The Unidad Popular and the Pinochet Dictatorship

Transcription

1 The Unidad Popular and the Pinochet Dictatorship

2 Also by Patricio Meller WESTERN HEMISPHERE TRADE INTEGRATION: A Canadian Latin American Dialogue (co-editor with R. G. Lipsey) ADJUSTMENT AND EQUITY IN CHILE EXTERNAL SHOCKS AND STABILIZATION MECHANISMS (co-editor with Eduardo Engel) THE LATIN AMERICAN DEVELOPMENT DEBATE: Neostructuralism, Monetarism, and Adjustment Processes (editor) DIVERGING PATHS: A Century of Latin American and Scandinavian Economic Development (co-editor with Magnus Blomström)

3 The Unidad Popular and the Pinochet Dictatorship A Political Economy Analysis Patricio Meller Professor of Economics University of Chile Santiago Translated by Tim Ennis

4 First published in Great Britain 2000 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN ISBN (ebook) DOI / First published in the United States of America 2000 by ST. MARTIN S PRESS, LLC, Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y ISBN Library of Congress Cataloging-in-Publication Data Meller, Patricio. The Unidad Popular and the Pinochet dictatorship : a political economy analysis / Patricio Meller. p. cm. Includes bibliographical references and index. ISBN Chile Economic conditions Chile Economic conditions Chile Politics and government Chile Politics and government I. Title. HC192.M '0646 dc Patricio Meller 2000 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources

5 Contents List of Tables and Figures Preface vi ix 1 The Road to Socialism of the Unidad Popular 1 Brief review of the social issue 1 Brief review of the political issue 10 The two governments prior to Unidad Popular 21 The Unidad Popular view of the Chilean economy 27 The macroeconomic situation during the Unidad Popular 31 The structural reforms of the Unidad Popular 47 Property rights 56 2 The Economic Model of the Military Dictatorship 61 The destruction of Chilean democracy 61 The structural reforms of the 1970s 75 The economic and financial collapse of The adjustment process of the 1980s 119 The structural reforms of the 1980s 141 Economic freedom and political liberty A Tentative Synthesis 158 The legacy of the Unidad Popular 158 The legacy of the military dictatorship 168 Human rights and historical memory 182 Notes 186 Bibliography 201 Index 216 v

6 List of Tables and Figures Tables 1.1 Relative Wages and Living Costs in Chile, Beginning of the Twentieth Century Land Ownership in Chile, 1925 and Growth and Employment in Chilean Agriculture and GDP, Relative Productivity and Prices in the Agriculture Sector, Chile Chilean Voters and Population, Results of Chilean Parliamentary Elections, Results of Three Chilean Presidential Elections: 1938, 1958 and Principal Macroeconomic Variables during the Alessandri and Frei Governments, Evolution of Unionization in Chile, Number of Strikes and Evolution of Real Wages, Chile Evolution of the Main Macroeconomic Variables, Chile Minimum and Average Real Wages for Blue- and White-Collar Workers, Chile Selected Components of the Balance of Payments, Chile Consolidated Non-Financial Public Sector, Chile Public-sector Employment in Chile, Social Expenditure During the Unidad Popular Government, Chile Quarterly Evolution of the Official and Parallel Exchange Rate, Chile Calculation of Compensation Associated with the Nationalization of Large Copper Mining, Agrarian Reform During the Governments of Frei and Allende, Productive Enterprises under State Control, by Economic Sector, Chile 1970 and vi

7 List of Tables and Figures vii 2.1 Distribution of New Voters, Chile Basic Structural Reforms in the Chilean Economy in the 1970s Time Sequence of the Structural Reforms of the 1970s Indicators of the Chilean Economic Miracle Indicators of the Import Boom, Chile Some Indicators of the Chilean Collapse Balance of Trade, Current Account Balance and Overall Balance of Payments, Chile Six-Monthly Inflation Rates in Chile after Implementation of the Fixed Nominal Exchange Rate Policy: June 1979 June Annual Growth Rates of Chilean Macroeconomic Variables, Selected Financial Sector Indicators, Chile Total Net Capital Flows, Chile Evolution of External Variables Relevant to the Chilean Economy, First Signs of Severe Economic Problems, Chile 1980-I to 1982-II The Working of the Automatic Mechanism, Chile 1980-I to 1982-II Impact of the Automatic Mechanism on the Real Economy, Chile 1980-I to 1982-II Monthly Evolution of the Nominal and Real Exchange Rate in Chile, Net Monthly Foreign Currency Sales by the Central Bank, Daily Rates for the Dollar under the Free Floating and Dirty Floating Systems, August September Evolution of Monetary and Real Sector During Chile, Selected Months Selected Chilean Economic Variables Illustrating Existing Imbalances and Successful Adjustment in the 1980s Main Sources of External Financing, Chile Nominal Devaluation and Inflation, Chile Real Exchange Rate and Real Wage, Chile Nominal Tariffs Following the External Debt Shock, Chile Measure of Real Transfer Abroad, Chile

8 viii List of Tables and Figures 2.26 Quasi-fiscal Subsidies Supplied by the Central Bank, Chile Unemployment and Real Wages, Chile Structure of Unemployment and Employment by Households of Different Income Levels, Greater Santiago, Fiscal Deficit, Employment and Wages in the Public Sector, and Social Spending, Chile, Composition of Social Spending Per Capita, Chile Milk and Near Substitutes Distributed National Nutrition Program, Chile The Second Privatization Process, Chile Privatization of State-Owned Firms, Chile Evolution of Employment in Selected Privatized Firms, Chile Number of Exporting Firms by Amount Exported, Chile Importance of Copper in Chilean Exports, Export Growth Rates, Chile Composition of Tax Revenues, Chile Comparision of the Final Years of the UP and Military Governments Economic and Social Indicators of Four Chilean Governments, Figures 1.1 Right-wing Voters (Parliamentary Elections), Chile Center Voters (Parliamentary Elections), Chile Left-Wing Voters (Parliamentary Elections), Chile

9 Preface Why Allende? Why Pinochet? These two questions are going to trouble several generations of Chileans during the twenty-first century. Is it too soon to start looking for answers? Is a detached assessment of the period between 1970 and 1990 possible? In those 20 years a level of antagonism prevailed that was sufficient to polarize Chilean society. There were two Chiles and two types of Chileans: the good and the bad. The tranquility did not exist to make possible a serene analysis: caricatures abounded indeed, maybe even the country itself was a caricature. The aim of this book is to look beyond such an exaggerated view of things. Incomprehension of the present is associated with an ignorance of what went before: the past clothes the present with sense and significance. 1 The founding characteristics of the ideologies that were predominant in the period were intent on destroying the past and its history. Hence the importance of reconstituting the historical record; for this fulfills a fundamental social role by explaining who we are as a nation, linking the present to our past. For what we are is also what we remember. On the other hand, the objective weight of history, in the Hegelian sense, needs to be balanced by analytical examination to enable the past to be assumed in a mature fashion. 2 Every generation has the duty and the right to ask its own questions of history, or to lay its own particular ghosts and use them as food for reflection and as a source of understanding. 3 The same past will be reinterpreted, therefore, by various generations. The traditional historical method uses a sort of backwards projection through time: historians, located in the present, examine all the existing information to try painstakingly to reconstitute the past that they are studying. Ideally, historians would like to have available a kind of time machine that would transport them back through the centuries, to be able to witness directly the events being analyzed; but obviously this is not possible. That being the case, it is worth posing the following question: what comparative advantages would a researcher have in the year 2099 in understanding the events that occurred in the period ? Assuming progress in the methodology of social science, the analysis in ix

10 x Preface 2099 would be more sophisticated, more at arm s length and more systematic than an analysis undertaken in the present. Yet it would also run the risk of confusing the relevance of different factors, and of not experiencing in their full intensity the circumstances in which the events actually occurred. Someone who is closer, someone who is present and sees with their own eyes someone who is actually there has information and a perception for which there is no substitute. There is a big difference between living through an experience and hearing or reading about it a hundred years later. No doubt historians of the present are susceptible to bias; they reach impassioned judgements that probably lack overall perspective but, in their analysis, what is relevant is sure to take precedence over what is not. How can one stand back from the present to enhance the objectivity of current analysis? Here again, the ideal would be to have a time machine, which this time would transport the historian into the future. As this is not feasible either, the next best alternative a close substitute for time travel would be to travel geographically: a concrete application of the concept of distancing oneself. There are various, not mutually exclusive, procedures for effecting this geographical displacement. The simplest consists of the social scientist physically installing himself abroad in order to analyze what is happening in his or her own country. A second option starts from the assumption that an underdeveloped country like Chile will, in the long run, acquire a degree of maturity, conscience and capacity for selfcriticism similar to that currently seen in developed countries. In this case displacement is mental, by examining the assessment and processing of recent events in Chile by European and North American analysts, or else imitating their reasoning: implicitly one is assuming that a Chilean analyst at the end of the twenty-first century will have a similar perception. A third possibility involves finding experiences similar to that of Chile in in the past history of developed countries; one then can examine the kind of analysis that was carried out 50 to 100 years later. This book makes a major effort to distance itself from recent events, using all the substitutes for a time machine described above, in an attempt to transport the analysis to a middle-of-the-twenty-firstcentury perception. The central aim of the book is not merely to construct an objective reconstruction of what happened; rather, it is to understand and explain why what happened did happen, and to analyze the factors that led to the replacement of one paradigm of knowledge by another,

11 Preface xi diametrically opposed one. Over these 20 years ( ) drastic changes have taken place in the way the Chilean economy is analyzed, and one is interested in understanding why people reasoned one way during a certain period, and what later influenced them to adopt principles that are so different. Why did people believe what they believed, and why did they change their beliefs? This might make it possible to learn to anticipate changes in current beliefs in the future. Each of the first two chapters is a self-contained unit, where I have used as a basis the prevailing literature of the period under analysis. Chapter 1 covers the government of the Unidad Popular. It examines the historical development of the social and political questions, in search of the historical antecedents of the Unidad Popular platform, recognizing that this did not simply come about spontaneously in The outlook of the Unidad Popular and the logic of the structural reforms of that period is contrasted with the resulting economic events. Their attitude to private property and property rights constituted one of the most contentious issues of that time. Chapter 2 deals with the military regime. In view of its beginnings, the analysis has to start with the destruction of Chilean democracy. Then the chapter examines the structural economic reforms, distinguishing, unlike other books and articles on this topic, the reforms carried out in the 1970s from those of the 1980s. In addition, there is an innovative methodological examination of the causes of the economic collapse of The question of economic and political freedom is one of the burning issues of that period. In brief, the predominant issues and questions in each period are the elements that condition the structure of each chapter. The relatively intensive use of the literature written in and confined to each period has the aim of identifying the fundamental ideas and the logical structure of the various arguments: it allows an inside view of how the world was perceived in each period. Finally, Chapter 3 proffers a tentative synthesis from the future, looking back. In other words, the same periods already examined are reviewed anew, but now from the standpoint of the next century, rather than through the lens of the period in question. This leads us to the legacies of the Unidad Popular and the military dictatorship. In the historical memory of the twenty-first century, the human rights violations are sure to occupy a special place. This book has been written over a period of four years. In that time, several articles have been presented and discussed in numerous national seminars and international conferences, and these have

12 xii Preface constituted important back-up material in the writing of the different chapters. I am grateful for the suggestions and discrepancies of those who took part in these academic events: Jorge Arrate, Sergio Bitar, Magnus Blomström, Vittorio Corbo, Sebastián Edwards, Ricardo Ffrench-Davis, Roberto Frenkel, Oscar Godoy, Alexis Guardia, Felipe Larraín, Rolf Lüders, Mats Lundahl, Cecilia Montero, Oscar Muñoz, Martin Paldam, Gabriel Palma, Aníbal Pinto, Francisco Rosende, Andrés Sanfuentes, Sol Serrano and Bo Sodersten. However, the usual caveats apply, and none of these individuals bears any responsibility for the contents of this book; in many cases, their discrepancies served to moderate certain issues or reinforce others. I want to acknowledge, most especially, the valuable comments and constructive suggestions made by Eduardo Engel, who was kind enough to read carefully the final drafts of the first and second chapters. I also wish to express my gratitude for the great efficiency and constant goodwill of Andrea Repetto, who collaborated in the preparation of the book s tables and graphs. The environment prevailing in CIEPLAN during these four years has been a huge stimulus for reflection and analysis, and the presence of an outstanding group of young economists and social scientists contributed to this: Andrea Butelmann, Pilar Romaguera, Raúl E. Sáez, Andrés Gómez-Lobo, Rodrigo Valdés, Andrea Repetto, Sergio Lehmann, Bernardita Escobar, Fernando Lefort, Rodrigo Cifuentes, Dante Contreras, Cecilia Montero, Pablo Halpern, Pablo González, Héctor Schamis, Francisco Aracena, Esteban Jadresic, Miguel Basch, Carlos Budnevich, Pilar Campero, the late Edgardo Bousquet, Pablo García, Juan Jiles, Claudio Bonacic, Mauricio Hidalgo, Marcelo Henríquez and Jaime Soto. Their tremendous capacity, cordiality, spirit of learning and eagerness to understand led to undertaking highly ambitious research tasks. To all of them I want to express my most sincere gratitude. The sustained support for CIEPLAN provided by various organizations has been an important factor in undertaking this lengthy research. I would like specifically to thank the Canadian International Development Agency and the International Development Research Center in Canada; the Andrew W. Mellon Foundation and the Ford Foundation in the United States, as well as SAREC in Sweden. Tim Ennis has done the English translation, while Rosa Jaime has shown infinite patience in diligently typing the numerous drafts and painstakingly making the repeated corrections. To both of them many

13 Preface xiii thanks. Finally, numerous weekends dedicated to studying and writing were always accepted with great understanding in my family; and as if this were not enough, my wife Clary and my children Ilana, Ariel and Alan had to put up with the repeated readings I subjected them to. For their permanent affection and concern at all times, I wish to express my eternal thanks.