Entering the world market
Mining and the development of capitalism in 19th century Chile
The entry of the Popular Unity government into political power in 1970 represented an extraordinary break in the political and economic history of Chile. Constituted as an explicitly anti-capitalist project, the Popular Unity proposed to nationalize key industries like copper, encourage the development of a cooperative economy in other areas of the economy, and on the whole empower the Chilean working class.
Saying that this was an anti-capitalist project seems like a pretty straightfoward statement, and the descriptor often gets applied broadly to left-wing movements. The anti-capitalism of the Popular Unity coalition, though, is rooted in the development of capitalism in Chile in the 19th century, and its characteristics are influenced by the course of that development.
And it’s when you look closely at this development that you’ll start to get different answers as to what exactly were the origins of Chilean capitalism and hence the Chilean working class, depending on who exactly you ask.
Some writers situate the origin of Chilean capitalism at the turn of the century, while others argue for an earlier development.
This, I think, is due to three biases in the way the development of capitalism generally is popularly conceptualized.
Three Biases
I see three weak points in the common conception of the origin and development of capitalism. The first is an almost exclusive emphasis on the development of capitalism within Western Europe. I wouldn’t go so far as to label this eurocentrism, since it’s pretty clear that capitalism is a social system with its origins in European, particularly English, feudalism. But capitalism’s development in the 19th century clearly didn’t take place in a vacuum in Western Europe as the common-sense understanding makes it seem.
The role of countries outside of Western Europe in the development of capitalism is at least as important, but the development of capitalism doesn’t look the same outside of Western Europe as it did within Western Europe.
The second is that confusion of capitalism with industrial capitalism creates a bias in how you understand the development of capitalism, both in a global and a national context. Specifically, this confusion leads to overemphasis on the use of mechanization as a signifier that a particular economic activity is more or less capitalist.
That’s related to the first, in that the hallmark of the development of capitalism within Western Europe was mechanization and standarization. There’s an important cause and effect distinction to make here. Technological advances and mechanization are often treated as the cause of the development of capitalist social relations, but really the inverse is true—capitalist social relations are the cause of technological advances and increased mechanization. This is significant because outside of Western Europe, in countries like Chile, capitalist social relations were able to arise significantly ahead of mechanization.
And lastly, there’s a tendency to “sociologize” the development of capitalism. What I mean by that in particular is that class relations — and whether or not they’re considered “capitalist” or something else (usually “feudal” or “semi-feudal”) — get reduced to what specific kind of economic activity is taking place. This is tied into the second flaw I listed since the bias here is towards industrial production and the specific kinds of interpersonal relationships that develop in that context between bosses and workers.
These may seem like abstract, intellectual quibbles but they have bearing on any account of the development of Chile’s ruling class, it’s working class, and the decisive confrontation of the two in the 1960s and 1970s.
Capitalism and Chile in the 19th century
The agricultural origins of Chile’s ruling oligarchy notwithstanding, the political economy of Chile, from the Spanish Conquest through the present, has rested on the extraction of minerals for export abroad, largely to Western Europe.
Mining is the basis of Chilean economic activity, and the history of class struggle in Chile runs through the mining of gold, silver, copper, and nitrate. Capital derived from mining funded Chile’s independence. The internal market for Chile’s agricultural produce largely supplied mining activity. Chile’s monetary system derived from mining, and the capital it invested went towards the development of infrastructure to make bringing minerals to market more efficient — the first railroad in South America, the introduction of steam ships (which led in turn to coal mining), and ports.
Critically, what made Chile a capitalist country, and what made its ruling class fundamentally bourgeois and its exploited classes fundamentally working class, was that economic activity was subjected entirely to the international, capitalist market.
And that’s despite the fact that Chile’s principal industry was not a productive industry — but extractive.
As with agricultural production, the development of the Chilean class system hinges on the manner in which mineral extraction, and its subservience to the global market, exploited labor and created an exploiting class — the incipient Chilean capitalist class — , and exploited class: the Chilean working class.
But this gets distorted when some of the biases I raised above are applied to the Chilean situation.
For one, what Chile’s exact relationship was to incipient Western European capitalism is not necessarily a focus of most writers. At least not explicitly.
Second, a focus on mechanization as indicative of the “presence” of capitalism in Chile contributes to considering its development there as relatively “late.”
The truth is, Chile’s agricultural and mining industries were persistently and comparatively less mechanized than in other countries. What this misses is that the relative lack of mechanization has its own dynamics, related to Chile’s relationship to the global market.
Finally, by focusing specifically on industrial and productive relationships, many perspectives on the development of capitalism in Chile misconstrue what were at heart capitalist class relationships as “feudal” or “semi-feudal,” not because of any economic difference or the strategic capacity for, for example, strike activity but due to more sociological criteria, such as the relationship between bosses and workers.
In any case, there’s no understanding the development of capitalism in Chile that doesn’t pass through understanding the development of mineral extraction, and in particular over the course the 19th century.
Colonial mining
From Chile’s colonial days, the three principal mineral resources mined in the country were copper, gold, and silver. Copper was known to be abundant in Chile from pre-Spanish times, but because the Spanish market had very little use for it, it was not the focus of intensive activity during the colonial period.
Instead, copper mining was “artisanal,” small-scale, and limited to largely ad hoc applications, like pots for household distilling, cooking utensils and implements, and trade of such items along with raw, unprocessed copper to other Spanish American colonies, in particular Argentina. What “foreign” trade did exist in copper took place alongside more large-scale trade in grain and various animal products.
Gold panning as an economic activity was the initial basis of the Chilean colonial economy, but it was relatively low yield and extremely labor intensive, so it came at the expense of human (specifically indigenous) lives. With the fading of the encomienda system, this kind of activity ceased to be interesting, though it continued into Chile’s republican days.
As Diego Barras Arana notes of the late 18th century in his seminal General History of Chile:
“It was true that gold was found in small proportions in the sands of several rivers or streams, or in the loose soil of some hills; but the expenses caused by its exploitation and the predation suffered by the workers made its exploitation very unfruitful. Only a few peasant families, who had no other means of earning a living, and who gave little importance to the time they lost in this work, occupied themselves with panning, by outdated methods, and one could almost say primitive, the gold fields.”
He goes on to note that gold production served only to supplement the meager incomes of poor small farmer families, who used to to barter for merchandise locally, not for export even on a small scale.
Finally, silver extraction also took place in Chile to a limited extent during colonial times, also on a small scale and in a very limited capacity. Barras Arana quotes a late 18th century source on silver production in Chile:
“These mines … incur greater costs than gold mines in the excavation of metals because of the greater hardness of the matrix in which the silver is found, because of the greater difficulty in extracting it from the mine, because of its depth in the recesses or stirrups required to support the mine and prevent it from collapsing, in the transportation of metals to the site and in other operations; For all these reasons, more workers must be employed for lack of intelligent men and instruments, because the miners know nothing more about metallurgy than the notions taught to them by the experience of one another without being able to advance anything because of their lack of instruction in such a profitable profession.”
Marcelo Segall, in Development of Capitalism in Chile, notes that the real level of production was somewhat obscured during this period, but could nonetheless be deduced “by comparing the sum of the values of imported goods with those exported,” in which he finds an imbalance such that “imported goods were several times higher in price than the exported ones.” This imbalance, Segall writes, was necessarily compensated for by direct payment in raw metal.
In other words, while the low level of production of gold, silver, and copper could be attributed to relative scarcity and high labor requirements in the case of gold, a lack of technical expertise and difficulty in accessing and extracting the metal in the case of silver, and only an artisanal, cottage industry in the case of copper, in reality these metals were relatively abundant even in colonial Chile, but the extractive process was just not fully developed.
And the obvious reason for this underdevelopment was the mercantilist relationship of colonial Chile to Spain and their American colonies. As a result, those who were able to profit from mineral extraction had a strong motivation to push for independence. Segall notes ties to mining fortunes in some of the leading vanguard of the Chilean independence movement — José Antonio Rojas (one of the “tres Antonios”) and the Carrera brothers — José Miguel and Luis — both heroes of the Chilean War of Independence and heirs to mining operations.
Opening up more markets for Chilean minerals was a key motivator for the fight for independence from Spain.
Post Independence developments
After decades of fighting for independence and then civil war, with the institution of the Chilean constitution of 1830, the country finally settled into a stable configuration with conservative landholders at the head of government overseeing an economy based on exports.
The results on mining output, in all areas but gold, were almost immediate, as reported by Carmen Cariola Sutter and Osvaldo Sunkel in The Economic history of Chile: 1830 and 1939:
“The gold deposits had decreased their yield, but in 1832 in Chañarcillo, silver was discovered, the fabulous mineral that would make such an important and prolonged contribution to the development of national wealth. In 1831, the French engineer Charles Lambert introduced smelting via reverberatory furnaces — following the English system — to copper mining, a technological innovation that would initiate an extraordinary and prolonged boom in its production. The expansion of mining activities mentioned above in the Norte Chico provinces caused an economic development in these provinces that translated into an increase in income and population, giving rise to a strong increase in the demand for agricultural products. This revived southern agriculture, which had fallen into disrepair … and gave a strong stimulus to coastal transport.”
This copper and silver boom not only stimulated the agricultural economy by creating a market for agricultural goods and the coastal trade, it launched new, subservient industries, such as steamships, most notably with the Pacific Steam Navigation Company, founded in 1838, whose initial ports of call included Valparaíso, where Chilean customs were located, and Copiapó/Caldera, a mining center, the railroad (the third railway in South America, the Caldera-Copiapó railway which brought mineral resources from the mining area around Copiapó to the coastal port of Caldera), and coal mining to support these two steam-powered industries.
Exports passed through the port city of Valparaíso, close to Santiago, which in turn led to the development of warehousing operations, followed by banking to help facilitate the export trade. These exporter banks soon became suppliers of capital for mining operations, standing at the top of the mining pyramid.
The bottomline is that it was mining operations that generated the capital necessary to initiate, launch, and sustain these ancillary economic activities. And it was the capital generated from mining that served as principal funder and material base for the Chilean state through tariffs.
And what was critical to the accumulation of this mining capital was not the industrialized improvements to methods of extraction, processing, transportation, and financialization. It was actually the other way around — all of this was facilitated by the opening of the markets thanks to the Independence of Chile and the stabilization of the post-Independence political situation. The ability to sell Chilean copper and silver to markets in North America and Europe was the necessary precondition to Chile’s industrial development.
In fact, despite improvements, Chilean industry in this period remained fairly undeveloped. Since industrial production was already developing in Europe, both consumer products and the industrial machines required for further exploitation of mining resources were imported from abroad, developing an export/import dynamic to the Chilean economy that centered the economic activities of Chile’s bourgeoisie on extractive industry as opposed to industrial production.
But that didn’t make the political-economy of Chile any less capitalistic. In fact, it was the shift to this dynamic that signaled the end of a more mercantilist period in Chilean political economy to a fully modern capitalist period, despite a persistent underdevelopment in terms of mechanization.
Very little industrial production took place and in fact in this period, Chile actually imported artisans to produce luxury commodities, with the government paying for schools of artisanal development with the earnings of export tariffs on copper and silver.
Copper and silver “dry up”
By the 1870s, the copper and silver boom was coming to an end. This was once again not primarily due to factors internal to Chile so much as it was due to Chile’s relationship to the market for these two metals as commodities.
First, North American copper discoveries dropped the price of copper on the international markets. Second, by this time, Western European countries and the United States were shifting away from silver as the backing for their currencies and towards gold, which further dried up demand for Chilean silver.
Still, the extraction of these resources between 1830 and 1870 and selling them on the international market had generated substantial capital, and copper miners in particular began investing their resources into the newly developing nitrate business in Southern Peru and Southwestern Bolivia.
Class struggle during the mining boom
Along with the entry of Chile into the international market and the subsequent mining boom came the first stirrings of political consciousness among the working class.
In Marxist Interpretation of the History of Chile, Luis Vitale cites “protest movements and worker rebellions, like one in Chañarcillo [silver mine] in 1835 and one on the part of miners from Lota and Coronel [coal mining areas] in 1859,” as some of the first organized mass action by the working class. Cristián Gazmuri in The Chilean “48” cites the first strikes as taking place “in the 1830s among the workers in the region of Copiapó,” with the first strike in Santiago being the tailors strike in 1849.
This last points to the more dynamic popular class during this period — the artisan class.
The artisan class
As referenced above, the development of an artisan class in Chile was a direct result of the entry of Chile into the international market. Specifically, government funds gained by taxing exports paid for the creation of artisanal craft schools and wealthy miners sought to purchase luxury goods, and build extravagant palaces in Santiago.
Critically, this means that unlike the artisans of Europe, who were a kind of remnant from the feudal economy, Chile’s artisan class was dependent on capital generated from mining. Nonetheless, their political consciousness was heightened by the fact that many of these artisans were, if not immigrants from Europe, taught by immigrants from Europe in the artisan schools mentioned above.
Some of these artisans who came to teach had been participants in the popular uprisings in Europe in the 1830s and 1840s and brought this experience with them to Chile.
But beyond that, the Artisan class began to constitute a critical popular, urban class, which faced a growing and evident inequality in places like Santiago. This, along with the political consciousness gained from the European revolutionary movements of the 1830s and 1840s, led the Artisans to begin to organize themselves politically
The Equality Society
Meanwhile, the children of Chile’s mining oligarchy, already predisposed to liberal ideas and sent to France to gain a European education paid for with mining profits, returned home to Chile after 1848 with exciting ideas about fomenting popular rebellion in Chile and fantasies about being “Chilean Girondins.” Meeting in liberal political clubs like the Club de Reforma, they went so far as to seek French revolutionary counterparts, seeing their peers as the Chilean Danton, and the Chilean Robespierre, amongst others.
These children of Chile’s mining elite, infused with revolutionary rhetoric and fervor, actually managed to agitate and organize the first proto-socialist organization in Chile on the basis of the radicalizing artisan class— the utopian socialist-influenced Sociedad de la Igualdad or “Equality Society.”
Built in the mold of a French revolutionary club like the Jacobin Club, the Equality Society attracted both reform-minded liberal elites as well as an artisan class energized by the growing inequality in Chile’s capital of Santiago.
While the Equality Society ultimately fizzled, it served as inspiration for some 20th century socialists who sought to find their own predecessors by plumbing the depths of Chilean history. Which is not to say that the Equality Society was without merits. It instigated the first popular political clubs in Chile and for the first time raised “the social question” in Chile.
Furthermore, it eventually gave rise to a new political party, also drawing heavily from the artisan and middle classes in Santiago and Valparaíso, but also drawing from the same elements in the northern mining areas near Copiapó — the Radical Party (a future member of the Popular Unity).
And artisans at this time also began to form themselves into Mutual Aid societies, using the Equality Society as an explicit or implicit model.
The next stage
The entry of Chile into the capitalist international market post-independence was what ultimately made Chile a capitalist country in the 19th century — not its level of mechanization, and not industrial production per se.
And while the political economy of this period did not produce a politically conscious and active working class, it did create the conditions for raising “the social question” for the first time — by elements of the middle and artisan classes — and set the stage for the development of working class organization.
But even more so, the crisis in the Chilean economy from the collapse of the copper and silver markets set the stage for the next major development in the Chilean political economy — the full dependence of the Chilean economy on foreign capital.
