But the prophets of the free market have a concrete template in Chile’s bold experiment with capitalism under Augusto Pinochet, from 1973 to 1990 – what Milton Friedman called the “Miracle of Chile”. Free marketeers are often hesitant about invoking that success story because of its association with the military dictatorship that overthrew “democratically elected” president Salvador Allende. He was indeed democratically elected in Congress, with the help of Christian Democrat votes. There the democracy ended.
Three years later Congress declared him guilty of 20 violations of the Constitution and national laws, including support of the North Korean-trained militia quaintly known as the Groups of Personal Friends, illegal arrests, torture, press censorship and confiscation of private property. When Allende’s supporters plotted a violent coup to eliminate the leadership of the armed forces and complete the Marxist reconfiguration of the country, Pinochet launched a pre-emptive strike. His seizure of power was subsequently legitimised at a referendum in 1980 by a 67 per cent majority vote.
But the economic background to these events remains the enduring lesson. By 1973, Allende’s rule had produced an inflation rate of 605 per cent, a GDP growth of –4.3, a fiscal deficit of 30.5 per cent of GDP and, while public sector salaries had risen by 48 per cent, a 38 per cent drop in wages, in real terms. More than 150 industries had been nationalised, with 70 per cent of firms confiscated by the state.
HD
