Labour reform in a neo-liberal ‘protected’ democracy: Chile 1990–2001

Abstract

This paper analyses the direction and degree of labour reform in Chile since the restoration of democracy in 1990 after seventeen years of military dictatorship. The regime of General Augusto Pinochet (1973–90) adopted a highly repressive political character and implemented neo-liberal economic policies, which, together with the institutional restructuring that accompanied them, transformed vast sectors of Chilean society. The 1979 Labour Plan significantly changed the character of industrial relations legislation and the roles and balance of power among social actors, transforming the way in which industrial relations had been conducted since the 1920s. We argue that, despite more than a decade since the restoration of democracy, and after several rounds of reform, the current legislation presents remarkable continuity with the one enacted under authoritarianism, contradicting claims that profound change has been achieved. In attempting to explain the direction and degree of the so-called Transition's Labour Reforms, we emphasize the importance of political-economy approaches. We explore the conservative nature of the Chilean transition to democracy, the continuity of the neo-liberal economic model and the increasing imbalance of power between capital and labour, in an effort to account for the persistence of the authoritarian legacy in today's Chilean industrial relations.

Keywords:

• Chile
• labour reform
• industrial relations
• political economy

Acknowledgements

We are grateful to Carola Frege for her supportive guidance in the process of writing the Masters Thesis on which this paper is based. We should also like to thank Fernando Contreras-Muñoz for his always-pertinent comments.

Notes

Fernando Durán-Palma, Adrian Wilkinson and Marek Korczynski, Loughborough University Business School. Adrian Wilkinson (address for correspondence), Loughborough University Business School, Ashby Road, Loughborough, Leicestershire LE11 3TU, UK (tel: +(0)1509 228273; fax: +(0)1509 223960; e-mail: [email protected]).

1 On the widespread violations of human rights in Chile between 1973 and 1990, see Comisión Nacional de Verdad y Reconciliación (1991) .

2 On political repression and demobilization in Chile post-coup, see Remmer (1980) .

3 Among other measures, it established the constitutional proscription of Marxist parties and prevented union members from holding party affiliations; set up the existence of influential non-representative institutions such as the National Security Council and a Supreme Court nominated by the military; and created a binominal representation system that would over-represent and confer veto power on minority elites and the military.

4 These measures included, among others, a sizeable cut back of public spending, the end of subsidies and price controls for entire industries and local products, the unilateral reduction of tariff barriers, a substantial increase in interest rates, the reorganization of taxation and the grant of privileges to private capital (Bronstein, 1997 ).

5 Kuruvilla describes import-substitution as a development model ‘to stimulate local industry to produce consumer and industrial goods that would substitute for imported alternatives and thereby conserve valuable foreign exchange’ (Kuruvilla, 1995: 116 ). Under this model, national industries had protection from external competition via state regulation and high import tariffs.

6 Between 1984 and 1996, the value of Chilean exports quadrupled from $3.6 billion to $15.4 billion, and natural-resource intensive goods (fruit, fishery, forestry, etc.) represented about 90 per cent of all exports (Schurman, 2001 ).

7 The early re-democratization process produced a substantial increase in labour participation and activation. Between 1988 and 1991, union membership increased from 10.4 to 15.1 per cent of the employed workforce (see Table 5 ), the number of strikes grew by almost 50 per cent and the participation of workers in strikes increased by 20 per cent. All these processes were complemented by the high degree of legitimacy gained by the labour movement due to its firm opposition to the dictatorship.

8 This time as Central Unitaria de Trabajadores.

9 For the purposes of this paper, the ‘Transition's Labour Reforms’ or simply the ‘Reforms’ will refer to both the ‘1994 Labour Code’ and the ‘2001 Labour Reforms’.

10 On the basis of one month's pay per year of service to the same employer, up to a maximum of five months' pay.

11 Severance payments were increased from five to eleven months' wages per year of service. Fines for unjust dismissal were raised by 20 per cent and, in 2001, by 80 per cent.

12 We are not considering, for example, the role of international financial institutions, whose influence in Latin American policy-making and reform cannot be denied.

13 The most important of these reforms eliminated the constitutional proscription of Marxist parties, allowed union members to hold party affiliations and prevented the President from dissolving the lower house of Congress (Roberts, 1998 ).

14 The Senate has forty-eight seats, thirty-eight elected by popular vote and ten appointed (all former presidents who served for six years are senators for life).

15 On the political process of labour reform and the role of employers under the democratic regime, see Haagh (2002) .

16 Valenzuela argues that:

a combination of high labour and popular mobilisation at certain critical moments of breakdown of the authoritarian institutions (that is, when the option for a course of re-democratisation becomes possible but state elites have not yet committed themselves to it), followed by the decline of that mobilisation and by the willingness and capacity of the labour movements' union and political leaderships to show restraint when the political agenda shifts in favour of re-democratisation, would seem to provide the ideal mix in terms of labour's contribution to ensuring the latter's success.

(Valenzuela, 1989: 450 )

17 Although in the first year of the Aylwin administration the number of strikes increased by almost 50 per cent and the participation of workers in strikes grew by 20 per cent, they dropped and have remained relatively low for the rest of the decade (Cortázar, 1996 ).

18 Indeed, Petras et al. (in Mesa-Lago, 2000 ) argue that Aylwin's government dismantled popular mobilization in order to achieve better export competitiveness.

19 The democratic governments have achieved significant economic growth and reduced the social deficit inherited from military rule. Between 1990 and 1997, the economy grew at an average of 7 per cent and poverty levels halved. Nevertheless, the worsening of income distribution, the exhaustion of natural resources and the high vulnerability to external economic shocks have allowed commentators to cast doubts about the long-term sustainability of the country's development strategy.

20 Some authors argue for a truly ‘entrepreneurial Pinochetist network’ that benefited from obscure privatization processes giving rise to powerful economic groups (Mönkeberg, 2001 ).

21 In 1991, 9858 unions had an average of seventy-one members while in 2002 there were 16,310 unions with an average number of thirty-eight workers. These figures contrast sharply with the 100 members an average union had in 1981 and the 144 they had in 1973 (see Table 5 ).

22 According to the Chilean legislation, a union can be valid or dissolved. Being ‘valid’ means that a union has legal existence but this can be ‘active’ or ‘in recess’. A valid and active organization has a registered membership and directorate while a union in recess lacks both (Montero et al., 2000 ).