endorsement. By November, the AD had turned almost exclusively to dialogue with the regime and protests had stopped.

When Pinochet ordered Jarpa to discontinue the talks in March 1984, the AD returned to organizing protests. Another wave of protests shook the country for most of the year. Despite an August 9 demonstration organized by the AD and the Catholic Church that condemned both the violence of the regime and the left, the mass movement had gained momentum. A mass strike later that month was backed by both the AD and MDP under the slogan “without protest there is no change.” The strike paralyzed the country until October, when Pinochet imposed another state of siege. Protests continued in smaller forms until the state of siege was lifted in July 1985. In August 1985, members of the Christian Democrats and others in the AD created the National Accord for a Full Transition to Democracy, which initiated another round of dialogue with the regime. Although the National Accord demanded the immediate resignation of Pinochet and the holding of national and local elections, it deliberately excluded leftists from the talks and reached out to conservative parties that had sometimes supported the regime, such as the Nationalist Party (PN).[27] It is possible that the move may have been an attempt to win over Chilean conservatives and to convince Pinochet that the opposition’s intentions were not to seek a transition through violent overthrow. In any case, Pinochet would only concede to the promulgation of provisions to register voters made in the 1980 constitution; there would be no concessions on his resignation or holding general elections.

The protests continued and intensified when Pinochet rejected the National Accord in December. By January 1986, the Civic Assembly (AC) was formed and broadened the MDP’s popular base to include students and professionals. Another mass strike took place from July 2-3, 1986 with the backing of the Alianza Civica. The obstinacy of Pinochet drove the AC back towards mass mobilization under the banner “without protest there is no change.”

The situation closely resembled the breakdown of dialogue between the Nicaraguan bourgeois opposition and Somoza dictatorship in 1979. Following these events, the Nicaraguan bourgeoisie came to rely on the armed struggle led by the Sandinistas as a means of dislodging the regime. This contributed to eventual overthrow of the Somoza regime and the establishment of a new revolutionary government in Nicaragua. The Carter administration had unsucessfully attempted this outcome, and the Reagan administration would attempt to dislodge the revolutionary government by training and backing Nicaraguan counterrevolutionaries. Given the emergence of a similar pattern in Chile, the US policy makers felt that the US had to move quickly to prevent “another Nicaragua.” Whereas Elliot Abrahms favored using a combination of diplomatic pressure and direct political intervention intended to buttress Chilean “moderates,” Langhorne Motley had favored backing the regime by reinstating military assistance.

The policy directives of the Reagan administration would eventually favor the stategy advanced by Abrahms. Beginning in October 1983, the House Subcommittees on Human Rights and Western Hemisphere Affairs held hearings on the political climate in Chile and three other South American countries. Deputy Assistant Secretary of Inter-American Affairs James Michel stressed the escalation of police violence against demonstrators in Chile and declared that “(the US) will continue, both publicly and privately, to encourage the transition to democracy.”[28] The primary instrument of pressuring the Pinochet regime to allow change was economic. In late 1984, the Reagan administration warned Santiago that Washington’s vote for a number of pending Inter-American Development Bank (IADB) loans to Chile would be subject to Pinochet lifting the state of siege. Pinochet responded by lifting the state of siege in July 1985, and the US approved the IADB loan and other financial flows.

About this time, a number of State Department officials and members of Congress had made trips to Chile to assess the political situation and the impact of using the pending loans as leverage. In March 1985, Michel testified in joint hearings by the House Subcommittees on Human Rights and Western Hemispheric Affairs that the escalation of violence in Chile had to do with offensive armed tactics by the leftist Manuel Rodriguez Patriotic Front (FPMR) and a response by the Chilean police. It was essential, Michel urged, that the opposition develop a consensus on key transition issues, particularly those regarding private property and the future of the military.[29] Despite the fact that Amnesty International testified in these hearings that the violence was overwhelmingly the work of the Chilean police targeting unarmed demonstrators, the State Department seemed bent on impressing Congress of the dangers of the Chilean left. Its human rights report on Chile submitted to Congress included an appendix of a statement by the Chilean Communist Party (PCCh) that had been broadcast over Soviet radio. An attached copy of the statement submitted by the State Department to Congress highlighted the following section:

The main and foremost task is to topple the dictatorship. Its demise will be a revolutionary event that could give rise to a democratic and progressive government with which we could move toward socialism through an uninterrupted process without insurmountable barriers between the antifacist, democratic, and anti-imperialist revolution and the socialist revolution.

The experience of two Latin American countries, Cuba and Nicaragua, proves that this is most possible despite foreign and domestic difficulties. If the conflict is resolved, as is most probable, through a confrontation between the dictatorship and a mass movement employing various types of action, this outcome is even more likely.[30]

Also in these hearings, Felice Gaer of the International League for Human Rights (ILHR) recommended that the US ambassador should be better involved in the work of Chilean human rights activists and urged Congress to “support projects and institutions in Chile that are identified with the process of return to democracy and respect for human rights” by providing funding through the US-funded National Endowment for Democracy (NED). Key members of Congress who had participated in the trips concurred with the ILHR’s recommendations.[31] In tandem with this strategy was the declaration of a flexible economic policy – advocated by Abrams – that conditioned future loans to Chile on the grounds that progress had been made in improving its human rights record. The strategy of buttressing the “moderates” while pressuring the regime to accommodate became the principal strategic line in April 1985 when the State Department called Ambassador Theberge back to Washington and replaced him with Harry Barnes. Barnes worked with the NED and the Chilean “moderate” opposition on a strategy that sought a political transition through careful dialogue and bargaining with the Pinochet regime and his supporters. Another crucial change took place in the State Department when Abrams replaced Motley as Assistant Secretary of State for Inter-American Affairs. Upon assuming the post, Abrams stated that the mission of the administration was to “cultivate a transition to democracy.”[32]

By 1986, the new policy was firmly in place. The Chilean police’s imprudent murder of Rodrigo Rojas DeNegri further hardened the US position against the regime. DeNegri – an American citizen of Chilean descent – and Carmen Quintana were set on fire by the Chilean police during a demonstration in July. Ambassador Barnes had attempted to secure the severely injured Rojas in a better hospital before his death four days after the attack. The funeral in Santiago was attended by thousands, including the ambassador, and ended by the Chilean military tear-gassing the mourners. Shortly after, Chile’s human rights record and the trajectory of a possible political transition was once again discussed in Congress when the House Subcommittee on International Development Institutions and Finance held hearings on the US position on future loans to Chile. Although Abrams harshly criticized the Pinochet regime, equal emphasis was placed on the potential danger of the left:

Failure to return democracy will be accompanied by increasing polarization and violence. The strengthening of the far left in Chile resulting from this can have a negative impact on some still fragile democracies elsewhere in the region and would jeopardize US interests.

A statement by Representative Doug Bereuter in these same hearings further defines the problem:

Continued failure to allow democratic reform in Chile, will, I fear play directly into the Chilean communists’ hands. If the citizens of Chile conclude that there is no hope of democracy under Pinochet and no hope of removing him peacefully, they may see the most radical and subversive elements of Chile as their only salvation. Events in Chile could take on a momentum and direction which we may later find impossible to influence. The United States should act now, while we still have a chance to assist the democratic cause.[33]

c. Pinochet – Reagan

As William Robinson observes, US objectives were to transfer leadership of the opposition from the mass movements to political parties representing a “center”, isolate the left within the parties and the movement, bolster the center, and wean the right away from support for dictatorship.[34] From 1985 to 1989, the US embassy and the NED reached out to members of the “moderate” opposition and helped to direct the protest movement into one that focused exclusively on the removal of Pinochet by electoral means. A decisive turn in the Chilean opposition movement began when the AD completely disavowed the strategy of mass mobilization and protests in late July 1986. The immediate impetus for doing so was a meeting between Undersecretary of State for Inter-American Affairs Robert Gelbard and members of Aliaza Democratica. Gelbard informed them that the Reagan administration did not favor the tactics of mass mobilization, the Civic Assembly, or concerted action with the left.[35] In August, a visit to Pinochet by General John Galvin – Commander in Chief of the US Armed Forces Southern Command – coincided with the Chilean military’s discovery of weapons allegedly hidden by communists. Pinochet asked the US government to send experts to trace the source. The experts concluded that the arms were brought clandestinely for the Manuel Rodriguez Patriotic Front (FPMR) and there was consistent evidence of external support for Communist terrorist groups.[36] Shortly after Galvin’s visit, the FPMR unsuccessfully attempted to assassinate Pinochet.

The AD reacted by denouncing all forms of violence and broke with the left. As PDC member Genaro Arriagada observed:

The assassination attempt and the discovery of the arsenals thus restored Pinochet’s position within the Armed Forces to its former strength and also persuaded conservatives, impelled by the fear of communism, to mend their alliance with the regime.[37]

Washington’s objective thereafter was to engage the regime in dialogue that would make it, the military, and its conservative backers confident that the AD was not seeking violent overthrow. To this end, the AD declared that it was seeking a negotiated exit of the armed forces that did not entail the military’s political defeat and making a democratic transition through the framework of the 1980 constitution.[38] By the end of 1986, the AD’s grassroots work had shifted entirely to voter registration and workshops that purportedly provided lessons on democratic values.

However, the AD’s distancing from the left neither immediately nor necessarily endeared it to Chilean conservatives, especially those in the business community. Granted, the economic crisis in the early 1980s had prompted some to criticize the regime. By and large, these criticisms were limited to economic policy, and business groups refrained from overtly political positions that would lead the regime to identify them with the political opposition. By mid-decade, Chile’s recovery from the economic crisis provided either direct or indirect benefit to Chilean capitalists that brought many back to cordial relations with the regime. The historical record, however, suggests that political maneuvering by Pinochet and inadequate organizational and tactical skills among centrists in the opposition were major factors behind the rekindling of this relationship.

From December 1982 to July 1983 – before the onstart of mass protests – peak business associations (representing agricultural – the Society of Agriculture and industrial production – the Society of Industrial Development) were established and worked through the Confederation of Production and Commerce (CPC) to demand economic changes. The CPC was the Chilean businesses community’s first proactive attempt to influence the regime.[39] As Guillermo Campero found, sectoral interests were important in shaping the stance individual business groups took against the regime’s economic policies. Past policies (such as those encouraging lenient lending practices by Chilean financial institutions) had favored large entrepreneurs needing foreign capital and technology over domestic producers, but economic criticisms never gave way to political criticism.[40] During the economic crisis from 1980 to 1985, however, the Chilean government experienced external pressures from private foreign creditors to take direct steps for ensuring the country’s creditworthiness. The Chilean government attempted to manage the crisis by curbing bank practices that provided loans to ailing businesses. Hence, Chilean businesses faced tightening financial inflows and dropping economic outputs at the very moment when the government was imposing strict monetary measures on banks to prevent unsecured loans.[41]

In late 1982, demonstrations among small to medium entrepreneurs in Lanco, Valdivia, Osorno, and Temuco demanded that the regime provide relief assistance to ailing Chilean businesses. In December, a meeting by the National Assembly of Entrepreneurs held in Temuco invited representatives of the banned union National Syndical Coordinator (CNS) and the regime-sanctioned Democratic Workers’ Union (UDT) to prepare a broader proposal that called for a political opening which would allow public participation in economic policy making. However, the CPC had previously decided in late 1981 that it would seek direct dialogue with the regime and refrain from gestures that may be interpreted by Pinochet as a threat against his rule. The CPC, therefore, would only attend the meeting held by the National Assembly of Entrpreneurs if the topic was limited to business matters. Under the CPC leadership the National Society of Agricultures and the National Society of Industrial Development also refrained from supporting the meeting, even though several of the organizers had businesses in agriculture, transportation, and other domestic industries.

The regime reacted by blocking the meeting place and expelling Manuel Bustos of the CNS and the National Association of Wheat Producers.[42] In the months to come, Pinochet thwarted potential political rebellion in the business community by selectively offering relief to firms and individuals that refrained from dissent and criticism of the regime. For example, the a business association in finance known as the Vial group was highly and openly critical of the regime’s economic performance, and its members were jailed on charges of banking fraud. The Cruzat-Larrain group, which had been conciliatory, did not face the same charges despite evidence that may have also committed similar misdemeanors.[43]

On its face, the emergence of mass protests by mid-1983 had the potential of driving Chilean capitalists into an overt political struggle. However, the opposition was rooted in the working class poblaciones, which organized on principles that challenged the fundamental socioeconomic basis of the regime; Chilean capitalists, as Jeffrey Friedan finds, wanted no part of the protests and quickly closed ranks with the military.[44] Furthermore, as Eduardo Silva found that capitalists returned to supporting the dictatorship because the government became more pragmatic on economic issues. Pinochet further ensured against the possibility of a multiclass opposition movement by deepening a working relationship with Chilean businesses and peak associations, especially the CPC.[45] In a move designed to palliate business demands, Pinochet appointed Sergio Onafre Jarpa as minister of interior and Luis Escobar as minister of finance. Both figures were well-known and liked in the business community. On the political front, Jarpa engaged in dialogue with the AD while Escobar and others in the regime’s economic ministries worked out a policy for economic recovery that hinged on debt relief and offering new loans.[46] By 1985, the boom in total industrial output and the stabilization of the Chilean peso indicated that Chile had recovered from the economic crisis.[47] In the process, the regime had won back its class-based constituency.

These events belie William Robinson’s contention that we can understand the transition from Pinochet to a civilian-elected government by focusing on the imperatives of transnational capital and the political agenda of a “transnational” capitalist class. By and large, Chilean capitalists remained firmly behind the dictatorship. Over the next four years, the NED would – as Robinson observes – attempt to gain the support of Chilean capitalists. However, I argue that elite support was driven by a belief that a return to civilian-elected government would not harm their class interests rather than a political agenda favoring “polyarchy” over dictatorship as a form of social control. Hence, “indifference” or “tolerance” rather than “support” or “approval” are better descriptions of the Chilean elite’s attitudes towards the political transition. Pragmatism on the part of the Chilean “moderate” opposition rather than an inherent political agenda held by transnational capitalists was responsible for the return of civilian-elected government and the continued security of the free market in Chile.

Indeed, a few small and medium producers – such as those in transportation, and those producing for local markets such as the Association of Metal Industrialists (ASIMET) – had not been part of that recovery. ASIMET and individual small business persons went on the join the Civic Assembly in January 1986 after meeting with opposition leaders from the Workers Central Command the previous August.[48] The outcome was the formation of Entrepreneurs for Democracy, but the group carried no weight since it represented only a tiny sector of Chilean businesseses tied to domestic enterprise.[49] By that time, the main image projected by the business community emanated from the CPC; most representation took place under its umbrella. Under the leadership of Manuel Felieu, the organization would become the primary source of pressure on the opposition to seek a conception of democracy and a transition framework that was compatible with the interests and concerns of Chilean capitalists. Furthermore, any possible political transition must take place in accordance with the 1980 constitution, which called for Chileans to vote for or against a continuation of Pinochet’s presidency in a 1989 plebiscite.

As early as 1984, the Alianza Democratica had attempted to win the support of Chilean capitalists by explictly declaring the opposition movement’s respect for free enterprise and private property. These efforts were impaired by the AD’s tactical alliance with the radical MDP.[50] Although the Alianza Democratica eventually distanced itself from the mass movement and condemned the use of violence, the CPC was still not convinced that alone guaranteed a post-Pinochet government would not radically alter the economy. As an executive of the Angelini Group, a powerful Chilean financial conglomerate stated:

Does the Socialist Party led by Nunez and Christian Democracy (CD) agree with the model of a free economy, in which the engine of development is private enterprise and private initiative, in which the role of the state is that of a promoter … but not that of owner of the large enterprises? (…) It is here where, in my opinion, you can find some of the obstacles still blocking a finalization of an agreement (on the transition).[51]

The lack of firm confidence in the AD’s agenda for political transition was also evident when House Republicans and members of the National Republican Institute (NRI) visited Chile from spring to summer 1988. The mission met with members of the conservative National Renovation Party (PRN) and the National Party on economic issues related to a possible political transition. Conservatives told the mission members that the preservation of free market gains was a necessity and there was concern that unless a newly-elected government has economic credibility – inside and outside Chile – existing achievements would not survive. In House hearings that corresponded with the missions, Professor Arturo Valenzuela of Georgetown University – who had been working in study groups funded by the NED – cautioned that continued intense divisions between Pinochet supporters, those seeking a moderated political transition (i.e., the Alianza Democratica), and the radicals could result in further polarization and a military coup unless the AD formed a viable center in the upcoming plebiscite. [52]

With neither a deep popular base in the poblaciones nor substantial support from the Chilean capitalists, the AD was in serious danger of becoming irrelevant – regardless of whether or not the US exerted pressure on the Pinochet regime. NED funding was, therefore, an essential foreign policy instrument for making sure that the drift away from supporting Pinochet did not result in “another Nicaragua.” The inflow of funds and other resources from the NED transformed the AD from a subordinate grouping within the opposition movement to the principal force behind the political transition. From 1986-1987, National Endowment for Democracy funds helped the Alianza Democratic (AD) to develop a separate and distinct identity from the insurrectionist-oriented Popular Democratic Movement (MDP) and the Civic Assembly (AC) by shifting the struggle from the streets to innocuous workshops for the young and labor organizers and meetings with business leaders. During this period, the AD’s strategy took advantage of one of the few concessions by the Pinochet government – the promulgation of laws permitting voter registration. NED funds helped AD members create organizations for registering Chilean voters.

From 1986 to 1987, the NED-funded programs in Chile suggest that members of the “moderate” opposition were attempting to address and assuage the concerns of Chilean elites. In July 1986, Ambassador Barnes delivered a speech at a conference on cooperatives and development hosted by the US Overseas Cooperative Development Committee (OCDC) – an NED grantee – that suggested the nature of the meetings was political:

Cooperativism as an economic and social idea has a much greater reach than as a system or way to unite people interested in monetary gains. Cooperatives are not only one of the best socio-economic instruments to strengthen and guarantee human dignity, they also inculcate the concept of democracy.[53]

The political intent is also revealed by House Representatives Doug Berueter's comments on the conference a month later:

This member sees little movement toward a democratic resurgence in Chile. General Pinochet apparently does not want democracy restored because he distrusts it. Therefore, …it becomes very important to create a groundswell of support and demand for democracy at all levels of the population. Oftentimes, cooperatives are a grass roots example of democracy.[54]

According to the OCDC’s conference report the political tone of the conference almost caused some conservative leaders of Chilean cooperatives to walk out. The OCDC concluded that “The major success of the conference was the involvement of all cooperative sectors despite historical and ‘political’ differences.”[55]

The NED funded other projects designed to attract the business community through the Center for International Private Enterprise (CIPE) and the National Republican Institute (NRI). In 1986, an $19,564 NED grant to CIPE was to assist the Center for Public Studies (CEP), a pro-free market think tank in Chile. The funds were to assist the CEP in hosting seminars and publishing a quarterly bulletin “aimed to expose the myth that Pinochet’s government has pursued market-oriented policies when, in fact, the role of the state and state-owned enterprise has expanded considerably in recent years.”[56] The NRI also received $75,000 from the NED for conferences in Chile that considered “the role of the National Accord, the business community, and other political parties.”[57]

In the following year, CIPE and NRI projects in Chile became more proactive. The CEP received another $19,500 grant that was used to develop six position papers on management-labor relations that would be “used in discussions and workshops in an effort to create an atmosphere of mutual confidence and cooperation between management and labor leaders.”[58] The NRI channeled another NED grant of $110,000 to the CEP so it could coordinate conferences that would be preceded by the preparation and completion of a questionnaire submitted to major opposition parties. The results of the questionnaire were hoped to “encourage the political parties to focus on their present and future roles in the economic development of Chile.”[59]

In 1988, NED recipients in Chile mobilized behind the promotion of a “no” vote in a plebiscite. The plebiscite was pursuant to stipulations in the 1980 constitution drafted by the regime. Chileans would be permitted to cast votes in favor of or against seven more years of governance by Pinochet. If a “no” vote prevailed, elections would be held to determine the country’s new leader. NED funds contributed to the success of the “no” vote, and in 1989 additional monies went towards efforts to vote out the regime and install a new civilian government headed by the Christian Democrats. Between this period, Chilean capitalists admitted that they no longer feared property loss if a transition took place, and did not think much would change regardless of the results of plebiscite. Furthermore, the AD had clarified the portion of its economic platform that called for state intervention so that it would be understood to mean assistance to private enterprise rather than an intent to create state enterprise. [60] At the same time, Council for Production and Commerce (CPC) – the primary and most powerful business organization in the country – and the National Renovation Party (PRN) – a conservative, pro-regime group – campaigned for a “yes” vote.

Early events leading up to the plebiscite were troubling. Regime supporters carried out acts of intimidation (e.g.: firebombing offices, beatings, and death threats) against those involved in the Campaign for the No.[61] Throughout this period, the left was marginalized and disoriented by changing political environment. Marxist organizations continued to be illegal. While many members of the revolutionary faction of the Socialist Party shifted their activity to the “no” campaign and joined the Pro-Democracy Party (which was created by Socialist Ricardo Lagos as means of organizing the left around an electoral strategy), other radicals refused to acknowledge the plebiscite as an effective strategy for ridding Chile of the regime. The Manuel Rodriguez Patriotic Front dismissed the plebiscite as a sham, and one affiliate group escalated its armed confrontation with the regime.[62] The volatile climate shook public confidence in the plebiscite.

By October 1988, however, both the Command for the No and the Command for the Yes held a rallies without incident. Nevertheless, there was some sentiment that Pinochet would never voluntarily concede defeat. On October 2, Acting Secretary of State John Whitehead called the Chilean Ambassador to the US and expressed concern about rumors that the regime might disrupt or cancel the plebiscite. A report by Freedom House – an NED grantee that sent an observer mission to the plebiscite – noted that two days before the plebiscite Ambassador Barnes stated, “At this point I think the ‘no’ will win, if the process does not get interrupted. That opens the way for free elections. Our whole approach has been to promote a rapid return to democracy.” The report concludes that Barnes successfully balanced “official neutrality with the promotion of democracy in a test of wills with General Pinochet.”[63] The next morning, the regime and its backers conceded that the results of the plebiscite indicated that the majority had voted “no.”

In 1989, NED funding helped prepare Chileans for the elections scheduled for that December. The NED provided almost $700,000 to the same groups in Chile so that they could register voters and hold workshops on the importance of the elections and democracy. The victory during the plebiscite probably made it quite easy to convince the Chilean population that change was simply a matter of casting a vote for the opposition. Indeed, the fairly gracious position of the regime after its defeat during the plebiscite was combined with a relatively nonviolent electoral campaign. The relative peace of the elections was not simply a product of the regime’s good will towards the opposition, however. While promising ordinary Chileans that the elections would end the dictatorship and usher in a new era, the opposition was ensuring the regime and its backers that there would be no fundamental change under a newly-elected civilian government.

Among other stipulations, several seats in the senate would be reserved for Chilean military officers (particularly Pinochet), so that they would not fear a victory by the opposition, the permanent retention of the National Security Council to oversee military relations, and the assignment of Pinochet as the commander-in-chief of the military.[64] After the plebiscite Pinochet also took steps to prevent any drastic alteration of the country’s economic and political system by passing a series of binding laws that prohibited the incoming government from changing the composition of the military, replacing the heads of the Supreme Court, and reversing recent privatization measures.[65] The Concertacion did not challenge any of these moves. Instead Alwyn’s speeches placed increased emphasis on the need for continuity and further engaging in free enterprise and free trade as the election neared.[66] In December 1989, Alwyn won the presidency over the Pinochet-backed Hernan Buchi, and power was handed over to a new civilian government.

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[1] William Robinson, Promoting Polyarchy: Globalization, US Intervention, and Hegemony (New York: Cambridge University Press, 1996), pp.66-72.

[2] William Robinson, Promoting Polyarchy, pp.75-78.

[3] William Robinson, “Polyarchy: Coercion’s New Face in Latin America” in NACLA: Report on the Americas, V.35, No.6, (November/December 2000), p.45.

[4] James Petras and Morris Morely, Class, State, and Power in the Third World (London: Zed Press, 1981), p.1

[5] James Petras and Morris Morely, US Hegemony Under Siege: Class Politics, and Development in Latin America (New York: Verso, 1990), p.65-66.

[6] ibid, pp.111-116.

[7] Graham Allison, “Conceptual Models and the Cuban Missle Crisis” in American Political Science Review, 63, No.3 (September 1969).

[8] Morris Morley, Imperial State and Revolution The United States and Cuba, 1952-1986 (New York: Cambridge University Press, 1987), p.25.

[9] William Blum, Killing Hope: US Military and CIA Operations since World War II (Monroe, ME: Common Courage Press, 1995), p.209.

[10] US Embassy, Chile to US State Department, Washington, DC. “Subject: Allende Wins.” September 5, 1970. Obtained with the assistance of the National Security Archives, Washington, DC. Emphasis added.

[11] James Petras and Morris Morley, The United States and Chile: Imperialism and the Overthrow of the Allende Government (New York: Monthly Review Press, 1975), pp.79-80.

[12] James Petras and Morris Morley, The United States and Chile, pp.80-81.

[13] William Blum, Killing Hope, p.210.

[14] James Petras and Robert LaPorte, Jr., “Can We Do Business with Radical Nationalists?,” in Foreign Affairs on Latin America, 1970-1980 (Boulder and Washington, DC: Westview Press and Carnegie Endowment for International Peace, 1983), p.22.

[15] James Petras and Robert LaPorte, Jr. argue that the expopriations may have specially targeted ITT, Kennecot, and Anaconda for defensive reasons. Indeed, the three companies had played some part in the plots to keep Allende from assuming office. (See William Blum, Killing Hope, p.211; James Petras and Morris Morley, The United States and Chile, pp.31-35.) There is no conclusive accounts, however, that Allende reacted against the corporations for these reasons.

[16] James Petras and Morris Morley, The United States and Chile, pp.89-90.

[17] Ibid, p.126.

[18] James Petras and Morris Morley, The United States and Chile, p.152.

[19] Note that during the Nixon administration, sudden increases in military assistance to Latin America (e.g.:Chile, Brazil, and Venezuela) may be a function of direct arms sales between the US and the region’s countries. President Richard Nixon initiated a policy that allowed Latin American countries to purchase arms directly from the US by relying on their own monetary resources rather than just supplimental aid from Washington. See Don Etchison, Militarism in Central America (New York: Praeger, 1975), pp.81-85.

[20] US Congress. House Committee on Foreign Affairs, Subcommittees on International Economic Policy and Trade and on Interamerican Affairs, US Economic Sanctions against Chile. March 10, 1981. (Washington, DC: US Government Printing Office, 1981)

[21] Thomas Carothers, In the Name of Democracy: US Policy Toward Latin America in the Reagan Years (Berkeley: University of California Press, 1991), pp.152-153. On Abrams’ views also see The Washington Post, March 5, 1982.

[22] The 1983-1986 protests and the subsequent repression have been thoroughly discussed, witnessed, and documented by Cathy Lisa Schneider, Shantytown Protests in Pinochet’s Chile (Philadelphia: Temple University Press, 1995)

[23] Paul Sigmund, The United States and Democracy in Chile (Baltimore: Johns Hopkins University Press, 1993), pp.143-144.

[24] Paul Sigmund, ibid, p.149; Martha Lyn Doggett, “Washington’s Not-So-Quiet Diplomacy,” NACLA, (March/April 1988), p.33-34.

[25] Genaro Arriagada, Pinochet: The Politics of Power (Winchester, MA: Unwin Hyman, 1988), p.70; Cathy Schneider, Shantytown Protest, p.165.

[26] Cathy Schneider, ibid, p.165-166.

[27] A ban on Marxist organizations from the 1970s continued throughout this period. Most of the organizations in the MDP (e.g.: the Revolutionary Movement of the Left and the Communist Party) were forbidden from engaging in any form of political activity under the law. The AD did not include a demand for the lifting of the ban in the National Accord.

[28] US Congress, House of Representatives, Committee on Foreign Affairs, Subcommittee on Human Rights and International Organization and Subcommittee on Western Hemisphere Affairs. Human Rights in Argentina, Chile, Paraguay, and Uruguay. October 4 and 21, 1983 (Washington, DC: US Government Printing Office, 1984)

[29] US Congress, House of Representatives, Committee on Foreign Affairs, Subcommittees on Human Rights and Western Hemispheric Affairs. US Policy, Human rights, and the Prospects for Democracy in Chile: Hearings and Markup before the Committee on Foreign Affairs and its Subcommittees on Human Rights and Western Hemispheric Affairs, March 21, 1985 (Washington, DC: Government Printing Office, 1985)

[30] ibid, appendix 3.

[31] The ILHR’s affiliate institutes have received funds from the NED. See Interhemispheric Resource Center (Albuquerque, NM). Group Watch Files, File Name: ilhr.txt. Available on-line at http://www.pir.org/gw/.

[32] William Robinson, Promoting Polyarchy, p.168.

[33] US Congress, House of Representatives, Committee on Banking, Finance, and Urban Affairs, Subcommittee on International Development Institutions and Finance. Human Rights Abuses in Chile: Time for United States Action. July 30, 1986 (Washington, DC: US General Printing Office, 1986). Emphasis added.

[34] William Robinson, Promoting Polyarchy, p.179.

[35] James Petras and Fernando Ignacio Leiva, “Chile: The Authoritarian Transition to Electoral Politics, A Critique,” in Latin American Perspectives, 15:3 (1988), p.99.

[36] Genaro Arriagada, Pinochet, p.77

[37] ibid, p.78.

[38] James Petras and Fernando Ignacio Leiva, “Chile: The Authoritarian Transition”, pp.101-102. The 1980 constitution stipulated that the regime would put forth a presidential candidate for approval or rejection by Chilean voters.

[39] Eduardo Silva, The State and Capital in Chile: Business Elites, Technocrats, and Market Economics (Boulder: Westview Press, 1996), p.175

[40] Guillermo Campero, “Entrepreneurs under the Military Regime,” in Paul Drake and Ivan Jaksic (eds.) The Struggle for Democracy in Chile, 1982-1990, (Lincoln: University of Nebraska Press, 1991), pp.132-133; for more on sectoral differences among Chilean business elites see Jeffrey Friedan, Debt, Development, and Democracy: Modern Political Economy in Latin America, 1965-1985 (Princeton: Princeton University Press, 1991).

[41] Jeffrey Friedan, Debt, Development, and Democracy, pp.170-171.

[42] Guillermo Campero, “Entrepreneurs under the Military Regime”, pp.136-37.

[43] Jeffrey Friedan, Debt, Development, and Democracy, pp.173-174.

[44] Jeffrey Friedan, ibid, p.169; Guillermo Campero, “Entrepreneurs under the Military Regime,” p.137.

[45] Eduardo Silva, The State and Capital in Chile, p.183.

[46] For more on Jarpa see Guillermo Campero, “Entrepreneurs under the Military Regime,” p.140; Eduardo Silva, ibid, p.187. For more on Escobar see Jeffrey Friedan, Debt, Development, and Democracy, p.173.

[47] Detailed statistics and sophisticated measures are provided in Eduardo Silva, The State and Capital in Chile, pp.198-199.

[48] Guillermo Campero, “Entreprenuers under the Military Regime,” p.142.

[49] ibid, p.146-147.

[50] Eduardo Silva, The State and Capital in Chile, pp.184-185. The AD also demanded an immediate general election rather than a plebiscite until mid-1988. For more on the Chilean conservatives’ concerns of AD’s alliance with “communists” in the MDP see Pamela Constable and Arturo Valenzuela, A Nation of Enemies: Chile under Pinochet (New York: WW Norton Press, 1991), pp.292-293.

[51] James Petras and Fernando Ignacio Leiva, “Chile: the Authoritarian Transition,” pp.106.

[52] The mission’s reports and Valenzuela’s testimony is recorded in US Congress, House of Representatives, Committee on Foreign Affairs, Subcommittee on Human Rights and International Organizations and Subcommittee on Western Hemisphere Affairs, US Policy, Human Rights, and the Prospects for Democracy in Chile. April 12, May 17, July 28, August 2-3, 1988 (Washington, DC: US General Printing Office, 1988).

[53] US Overseas Cooperative Development Committee, Cooperatives in Chile’s Transition to Democracy: Conference on ‘Cooperatives and Development’ (Washington, DC: OCDC, 1986), p.7.

[54] Congressional Record, August 8, 1986. A copy of the article is included in the OCDC report.

[55] ibid, p.25

[56] National Endowment for Democracy, 1986 Annual Report, p.32.

[57] National Endowment for Democracy, 1986 Annual Report, p.33.

[58] National Endowment for Democracy, 1987 Annual Report, p.48.

[59] ibid, p.51.

[60] Eduardo Silva, The State and Capital in Chile, p.226.

[61] America’s Watch, Chile: Human Rights and the Plebiscite. July 1988.

[62] Pamela Constable and Arturo Valenzuela, A Nation of Enemies, pp.303-304.

[63] Freedom House, Mission to Chile, 1988, p.76.

[64] Lois Oppenheim, “Military Rule and the Struggle for Democracy in Chile,” Latin American Perspectives, 18:1 (1991).

[65] Lois Oppenheim, Politics in Chile: Democracy, Authoritarianism, and the Search for Development (Boulder: Westview Press, 1993), pp.208-209.

[66] Arturo Valenzuela and Pamela Constable, Nation of Enemies: Chile under Pinochet (WW Norton, 1991), pp.315-316.