Chile's Past and Present

Source: Internet

By Naveed Qazi | Editor, Globe Upfront

Chile has been known in history as the world’s second-largest copper mine pit. There was a time when the copper minefields at Chuquicamata, El Salvador mine and El Teniente became to be known as “Chile’s salary.” The area had self-sustained settlements, own rail networks, schools, stores, and even their own police forces.

Che Guevara’s memoirs, The Motorcycle Diaries, present an anguish of sorts after visiting the place which he had read about only in books, where mining workers were ill-treated by their bosses. When he and his friend, Granada visit the mining country, they meet a homeless communist couple searching for work. “By the light of the single candle … the contracted features of the worker gave off a mysterious and tragic air … the couple, frozen stiff in the desert night, hugging one another, was a live representation of the proletariat of any part of the world,” Che wrote. These moments in Chile ultimately shape up his political consciousness against economic inequalities in Latin America.

Many workers had stained this place with their blood building it. At that time, US multinational corporate monopolies were expeditious and were viewed by many as an imperial domination. In 1971 when Salvador Allende won the election, as a socialist, he wanted to end the problem by the complete nationalisation of Chilean major industries. He had introduced the idea of “excessive profits” of the worldwide profits of these corporations going back to the invested State. The US Department of State viewed it “as a serious infraction to international practice which could damage not only Chile but many developing countries as well.”

However, after the 1973 coup of Allende’s government by the military junta, which was backed by the USA’s CIA changed the political climate. It was mainly because the Communist party in Chile considered Fidel Castro’s way of governance the ideal way of ruling the state’s social and economic system, and the comrades in Chile still enjoy a large following amongst its youth, even today.

However, the ideology was dissolved by the Pinochet regime that adopted a free market model financed by the CIA, guarded by American economists known as the Chicago Boys because most of them had done post-graduate programs in Chicago. Once in government positions, they immediately made several structural reforms, price liberalisation, elimination of trade barriers, privatisation of state-owned companies, monetary expansion and privatisation of social security. Many tainted the primal success of Chile’s economic miracle to its Constitution of 1935 which gave restraints in changing its economic model.

As a result, the Chilean economy improved. The country had also introduced a popular voucher program where students could get an education at private schools with the help of government resources and parental assistance. In the last thirty-five years, poverty fell from 50 percent to 11 percent, per capita income drastically increased and inflation was drastically decreased to 250 percent.  

However, many claim that free-market policies introduced by the Pinochet regime were far less than that of a miracle.  The market output had fallen by 15%, wages dropped to their one-third, and unemployment rose to 20%.  The average GDP was 1.5% which was lower than the average of GDP of 4.5 % in other Latin American countries between 1970 to 1980. In the same time frame, GDP grew only by 8%, while for Latin America as a whole, it grew at 40%. 

The neo-classical economics of the Pinochet regime made things worse for the labour class, and the domestic industry lost its way with generating more local jobs. About 113 protestors were killed in the early 1980’s. It also allowed an overhaul of the labour system, eliminating collective bargaining and allowing massive dismissal of workers. 

In Pinochet’s rule, only the rich became more wealthy and enjoyed liberties. Economic liberty and social justice did not exist, in contrary to arguments which were made about the country’s economic miracle. Freedom of the press was not allowed against the privileged classes. Even the education system is set to change which many regard as cruel. In Chile, police state controlled the interests of the wealthy capitalists. Only those with power and wealth did well with the experiment.

A political scientist would often ponder: are liberal policies better to structure institutions or there is a dire need for social equality? Poor depend upon investments and job creation to make their bread. 

These experiences, if taken note of, could actually help any developing country in a healthy economic progression. But things could turn good for Chile in the next four to five years. The former President, Michelle Bachelet proposes a welfare state that will provide all benefits to its people, and will replace the market as the engine of growth. Some proposals include takeover of education by the government, dramatic increase in tax for corporations, switching the social security system to betterment.