General Pinochet came to power in Chile in a coup which cost the lives of over 10,000 people. The coup brought to an end the socialist government of President Allende and inaugurated an experiment in monetarist economics which Time Magazine described as ""a model of what can be achieved in restructuring an ageing prostrate economy into a streamlined machine."" A decade later, the experiment collapsed and Chile entered the worst economic crisis in its history and Pinochet faced widespread opposition.

Chile: The Pinochet Decade tells the story of the rise and fall of the laissez-faire economic technocrats known as the Chicago Boys, who masterminded the experiment and it analyzes the nature of their alliance with General Pinochet. The book shows how the Chicago Boys promoteed a concept of ""economic liberty"" based on the individual's right to compete in free markets. This could only be implemented through a state with vastly increased powers of repression and surveillance. In this way, manual and white collar workers and the rural and urban poor were forced to accept dramatic falls in their living standards which were a consequence of the model. For the Chicago Boys presupposed a political and economic system in which only the privileged few are actors and notions of social justice do not figure. Chile: The Pinochet Decade traces the failure of the model from the ""shock treatment"" of 1975, in which the economy was massively contracted in order to reduce inflation, through the supposed miracle years of high growth funded by foreign loans, to the bankruptcy and final abandonment of the free market model.

Fragmento. � Reproducci�n autorizada. Todos los derechos reservados.

Chile: The Pinochet Decade

The Rise and Fall of the Chicago Boys

By Phil O'Brien, Jackie Roddick

Practical Action Publishing

Map of Chile, iv, 
1. Chile in Brief, 1, 
2. New and Old Extremisms, 14, 
3. Popular Unity 1970-1973, 23, 
4. The Making of the Coup 1970-1973, 30, 
5. The Transition 1973-1974, 42, 
6. The Shock 1975-1976, 54, 
7. Fool's Gold and Fool's Democracy, 67, 
8. The Roots of Resistance, 88, 
9. The End of the Dream, 97, 
10. The Model in Retrospect, 106, 
Appendix: Human Rights and the Pinochet Decade, 110, 
Bibliography, 118,

CHAPTER 1

Chile in Brief

Chronology

1541 Foundation of Santiago by Pedro de Valdivia.

1818 Chile achieves independence from Spain under leadership of Bernardo O'Higgins and Argentinian San Martin. O'Higgins becomes first president (Director Supremo) of Chile.

1833 New constitution, introduced by Diego Portales, establishes strongly-centralized and authoritarian state.

1879-1883 Bolivia and Peru defeated by Chile in the War of the Pacific. Bolivia loses access to the sea, and Chile gains possession of the Atacama desert, main source of the world's supply of nitrates.

1891 Defeat of President Jose Manuel Balmaceda in brief civil war.

1907 Massacre of 3,000 miners by troops after demonstration in nitrate port of Iquique.

1920 Arturo Alessandri elected as president.

1922 Communist Party of Chile officially formed.

1927-1931 Military dictatorship of Colonel Carlos Iba�ez.

1932 12-day 'Socialist Republic' of Colonel Marmaduke Grove. Arturo Alessandri elected as president for second time.

1933 Foundation of Chilean Socialist Party.

1938 Election of Popular Front government, with a programme of state investment and state protection for national industry, under joint banner of Radical, Communist and Socialist Parties.

1948Ley Maldita, or the 'Evil Law', bans the Communist Party.

1952-1958 Second administration of Carlos Iba�ez.

1958 Salvador Allende, presidential candidate for the Popular Action Front (FRAP), loses to National Party candidate, Jorge Alessandri, by 33,000 votes.

1964 Eduardo Frei, Christian Democrat candidate, wins election with 56 per cent of the vote, offering 'revolution in liberty' as an alternative to Marxist socialism.

1970 Salvador Allende, candidate for Popular Unity, wins presidential elections with 36 per cent of the vote, and becomes first ever elected Marxist president.

1973 Military coup. Military junta composed of Leigh, Merino, Pinochet and Mendoza takes power; Popular Unity parties banned; others suspended. National trade union confederation CUT dissolved. Congress dissolved; Comit� Pro Paz created by Catholic and Lutheran Churches to deal with victims of repression. Junta organizes legislative committees: army controls defence and Leniz named minister of economy.

1974 DINA, Chile's secret police, created, solely responsible to Pinochet, who now becomes officially head of junta; El Mercurio outlines two alternative measures to reduce inflation: gradualism or economic 'shock treatment'; Christian Democrat advisers leave government; ban on union elections. Wage freeze continues, but old law of contract reinstated against employers' opposition; General Prats murdered in Buenos Aires. Miguel Enriquez, leader of MIR, killed in Santiago; El Mercurio comes out in favour of shock treatment in November. Privatization of banks announced; Pinochet becomes president of Chile in December.

1975 General Bonilla killed in air crash. Friedman and Harberger visit Chile to support 'shock treatment' to reduce inflation; cabinet reshuffle, consolidating 'Chicago' hold on government. Minister of finance Cauas announces introduction of 'shock treatment'; Movement of National Unity created by Declaration of Codegua, in face of growing economic emergency and world hostility to Chile; arrest of trade unionists from El Salvador copper mine. Ministry of interior (responsible to Pinochet) takes over control of trade union affairs from General Diaz and air force; Academy for National Security created; Leigh declares social cost of Chicago Plan too high; assassination attempt on left-wing Christian Democrat exile Bernardo Leighton in Rome; Comit�: Pro Paz dissolved, Vicaria de Solidaridad created; withdrawal of British ambassador after torture of Sheila Cassidy, a British doctor.

1976 Cabinet reshuffle: air force General Diaz replaced by Chicago supporter Sergio Fernandez at ministry of labour; El Mercurio reports 20 minute strike attempt at Chuquicamata copper mine; Group of Ten right-wing Christian Democrat trade union leaders emerge into open with public letter to Fernandez; Letelier murdered in Washington; CNS made up of Marxists and leftwing Christian Democrats makes its first public appearance with another open letter to Fernandez; pro-government union confederation UNTRACH formed; Chile withdraws from Andean Pact.

1977 All political parties made illegal; British mediation awards Chile legal title to three disputed islands in Beagle Channel; DINA disbanded in wake of Letelier scandal, replaced by CNI; Bardon (Chicago supporter) president of central bank, says Chile will increase its foreign debt to speed up battle against inflation; Friedrich Von Hayek, father of free-market 'Chicago model' visits Chile; economics minister De Castro announces reduction of virtually all tariffs to 10 per cent.

1978 State of siege changed to state of emergency; Fernandez becomes minister of interior. Hernan Cubillos becomes minister of foreign relations with mandate to end Chile's diplomatic isolation; members of US AFL-CIO visit Chile at the invitation of the Group of Ten; Leigh and eight other air force chiefs retired. Matthei becomes chief of air force and new member of junta; Pinochet holds fourth mass meeting with trade union leaders organized by Secretario de los Gremios; Manuel Contreras indicted for murder of Letelier. Argentina calls up reserves and sends troops to Chilean border. Pinochet gives in to demands for union elections, and allows them in private sector. CNS federations dissolved; Vatican's offer to mediate the Beagle issue is accepted, after church in Chile and Argentina organizes protest demonstrations against war; US unions announce plan to organize a transport boycott of Chilean goods; first public discussion of the 'disappeared' of 1973 after bodies are found at Lonquen. Cabinet reshuffle: Fernandez's deputy at the labour ministry is replaced by Chicago Boy Jose Pi�era, completing the Chicago revolution.

1979 Pi�era promises restoration of trade union rights, an end to police surveillance of trade unions. Proposed US union boycott is lifted; collective bargaining begins for first time since the coup; size of US Embassy in Santiago cut as protest over government's failure to extradite Contreras.

1980 Government wins strike at El Teniente copper mine, seen as a victory for Chicago-style Labour Plan; protest march by student doctors unable to get jobs; Pinochet's trip to Philippines cancelled hours before his arrival; Cubillos is sacked as foreign minister; in first free university elections, opposition students win two thirds of vote; civil police investigating tax frauds by DINA officers receive death threats; assassination of intelligence officer, Vergara, leads to new duro gains in security, as Mena, a supporter of liberalization, is replaced by duro General Gordon at CNI. Ex-DINA head Contreras welcomes appointment; disillusioned Fatherland and Freedom leader founds Popular Nationalist Movement, capitalizing on discontent of small farmers in south; opposition wins easily in first genuine union elections. Plebiscite on new constitution, Pinochet wins by large majority; duros given go-ahead to create new Civic-Military Movement to support government.

1981

Feb. Reagan lifts Carter restrictions on US government finance to Chile.

march New constitution comes into effect. ODEPLAN announces plans to break up state monopolies.

April Four-week strike at El Teniente.

May Jorge Ross' business empire, based on CRAV sugar refinery, collapses, sending shock waves through financial community.

July CNS leaders Bustos and Guzman imprisoned.

Sept. Open disputes between duros and blandos in government over new mining code. Four opposition politicians expelled for trying to create a political force of the centre.

Nov. Government takes over four banks and four finance companies, arresting three prominent financiers.

Dec. Dispute among blandos. Chicago Boy Pi�era, minister of mining, calls for a 10 to 15 per cent devaluation and higher import tariffs. He is replaced. Pinochet says Chicago model to continue, but duro General Danus brought into ODEPLAN as a gesture to economic nationalists.

1982

Jan. Eduardo Frei, leader of the Christian Democrats, dies. Thousands march behind funeral procession chanting antigovernment slogans.

Feb. Moderate trade union leader Tucapel Jimenez, of the public employees' union ANEF, assassinated after calling for a united trade union front.

April Pinochet declares Chile neutral in Falklands/Malvinas conflict despite constant rumours of secret pacts between Chile and the UK; cabinet re-shuffle; Fernandez is replaced at the interior ministry by Montero Marx, and duros Generals Danus and Frez become minister of the economy and minister of ODEPLAN respectively.

May Entire executive committee of the CNS arrested; Edwards takes over the editorship of El Mercurio.

June Peso devalued by 18 per cent, despite prior denials.

July IMF offers standby credit of US$! billion to prevent collapse of banking system; guerrilla attack blacks out Valparaiso for four hours.

August Central bank steps in to buy private sector's bad debts of US$1 billion; cabinet reshuffle, Danus and Frez resign, and Rolf Liiders, Chicago economist and head of BHC business empire, assumes ministries of economy and finance; unemployment officially stands at 24 per cent.

Sept. Four different exchange rates are introduced in an effort to protect banks and business empires with huge private debts; demonstrations in Santiago and Valparaiso, 70 arrested.

Nov. CNS offices raided; national debt reaches US$14 billion; negotiations begin with IMF for US$850 million loan.

Dec. 2-3 Massive demonstrations in Santiago against government economic policies; CNS leader Manuel Bustos and construction workers leader Hector Cuevas, together with Carlos Podlech of the right-wing Wheat Growers Association expelled.

8 Hunger strike by relatives of the disappeared.

15 Co-ordinated demonstrations in Santiago, Valparaiso and Concepci�n, 200 arrested; police raids on shanty-towns in Santiago, 1,500 arrested; four main trade union organizations present a single charter of demands to the government.

1983

Jan. IMF agrees package of US$850 million; government take over nine key banks and financial institutions; BHC empire forced into liquidation by government; nine former congressmen of the National Party criticize regime's economic policies.

Feb. 90-day moratorium announced pending agreement on the rescheduling of US$2.8 billion debt; cabinet re-shuffle, Carlos Caceros becomes fourth finance minister in 12 months; press censorship re-introduced; General Sinclair takes over as Pinochet's second-in-command.

March Caceres seeks extra US$1.2 billion Joan from commercial banks; broad opposition front of political parties (except Communists) formed; 200 arrested after clashes between police and demonstrators; import tariffs doubled to 20 per cent; 'democratic manifesto' signed by broad spectrum of parties.

April SNA warns that free market policies in agriculture have led to a massive shortage in basic foods.

May 1 May Day demonstrations in Santiago, 76 arrested.

11 National day of protest called by the copper workers trade union (CTC) attracts widespread support from all sectors. Two civilians killed, 150 injured and 600 arrested; Pinochet advocates the formation of pro-government civilian-military movement; US$480 million bridging loan requested to meet short-term cash shortage.

June 14 Second day of national protest; more than a thousand arrests, and three shot dead; CTC president, Rodolfo Segue) also arrested.

17 24-hour protest strike held by copper workers.

22 Adolfo Quinteros, leader of the truckowners federation, arrested.

23-26 General Strike.

July 10 Three leaders of the Christian Democrats, including Gabriel Valdes, arrested and held for five days.

12 Third day of national protest; army used to clear the streets for the first time since the coup.

Political Parties

After the coup all parties forming the Unidad Popular (Popular Unity) were banned, together with the MIR. All the remaining parties, the National Party, the Christian Democrats, and two small fascist groups, were considered 'in recess', and in March 1977 they were also dissolved. Since then no political parties have been officially allowed to participate in Chilean politics. Those parties which existed prior to the coup and are known to exist either in Chile or in exile in May 1983 are:

Popular Unity Parties

Partido Comunista de Chile (Communist Party)

Formed out of the Socialist Workers Party and officially founded in 1922 by Luis Emilio Recabarren. A Marxist-Leninist party, it has historically enjoyed a strong presence in the working class and trade union movement. Strongly pro-Soviet in ideology. Formed Popular Front of 1938 with Socialist and Radical parties, and was banned from 1948-1958. One of the main forces behind the formation of Popular Unity in 1969. It pursued a moderate line, including the pursuit of an alliance with the Christian Democrats all through the Allende period, which led to strong disagreements with the MIR and the left wing of the Socialist party. Official policy after the coup was 'to retreat in order to save the cadres and the organization'. Believed to have considerable presence in the CNS. After 1980 plebiscite joined forces with the MIR in advocating armed opposition to the Pinochet government as a viable tactic. Proposes establishment of provisional government to replace Pinochet.

Leader: Luis Corvalan (in exile).

Partido Socialista de Chile (Socialist Party)

Founded in 1933, the other main Marxist party with a large working class base. Affiliated to no international grouping. Throughout its history, the party has suffered numerous divisions. From 1948 onwards, two broad currents, the 'revolutionary' (who advocate an immediate transition to socialism) and the more moderate or 'populist' have emerged. Salvador Allende, usually regarded as a moderate, stood as Socialist Party candidate in 1952, 1958 and 1964, and finally won in 1970. Through the Popular Unity years, Allende and his supporters tended to share Communist Party positions, while the group led by Carlos Altamirano advocated a more radical line. Heavily repressed after the coup, the party has suffered badly from a series of disputes, splits and lack of communication between the party in Chile and the leadership in exile. The two most important groups are led by Clodomiro Almeyda (foreign secretary in the Popular Unity government), which has preserved an underground apparatus in Chile, and (up until 1981) Carlos Altamirano (ex-secretary general of the party), which rejects the Eastern European model of socialism — the latter is now led by Jorge Arrate (in exile). There are several other groups within the Socialist Party, the majority of which support the Altamirano faction.

Movimiento de Accion Popular Unido (MAPU) (Movement for United Popular Action)

Formed in 1969 as a left-wing breakaway from the Christian Democrats, after disagreement over the latter's agrarian reform. Supporter of Popular Unity, its first secretary general, Jacques Chonchol, became minister of agriculture in the Allende government. At its first congress of 1970 declared itself a Marxist party. After March 1973 elections, the party split into MAPU-OC (Obrero-campesino, worker-peasant), which supported Communist Party positions and MAPU, which advocated more revolutionary positions.

Leaders: Jaime Gazmuri (MAPU-OC), Oscar Garreton (MAPU).

Izquierda Cristiana (Christian Left)

Broke away from Christian Democrats in June 1971 after electoral pact between Christian Democrats and National Party. Non-Marxist party. Supporter of Popular Unity.

Leader: Luis Maera (in exile).

Partido Radical (Radical Party)

Formed in 1862 as a reaction against oligarchic domination of the Central Valley landowners. Historically its political base has come from white-collar workers and state employees. Formed the Popular Front of 1938 with the Socialist and Communist Parties. Won elections of 1938, 1942 and 1946. In 1969 minority of party split to form Democracia Radical (which supported the National Party candidate in 1970), while the majority of the party supported the Popular Unity. In September 1971, the anti-Marxist Partido de Izquierda Radical (Radical Left Party) was formed which later left the Popular Unity in 1972.

(Continues...)

Excerpted from Chile: The Pinochet Decade by Phil O'Brien, Jackie Roddick. Copyright � 1983 Latin America Bureau (Research and Action) Ltd. Excerpted by permission of Practical Action Publishing.
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