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 possessed limitless faith in economic science as the legitimising basis for their draconian decisions [Valdes, 1995]. These neo-liberal economists immediately advocated slashing public spending.

There was a 60 percent 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 for Pinochet; Chile received US$322.8m in loans and credits in the year following the coup [Petras & Morley, 1974]. Although there was considerable international condemnation of the military regime, the United States' oppositional attitude to the Pinochet dictatorship in the United Nations contrasted with considerable U.S. economic support of the regime in the years 1973–1979.

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

The effect of neo-liberal policies on the poorest Chileans under Pinochet was catastrophic. 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 percent in the years 1982–1985 [Petras and Vieux, 1990].

While Pinochet's policies led to GDP growth, almost without exception that growth benefited the upper 20 percent, which received 85 percent of the increase [Schatan, 1990]. At the same time, foreign debt grew 300 percent between 1974 and 1988.

Pinochet was nontheless lauded internationally for an "economic miracle". Margaret Thatcher, UK prime minister at the time, has credited him with bringing about a thriving, free-enterprise economy, while at the same time dismissing criticism of Pinochet's human rights record by condemning the "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.