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PROMOTING POLYARCHY: GLOBALIZATION, U.S. INTERVENTION, AND HEGEMONY

Chapter 4: Chile: Ironing out "a fluke of the political system"

Mr. Minister, you come here speaking of Latin America, but this is not
important. Nothing important can come from the South. History has
never been produced in the South. The axis of history starts in
Moscow, goes to Bonn, crosses over to Washington, and then goes to
Tokyo. What happens in the South is of no importance. You're
wasting your time.
-- Henry Kissinger, speaking to Chilean Foreign Minister Gabriel Valdes, June 1969 [1]

From dictatorship to "redemocratization" and the US role

"1 don't see why we need to stand by and watch a country go
communist because of the irresponsibility of its own people," declared
National Security Advisor Henry Kissinger in June 1970.2 Kissinger
was referring to the election that year of Salvador Allende as president
of Chile. For Kissinger, the election of a self-declared socialist "represented
a break with Chile's long democratic history," the result of "a
fluke of the Chilean political system."3 What followed was one of the
darkest chapters in inter-American relations: a massive US destabilization
campaign against the Allende government, culminating in the
bloody 1973 military coup. For fifteen years, successive US administrations
propped up the dictatorship of General Augusto Pinochet. Then,
in the mid-1980s, on the heels of the "success" in the Philippines,
policymakers switched tracks and began to "promote democracy" in
Chile.

The coup in Chile was part of a general pattern in Latin America of
military takeovers in the 1960s and 1970s, in the face of mass
struggles against ubiquitous social and economic inequalities and
highly restricted "democracies." Similarly, the "return to democracy"
in Chile in the late 1980s was part of a hemispheric pattern, referred
to in US academic literature as "redemocratization." There is more
than semantics behind this term. Underlying specific ~ermipology is
the debate over a contested concept. If democracy is considered
power of the people, then there is little basis, intellectually and
theoretically, to speak of "redemocratization," whereby, in regular
cycles, power is held, then lost, then held again by the people. If,
however, democracy is limited to its institutional definition, then the
formal structures of polyarchy - civilian government, elections, etc. -
can, in fact, be established, dismantled, and established again in
regular cycles. When scholars speak of the "breakdown of democracy"
and a "redemocratization," they are therefore utilizing the
hegemonic version of an essentially contested concept, and what they
really mean are cycles in the breakdown and restoration of consensual
mechanisms of domination.

US policy towards Chile from the 1960s to the 1990s involved four
successive stages: (1) covert support for centrist and rightist groups
against the Chilean left in the 1960s (2) destabilization of the left once it
came to power through free elections (3) support for military dictatorship
until the mid-1980s, including its program of decimation of the
left and economic restructuring (4) intervention in the anti-dictatorial
movement from the mid-1980s to bring about a transition to polyarchy.
The United States had spent millions of dollars in the 1960s in Chile in
covert intervention to marginalize the left and bolster its favored
parties,4 particularly the Christian Democratic Party (POC), which
was headed by Patricio Aylwin. Two decades later, Aylwin and his
party again became the recipient of US assistance, this time channeled
through the NED and the AID, which would help Aylwin become the
Chilean president. It was with telling irony that the return to power in
early 1990of the same Aylwin and the PDC that openly participated in
the 1973 military coup was projected around the world as the culmination
of a "democratic revolution" that swept Latin America.

United States-Chile relations must be seen in the context of the
evolution of post-World War II US policy towards Latin America, from
open support for dictatorship, to a period of "rethinking" and then to
"democracy promotion." Washington launched a hemispheric campaign
to isolate the left following the declaration in 1947 of the Truman
Doctrine, which initiated the Cold War. This included the development
of close ties between the United States and Latin American militaries,
and the supply of $1.4 billion between 1950 and 1969 in military
assistance.s The Cuban revolution in 1959 constituted a dangerous
rupture in traditional inter-American relations and a hemispheric
threat to US domination. The Kennedy administration's Alliance for
Progress aimed to prevent repeats through a combination of United
States-led counterinsurgency and reform efforts.6 The breakdown of
that effort led the Nixon administration to commission the Rockefeller
Report of 1969.7This blueprint for Nixon-Ford policy towards Latin
America claimed that the "new militaries" - armed forces and security
apparatuses that had been "modernized" through US military and
security assistance and training programs - were the "last best choice"
for preserving social order and traditional inter-American relations,
and coincided with the turn to military dictatorship in many Latin
American countries. The Rockefeller Report was followed by the
Trilateral Commission's report The Crisis of Democracy, which argued
that "democracy" had to be reconstituted to assure that it did not
generate its own instability, both within states and in the international
system.s A year later, the Linowitz Report, which provided guidelines
for Carter administration policies, highlighted the conclusions of the
Trilateral Commission and stressed that military dictatorship and
human rights violations threatened to destabilize capitalism itself and
undermine US interests.9 It also recommended a US policy thrust of
"redemocratization" in order to avoid crises and preserve the hemispheric
order. The triumph of the Nicaraguan revolution in 1979
demonstrated to US policymakers the need for such an undertaking.
The 1984 Kissinger Commission report stated that promotion of
civilian regimes was an essential requisite of US policy and should be
coupled with greater linkage of the Latin American economies to the
world market as well as with a political, military, and ideological
offensive against leftist forces in the region.10

Transnational economics, transnational politics, and military rule in Latin America

South American politics changed from the 1960s to the 1990s concurrently
with the emergence of the global economy. In theoretical
abstraction, we see most clearly in South America how movement in
the "base" (globalization) intersected in a highly interactive and
complex manner with movement in the "superstructure" (political and
social changes). During the 1960s and 1970s repressive military
regimes took over in Brazil, Argentina, Chile, Uruguay, and elsewhere.
Authoritarianism was an instrument of local elites, acting in conjunction
with the United States, for suppressing an upsurge of nationalist,
popular, and leftist challenges to the status quo. There was an "elective
affinity" between these authoritarian regimes and US domination in
the hemisphere, corresponding to the exercise of domination through
coercive mechanisms in the inter-American arena. The relation
between the military and the social order is complex. Mechanical
reduction of the military regimes to "guardians of imperialism" denies
any autonomy to politics and institutions and to endogenous national
dynamics. However, the argument common to much mainstream
"democratization" literature that the military was an independent
institution merely seeking to preserve its own "institutional interests
and prerogatives" in the face of social turbulence is equally fallacious
and particularly misleading. [11] It theoretically separates a coercive
apparatus from the function of coercion in reproducing a social order,
and hence extricates the military from its structural location in the
socioeconomic organization of society and from the broader international
setting. This separation is grounded in structural-functionalism,
with its functional separation of the different spheres of the social
totality and their respective institutions, and an internal logic assigned
to each institution such that movement may occur independent of the
totality. The following discussion is intended to provide the historical
background and a theoretical framework for the Chile case. But
beyond that, it is also an attempt, in contradistinction to the structuralfunctional
approach associated with "democratization" theory, to
substantiate essential theoretical issues raised in chapter 1, including
how politics and economics intersect and evolve over time and how
they correlate to globalization.

The military coups of the 1960s and 1970s responded to threats to
social orders resulting from the breakdown of the prevailing model of
dependent capitalist development, known as import-substitution industrialization,
or ISI,u This model provided the economic basis for
populist political projects that prevailed throughout much of Latin
America in the post-World War II period. Populist projects were multiclass
alliances under the dominance of local elites and foreign capital
that undertook state-sponsored income redistribution, social welfare,
and the promotion of local capital accumulation. The ISI model and the
populist program were the form that Keynesian capitalism took in the
periphery and semi-periphery. Taking place prior to globalization, it
subordinated national economies in the periphery to the core, but
hinged on local accumulation processes at a time when these economies
enjoyed a measure of autonomy and "inward-oriented" development
programs were viable. Populist programs were often led by
national elites whose interests lay in local accumulation and who often
clashed with foreign capital and core country elites. But globalization,
by undermining the ability of any nation to pursue an autonomous
development path, led to the breakdown of the ISI model by the 1970s,
which in turn undermined the economic basis for populist programs.
Chronic inflation and macro-economic instability, a decline in local and
foreign investment, and the fiscal crisis of the state made it increasingly
impossible to sustain these programs. Economic crisis thus begat
political crisis as the social structure of accumulation unravelled.
Leftist alternatives and mass movements clamoring for more fundamental
social change threatened local elites and US interests. In Chile,
there was even more at stake: an avowedly socialist coalition had
actually assumed the reins of government.

The military takeovers had dual objectives: (1) to crush popular and
revolutionary movements through mass repression and institutionalized
terror, and (2) to launch processes of economic adjustment and
deeper integration into the world market in response to the exhaustion
of the ISI model and in concurrence with the emergence of the global
economy. The military regime's economic model- a regional prototype
of the full-blown neo-liberalism of the 1980s and 1990s - was antipopular,
involving a compression of real wages, the opening of
markets, lifting state regulations, price and exchange controls, reallocating
resources towards middle and higher income groups in the
external sector, and deepening ties with transnational capital. These
tasks could not be carried through under formal "political democracy,"
which became, in effect, a fetter to the restoration of capital accumulation
under globalization. Military dictatorship provided the political
conditions for economic restructuring, bringing about an entirely new
correlation of national and regional forces in South America. By the
1980s, the militaries, having launched restructuring and having accomplished
the destruction of popular and leftist movements, could
"safely" withdraw.

"Redemocratization" must thus be seen in light of globalization. The
military regimes provided the political conditions for initiating the
restructuring of social classes and of productive processes reciprocal to
the changes taking place in the world political economy. Restructuring
generated new economic and political protagonists with distinct interests.
A critical variable in this conjuncture was the debt crisis. Latin
America's foreign debt went from some $50 billion in 1974 to over $300
billion in 1981 and over $410 billion in 1987. This massive borrowing
spree responded in immediate terms to chronic balance-of-payments
crises associated with the exhaustion of the ISI model. But structurally
it was rooted in long-term movements in the world economy, particularly
the emergence of transnational finance capital as the hegemonic
fraction in the global economy.B The massive infusion of capital into
Latin America in the 1970s, linked to the concentration of economic
power in transnationalized finance capital in the center countries, had
profound effects on existing groups and class constellations. This point
is crucial: the need to earn foreign exchange to pay back the debt
requires that nations restructure their economies towards the production
of exports ("tradables" in official neo-liberal jargon) in accordance
with the changing structure of demand on the world market.14 Debt
leads to the reinsertion of these countries' economies into a reorganized
world market. Over an extended period, debt contraction and subsequent
reservicing has the consequence of strengthening those sectors
with external linkage, redistributing quotas of accumulated political
and economic power towards new fractions linked to transnational
finance capital. Two new social agents appear: a transnationalized
fraction of the bourgeoisie tied to external sectors; and regrouped
popular sectors displaced from traditional peasant and industrial
production. Each agent becomes politically active and articulates its
own project: the former, a return to polyarchy and the consolidation of
neo-liberalism; the latter, projects of popular democratization pushed
through "new social movements." Each agent, for its own reason,
mounted opposition to the military regimes and this opposition
coalesced into national democratization movements.

During the 1980s, the transnationalized fractions of the bourgeoisie
(the "New Right") came to the fore and achieved hegemony within
their class. Sociologist Ronaldo Munck has documented the emergence
of "a lucid bourgeois technocracy, based on the internationalized
sectors of the capitalist class with the strong backing of global capitalist
agencies such as the International Monetary Fund." There was "a
felicitous blend between global economic transformations - the era of
finance capital hegemony was arriving - and the international class
struggle which had thrown up a decisive bourgeois leadership committed
to ending the populist cycles and reasserting a new order."1s In
other studies, political scientists Eduardo Silva and Alex Fernandez
}ilberto show how new capitalist coalitions emerged in Chile between
1973 and 1988 dominated at all times by transnationalized fractions,
drawn from financial, extractive export, internationally competitive
industrial, and commercial sectors, all linked to the global economy,
and how these fractions linked with the military regime and shaped
state policies.16After the military dictatorships created conditions for
its emergence, this New Right swept to power in the 1980s and early
1990s in virtually every country in Latin America, especially through
electoral processes in "transitions to democracy." In power, it set about
to deepen neo-liberal restructuring and to stabilize new patterns of
accumulation linked to hegemonic transnational capital.

In sum, by the 1960s the 151model and populism had lost their
dynamism simultaneously with increased political activation among
popular sectors. The social order faced a crisis of accumulation and of
political legitimacy. The military regimes sought to resolve both the
economic impasse and the political challenge. The authoritarian form
·of the political system achieved these objectives, yet resulted by the
1980s in a situation of disjuncture between the economic and political
spheres of the social order, whereby the economic rearticulation of
society had proceeded more rapidly than the political. A synchronization
of the two was required. "The State is the instrument for
conforming civil society to the economic structure, but it is necessary
for the State to 'be willing' to do this," states Gramsci, "i.e., for the
representatives of the change that has taken place in the economic
structure to be in control of the State."17The New Right had to retake
formal control of the state as an economic and a political requirement.
In the civilian government to dictatorship to "redemocratization"
cycle, new transnational fractions among the dominant classes entered
the political stage and vied for hegemony, calling for "democratization"
so as to regain direct political power, carry forward neo-liberalism,
and create the "democratic" mechanisms for managing the
conflicts associated with restructuring.

Ironically, in the ten to twenty years from the turn to dictatorship
and the return to "democracy," polyarchy started out as a fetter to new
patterns of capital accumulation, only to later become a necessity for
continuing neo-liberal restructuring. This is because, on the one hand,
the dictatorships were blocking the further development, both political
and economic, of the new fractions among the bourgeoisie linked to
transnational capital accumulation. On the other hand, they had
engendered anti-dictatorial social movements by the 1980s that threatened
to burgeon out of control and pose an alternative of popular
democratization. The relative autonomy dominant classes granted
military regimes was based on their fear of the threat from below.
When the dominant groups felt they could work within civil society,
they began to feel constrained by the shackles of an all-powerful
military state. A reactivated civil society played a major role in the
rearticulation of the state and the dominant classes.

The military regimes preserved the capitalist social order. But they
could never achieve legitimation or a political-juridical formula for
consensus in the exercise of power. The dictatorships could not establish
institutional mechanisms for harmonizing the interests of dominant
classes under the hegemony of the newly emerging
transnationalized fraction. The establishment of legitimation through
the return to polyarchy became a necessity for the reproduction of
capitalism. However, "redemocratization" provided all social classes
with access to the political arena. Fractions within dominant groups
competed with each other as well as with other social groups. In Chile,
"redemocratization" became not the struggle of anyone class but a
majoritarian social struggle, in which the primary contradiction shifted
from society versus military dictatorship to which social classes would
lead the democratization process.

Chile: a "long tradition" of polyarchy

Sealed off from the rest of the South American mainland by the
Andean cordillera, Chile was a secondary center for the Spanish
empire, valued largely as a backwater producing agricultural and
mineral goods for neighboring colonies and the metropolis. As in
much of Latin America, with independence from Spain in 1818, an
oligarchy of landlords and a small class of urban aristocrats seized
control of the new nation. The government apparatus was controlled
by an indigenous elite which coalesced through the nineteenth and
twentieth centuries, made up of the landed oligarchy, mine-owners,
merchants and nascent manufacturers. Unlike the case in neighboring
countries, this elite, whose members overlapped extensively through
family and commercial ties, developed a high level of cohesion. This
allowed for relative stability and intra-elite consensus, notwithstanding
brief civil wars in 1859 and 1891.18The early formation of a polyarchic
system among the elite was a central factor in the country's subsequent
social and political development, and would lead US and Chilean
political observers to extol Chile's "long democratic tradition." What
these observers fail to mention is that this "democracy" was the
exclusive reserve of a tiny elite, an imprimatur on the feudal hacendado
system in the countryside that kept the mestizo-Indian majority in
virtual peonage and disenfranchised the vast majority of the population
until the second half of the twentieth century. What these analysts
are really applauding is not democracy but the viability and stability of
elite consensus and cooperation in ruling Chile. In reality, Chilean
"democracy" developed much like US polyarchy - restricted exclusively
to the elite until well into the twentieth century, when mass
pressures gradually opened up the formal political system. By enfranchising
only literate, male property-owners, the political system successfully
prevented the overwhelming majority of Chileans from
participating.

In the 1840s, only 2 percent of the nation's one million citizens were
allowed to vote. The figure rose to about 5 percent late in the nineteenth
century, and to only 14 percent in the 1940s. A repressive
patronage system prevailed in the countryside, where 40 percent of the
population resided at mid twentieth century. Instead of providing
peasants with ballots, the government authorized rural landowners to
"collect" the votes from their inquilinos (serfs or squatters), thus
assuring political control by the landed oligarchy. In 1958, women
were enfranchised, but the illiterate were still barred from voting, so
that in national elections that year only 20 percent of the adult
population could actually cast a ballot. With gross socioeconomic
inequalities and limited educational opportunities, especially in the
countryside, the natural functioning of this electoral system was
enough in itself to assure the elite's political power. It was not until the
1964 national elections that the inquilinos were allowed to vote freely,
and not until the 1970 elections that illiterates were finally granted
voting rights.19

Because of the relative unity of the Chilean elite, an established
polyarchic system, and the growth of a militant working class, Chilean
social conflict was characterized from the outset less by the intra-elite
feuding that predominated in much of Latin America than by class
conflict and demands from subordinate groups, first for integration
into the political system, and later for fundamental change in the entire
social order. By the early twentieth century, workers in the mining
enclave, railroads, ports, and manufacturing had begun to organize.
The growth of labor strength worried the oligarchy and the emergent
middle sectors, which responded in the early decades of the twentieth
century with a combination of systematic repression, economic concessions,
and the gradual integration of urban workers through suffrage
into the formal political system. Anarcho-syndicalist movements gave
way to two organized left parties, the Communist, founded in 1921,
and the Socialist, formed in 1933, and popular support for the left rose.
Chile entered a period of equilibrium, or relative stalemate, among
social classes in the post-World War II period, against the backdrop of
industrialization and development, a dynamic political party system,
and growing conflict between popular sectors, on the one hand, and a
complex convergence of local elites and foreign interests, on the other.
This laid the basis for a strong tradition of populist programs and
fierce party politics.

The major political parties in this period were: the traditional
Conservatives and Liberals dating back to independence (which
merged into the National Party in 1966), representing the right and the
traditional oligarchy; the Radical Party (which dated back to 1863) and
the PDC, representing the center and anchored in urban middle
sectors; and the Communists and Socialists, representing the left, the
working classes and the poor. This three-way division of political
forces lent itself to an unusual and highly unstable situation of a strong
right, a strong left and a strong center, without any decisive hegemony
among them. The three-way left-right-eenter balance resulted in a
political equilibrium for several decades, but also constituted a cleavage
which later opened space for popular classes to utilize politics to
challenge elite hegemony.

US penetration of the Chilean economy and political system

Great Britain, as the premier imperial power of the nineteenth century,
had eclipsed the Spanish crown as the foreign "hegemon" after
Chilean independence. Foreign, mostly British, capital came to control
some two-thirds of Chile's nitrate, silver and copper mining concerns,
the lifeblood of the nineteenth-century economy. But in the final
decades of the nineteenth century, US capital also steadily penetrated
the Chilean economy as part of the broader process of the displacement
of other imperial powers by the United States and the definitive
establishment of US domination over the Americas as its "natural"
sphere of influence. "The United States is practically sovereign in this
continent and its fiat is law upon the subjects to which it confines its
interpositions," declared Secretary of State Richard Olney in 1896.20

In the early 1900s, US capital quickly came to dominate the Chilean
economy. By the 1920s, the mining industry was dominated by three
US companies: Anaconda's Andes Copper and Chile Exploration
Company, and the Kennecott Corporation's Braden Copper.21 US
banks, utility companies, and industrial concerns also poured in. US
domination of the mining industry, which in turn dominated the
Chilean economy, had major ramifications for Chilean society and laid
the basis for US-Chilean relations. Following World War II, copper
came to dominate the economy, accounting for over half the country's
exports, and taxes on the US companies' profits yielded one-fifth of the
government's entire revenue. Resentment over US domination and
intervention grew throughout the twentieth century. US domination
over Chile intermeshed with and helped shape the local social structure.
The rural sector contained a traditional landowning elite, a
peasantry tied by labor obligations to the estate where they lived, and
a small but mobile workforce that provided wage labor for the large
commercial estates which produced for the foreign, principally US,
market. There was a mining, industrial, and commercial elite, many of
whose members had kinship ties to the landed oligarchy, and which
became thoroughly subordinated to US capital that dominated these
sectors of the economy. There was also a relatively large middle class
and urban working class.

As US economic interests in Chile grew, so did its political involvement.
As in the Philippines, Washington used a judicious combination
of military and economic aid, and it also introduced large-scale, covert
"political aid" programs as early as 1953, including founding and
funding "friendly" media outlets, intellectual and political figures,
under the aegis of the CIA, the AID, the USIA, and various nongovernmental
organizations.22 Meanwhile, the left grew in strength in
the 1950s and 1960s. In the 1958 elections, Allende, running as the
candidate for an alliance of Socialists and Communists under the
Popular Action Front (FRAP), won 28.9 percent of the vote. A FRAP
triumph appeared likely until a defrocked radical priest, Antonio
Zamorano, encouraged by the US embassy and by reported CIA
payments, entered into the presidential campaign. The former cleric
siphoned enough votes from Allende to allow the conservative Jorge
Alessandri to win a narrow victory.23 As the 1964 elections approached,
US officials and corporations with large investments in Chile
became increasingly concerned over a possible move to the left. The
Kennedy administration set up a secret Chile electoral committee in
1961, operating out of the White House and composed of top-level
State Department, White House and CIA officials.24 As many as a
hundred CIA agents and other US operatives were covertly despatched
to Santiago to carry out the program, whose purpose, according to a
US Senate investigation committee, was to establish "operational
relationships with key political parties and [create) propaganda and
organizational mechanisms capable of influencing key sectors of the
population." Projects were undertaken "to help train and organize
'anti-communists'" among peasants, slum-dwellers, organized labor,
students, and the media, "disinformation and black propaganda"
campaigns were conducted, and so on.25

Three candidates eventually entered the 1964 race: Allende for the
FRAP alliance, Eduardo Frei of the PDC as the centrist candidate, and
Julio Duran representing a right-wing coalition. Pre-electoral polls
indicated an even split between Frei and Duran, with the FRAP
winning by a small but significant margin. Washington thus pressured
for a united center-right ticket, and this included channeling funds
directly to Duran's coalition for him to withdraw from the race and
unite under the Frei ticket.26The task was made easier by the Chilean
elite's own recognition of the threat from below, including the rapid
rise in support among the rural population for the left, following the
dissolution of the traditional patronage networks among landlords and
peasants. Some $20 million were then spent in US covert assistance for
Frei's 1964 presidential campaign, which amounted to over $8 per
voter and constituted 50 percent of Frei's total campaign expenses.27
These US political operations were crucial in influencing the elite as
well as the general electorate. Allende won 39 percent of the popular
vote, but lost to the center-right alliance, which together pooled 56
percent of the vote.

Once in office, Frei's government was selected by Washington to be
a model for the Alliance for Progress. Alliance objectives were to
bolster political centers and promote limited reforms in Latin America
in order to undercut radical change and stabilize the hemispheric
status quo. "In supporting the Alliance, members of the traditional
ruling class will have nothing to fear," explained Kennedy official
Teodoro Moscoso.28 Frei's government received over $1.3 billion from
US government agencies and private creditors during its six-year
tenure (1964-1969), as well as several billion more from other foreign
and multilateral sources - by far the largest per capita US aid program
in Latin America.29 Parallel to this overt assistance from Washington,
the Christian Democrats and other center and right groups were
recipients of massive covert funding and advisement aimed at helping
them to challenge the left at every level in civil and political society,
including battles for control over unions, student associations, cooperatives,
professional groups, and so forth. The Senate committee listed
some of the specific projects:

Wresting control of Chilean university student organization from the communists;
Supporting a women's group active in Chilean political and intellectual life;
Combatting the communist-dominated Central Unica de Trajabadores (CUTCh) and supporting democratic labor groups; and,
Exploiting a civic action front group to combat communist influence within cultural and intellectual circles. [30]

Although the Christian Democrats developed a significant support
base, their reform program was unable to resolve the plight of an
impoverished majority. Only 28,000 families benefitted from their
agrarian reform and income inequality continued to grow. By 1968,2
percent of the population still controlled 45.9 percent of the national
income, at least half of all Chileans were considered malnourished, and
half of all workers earned wages below the subsistence level.31 The
failure of the reform program had the effect of radicalizing popular
sectors and weakening the Christian Democratic center. In 1969, leftist
dissidents representing some 30 percent of the PDC membership,
based in the trade union and youth wings, broke off from the party,
formed the Movement of United Popular Action (MAPU), and announced
their intention to seek an alliance of all popular forces. Both
the left and political polarization grew.

The extent of US business involvement was a constant debate in
Chile, and had become a critical political issue by the late 1960s, pitting
the right, with its support for US (and their own) profit-taking, against
the left, which organized increasingly fractious labor strikes and public
demonstrations against US firms. On the eve of Allende's victory,
foreign, mostly US, corporations controlled virtually every sector of the
economy, including the mines, where US corporations controlled 80
percent of copper production and 100 percent of processing. Foreign
capital also controlled machinery and equipment (50 percent); iron,
steel, and metal products (60 percent); petroleum products and distribution
(over 50 percent); industrial and other chemicals (60 percent);
automotive assemblage (100 percent); tobacco (100 percent); office
equipment (nearly 100 percent); and advertising (90 percent). US direct
private investment in 1970 stood at $1.1 billion, out of total foreign
investment of $1.7 billion.32 Profits for US firms were enormous:
during the 1960s Anaconda earned $500 million on its investments in
Chile, whose value the company had estimated at only $300 million,
yet it reinvested back into Chile only some $50 million.33

As the 1970 elections approached, the US NSC's "Forty Committee,"
an interagency group set up to oversee all US covert operations
abroad, supervised a full range of intervention activities. But the right,
having lost confidence in the Christian Democrats, ran its own candidate
this time, Jorge Alessandri. With the split in the elite, Allende,
running on the Popular Unity (UP) coalition ticket, won the September
1970election with 36.3 percent of the vote.

Allende ran on a platform of popular democratization and radical
socioeconomic changes, including nationalization of key areas of the
economy (especially the mines), a far-reaching agrarian reform, redistribution
of income, judicial reform, direct popular participation in
government structures, and worker participation in management. The
UP program aimed to create conditions for a transition to socialism
while respecting Chile's constitution. The economic plan was for a
mixed economy, rather than a statist model, involving a public sector,
a private sector, and a mixed sector.34 The fear in Washington was that
for the first time in Latin American and world history, a declared
Marxist assumed the reigns of government within the established
constitutional process to initiate a transition in Chile from polyarchy to
popular democracy.

From covert operations to all-out destabilization

The US destabilization campaign against the Allende government and
its contribution to the 1973 coup has been amply documented.35 It
was in this campaign that the word "destabilization" entered world
currency for the first time. Coined by then-CIA director William
Colby, it means studying the myriad of factors that constitute the
basis of a society's cohesion and then using that knowledge to literally
undo the fabric of society and bring about internal collapse, through
overt programs of socioeconomic and diplomatic harassment and
covert programs of political, psychological, and paramilitary terror.

In the weeks leading up to the October 1970 ratification by the
Chilean Congress of Allende's appointment, Washington scrambled to
prevent him from taking office through a host of covert operations,
including unsuccessful attempts to have him assassinated, to organize
a pre-inaugural military putsch, and, by lobbying in the Chilean
Congress, to have it veto Allende's investiture.36 After Allende's
inauguration, the destabilization program moved into high gear. Kissinger
himself chaired weekly interagency meetings on Chile in the
White House, attended by high-level officials from State, Treasury, the
Pentagon and the CIA. The leaders of US businesses in Chile, among
them lIT, PepsiCo, the mining companies, W. R. Grace Co., Bank of
America, and Pfizer Chemical, worked closely with the US government
in destabilizing the Allende government. Under the aegis of lIT, US
corporations formed an Ad Hoc Committee on Chile to urge on the US
government in its campaign. [37]

The program included an "invisible blockade." National Security
Council Memorandum 93 was issued prohibiting economic aid to
Chile.38As US ambassador to Chile Edward Korry put it, "not a nut or
bolt [will] reach Chile under Allende ... We shall do all within our
power to condemn Chile and the Chileans to utmost deprivation and
poverty."39 To this was added a myriad of economic sabotage activities
and training and support for the paramilitary terrorist activities of the
ultra-right Patria y Libertad organization. The high levels of dependency
on the United States, including direct corporate investment,
reliance on US financing, and a huge debt owed to US creditors, left
the Chilean government extremely vulnerable to US economic sanctions.
As they sought to do later in Nicaragua, US strategists set about
to finance and mobilize those sectors in Chile most adversely affected
by the hardships created by US economic sanctions, and then to
channel their political energies against the popular government.

The CIA penetrated all major political parties, supplying funds to
organize and sustain every major anti-government strike, demonstration
and boycott between October 1971 and the September 1973 coup.
Among recipients were the Christian Democrats, headed by Aylwin,
who represented the conservative wing of the POC. The POC leadership
participated actively in the destabilization efforts. Aylwin himself,
as head of the Chilean Senate during Allende's administration, urged
continued armed repression of the militant, but peaceful, popular
mobilization that escalated under the UP government, and all but
called publicly for a military coup. He was the architect of what
became known as the "white coup d'etat" strategy, which called for
placing increasingly broad sectors of public administration under
military control and the progressive militarization of government and
society to put the brakes on the UP program.40

Another program conducted by the CIA and the DIA was penetrating
and courting the Chilean military. The difficulty in gaining
influence over the military was described by the CIA as a problem of
overcoming "the apolitical, constitutional-oriented inertia of the
Chilean military."41 In a secret memorandum early in 1971, US
ambassador Nathaniel Davis emphasized that a military coup would
only occur when public opposition to the Allende government became
"so overwhelming and discontent, so great that military intervention is
overwhelmingly invited."42 The economic sanctions and political intervention
created internal conditions propitious to a coup. US penetration
of the military prompted it to go forward.

While economic aid was cut off, Washington actually increased ilc;
military assistance to the Chilean armed forces and training for select
military personnel in the United States and Panama. Military aid, after
dropping to less than $1 million in 1970, reached an all-time high of
$15 million in 1973.43 A flood of US military advisors poured into
Chile, and a long list of "intelligence assets" in the three branches of
the military was drawn up. Following the September 11 coup, intelligence
information collected by the CIA's Santiago station such as
"arrest lists, key civilian installations and personnel that needed
protection, key government installations that would need to be taken
over, and government contingency plans which would be used in case
of a military uprising," according to the US Senate report, guided
Pinochet and his cohorts in their takeover.44

The overall US response to the Allende government was twofold,
note James Petras and Morris Morley:

A combination of severe economic pressures whose cumulative
impact would result in internal economic chaos and .a policy of
disaggregating the Chilean state through creating ties with specific
critical sectors (the military, political parties, etc.) and supporting
their efforts at weakening the capacity of the state to realize a
nationalist development project. This sustained policy of direct and
indirect intervention culminated in a general societal crisis, a coup,
and a military govemment.45

The US-instigated coup was the bloodiest in Latin American history.
At least 20,000people were killed in the first few months of the military
takeover.46 This was a veritable totalitarian regime, one of the most
vicious in twentieth-century history, and one that was warmly embraced
by the United States. A year later, President Gerald Ford
declared that what the United States had done in Chile was "in the
best interests of the people of Chile and certainly in our own best
interests."47

Defending "our own best interests" in Chile was not seen by US
policymakers as a Cold War fight against Soviet influence. State
Department analysts assessed that "Soviet overtures to Allende [were]
characterized by caution and restraint ... [the] Soviets desire to avoid"
another Cuba-type commitment.48 A CIA study three days after
Allende's electoral victory concluded that "the US has no vital national
interests within Chile, the world military balance of power would not
be significantly altered by an Allende regime, and an Allende victory
in Chile would not pose any likely threat to peace in the region." The
study made clear what was under threat in Chile: the Allende triumph
would fragment "hemispheric cohesion [and] create considerable
political and psychological problems" for the United States in Latin
America.49 Petras and Morley note: "The changes envisioned by the
Allende government not only restricted the capacity of US capital to
expand in Chile but threatened to disarticulate the economic and trade
patterns within the region. Changes in Chile potentially laid the basis
for modifying and redefining Latin America's external economic relations."
so The only threat of the Allende government was as a potential
challenge to international assymetries by modifying Chile's internal
system through popular democratization, as discussed in chapter 1. In
the wake of the coup, one US official declared: "We are now in a
position to take a much tougher position toward other [Latin American]
countries now that we have eliminated a major problem." [51]

US intervention in Chile does not provide a total explanation of
events in that country, neither before, nor during, nor after the Allende
period. US destabilization of the Allende government played a crucial
role in its overthrow. But it was only effective in conjunction with a
host of internal factors, including the local elite's determination to
preserve its own historic privileges, as well as the grievous miscalculations,
failures, and fierce infighting in the UP government, which
should not be downplayed, and which US strategists were able
adroitly to exploit.52 In jeopardy in Chile was the ability of the
dominant groups to preserve the social order under a polyarchic
system. This threat firmly united Washington and the Chilean elite,
above and beyond any differences within the local elite or between it
and Washington.

The Christian Democrats had signed a formal unity pact with the
right-wing National Party against the Allende government and in
favor of the destabilization program, and Frei, Aylwin and other POC
leaders voiced their unqualified support for the COUp.53Given that the
Christian Democrats, under Aylwin's personal leadership, would later
be projected as the bulwark of the "democratic forces" in Chile and the
steward of the anti-Pinochet democratization movement, it is important
to recall the party's long history of linkages to US political,
security, and intelligence organs and its alliance with the Chilean
military during the Allende government and after the coup. It was only
in 1977, when it became clear that the military was not a mere caretaker
government that would shortly hand over power to the Christian
Democrats - as the military had promised to Frei and Aylwin before
the coup - that the PDC moved into full opposition.54

From counterrevolution to restoration of polyarchy

The Chilean case provides for rich theoretical abstraction regarding
relations between states, political systems, and social classes. On the
heels of a century and a half of polyarchic tradition, the UP government
proposed to implement the project of popular democratization
for which it was elected within the legal, constitutional framework,
that is, to put "liberal democracy" to a test of its own rules. Allende
was overthrown when his coalition attempted to use the legal and
constitutional instruments of polyarchy itself to transform the socioeconomic
structure of society.

This seems to confirm the thesis which Nora Hamilton developed on
the basis of her study of post-revolutionary Mexico of "the limits to
state autonomy." Hamilton shows how the Mexican state exhibited the
maximum degree of autonomy which states may enjoy, but that such
autonomy falls short of the ability of states to actually realize a
revolutionary transformation of the social order. Such a transformation
would signify a "structural autonomy" of the state, which it does not
possess. This transformation would have to come from within the
womb of the social order itself, beyond the boundaries of the state
power and the state itself (hence the "limits" of state autonomy).55 As
regards Chile, the UP government, having captured a portion of the
state on behalf of the subordinate classes, attempted to carry through
what Hamilton referred to as "structural autonomy," to utilize the
state to actually transcend capitalism. This experiment ran up against
the "structural boundaries" of the social order. Previously fragmented
interests and segments among the dominant classes quickly achieved
internal unity, coherence, and class consciousness. The "structural
relations" between the legislative, judicial, and military apparatus
were such that they became organs penetrated and influenced by the
dominant classes, and at the same time both the Chilean state and the
dominant classes became closely linked to internationalized organs of
the US "imperial state." At the same time, the formal rules and the
legitimizing boundaries of polyarchy placed institutional constraints
on any UP effort to transcend the social order, while the world
economy placed structural constraints on that effort. We will see a
similar pattern in Nicaragua and Haiti.

In Chile, polyarchy was ruptured by authoritarianism in order to
preserve the social order. Allende's UP moved to challenge capitalism
utilizing the very procedures and institutions (i.e., the political-juridical
superstructure) of its legitimacy. This situation placed Chile apart from
other revolutionary ruptures with existing social orders, whether in the
United States (1776), France (1789), the USSR (1917), or Nicaragua
(1979), which challenged social orders from outside of their own
legitimizing institutionality and created their own, new legitimacy.
When a self-declared socialist government came to power, the dominant
classes - conceived here as a convergence of dominant groups in
Chile and in the United States - were forced to stave off the challenge
to their domination from within their own institutions of legitimacy;
their only alternative was a rupture with legitimacy in order to
preserve the capitalist social order. The Pinochet regime rescued the
social order at the cost of legitimacy. Restoration of such legitimacy
required reorganizing the political system and restabilizing class
domination prior to "redemocratization." The restoration of polyarchy
involved a three-step process: first, the brutal destruction of the
popular movement and the left; second, the complete restructuring of
the Chilean political economy; third, a tightly controlled "transition to
democracy," under a new correlation of political, social, and economic
forces that would assure a polyarchic, rather than popular, outcome to
the anti-dictatorial movement.

The first step, the suppression of the left and the mass social
movements and the reversal of the popular structural transformations
of the late 1960s to 1973, was swift and brutal. In addition to the reign
of terror, expropriated properties were returned to their former owners
or auctioned off (all US corporations reclaimed their investments, with
the exception of the copper companies, which were paid compensation),
peasants who benefitted from the agrarian reform were thrown
off their land, trade unions were abolished by junta decree, popular
organizations and the UP parties were outlawed (all other parties were
placed in temporary "recess"), twenty-six newspapers and magazines
were closed, and society became militarized at every level.

"Conditions in Santiago's slums had deteriorated markedly since the
military coup, with a reappearance of delinquency, heavy liquor
traffic, and disease," reported Le Monde newspaper in January 1974.
"Left-wing leaders who helped organize the shantytowns, eliminating
crime and improving health and housing conditions, have either
disappeared or been arrested or killed since the coup," continued the
report. "Local clinics have been dismantled, leading to a reappearance
of diarrhea in infants, and the price of public housing has been raised
so high that members of the shantytowns could no longer afford it."56
Workers organized into trade unions dropped from over 40 percent of
the workforce before the 1973 coup to about 10 percent in the late
1980s. One observer points out: "The smashing of Chilean democracy
by the military in 1973carried with it - not a byproduct of the coup but
as a strategic objective - the destruction of organized labor and the
imprisonment, torture, exile and murder of thousands of union activistS."
57 Some one million opponents of the regime were sent into
exile, and tens of thousands murdered or imprisoned.

Only after this first step was completed - the destruction of the
popular movement, the decimation of the left, and thus the achievement
of a completely new correlation of forces favoring elite hegemony
and dominant foreign interests - was the next step undertaken.
Structural adjustment began with the "Chicago Boys" team, a group of
Chilean New Right technocrats provided with scholarships by the AID
to be schooled in the free-market ideology of neo-liberalism. At least
150 Chileans, drawn from the upper class and recruited mostly from
the conservative Catholic University of Santiago, were sent to the
University of Chicago to study economics under Milton Friedman and
Arnold Hargberger before returning to Chile to take the reins of the
economy and become the technocratic interlocutors between the military
dictatorship and international finance capita1.58In this process
new class fractions and social groups came into being with political
interests that eventually crystallized around a return to polyarchy.
Valenzuela points to the emergence of "a powerful new breed of
dynamic business leaders who flourished with the opening of Chile's
economy to the world market."59

The third and final phase was restoring legitimacy via a return to
polyarchy - but now under the new conditions of globalization. The
dictatorship turned over the government to a civilian regime only after
that task of anti-popular economic restructuring had been accomplished
and only after the left and the popular sectors had been decimated.

In all three phases, the United States was intimately involved, playing
a key role as the dominant power under which Chilean classes and
groups fought with each other and political and socioeconomic processes
unfolded.

Although the new military regime became an international pariah,
Washington established cordial relations with the junta. US corporations
with interests in Chile and the CIA drafted blueprints for
dismantling the social transformations of the Allende period.60 In the
two years following the coup, US economic aid, systematically denied
to Allende, cascaded into Chile. Washington provided Santiago with
$324 million in direct aid and assisted the junta in securing an
additional $300 million through multilateral sources. Chile received
almost half the foodstuffs authorized by the Food for Peace program
for Latin America. The United States also increased aid to the military
to an all-time annual high of $18.5 million in 1974, and the CIA
provided technical assistance to the newly formed secret police, the
National Directorate of Intelligence.61This aid was crucial in restabilizing
the Chilean economy and putting into motion a long-term, neoliberal
program. "The disparity between state and corporate involvement
is evident in post-coup Chile," note Petras and Morley. "Heavy
imperial state involvement is not matched by the multinationals: for
the immediate foreseeable future, the imperial state and its financial
network is the major political-economic prop for the junta. Only after a
substantial and prolonged commitment by the state can we expect the
insertion of private capital, despite the junta's policies of 'opening' the
country to unrestrained foreign exploitation."62

By 1976, these conditions had been achieved, and foreign private
capital substituted USbilateral aid. From 1975 to 1978,nearly $3 billion
in foreign private capital flowed in, while US government aid dropped
to $25 million.63 Military aid remained at record high levels - $107
million from 1973 to 1977, and then another $20 million from 1978 to
1982, despite the Carter administration's professed human rights
policy. And the Carter White House provided Pinochet with $114
million in loans, grants, and donations, and also approved further
lending by the international agencies.64 Jimmy Carter himself, following
Nixon's and Ford's lead, refused to acknowledge any US
complicity in Allende's overthrow.65 After several years of massive
economic aid to reorganize and reactivate the economy, Washington
thus used military aid to preserve the junta's repressive capacity,
which secured conditions congenial to the operation of transnational
capital in Chile.

From the mid-1970s to the early 1980s, "political aid" programs in
Chile were phased out, partly because of the scandal over CIA
involvement against Allende and the shift underway in Washington to
Project Democracy and the NED, but mostly because such aid, covert
or overt, was neither necessary nor appropriate for US objectives in
that period. On the one hand, the dictatorship was effectively using
direct mass repression against the popular sectors and their organizations,
and on the other hand, traditional civil and political society had
been dramatically disarticulated and was still in an early process of
reconstitution. This would change in the mid-1980s.

Washington turns to "democracy promotion" in Chile

We believe that a restoration of democracy is the best way of assuring
Chile's political, social and economic stability. Terrorism, human and
civil rights violations, a substantial Communist party committed to
the violent overthrow of the government, the national debt crisis, are
only a few of the current obstacles to be overcome in achieving
genuine political stability. Perhaps the most difficult challenge of all is
forging a broad consensus on the institutional means of rebuilding a
stable democracy.
-- US Senate resolution on Chile, 1985 [66]

By 1985, given the demise of military regimes in other Southern
Cone countries and mounting unrest inside Chile, the Reagan administration
had concluded it was time to phase out the Pinochet regime.
Between 1985 and 1988, the United States shifted its support from the
dictatorship to the elite opposition.67 The shift came quite abruptly.
Between 1981 and 1985, the Reagan administration strengthened relations
with the dictatorship under the policy of "quiet diplomacy"
towards the South American military regimes. Then, in November
1985, Washington sent to Santiago a new ambassador, Harry Barnes,
to replace James Theberge, a one-time CIA consultant whom the
Chilean opposition had nicknamed the military junta's "fifth man."
Barnes's instructions were twofold: to signal to Pinochet that the
United States was shifting tracks; and to develop ties with the elite
opposition that was to replace the dictatorship.68 A month later,
Undersecretary of State for Inter-American Affairs Elliot Abrams
articulated the shift: "The policy of the United States government
toward Chile is direct and unequivocal: we will cultivate the transition
toward democracy."69

Apart from the general shift to promoting polyarchy, there was a
specific Chilean imperative behind the sudden shift: a mass protest
movement against the dictatorship had emerged and was gathering
steam, encompassing a broad spectrum of groups whose confidence
and militancy steadily grew from 1983 to 1987. During this period,
leadership of the anti-dictatorial struggle was disputed between
popular groups and the elite opposition. If it did not intervene in
support of the latter, Washington risked opening space for a popular
or leftist outcome to the anti-Pinochet movement, as had happened a
decade earlier in Nicaragua. "The challenge is how to support democratic
change," said Abrams. "This challenge creates a genuine
dilemma because change in friendly countries may, in the short run,
entail some risks... But we know that the risks will become larger -
unacceptably large, in the long-run - if there is no opening toward a
democratic political order." For Abrams, the risk was that "Chile
remains a special target for foreign Marxist-Leninists"70 (read: the left
is strong in Chile).

Despite the harsh repression, by the late 1970s there had been a
gradual recovery within the popular movement, particularly among
the pobladores, or residents of poor neighborhoods, and the trade
unions, which had been two of the most active sectors before the coup.
In mid-1983, the popular opposition initiated a series of jornadas de
protesta (days of protest) across the country. The protest movement,
although it enjoyed the active support of the Communists, Socialists,
and other organized left groups, was initiated not by political parties
but by the labor unions and the community-based grassroots popular
movement. It caught the elite and US policymakers by surprise as
much as it did the dictatorship. The regime, badly shaken, responded
by declaring a state of siege and unleashing a wave of repression.
Political arrests, which had subsided to an annual number of fewer
than 1,000 between 1976 and 1982, climbed to 5,000 by 1984.71 The
protests stirred concern in Washington that the dictatorship was
becoming vulnerable and that events might slip out of US control.

Two positions emerged between 1983 and 1987, the years in which
the direction of the democratization movement hung in the balance.
The left and the grassroots popular movement took the lead, arguing
for mass mobilizations to bring down the dictatorship. In October
1984, these sectors called a successful national protest strike based on
the slogan "Without protest there is no change." As protests increased,
so too did the strength of the movement. In March 1986, a new
umbrella group, the Civil Assembly (Asemblea de la Civilidad),
emerged, encompassing 300 organizations ranging from labor unions,
to student, women's, professional, and civic organizations, community
groups in the poblaciones, and political parties. Events were snowballing
towards an uprising in civil society under popular forces.

The political parties, and particularly the traditional center and right
groups, passive and disorganized, were marginal to the rapidly developing
movement. A prime objective of US political intervention
became to reactivate and unify the traditional political parties, and
simultaneously to bolster, or help organize from scratch, moderate
groups in civil society to compete for leadership with the popular
forces. Once the elite opposition organized, it began its own mobilization
and set about to try to gain control of the burgeoning opposition
movement. Its strategy, designed in collaboration with US policymakers,
was to eschew mass mobilization and instead open a process
of direct negotiation with the dictator and seek a pact - behind the
back and to the exclusion of the popular movement - for a transition to
civilian rule. The popular sectors, in the elite scenario, would constitute
"bargaining chips," called upon for disciplined and controlled actions
to apply pressure on the regime at key moments in the negotiations.72

Between 1983 and 1985, there was a flurry of low-profile diplomatic
activity between Washington and Santiago, as US emissaries tried to
open a quiet dialog between Pinochet and the elite. In late 1984, US
officials conducted a month-long inter-agency policy review. As a
result of the review, said one official, Washington decided to "increase
high-level contacts with Chileans in the government and in the opposition
to try and bring about a compromise." The US goal was "to get
the military and the civilians to realize that the growing split only
helps the radical left," and could make Chile "another Nicaragua,"
said the official.73However, these efforts amounted to little, because
mass popular opposition had seized the initiative and because the elite
opposition itself was highly divided; desirous on the one hand to
regain direct political power, yet fearful, on the other, of putting too
much pressure on Pinochet lest a weakened dictatorship open further
space for the popular sectors. These fears were shared by Washington,
and the State Department maintained a strict policy of not pressuring
the regime publicly and not vetoing any of its loan applications.74

After a new wave of mass protests broke out in November 1984,US
officials began to implement the "democracy promotion" program
announced by Abrams, which, as we shall see, proved to be a crucial
factor in the direction the democratization movement would take.
Following the 1985 shift, Washington applied the same combination of
coercive diplomacy and carrot-and-stick pressures toward Pinochet as
it had done so skillfully toward Marcos. For instance, in June 1985,
Washington blocked a $2 billion loan package from the World Bank
that Chile had requested. Secretary of State George Shultz stated that
the purpose was to demonstrate US "concern" over Chile's domestic
situation. If Santiago wanted the loans, it would have to meet certain
"conditions" which the State Department had relayed to Pinochet,
among them, a lifting of the state of siege so that the elite opposition
could mobilize. Two days later, Pinochet lifted the state of siege and
the World Bank approved the loan.75 Then, in December 1987, Washington
abstained from supporting - rather than vetoing - a new
World Bank loan to Chile. "Many argued that the Pinochet regime
would collapse if Washington vetoed these loans," one observer noted.
"The White House, however, did not want Pinochet to fall unless a
moderate democratic government took his place."76

Massive external financing for the regime was not suspended, but
sustained by Washington during the entire transition, parallel to the
introduction of political aid for the elite opposition. The economic aid
was used to keep the regime afloat at the same time as Pinochet was
being prodded by a combination of internal and external pressures. In
contrast, one month before the $2 billion was released for the Chilean
dictatorship, in May 1985, Washington imposed a full economic
embargo on Nicaragua, simultaneously with an increase in political
and military aid to the anti-Sandinista opposition. The comparison is
important: in Chile, the United States wanted the dictatorship to
survive, as a bulwark against popular forces, while it carefully nudged
power from its hands to the civilian elite; in Nicaragua, the United
States wanted to destroy the revolutionary government by any means
possible and transfer power to the elite opposition.

Meanwhile, encouraged by the grassroots upsurge, political parties
by the mid-1980s had become reactivated and two major contending
coalitions were formed, one of the left and the other of the center. One,
the Popular Democratic Movement (MDP), was led by the Communist
Party and included the main Socialist faction (the Socialist Party,
having never recovered from the 1973coup, had splintered into several
factions) and several other left groups. It was promptly banned by the
regime. The second was the Democratic Alliance (AD), headed by the
Christian Democrats. While the MDP joined the burgeoning protest
movement (as did much of the AD rank and file), the AD leadership
sought to open a "gentlemen's" dialog with the regime.77

A querulous hodgepodge of new parties and party factions also
sprang up, as part of a continuous, and confusing, process of opposition
regroupment during the mid-1980s,78 One of these was the
Humanist Party, formed in 1985 and attracting urban middle-class
youth, another was a Green Party, and a third was the Pro-Democracy
Party (PPD), founded in late 1987 out of the second main Socialist
faction headed by Ricardo Nunez and Ricardo Lagos. These middle-ofthe-
road groups, espcially the PPD, which attracted middle classes and
a portion of the popular sectors, were important in the subsequent
formation of a centrist bloc under Christian Democratic hegemony (see
below) and in helping shift the correlation of forces in the period 1987-
1989 towards a unitary center. With the "democracy program" now
underway, Washington's objective became twofold: first, to transfer
leadership of the democratization process from the mass movement to
the political parties; and second, to isolate the left within the cluster of
political parties, bolster the center, and wean the right away from
support for the dictatorship.

The shift in policy in Washington was little understood by the
Chilean left and the popular sectors, which assumed that the United
States would continue unswerving support for the dictatorship. The
new US strategy thus contributed to popular disorientation. At the
same time, the left seemed unable to find an effective formula for
translating the social mobilizations into a viable political strategy. One
left faction tied to the Communist Party formed the Manuel Rodriguez
Patriotic Front (FPMR)as an underground guerrilla wing (the Communists,
after fifty-eight years of peaceful, legal struggle, had endorsed
armed struggle as legitimate in 1980). This development caused
considerable tactical debate and division within the left.79 In September
1986, an FPMR commando ambushed Pinochet's motorcade, but the
General emerged unharmed and promptly reinstated the state of siege
that had been lifted a year earlier. The action (or rather, its failure)
quieted mass protests and strengthened the moderate opposition's
alternative strategy.

The divisive debate over anti-dictatorial tactics also led to the
dissolution of the MDP in June 1987.Shortly afterwards, the Communist
Party renounced the armed struggle strategy (the FPMR broke
away and become an independent group). The left parties regrouped
into a new coalition, the United Left (IV). Although the United Left
brought together many of the old UP groups - the MAPU, the
Christian Left, Communists, Socialists, a sector of the Radical Party,
the MIR, and so on - it clearly represented a waning of leftist influence
in the democratization movement and enhanced conditions for the
elite to vie for the initiative. Following the abortive ambush on
Pinochet, the Christian Democrats declared that, because of the Communists'
support for violence, any joint action with them was incompatible
with a struggle for democracy - quite a hypocritical position,
given that the Christian Democrats had championed the violent overthrow
of the Allende government after they could not attain their goals
through peaceful means. With the active backing of Washington, they
set about to shape an opposition that excluded the left.

Meanwhile, the junta had drawn up a new constitution - approved
in 1980 in a national plebiscite widely viewed as fraudulent - that laid
out an ambiguous program for a return to civilian rule. It called for a
plebiscite to be held in 1988, in which voters could simply confirm or
reject a candidate put forward by the armed forces. According to the
plan, if the military candidate was rejected, power would be turned
over to the winner of competitive elections by March 1990. At first, the
IV and sectors within the AD advocated a boycott of the plebiscite,
fearful that Pinochet would resort to fraud and legitimize his rule.
Other groups in the AD, including Christian Democratic factions,
argued that, if conducted skillfully, a combination pact-plebiscite
strategy could provide for a "safe" transition. These sectors argued
that exhaustion and disillusionment had been gradually setting in
among the popular sectors, which could be harnessed and channeled
into a pact-electoral formula. US funds and policymakers were deeply
involved, behind the scenes, in ongoing discussion and analysis with
the elite on the most promising "democratization" formula (see
below). In November 1987, the IV groups and the Civic Assembly
organizations, with the support of many AD sectors, joined together
for massive street demonstrations against the Pinochet plebiscite. At
this point Washington intervened decisively to press an increasingly
united opposition not to oppose the plebiscite, but rather to participate
massively in it. The strategy in Washington was to combine its own
tough coercive diplomacy toward Pinochet with massive intervention
to organize and advise an elite-led opposition to defeat Pinochet in the
plebiscite, and then to proceed, on the basis of more political intervention,
to guide subsequent national elections. [80]

In December 1987, the State Department released an unusually
strongly worded statement calling for a fair plebiscite followed by a
"legitimate electoral process."8t For its part, the conservative but
influential Roman Catholic Bishops' Conference, which had supported
the 1973 coup and for many years had provided ideological and
symbolic legitimization for the dictatorship, came out vocally against
the regime when the elite opposition began to mobilize. By the 1980s it
was leading the cause of human rights. In contrast to the increasingly
radicalized grassroots base of clergy and lay workers within the
Church, the hierarchy established close ties both with US policymakers
and with the elite opposition. Archbishop Francisco Fresno of Santiago
worked with US emissaries in brokering a dialog between the elite and
the regime.82 In April 1987 Pope John Paul II made a visit to Chile
during which he both rebuffed Pinochet and called for "constraint"
and "nonconfrontation" among the population, making clear the
Church's preference for an elite-led return to civilian rule. Several
months later, the Chilean Bishops' Conference called publicly for the
plebiscite to proceed under fair conditions, a call which was particularly
persuasive with the Christian Democrats.

The combination of US pressures (on both the regime and the
opposition), the Church's influential position, and changes in the
balance of forces between 1983 and 1987, eventually brought the
opposition into a united front to participate in the plebiscite. This same
combination of pressures led the regime to agree to lift the "recess" on
moderate opposition parties ("Marxist" parties remained outlawed),
end the state of emergency, allow exiled opposition leaders to return,
establish electoral registries, and provide the opposition with access to
the communications media. Genaro Arriagada, a top PDC leader,
noted that "the political situation had undergone a change by 1987,"
such that "the notion had taken hold that the decisive confrontation
between Pinochet and the democratic opposition would be an electoral
contest. The theme of free elections now began to dominate the
debate."B3 The conditions were propitious for a broad national antidictatorial
front, which crystallized in late 1987 in an agreement to
organize a "no" vote in the plebiscite and under the banner of a
coalition known as the "Command for the NO." Pre-plebiscite polls
funded by the NED and supervised by the NRI indicated that 70
percent of Chileans wanted an end to the regime, but nearly 60 percent
were convinced that, through fraud, opposition errors or a new coup,
the military would manage to stay in power.84 The goal thus became to
build public confidence in the plebiscite and to channel mass energies
into the electoral-institutional process.

The baton had passed fully to the elite. By then, the PPD had
attracted members of the right-wing Republican Party, the Radical
Party, factions of the MAPU and individual Communists, as well as a
number of Chilean celebrity figures (artists, singers, and actors). It
became an odd grouping, embracing factions from the center-left to the
center-right, solidly subordinated to an emergent bloc under Christian
Democratic hegemony. By 1988, the entire "democratic" opposition
and a significant portion of the left in Chile had united under the
hegemony of the Christian Democrats to square off against the
dictatorship. This was not a predetermined outcome. The Christian
Democrats emerged as the hegemonic party of the opposition only
after the crucial 1983-1987 period, and taking into account that the left,
already decimated politically and militarily after fourteen years of
military rule, continued to suffer intense repression. Apart from
generalized repression against the popular sectors, the Communist
Party, most Socialist factions, and other left groups remained illegal
throughout this period, under a law banning "the advocacy of
Marxism." PDC leader Genaro Arriagada noted frankly that, during
the long years of dictatorship, the Christian Democrats had the
advantage of "less risk of violent repression" than the Communists or
the Socialists. "The greatest personal risk for Christian Democrats was
exile, while for the communists, it was death." [85] The decline of left and
popular hegemony was due to a synchronization of three factors: US
political intervention activities, now conducted under the rubric of
"promoting democracy"; the regime's repression; and, just as during
the Allende period, the left's own sectarian infighting and inability to
develop an effective alternative strategy.

This combination of factors laid the basis for the gradual transfer of
hegemony over the anti-dictatorial struggle from the left to the centerright.
However, the elite opposition was also quite fractious, and US
political intervention played an important role in instilling discipline
and unity in its ranks. Strengthened by NED funds, political advisors,
organizers, and other forms of US support that began to pour in, the
elite would take the reins of a tightly controlled transition that would
preclude popular democratization from the national agenda.

Ironing out the political system through political operations

Between 1984 and 1991, Washington allocated at least $6.2 million
through the NED, and another $1.2 million through the AID's 001 for
an array of programs in support of moderate political parties, labor
unions, and women's, youth, business, academic, and civic groups.
These same groups were also incorporated into regional US programs
involving another $5 million.86 Given the long history of CIA and other
forms of intervention in Chile's political process, US officials were able
to rely on an infrastructure and a broad network which were already
established. This US political intervention performed three closely
related tasks: (1) reconstituting elite consensus (2) unifying and organizing
the elite opposition on the basis of this reconstituted consensus,
and (3) competing with the popular sectors at the grassroots level.

Step 1: Reconstituting elite consensus

The first step involved cultivating ties with moderate and conservative
political, civic, and business leaders and tapping the talents and knowledge
of leading intellectuals. It involved funding several elite thinktanks
in Chile to recruit and train these leaders and intellectuals, and
draw upon their resources and constituencies. One was the Center for
Development Studies, a center-right policy planning institute focusing
on political issues. Its director was Edgardo Boeninger, a rDC leader
who had been a cabinet minister in the Frei government and had
participated actively in the 1970-1973 anti-Allende campaign.87 Boeninger
lobbied heavily within the PDC against the social mobilization
line, and in 1986 he personally drafted the blueprint for the alternative
pact-plebiscite strategy. The PDC was seriously split from 1983 to
1987. The progressive wing supported the social mobilization line in
alliance with left and popular forces. The conservative wing, led by
Aylwin, Boeninger, and Arriagada, supported the pact-plebiscite line.
In this intra-party struggle, US backing for the conservative faction
assured its predominance. The strategy sought to win over the middle
and upper classes from support for Pinochet, and to demobilize the
poor and leave them with no other option than the pact-plebiscite line
under elite leadership. (Other NED programs at the grassroots, discussed
below, targeted the poor and workers for this purpose.)88
Another think-tank was the Center for Public Studies, run by businessmen
and women and focusing on economic affairs. The NED also
gave monies for research projects to the Chilean branch of the Latin
American Social Sciences Faculty (FLACSO).89As part of these programs,
analysts from NED core groups, the AID, the Department of
State, US think-tanks, and universities were sent to Chile to participate
and, reciprocally, Chileans from the think-tanks were brought to the
United States. These programs included diverse intellectual and cultural
exchanges, seminars, training courses, research projects, and so
forth.

The objective was to investigate the social and political conditions
in Chile under which the democratization process was unfolding and
with which US political intervention programs could intersect, and to
undertake consensus-building processes around a transnational
strategy and on the transnational agenda for Chile in the posttransition
period. Collecting precise information on the specific social,
political, and cultural conditions in target countries has become a
standard feature of these programs. Academic studies in the service
of "democracy promotion" may be objective, and often recruit
reputable and virtuous intellectuals. However, these academic undertakings
enlist Gramscian organic intellectuals to do political and
theoretical thinking for dominant groups. As became quite clear in
Chile, where many of those who prepared reports through the thinktanks
were simultaneously key political actors in the transition, such
organic intellectuals are tied directly to contending groups in social
struggles and serve key intellectual-ideological functions in those
struggles. Information produced through "academic" investigations
conducted under "democracy promotion" programs serves to guide
US policymakers and their local allies. Chilean and US organic
intellectuals and policymakers worked together closely in devising
and then implementing an elite transition. The Council on Foreign
Relations, for instance, established a special Chile Study Group in
1987. This group brought together representatives from the State
Department, the NED groups, private US corporations with major
interests in Chile, and key Chilean politicians and academicians
involved in the US "democracy promotion" program. Study group
participants included Georgetown University professor Arturo Valenzuela
(who in 1993 became a high-level Clinton official for Latin
American policy), Gershman, Ambassador Barnes, William Doherty of
the AIFLD, Edgardo Boeninger and other PDC leaders, leaders from
other Chilean political parties, and so forth.90

In Chile, these projects helped to strengthen local elite consensus,
cohesion, and unity of purpose, and to orient the elite democratization
strategy. The goal, according to a NED document, was "to collect
objective empirical data on the political attitudes and behavior of
Chileans to serve as a basis for the formulation of a more realistic and
consensual set of political strategies of a transition to democracy."
Another NED document explained that activities by these policy
planning and research centers sought "to conduct an open, pluralistic
project of study and dissemination of the basic values of democratic
theory to different organized social groups, such as unions and professional
associations, and create objective conditions for dialogue among
individuals and institutions of diverse democratic political leanings,
with democratic theory as the field of analysis."91 Conferences, seminars,
and studies conducted by the think-tanks were followed by
"outreach activities," including "lectures, conferences, publications,
[and] radio programs," to disseminate the results in order to "inform
political elites, social and civic leaders as well as the public-at-large." [92]

The NED also developed exchanges between the Catholic University
in Chile and US academic institutions, particularly the conservative
Georgetown University. The Catholic University was a major base for
the Christian Democrats in the 1960s and a key organizing center for
opposition to Allende. Campus-based student and professional groups
received AID and CIA funds as part of the destabilization program.93
One NED-sponsored symposium on "problems of democracy" held at
the Catholic University brought US academics and policymakers
together with their Chilean counterparts, and was "a major step in an
ongoing effort to foster dialogue among individuals and institutions of
diverse democratic political orientations within Chile."94Subsequently,
the Catholic University sponsored a slew of meetings and forums of
the elite opposition and became a clearing-house and organizing headquarters
for its political activities.

The US organization Freedom House was given several hundred
thousand dollars for the Editorial Andante publishing house in
Santiago. Freedom House, a Washington-based clearing-house on
foreign policy issues, has been closely tied since its inception in 1941 to
the US national security and intelligence apparatus. Its principal
officers sit on numerous boards of the interlocking political intervention
network.95 It specializes in informational and communications
aspects of political intervention, such as the circulation of "democratic
theory" literature, funding international speaking tours of NED recipients
in intervened countries, and funding media outlets in target
countries. The Andante program included "the production of books
that promote the spread of democratic values ... and the best methods
for producing a stable democratic future for this country."96 Representatives
of five political parties were chosen to participate in the project:
one from the right-wing and four from the center.97Andante, although
it was technically a publishing house, functioned throughout the
transition period as a policy planning institute and as a clearing-house
for disseminating information to public opinion makers in the news
media, political parties, and civic groups.

The importance of these "academic" undertakings in Chile in
building a Gramscian consensus and in devising technical solutions as
the basis for a hegemonic project should not be underestimated. Out of
the think-tanks, research centers, and U5-Chilean political and academic
exchanges came a steady flow of policy planning and academic
literature analyzing the strategies and tactics of a "democratic transition"
and providing an intellectual and ideological compass for
reconstituting elite consensus. They set the discourse of the democratization
agenda and the tone and parameters of public debate. They also
contributed to the development of a network of prominent political
and civic leaders with a public projection and a political action
capacity. "Experts" from these same Chilean think-tanks and research
centers were recruited by the NED groups to assist the opposition
political parties - together with teams of US advisors - in the plebiscite
and elections of 1988 and 1989.98And after Aylwin came to power in
1990, these policy planning institutes had already drafted concrete
social and economic programs for the new government and provided a
ready pool of organic intellectuals and technocrats to fill cabinet posts.
These NED programs thus helped groom the leadership of a broad and
interlocking civic opposition network in Chile of US-allied parties,
labor, youth, academic, and neighborhood organizations, and the
communications media (see below).

The overall conclusions that emerged from this US-sponsored
research was that the popular classes had earlier been able to challenge
elite hegemony from within the framework of constitutional legitimacy
as a result of a poorly structured polyarchic system. A weakened
center and heightened divisions between the center and the right had
paved the way for the ascent of the left. If properly organized, a
polyarchic system involves a series of functional mechanisms and
organizational forms for structuring politics in such a way as to assure
precisely that social and political struggles are resolved or defused
without any challenge to hegemony itself. Valenzuela, in a NEDfunded
study, went to great pains to show that a better mechanistic
and institutional organization of the political system in Chile would
have prevented subordinate groups from utilizing the state for their
own project. Such a better organized polyarchic system would include
more parliamentary power vis-a-vis the executive, a less fractious
center and right party structure, and stronger institutional links
between the state and civil society (with less autonomy for popular
sectors operating in civil society).99This conclusion is echoed in the
reports that came out of the US-funded think-tanks.lOD Constant
themes in the conferences and studies funded by the NED were "the
relationship between institutional forms of governance and democratic
stability in Chile," "party building for political leaders of the democratic
center and center-right," and "strengthen[ing] the Congress'
policy-making role in a democratic Chile." [101]

In sum, the "flukes of the Chilean political system" referred to by
Kissinger, which had facilitated a legal and constitutional opening for a
project of popular democratization, had to be ironed out. This ironingout
required reshaping the political landscape so as to achieve a strong
center, a strong right and a weak left. The tripolar historic left-rightcenter
stalemate had to be replaced by a bipolar system and a greater
fusion of right and center in a stable and solid hegemonic bloc, under
centrist leadership. The US objective in Chile was to bolster the center
forces - primarily a renovated Christian Democracy - to strengthen a
"democratic" right under centrist hegemony, and to wean away the
most "moderate" element of the left and subordinate it to the center.
As we shall see below, Christian Democratic leaders were placed at the
head of every organization and project supported by the NED. The
goal was not just to manage the transition from dictatorship to
polyarchy, but also to assure that there would be no future "flukes" in
the Chilean political system. One 1990 NED document, reflecting back
on the successful "democracy promotion" program in Chile, noted:

With their victory [the PDC electoral triumph), it is clear that the
Christian Democrats have a key role to play in the transition process
that will Wlfold over the next four years... it is crucial that the
Christian Democratic party be able to maintain itself as a buffer
between the newly elected president, Pinochet, and pressures from
the left. The next four years are very important for Chile's democratic
future, because after this transition period, new elections will take
place. A repeat of 1973 [sic: the document probably meant 1970)
where three distinct political positions emerged - the right, a weak
center, and the left, creating a polarized society between two extremes
- would have drastic consequences. There are many barriers to be
overcome before Chile's democracy is firmly installed but the first
steps have been taken to laWlch the COWl try in that direction.102

Step 2: Unifying and organizing the elite

Endowment programs helped reactivate political parties, forge a bloc
with the center-right at its helm, and have this bloc gain leadership of
the democratization movement. Abrams and others in Washington
had stressed marginalizing the left and the groups from Allende's
Popular Unity coalition in a post-dictatorial period. The NDI and the
NRI received some $2 million to work with the Chilean parties
between 1984 and 1990.103

Chilean opposition leaders were brought to Venezuela in 1985 to
hold meetings with US organizers at the School for Democracy that the
NED had set up there in 1984. This "School" was intended to replace
an "Institute for Political Education" that the CIA had secretly established
in San Jose, Costa Rica in 1960. The purpose of this institute had
been to recruit peasant, labor, and political leaders from Latin America
and turn them into "assets." The institute was closed after its CIA links
were exposed. But the idea was revived as part of Project Democracy,
and then reactivated as the School for Democracy in Caracas, now
under the auspices of the NED rather than the CIA.104

Also in 1985, the NDI brought leaders of Chile's centrist and rightwing
parties to a conference in Washington on "Democracy in South
America."105 The conference, declared NDI vice-president Ken
Wallock, was "pivotal in promoting unity within the Chilean opposition."
On the heels of the conference, the NOl, working in tandem with
the Catholic Bishops' Conference in Chile, and particularly with Archbishop
Francisco Fresno of Santiago, brokered an agreement among
eleven of Chile's moderate political parties on working collectively for
a "democratic transition." The agreement, known as the National
Accord for the Transition to Democracy, called for constitutional
reforms and elections, and explicitly excluded the Chilean left, as did
the conference in Washington.106

Pinochet's negotiator with the elite opposition, Interior Minister
Sergio Onofre ]arpa, gave his blessing to the accord when it was first
signed since it explicitly excluded the left and because, in his view, it
provided a good strategy for diffusing the groundswell of popular
protest.107That groundswell, however, did not dissipate, and in the
face of continued mass protests, the accord quickly crumbled. The
right pulled out over fear that its participation would help fuel the
anti-Pinochet ferment beyond elite control, since in 1985 the left still
had the initiative. In addition, the Pinochet regime did have a significant
support base beyond an inner circle of cronies, including sectors
of the technocratic business community that had flourished under neoliberal
restructuring and sectors of the traditional political right that
felt more secure under authoritarian rule than in risking any popular
resurgence in an uncertain transition.

It became a top priority of US strategists to convince these sectors to
cast their lot not with the dictatorship but with a return to polyarchy.108
For this purpose, the NRI and the CIPE conducted programs with
respective right-wing political and business constituencies in Chile. The
big-business community and the traditional right were represented
politically in two major parties, the National and the National Renovation
parties. The NRI worked with "conservative and moderate political
parties... [which] have traditionally suffered from a sense of
isolation, and in local political battles they have regularly faced wellfinanced
leftist and totalitarian forces," stated one NED report.109
Meetings and forums conducted by the NRI focused "on those institutions
and actors who are not currently as active as they could be in the
difficult politics of opposition to the military government."110

The CIPE was put in charge of programs with the pro-Pinochet
business community, with the goal of bringing it into the democratization
movement and simultaneously imbuing the overall movement
with the neo-liberal free-market ideology. The democratization
program would thus be committed to free-market neo-liberalism, and
in turn the business community would be committed to the democratization
program. One CIPE program, conducted through the Chilean
businessmen's think-tank, the Center for Public Studies, for instance,
involved "a series of seminars on privatization for academics, journalists,
government leaders, and the business community ... By building
support for a competitive private enterprise economy, CEP seeks to
enhance the economic role of the individual and encourage the inclusion
of private enterprise principles in the democratic transition
process."111 Another CIPE program in 1989, conducted through the
Catholic University's Foundation of Economics and Administration,
focused on educating the public "on the importance of a free enterprise
system in fostering economic growth and supporting stable democracies."
The program included designing "courses on free market
economics" which were imparted to the leadership of the NED-funded
parties, trade unions, and youth, neighborhood, and other civic
groups.H2 Subsequent activities conducted by both the NRI and the
CIPE included the preparation of economic policy documents and their
distribution among the political parties and the entire overlapping
network of national political, business, and civic leaders being cultivated
by Washington.113

The efforts of the NRI and CIPE were largely successful. Although
they did not actually join a unitary opposition, much of the business
community and the political right did eventually come out in favor of a
restoration of polyarchy and of the post-Pinochet political order under
construction. Thus the right became, in the words of US officials, a
"democratic right." Seen theoretically, the objective - successfully
achieved - was gradually to forge a transnational nucleus made up of
political, civic, and business elites, and later, to have this nucleus fuse
with state managers through a transition from the military to a civilian
regime. The new polyarchic state would advance the economic aspect
of the transnational agenda, neo-liberalism, through a polyarchic
political system, in contrast to the military regime's implementation of
neo-liberalism through authoritarianism, which generated too many
cleavages to achieve elite consensus and too much social conflict to
bring about hegemonic social control. Forging a Gramscian consensus
among the elite around neo-liberalism and polyarchy in this way
involved three dimensions: converting sectors of the elite formerly
committed to ISI inward-oriented and statist development to neo-
liberalism; converting the new business elite tied to the global
economy to polyarchy; and bringing the two together around the
transnational agenda for Chile.

For its part, the NDI took responsibility for encouraging a solid
center-left to center-right anti-Pinochet coalition among a broad range
of political parties, under the hegemony of the Christian Democrats,
and for supervising its campaign activities. It·sponsored a follow-up
meeting of Chilean parties in 1986 in Venezuela,114 and then transferred
activities to inside Chile. US assistance was made conditional on
opposition unity. In 1987, as the opposition was beginning to form a
single bloc, the NED provided the NDI with several grants to form the
Committee for Free Elections as a formal coalition of opposition
parties.115The NDI described the Committee as a "non-partisan and
independent group of prominent Chileans,"116but the Committee was
a virtual front, in fact, for the top POC leadership. Its head was Sergio
Molina, a POC leader, former government minister in the Frei administration,
and a confidant of Patricio Aylwin. Aylwin himself became
the Committee's official spokesperson. The Committee's second-incharge
was Genaro Arriagada, a member of the PDC Central Board
who became the Executive Secretary of the Command for the NO.
Arriagada was also head of the Christian Democrats' Radio Cooperativa,
one of the most important media outlets in the country and a
mouthpiece for the elite strategy. The Committee's fourteen-member
board was dominated by POC leaders and, in fact, brought together
much of the top leadership of the "civic opposition front" that US
political operatives were weaving together. Among them were Christian
Democrats Eduardo Frei (son of the former president and the
winner of the 1993 presidential elections), Monica Jimenez, who helped
run the Catholic University programs and also directed another NED
program known as Participa, and Oscar Godoy, Director of the
Institute of Political Science at the Catholic University. [117]

In 1988, the NDI sent a team of specialists to Chile to work directly
with the political parties. Under the watchful eyes of the ubiquitous US
advisors, sixteen opposition parties, including those that had originally
signed the National Accord and the newly created Pro-Democracy
Party, formed the Command for the NO. Simultaneous to NDI's work
with the opposition coalition, both it and the NRI spent over half a
million dollars conducting a series of nationwide public opinion
surveys from 1987 to 1989, in conjunction with the think-tanks and
research institutes.118 The surveys were judiciously used to design
campaign themes and strategies and to guide the coalition's activities.
"The findings [of the surveys and polls]," explained the NED, "clearly
achieved their objective of guiding democratic leaders in planning their
strategies for attaining widespread public support."119 For instance, an
early poll indicated a split three ways in the plebiscite, with one-third
undecided.12o "The undecided vote became the key," said one NDI
polling analyst. "They had ambiguous feelings about the policies and
plans of the opposition." On the basis of this poll, NOI media
consultant Frank Greer drew up a Madison Avenue-style media blitz
for the Command for the NO, specifically targeting the undecided.

Another NED program conducted in tandem with the work of the
NDI and the NRI was known as Crusade for Citizen Participation, or
simply as Participa. Headed by well-known PDC leader Monica
Jimenez, Participa carried out a variety of projects intended to cohere
the different political parties through consensus-building activities
among the elite. These activities included convening several seminars
among political parties, government officials, policy planners, and the
media on future social policies in the country, as well as conducting a
series of broadly publicized "debates" among political party leaders,
and designing specific activities to target women. In these activities,
Participa was guided by full-time US "trainers," and the materials for
its programs were sent to Chile from the United States through
Partners of the Americas (which ran NED-funded U5-Chilean exchange
programs), the NOI, and the Delphi organization, another USbased
conduit for NED funds.121

Through Delphi, the NED provided support to La Epoca, a newspaper
launched by the Christian Democrats in 1987 which quickly
became one of the country's main dailies. La Epoca proved to be a
refreshing alternative to the tightly censored media outlets that functioned
under the dictatorship, including El Mercurio. The latter had
been a major recipient of CIA funds in the 1960s and had played a key
role, through its psychological operations, in the anti-Allende destabilization
activities,122but after the coup it refused to switch loyalties
from Pinochet to the opposition. La Epoca provided a broad outlet for
the opposition's public projection and for fostering discussions conducive
to consensus-building and unity around the centrist bloc under
formation.123

US intervention in Chile's internal political process reached a
pinnacle in 1988, the year of the plebiscite. Washington allocated
approximately $4 million through the NED and through the AID's
ODI to organize and guide the Command for the NO,124The AID
granted $1.2 million to the Costa Rican-based Center for Electoral
Assistance and Promotion (CAPEL),an organization formed in 1982 at
the behest of US policymakers as a conduit for US political operations
in Latin America, and whose board members were drawn from the
same sources as the interlocking directorates of the other NED
groups.125The CAPEL sent a team to Chile to work with the Catholic
Church-sponsored Fundacion Civitas and with Participa for "voter
education" campaigns.

In the division of labor, the NDI guided the political parties in the
campaign, while CAPEL supervised such activities as highly successful
voter registration drives, door-ta-door canvassing, distribution of
electoral paraphernalia, and poll monitoring. A US trainer was selected
to prepare step-by-step manuals and other materials for Chilean
organizers, and other US advisors managed the "national forums" that
Participa and the Fundacion Civitas conducted.126 Meanwhile, NDI
advisors designed the coalition's campaign and even produced its
media advertisements, exporting US campaign techniques, particularly
those which took full advantage of new communications technology
and the use of television. "In Chile, we went in very early," said one
consultant sent down by NED. "We literally organized Chile as we
organize elections in precincts anywhere in the United States."127And
as in the Philippines, US pressures on Pinochet, along with the
presence of some 6,000 foreign electoral observers and quick-eount
tallies on voting night conducted by US advisors, were crucial in
preventing fraud and assuring that the dictator would respect the
outcome of the vote.

Following the plebiscite, the Command was transformed into a
coalition of seventeen political parties, known as the Concertacion,
which nominated Aylwin as its presidential candidate. Aylwin was
more concerned during the brief campaign with containing popular
enthusiasm for change than with squaring off against his electoral
opponents. The NO victory generated "enormous expectations among
the common people," he said during a campaign interview. "These
sectors will press for popular demonstrations and protests. The biggest
challenge that we political leaders face is controlling such pressures."
128 Pinochet's followers nominated Heman Buchi to the promilitary
Independent Democratic Union (VOl) ticket. The traditional
right decided to run its own candidate, Francisco Havier Errazuriz, a
prominent businessman from the National Renovation Party. Aylwin's
coalition, with more NED support, won the December 1989 election
with 55 percent of the vote (the two right-wing candidates garnered 45
percent of the vote between them).129This was the first election in
modem Chilean history in which the left had no candidate of its own
and no conspicuous or autonomous participation in the political
process. US efforts had largely succeeded in completely reconfiguring
the Chilean political landscape, and in particular, in restructuring three
blocs (left, center, right) into two blocs, the center (with left and right
elements at its fringe) and the right. By the late 1980s, even before the
1990 transfer of government to Aylwin, US political operatives were
referring with great satisfaction to "two major political currents" in
Chile, the center and the right.130 This new political configuration
appeared to have stabilized in the early 1990s. The 1993 national
elections were a contest between two presidential candidates, Arturo
Alessandri, candidate for a coalition of rightist parties, and Christian
Democrat Eduardo Frei, candidate for the Concertacion coalition -
both sons of former right and center presidents in the pre-Allende
period.

Step 3: Suppressing popular mobilization

If step I was defining the contours of a controlled transition and step II
was unifying and organizing the elite, the third step was competing
with, and displacing, existing popular leadership and initiative at the
grass roots level. There were two priority target sectors: the poblaciones
and labor. The sprawling poblaciones had historically been hotbeds of
radical political activism, and were bastions of support for the Allende
government. Following the 1973 coup, the junta made an unsuccessful
effort to pacify the poblaciones by replacing leftist community leaders
with junta supporters, in many cases Christian Democrats.131

In mid-1985, the NED planned a program for funding and advising
the Neighborhood and Community Action (AVEC) group, a civic
organization that targeted poblaciones in Santiago and other major
Chilean cities. A NED summary document in May 1985, titled "Democratic
Action in Slum Areas," stated:

The political, social and economic crisis inside Chile is being used by
the Communist party to penetrate the "poblaciones" through an
effective campaign to incorporate the poor into their ranks. Moreover,
the restrictions and prohibitions imposed by the military regime on
democratic political parties have smoothed the way for the Communist
party, accustomed as it is to working under clandestine condi-
tions... In an effort to counter the predominance of the Communist
party in the "poblaciones"... [the AVEC project] is designed to
support the activities of the avowedly democratic organizations,
focusing on the country's most densely populated areas; in order to
counter the Marxists' intensive activities in these areas, the proposed
program... would initiate professional training and indoctrination
programs particularly for Chilean women and youth. (Courses would
include sewing, children's fashions, hairdressing, knitting, cooking,
first aid and arts and crafts.) Democraticeducation would place great
emphasis on the value of representative democracy, and would stress
the proposers' [sic]opposition to the popular democracies advocated
by Marxism.132

The AVEC program was administered by the Delphi International
Group, a self-described multinational consulting and management
firm. Since the early 1980s, Delphi had functioned as a large-scale
contractor for the USIA and the AID. With the NED's creation in 1984,
Delphi became one of the principal contractors for its projects in Latin
America, especially those involving the communications media, and
women, youth, and community groups. In late 1987, Delphi assigned
its staff member Henry "Hank" Quintero to coordinate its Chile
programs.133 Quintero was an intelligence community veteran who,
together with Richard Miller and Carl "Spitz" Channel, had run the
Institute of North-South Issues, which was exposed in the Iran-Contra
scandal as an Oliver North front group.134

The AVEC was actually founded in 1964 under the auspices of the
Santiago archdiocese as a "self-help" charity-oriented program. It was
run by Christian Democrats, with US support, as one of their "communitarian"
projects in the 1960s campaigns to develop a social base and
counter the left. In the late 1970s, Christian Democratic organizers
reactivated AVEC. Its president was Sergio Wilson Petit, a PDC leader
and a lawyer involved in the early and mid-1980s negotiations
between the elite opposition and the dictatorship. Another AVEC
leader was Hernol Flores, also a POC leader. In 1973, Flores had come
out vocally in support of the COUp.135Not surprisingly, simultaneously
with his leadership in the AVEC and militancy in the PDC, Flores was
also the Secretary-General of a US-funded trade union federation (see
below).

Using the "multiplier effect" method, and manuals, audiovisual, and
other materials supplied by Delphi, the AVEC conducted leadership
training seminars for several thousand local leaders, who then spread
out and organized the poblaciones zone by zone. Activities focused on
weaning the poor neighborhoods away from leftist influence and
radical sympathies, and channeling political energies into the plebiscite,
and later into the 1989 presidential elections. "These programs
were active in organizing residents in their communities to either
challenge established leaders or assume the presently unoccupied role
of community leaders," reported Delphi. "Discussions [in NED-AVEC
seminars] held in the poblaciones centered on the concept of heritage
and the concept of rights residing with the individual and not with the
state."l36 Another document cautioned: "the urban slums and shantytowns
are centers of acute social conflict. .. due to the permanent nonsatisfaction
of their demands, it is urgent to address this situation and
incorporate them into the redemocratization process." There is
"intense opposition in the poblaciones to the regime," it warned: "This
intense social mobilization has generated repression [from the regime]
and has also opened up new space for some of the historic political
parties of the center to restructure their work" in the poor neighborhoods.
It then listed the specific objectives of the NED-AVEC program:
"mount a democratic alternative that undercuts the process of communist
and fascist penetration of the marginal sectors in our country";
and "conduct intense promotional work so as to penetrate the organizations
that currently exist, and to incorporate these actively into the
objectives of this project."137A NED report on the program stated that
"the project with AVEC directly filled a void within poor community
organizations in Chile. AVEC is one of the few Chilean organizations
working with the poor to enhance both socio-economic well-being and
political and social awareness."138 In reality, there was no such void in
the poblaciones - both the organized left parties and the communities
themselves were highly organized, and politically and socially aware.
The objective was not to fill a void but to compete with existing
organizational forms and to try and displace their leaders.

An important aspect of the AVEC, and all NED and AID "democracy"
programs in Chile and elsewhere, is the propagation of specific
ideological messages associated with capitalist polyarchy and consensual
domination, including a highly individualist and atomized conception
of "individual rights and responsibilities," in contradistinction
to competing concepts of collective mobilization, demands, and rights.
The objective is to defuse and destructure autonomous mass constituencies.
"AVEC's civic education programs were closely linked to the
socio-political situation in the targeted communities and were aimed at
supporting momentum for the return to democracy," explained the
NED. "[NED] grants enabled AVEC, during a critical juncture in
Chilean politics, namely the pre- and post-Plebiscite periods, to
provide a viable alternative." Through the NED program, "AVEC has
gained the loyalties of its constituencies, and has effectively encouraged
a self-help approach in the targeted organizations."139 At a time
when mass mobilization was sweeping the poblaciones, placing collective
political demands on the dictatorship for democratization and also
collective socioeconomic demands for public resources for food, housing,
and employment, the AVEC propagated its alternative approach of
community "self-help" and "individual participation" in the political
process. Explained another NED report: "At the communal level,
AVEC's main area of emphasis, civic education efforts, continued to
address the individual's rights, obligations, and participation in a
democracy."140

The NED program targeting the second priority sector, labor, was
conducted by the FI'UI.141As in the Philippines, the United States
backed a minority labor federation with the aim, not of defending
workers, but of tempering the revival of labor militancy. In 1983,in the
heat of the renewed protest movement, a broad new labor federation
was formed, the National Workers Command (CNT), described by one
informed observer as "the most representative labor coalition since the
United Workers Central (CUT) was abolished by the military in
1973."142Chile's trade unions have a long history of militancy and of
genuine pluralism in their own ranks.143 Before the coup, over a
million workers in some 10,000workplaces - more than 40 percent of
Chile's workforce - belonged to the CUT. Labeled by Washington as a
"communist front," the CUT, formed in 1953 out of diverse federations,
brought together trade unionists of differing ideologies and
political affiliations, including Christian Democrats, Socialists, Communists
and Radicals, into a single body, and was perhaps unique in
Latin America in its commitment to labor unity.144Now, once again, in
1983, the CNT mushroomed into the largest and most representative
federation. Its leadership included Communists, Socialists, Christian
Democrats, and others under a program of broad labor unity and
militant opposition to the dictatorship.

In 1984,a year after the CNT was formed, the FI'UI began funding a
small grouping, the Democratic Workers Union (UDT). The UDT had
grown out of the "Group of Ten," a small club of trade union leaders
led by Christian Democrats from the right-wing of the POC and
financed by the AFL-CIO since 1976.145As in the Philippines, the
"Group of Ten" was for the most part unmolested by the dictatorship
and even collaborated openly in the mid-1970s with the junta, which
continued to brutally repress unionists from the banned CUT.146
According to the NED, the UDT received support because its "development
has been severely curbed by government restrictions and
threatened by communist-subsidized rivals."147 Briefly, in 1983, the
UDTjoined the CNT, but in 1984,the same year that it began receiving
NED funds, it broke off, and subsequently renamed itself the Democratic
Workers Confederation (COT). US funds enabled the COT "to
establish youth and community services, to distribute an information
bulletin and to conduct a media outreach campaign," explained a NED
report. "Regional offices have been established and seminars have
been held" by FlUI specialists to train local leaders. The NED also
financed a COT campaign to gamer workers' support for the abortive
National Accord signed by the moderate parties in 1985.148

Thus, between 1984 and 1988, the crucial period in which the leadership
and direction of the democratization movement was being fought
out, there were two principal labor organizations, the pluralist and
militant CNT, which advocated continued social mobilization against
the dictatorship, and the minority COT, which called for an "orderly
return to democracy" and the exclusion of Communists, Socialists and
other left groupings from the labor movement.149 But pressures were
mounting in Chile for a unitary labor federation. A convention was
planned for late 1988 to form a new labor central out of the CNT and
other groupings, to be called the Unified Workers Central (CUT, with
the slight change of name meant to get around the regime's ban of the
defunct United Workers Central). The US-sponsored COT had remained
a minority grouping, but clusters from its rank and file had
steadily broken off to join the CNT under the banner of labor unity. In
that year, the NED described the minority group as "the embattled
Chilean trade union federation," meaning that it was losing ground to
the CNT. Thus, in 1988, US strategy shifted from trying to bolster the
parallel unionism of the COT to trying to gain as much influence as
possible within the soon-to-be-formed CUT, eclipse leftist influence
and counter the social mobilization line. The NED continued funding
its parallel federation, but at the same time advised the group to join
the new CUT as a constituent member. Then, starting in 1989, the NED
simultaneously funded the COT and began to penetrate and fund the
CUT. As with the political parties, the strategy was to try and achieve
the overall hegemony of pliant, moderate and pro-US forces within the
national democratization movement. This dual funding - for the COT
as a small, constituent member of the CUT, and for the CUT overall -
continued into the 1990s. [150]

The COT, affiliated to the ICFfU, became the Chilean representative
to that body. COT Secretary-General Hemol Flores, a Christian Democrat
and also an AVEC leader (the COT central offices in Santiago also
housed the AVEC national headquarters) endorsed Aylwin early on
and campaigned actively for labor support for the Aylwin ticket. In
addition Hemol Flores was interviewed regularly in the television
programs sponsored by the Catholic University, in La Epoca, and in the
other public forums and media outlets of the US-promoted civic
opposition front, as "the representative of labor."

In targeting labor, the FfUI sent in several dozen AIFLD field
organizers to train top-level Chilean union leaders, who then, through
the multiplier effect, branched around the country with the dual
agenda of organizing labor into the anti-Pinochet, pro-centrist bloc
then under formation, and competing with more radical and leftist
labor tendencies.lSl Following Aylwin's inauguration, funds went for
COT recruitment drives and stepped-up activities to counter leftist
opponents. "The democratic sector of CUT needs reinforcement in
several important provinces of the country, as the antidemocratic
sectors of the organization have mounted vigorous recruitment campaigns
among workers in these areas."152Beyond seeking to marginalize
militant tendencies, US activities also sought to gamer workers'
support for the neo-liberal program. NED funds sponsored the drafting
by the COT of a forty-point program for labor-management relations
(the program was presented to, and adopted by, Aylwin's administration),
and a series of forums to promote "dialogue and cooperation"
between labor and the business sector.153

A third sector targeted by US operatives was Chilean youth.
"Political education has been tragically neglected in Chile during the
past fourteen years, weakening the ability of centrist forces to consolidate
popular support and posing a serious obstacle to the reemergence
of a stable democracy," warned a 1987 NED document. "Given the
dearth of democratic education, youth, in particular, are highly susceptible
to the 'idealistic' rhetoric of Chile's Marxist parties."I54 Delphi
took charge of a program with the Institute for the Transition (ISTRA),
which subsequently changed its name to the Center for Youth Development
(CD]). Another NED document noted: "The US Embassy in
Santiago reports that ISTRA is the moderate wing of the Christian
Democratic Party's youth organization ... ISTRA is described as markedly
pro-US and dominated by moderates."155 Under Delphi advisors,
Miguel Salazar was named CD] president. Salazar at the same time
held the post of PDC National Advisor. Another top CD] leader was
Sergio Molina, also a Christian Democratic activist and a personal
advisor to Aylwin.

Young people were considered a strategic sector because the anti-
Pinochet strategy devised by Chilean activists and US advisors was
based on registering a vast bloc of the population to vote. Through a
voter registration campaign, they hoped not only to assure a high
turnout and an electoral victory, but also to reach a major portion of
the population with the elite political message. "Among the nearly 5
million citizens who have not registered" of an estimated 8 million
eligible voters in Chile, noted a 1988 NED document, "the CD]
estimates that sixty-five percent are between the ages of eighteen and
twenty-eight, mostly from the poorer sectors of the population."156
Thus a huge proportion of the electorate had reached maturity under
the dictatorship, when politics was illegal and civil society suppressed.
According to CD] president Salazar, "we must do something to orient
and channel the conduct and attitudes" of this youth generation. "The
idea is to be able to make this new line of work [among youth)
complementary to our other work in the doctrinaire and political
areas."157 The youth program implemented the multiplier method:
2,500 university, labor, peasant, and community youth leaders were
trained by US advisors. "Each individual trained will reach an additional
15-30 young people over a two-year period," explained the
NED.158The youth leaders were oriented, following their training, to
liaison with the political parties that had signed the U5-brokered
National Accord.159 The CD] also established an "academic committee"
to liaise with the political parties and the think-tanks being
funded by Washington. The flood of literature and paraphernalia from
the think-tanks, research centers, and publishing outlets thus supplied
the US-funded civic groups with political orientation and materials to
conduct their work.

The new modalities of US political intervention in Chile did not cease
with "redemocratization" but shifted focus, from guiding a transition
to further penetrating Chilean political and civil society and consolidating
an emergent polyarchic system and elite hegemony. The same
groups funded during the transition, many of them now in government,
continued to receive political aid from Washington, and new
programs focused on fine-tuning the mechanisms and institutions of
Chilean polyarchy. As PDC leader Sergio Molina stated in a late 1989
report to the NED: "Now that the elections are over, what is needed is
to provide for administrative functioning under the new institutionality,
as regards the process of decision making and the system of
relations between state powers, especially executive-legislative, and
between the state and the social organizations and private entrepreneurs."
160New programs in the early 1990s focused on strengthening
the center and the right, fostering polyarchic political culture in the
parties and civic groups, and maintaining consensus for the neo-liberal
program.161

Conclusion: Neo-liberalism and polyarchy: the dialectics of transnational economics, politics, and social order

The changes in work patterns [resulting from economic restructuring]
have had a significant impact on social relations .. , The fragmentation
of the social relations of the workplace has obscured the sense of
collective fate and identity among Chile's working class. The transformation
of the workplace has been complemented by the transformation
of the political system... The fragmentation of opposition
communities has accomplished what brute military repression could
not. It has transformed Chile, both culturally and politically, from a
country of active, participatory grassroots communities, to a land of
disconnected, apolitical individuals. The cumulative impact of this
change is such that we are unlikely to see any concerted challenge to
the current ideology in the near future.
-- Cathy Schneider, scholar on Chile [162]

As in the Philippines, Chileans were genuinely elated over the opportunity
to rid themselves of a dictatorship. Participation in the NO
campaign and the 1989 elections as a means of removing Pinochet was
genuine and mass-based. But there are important differences between
the two countries' democratization movements. By 1988 the anti-
Pinochet forces were well organized, the hegemony of the elite opposition
over the anti-dictatorial movement was already achieved, and the
transition from authoritarianism to polyarchy was proceeding considerably
more smoothly than in the Philippines. Yet in both countries
there was a convergence between popular sectors, the left, the elite
opposition, and US interests in getting rid of dictatorships, and
simultaneously a contention between popular and elite alternatives to
the authoritarian regime.

Through its ubiquitous and multi-layered intervention in Chilean
society, ranging from influence over international lending agencies to
state-to-state relations with the Pinochet regime, Ambassador Barnes's
influential diplomatic activities inside Chile, political assistance and
advisement of the opposition parties, and grassroots intervention in
civil society, the United States was able to foster a well-oiled "democratization"
machine that latched on to the Chilean masses' authentic
democratic aspirations and helped to channel the entire process into an
elite outcome. Protagonists of the new political intervention could
boast of consecutive "success stories" in the Philippines and Chile. US
intervention synchronized with internal Chilean factors and the macrostructural
context described at the outset of this chapter to determine
the outcome. US intervention in the transition must be seen as part of
an uninterrupted process of intervention in Chile's internal political
process over some twenty-five years that was crucial in shaping the
dynamic of "democratization." Following the transition a torrent of
academic works published in the United States on this "democratic
miracle" argued that "democracy" had been successfully "restored" to
Chile and that the United States played a remarkably constructive role
- a position which has uncritically been taken for granted, indeed, a
position which has achieved intellectual hegemony.163

Just as in the Philippines, the reach of the democratization process in
Chile became severely curtailed, and was contained comfortably
within the prevailing social order, as a result of the manner in which
the anti-dictatorial movement unfolded. But unlike the Philippines,
where left and popular sectors enjoyed sufficient strength and
autonomy in the climax of the anti-Marcos movement and the first part
of the Aquino administration to force the government to launch an
authentic reform program (which was subsequently undermined), the
new Chilean rulers were explicit in stating that there would be no
fundamental changes in the socioeconomic order. The entire Chilean
elite, historically divided over development models, had achieved
consensus during the twenty-year overhaul of the Chilean economy
and society in the context of globalization.

And as in the Philippines, the preservation of the repressive military
apparatus and its impunity remained an instrument of blackmail
against popular claims for deeper social transformations. Virtually all
military institutions remained intact, Pinochet himself was scheduled
to remain the head of the armed forces until 1998, the constitution
stipulated that the military appoint eight non-elected representatives to
the Senate, and the Supreme Court upheld an amnesty for human
rights violators decreed in 1978. Edgardo Boeninger, who helped
design the elite democratization strategy through the NED-funded
think-tanks and went on to become Aylwin's chief of staff, made clear:
"Should a government attempt to make drastic changes in the socioeconomic
system - as was the case of Chile under Allende - the
threatened sectors [that is: the dominant minority] will decide that
democracy is no longer able to protect their basic values and interests.
A 'coup mentality' is the likely result."lM Such reasoning was shared
by the entire coalition that backed Aylwin. Socialist deputy Camilo
Escalona asserted: "We think ... that the greatest threat to the democratic
process isn't Pinochet. The greatest threat is that the people will
not see its demands satisfied, that the people will be disenchanted with
democracy, that millions of persons will turn their backs on the
democratic process because it is not capable of responding to their
enormous demands."165 The "threat" to Chile's new "democracy"
thus became, not the specter of a new coup by a privileged military
caste, but potential demands by an impoverished majority for changes
in the socioeconomic system that might improve their lot.

In his first year in office, Aylwin increased the military budget. In
November 1990, the Bush administration lifted an earlier ban on the
sale of military equipment to the Chilean armed forces and resumed
military aid. An intact and autonomous military and security apparatus
functioned to keep the left and popular forces in fear and in
check in the post-transition period and to further circumscribe democratic
participation. Human rights organizations reported a spate of
continued violations despite the end of systematic repression.l66 As
part of the "negotiated transition," the military and the incoming
civilian government agreed that the military budget could not fall
below the 1989 level of $1.4 billion out of a total of $7.7 billion. In 1989,
the military budget was $432 million higher than the housing, health,
and education budgets taken together.167By guaranteeing the military
such huge resources, there was little surplus to attend to the pressing
needs of the impoverished majority. Thus, even if the new government
had the will to undertake basic social and economic reforms affecting
wages, housing, health, and education, it could not do so without
challenging the military's preeminent role in political life. Why the new
civilian government remained so beholden to the military, beyond the
latter's own threats, is explained by the dynamics of polyarchy and
neo-liberalism.

Chile provides a clear example of the fusion of "promoting democracy"
and promoting free markets in US foreign policy. Chile has been
held up to the world as a model of "successful redemocratization" and
as an "economic miracle" which demonstrates the virtues of global
capitalism, from which other Third World countries should take
inspiration. In this view, uncritically adopted by a host of academics,
journalists, and policymakers, Pinochet is criticized for his authoritarianism
but credited as a hero for the "economic success story," and
"redemocratization," as a matter of course, meant a return to civilian
rule without any change in the socioeconomic order. Alejandro Foxley,
a leader of the elite opposition to Pinochet, declared following his
appointment by Aylwin as the new finance minister: "A country
shows maturity when it is capable of taking advantage of the positive
experiences which others have implemented, even when one doesn't
like the government which implemented these measures. I respect
technically and professionally those who were in the previous government."
168

However, a cursory empirical glance at the actual structure and
performance of Chile's economy reveals the real "miracle" was (and
continues to be) a "success story" for a minority of the Chilean upper
and middle classes together with transnational capital operating in
Chile's free-market environment, but a burden for the broad Chilean
majority. The mass of Chileans have sunk into ever deeper impoverishment.
What took place between 1973 and 1993 was a severe, and still
continuing, regression in democratization of the economy and in the
well-being of the mass of Chileans. During the military regime,
poverty levels increased by 100 percent, and by 1990, 45 percent of the
population were living in poverty.169

Petras and Vieux show that in four key areas touted .as "success
stories" - poverty management, growth, privatization, and debt management
- Chile's performance under the dictatorship does not stand
up to an empirical test. As for what neo-liberal jargon calls "poverty
management," what took place in Chile was just that: the management,
not the decrease or elimination, of poverty. As wealth continued to
concentrate in the 1970s and 1980s, overall poverty levels increased.
Real wages fell 40 percent during the first decade of military rule. By
1987, GDP per capita barely equaled that of 1970, while per capita
consumption was actually 11 percent lower than the 1970 level.170
Contagious diseases spread as health expenditures fell from $29 per
capita in 1973 to $11 in 1988. Typhoid cases, for instance, more than
doubled between 1970 and 1983,and in the 1980s, Chile accounted for
20 percent of all reported cases of typhoid in Latin America. While 45
percent of the population dropped below the poverty line, nearly one
million families were homeless out of a population of some twelve
million people.17l Modern shopping malls rivalling the most luxurious
found in the developed countries sprang up in Santiago's plush upperclass
neighborhoods in the 1980s and 1990s, at the same time as
shantytowns spread like wildfire in the outskirts of the capital and
other Chilean cities, fed by the growing army of those marginalized
and excluded from the "miracle."

As for growth, GDP grew by an average of 3.9 percent in the period
1950-1972, dropped to 1.4 percent from 1974 to 1983, and averaged
only 1.2 percent during the 1980s,the years of the alleged "miracle."ln
Moreover, given the cyclic nature of this growth, it being interrupted
by several economic crashes, including a 1982 collapse which brought
unemployment to over 30 percent and shrank the GOP by an incredible
14 percent, "these rates didn't contribute to growth at all, properly
speaking, but to the recovery of previously achieved levels."173 In
another study, Chilean economist Pedro Vuskovic points out that
economic growth rates between 1974 and 1989 were considerably
below the overall Latin American average of 4 percent for this same
period.174"Far from advancing," he notes, "Chile receded with respect
to Latin America as a whole." Even if one were to disaggregate growth
rates and point to high rates from the mid-1980s into the early 1990s,
the more important question is not whether total output has increased,
but what impact an increase in the total production of wealth has
meant for the Chilean majority. Increased wealth has not meant an
improvement in the living conditions for the majority - it has meant
"poverty amidst plenty," has brought a concomitant increase in the
drainage of wealth out of Chile, and a concentration of that wealth
remaining in Chile into the hands of a minority.

Pinochet's regime's alleged dexterous "debt management" is based
on its successful renegotiations in the late 1980s and on its perfect
debt-servicing record. Chile's perfect record in its foreign debt-service
payments is without doubt a "success story" for the international
banks, which recover loans and earn interest, as is privatization for
local investors and transnational capital. But the regime was forced to
manage a debt which it accumulated in the first place, mostly to
increase imports of consumer goods destined for luxury consumption
under the neo-liberal lifting of trade controls, and which totalled $20
billion by late 1987, the highest per capita level in the world.
Renegotiations amounted mostly to exchanging bilateral debts with
commercial banks for new debt with multilateral lending institutions.
Most important, debt-servicing has meant a permanent drainage from
the country of whatever increased wealth was actually produced. In
the late 1980s debt-servicing consumed a full 5 percent of the
country's annual economic output. Compared with average annual
growth in this period of 1.2 percent, we are left with a dramatic net
outflow of wealth, well beyond new growth, as a result of debtservicing.
175Privatization has brought the government temporary and
non-sustainable revenues, used mostly for debt-servicing, and at the
same time has resulted in a dramatic concentration of capital and the
transfer of a huge portion of the Chilean economy from local hands to
transnational capital. The much-touted inflow of foreign investment
in the 1980s did not constitute, in its majority, new productive
investments, but foreign purchases of existing Chilean assets through
debt conversion programs.176 The bulk of productive foreign investment
which did enter the country was in the form of agri-business,
which accelerated a process of proletarianization of the Chilean
peasantry and increased urban and rural unemployment. [177]

The "miracle" involved the successful rearticulation of Chile to the
world market, and a dramatic expansion of exports, at a time when the
global economy was emerging. Exports as a proportion of GDP soared
from 19 to 32 percent from 1984to 1988,178due to a pattern of dynamic
growth confined to a narrow range of "non-traditional" primary goods
exports, particularly seafoods, timber, and fruits, which, together with
the traditional mining sector, accounted for nearly 90 percent of
exports.179Historic dependence on primary exports has dramatically
increased in an entirely unsustainable model. Overexploitation of
maritime resources, which are expected to be depleted by the next
century, has already led to the extinction of several marine species. As
timber reserves become depleted, overexploitation has triggered an
ecological disaster - rapid soil depletion, a decrease in precipitation,
and an incipient process of desertification. Moreover, given heavy
foreign participation, much of the wealth produced in these dynamic
export sectors is sent abroad through profit remittance. By way of
example, two-thirds of the increase in export earnings produced in
1990 was transferred abroad (of that remaining in Chile, 85 percent
corresponded to capital profits and only 15 percent to that retained by
the wage sector).180

This is a general Latin American pattern - a crucial point simply
ignored by the proponents of neo-liberalism, yet one which belies the
very basis for legitimizing the model. Both the volume and the value of
Latin American exports grew in the 1980s and early 1990s - a central
goal of restructuring - yet these "gains" merely resulted in net capital
transfers abroad in the form of debt servicing and profit remittances.
Benefits from the generation of greater surplus as a result of increased
production for export are canceled out by the permanent drainage of
surplus from Latin America. Pointing to increased export-oriented
production as an isolated variable therefore conceals the reproduction,
and intensification, of relations of dependence and domination and of
real social inequalities. The Chilean "success story" also includes
macro-economic equilibrium (low inflation, balanced budgets, stable
and "realistic" exchange rates, etc.) - another factor which, when seen
as a variable isolated from a larger totality, serves to mystify real
relations of domination and inequalities. The importance of equilibrium
is contingent and relative to concrete interests. It is a "success"
to the extent that it provides transnational capital with the stability
required for its incessant and diverse operations within and between
nations, and thus helps reproduce and stabilize patterns of capital
accumulation whose immanent outcome is the polarization and concentration
of wealth and of political power that wealth yields. Macroeconomic
stability, in itself, tells us nothing about the actual well-being
of the broad majorities in Chile and in the Third World. In short,
success and failure are not mutually exclusive; some have benefitted
and many have lost out from Chile's neo-liberal program.

Chile's new polyarchic rulers were, if anything, more committed
than their authoritarian predecessors to neo-liberalism. The new
regime declared that its mission was to continue neo-liberal restructuring
under "democratic" managers. "The main economic challenge
facing Chile is to consolidate and expand its integration into the world
economy," explained Boeninger.181Social unrest is the objective consequence
of the anti-popular character of the model. Thus there is more
behind the new civilian regime's relation to the military than a delicate
effort to consolidate the "transition to democracy." As Petras and
Vieux note: "Managing the model also means taking political responsibility
for defending it with the armed power of the state. This is a task
the Aylwin government has equipped itself to face, in part by
increasing the Carabineros [militarized police] by 4,400 slots... It also
reflected a long term commitment by the Aylwin government to
expand the size and better equip the national and political police, who
were also carefully nurtured during the dictatorship."182 By the early
1990s, Aylwin's honeymoon was over and a new cycle of strikes,
popular protests and government repression had set in - hegemony
remained consensus protected by the "armor of coercion."

Transnational economics and transnational politics converged as a
new hegemonic bloc was forged in Chile through a "transition to
democracy." The achievement of center and right consensus around a
free-market economy overcame the historic split in the dominant
groups between two alternative strategies, one of free-market, externally
linked development (the right's historic program), and the other
of nationally oriented dependent capitalist development with a
measure of state intervention (the centrists' historic program). These
different strategies had, in the past, resulted in different political
programs and in elite splits that opened space for the left. The
unification of elite criteria over the country's economic model, linked
to the global economy and the reconfiguration of Chile's dominant
groups, thus also resolved the political stumbling bloc, or "fluke," of
the Chilean political system. The neo-liberal model of structural adjustment
as the "grease" for the operation of the global economy leaves
little room for maneuver or for minor alterations. The constraints it has
imposed on Chile, with its concomitant implications for the political
system, go beyond the control of local Chilean sectors, whether
dominant or subordinate. What is required is the development of
strategic alternatives in the interests of, and implemented by, broad
majorities who have gained hegemony in a transnational setting.

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