Student Paper: The Labor Movement in 20th Century Chile by Lily Montesano

Victor Jara, Chilean singer, tortured and killed by the U.S. backed (and planned) 1973 coup in Chile.

(Note: This is a part of a series of articles that I am posting; 10-12 page papers for a course I just finished teaching: Labor and the Global Economy. I asked permission to post several of them. Here is one.)

The Labor Movement in 20th Century Chile: A Brief Retrospective

Chile has a rich and storied history of labor struggle that extends its ideological roots all the way back to the European Revolution of the mid 19th century (Alexander, 1962). However, labor struggles in Chile truly began to gain speed at the turn of the 20th century, due to a mix of social, political, and economic conditions. This essay seeks to offer a brief insight into what factors underpinned Chile’s regionally revolutionary approach to labor relations, and how those relations changed over time.

Ultimately, it will argue that the economic oppression of Chilean laborers, which was justified through paternalistic social rhetoric, and supported with dominance of the political sphere by the capitalist class, was analyzed using the newly-introduced socialist framework in the late 19th and early 20th century. This gave laborers both a mechanism by which they could understand and organize against the forms of oppression described above. With this new analysis in hand, Chilean laborers concentrated their power in unions and other community organizations, and were ultimately able to change class relations, the political landscape, and social rhetoric in their favor. 

Post-Colonial Period

Chile, like most of Latin America was an exporter of raw goods during the colonial period. Upon its liberation, it maintained its status as an export-led economy, both because exports were profitable and because it did not have the capital necessary to industrialize, and the capitalist class (i.e. landowners) changed only marginally in its composition (Williamson, 2009). Rather than a configuration in which Spanish colonizers owned the land and the Chilean people worked the land, wealthy foreign investors from the West and some wealthy Chilean locals now owned the land, with the vast majority of Chileans still laboring on the land (Alexander 1962). As the wealthy Western nations began to industrialize more rapidly, a higher demand for raw goods as inputs for manufacturing was observed. Consequently, commodity prices rose.

The result was rampant growth in income inequality – the land-owing elites enjoyed ever-increasing profit margins at the expense of laborers whose wages remained stagnant (Williamson, 2009). From the perspective of economic growth broadly, this was a golden era for Chile – the value of its yearly production grew substantially each year (Williamson, 2009) – but from a laborer’s perspective, this was a time of frustration and disappointment. Laborers were working just as hard as they always had, and yet they were unable to enjoy the rise in the value of their labor the way that their employers were.

The nitrate extraction industry contributed to the inequality and accompanying discontent among laborers significantly. In 1879 Chile went to war with Peru and Bolivia. Called the War of the Pacific, the conflict arose out of a dispute over control of a substantial parcel of coastal land that was known to contain rich deposits of sodium nitrate, a chemical that provides crops with a vital supply of nitrogen (Encyclopedia Britannica, 2013). After several years of bloody conflict, Chile and Peru signed the Treaty of Ancón, which ceded the land to Chile.

Once Chile owned the land, it sold the rights to mine the land to primarily wealthy foreign investors. Much of the market was taken up by the Guggenheim family of the United States, and the Compañia Salitrera de Tarapaca y Antofagasta, an English-controlled firm at the time, though a few small Chilean firms did exist alongside these corporate giants (Alexander, 1962). Like other raw goods, the demand for nitrates rose throughout the late 19th and early 20th century, so that by 1910 Chile was producing around 2.5 million metric tons of nitrates per year, up dramatically from a meagre 0.5 million metric tons in 1885 (Bergquist, 1986). As was discussed above, the profits resulting from both the expansion of this industry and price increases as a result of growing demand largely went into the pockets of the Americans and English who owned the means of production in the nitrate industry (Bergquist, 1986).

Because nitrates were such a large part of the Chilean economy in the lead-up to both its period of industrialization and the birth of its labor movement, it is useful to understand some of the dynamics present in labor relations within that industry. Therefore, it is appropriate to spend some time discussing the characteristics of the nitrate market, as well as how that impacted management and laborers.

The market for nitrates is characterized by substantial volatility. Demand for nitrates fluctuated significantly in the 19th and 20th centuries, and this made it necessary for producers to respond by increasing or decreasing production quickly by hiring or firing on short notice. Nitrate extraction companies did just that, and extremely high levels of turnover were observed. When laborers were laid off though, they did not stay in the area and wait for an uptick in nitrate demand, they migrated away from the nitrate mines and towards other industries in the South of Chile. This led to a short-term but frequent labor shortage in the nitrate industry (Bergquist, 1986). In effect, the economic flexibilization of Chilean labor had resulted in corresponding geographic flexibilization, a result that did not suit the interests of nitrate producers (Bergquist, 1986).

Managers responded by making it costly for laborers to move out of the area. They changed the payment schedule so that laborers would only be paid once a month, and offered them a line of credit to purchase food, water, and basic household goods throughout the month (Bergquist, 1986). This effectively produced an indentured population through the creation of debt, a phenomenon that has been widely implemented by core countries in peripheral countries (as has been discussed at length in class). In addition to this form of control, nitrate companies increasingly looked to hire men with families, rather than single men, because men with families are much less likely to get involved in labor disputes (Bergquist, 1986). Through these mechanisms, it is clear that managers of nitrate extraction operations were putting pressure on their laborers.

At the same time that the mining industry was developing and gaining economic speed, Chile was being introduced to some of the more revolutionary, leftist ideas developing in Europe at that time. A Chilean by the name of Francisco Bilbao returned to Chile in the late 1840s, having been moved to share the socialist principles that pervaded the European Revolutions with his county people (Alexander, 1962). He started a group called the Society of Equals, which was largely responsible for the founding of mutual aid societies in Chile (Alexander, 1962). These societies were essentially the precursor to unions. While the did offer workers support in approaching management or the government in regards to labor disputes, they offered few other protections (Troncoso, 1928).

Finally, the pace of industrialization began to quicken around this same time. One of the most significant signs of this was the development of a fairly extensive rail system (DeShazo, 1947). In the context of a core/periphery global relationship, it makes sense that the development of this rail system was so important. I argue that Chile’s legacy as a colony remained even after the Spanish left; it had initially been integrated into the global economy as an exporter of raw materials. As was discussed above, this continued to be the most beneficial economic configuration for Chile, especially given its newly-acquired endowment of nitrates.

Furthermore, foreign investment arguably contributed to the maintenance of Chile’s peripheral status in the years after independence. Because foreign investors like the Guggenheim family chose to invest in the production of raw commodities, rather than attempting to develop industrial manufacturing in Chile, they effectively prevented Chile from even having the chance to urbanize and industrialize, because it simply did not have enough capital to pursue those ends on its own. Therefore, it makes sense that Chile would develop a rail system in order to facilitate the export of its raw commodities.

It is important to note though that the railroad was not built by foreign investors who wished to expand the scale of their export businesses, as it was in other peripheral nations. The Chilean government was levying an export tax on nitrates, and consequently its treasury grew immensely in a very short period of time. This allowed the government to expand in scope and begin to fund more expansive public works projects, the most notable of which was the railroad (DeShazo, 1947).Thus there are two primary factors that played a role in the development of Chile’s rail system: a desire to support the export-led growth of the past, and the financial capacity to fund the project as a result of greater tax revenues.

The Development of the Labor Movement: Late 19th Century to Early 20th Century

The development of railroads and the urbanization that came with infrastructural projects resulted in consequences for Chile’s economic situation that extend far beyond its raw commodities market. Employment opportunities in the bureaucracy and as laborers for new government projects leapt forth, and substantial urbanization was observed (DeShazo, 1947), especially given that the working conditions of railroad laborers were considered to be some of the best in the country at that time (Alexander, 1962).

The city of Santiago is a strong example of how rapidly urbanization and industrialization occurred. In just over 30 years, Santiago’s population increased dramatically, and its physical size nearly doubled (DeShazo, 1947). It became fully electrified, complete with an urban railway and electric trams, and the roads were all paved. By 1930, it had opera houses, universities, theaters, libraries, and parks (DeShazo, 1947).

Urbanization’s twin, industrialization was also occurring at the time. DeShazo points out that in addition to providing the capacity for increased exports and fulfilling a precondition for further industrialization, the rail industry also directly stimulated industrialization by promoting a growing market for foundries (1947). Industrialization was also driven by increased demand from the nitrate mining industry. With the capital that they gained from rising prices and expanded mining operations, the capitalists began to purchase both machinery to increase mining efficiency, and raw materials, in order to diversify into manufacturing industries (DeShazo, 1947). It is important to keep in mind that industrial operations were largely owned by wealthy foreigners, and that management chose to hire foreigners for the higher-paid technical positions within the companies (DeShazo, 1947). This effectively cut off Chilean laborers from any possibility of sharing in the economic success that was made possible by industrialization.

Though this transition was generally characterized by moderate to high levels of economic growth, labor disputes began to arise for just this reason. Workers saw that they were working hard, but they were being excluded from the increasing profits of both extraction and manufacturing industries. This issue was exacerbated by inflation that was not matched by wage increases, which left workers worse off in some cases than they had been before industrialization.

In response, more workers began to join the mutual aid societies proposed by Bilbao and the Society of Equals, growing from 13 societies in 1870 to 600 societies with a membership of over 90,000 by 1925 (Troncoso, 1928), and membership extended beyond just industrial workers to incorporate nitrate workers (Alexander, 1962). Strikes also began to take place, the first of which was held by trolley car workers in the late 1880s (Alexander, 1962). The first strike took place among urban laborers because their setting had permitted greater exposure to the socialist ideals that support the act of striking for better working conditions, unlike the nitrate workers, who had yet to receive much knowledge of socialist principles (Bergquist, 1986). The strike was followed by a well-coordinated walkout by traction employees in 1900.

However, the burgeoning labor movement soon ran into serious opposition. Recall that at the time, democracy was functioning poorly in Chile, as those who held economic power also held political power. This left laborers who demonstrated against their managers vulnerable to both economic and political forms of power, as was clearly demonstrated in 1907.

Nitrate workers belonging to a mancomunidade obrera (workers’ brotherhood) went on strike, and hundreds were consequently slain by the military, under the orders of a government that supported the economic interests of the capitalists (Alexander, 1962). Given the conditions that nitrate workers faced, it is unsurprising that they were so militant in their opposition to their treatment at the hands of management as to accept hundreds of casualties. Faced with difficult physical labor, stagnant wages alongside inflation (Alexander, 1962), and the nearly inescapable debt burdens deliberately imposed by their employers (Bergquist 1986), it is clear that workers were struggling.

After the 1907 strike, the labor movement grew significantly. Workers began to perceive and understand the inequity perpetuated by foreign ownership of capital and domestic provision of labor (Bergquist, 1986). This class consciousness, which was truly vital to the success of the Chilean labor movement, was promoted through a variety of channels. Perhaps the most important is the workers’ brotherhoods. Laborers who possessed a higher level of education spent a great amount of time and effort reformulating socialist understandings of capitalism in ways that less educated workers could understand. They talked about how the fichas system ensnared workers in a cycle of debt that was difficult to escape, and they argued that the central root of the fichas problem was the existence of private property in general. They harnessed worker resentment for the fact that profits from nitrate extraction did not stay in the country in order to further develop it or improve the quality of life for its citizens, in order to make the case that social classes should be abolished and replaced by worker-controlled cooperative production (Bergquist, 1986).

This economic philosophy was supported by nationalist rhetoric that emphasized the necessity of Chilean control of the means of production for Chilean benefit, rather than Western control of Chilean labor for the benefit of foreigners (Bergquist, 1986). In this way, the brotherhoods served as a location in which (re)education could take place. The second channel through which information both on socialist ideology and events within the nitrate mines was spread is the working-class press that was operated by workers. This press helped to form and maintain a complex network of individuals within the nitrate mines, a crucial strength of the labor movement in the North (Bergquist, 1986).

I would argue that it is very important that these two means of spreading alternative ideology should not be underestimated. In my opinion, labor movements are dependent on self-empowerment, and the Chilean nitrate workers’ ability to empower their own communities through the sharing of knowledge is what provided the movement with strength. Indeed, these communities engaged in a variety of activities that specifically sought to undermine the dominant cultural values of Chilean society in order to further support community empowerment (Bergquist, 1986). As was argued in the previous section, workers certainly held the resentment and frustration that is necessary to drive people to action, but they lacked a framework on which to hang their concerns and their new demands from management. Upon the introduction of brotherhoods and through community education, workers were endowed with the necessary framework.

Meanwhile, laborers in urban centers were working on their own struggle. Maritime laborers were shifting to the same ideology that now pervaded the working class in the North, and labor organizations were being formed too. Beginning in 1917, all maritime workers were required to register for and possess a photo identification card in order to work in shipping yards. The laborers saw this as an attempt by the still capitalist-controlled government to identify and blacklist individuals who were heavily involved in the efforts to organize (DeShazo, 1947). If this was indeed the intent, the plan backfired phenomenally; maritime workers went on a strike that had to be broken by force, and that ultimately served only to further galvanize the need for unionization in the minds of laborers (DeShazo, 1947).

The capitalists quickly became troubled by the emerging labor movement. They too recognized the threat of a tightly-knit, well-informed community to the type of workforce that they desired. They responded by relocating nitrate workers to jobs in the public or agricultural sectors (Bergquist, 1986). This served to fragment the nitrate workers’ communities. However, this also unsettled agricultural managers. They now became concerned that these ex-nitrate employees would “contaminate” their workers with the socialist ideas that had not yet made their way into the rural South (Bergquist, 1986). When this solution proved to be insufficient to quell Chilean frustration with the socioeconomic stratification that resulted from their labor arrangements and the corresponding imbalance of political power, the capitalists escalated their actions and began to employ spies, record blacklists, and even resorted to a private militia to bring workers back into line (Bergquist, 1986).

Even in the face of these harsh repressive tactics, and the political force deployed on behalf of capitalist interests, laborers continued to push forward with a socialist agenda, and they slowly but surely began to gain ground. In the late 1910s a unionization drive was undertaken in many industries in Santiago and Valparaíso, and was quite successful (DeShazo, 1947). A substantial portion of new membership was due to increasing rates of participation in the labor force among women, who were quite likely to join unions (DeShazo, 1947).

Among the unions that grew in strength during this period, the Federación de Zapateros y Aparadoroas (a union of footwear workers) is arguably the most important. This union of nearly 1,000 workers across 45 companies went to management to demand a nine-hour workday, higher wages, a standardized minimum wage across the industry, cleaner shops, and the recognition of a union delegate (DeShazo, 1947). The factory owners responded with what they expected would be a strong, effective policy – they locked the worker out. As was the case in the nitrate industry, this heavy-handed response only served to reinforce the importance of collective bargaining, and membership in the FZA tripled to 3,000 (DeShazo, 1947).

Acknowledging the failure of their ill-conceived tactic, the factory owners re-opened, but workers remained on strike until their factory signed on to the terms outlined above. Finally, after 128 days of strike, the last holdout signed on to the agreement. This was the biggest labor victory thus far in Chile’s history.

Corresponding increases in political power followed suit. Unions became a voting bloc, and politicians recognized how important it was to serve the interests of the working class (DeShazo, 1947). In 1920, Arturo Alessandri was elected to the presidency. Alessandri was the first Chilean President to come from a middle-class background, and though he wished to affect change that would benefit the working class, his progress was hampered by a still aristocratic congress (Alexander, 1962). He was ousted by a military coup in 1924, but returned to office after only three months, whereupon he helped to draft a law that granted unions legal recognition, the right to collectively bargain, the right to bargain on behalf of individuals when so requested, the right to provide members with insurance and funeral benefits, and the right to register trademarks (Troncoso, 1928). This victory was quite significant for the labor movement – they now had both legal recognition and an enshrined right to collectively bargain.

The Great Depression in the United States had significant secondary impacts though much of the global economy, because it is a major buyer of raw materials from the peripheral countries, and because it engages in substantial amounts of trade with other core countries. Chile’s economy was certainly impacted by the dramatically reduced demand, and during this time laborers’ power relative to the power of management slipped (Alexander, 1962). However, the economy recovered, and was driven even higher by World War II. The war and post-war decades were characterized by strongly leftist political and economic policies. Socialist and Communist candidates dominated much of the political sphere, and laborer made many gains in its relation to management (Alexander, 1962).

Conclusion

Chilean labor appears to have been remarkably effective in organizing itself, once the catalyst of socialist modes of thinking were introduced to the working class. The labor relation in Chile remained quite colonial in nature even after Chile won its independence in name, with capital being controlled by wealthy foreigners and labor being supplied by domestic individuals. The social dynamics of Chile reflected this rift; foreigners adopted a rather paternalistic attitude in dealing with Chileans. Furthermore, the political structure embodied the core/periphery relationship, as politicians felt compelled to respond primarily to the interests of the capitalists, who held much of the economic power.

Once Chilean laborers found a framework in which to organize their discontent, they empowered their own communities through collectives and disruption of the existing social structure with tools such as community-run media. This allowed them to rapidly and effectively gain the power to influence labor relations, and ultimately alter all three spheres – social, political, and economic – of relation in Chile for much of the 20th century. The Chilean story can be taken as an instructive and inspiring example of how a community is capable of leveraging its own oppression in a way that permits it to make gains.