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«STANFORD UNIVERSITY PRESS Stanford, California 1986 Modern Latin American Historiography and the Labor Movement Twentieth-century Latin American ...»

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Government tax and expenditure policies, and the influence of nitrate expansion on national markets and labor systems, combined to p r o m o t e important changes in the development of Chilean agriculture and industry. During the nitrate era the rate of urbanization in Chile greatly increased. Nitrate expansion also altered the proportion of the national population living in the north. In 1805, according to census data, only a little m o r e than one-fifth of the 1,819,223 Chileans lived in towns of more than 2,000 people. For the next 70 years, the pace of urbanization was slow; as late as 1875, only about one-fourth of the population of °7S971 were townsfolk. But 55 years later, in 1930, almost half of Chile's 4,287,445 people were urban dwellers. Meanwhile, the t w o northern nitrate provinces (virtually all of which, given the nature of economic activity in the desert, should be considered urban) m o r e than d o u bled their share of national population, from 3.5 percent in 1885 to 7.7 percent in 1920."

The influence of nitrate expansion on the process of urbanization was powerful and complex. Clearly, the increase in economic activity in the north, the g r o w t h of the import trade and the coastal carrying trade, and the flow of nitrate revenue through an expanded state bureaucracy into public works and h u m a n and material infrastructure all created economic opportunities for rural migrants in the cities, towns, and ports of n o r t h ern and central Chile. In addition, the fuel demands of the expanding railBrian Loveman, Chile ( N e w York, 1979), p. 230. This w o r k, the best o n e - v o l u m e survey of Chilean history, contains an excellent survey of the nitrate era.

13- Cariola and Sunkel, "Expansion salitrera" (cited in n. 5), table 2.

Chile road and shipping n e t w o r k and of Chile's growing cities stimulated an important domestic coal industry near the southern port of Concepcion. 1 4 But nitrate expansion also affected Chilean agriculture and industry in ways that both stimulated and responded to the urbanization process.

C a r m e n Cariola and Osvaldo Sunkel have persuasively challenged the idea, long accepted in the economic literature on Chile, that agriculture stagnated during the nitrate era. They have shown, on the contrary, that the whole period, at least until 1920, was one of growth, diversification, and rising labor productivity. This process was a result of a series of effects closely related to nitrate expansion. First of all, agriculture expanded geographically. The strengthening of the state and the development of transportation networks helped push the Araucanian Indians farther south and opened up new lands to wheat cultivation. Second, the growth of urban markets in central Chile and the mining areas of the north encouraged the diversification of agricultural production in the central valley. Finally, the modernization of the whole society fostered the spread of scientific techniques and the use of agricultural machinery in the countryside.

T h e last no doubt accounts in no small way for the increase in labor productivity in agriculture demonstrated by Cariola and Sunkel. But the increase may also be due in part to changes in tenancy and labor systems.

Competition for labor generated by employment opportunities for rural workers in the nitrate zone and in manufacturing and services in the larger cities may have forced landowners to adopt m o r e capitalist or more labor-extensive relations of production. Many landowners shifted from agriculture to ranching around the turn of the century. This response may reflect both the rising purchasing power (and meat consumption) of sectors of the Chilean proletariat and the inability of landowners to retain, without concessions they were unwilling to make, their workers on the land. After the turn of the century, the government imposed taxes on Argentine meat imports to protect Chilean livestock producers. The meat tax became an explosive political issue around which export and manufacturing workers, and urban consumers generally, mobilized dramatically during the first decades of the twentieth century.

The relationship of nitrate expansion to the g r o w t h of Chilean industry during this period is somewhat better understood, thanks in large part to the pioneering w o r k of Henry W. Kirsch. 15 Contrary to previous interBut the demand for coal in the nitrate zone itself was not a particularly great direct stimulus in the growth of domestic production. Nitrate carriers often used coal for ballast on the return trip from Europe. In the early twentieth century only about one-fifth of the coal consumed in the north was Chilean. It was of lower quality and usually mixed with imported coal. As the century progressed, imported oil steadily replaced coal in the nitrate zone.

15. Industrial Development in a Traditional Society (Gainesville, Fla., 1977).

Chile 33 pretations, which date the country's industrialization from the 1930's or the First World War, he argues persuasively that after 1880 Chilean m a n ufacturing moved out of the artisanal era. In the following decades, the secondary sector developed rapidly. By 1915 the number of people w o r k ing in manufacturing establishments employing five people or more stood at almost 53,000. By 1924 their numbers reached 85,000.

This process stemmed from the demand for manufactured goods stimulated by the War of the Pacific, from the expansion of the nitrate sector itself and its influence on the rate of urbanization, and from the growth of a communications infrastructure that integrated and expanded the national market. Kirsch emphasizes middle-class consumption as the main market for Chilean industry, but his data show that the largest branches of manufacturing provided items like sugar, beer, glass, shoes, clothing, and matches for urban mass consumption. Kirsch demonstrates that the pace of industrial expansion was linked closely to growth and fluctuations in the nitrate export sector. He shows h o w the few basic industries that managed to emerge in the period (e.g. cement and locomotive p r o duction) found their markets in the mining sector or in the construction of public works made possible by nitrate revenues.

According to Kirsch, the structural characteristics that define Chilean industry in the decades following 1930 were acquired during the nitrate era. National industry primarily produced light and durable consumer goods for sale in a domestic market protected from foreign competition.

The firms engaged in industrial production became highly concentrated, and many enjoyed virtual monopolies. Most depended on capital-intensive production techniques and relied on capital goods and raw materials

imported from abroad. Many were foreign-owned or foreign-financed:

almost half of the proprietors of manufacturing concerns during the period 1914 to 1925 were foreign-born; and about one-third of total capital invested in industry in that period was foreign.

Government policy fostered all these industrial developments. Inflationary monetary policy, by making imports more expensive, provided blanket protection for local industry. Tariff policy after 1880, although aimed primarily at producing revenue, provided some protection and set low rates on the imports needed by domestic industry. Government credit policy consistently favored large enterprises producing consumer goods. Small producers, even successful manufacturers of heavy equipment such as locomotives, were denied credit and incentives. Protected and favored by such policies, light manufacturing provided higher rates of return on invested capital than agriculture and even mining and c o m merce. Kirsch found no evidence of structural antagonism between foreign and domestic export-import interests, agriculturalists, and industrialists. In fact, he shows how they frequently were the same people, Chile families, or financial groups involved in all sectors of Chilean economic and financial life, w h o used their control of the state to maximize shortterm profits. 16 Nitrate expansion thus exercised a powerful influence on Chilean economic development before 1930. But that influence was largely indirect, a consequence of j o b s and demand opened up in the north and of government projects funded by nitrate revenues. Although the state managed to capture roughly half of the profits made in nitrate production, 1 7 most of the rest flowed into the hands of foreign capitalists and was remitted abroad. T h e scope of foreign ownership in the nitrate zone seriously u n dercut the direct contribution of nitrate production to capital accumulation in Chile.

Contrary to what might have been expected, the annexation of the nitrate zone in 1880 did not lead to control of nitrate production by Chilean nationals. At the start of the war, the bulk of production was located in the hinterland of Iquique in Peruvian-owned nitrate factories, or oficinas.

Chilean policy in the newly acquired territories was designed to foster uninterrupted production and maximize revenue to a state at war. The legal dispositions developed to deal with the issue of ownership of nitrate companies and land claims in the new Chilean provinces of Tarapaca (Peru's former territory) and Antofagasta (which had belonged to Bolivia) redounded to the benefit of economic interests with access to liquid capital and to the bonds with which Peru had compensated nitrate capitalists when it nationalized the industry on the eve of the war. 18 Chilean and British capitalists had access to both. The Chileans were well established in the nitrate zone, and Chilean banks in Valparaiso financed many of the reorganized companies in the years after 1880. Chilean capitalists also had preferential access to information and personal contacts with government officials, a not unimportant advantage in the often corrupt process of entitlement and the sale of new nitrate lands. British capitalists and merchant houses, which had financed the transport and commercialization of Peruvian guano and nitrates, were also in a privileged position. In many

–  –  –

cases British speculators bought the greatly depreciated Peruvian bonds and drew on their connections in Valparaiso and in London money markets to meet the Chilean government's stiff financial requirements for legalization of their status. Alfred T. North, the British "Nitrate King" who emerged to dominate production and transport in the nitrate zone in the 1880's and 1890's, was the most successful of these speculators.

But British dominance of the industry by 1895 was not so much a result of acquisitions made in the early 1880's as a consequence of access to capital needed to expand and modernize production. A potential obstacle was eliminated by the political defeat of nationalist and statist forces in the civil war of 1891. Thus, British success was the result neither of alleged cultural defects among Chilean entrepreneurs nor of ignorance or lack of patriotic sentiment on the part of the Chilean officials who reorganized the industry following the War of the Pacific. Rather, it was the logical result both of assumptions about the best way to foster capitalist exploitation of the nitrate zone, on the one hand, and of the privileged position of British entrepreneurs and commercial interests in the world capitalist system at the end of the nineteenth century, on the other."

Table 2.1 shows the changing pattern of ownership in the nitrate enclave over the half century beginning in 1878.

By 1895 British capitalists had largely displaced both the Peruvian and the Chilean companies, whose combined share of ownership was reduced from 74 percent to 21 19- This issue has generated m u c h heat in Chilean historiography. A recent review of the debate, w h i c h develops the m o s t commonsensical and persuasive explanation of the failure of Chilean capitalists to control the means of p r o d u c t i o n in the nitrate enclave following the war, is T h o m a s O ' B r i e n, The Nitrate Industry and Chile's Crucial Transition: 1870-iSgi ( N e w York, 1982).

Chile percent. British and other foreign interests owned the bulk of nitrate p r o duction facilities during the period of expansion up to the First World War. But beginning at the turn of the century, and especially following the war, Chilean capital recaptured an important share of ownership.

This trend was a result of a variety of factors. In the new century the industry's expansion came not in the northernmost province of Tarapaca, where British capital was most dominant, but in Antofagasta, where Chileans exercised more control. T h e war brought the elimination of German ownership and hastened the decline of the h e g e m o n y of British capital in the world economy. Finally, the introduction in the 1920's of a new capital-intensive technology for processing low-grade ores enabled U. S. capital, especially the Guggenheim interests, to capture a growing share of nitrate production.

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