Chilean success defies Bush doctrine

October 10, 2005

President Bush uses Chile as a shining example of political and economic freedom. The free market economy, introduced by Pinochet, is said to have pulled the country out of the economic malaise it experienced in the 1970s. However, Dutch researcher Lucian Peppelenbos discovered that centuries-old paternalistic relationships form the basis of this success.

In the 1970s Chile suffered food shortages and a brutal coup. Yet thirty years later it is one of the top emerging economies in the world. Lucian Peppelenbos demonstrated that the Chilean success is based on centuries-old paternalistic relationships which have persisted within the free market. Although Pinochet replaced the welfare state with a free market economy, he was a patriarchal statesman who gave his citizens little room to make their own choices.

This hierarchical organisational structure made the economy less efficient and the country less democratic, yet it did result in more security and solidarity within society. As a result of this opportunities arose for small businesses and unskilled labourers, who would not have stood a chance within our individualistic, goal-driven society.

Patronised tomatoes

This is apparent from the showcase examples of the Chilean neo-liberal 'export miracle', the tomato-processing industry. The industry draws up a one-sided production contract, takes almost all of the operational decisions and compels the growers to provide a total package of products and services.

The growers scarcely have any entrepreneurial freedom, are not organised, and defend their interests by cultivating friendly relationships with the personnel from the industry and where possible by swindling. This patron-client model leads to considerable inefficiency in the chain. Yet at the same time it ensures that small farmers, under the patronage of a large processor, have access to the world market.

As a consultant, Peppelenbos tried to introduce cooperation in the chain. Yet his efforts were continuously confounded by a critical system characteristic of the existing organisational structure - the need for personal leadership. Grassroots initiatives were fruitful, as long as these were directed by the consultant in cooperation with the top of the organisation. Yet as soon as the consultant disappeared from the scene, the initiative collapsed like a pack of cards.
Lucian Peppelenbos' research was funded by WOTRO.

Netherlands Organization for Scientific Research

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