How Chile Was Saved

How Chile Was Saved

Published: Mar 21, 2011 at 3:23 pm

by Jose Pinera

In 1956, an extraordinary three-year agreement on cooperation was signed by the Department of Economics at the Chicago University and the Faculty of Economics at the Catholic University of Chile. It was renewed twice, for a total of nine years. As a result, by the mid-1960s, there existed in Chile a substantial number of free-market economists, known as the Chicago Boys, even though many went on to graduate studies at other American universities. (Personally, after receiving my undergraduate degree there in 1970 and being a “Chicago Boy”, I went to Harvard University for my M.A. and Ph.D., to be forever the subject of jokes by my libertarian friends as a “Harvard Man”.) By the end of the 1960s, this team had begun to exert influence from middle-level positions on the Christian Democratic government of Eduardo Frei Montalva.

Then came the breakdown of democracy under Salvador Allende and his ouster by the armed forces. Being in graduate school in the United States, I did not witness those dramatic days in my country, but for the same reason I faced a very difficult choice at the end of 1974: to remain in Boston enjoying the academic life I loved so much, or to go back to help the Chicago Boys (my former dean was already the economics minister) fight for a new country. I chose the latter. This team of economists who had learned so much from the American experiment did a “friendly takeover” of the Pinochet government in order to engineer a free-market revolution and to restore democratic rule. Our goal was nothing less than to transform a socialist country into a free one. And, we believe, we succeeded.

From 1973 to 1989, a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward free markets. This Chilean revolution doubled Chile’s historic rate of economic growth (to an average of 7 percent a year from 1984 to 1998), drastically reduced the proportion of people living in poverty, enormously advanced human liberty, and unleashed the forces that brought liberal democracy and the rule of law. The demonstration effect of the revolution has been described in this way:

“In a sense, it all began in Chile. In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports. . . . In 1981, Chile privatized its social-security system. . . . Many of those ideas . . . ultimately spread throughout Latin America and to the rest of the world. . . . They are behind the reformation of Eastern Europe and the states of the former Soviet Union today. . . . In some measure, Chilean economics are the prescription for bringing ailing Asian economies back to health . . . which demonstrates, once again, the awesome power of ideas” (James Flanigan, Los Angeles Times, August 5, 1998).

The Economist has stated that “Chile has become the most studied country in Latin America. Visitors arrive from all over the world to see how they can emulate the Chilean transformation, and what they should be doing next” (November 13, 1993).

Nevertheless, those of us who decided to enter the arena to bring about positive change working inside the revolutionary Pinochet government knew that the project would be controversial, even if we succeeded. Or, I should say, especially if we succeeded. We knew that socialists would never forgive a successful liberal revolution like the one we were engineering and would use all their influence in the media to create a black legend. To an amazing extent, they have succeeded…up to now. And that is why I have accepted Navigator’s invitation to speak out on the Chilean revolution, on the occasion of its thirtieth anniversary, even though my cause in America is a completely different one (introducing social-security choice).

Check Your Premises

The Pinochet government originated in a civilian rebellion against an unconstitutional government. Of course Salvador Allende was elected president of Chile in 1970 by means of a democratic election (though with only 36.6 percent of the vote, and only after a congressional choice between the top two vote-getters), but his government lost its democratic character by repeatedly violating the Constitution. There are numerous evidences to that effect (including a letter of the Supreme Court to Allende), but the most important one is the momentous agreement of August 22, 1973, of the Chamber of Deputies (the Lower House of the Chilean Congress that had elected Allende).

This agreement was approved by 81 to 47 votes, with all the deputies of the Christian Democratic Party (the party of former president Eduardo Frei Montalva) voting in favor. In this agreement, the chamber presented a list of twenty legal and constitutional violations of President Allende’s government (including illegal detentions and torture), and it agreed to give information of this “grave breakdown of the legal and constitutional order of the Republic” to the Armed Forces, among other authorities, and to tell them that “by virtue of their function, of their oath to remain faithful to the Constitution and the law, . . . it is up to them to put immediate end to all the situations referred to above, which infringe the Constitution and the law.” This demand of the elected legislature to the armed forces was, in fact, a call to forcibly remove the president, who had initiated the use of violence with the purpose of imposing a communist dictatorship. The Armed Forces, led by the person who was then the commander-in-chief of the army and acting pursuant to the agreement of the House of Deputies, removed Allende and took power eighteen days later, on September 11, 1973, vowing to restore democratic rule once circumstances permitted. It was as though Hitler, another democratically elected leader, had been removed by the Reichstag before becoming a dictator. As The Economist said in an editorial only two days later: “The temporary death of democracy in Chile will be regrettable, but the blame lies clearly with Dr. Allende and those of his followers who persistently overrode the Constitution” (September 15, 1973).

Another key document in this regard is the letter that former president Eduardo Frei Montalva sent in November 1974 to Mariano Rumor, then president of the International Christian Democrat Union, explaining and justifying the military intervention to remove Allende. He wrote: “The fall of Allende has meant a setback to world communism. The combination of Cuba with Chile, with its 4.500 kms. of Pacific Ocean coast and its intellectual and political influence in Latin America, was a decisive step in the control of this hemisphere. That explains such a violent and exaggerated reaction [against the ouster]. This country was going to be an operations base for the whole continent.”

According to Brian Crozier, founder of London’s Institute for the Study of Conflict: “During his three year period, Allende transformed the country, in effect, into a satellite of Cuba, and hence an incipient addition to the Soviet Empire. . . . By then Chile could be truthfully described as a Marxist state in ideological and economic terms. . . . From a strategic viewpoint, it had been turned into a major base for Soviet and Cuban subversive operations, including terrorism, throughout Latin America. . . . The Soviet KGB was recruiting members for training courses in terrorism. . . . North Korean specialists were training young members of Allende’s Socialist Party” (The Rise and Fall of the Soviet Empire, 1999, pp. 346-48).

Given how far communist forces had proceeded in Chile, and given Allende’s unconditional support of Castro’s Cuba and the Soviet Union (he even called this country the “big brother” of Chile in a meeting in Moscow with Brezhnev), it is not surprising that a state of civil war followed the military intervention of September 1973. Despite that, and perhaps because of a long Chilean tradition of respect for the law, this civil war produced a minimal number of deaths – every one of them regrettable, of course, to those who value the human life as supreme – when measured by any historic standard. According to the report of the commission set up by President Aylwin (an antagonistic successor to President Pinochet): In a seventeen-year period, 2,279 people died, including members of the armed forces, terrorists, and possibly innocent civilians. “Most of them,” Crozier states, “died during the first months of military rule, when Chile was in effect a combat zone.” By way of comparison, 600,000 people died in the Spanish civil war (2 percent of the population), 375,000 in the American civil war (1.1 percent of the population), and 250,000 in the Guatemalan civil war (2.5 percent of the population) – not to mention the 100 million deaths attributed to socialism by The Black Book of Communism. In a country of 12 million, where a third of the voters had initially supported Allende, the toll was so low that clearly there was no systematic policy of human-rights violations such as would have involved hundreds of thousands of deaths.

But I also believe, and let me state it unequivocally, that members of the armed forces, in their fight against leftist terrorism, went beyond the law and committed human-rights violations. (See the compilation of my press articles, “Standing up for human rights and promoting democracy during the Pinochet government,” in www.josepinera.com.) Those were not mistakes, as some people call them, but crimes. They should be condemned, and the guilty individuals should suffer the penalties imposed by the courts. And indeed some are, the most notorious example being the former head of the intelligence office, an army general, who is in a Chilean jail.

Once we had created the institutions for democracy and limited government – a free-market economy, an independent central bank, a constitutional court, private television, and so on – the transitory government of President Pinochet, according to the constitution proposed by him and approved by referendum in 1980, voluntarily surrendered its power to a democratically elected government on March 11, 1990.

Since then, Chile has had three democratic governments and all the free-market reforms have survived successfully the political transition. Moreover, Chile has been the top-ranking Latin American country in several indexes of economic and political freedom. One of the younger members of the Chicago Boys, the current mayor of Santiago, received 49 percent of the vote in the 1999 presidential election, and current polls indicate he may be the next president.

Those of us who stayed in Chile or returned to Chile to bring about the success of this revolution were willing to risk our honor and our lives on its behalf. One of my best friends, Senator Jaime Guzman, was gunned down by leftist terrorists. We were willing to run such risks because we loved liberty above all, and because we thought it obscene to stand by and watch from an American campus or from Wall Street while our country was turned into a second Cuba. Today, we celebrate the Chilean revolution because, like the American Revolution, it has given birth – not without pain – to a new country and a free society.

José Piñera is founder and president of the International Center for Pension Reform, a worldwide initiative to promote the privatization of state-run social security systems. He is also a Senior Distinguished Fellow of the Cato Institute, co-chairs its Project on Social Security Choice, and is a member of the Advisory Board of the institute’s Trade Policy Center.

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