A Critic of Pinochet Speaks Out

Henry sent the post below as a comment to my post on Why You Should Move to Santiago, Chile. It’s too long for a comment so I reproduce it here. – Mark

In my view it is rarely “government” per se that is the real problem; that just looks at half the reality. It is almost always corrupt government, bought government, in short, government controlled by big money. It’s accurately been called “friendly fascism” or “corporate socialism.” If you understand what is going on in Europe right now, and in the US, you will understand. Its essential weapon of mass manipulation is the theological dogma that “free markets” (markets open to crony capitalism and big money without any interference) acts as a deus ex machina to ensure liberty and justice for all. It is ideology, pure and simple, and it has convinced millions who passionately embrace it. It also implies a central bank apparatus in which the private banking industry acts as a kind of giant tapeworm on the national treasury.

In South America, Chile has the worst GINI coefficient with the exception of such luminaries as Bolivia and Paraguay. However, it has the best window dressing, although the recent spate of student unrest shows that some Chileans, at least, are using their brains. However, being the essential fascist state that it is, it does not hesitate to bring out the troops and guns to keep things on track for their elites.

In 1973, the year General Pinochet brutally seized the government, Chile’s unemployment rate was 4.3%. In 1983, after ten years of free-market modernization, unemployment reached 22%. Real wages declined by 40% under military rule.

In 1970, 20% of Chile’s population lived in poverty. By 1990, the year “President” Pinochet left office, the number of destitute had doubled to 40%.

Thanks to the tender interventions of the CIA and the “Chicago Boys” neoliberal theories, Pinochet abolished the minimum wage, outlawed trade union bargaining rights, privatized the pension system (most of it stolen by big money), abolished all taxes on wealth and on business profits, slashed public employment, privatized 212 state industries and 66 banks and ran a fiscal surplus. By 1982, the GDP had collapsed 19%, the result of de-regulation gone amok, or in other words, the corral gates were left open and the hogs fed to repletion at the expense of everyone else. The result, predictably, was disastrous.

Pinochet sold off the state banks – at a 40% discount from book value – and wound up in the claws of the two conglomerate empires controlled by Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers – then leveraged these assets with loans from foreign investors clamoring for a piece of the state giveaways. Empty securities were the banks’ reserves and, by 1983, Vial and Cruzat declared bankruptcy. Pension funds were worthless, industry basically shut down, and there was rioting in the streets. A real economic miracle had been accomplished. Such is the incredible illusion still firmly believed in today.

Pinochet had to face reality. He dismissed the Chicago Boys and started programs for jobs. Oh dear, that’s socialism, isn’t it? It is the equivalent of the mortal sin and excommunication of Catholics in neoliberal theology. As Dr. Janet Finn noted, “It’s absurd to describe a nation as a miracle of free enterprise when the engine of the economy remains in government hands.” Copper has provided 30% to 70% of the nation’s export earnings. This is the hard currency which has built today’s Chile, the proceeds from the mines seized from Anaconda and Kennecott in 1973 – Allende’s posthumous gift to his nation. As for the agricultural sector, the other great contributor to Chilean exports, according to Professor Arturo Valenzuela of Georgetown University, Allende’s land reform, the break-up of feudal estates, created a new class of productive tiller-owners, along with corporate and cooperative operators, who now bring in a stream of export earnings to rival copper.”

Any miracle in Chile is scarcely due to Pinochet, it is due in the first place to Allende. Sorry to burst your bubble. The very last thing any country needs is the financial colonialism of big finance in the guise of the World Bank, the IMF, the Inter-American Development Bank and the International Bank for Settlements. And I’m not even a “leftist”! I just like impartial, unbiased, intellectual integrity. Vincit omnia veritas.

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For a fuller explanation, and a refreshing dose of non-”true believer” intellectual integrity see: The Myth of the Chilean Miracle

Related Posts:
Does the Chile Economic Model Remain Intact?
Is Chile Losing the Battle of Ideas?
Chilean President Warns of Danger of Socialism
Climbing the Economic Ladder in Chile

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One Response to A Critic of Pinochet Speaks Out

  1. Mark Brophy says:

    You’re more optimistic than I am about what government can accomplish. In your view, government is bad only when it is controlled by big money; but I reckon that government is always corrupted by big money. The only way to avoid tyranny is to restrain the size of government. Complaining about corruption in government is like laying out food at a picnic and complaining that ants arrive to spoil the fun.

    You seem to believe that central banking can be beneficial even though it’s a parasite in Europe and the USA. I reckon that central banking is always evil because it allows governments to grow; fiat money is the scourge of modern society and government will not shrink until gold and silver currency circulate again. Central banking is also evil in Chile; the bank buys dollars to subsidize exporters, squandering billions from the government treasury.

    You claim that “free markets” is a theological dogma that really means “friendly fascism” or “corporate socialism.” I disagree with your terms; in reality, free markets are the opposite of socialism and fascism. Fascism is a form of socialism known as nationalistic socialism.

    You excoriate Chile because it has “the worst GINI coefficient” in South America. I object because the amount of wealth spread measured by GINI is irrelevent. Instead, what’s important is whether the average person is becoming richer and whether a poor person has a realistic opportunity to become much richer than his parents. One study showed that it’s easier for a poor Chilean to become rich than for a German or United Statesian and nobody can deny that the average income in Chile has increased faster than any country in South America. Singapore and Hong Kong also have high GINI scores; it’s inevitable in an ascending country.

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