News - October 13, 2005

Chile’s success is due to patronage

If it were not for patronage, the Chilean economy would never have been as successful as it has been in the last twenty years. Claims by supporters of the market economy that prosperity can only achieved through the free market mechanism, are untenable according to sociologist Dr Lucian Peppelenbos.

Both US presidents Bush had nothing but praise for the free market economy in Chile. And for the World Bank and the IMF, Chile is the textbook example of a country that has achieved rapid economic growth by strictly adhering to free market policies. The Chilean miracle, with growth rates of nine percent in the 1990s, shows that if the market is free, development occurs spontaneously. That is the message.

Peppelenbos suggests in his PhD thesis, however, that the market in Chile is nowhere near as free as these spokesmen for the global powers assert. He made a study of the production of tomato puree, one of the biggest and most successful export products in the country.

His research showed that tomato growers have little freedom, but are tied as clients to their patrons, in this case the exporting multinationals. Growers are involved in long-term relationships with the multinational, which prescribes exactly what seed they must use and what machines they must buy. The farmers have no forms of mutual organisation through which they could resist this paternalism. But they do try to build up personal relationships with employees of the multinational, so that they can use these to derive benefits, such as better seed from the multinational, or that the company turns a blind eye when it comes to quality control.

This patron-client system is a continuation of the old culture that goes back to when Chile was a Spanish colony, Peppelenbos argues. On the haciendas, large landholdings, the population was loyal to the landlord in exchange for protection and leadership. The story of the tomato industry is the same as that of patronage, but a modern version of it.

This culture results in an inefficient organisation. Little in the way of innovation comes from the tomato growers themselves. It doesn’t pay to get extra training or take initiative as a tomato grower.

Peppelenbos not only carried out research, he also worked as a consultant for the multinationals so that he got to know the businesses from the inside as well. As a consultant he tried to get the growers more involved in the production process. It looked as though he had succeeded, until he returned to the Netherlands. Once he was gone, the more equitable relations between the growers and the company collapsed like a house of cards and the parties returned to the patronage system.

Industry in Chile is more rooted in patronage than a truly free market, is Peppelenbos’ conclusion. Patronage is authoritarian, but creates a form of leadership that Chileans believe they lack in their national character. There is inequality between the farmer and his boss, but this provides the farmer with protection. The system is also random, but on the other hand it offers individuals opportunities to improve their position. According to Peppelenbos, the free market is a success in Chile, but would not be so without the patronage system. Without the system many small and weak farmers would fall through the net and companies would not be assured of their tomato supply. / JT