Chile, capitalism and liberty for the rich

by Iain MacSaorsa

* Doesn't Chile prove that the free market benefits everyone?

This is a common Libertarian argument. Milton Friedman stated that
Pinochet "has supported a fully free-market economy as a matter of
principle. Chile is an economic miracle" [Newsweek, Jan, 1982].
We will ignore the obvious contradiction, ie why it always takes 
authoritarian/fascistic states to introduce "economic liberty", 
and concentrate on the economics facts of the free market capitalism 
imposed on the Chilean people.

Working on the believe in the efficiency and fairness of the free
market, Pinochet desired to put the laws of supply and demand back 
to work, and set out to reduce the role of the state and also cut back 
inflation. He, and "the Chicago Boys" - a group of free market economists-
thought what had restricted Chile's growth was government intervention 
in the economy -- which reduced competition, artificially increased 
wages, and led to inflation.  The ultimation goal, Pinochet once said, 
was to make Chile `a nation of entrepreneurs'.

The actual results were far less than the "miracle" claimed by Friedman
and a host of other "Libertarians". In per capita terms, the GDP only
increased by 1.5% per year between 1974-80. This was considerable less
than the 2.3% achieved in the 1960's. The average growth in GDP was
1.5% per year, which was lower than the average Latin American growth
rate of 4.3% and lower than the 4.5% of Chile in the 1960's. Between
1970 and 1980, per capita GDP grew by only 8%, while for Latin America,
it increased by 40%. [Not so Free to Choose, Elton Rayack] By the end 
of 1986 Gross Domestic Product per capita barely equaled that of 1970.
[The Pinochet Regime (pages 137-138, "Modern Latin America", 
Second Edition, by Thomas  Skidmore and Peter Smith, 
Oxford University Press, 1989)]

The Pinochet regime *did* reduce inflation, from around 500% at the
time of the coup, to 10% by 1982. From 1983 to 87, it fluctuated
between 20 and 31%. The advent of the "free market" lead to 
reduced barriers to imports "on the ground the quotas and tariffs 
protected inefficient industries and kept prices artificially high. 
The result was that many local firms lost out to multinational 
corporations. The Chilean business community, which strongly 
supported the coup in 1973, was badly affected." 
[The Pinochet Regime, op. cit.]

Which was part of the reasonm why Pinochet had to go. However, by
far the hardest group hit was the working class, particularly the
urban working class. By 1976, the third year of Junta rule, real
wages had fallen to 35% below their 1970 level. It was only by
1981 that they has risen to 97.3% of the 1970 level, only to
fall again to 86.7% by 1983. Unemployment, excluding those on
state make-work programmes, was 14.8% in 1976, falling to 11.8%
by 1980 (this is still double the average 1960's level) only
to rise to 20.3% by 1982. [Rayack, op cit]. Unemployment (including 
those on government make-work programs) had risen to a third of the 
labor force by mid-1983. By 1986, per capita consumption was
actually 11% lower than the 1970 level. [The Pinochet regime, op. cit.]

The decline of domestic industry had cost thousands of better paying 
jobs. The ready police repression made strikes both impractical and 
dangerous. 

One consequence of these neoliberal monetarist policies "was a 
contraction of demand, since workers and their families could afford 
to purchase fewer goods. The reduction in the market further threatened 
the business community, which started producing more goods for export 
and less for local consumption. This posed yet another obstacle to 
economic growth and led to increased concentration of income and 
wealth in the hands of a small elite." [The Pinochet regime, op. cit.]

The number of poor under Allende was million, by 1992, it was
seven million. 

For all but the small elite at the top, the Pinochet regime of
"economic liberty" was a nightmare. Economic "liberty" only
seemed to benefit one group in society, an obvious "miracle".
The ironic thing is that many "libertarians" point to it as 
an example of the benefits of the free market.

* But didn't Pinochet's Chile prove that "economic freedom is an
indispensable means toward the achievement of political freedom"?

Pincohet did introduce free market capitalism, but this is only
real liberty for the rich. For the working class, "economic liberty"
did not exist as they did not manage their own work nor control
their workplaces and lived under a fascist state.

As far as political liberty goes, it was only re-introduced once
it was certain that it was not usable by ordinary people. As
Cathy Scheider notes, "economic liberty" resulted in most
Chileans having "little contact with other workers or with their
neighbours, and only limited time with their family. Their 
exposure to political or labour organisations is minimal... they
lack either political the resources or the disposition to confront
the state. The fragmentation of opposition communities has 
accomplished what brute military repression could not. It has 
transformed Chile, both culturally and politically, from a
country of active participatory grassroots communities, to a
land of disconnected, apolitical individuals. The cumulative
impact of this change is usch that we are unlikely to see any
concerted challenge to the current idealogy in the near future".
[Report on the Americas (NACLA) XXVI, 4/4/93]

In such circumstances, political liberty can be re-introduced
as on one is in a position to effectively use it. In addition,
the fact that challenging the state in the past resulted in
a fascist dictatorship which murdered 30 000 people as well as
repeated and persistent violations of human rights by the juta,
would also have a strong negative impact for people using political
liberty to actually *change* the status quo in ways that the
military and economic elites did not approve of.

