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The New Politics of Inequality in Latin AmericaRethinking Participation and Representation$

Douglas A. Chalmers, Carlos M. Vilas, Katherine Hite, Scott B. Martin, Kerianne Piester, and Monique Segarra

Print publication date: 1997

Print ISBN-13: 9780198781837

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198781830.001.0001

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Rethinking Economic Alternatives: Left Parties and the Articulation of Popular Demands in Chile and Peru

Rethinking Economic Alternatives: Left Parties and the Articulation of Popular Demands in Chile and Peru

Chapter:
(p.313) 13 Rethinking Economic Alternatives: Left Parties and the Articulation of Popular Demands in Chile and Peru
Source:
The New Politics of Inequality in Latin America
Author(s):

Kenneth M. Roberts

Publisher:
Oxford University Press
DOI:10.1093/0198781830.003.0013

Abstract and Keywords

How have left parties responded to the challenges of neo‐liberalism, the debt crisis, and the decline of socialist models, and how have they adapted their economic projects? In Peru, the left went from serious national contender in the 1980s to political also‐ran in the 1990s under Fujimori's neo‐liberal reforms, while the Chilean left was able to return to power in the 1990s with a moderate economic programme following Pinochet's authoritarian neo‐liberal transformation of that country. This comparative examination of left parties’ responses in Chile and Peru argues that structural changes in capitalism have helped consolidate social democratic reformism on the left even as two structural constraints undermine the possibilities for redistributive social democratic reforms: namely, (1) the internationalization of economic competition and capital markets, and (2) the structural weakness of labour and social fragmentation of civil society.

Keywords:   civil society, internationalization, labour movement, neo‐liberalism, (left‐wing) political parties, social democracy

Few political actors have been as profoundly challenged by Latin America's wave of neoliberalism as left‐wing parties and political movements. The neoliberal ascendance in the 1980s combined with the debt crisis and the collapse of empirical socialist models to wreak havoc with the left's traditional conceptions of state‐ led development. After long emphasizing the role of the state as investor, producer, protector, and redistributive agent, the left was placed on the defensive when fiscal crises generated pressure to reduce the size and scope of the developmentalist state.

How have left parties responded to these challenges, and how have they adapted their economic and political projects to the exigencies of an era dominated by neoliberalism? In recent years, the Latin American left has demonstrated a fertile capacity for self‐critical reassessment and ‘renovation’, at least in the spheres of politics and ideology. Experience with military coups, authoritarian repression, and redemocratization encouraged leftist intellectual and political leaders to reconsider the costs, benefits, and risks of revolutionary strategies, while simultaneously embracing democratic institutions and reformist options that many previously disparaged. Indeed, the ‘revaluation’ of political democracy spawned an avalanche of literature and a widespread reconceptualization of socialism as the gradual ‘deepening’ or extension of democratic practices into new domains of social interaction.1

However, ‘new thinking’ in the sphere of economics tended to lag behind in this process of ideological redefinition. It generally received less attention than the question of democracy, and fell considerably short of a new consensus on the main features—or even the rough outlines—of a progressive alternative to neoliberalism. While some pioneers linked the renovation of political thought to a critique of state‐centric socialism from the start (Petkoff 1976), more generalized reassessment of economic principles was considerably delayed.

(p.314) Although the preoccupation with democratic transitions was understandable in the 1980s, the relative neglect of economic issues occurred at the precise moment that Latin America plunged into its deepest economic crisis in half a century. As such, this neglect undermined the capacity of the left to pose a viable and compelling alternative to neoliberal structural adjustments. Nevertheless, as inequalities were exacerbated and living standards fell across the region, and as the collapse of the Soviet bloc obliterated bureaucratic collectivism as a development alternative, the Latin American left eventually began a more systematic reassessment of economic strategies (Flisfisch 1991).

One of the most prevalent responses—and one which paralleled the political orientation of the aforementioned process of ideological renovation—was to propose some type of social democratic reformism combining market competition with state regulation and redistribution (Castañeda 1993b; Bresser Pereira et al. 1993; Vellinga 1993). Is social democracy, then, the left's most viable alternative to neoliberalism in contemporary Latin America? If so, what forms will it take in the Latin American context, and what opportunities and constraints does it face? This study addresses these questions, first, through an analysis of the different tendencies that can be found within the increasingly heterogeneous political space of the Latin American left. It then examines the social democratic option, arguing that it may have feasibility advantages over other alternatives, since it has the potential to garner multi‐class political support and neutralize business opposition. Nevertheless, the social democratic option faces serious constraints of its own in Latin America. These constraints are predominantly structural in nature, taking two basic forms: (1) the internationalization of economic competition and capital markets, and (2) the structural weakness of labor and the fragmentation of civil society in the social sphere. While these constraints may not preclude social democratic experiments in Latin America, they will inevitably shape their prospects and content, giving local variants of ‘social democracy’ distinctive features which are likely to diverge from classical European models.

The prospects for social democracy are analyzed through case‐studies of the left in Peru and Chile, allowing a comparison of political dynamics before and after neoliberal adjustments. In Peru, the left was a serious contender for political power during the national crisis of the 1980s, before the neoliberal adjustment of President Fujimori. In Chile, the Socialist Party returned to political importance in the 1990s in the aftermath of the military regime's neoliberal revolution. The comparison suggests that neoliberal transformation may help consolidate a social democratic option within the left, yet limit the possibilities for social democratic reforms on the national political stage.

This emphasis on structural conditions represents a sharp departure from the predominant theoretical trends in the study of Latin American politics. While the classic literature on authoritarianism in the 1970s highlighted structural factors (O'Donnell 1973; Collier 1979), more recent scholarship on democratization has largely ignored them, while emphasizing the ‘possibilism’ of statesmanship and (p.315) elite accommodation (O'Donnell and Schmitter 1986; Higley and Gunther 1992). Although political voluntarism may expand the boundaries of lo posible, this study suggests that reformist boundaries in contemporary Latin America are more narrow and confining than those which prevailed during the era of social democratic ascendance in Western Europe. As such, caution should be exercised when transplanting the social democratic label to the progressive and reformist alternatives that are identifiable on the Latin American horizon.

Change and Continuity in the Latin American Left

Social democracy does not have the deep historical roots in Latin America that it possesses in Western Europe. As Aricó has noted, progressive political space in Latin America has traditionally been dominated by various strains of Leninism or populism (Aricó in Calderón et al. 1992). Although social democratic forces have developed rapidly in the region since the 1970s, it is probably premature to claim that they have established a hegemonic position within the left; instead, they have been a major contributor to the growing heterogeneity of the Latin American left.2

Within this pluralism, four principal tendencies can be identified. The first is a fundamentalist orientation which holds fast to one of several variants of Marxist‐ Leninist orthodoxy, including a commitment to the revolutionary conquest of state power as a precondition for the collectivization of property and production. This orientation rejects the winds of ideological renovation which have influenced the left in recent years, and manifests high levels of continuity with historical identities and political objectives. The most significant and extreme example of this tendency is the Maoist fundamentalism of Sendero Luminoso in Peru.

A second orientation could be characterized as a form of class‐based oppositional populism. The hallmark of this orientation is the encouragement of confrontational forms of popular mobilization tied to the immediate particularistic demands of subaltern groups. This mobilization is economistic and particularistic rather than ideological, and is primarily a tactic of political opposition, with little capacity to be transformed into a national‐level governing alternative. In some cases, this orientation is found among parties—such as the Chilean Communist Party—which have had their ideological moorings shaken by the collapse of communism, but have been unable to reconstruct political identities around new transformative projects. Instead, they ‘bunker down’ among core social constituencies —organized labor, urban popular sectors, the peasantry, etc.—while emphasizing class conflict and immediate redistributive demands. In the process, these parties retreat from the teleological visions of socialism which prevailed in the past.

A third orientation leads to a radical democratic project. While retaining a critique (p.316) of capitalist inequalities, it does not attribute social domination exclusively to capitalist relations of production or class divisions. Instead, it identifies class exploitation as one of the multiple forms of social, economic, political, or cultural domination. The radical democratic project thus enjoins the struggle to transform capitalism with struggles against patriarchy, racial and ethnic discrimination, environmental degradation, and other forms of exploitation or subjugation. This orientation emphasizes the role of grassroots organizations as popular democratic subjects and agents of social and economic transformation. The primary locus of political initiative thus shifts from the state to civil society, where base‐level protagonism extends the democratic norms of equality and popular sovereignty from the political sphere to the terrain of social, economic, and cultural relations. The traditional notion of socialism as an alternative mode of production may thus be diluted or reconceptualized as the extension or deepening of democracy. This orientation was highly influential in the Brazilian Workers' Party (PT) during its formative years, and found considerable resonance in less orthodox sectors of the Peruvian left in the 1980s.

The fourth orientation has a social democratic character, and although it shares important features in common with the radical democratic approach, it also manifests subtle distinctions. Its primary political objectives are to transform the left from an oppositional force into a serious and viable governing alternative within the framework of pluralistic democracy, and to use state power as an instrument for social and economic reform. The social democratic orientation stresses an activist state which can ‘govern’ market behavior through regulatory, industrial, and lending policies, and redistribute income through taxation and social policies. In general, it aims to modify capitalist development to allow for more equitable and sustainable patterns of growth. It also seeks to ameliorate class conflict by incorporating organized labor into institutionalized channels for political representation and social concertation. Generally wary of confrontational forms of social mobilization, the social democratic approach opts for technocratic pragmatism over ideology, and multi‐class, catch‐all electoral movements over class‐based forms of organization. Expressions of this orientation can be found in sectors of the Chilean Socialist Party, although the party's contemporary positions fall short of the reformist and redistributive standards of traditional social democracy, as will be discussed below. The leadership of the Brazilian PT may also be moving in a social democratic direction as the party competes for political power at the national level.

Clearly, the third and fourth orientations are both manifestations of the new emphasis on political democracy within the left, and the distinctions between them can be easily blurred, especially in parties that are internally heterogeneous. Both correspond to an era when the teleological certainty of socialism has faded from view, and more open‐ended political and economic alternatives have replaced predetermined socialist models (Garretón 1987: 32–3). While the third orientation maintains a vision of grassroots empowerment and radical social transformation, (p.317) it is inherently difficult to translate into alternative political and economic institutions at the national level. As Claus Offe has argued, dispersed and decentralized grassroots movements rarely exhibit a comprehensive vision or the institutional design for an alternative social order, much less an integrative, national‐level transformative strategy.3

In contrast, the social democratic option sacrifices radical change on the altar of political realism, moderating its objectives—and ideals4—in order to ameliorate opposition and enhance its viability as a governing alternative. But if the moderation and pragmatism of the social democratic option enhance its political feasibility, they do not necessarily enable it to escape the structural constraints which differentiate the contemporary Latin American context from that of Western Europe when social democracy rose to prominence during the Great Depression and the early post‐war era. Any future social democratic option in Latin America will be shaped by these constraints, and forced to develop innovative strategies to overcome (or at least ameliorate) them.

Economic and Social Constraints to Social Democracy

Perhaps the most fundamental constraint upon a social democratic project in Latin America—or anywhere else, for that matter—is the increasing internationalization of capital markets and productive activities. As Przeworski has demonstrated, there is an inherent contradiction between the process by which capital is accumulated and reproduced on an international level, and the domestic process by which social democratic forms of class compromise are constructed (Przeworski 1981). Even in the European context where social democracy developed and thrived, it came under increasing pressure in the 1970s as national economies became more thoroughly intertwined. The enhanced competition of a global market‐place can undermine social welfare provisions which impose higher taxes or labor costs on firms without clearly increasing productivity (Pfaller et al. 1991). Corporate downsizing may thus be complemented by pressures for welfare down‐ sizing as governments and firms try to cut the costs of extra‐economic objectives.

The effects of international competition are compounded by the growing international mobility of capital. Disinvestment has always been a weapon of capitalists confronted with unfavorable government policies, but this ‘exit’ option has been considerably eased with the transnationalization and liberalization of capital markets, which facilitate capital flight and overseas investment (Goodman and Pauly 1993). As patterns of investment and financial speculation become increasingly (p.318) transnational, capitalists have ever greater leverage to force national governments to adopt pro‐business policies and to punish those which do not.5 In short, increased international capital flows exacerbate the structural dependence of the state on capital, modify the power balance between labor and capital, and thus complicate or skew efforts to institutionalize class compromise within the domestic polity.

This problem is especially acute in the context of dependent capitalism in Latin America, where important components of private capital are in the hands of highly mobile transnational corporations or domestic firms with deep ties to foreign capital. Even in Europe, the internationalization of capital markets has undercut traditional sovereign tools of national economic management which were effectively used by social democratic governments in the past. As the early French experience under Mitterrand showed, countries whose fiscal, monetary, or exchange rate policies diverge from international norms are either forced into line or plunged into crisis by currency speculation, capital flight, and liquidity pressures.6 In the nations under investigation here—Chile and Peru—the plight of Salvador Allende and Alan García provide ample evidence of the domestic and international economic pressures which can suffocate the plans of reformist governments that transgress international norms.

These economic pressures pose a fundamental political constraint upon any left‐wing project which leaves important production and investment decisions in private hands; in order to be economically (and, therefore, politically) viable, the planning, regulatory, and redistributive policies of the state will have to be not only compatible but functional to the process of capital accumulation in the private sector. This is not a novel constraint, nor is it unique to Latin America; social democracy has never been imposed against the interests of capital, as it has always relied upon some type of compromise or partnership with capitalists. The point is that this political constraint has been aggravated in the contemporary period by an internationalized economic order in which the behavior of capitalists is less and less bound by purely domestic class relations and power balances. No matter how strong a political majority a social democratic option musters, it cannot compel capitalists to fulfill their entrepreneurial function in the domestic economy. It is no small irony, then, that Latin American leftists have embraced the social democratic option at a time when it is on the political defensive in its European homeland. While European socialist and social democratic parties have continued to have electoral success in some contexts, they have generally done so by rearranging their political constituencies, articulating new communitarian and libertarian concerns, and prioritizing market efficiency over the traditional emphases on class‐based (p.319) redistributive policies and the Keynesian welfare state (Kitschelt 1994). If the social democratic policy orientation is no longer what it was in most of Western Europe, it is even less likely that Latin American societies will be able to approach traditional social democratic standards for redistributive reform and market governance.

Given the exit option of capitalists and their structural advantages over labor, scholars have argued that social democracy in Latin America requires either that capital secure a hegemonic position (Cammack in Vellinga 1993), or that it be incorporated into an East Asian–style partnership with the state to promote an export‐ oriented industrial policy (Castañeda 1993b). It may be true, as Cammack suggests, that only a powerful capitalist class will be secure enough in its economic and political position to view redistributive reforms as an asset to hegemony rather than an intrinsic threat to the social order. The problem, of course, is that a capitalist class which is too dominant may perceive no need for redistributive reforms, and be capable of vetoing them when they are demanded by others. Clearly, then, social democracy requires a powerful labor or popular movement as well to generate political pressure for redistribution; the dilemma is that popular forces must be strong enough to create a balance of power conducive to class compromise, without so threatening capital as to encourage the exit option or its ultimate recourse to coercive methods of domination. The historical record provides few, if any, enduring examples of this delicate balance of forces in the Latin American context.

This issue highlights the second broad structural constraint to social democracy in the Latin American context—the relative weakness of organized labor and the social fragmentation of the popular sectors. If the industrial proletariat in Western Europe never achieved the majoritarian status that early Marxists anticipated (Przeworski 1985, ch. 1), it nevertheless comprised a far higher percentage of the population (over 40 per cent of the work‐force in most of northern Europe during the heyday of social democracy) than it ever has in Latin America. European social democracy emerged within a proletarian subculture, and its success was closely tied to the political strength of large, centrally organized working‐class movements with organic linkages to the partisan left. These structural and organizational features were also central to the establishment of neocorporatist patterns of interest intermediation, with their characteristic forms of tripartite bargaining and institutionalized class compromise (Korpi 1983). Not surprisingly, structural changes in the European economy which have increased social heterogeneity and diminished the relative weight of the working class have coincided with a weakening of social democracy in some of its traditional European bastions.7

In the Latin American context, the industrial proletariat remains a small minority within the working population. Even in relatively developed Chile, employment (p.320) in mining and industry comprised less than 19 per cent of the work‐force in 1989 (Díaz 1989: 30). The corresponding figure in Peru was only 13 per cent (Perú: Compendio Estadístico 1992: 574). Unionization rates are also far lower than in European social democratic societies; even with the structural shift toward less unionized service sectors, Germany retained unionization rates over 38 per cent in the early 1990s, while Sweden boasted more than 80 per cent. In Peru, the 1980s economic crisis reduced unionization levels from 18 per cent of the work‐force to only 12 per cent in 1991. In Chile, unionization levels fell from the very high 32.3 per cent achieved under Allende to only 8.5 per cent in 1985 under Pinochet, before recuperating partially to 15.4 per cent under the new democratic regime in 1991.8

Furthermore, labor movements in Latin America are often fragmented rather than united in centralized and broadly representative peak associations. Although lower‐class or ‘popular sectors’ represent a social majority in most Latin American societies, their structural heterogeneity militates against class‐conscious collective action in highly segmented labor markets. Workers in formal industries—often a relatively privileged sector—may have few apparent interests in common with workers in the informal sector, who generally pursue individualist strategies for survival and lack the workplace socialization experiences that are conducive to collective action. The provision of integrative political direction to such fragmented working‐ and lower‐class sectors is a sine qua non for the transformation of the popular social majority into a political majority capable of sustaining a social democratic project. This involves a complex process of interest articulation and identity construction across diverse social sectors; although overarching labor federations or national popular movement centrals may help aggregate interests in civil society and channel them into the political arena, party organizations find it difficult to effectively represent such heterogeneous interests, and rarely come close to capturing the power potential which inheres in their numerical majority.

How, then, have social democratic projects been shaped by these constraints in Latin America? As the following case‐studies suggest, left parties have responded in very different ways to the challenges they face. In Chile, a social democratic option triumphed within the left during a period of democratic transition, but has struggled to devise an alternative to the neoliberal economic model inherited from the military regime of Gen. Augusto Pinochet. In contrast, Peru's legal left fragmented under the pressure of trying to craft a progressive response to a deepening national crisis in the 1980s. Trapped between the violent fundamentalist insurgency of the Sendero Luminoso guerrilla movement and a profound fiscal crisis of a populist‐developmentalist state, Peru's legal left was unable to construct a viable social democratic (or any type of socialist) option; indeed, the self‐destruction of the democratic left cleaned the slate for the eventual imposition of neoliberalism (p.321) under the autocratic direction of Alberto Fujimori. It is to this political defeat that we will first turn.

The Peruvian Crisis and the Dissolution of the Leftist Alternative

Peru provides a sobering case‐study of the capacity of the left to respond to the debt crisis, economic recession, and hyperinflation with a viable alternative to neoliberal shock programs. In the 1980s Peru combined an exceptionally severe economic crisis and a brutal guerrilla insurgency with a democratic left that was among the strongest in the region. The ultimate failure of the Izquierda Unida (IU) electoral coalition to capitalize politically on the economic crisis by constructing a governmental alternative is instructive for an understanding of the challenges faced by reformist options in contemporary Latin America.

Throughout most of the 1980s, the Peruvian left seemed to have greater potential to gain governmental power through elections than any other in the region. The partisan left rode a groundswell of popular mobilization in the 1960s and 1970s into political prominence, and actually benefited from the military regime of Gen. Juan Velasco Alvarado, whose economic reforms between 1968 and 1975 were accompanied by new organizational efforts among workers, campesinos, and urban popular sectors.

Whereas the left in neighboring countries was decimated by repressive military dictatorships, Peru's left‐wing parties expanded their bases as the Velasco regime failed to consolidate corporatist controls over the popular organizations it helped to mobilize (Stephens 1983: 57–93; Stepan 1978). Although highly fragmented between competing Leninist, Maoist, Trotskyist, Guevarist, and socialist tendencies, the partisan left helped coordinate a series of general strikes and popular protests in 1977–8 which rocked the more conservative military regime of Gen. Francisco Morales Bermúdez. After a gradual transition to civilian rule in 1980, six parties founded the IU, which captured the mayorship of Lima for its coalition president, Alfonso Barrantes, in 1983. The IU quickly consolidated a position as the second largest electoral force in the nation after APRA; it consistently earned between a quarter and a third of the vote in municipal and national elections, and swept dozens of mayorships in the impoverished Andean highlands and sprawling urban popular communities.9 The IU received strong support from Peru's largest labor confederation, the Confederación General de Trabajadores del Peru (CGTP), as well as from peasant associations and community organizations in urban lower‐class districts. A deepening economic crisis and spiraling political violence under the administrations of the conservative Fernando Belaunde Terry from 1980 to 1985 (p.322) and the populist Aprista Alan García from 1985 to 1990 made the IU the early front‐ runner for the 1990 elections.10

However, the coalition was unable to resolve its own internal disputes or craft a compelling political and economic alternative. From the outset the political viability of the IU was undermined by its heterogeneity and by the lack of internal consensus over basic objectives and strategies. The factionalism of the IU reflected competing international loyalties and ideological identities, as well as basic disagreements over the compatibility between revolutionary ideals and institutionalized democratic participation. The coherence of the IU was also undermined by intra‐alliance competition, which was exacerbated by the tendency for individual parties to be organized in a sectarian manner around the leadership of a prominent personality.

The coalition's radical wing was anchored by the two organizations with the most electoral appeal and the deepest roots in popular movements, the new‐left Partido Unificado Mariateguista (PUM) and the Maoist alliance UNIR. The radical wing generally adopted an instrumentalist approach to the IU's participation in the fragile new democratic regime, seeing it as an arena in which to accumulate forces for an eventual process of revolutionary transformation.11 The IU's more moderate sectors lined up behind the leadership of Barrantes, who believed the necessary social and economic reforms could be achieved within the institutional framework of the democratic regime. Although it was very weak organizationally, the moderate tendency had the potential support of political independents who were attracted by the personal appeal of Barrantes.

Beyond ideological differences, the dominant parties in the IU clashed with Barrantes over a number of tactical issues, including his political flirtations with APRA and his unwillingness to adopt a staunch opposition line to the Belaunde and García administrations. Most important, perhaps, was their rejection of his personalistic leadership style, which they considered too independent of the IU's constituent parties and popular organizations. The PUM, in particular, feared that Barrantes embodied a new expression of populism which prioritized electoral victories and governmental office over the long‐term objective of building base‐ level organizations as the foundation for a revolutionary project.12

(p.323) After several years of internecine conflict, Barrantes and his followers provoked a rupture of the IU following the coalition's first congress in 1989,13 forcing the left to run two separate tickets in the 1989 municipal and 1990 national elections. Meanwhile, García's populist‐heterodox economic program collapsed after two years of euphoric but unsustainable expansion, causing the economy to shrink more than 25 per cent and inflation to reach four‐digit levels the last three years of his administration.14 The political right—considered moribund after Belaunde's disastrous administration and an abysmal electoral performance in 1985—was rejuvenated under the new leadership of Mario Vargas Llosa, who pledged a severe neoliberal shock program to stabilize the economy.

In theory, the social costs attendant to Vargas Llosa's promised shock therapy and his open alliance with traditional political and economic elites should have given impetus to a progressive alternative. The IU, in fact, under the direction of a programmatic task force led by the highly respected economist Javier Iguíñiz, made a serious effort to devise an economic project that would be an alternative both to neoliberalism and to the erratic populism of APRA. The centerpiece of this program was a strategy to stabilize the economy and control inflation without a deep recession or a reduction of living standards, as shock therapy would entail. Indeed, the IU proposed a selective reactivation of the economy, centered on the domestic agricultural sector and basic consumer goods industries, in harmony with anti‐ inflationary objectives.

For the IU, Peru's economic crisis was not attributable to excessive state intervention, as neoliberal critics alleged. Instead, it was indicative of a state which had been captured by private interests and weakened in its capacity to pursue collective national objectives (Iguíñiz 1991: 18–24). Therefore, in contrast to neoliberalism, the IU's prescription was not to privatize economic activity but to deprivatize the state and restore its public character. This involved, first and foremost, tax reform to correct the Peruvian state's notorious inability to extract resources from the private sector, thus addressing the fiscal crisis through revenue gains rather than painful cuts in public services or the inflationary printing of money. It also called for state subsidies and credits to be withdrawn from favored private monopolies and redirected to small and medium‐sized producers in domestic agriculture and consumer goods industries. Wage indexation and subsidies for the popular organizations of the urban poor would help to sustain aggregate demand for economic reactivation while maintaining popular consumption levels. The IU also promised to protect job security, establish workers' right to participate in enterprise management, defend the property rights of indigenous communities, and transfer the (p.324) management of public enterprises to regional governments in order to democratize and decentralize economic power.15

The strategy of the pro‐Barrantes sector of the left, grouped together in the Izquierda Socialista (IS), included many of the same features, including reforms to eliminate tax exemptions and government subsidies for the private sector. However, the gradualist approach to economic stabilization advocated by the IS was distinguished by two major emphases (Gamero 1990: 9–12). First, the centerpiece of its anti‐inflation plan was a ‘national accord’ between labor, capital, and the state to create a consensus on wages and prices. This accommodative stance was designed to elicit the cooperation of the private sector as well as organized labor in a national strategy for economic reactivation. Second, Barrantes's campaign—in keeping with his populist image—gave high priority to a 1.6 billion dollar program to provide a basic food ‘basket’ to the neediest sectors of Peruvian society, including milk for young children and expectant mothers, school lunches, and direct assistance to community soup kitchens. Although the IS pledged a ‘tax shock’ on the elite as an alternative to neoliberal shock treatment, Barrantes's commitment to an anti‐inflationary program was called into question by assertions that tough measures would have to be delayed until after economic recuperation.16

Clearly, neither the IU nor the IS envisioned the type of socialist project attempted by the Allende government in Chile in the early 1970s, with radical changes in property structures and state–market relations. Both coalitions proposed reformist programs that would maintain a substantial state role within an essentially mixed economy. Even the more radical IU tried to reassure skeptics that it was opposed neither to private property nor to foreign investment, so long as they operated under clearly defined rules and were oriented toward productive rather than speculative activities.17 Nevertheless, the essence of the IU program was to dramatically shift the burdens of economic adjustment from subaltern sectors to the middle and upper classes, while democratizing political and economic structures by incorporating base‐level organizations into decision‐making procedures and promoting popular, self‐managed institutions.18 Such a project would have posed patent challenges to the traditional dominance of propertied sectors, whose collaboration was essential, given their control over financial and investment resources that a bankrupt state and poverty‐stricken popular organizations could hardly hope to match.

In short, the IU could not escape the structural dependence of the Peruvian state on capital, making the economic viability of its project heavily contingent upon the cooperation of the private sector. Leaders of the IU argued that a strong state (p.325) establishing clearly defined rules of the game could earn the confidence of capital even while pursuing a redistributive agenda. In particular, they believed they could induce the private sector to cooperate by establishing the state as its protector against the insecurities of market competition and economic contraction that would accompany a neoliberal shock (Iguíñiz 1991: 19–20). As such, they hoped that economic self‐interest could induce capitalists to participate in a national project for economic reactivation under the leadership of political forces identified with the popular sectors.

However plausible these hopes might have been in theory, in practice most Peruvian capitalists threw their political support to Vargas Llosa, despite the potential risks of the market‐place. Indeed, neither the IU nor the IS came close to being able to test the economic viability of their plans; both coalitions received crushing blows in the 1990 elections, as voters delivered their verdict on the political viability of a divided left. Barrantes—the erstwhile front‐runner—finished in fifth place in the presidential race with a dismal 4 per cent of the vote after being the central protagonist in the left's division, while IU candidate Henry Pease did little better with 7 per cent. Although the electorate soundly rejected Vargas Llosa's neoliberal project, for an alternative they turned not to the left but to an independent and ill‐defined political novice, Alberto Fujimori, little knowing that he would impose a neoliberal shock of his own upon taking office. The IU subsequently unraveled, and by 1993 the left had even lost most of the municipal governments that it held during the 1980s.

Ultimately, the Peruvian left was defeated not so much by the inevitability of neoliberalism—which a substantial majority of the electorate clearly rejected in 1990—as by its own inability to construct political foundations for an alternative project. Indeed, the profound crisis of the Peruvian social order, far from strengthening the left, undermined its prospects in two fundamental ways.19 First, it exerted a polarizing effect upon the IU and weakened its political coherence, as the coalition's radical and moderate wings adopted very different responses to the economic crisis and the challenge of Sendero Luminoso. Barrantes and the moderates, fearing social disintegration and civil war, believed it was necessary to buttress the democratic regime—whatever its limitations—through a national accord involving multilateral social and political pacts. Their de‐emphasis of radical social and economic change corresponded with their belief that consensual politics were required to dampen social conflict and overcome the national crisis.

In contrast, the PUM and other radical sectors interpreted the deepening crisis as visible evidence of the regime's failure and exhaustion. Attempts to salvage the regime or seek ephemeral power within it were doomed to failure;20 the only viable strategy, they believed, was to construct new organs of popular power from (p.326) below as the foundation for a revolutionary alternative both to representative democracy and to the sectarian militarism of Sendero Luminoso. The Senderista insurgency merely compounded this polarization in the legal left; if it drove the moderates toward the political center to distinguish themselves from the insurgents, it also exerted a radicalizing effect by competing at the base level with popular organizations linked to groups like the PUM. Given Sendero's relentless advance in the 1980s, the PUM feared that the legal left's adherence to the crumbling façade of institutional politics would cause it to relinquish revolutionary terrain entirely to the minions of Abimael Guzmán. This ‘fundamentalist backlash’ from radical sectors of the IU strengthened as Barrantes and his followers laid the groundwork for the political compromises that would be necessary to attain institutional power.21 Believing these institutions to be an empty shell, far removed from the real loci of political and economic power in Peruvian society, the radicals feared the left would be destroyed if it took office behind a personalist figure who lacked the organizational force required for a genuine transformative project.

In short, the crisis in Peru was such that it polarized the legal left and made it difficult for a coherent social democratic project to congeal within the IU. It encouraged the IU's dominant parties and sectors of its popular bases to explore revolutionary alternatives to established institutions. More moderate tendencies were left suspended in mid‐air, without the organic backing of political parties or their affiliated social movements. Even the IS, whose ideological orientation was ostensibly closer to that of social democracy, had its project heavily tinged with the populist style and asistencialismo of Barrantes.

The economic crisis also hurt the left's prospects by eroding the structural conditions for class‐based collective action and political identities in Peru, thus weakening and fragmenting the social base of the IU. The surge of the political left in Peru in the 1970s coincided with the strengthening of the labor movement, which had organic ties to the partisan left. Organized labor served as the backbone and socializing agent for a dense network of popular movements.22 Its political strength peaked in the late 1970s when unions led the protest movement against the military regime, but then steadily declined as the Peruvian economy lurched from one recession to another in the 1980s. The process of deindustrialization and huge cuts in public sector employment produced a dramatic informalization of the work‐ force, which reached 57 per cent in 1992 (Sulmont Samain 1994: 11). The industrial work‐force alone in Lima shrank from 744,000 in 1976 to 430,100 in 1989 (Wilkie and Contreras 1992: 373). While inflation devastated real wages, union militancy and representativeness were undermined by the explosive growth in the number of underemployed, informal, and temporary contract workers, whose individualistic survival strategies complicated class‐based identities and collective (p.327) action (Balbi 1989). Although community organizations remained active, they also adopted localized survival strategies that were difficult to coordinate into a national‐level political project.

The atomization of social life in Peru severely complicated the political project of the IU, which relied heavily upon class and community‐based collective action. Given its own internal polarization, the IU was hardly capable of reintegrating such a fragmented social fabric or providing political direction to increasingly heterogeneous popular interests. Instead, social atomization was transposed to the political realm, where the electorate opted for the individualistic mediation of new, independent personalist figures—such as Fujimori and Lima mayor Ricardo Belmont —over the collective mediation of political parties.23 By 1992, when Fujimori suspended Peru's constitutional regime, not only the left but the entire party system had lost its capacity for political representation, as voters turned en masse to independent candidates. The once‐formidable left had been decimated, forced to begin a process of political recomposition over the base of an alienated and atomized social constituency.

The nature of the Peruvian crisis, then, exacerbated the pre‐existing cleavages within the IU, which blocked the construction of a viable left‐wing political alternative. In such a context, a social democratic option was unable to consolidate a hegemonic position within the IU. In contrast, the Pinochet military dictatorship in Chile produced patterns of political and economic change which encouraged the predominance of a social democratic option within the left. However, as shown below, there continue to be significant structural constraints to the success of such an option on the national stage.

The Neoliberal Road to Social Democracy? the Case of Chile

As Chile returned to democratic rule in 1989–90, it became clear that dramatic changes had occurred within the Chilean left in the sixteen years since a military coup ended Salvador Allende's brief experiment in democratic socialism. The Socialist Party (PSCh) to which Allende belonged had anchored the radical wing of the governing Popular Unity coalition from 1970 to 1973, rejecting compromises with the political opposition and insisting that armed struggle was inevitable on the road to socialism. In contrast, the Communist Party (PCCh) backed the more moderate position of Allende, who was willing to negotiate compromises with Christian Democratic opponents while upholding the possibility of a peaceful, democratic transition to socialism in the Chilean context.24

However, two fundamental changes occurred within the Chilean left under military rule from 1973 to 1990. First, the Socialist and Communist parties reversed (p.328) political positions. The Socialists engaged in a self‐critical process of ideological renovation which culminated in a patently social democratic orientation, as well as an alliance with the centrist Christian Democrats which made the PSCh a pillar of Chile's democratic transition.25 Political change in the Communist Party was diametrically opposed, leading to a new emphasis on the role of force in political affairs and to support for armed struggle against the military dictatorship.26 These divergent paths produced a rupture of the political alliance which had elected Allende to the presidency and united the PSCh and PCCh since the 1950s.

Second, the power balance between the two linchpins of the left shifted in favor of the Socialist camp as Chile moved toward a democratic transition in the late 1980s.27 The Socialists and their offspring, the Partido por la Democracia (PPD),28 became central actors in the multi‐party Concertación coalition which formed Chile's new democratic government. After absorbing several smaller parties of the Christian left, the PSCh and PPD combined for 24 per cent of the vote in the 1993 national elections, earning a quarter of the congressional seats and strong representation in the cabinet. The PSCh–PPD bloc is increasingly capable of challenging the Christian Democrats for leadership of the Concertación. The Communist Party, on the other hand, paid a high price for having insisted that armed rebellion rather than electoral mobilization was the most viable strategy for toppling the dictatorship. The PCCh was left on the margins of the new political order, excluded from the Concertación and shut out of Congress by an unrepresentative electoral system bequeathed by the military regime. The PCCh established a new alliance with a number of very small, radical left groups, which has received between 5 and 7 per cent of the vote in recent municipal and congressional elections.

The economic programs of the PSCh and PCCh reflect their respective alliance options and their differential access to governmental responsibilities. Long a loyal adherent to Soviet ideological orthodoxy, the Communist Party in the post‐ perestroika era was ill prepared to put forward a national‐level political and economic alternative, especially in the wake of the party's strategic defeat during the democratic transition. However, with its deep roots in the labor movement and shantytown organizations, the PCCh has been able to play the type of oppositional populist role outlined above. After initially declaring a policy of ‘constructive (p.329) independence’ toward the new democratic government in 1990, the party moved quickly to an opposition stance, criticizing the Concertación for continuing the neoliberal policies of Pinochet. Completely shut out of national political institutions, the PCCh devoted its energies to social protest, articulating the sectoral demands of labor, student, human rights, and shantytown organizations. The party encouraged labor strikes and other forms of confrontational mobilization, and condemned the political and institutional constraints which inhered in Chile's ‘pacted’ democratic transition. Its support for economistic demands has been related less to a global vision of an alternative order than to a political strategy to enable the party to maintain a core social constituency in a period of adversity and ideological uncertainty.

In contrast, the Socialist Party oriented its program explicitly toward governmental responsibilities, prioritizing political stability, social consensus, and macroeconomic equilibrium. Although the PSCh remains internally heterogeneous, the process of ideological renovation in the party hierarchy has given it a notable social democratic hue, in sharp departure from the Marxist‐Leninist positions which dominated the party in the 1960s and 1970s. Among the most significant changes are an unswerving commitment to representative democracy, the belief that a majoritarian, center‐left political coalition is essential to sustain any process of social and economic reform, and a willingness to eschew socialist economic transformation in favor of a growth‐with‐equity strategy of capitalist development.

This new, growth‐with‐equity strategy reflected with the context in which the PSCh assumed governmental responsibilities in the early 1990s in partnership with the Christian Democrats. The Pinochet regime had been the trailblazer in Latin America's neoliberal revolution, privatizing industries and public services, slashing tariffs, and exposing both labor and capital to the vagaries of a competitive marketplace. After a speculative boom in the 1970s ended in financial collapse and a deep recession in 1982–3, the Chilean economy rebounded after 1984, with growth sustained by a primary product export boom and a process of reindustrialization. But if the new democratic regime inherited Latin America's most dynamic economy, it also inherited an economic model with two basic Achilles' heels: it had sharply exacerbated social inequalities, leaving over 40 per cent of the population below the poverty line (Dimensión y características de la pobreza según CASEN 1990, 7), and it remained highly dependent upon agricultural and raw material exports, which were vulnerable to international market fluctuations, contingent upon natural comparative advantages, and not clearly linked to an integrated process of industrialization.

The new government, then, faced the challenge of sustaining this economic dynamism while distributing its benefits more widely. In response, the PSCh—anxious to demonstrate a capacity for governance after the economic chaos of the Allende years—has tried to craft a post‐neoliberal economic project capable of synthesizing the often contradictory objectives of growth and equity. The centerpiece of this project is a reconceptualization of the developmental role of the state, one (p.330) which is distinct both from the minimalist, subsidiary conception of the state under neoliberalism and the suffocating statism of classical socialism.29

As part of this reconceptualization, the PSCh has accepted much of the economic restructuring of the Pinochet era as a fait accompli—and even, perhaps, as a necessary reorientation of Chile's development trajectory. The party program does not anticipate a reversal of the privatizations carried out under Pinochet; indeed, not only are private property and entrepreneurship accepted as the principal engines of economic growth, but the property structure in general has been deproblematized as a public policy issue. Likewise, the party has accepted the low tariff levels adopted under Pinochet and the openness of the Chilean economy both to foreign competition and to foreign investment. The party has supported the export orientation of the economy as a stimulus to productivity and growth, and ratified the essential role of market mechanisms for an efficient allocation of goods and services.

In short, contrary to its socialist project of twenty years ago, the PSCh no longer views the state as a major producer, entrepreneur, or planner of economic activity; instead, these functions are relegated primarily to the private sector operating in a competitive market‐place.30 Likewise, the economic nationalism of the past has yielded to strong support for international integration. However, the project of the PSCh differs from that of neoliberalism in important respects, particularly in the role that it assigns to the state as regulator of the market, agent of social integration, and strategic promoter of private economic activity in new spheres of production. The new vision rejects the assumption that free markets and natural comparative advantages in the production of primary commodities are adequate to sustain long‐term development. It proposes a strong, efficient state to regulate the market in the public interest by correcting externalities and oligopolistic distortions, while trying to level the playing field to facilitate integration into the marketplace by previously excluded sectors. Likewise, it reserves a powerful role for the state in promoting technological innovation and labor capacitation so as to facilitate a shift toward higher value added lines of production, especially in export activities. The state is also expected to facilitate social concertation between labor and capital, institutionalizing forms of class compromise that allow for a genuinely national development model.

The call for the state to promote a ‘second phase’ of export development based upon agroindustrial activities and raw materials processing is indicative of this (p.331) strategic vision. Rather than rely upon natural—and often unstable—comparative advantages in the international market‐place, the state promotes the development of specialized niches of production where ‘acquired’ comparative advantages based upon higher productivity prevail. The state can also promote domestic economic integration through backward and forward linkages, using its resources and regulatory power to modify incentive structures where market signals alone are incapable of inducing the desired private behavior.

For the PSCh, this new type of developmentalist state is essential for a growth‐ oriented strategy that moves beyond primary commodity production to generate an integrated industrial economy. The party does not perceive equity objectives as being incongruent with this growth orientation; indeed, it sees growth and equity as being not only compatible but mutually reinforcing. The party's strategy for alleviating poverty in Chile relies more heavily upon the employment‐ generating effects of economic growth than governmental redistribution of income or assets. In fact, the party has consciously downplayed traditional welfare‐type transfer payments and emphasized targeted social investments to provide the poor with greater access to education, worker training, and other benefits that can facilitate their integration into the market economy. Such investments in human capital development are designed to equalize opportunities and enhance the autonomous capabilities of the poor to improve living standards. Moreover, they are seen as beneficial for labor productivity and long‐term economic growth, particularly growth that is oriented toward more technologically advanced, higher value added lines of production.

Clearly, this new vision is a far cry from the state socialist project of the Allende era and the textbook neoliberalism of Pinochet's Chicago Boys. It also diverges sharply from the state capitalist model of development adopted by Chile and other Latin American nations from the 1930s until the 1970s, which emphasized import‐ substitution industrialization, high tariff protections, and public enterprises. It bears most resemblance, perhaps, to the forms of strategic capitalism practiced in various European and East Asian societies that have successfully used the state to mediate between domestic and international markets and help carve out specialized niches for highly competitive international economic integration (Katzenstein 1985; Wade 1990). Indeed, the program of the PSCh largely conforms to the trends in policy orientation that Garrett and Lange have identified within the European left; given the constraints on national policy autonomy posed by international economic integration, the left‐wing alternative is identified not so much by fiscal and monetary policies, which tend to converge across nations and partisan divisions, but rather by supply‐side policies in the labor market and industrial sphere which enhance competitiveness on quality (rather than price) indicators (Garrett and Lange 1991: 539–64).

But does the project of the PSCh warrant the social democratic label? Although possessing clear similarities, it would appear to have several subtle but significant shades of difference from classical European social democracy. First, it is not as (p.332) consciously redistributive, as it places less emphasis on direct subsidies and transfer payments to eliminate poverty than on a new, more inclusive model of accumulation that would distribute its rewards more broadly. Second, the social benefits that are extended by the state tend to be targeted and selective, rather than founded upon the universal rights of social citizenship that are integral to social democracy.31 Third, more than an agent of redistribution or social welfare, the state is envisioned primarily as a strategic actor with two fundamental objectives—that of promoting economic growth through technological advancement, and that of facilitating social concertation and integration. Fourth, this project rests upon a more diffuse social constituency than that of European social democracy, which very gradually evolved from working‐class to catch‐all parties. This final difference is attributable to several factors: the structural heterogeneity of the Chilean work‐force, relatively low levels of unionization, and the fragmented political loyalties of Chilean workers, whose central labor federation uneasily aggregates Socialist, Communist, and Christian Democratic workers.

Given the absence of a politically loyal labor movement, the PSCh has developed a catch‐all, electoralist orientation and a technocratic style that is designed to appeal to the middle class, somewhat reminiscent of Felipe González and the Spanish Socialists. Unlike the Spanish Socialist Party in the 1980s, however, the Chilean Socialist Party does not face a vacuum in the political center waiting to be filled. Indeed, the presence of the Christian Democratic Party places limits to the growth of the Socialist/PPD bloc, and makes it likely that the Socialists' access to government will continue to be contingent upon their participation in a broad coalition of forces. The content and success of their social democratic project—if it can be called that—is thus subject to the vicissitudes of their alliance with the political center, and therefore to the programmatic leanings of the Christian Democrats themselves.

In addition to this basic political constraint, the project of the PSCh is inevitably shaped by the structural balance between labor and capital in Chile, which shifted dramatically in favor of capital under Pinochet. After the imposition of a neoliberal model which entailed early deindustrialization, political repression of organized labor, and a labor code designed to enforce market principles rather than collective rights, labor clearly lacks the ‘structural weight’ (Jilberto in Vellinga 1993) required to balance the interests of capital in the political process. Therefore, one of the stated objectives of the Concertación government was to encourage unionization and modify the labor code to create a balance of forces that would be more conducive to institutionalized forms of class compromise. However, after a growth spurt at the outset of the democratization process, the rate of unionization declined in 1992 and 1993, remaining less than half the pre‐1973 rate.32 By mid‐1994 the (p.333) central labor federation had become increasingly vocal in its criticism of the government's tepid reforms (and implementation) of the labor code.33

On the other side of the ledger, the private sector accounts for three‐quarters of all investment in Chile today—compared to half of direct investment and a quarter of indirect investment in 1970 (Guardia 1993: 40)—and its economic centrality has been magnified by widespread privatizations and low levels of taxes and public employment. Consequently, the structural weight of capital—even in the absence of coherent partisan representation in the political sphere—has encouraged the PSCh to make its project palatable to business interests. Indeed, the party has actively cultivated support among small and medium‐sized entrepreneurs, and proposed a form of strategic collaboration with capital that is aimed at submerging the political animosities of the recent past.

In many respects, the structural weight of capital—and the decisive triumph of capitalism under Pinochet—probably contributed to the consolidation of a project resembling social democracy within the Chilean left. Certainly, this social democratic hegemony within the left cannot be attributed solely to structural economic factors; the dynamics of self‐criticism, political learning, and ideological debate in the PSCh after the 1973 coup had a political logic of their own, and exile experiences in Europe had a powerful impact as well. However, in conjunction with the institutional constraints of Chile's democratic transition, the economic boom after the mid‐1980s undermined the revolutionary option of the Communist Party and shifted the internal balance of power toward the more moderate sectors within the Socialist Party, who spoke of modifying rather than abolishing capitalism. Although the neoliberal model was highly inegalitarian, its dynamism encouraged Socialist leaders to explore reformist options that would modify its distributive impact while safeguarding its vibrancy. Likewise, the neoliberal model established an extreme reference point which probably made a social democratic alternative more palatable within the left, even if it fell short of traditional revolutionary objectives.

The contrast with Peru could hardly be more striking—in the political terrain (where the Peruvian left had never experienced a comparable process of political defeat and military repression like the Chilean left after 1973) as well as the economic. The Peruvian economic crisis not only helped sustain the insurgency of Sendero Luminoso—the only sector of the left which ended the 1980s stronger than it was at the beginning of the decade—but also encouraged the more radical tendencies within the IU to hold fast to revolutionary objectives, under the assumption that Peru had entered a ‘pre‐revolutionary situation’. As such, the more moderate elements in the IU were unable to commit the bulk of the legal left to a reformist project that would attempt to resolve the crisis through a broad national accord within existing political institutions.

(p.334) But if the dynamism of Chilean capitalism helped consolidate a social democratic orientation within the left, did it create structural conditions for its advance in national politics? In some ways, the answer is positive; since the mid‐1980s, Chile has witnessed a steady expansion of industrial production, the salaried work‐ force, real wages, and (until 1992) unionization. It could even be argued that rapid growth has the potential to establish ‘material bases for consent’ (Przeworski 1985), allowing both high profit levels and steady gains in real wages. Indeed, Chile's rapid economic growth enabled the new government to quickly reduce poverty from over 40 per cent to 32.7 per cent (Ruíz‐Tagle 1993b: 642) by expanding employment, raising wages, and enhancing social programs without sharp increases in taxes or the burden of public spending on the overall economy.34

However, Chile remains a considerable distance from social democracy. Her international economic integration has not only limited the space for domestic policy innovation, but strongly reinforced the internal dominance of Chilean capital. This dominance, furthermore, is not fully consensual; while being reproduced within the new democratic regime, it still relies partially upon the authoritarian enclaves bequeathed by the military dictatorship.35 There is, then, a structural imbalance between labor and capital, rather than the type of rough equilibrium that would allow more redistributive policies or more institutionalized forms of class compromise. This correlation of forces has not been seriously challenged by the Concertación, despite its center‐left orientation. Wary of killing the goose that can—they hope—lay the golden egg, both the Socialists and Christian Democrats have been very cautious in their relations with capital, reassuring businessmen that new social policies complement rather than undermine the market economy. As such, both parties have staunchly resisted the ‘populist temptation’ of rapidly increasing social spending beyond the rate of growth of the economy itself. In blunt terms, they are addressing poverty through a trickle‐down of the benefits of growth more than a redistributive program; consequently, while poverty rates have sharply fallen, indices of income inequality have been almost unchanged under the democratic government.36

Capital has thus shown that it can tolerate a center‐left government, so long as it does not have a strong redistributive orientation, much less an intent to alter the basic model of accumulation in the Chilean economy. Given the structural constraints discussed above, the cautiousness of the new government is hardly surprising; whether it is inevitable is another question, one that may depend as much (p.335) upon the political will of the Concertación as its skill in pushing the limits of reform without alienating the private sector. Ultimately, movement towards social democracy will be contingent upon the ability of reformers to use the political power of democratic majorities to temper the structural imbalances that exist in civil society. To date, this process is still at a rudimentary stage.

Toward a Latin American Model of Social Democracy?

The Latin American left has long been noted for its tendency to borrow ideas and political models from Europe. A number of factors have recently converged to make social democracy an attractive import: the political offensive of European social democracy in Latin America after the mid‐1970s, the ties of solidarity developed during years of exile in Western Europe by many Latin American leftists, and the collapse of the Soviet model of socialism. But as this analysis suggests, social democracy may not be any more exportable to Latin America than revolution was. Latin American societies have different political backgrounds and socioeconomic structures than the European societies where social democracy developed. Perhaps most important, they occupy a subordinate position in an international economic order whose growing integration systematically restricts national latitude for reformist or redistributive policies.

In short, the classical European models of social democracy may not ‘travel’ easily from one time period or socioeconomic context to another. It should thus be expected that Latin American variants of ‘social democracy’ will not replicate European models, and may even warrant a different label. Shaped by indigenous conditions, they will likely rest upon more heterogeneous sociopolitical coalitions, adopt different economic policies, and redefine the developmental role of the state. Given the structural constraints, they are likely to be less organically bound to labor, more conciliatory towards capital, and more inclined toward growth‐oriented policies of social integration than a redistributive welfare state. Their social base will necessarily be diffuse and pluralistic, reflecting the social heterogeneity of popular sectors in Latin America. The social majority comprised by these popular sectors creates the potential for electoral success, but in the economic or policy‐making arena, the requisite alliances with capital are likely to significantly constrain reformist options. Therefore, it seems reasonable to expect that the electoral prospects for social democratic coalitions in Latin America are brighter than the prospects for social democratic policy reforms. Likewise, where social democratic parties do have electoral success, contradictions are highly likely to emerge between their electoral and economic coalitions, given the conflicting interests at stake.

Clearly, local variants of social democratic strategies do not promise a direct and immediate solution to poverty and inequality in Latin America. At best, they offer (p.336) gradual, tentative, and partial solutions, falling far short of more radical demands for social transformation and popular empowerment. They are highly unlikely to transcend capitalism, although they might succeed in replacing the atomistic and exclusive capitalism of neoliberalism with a more integrative, ‘organized’ model of capitalist development. Their most obvious advantage is their potential viability, rooted in conscious efforts to forge compromise and build consensual solutions that will address popular needs without provoking elite hostility.

What must be asked, however, is whether institutionalized forms of class compromise are possible in a region with such egregious structural inequalities. In this sense, neoliberalism has raised high barriers indeed to any social democratic project in Latin America. By exacerbating social inequalities, it has narrowed the scope of common interests and enhanced zero‐sum perspectives. It has also made popular sectors more socially heterogeneous, organizationally weak, and politically fragmented, thus undermining their capacity to balance the interests of capital and sustain a social democratic project. If social democracy is to succeed in Latin America, it will only do so with a political formula which reintegrates the social fabric and reconstructs a sense of national purpose that is capable of transcending the existing social divisions. In Europe, generalized affluence and the historical development of the welfare state have created levels of economic security which diminish the political centrality of traditional redistributive issues, enabling contemporary leftists to reconfigure the social democratic agenda. In Latin America, by contrast, class‐based redistributive issues are likely to be a central axis of political conflicts and popular mobilization for the foreseeable future; the challenge for the left is to find programmatic means to address such issues and generate popular support within the reformist constraints of the new international economic order.

Notes:

(1) The revaluation of democracy is analyzed in Barros (1986), Lechner (1988), and Garretón (1987).

(2) This heterogeneity is discussed by Cavarozzi in Vellinga (1993).

(3) Offe (1990). A detailed analysis of some of these difficulties in the Peruvian case can be found in Pásara et al. (1991).

(4) For an argument that the left must modify its political ideals to become more realistic and ‘responsible’, see Flisfisch (1987).

(5) As Jeffry A. Frieden (1991) notes, capital mobility is never absolute, as there is considerable variance between different sectors of business and finance. However, the general trends have tended to enhance the structural economic power of capital and lead to more pro‐business public policies internationally.

(6) For a discussion of policy implications for European social democracy, see Scharpf (1991) and Moses (1994).

(7) This issue is discussed in Merkel (1992). Kitschelt (1994) argues persuasively that the relative decline of the traditional working class need not spell the electoral demise of social democracy, so long as parties can adapt their program and discourse to accommodate the interests and concerns of more heterogeneous white‐collar and professional sectors. This entails, however, a significant shift in the traditional economic policy orientation of social democracy.

(8) Data for Germany, Sweden, and Peru are taken from the US Department of Labor series Foreign Labor Trends. Chilean data is taken from Patricio Frías (1989), and the statistical annex in Economía y trabajo en Chile 1993–1994 (1994: 229).

(9) The IU's base of support in urban lower‐class communities is analyzed in Tuesta (1989b).

(10) For example, in a public opinion poll conducted in March 1988, Barrantes was the preferred presidential candidate of 36 per cent of the respondents, followed by the conservative novelist Mario Vargas Llosa with 25 per cent and APRA leader Luís Alva Castro with 22 per cent. See ‘Informe de Opinión de APOYO S.A.’, published in Debate, 9/49 (Mar.–Apr. 1988), 10.

(11) The PUM, created through a 1984 merger of new left groups with their roots in the Guevarist movements of the 1960s and progressive Christianity, contained internal tendencies with very different orientations. While much of the party's intelligentsia favored a strategy of ‘deepening’ Peru's democratic regime, the majoritarian tendency insisted on the revolutionary construction of alternative organs of popular power. Although these differences led to a division of the party in 1988, the PUM remained the single most powerful force within Peru's legal left.

(12) For an early statement of the PUM's criticisms, see ‘Los Resultados del 14 de Abril y el Reajuste de la Táctica’, Second Plenary Session of the Central Committee, May 1985, pp. 8–17.

(13) With support from two small parties in the IU, Barrantes tried to isolate the PUM and UNIR by polarizing the coalition and drawing to his side the ‘neutral’ sectors led by the Communist Party and independent left Christians. However, the neutral sectors rejected these divisionist tactics, and remained with the PUM and UNIR in a truncated IU through the 1990 elections.

(14) The economic crisis and policy swings are analyzed in Pastor Jr. and Wise (1992).

(15) The IU's economic program is detailed in Comisión Nacional de Plan de Gobierno, Plan de Gobierno de Izquierda Unida 1990–1995: Plan de Acción Inmediata (1990).

(16) Resúmen Semanal, 23–9 Mar. 1990, p. 5.

(17) See Resúmen Semanal, 25 Jan.–3 Feb. 1990, p. 11.

(18) The IU's emphasis upon base‐level protagonism and self‐managed political and economic structures was a major factor distinguishing its project from that of European social democracy, whose statist and bureaucratic orientations precipitated a backlash from ‘left libertarian’ movements advocating participatory democracy and decentralization. On these distinctions, see Kitschelt (1988).

(19) A more thorough analysis of the impact of the crisis can be found in the author's ‘Economic Crisis and the Demise of the Legal Left in Peru’, forthcoming in Comparative Politics.

(20) See the interview with PUM leader Javier Diez Canseco in The Peru Report, 3/5 (May 1989), B3–4.

(21) The idea of a fundamentalist backlash induced by political institutionalization is discussed in Offe (1990).

(22) For an analysis of the impact of union exposure on political militancy in shantytown communities, see Stokes (1991b).

(23) Changing voting patterns are dissected in Cameron (1991b).

(24) An overview of the Chilean left can be found in Faundez (1988).

(25) The process of ideological renovation in the PSCh is discussed in Walker (1990).

(26) Patterns of change in the PCCh under the military dictatorship are discussed in Varas (1988).

(27) Prior to the late 1980s, the PCCh had been dominant in the left‐wing opposition to Pinochet, since its organizational cohesion enabled it to withstand repression and organize resistance more effectively. In contrast, political and ideological divisions led to the rupture and fragmentation of the PSCh in 1979, forcing a difficult recomposition in the late 1980s.

(28) The PPD was created as an ‘instrumental’ party in 1987 at the initiative of moderate Socialists led by Ricardo Lagos to circumvent the legal proscription of traditional left parties. With its image of modernity and non‐ideological pragmatism, the PPD attracted political independents and quickly occupied the center‐left political space. It increasingly established its own identity and asserted its autonomy from the PSCh in the early 1990s, although the two parties maintained an electoral pact and jointly sponsored Lagos's candidacy for the presidency in the 1993 primary of the Concertación coalition.

(29) Information for the analysis which follows has been drawn, in part, from party documents, including the Propuesta programática de los Socialistas para el Segundo Gobierno de la Concertación de Partidos por la Democracia (Sept. 1992). Information was also obtained through an interview by the author with Alvaro Díaz, a member of the Economic Commission of the PSCh and an adviser to the Ministry of Economy, Santiago, 13 Aug. 1993.

(30) This does not mean, of course, that the state plays no role in these areas, only that it is subordinate to the private sector. Even the Pinochet regime did not privatize the copper industry, for example, which remains Chile's largest earner of foreign exchange, and the Concertación has likewise resisted calls from the business community to extend privatization to this sector of the economy.

(31) On the distinctions between targeted benefits and universal rights to social citizenship, see Esping‐Andersen (1990). On social citizenship in general, see Marshall (1965).

(32) The unionization rate reached its post‐transition peak in 1991 at 15.4 per cent, then declined to 13.7 per cent by 1993; see Economía y trabajo en Chile 1993–, 229.

(33) In July 1994, the main labor federation sponsored its first protest march under the new democratic regime. The march created tension within the Concertación, as the PSCh—wary of ceding space to more radical sectors of the labor movement—offered public support to the workers, despite its presence in the government.

(34) For an insightful analysis of the democratic government's social policies, see Weyland (1997).

(35) These include, among others, a bloc of senators designated by Pinochet who prevent the Concertación from establishing a legislative majority; a highly disproportional electoral system which over‐ represents the right and completely excludes the Communist Party; and a constitutional provision which prevents the President from removing military commanders.

(36) Although more than 800,000 persons were lifted above the poverty line between 1990 and 1992, the percentage of the national income captured by the poorest 40 per cent of the population only increased from 13 to 13.3 per cent, while that of the wealthiest quintile stayed flat at 55.1 per cent (see Ruíz‐Tagle 1993b: 642–3).