Chilean reforms at gunpoint and their consequences
Today we will talk about the reforms that were carried out in Chile according to the recipes of Milton Friedman and at gunpoint, and their consequences, as well as the armed struggle of the left parties.
Reforms at gunpoint
US Secretary of State Kissinger and Pinochet, 1976
Against the backdrop of large-scale and brutal repression in Chile, economic reforms were launched according to the liberal recipes of the American professor Milton Friedman. His followers are often referred to as the "Chicago Boys". In many countries of the world, the implementation of Friedman's ideas invariably led to catastrophic impoverishment of the population and a sharp stratification of society into "oligarchs" and barely making ends meet "hard workers". Chile is no exception. Friedman personally supervised the implementation of reforms in Chile and visited this country several times.
Milton Friedman. Hundreds of millions of people around the world experienced the destructive power of his ultra-liberal ideas.
In addition to Friedman, the Chilean government was advised by another professor at the University of Chicago, Arnold Harberger. Their students, according to The Wall Street Journal, from the very beginning of the coup "were impatient, waiting to be unleashed" and given the opportunity to conduct a cruel experiment with the Chilean economy.
The Fake Economic Miracle of the Pinochet Junta
The Chilean government completely abandoned all forms of state regulation of the economy, and the principle of unlimited free trade was proclaimed. Almost all state property was privatized, the pension system became not "solidary", but accumulative. Salaries were cut, jobs were cut in the public sector, educational and medical institutions lost state funding.
Trade unions were then banned, workers and employees had practically no rights left, which made the labor force extremely cheap and attractive to foreign investors. The middle class has practically disappeared, leaving a rapidly growing wealthy elite and a population teetering on the brink of poverty and destitution. 97% of the country's industrial enterprises then ended up in the hands of 11 oligarchs. Radomiro Tomic, one of the three leaders in the 1970 presidential election (Christian Democratic Party), gave this assessment of the reforms of the Pinochet government:
"The market began to determine the price in Chile of all goods, with the exception of labor, the price of which was determined by the machine gun."
And what was the result?
In the first 6 months of the junta's rule, the purchasing power of the population fell by 60%, and the national currency was devalued by more than 2 times. Then it only got worse. Measures were taken to create the illusion of well-being, as foreign journalists talked about. This was achieved by banning the sale of meat in 19 out of 25 provinces, where 80% of the country's population lived. In 1974, the cost of living in Chile increased by 375%, the price of bread increased 22 times, sugar 29 times, soap 69 times. The share of wages in national income fell from 60% to 35%.
People became so impoverished that they could no longer pay their rent, and from comfortable apartments in houses built for workers under President Allende, they began to move to shacks on the outskirts. By 1982, 5,5 million people had moved into the slums.
In 1974, the national currency devalued 28 times. It got really bad in 1975, when the “Chicago boys” decided to try “shock therapy” to “treat” the Chilean economy, which was well known to Russians in the early 1990s. The result exceeded all expectations: Chile's GNP for the year decreased by 19% (according to the IMF - by 26%), industrial production fell by 25%, construction work - by more than 50%.
The use of fertilizers by peasant farms has decreased by 40%. The total value of exports fell by 28%, the value of imports by 18%. Even oil production fell by 11%. But consumer prices for 1975 increased by an average of 375%, wholesale - by 440%, the cost of living increased by more than three times, and unemployment was 20%. In Chile, then bitterly joked: they say, in order to eradicate poverty in the country, Pinochet decided to kill all the poor.
In 1976, Argentina stepped on the same Friedman rake, where another "savior of the fatherland" came to power - General Jorge Videla. In the first year, industrial production in this country decreased by 40%.
And in the early 1990s, a truly terrible experiment on Fridman's recipes was carried out on Russians by the "bad boy" Yegor Gaidar and his untalented team. Under them, industrial production decreased by 25% (during the Great Patriotic War - by 21%, during the Civil War - by 23%), salaries to public sector employees and pensions for disabled citizens were paid with a delay of several months, the birth rate dropped sharply, and the country literally collapsed into a demographic pit, from which it still cannot get out.
It is curious that, unlike Chubais and his gop company, Pinochet left the most profitable mining enterprises in state ownership. Many believe that this is precisely why the Americans later became concerned about the violation of human rights in Chile.
Let us continue to consider the socio-economic situation in Chile after the shock therapy. In 1976, the average life expectancy in this country compared with 1973 decreased by 2 years, and 34% of school-age children did not go to school.
By October 1975, the escudo had depreciated so much that it was decided to replace it with the peso, pegging the new currency to the dollar, setting the exchange rate one to one.
What do you think happened next? In January 1977, the dollar was worth 18,48 pesos, in January 1978 - 27,47, in January 1980 - 39, in June 1982 - 46. In 1980, the unemployment rate in the country was 25%. It all ended with a large-scale crisis in 1982, when the decline in production reached 20%, more than 800 industrial enterprises went bankrupt, and GDP fell by 14%. For the first time since Allende, GDP growth in Chile was recorded in 1984 and amounted to 3,8%. And the average annual "growth" of the Chilean economy in 1974-1989. was minus (minus!) 3,9%. In 1989, 22,6% of Chile's population lived below the poverty line, and per capita consumption was lower than in 1969.
During the reign of Pinochet, external debt increased from 4 billion to 27 billion dollars, infant mortality during this period increased by 8,2%, life expectancy decreased by a year and 4 months, the number of students compared to 1973 decreased by 40%. Even the liberal Russian economist Konstantin Sonin, who is now a professor at the same University of Chicago, admitted through gritted teeth that
“The pace of growth in the 17 years of Pinochet's rule was not impressive. Both in the 1960s, before him, and in the 1990s, after him, they were higher.”
Starting in 1983, despite the ongoing repression, mass anti-government rallies began in large cities of Chile, the number of participants in which reached tens of thousands of people. Can all this be called an "economic miracle" and set as an example to other countries?
Armed struggle against the Pinochet regime
We have already said that the Directorate of National Intelligence (DINA) was created in Chile to hunt for dissidents. Moreover, its employees acted not only on the territory of their country, but also abroad. In 1974, for example, in Argentina, the former commander-in-chief of the armed forces of Chile and Minister of Defense Carlos Prats and his wife were killed. And in 1976, in Washington, DINA agents killed Orlando Letelier, the former minister of foreign and internal affairs in the Allende government.
The Chileans themselves recognize themselves as the "coldest" among the "hot" Latin Americans, linking this to the long-term rule of the Pinochet junta. However, other reasons are also mentioned: the isolation of the country, literally pressed against the Pacific coast of the Andes, and a rather cool climate in most of its territory. According to a common version, even the name "Chile" comes from the word ch'iwi - "cold" or "winter": this is how the Incas and Arawaks called this territory. However, despite the relative "coldness" of the Chileans, Pinochet and his associates, among other things, managed to create in Chile something that had never happened in this state - a mass insurrectionary movement with the formation of not small terrorist groups, but full-fledged partisan detachments.
Despite brutal repressions, the rebels of the Left Revolutionary Movement (MIR) became more active in Chile, which seemed to be completely defeated in September 1973: 92% of the members of this organization were then killed or arrested. Very soon, these dashing guys came to their senses and already in 1975 launched a guerrilla war, organizing 6 bases on the border territory of Argentina - in the Andes. That year they carried out 132 operations - expropriations, attacks on warehouses and barracks, executions of DINA political police officers and informants.
And in the first half of 1976 - already 202 military operations, during which they released 38 of their comrades, expropriated more than 6 million escudos, disabled 16 aircraft and helicopters, attacked barracks, carabinieri posts, police stations and DINA 29 times. But in Argentina, in March 1976, there was a military coup, after which, in June, airstrikes were carried out on the bases of the Chilean partisans, from which 800 to 1 fighters died. The number of military actions was reduced to a few dozen a year. The number of operations increased again after the fall of the military dictatorship in Argentina in October 200.
In the early 80s, armed detachments of the communist "Patriotic Front of Manuel Rodriguez" (FPMR) and the left-wing Christian "Movement of United People's Action" (MAPU, Movimiento Juvenil Lautaro) appeared.
It was the FPMR rebels who organized the assassination attempt on Augusto Pinochet on September 7, 1986, during which 5 of his bodyguards were killed, but the dictator himself was only slightly injured. The rebels were let down by a grenade launcher, which at first misfired, and the second grenade pierced the windshield of the dictator's car, but did not explode.
Raul Alejandro Pellegrin (Comandante José Miguel), founder and leader of the FPMR
And in 1987, armed detachments of the Socialist Party appeared.
Street protests in Santiago, 1984
In 1988, 40 attacks on American companies were recorded. It is believed that precisely because of the pressure of their owners on the US government, the authorities of this country then refused to support Pinochet after his defeat in the plebiscite organized by him.
For the people of Chile, the economic results of Pinochet's rule were disappointing. Until the early 1990s, 40% of Chileans were below the poverty line, and the middle class began to recover only in the second half of the 90s. And now, without a dictatorship, the financial situation of the Chileans has leveled off, and there is no longer such a sharp division into rich and poor. Despite the fact that Pinochet's methods unexpectedly found many admirers in other countries, many Chileans insist that they have achieved their current fairly high standard of living, "despite many years of Pinochet's rule."
Indeed, this country has achieved the greatest success in the economy over the past 30 years. However, about 10% of Chileans still live below the poverty line. The mass protests in Chile, accompanied by numerous pogroms, that began in the fall of 2019, showed that the heavy legacy of Friedman's ultra-liberal reforms has not yet been overcome. The reason may seem insignificant - an increase in the price of travel in the metropolitan subway by 30 pesos - about 2,5 rubles. However, this money was not superfluous for many Chileans from poor neighborhoods.
Santiago, 25 October 2019
Burnt bus in Santiago, autumn 2019
Valparaiso, Fall 2019
It became clear to many that Chile had not yet been able to overcome the heavy legacy of ultra-liberal reforms according to Friedman's recipes.
The final article will talk about the attempts to liberalize the junta regime and the 1988 plebiscite, about the war that almost started between Chile and Argentina, the criminal prosecution of Pinochet and his associates, as well as about Russian liberals - fans of the Chilean dictator.
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