The Róbinson Rojas Archive.- Chile: Economic "freedom" and political repression, by Orlando Letelier .-RRojas Databank: Analysis and Information on economics, development, research methods, globalization, poverty, sustainability, environment, human rights, China, Chile, Asia, Africa, Latin America, America Latina. Puro Chile. The Memory of the people
Make your work easier and more efficient installing the rrojasdatabank  toolbar ( you can customize it ) in your browser. 
Counter visits from more than 160  countries and 1400 universities (details)

The political economy of development
This academic site promotes excellence in teaching and researching economics and development, and the advancing of describing, understanding, explaining and theorizing.
About us- Castellano- Français - Dedication
Home- Themes- Reports- Statistics/Search- Lecture notes/News- People's Century- Puro Chile- Mapuche

Chile: Economic "freedom" and political repression
                               by Orlando Letelier
A joint publication by Race & Class/The Transnational
Institute/Spokesman Pamphlets               1976

The author of this pamphlet, Orlando Letelier, was assassinated
in Washington, D.C., on Septiembre 21, 1976, when his car was
blown up. Ronni Moffit was also killed in the explosion.*

Orlando Letelier was a former senior economist and director of
the loan division of the Inter-American Development Bank. He
was Chilean Ambassador to the United States and Minister of
Foreign Affairs in the Popular Unity (Allende) Government. In
the coup d'etat of September 11, 1973, he was seized and held
for twelve months in concentration camps, suffering severe
torture, until international pressures secured his release into
exile. He became director of the Transnational Institute of the
Institute for Policy Studies. (TNI is an independent research
institute with centres in Amsterdam and Washington, D.C.,
devoted to international policy studies.) He also taught at the
School of International Services, American University,
Washington, D.C.

During the last two years of his life, Orlando Letelier remained
tireless in his work for the restoration of democracy in Chile.
The following article, written only a few days before his death,
assesses the economic policies of the fascist military junta in
Chile, and their results. It has special application to the
situation in Chile, but raises questions of universal importance
concerning both human rights and the "free" market economy.

Copyright @ 1976 The Institute of Race Relations
* In 1993, the former chief of the Chilean secret police, DINA,
general Manuel Contreras, was found guilty of ordering the
murder of Orlando Letelier. Contreras was following orders by
the dictator Pinochet as it was demonstrated afterwards, when Manuel
Contreras declared under oath that he was following direct orders from
general August Pinochet. By 1999, Contreras was in prison in Chile, and
Pinochet under house arrest in London.(Róbinson Rojas)

It would seem to be a common-sense sort of observation that economic
policies are conditioned by and at the same time modify the social
and political situation where they are put into practice. Economic
policies are introduced precisely in order to alter social structures.

If I dwell on these considerations, therefore, it is because the
necessary connection between economic policy and its sociopolitical
setting appears to be absent from many analyses of the current
situation in Chile. To put it briefly, the violation of human rights,
the system of institutionalized brutality, the drastic control and
suppression of every form of meaningful dissent is discussed (and
often condemned) as a phenomenon only indirectly linked, or indeed
entirely unrelated, to the classical unrestrained 'free market'
policies that have been enforced by the military junta. This failure
to connect  has been particularly characteristic of private and
public financial institutions, which have publicly praised and
supported the economic policies adopted by the Pinochet government,
while regretting the 'bad international image' the junta has gained
from its 'incomprehensible' persistence in torturing, jailing and
persecuting all its critics. A recent World Bank decision to grant
a $33 million loan to the junta was justified by its President,
Robert McNamara, as based on purely 'technical' criteria, implying
no particular relationship to the present political and social
conditions in the country.

The same line of justification has been followed by American private
banks which, in the words of a spokeman for a business consulting
firm, 'have been falling all over one another to make loans'.[1]
But probably no one has expressed this attitude better than the
US Secretary of the Treasury. After a visit to Chile, during which
he discussed human rights violations by the military government,
William Simon congratulated Pinochet for bringing 'economic freedom'
to the Chilean people.[2] This particularly convenient concept of a
social system in which 'economic freedom' and political terror
coexist without touching each other, allows these financial spokesmen
to support their concept of 'freedom' while exercising their verbal
muscles in defence of human rights.

The usefulness of the distinction has been particularly appreciated
by those who have generated the economic policies now being carried
out in Chile. In NEWSWEEK Milton Friedman, who is the intellectual
architect and unofficial adviser for the team of economists now
running the Chilean economy, stated:

     "In spite of my profound disagreement with the authoritarian
      political system of Chile, I do not consider it as evil for
      an economist to render technical economic advice to the
      Chilean Government, any more than I would regard it as evil
      for a physician to give technical medical advice to the
      Chilean Government to help end a medical plague."[3]

It is curious that the man who wrote a book, CAPITALISM AND FREEDOM,
to drive home the argument that only classical economic liberalism
can support political democracy, can now so easily disentangle
economics from politics when the economic theories he advocates
coincide with an absolute restriction of every type of democratic
freedom. One would logically expect that if those who curtail private
enterprise are held responsible for the effects of their measures in
the political sphere, those who impose unrestrained 'economic
freedom' would also be held responsible when the imposition of this
policy is inevitably accompanied by massive repression, hunger,
unemployment and the permanence of a brutal police state.


The economic plan now being carried out in Chile realizes an historic
aspiration of a group of Chilean economists, most of them trained at
Chicago University by Milton Friedman and Arnold Harberger. Deeply
involved in the preparation of the coup, the 'Chicago boys', as they
are known in Chile, convinced the generals that they were prepared
to supplement the brutality, which the military possessed, with the
intellectual assets it lacked. The US Senate Select Committee on
Intelligence has disclosed that 'CIA collaborators' helped plan the
economic measures that Chile's junta enacted immediately after
seizing power.[4] Committee witnesses maintain that some of the
'Chicago boys' received CIA funds for such research efforts as a
300-page economic blueprint that was given to military leaders
before the coup. It is therefore understandable that after seizing
power they were, as the WALL STREET JOURNAL put it, 'champing to
be unleashed' on the Chilean economy.[5] Their first approach to
the situation was gradual; only after a year of relative confusion
did they decide to implement without major modification the
theoretical model they have been taught at Chicago. The occasion
merited a visit to Chile by Mr. Friedman himself who, along with 
his associate, Professor Harberger, made a series of well-publicized
appearances to promote a 'shock treatment' for the Chilean economy
-something that Friedman emphatically described as 'the only medicine.
Absolutely. There is no other. There is no other long-term solution.'[6]

These are the basic principles of the economic model offered by Friedman
and his followers and adopted by the Chilean junta: that the only
possible framework for economic development is one within which the
private sector can freely operate; the private enterprise is the
most efficient form of economic organization, and that, therefore,
the private sector should be the predominant factor in the economy.
Prices should fluctuate freely in accordance with the laws of
competition. Inflation, the worst enemy of economic progress, is the
direct result of monetary expansion and can be eliminated only by a
drastic reduction of government spending.

Except in present-day Chile, no government in the world gives private
enterprise an absolutely free hand. That is so because every economist
(except Friedman and his followers) has known for decades that, in the
real life of capitalism, there is no such a thing as perfect competition
described by classical liberal economists. In March 1975, in Santiago,
a newsman dared to suggest to Friedman that even in more advanced
capitalist countries, as for example the United States, the government
applies various types of controls on the economy. Mr. Friedman
answered: 'I have always been against it. I don't approve of them.
I believe we should not apply them. I am against economic intervention
by the government, in my own country, as well as in Chile or anywhere

This is not the place to evaluate the general validity of the postulates
advanced by Friedman and the Chicago School. I want to concentrate only
on what happens when their model is applied to a country like Chile.
Here Friedman's theories are especially objectionable - from an economic
as well as a moral point of view - because they propose a total free
market policy in a framework of extreme inequality among the economic
agents involved: inequality between monopolistic and small and medium
entrepreneurs; inequality between the owners of capital and those who
own only their capacity to work, etc. Similar situations would exist
if the model were applied to any other underdeveloped, dependent

It is preposterous to speak about free competition in Chile. The
economy there is highly monopolized. An academic study made during
President Frei's regime pointed out that in 1966:

    284 enterprises controlled each and every one of the subdivisions
    of Chilean economic activities. In the industrial sector, 144
    enterprises controlled each and every one of the subsectors. In
    turn, within each of these 144 manufacturing enterprises which
    constituted the core of the industrial sector, a few shareholders
    controlled management: in more than 50% of the enterprises, the
    ten largest shareholders owned between 90 and 100% of the

On the other hand, studies also conducted during the pre-Allende period
demonstrated the extent to which the Chilean economy has been dominated
by foreign-based multinationals. As Barnet and Muller put it in

    In pre-Allende Chile, 51% of the largest 160 firms were effectively
    controlled by global corporations. In each of the seven key
    industries of the economy one to three firms controlled at least
    51% of the production. Of the top twenty-two global corporations
    operating in the country, nineteen either operated free of all
    competition or shared the market with other oligopolists.[9]

From 1971 to 1973, most of the monopolistic and oligopolistic industries
were nationalized and transferred to the public sector. However, the
zeal with which the military dictatorship has dismantled state
participation in the economy and transferred industries to foreign
ownership suggests that levels of concentration and monopolization are
now at least as high as they were before the Popular Unity (Allende)

An International Monetary Fund Report of May 1976 points out:

    The process of returning to the private sector the vast majority
    of the enterprises which over the previous fifteen years, but
    especially in 1971-73, had become part of the public sector
    continued (during 1975)...At the end of 1973 the Public Development
    Corporation (CORFO) had a total of 492 enterprises, including
    eighteen commercial banks...Of this total, 253 enterprises...have
    been returned to their former owners. Among the other 239
    enterprises...104 (among them ten banks) have been sold; sixteen
    (including two banks) have already been adjudicated, with the
    completion of the transfer procedure being a matter of weeks; the
    sale of another twenty-one is being negotiated bilaterally with
    groups of potential buyers...

Competitive bidding is still to be solicited for the remaining
enterprises. Obviously the buyers are always a small number of
powerful economic interests who have been adding these enterprises
to the monopolistic or oligopolistic structures within which they
operate. At the same time, a considerable number of industries have
been sold to transnational corporations, among them the national tyre
industry (INSA), bought by Firestone for an undisclosed sum, and one
of the main paper pulp industries (Celulosa Foestal Arauco), bought
by Parsons & Whittemore.

There are many other examples to show that, as far as competition goes,
Mr. Friedman's prescription does not yield the economic effects implicit
in his theoretical model. In the first half of 1975, as part of the
process of lifting regulations from the economy, the price of milk was
exempted from control. With what result? The price to the consumer rose
40 per cent and the price paid to the producer dropped 22 per cent.
There are more than 10,000 milk producers in Chile but only two milk
processing companies, which control the market. More than 80 per cent
of Chilean paper production and all of certain types of paper come from
one enterprise -the Compania Manufacturera de Papeles y Cartones,
controlled by the Alessandri interests- which establishes prices without
fear of competition. More than fifteen foreign brands are offered in
the Chilean home appliances market, but they are all in the hands of
only three companies, which assemble them in Chile and determine their
retail prices.

Of course, any of the followers of the Chicago School would say that,
with the liberalization of the international market, as prescribed by
the model, Chilean monopolies and oligopolies would be exposed to
competition from abroad. However, that does not happen. Chile so lacks
foreign currency that it cannot import what it needs of even the most
essential goods. Still more important is the fact that foreign
enterprises are not interested in sending to Chile goods which could
compete with those manufactured by their own Chilean subsidiaries.
Besides, in Chile the economic interests which control the manufacturing
industry also control control the financial apparatus and import
activities. These groups are not disposed to compete with themselves.
In short, the applicaction of Friedman's theories to the real work
of Chile means that the industrialists can freely 'compete' at whatever
price levels they choose.

Other aspects of the brand of economics taught at the University of
Chicago are conveniently ignored by the junta's economic advisers.
One is the importance of wage contracts freely negotiated between
employers and workers; another is the efficiency of the market as an
instrument to allocate resources in the economy. It is sardonic to
mention the right of the workers to negotiate in a country where the
Central Workers' Federation has been outlawed and where salaries are
established by the junta's decree. It may also seem grotesque to speak
of the market as the most effective instrument for allocating resources
when it is widely known that there are practically no productive
investments in the economy because the most profitable 'investment' is
speculation. Under the slogan 'We must create a capital market in
Chile', selected private groups enjoying the junta's protection have
been authorized to establish so-called FINANCIERAS, which engage in the
most outrageous financial speculations. Their abuses have been so
flagrant that even Orlando Saez, former president of the Chilean
Industrialists' Association and a staunch supporter of the coup, could
not refrain from protesting:

  It is not possible to continue with the financial chaos that dominates
  in Chile. It is necessary to channel into productive investments the
  millions and millions of financial resources that are now being used
  in wild-cat speculative operations before the very eyes of those who
  don't even have a job.[10]

But the crux of Friedman's prescription, as the junta never ceases to
emphasize, is control of inflation. It should, according to the junta,
enlist 'the vigorous efforts of all Chileans'. Professor Harberger
declared categorically in April 1975:

  I can see no excuses for not stopping inflation: its origins are well
  known; government deficits and monetary expansion have to be stopped.
  I know you are going to ask me about unemployment; if the government
  deficits were reduced by half, still the rate of unemployment would
  not increase more than 1%.[11]

According to the junta's official figures, between April and December
1975 the government deficit was reduced by approximately the 50 per cent
that Harberger recommended. In the same period, unemployment rose six
times as much as he had predicted. The remedy he continues to advocate
consists of reducing government spending, which will reduce the amount
of currency in circulation. This will result in a contraction of demand,
which in turn will bring about a general reduction of prices. Thus
inflation would be defeated. Professor Harberger does not say explicitly
who would have to lower their standard of living to bear the costs of
the cure.

Without a doubt, excessive monetary expansion constitutes an important
inflationary factor in any economy. However, inflation in Chile (or any
underdeveloped country) is a far more complex problem than the one
presupposed by the mechanical models of the monetarist theorists. The
followers of the Chicago School seem to forget, for example, that the
monopolistic structure of the Chilean economy allows the dominant firms
to maintain prices in the face of falling demand. They also forget the
role that so-called inflationary expectations play in generating price
increases. In Chile, inflationary expectations have lately been
approximating 1 per cent per month. Looking ahead, firms prepare for
rising costs by raising their own prices. This continuous price
'leap-frogging' feeds a general inflationary spiral. On the other hand,
in such an inflationary climate, no one with liquid assets wants to
hold them. Powerful interest groups, operating without government
control, can thus manipulate the financial apparatus. They create
institutions to absorb any available money and use it in various forms
of speculation, which thrive on and propel inflation.


Three years have passed since the experiment began in Chile and
sufficient information is available to conclude that Friedman's
Chilean disciples failed - at least in their avowed and measurable
objectives - and particularly in their attempts to control inflation.
But they have succeeded, at least temporarily, in their broader
purpose: to secure the economic and political power of a small dominant
class by effecting a massive transfer of wealth from the lower and
middle classes to a select group of monopolists and financial

The empirical proof of the economic failure is overwhelming. On
24 April 1975, after the last known visit of Messrs Friedman and
Harberger to Chile, the junta's Minister of Finance, Jorge Cauas,

  The Hon. junta have asked me to formulate and carry out an economic
  program primarily directed to eradicate inflation. Together with a
  numerous group of technicians ( obviously Friedman and company ), we
  have presented to the Chilean authorities a program of economic
  revival which has been approved and is beginning. The principal
  objective of this program is to stop inflation in the remainder
  of 1975.

By the end of 1975 Chile's annual rate of inflation had reached 341
per cent - the highest rate of inflation in the world. (The two
countries with the next highest rates of inflation in 1975 were
Argentina, with 312 per cent, and Uruguay, with 68.1 per cent. Both
are countries with dependent capitalist economies that apply junta-style
models of political repression and 'economic freedom'.) Consumer prices
increased that same year by an average 375 per cent; wholesale prices
rose by 440 per cent.

Analysing the causes of Chilean inflation in 1975, a recent report of
the International Monetary Fund (IMF) says: 'The cutback in government
spending, with its adverse effects on employment, in housing, and
public works, went significantly further than programmed in order to
accommodate the large credit demands of the private sector'. Later on
it states: 'Overall monetary management remained expansionary in 1975.
Moreover, continued high inflationary expectations and the public's
attendant unwillingness to increase its real cash balances greatly
complicated the implementation of the monetary program'. Referring to
private organizations which have begun to operate without any control,
the report adds that the FINANCIERAS have been allowed to operate beside
the commercial banking system and at interest rates up to 50 per cent
higher than the maximum permissible banking rate. According to the same
source, the FINANCIERAS were operating in 1975 at an interest rate of
14 per cent a month, or 168 per cent a year; they obtained loans in
New York at 10 to 12 per cent a year.

The implementation of the Chicago model has not achieved a significant
reduction of monetary expansion. It has, however, brought about a
merciless reduction of the income of wage earners and a dramatic
increase in unemployment; at the same time it has increased the amount
of currency in circulation by means of loans and transfers to big firms,
and by granting to private financial institutions the power to create
money. As James Petras, an American political scientist, put it: 'The
very social classes on which the junta depends are the main
instrumentalities of the inflation.'[12]

The inflationary process, which the junta's policies stimulated
immediatley after the coup, was slightly reduced in 1975 as compared
to the unbelievable rate of 375.9 per cent in 1974. Such a minor
reduction, however, does not indicate any substantial approach to
stabilization and seems on the whole utterly irrelevant to the majority
of Chileans who must endure the total collapse of their economy. This
situation recalls the story of a Latin American dictator at the
beginning of this century. When his advisers came to tell him that the
country was suffering from a very serious educational problem, he
ordered all public school closed. Now, more than seventy years into this
century, there still remain disciples of the anecdotal dictator who
think that the way to eradicate poverty in Chile is to kill the poor

The exchange rate depreciations and the cutbacks in governmental
expenditures have produced a depression which, in less than three years
has slowed the country'rate of development to what it was twelve years
ago. Real Gross Domestic Product (GDP) contracted during 1975 by nearly
15 per cent to its lowest level since 1969, while, according to the IMF,
real national income 'dropped by as much as 26 per cent, leaving real
per capita income below its level ten years earlier'. The decline in
the overall 1975 GDP reflects and 8.1 per cent drop in the mining
sector, a 27 per cent decline in the manufacturing industries and a
35 per cent drop in construction. Petroleum extraction declined by an
estimated 11 per cent, while transport, storage and communications
declined 15.3 per cent, and commerce fell 21.5 per cent.

In the agricultural sector production appears virtually stagnant in
1975-76, with only an 0.4 per cent variation from the previous
agricultural year. This stagnation has been caused by a combination of
factors, including the continued rise in the cost of imported
fertilizers and pesticides. The use of fertilizer dropped by an
estimated 40 per cent in 1975-76. The increase in import prices also
accounted for the decline in production of pork and poultry, which are
almost entirely dependent on imported feed. The return to the former
owners of several million hecaters of farm land, that had been
expropriated and transferred to peasant organizations under the 1967
Agrarian Reform Law, has also reduced agricultural production. As of
the end of 1975 almost 60 per cent of all agricultural estates affected
by the land reform -equivalent to about 24 per cent of total
expropriated land- has been subject to the junta's decisions. Of this
total, 40 per cent of the agricultural enterprises (74 per cent of the
physical acreage and more than 50 per cent of the irrigated land) has
entirely reverted to former owners.

In the external sector of the economy, the results have been equally
disastrous. In 1975 the value of exports dropped 28 per cent, from
$2.13 billion to $1.53 billion, and the value of imports dropped 18
per cent, from $2.24 billion to $1.81 billion, thus showing a trade
deficit of $280 million. Imports of foodstuffs dropped from $561
million in 1974, to $361 million in 1975. In the same period domestic
food production declined, causing a drastic reduction in food for the
masses of the population. Concurrently, the outstanding external public
debt repayable in foreign currency increased from $3.60 billion on
31 December 1974, to $4.31 billion on 31 December 1975. This accentuated
Chile's dependence on external sources of financing, especially from the
United States. The junta's policies have burdened Chile with one of the
highest per capita foreign debts in the world. In the years to come the
nation will have to allocate more than 34 per cent of its projected
export earnings to the payment of external debts.

But the most dramatic result of the economic policies has been the rise
in unemployment. Before the coup, unemployment in Chile was 3.1 per
cent, one of the lowest in the western hemisphere. By the end of 1974,
the jobless rate had climbed beyond 10 per cent in the Santiago
metropolitan area and was also higher in several other sections of the
country. Official junta and IMF figures show that by the end of 1975
unemployment in the Santiago metropolitan area had reached 18.7 per
cent; the corresponding figure in other parts of the country was more
than 22 per cent; and in specific sectors, such as the construction
industry, it had reached almost 40 per cent. Unemployment has continued
to climb in 1976 and, according to the most conservative estimates, in
July approximately 2.5 million Chileans (about one-fourth of the
population) had no income at all; they survive thanks to the food and
clothing distributed by the church and other humanitarian organizations.
The attempts by religious and other institutions to ease the economic
desperation of thousands of Chilean families have been made, in most
cases, under the suspicion and hostile actions of the secret police.

The inhuman conditions under which a high percentage of the Chilean
population lives is reflected most dramatically by substantial increases
in malnutrition, infant mortality and the appearance of thousands of
beggars on the streets of Chilean cities. It forms a picture of hunger
and deprivation never seen before in Chile. Families receiving the
'minimum wage' cannot purchase more than 1,000 calories and 15 grams
of protein per person per day. That is less than half the minimum
satisfactory level of consumption established by the World Health
Organization. It is, in short, slow starvation. Infant mortality,
reduced significantly during the Allende years, jumped a dramatic
18 per cent during the first year of the military government, according
to figures provided by the UN Economic Commission for Latin America.
To deflect criticism from within its own ranks against the brutal
consequences of layoffs, the junta in 1975 established a token 'minimum
employment program'. However, it covers only 3 per cent of the labour
force, and pays salaries amounting to less than $30 - a month!

Although the economic policies have more merciless affected the working
classes, the general debacle has significantly touched the middle class
as well. At the same time, medium size national enterprises have had
their expectations destroyed by the reduction in demand, and have been
engulfed and destroyed by the monopolies against which they were
supposed to compete. Because of the collapse of the automobile industry,
hundreds of machine shops and small industries which acted as sub-
contractors have faced bankruptcy. Three major textile firms (FIAD, Tome
Oveja and Bellavista) are working three days a week; several shoe
companies, among them Calzados Bata, have had to close. Ferriloza, one
of the main producers of consumer durables, recently declared itself
bankrupt. Facing this situation, Raul Sahli, the new president of the
Chilean Industralists' Association, and himself linked to big
monopolies, declared earlier this year: 'The social market economy
should be applied in all its breadth. If there are industrialists who
complain because of this, let them go to hell. I won't defend them.'[13]

The nature of the economic prescription and its results can be most
vividly stated by citing the pattern of domestic income distribution.
In 1972, during the Popular Unity Government, employees and workers
received 62.9 per cent of the total national income; 37.1 per cent went
to the propertied sector. By 1974, the share of the wage earners had
been reduced to 38.2 per cent, while the participation of property had
increased to 61.8 per cent. During 1975, 'average real wages are
estimated to have declined by almost 8 per cent', according to the
International Monetary Fund. It is probable that these regressive trends
in income distribution have continued during 1976. What it means is that
during the last three years several billions of dollars were taken from
the pockets of wage earners and placed in those of capitalists and
landowners. These are the economic results of the application in Chile
of the prescription proposed by Friedman and his group.


The economic policies of the Chilean junta and its results have to be
placed in the context of a wide counter-revolutionary process that aims
to restore to a small minority the economic, social and political
control it gradually lost over the last thirty years, and particularly
in the years of the Popular Unity Government.

Until 11 September 1973, the date of the coup, Chilean society had been
characterized by the increasing participation of the working class and
its political parties in economic and social decision making. Since
about 1900, employing the mechanisms of representative democracy,
workers had steadily gained new economic, social and political power.
The election of Salvador Allende as President of Chile was the
culmination of this process. For the first time in history a society
attempted to build socialism by peaceful means. During Allende's time
in office there were marked improvement in the conditions of employment,
health, housing, land tenure and education of the masses. And as this
occurred, the privileged domestic groups and the dominant foreign
interests perceived themselves to be seriously threatened.

Despite strong financial and political pressure from abroad and efforts
to manipulate the attitudes of the middle class by propaganda, popular
support for the Allende government increased significantly between 1970
and 1973. In March 1973, only five months before the military coup,
there were Congressional elections in Chile. The political parties in
the Popular Unity increased their share of the votes by more than 7
percentage points over their totals in the Presidential election of
1970. This was the first time in Chilean history that the political
parties supporting the administration in power gained votes during a
midterm election. The trend convinced the national bourgeoisie and its
foreign supporters that they would be unable to recoup their privileges
through the democratic process. That is why they resolved to destroy
the democratic system and the institutions of the state, and, through
an alliance with the military, to seize power by force.

The military coup opened the way to one of the most extraordinary
examples of social and political regression in this century. In a
matter of hours the generals had unequivocally defined their roles
as restorers of the old social and economic order. Repression and
terror against those who had supported the Popular Unity went along
with a careful and systematic process of purges and revision of goals
in the political, the economic and the cultural spheres designed to
return to the traditional dominant classes their lost predominance.
It was soon apparent that this amounted to a phenomenon of massive class
revenge of the rich against the poor who had dared to imagine a society
of their own. As a dramatic illustration of this stands the fact, proven
by Church reports, that more than 80 per cent of those 100,000 Chileans
detained are workers or peasants.

In such a context, concentration of wealth is no accident, but a rule;
it is not the marginal outcome of a difficult situation - as the junta
would like the world to believe - but the base for a social project; it
is not an economic liability but a temporary political success. Their
real failure is not their apparent inability to redistribute wealth or
to generate a more even path of development (these are not their
priorities) but their inability to convince the majority of Chileans
that their policies are reasonable and necessary. In short, they have
failed to destroy the consciousness of the Chilean people. The economic
plan has had to be enforced, and in the Chilean context that could be
done only by the killing of thousands, the establishment of
concentration camps all over the country, the jailing of more than
100,000 persons in three years, the closing of trade unions and
neighbourhood organizations, and the prohibition of all political
activities and all forms of free expression.

While the 'Chicago boys' have provided an appearance of technical
respectability to the LAISSEZ-FAIRE dreams and political greed of the
old landowning oligarchy and upper bourgeoisie of monopolists and
financial speculators, the military has applied the brutal force 
required to achieve those goals. Regression for the majorities and
'economic freedom' for small privileged groups are in Chile two sides
of the same coin.

There is, therefore, an inner harmony between the two central priorities
announced by the junta after the coup in 1973: the 'destruction of the
Marxist cancer' which has come to mean not only the repression of the
political parties of the Left, but also the destruction of all labour
organizations democratically elected and all opposition, including
Christian-Democrats and church organisations -an the establishment of a
free 'private economy' and the control of inflation a la Friedman.

It is nonsensical, consequently, that those who inspire, support or
finance that economic policy should try to present their advocacy as
restricted to 'technical considerations', while pretending to reject
the system of terror it requires to succeed.

The truth behind it all is that the financial and monopolist bourgeoisie
of our dependent countries, and their mentors and masters in the
imperialist centre, have realized that in most of these societies,
particularly in those with strong working-class organizations, not only
socialist but also liberal democracy, so enthusiastically praised in
the past, cannot be allowed anymore. Experience has proved to them that
even the most restricted forms of bourgeois democracy can be used by
the working class to make significant advances which endanger their
dominant role. In this context, the monopolist bourgeoisie gives up
to all its pretensions of favouring freedom, equality and fraternity,
it rejects constitutional liberties, and supports wholeheartedly the
establishment of fascist regime resting on a system of terror directed
against the working class and its political parties. The old bourgeois
notion of public liberties is reduced to the freedom of the few to
speculate and exploit. That is the kind of freedom that requires terror
as a counterpart.


1  Ann Crittenden, 'Loans from Abroad Flow to Chile's Rightist
                    Junta', New York Times (20 February 1976)
2  The Times (17 May 1976)
3  Newsweek (14 June 1976)
4  'A Draconian Cure for Chile's Economic Ills', Business Week
                                                 (12 January 1976)
5  Wall Street Journal (2 November 1973)
6  El Mercurio, Santiago (23 March 1976)
7  Que Pasa, Chilean weekly (3April 1975)
8  Politica y Espiritu (No. 356, 1975)
9  R.J. Barnet and R.E. Muller, 'Global Reach: the power of the
        multinational corporation', (London, 1975)
10  La Tercera (9 April 1975)
11 Que Pasa (10 April 1975)
12 New Politics (Winter 1976)
13 Quoted by Andre Gunder Frank in a 'Second Open Letter to Milton
   Friedman and Arnold Harberger' (April 1976)
Copyright @ 1976 The Institute of Race Relations