Military dictatorship of Chile

After the 1973 coup in Chile, Augusto Pinochet, head of the resulting military junta, immediately initiated major social changes. The new regime set out to crush the representative institutions that had allowed Chile (in the 1970 presidential election) to become the first nation in the world to democratically elect a Marxist head of state [Roberts, 1995]. The long-standing democracy of Chile was now a dictatorship, and the socialist experiment was over.

To supervise the economy, Pinochet installed a group of economists who had been trained in the United States at the University of Chicago. Given financial and ideological support from Pinochet, the U.S., and international financial institutions, Los Chicago Boys advocated laissez-faire, free-market, and neoliberal, and fiscally conservative policies, in stark contrast to the extensive nationalization and centrally-planned economic programs supported by Allende.

There was a 60% fall in health funding between 1973 and 1988. The cuts indirectly caused a significant rise in many preventable diseases and mental health problems. These included rises in typhoid [121%], viral hepatitis, and an increase in the frequency and seriousness of mental ailments among the unemployed. [Contreras, 1986].

The previous drop in foreign aid during the Allende years was immediately reversed following Pinochet's ascension; Chile received US$322.8m in loans and credits in the year following the coup [Petras & Morley, 1974]. There was considerable international condemnation of the military regime's human rights record, a matter that the United States expressed concern over as well. But the U.S. was considerably friendlier with Pinochet than it had been with Allende, and continued to give Chile substantial economic support between the years of 1973–1979.

Under Pinochet, funding of military and internal defence spending rose 120 percent from 1974 to 1979. Due to the reduction in public spending, tens of thousands of employees were expelled from other state-sector jobs. [Remmer, 1989]

The economic policies espoused by the Chicago Boys and implemented by the junta severely hurt the poorest sectors of Chilean society. Between 1970 and 1989 there were large cuts to incomes and social services. Wages decreased by 8%. Family allowances in 1989 were 28% of what they had been in 1970 and the budgets for education, health and housing had dropped by over 20% on average [Sznajder, 1996]. The massive increases in military spending and cuts in funding to public services coincided with falling wages and steady rises in unemployment, which averaged 26% in the years 1982–1985 [Petras and Vieux, 1990] and eventually peaked at 33%.

Pinochet's policies led to substantial GDP growth, in contrast to the negative growth seen in the final year of the Allende administation. The upper 20% of income earners ultimately benefitted the most from such growth, receiving 85 percent of the increase [Schatan, 1990]. Foreign debt also grew substantially under Pinochet, rising 300 percent between 1974 and 1988.

Pinochet's policies were lauded internationally for transforming the Chilean economy and bringing about an "economic miracle." British Prime Minister Margaret Thatcher credited him with bringing about a thriving, free-enterprise economy, while at the same time downplaying the junta's human rights abuses, condemning an "organised international Left who are bent on revenge."

The 'Chilean Variation' is still seen by many as the potential model for nations that fail to achieve significant economic growth. The latest is Russia, for whom David Christian warned in 1991 that "dictatorial government presiding over a transition to Capitalism seems one of the more plausible scenarios, even if it does so at a high cost in human rights violations" [Christian, 1991].

References

• David Christian (1991). "Perestroika and World History", Published in Australian Slavonic and East European studies Macquarie University (Sydney, Australia).
• Petras, J., & Vieux, S. (1990). "The Chilean 'Economic Miracle"': An Empirical Critique", Critical Sociology, 17, pp. 57-72.
• Roberts, K.M. (1995). "From the Barricades to the Ballot Box: Redemocratization and Political Realignment in the Chilean Left", Politics & Society, 23, pp. 495-519.
• Schatan, J. (1990). "The Deceitful Nature of Socio-Economic Indicators". Development, 3-4, pp. 69-75.
• Sznajder, M. (1996). "Dilemmas of economic and political modernisation in Chile: A jaguar that wants to be a puma", Third World Quarterly, 17, pp. 725-736.
• Valdes, J.G. (1995). Pinochet's economists: The Chicago School in Chile, Cambridge: Cambridge University Press.