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The World Affairs Discussion Group Message Board › Pinochet’s Chilean Miracle?

Pinochet’s Chilean Miracle?

David
dr78
Group Organizer
San Diego, CA
Post #: 18
Below is a short paper I wrote years ago for an undergraduate political science class. It is about how Pinochet's oppressive regime may have ultimately contributed to Chile's economic success. I have removed the citations so that it would be easier to read.

In 1975, after two years of dictatorial rule, General Augusto Pinochet was unable to control Chile’s failing economy. He sought advice from the well-known economist Milton Friedman. Friedman recommended what he called a “shock treatment,” which included cutting state spending, privatizing industries, ending wage and price controls, and deregulating capital markets. Pinochet followed Friedman’s recommendations and in a couple years, Chile’s economy rebounded. Between 1978 and 1981, there was an economic boom. Capitalists praised Pinochet for this “miracle.” Chile became the free market model for economic development in developing countries. Pinochet received billions of dollars in loans that were previously denied to his socialist predecessor, Salvador Allende.

The reforms implemented during those golden years became an economic prescription for developing countries. This prescription would later be called the Washington Consensus. Its primary recommendations are maintaining macroeconomic stability by controlling inflation, opening up foreign trade, and reducing the role of state while promoting the role of markets in allocating resources and generating wealth. Today, these recommendations are widely accepted as sound fiscal policy. As a harbinger for the Washington Consensus, it appears that Chile’s economic boom validated free market economics. Chile had fulfilled the New Right's agenda of defining democracy in terms of economic freedom.

However, before Friedman recommended it to Pinochet, and before it was called the Washington Consensus, it was very controversial. At the time, Latin America had adopted Keynesian economic policies, which encouraged state control of economic growth. Contrarily, Pinochet and Friedman favored a market economy. This conflict became more than ideological.

Chile’s economic success came with violent and deadly social unrest. After seizing power, Pinochet brutally suppressed leftist opposition. Ultimately, tens of thousands were imprisoned, tortured or killed during Pinochet’s rule. However, during the economic boom, human rights violations decreased. Pinochet defended the violence, saying that it was needed to prevent leftist extremists from turning Chile into a Stalinist gulag. He said that without his draconian measures, the violence would be worse.

Friedman also used this “it could be worse” rationale to defend the cruel oppression that accompanied Pinochet’s economic reforms. Despite the atrocities, Friedman believed that Pinochet’s regime would ultimately offer freedom. For Friedman, political freedom results from the economic freedom of free markets and limited government. In Capitalism and Freedom, he wrote “increases in economic freedom have gone hand in hand with increases in political and civil freedom and have led to increased prosperity; competitive capitalism and freedom are inseparable.” With a nationalized economy, there is no economic freedom. He claimed that if Allende had remained in power, Chile would eventually devolve into a coercive, savage, totalitarian socialist state. Under Pinochet, Friedman believed that Chile had a better chance of returning to a democratic society. Friedman praised Pinochet for putting Chile on the right track.

To accept Friedman and Pinochet’s justification for the oppression, you would have to believe that suffering was inevitable. You would have to believe that it would not matter if there was a capitalist or socialist regime, there would be oppression. Some free market advocates excuse oppression if it is done in the name of capitalism. In 1978, William Rusher, publisher of National Review, said “a certain amount of deprivation today, in the interest of a far healthier society tomorrow, is neither unendurable nor necessarily reprehensible.” To defend this “no pain, no gain” mentality, we need to determine if Chile has made gains.

Uniquely in Latin America, Chile has achieved sustained and rapid economic growth over the past two decades, and as a result has seen poverty fall sharply. Although Pinochet cruelly repressed his opposition, Chile has benefited greatly from his free market economic policies. The foundations of Chile’s dynamic export-led growth were laid by Pinochet- but only through a costly process of trial and error. This is because capitalism is inherently risky. There will be winners and losers. Chile has learned from its mistakes and has become more pragmatic. Chile has kept most of Pinochet’s policies, deepening some of them and reforming others. Admittedly, with capitalism, there is a lot of trial and error and learning from mistakes.

In Chile, the days of political oppression are long gone. Chile’s economic growth has gone hand in hand with an increasingly solid democracy. Chile is now democratically consolidated, meaning that it is highly unlikely to revert to authoritarian rule. Chile has removed Pinochet’s shackles. In 2005, authoritarian clauses were removed from their constitution. Chile’s Concertación center-left coalition government has redressed Pinochet’s lack of social investment by implementing policies to reduce inequality.

Pinochet’s brutal regime was part of the economic ideological and political clash between socialism and capitalism. Chile’s success is partly due to Pinochet. Although it was brutal, Milton Friedman argued that Pinochet’s regime was better for Chile than what would have resulted from Allende’s socialist government. We will never know how Chile would have fared if Pinochet never seized power. However, in the conflict between socialism and capitalism, there is no comparison when comparing Chile to Chavez’s socialist Venezuela. Chile is more democratic and economically viable than Venezuela.

Although it was painful, it appears that Chile and Pinochet’s regime has validated Milton Friedman’s views that economic freedom precedes and ultimately creates political freedom. Chile’s success comes from its free market economy and its democratic government. Former Chilean president Ricardo Lagos said, “The market is essential for growth and democracy is essential for governance.” All people want freedom, security, effective government, social provision, and vigorous capitalism that creates jobs, opportunities, and prosperity. While not excusing Pinochet’s cruelty but acknowledging the benefits of his regime, it appears that Pinochet helped to (painfully) give the people what they want. Sometimes you have got to break some eggs to make an omelet.
John Van P.
JohnVP
Tucson, AZ
Post #: 44
It is notable that Pinochet ultimately put his rule to the test of an election, and peacefully stepped down when the vote went against him. Thus, he can be credited not only with Chile's economic miracle, but also with the establishment of a stable democracy in that country.
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