1 Employee Relations. 2009: 30 3:322-333. Paternalism at a crossroads: Labour relations in Chile in transition. Darío Rodríguez M. 1 René Ríos F. 2 Abstract In this paper we contribute with a conceptual analysis of paternalism in the social bond that constitutes labour relationships, illustrated with two examples which show that the paths to development are culturally manifold, as so many emergent economies demonstrate. The contribution of this paper is to highlight how culturally stabilised expectations of a traditional kind evolve to become compatible with modern labour relationships. Using the social systems theory of Niklas Luhmann, paternalism is analysed as a semantics which makes three main aspects visible: interests, autonomous decisions and responsibility. Paternalism relies on the lack of capacity of the worker to take risks and the surrogate by the boss that decides for the worker in his or her supposed benefit. Paternalism is reinforced and reproduced by distrust in the workers‟ capacities to make decisions on their own and it becomes a justification to keep wages low, hinder delegation and become an ideology that justifies gaps between productivity and compensation. 1.- Introduction. In the last decades, the Chilean economy has undergone substantial developments. The per capita Gross Domestic Product based on purchasing-power-parity (PPP) grew from US$ 2,827 in 1980 to US$ 14,673 in 2008, more than a five fold increase 3 . New salmon, wine, forestry, and fruit industries were established amongst others; and the existing ones, like mining, banking, and financial services experienced both growth and differentiation. The ample modernization implied profound changes in labour relationships and their management, but it has not suppressed deeply engrained cultural expectations that appear at first sight as incompatible with modern contractual exchanges. This is the case with paternalism, which is widely evident throughout Latin America (Dávila and Elvira 2005). Even though Chile has had centre left governments, they have not made significant differences in this paternalistic outlook. We argue that it should not be conceived as a hindrance to the consolidation of modern labour relation- ships, but that it can be made compatible with them. 2.- The arrow of change: Modernisation within paternalism. Until the middle of the twentieth century, paternalism was extended through all the Chilean organisations. The hacienda‟s model was based on a social bond where peasants depended on their patron‟s benevolence by offering their loyalty in return. In the cities, things 1 Instituto de Sociología, Pontificia Universidad Católica de Chile. drodrigm@uc.cl 2 Instituto de Sociología, Pontificia Universidad Católica de Chile. rrios@puc.cl 3 International Monetary Fund, World Economic Outlook april 2008 http://www.imf.org/external/pubs/ft/weo/2008/01/weodata/index.aspx (accessed august 2008).