LIBERAL ECONOMY, LIMITED DEMOCRACY: THE CASE OF CHILE By Kathryn A. Lasso Submitted to the Faculty of the College of Arts and Sciences of American University in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy In Sociology Chair: Russell A. Stone, Ph.D. CL:.u l\~'1b fvk_.LO o ._. ~brugge Brantley, phi)~ ~~ Hector Schamis, Ph.D. D~~dSciences ;2_r ~ otC'elr Date V 2008 American University Washington, D.C. 20016 AMERICAN UNIVERSITY UBRJ\RY q 311. UMI Number: 3340558 INFORMATION TO USERS The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleed-through, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. ® UMI UMI Microform 3340558 Copyright 2009 by ProQuest LLC. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 E. Eisenhower Parkway PO Box 1346 Ann Arbor, MI 481 06-1346 LIBERAL ECONOMY, LIMITED DEMOCRACY: THE CASE OF CHILE BY Kathryn A. Lasso ABSTRACT This is a sociological study about the political constitution drafted in 1980 in the Republic of Chile by its military junta that was intended to "protect" democracy through authoritarianism. Each section of the study begins by summarizing the international ideological context in which Chilean social action took place before looking at Chilean political economy under its three constitutions of 1833, 1925 and 1980. While this study is focused on the particular case of Chile, it hopes to make a broader contribution to historical-comparative sociology by demonstrating how Chile's constitutional contract changed in an effort to create a rules framework to mediate social relations by using a multi-polar political-economy approach. In this respect we hope to gain understanding about the fundamental nature of liberalism as an organizing concept and in contrast to competing paradigms. While the attention of historical-comparative sociology is traditionally focused upon large-scale structures, this study focuses its attention on large-scale ideas about structures. In 1982 Milton Friedman wrote: "Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ii ideas that are lying around."1 This study identifies the myriad of ideas about politics and economics that were "lying around" Chile in the 1970's and 1980's, to tease out where those ideas came from, to follow what happened to them, and, most importantly, to learn of their influence upon the everyday life of everyday people even today. 1 Milton Friedman with the assistance of Rose D. Friedman. Capitalism and Freedom. Chicago, IL: University of Chicago Press, 1982. p. ix 111 ACKNOWLEDGMENTS This paper would never have been written without the encouragement and support that I have experienced over many years. My interest in Chile began when I served as an intern at the Third World Women's Project of the Institute for Policy Studies. I was encouraged by both Isabel Letelier and Jill Gay to write my master's thesis on Chilean women, which sparked what has become a long term interest in that country. Back in school some twelve years later when I found myself wrangling with questions about the relationship between democracy and economics, I was fortunate to have taken an independent studies course with Chilean economist Fernando Leiva, whose early mentoring pointed me to explore the influence of F .A. Hayek upon Chile. This encouragement led me down the winding path that has culminated in the study before you today. Later on human rights activist Jose Aylwin and Tomas Hirsch, leader of Chile's Humanist Party graciously granted me interviews, which helped to confirm some of the conclusions that I had drawn about the lasting impact that Pinochet's regime had had upon Chile. I also must thank American University's Department of Sociology; I entered a doctoral program there with a decision to fully explore this theme, with the encouragement of each professor there. My specific thanks go to Professors Russell iv Stone, Jill Brantley and Hector Schamis who served on my dissertation committee. American University's College of Arts and Science provided me with generous financial assistance upon three occasions, two times with travel grants for field work in Chile and in between with a year-long fellowship that allowed me to stop working full time to write. A cadre of friends valiantly agreed to read my dissertation in various stages of completion. I am grateful for all of their comments and corrections. Many thanks to Helen Albert, Gail Arnall, Dottie Bockstiegel, Lauren Conover, Wendy Dorsey, Jose Gutierrez, David Hilfiker, and Alexandra Zekas. I must also recognize Dr. Wilson, who helped me come to terms with my own bifurcated consciousness. But my greatest thanks are reserved for my family. I would like to thank my husband Ernesto for his encouragement, and, most of all, I must thank my boys, Manuel, Paul and Benjamin, who put up with a mom who needed to do more than take them to soccer games, karate classes and art classes. Thanks guys, you're the best. v TABLE OF CONTENTS ABSTRACT . .. 11 ACKNOWLEDGMENTS .......................................................................... .iv LIST OF ILLUSTRATIONS ..................................................................... vii Chapter 1. OVERVIEW OF THE GOALS AND OBJECTIVES, SCOPE, CONTRIBUTION, STRUCTURE ................................................... 1 2. THEORETICAL REVIEW AND FRAMEWORK ............................... 9 3. METHODOLOGY -A MULTI-POLAR POLITICAL ECONOMY APPROACH ................................................................................................. 48 4. THE SHAPING OF EARLY LIBERALISM ...................................... 63 5. LIBERALISM IN AN AGE OF RISING POPULISM ....................•...... 84 6. LIBERALISM VERSUS REVOLUTIONARY POPULISM .................. 116 7. A BREACH IN THE CONSTITUTIONAL ORDER ............................ 147 8. GLOBALIZED DEMOCRACY, GLOBALIZED ECONOMY ............... .152 9. CHILE'S 1980 CONSTITUTION OF LIBERTY .............................. .171 10. THE 1980 CONSTITUTION REVISITED ....................................... 189 11. CHILE TODAY ..................................................................... 196 12. CONCLUSION ..................................................................... 230 BIBLIOGRAPHY ................................................................................... 24 7 vi LIST OF ILLUSTRATIONS Page Figure 1 The Bifurcation of Consciousness . .. 13 2. Traditional Paradigm . ... .. 17 3: Traditional and Liberal Paradigms . 23 4: Traditional, Liberal and Revolutionary Populist Paradigms . 29 5: Traditional, Liberal, Revolutionary Populist and Pluralist Paradigms ............... 36 6: The Four Paradigms and Levels of Cooperation and Coercion ..................... 45 7: Economic Liberalism versus Political Liberalism ...................................... 71 8: Early Years in the Republic of Chile ..................................................... 80 9: Traditional Conservatism, Classical Liberals United Against Populism ............ 88 10: Keynesianism becomes Dominant Economic Theory ................................ 93 11: Map of Political Positions in the Republic of Chile-late 1800's .................. 106 12: Map of Political Positions in the Republic of Chile-early 1900's ............... 109 13: Political Positions in the Republic of Chile in the mid 20th Century ............. 113 14: Western Ideologies in the Post War Era ............................................. 124 15: Ideological Influences in Allende's Chile ............................................ 139 16: Ideological Influences in Pinochet's Chile .......................................... 164 17: Chile Under the 1980 Constitution ................................................... 173 vii 18: Revival of Political Parties and Coalitions in Chile After 1987 ................... 184 19: 2005 Reforms and the End of"Authoritarian Enclaves" ........................... 193 20: The Bifurcation between Concertaci6n Discourse and Policy Options .......... 219 viii CHAPTER 1 OVERVIEW, GOALS AND OBJECTIVES, SCOPE, CONTRIBUTION, STRUCTURE Dear Professor Hayek: ... There were several things that I wanted to discuss with you but somehow forgot. One of them is ideology. What is ideology? How is it born? How does it die? To my knowledge there is very little rigorous work on the subject. Sociologists are once again no help .. Can you recommend something on the subject? Letter from Hernan Cortes Douglas to F.A. Hdyek May 9, 198a2 The concept of 'ideology' reflects the one discovery which emerged from political conflict, namely, that ruling groups can in their thinking become so intensively interest-bound to a situation that they are simply no longer able to see certain facts which would undermine their sense of domination. There is implicit in the word 'ideology' the insight that in certain situations the collective unconscious of certain groups obscures the real condition of society both to itself and to others and thereby stabilizes it. Karl Mannheim Ideology and Utopia3 Democracy, a form of government that