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<TITLE>C.11 Doesn't Chile prove that the free market benefits everyone? 
</TITLE>
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<p>

<H1>C.11 Doesn't Chile prove that the free market benefits 
everyone?</h1> 
<p>
This is a common right-wing "Libertarian" argument, one which is 
supported 
by many other supporters of "free market" capitalism. Milton Friedman, 
for 
example, stated that Pinochet <i>"has supported a fully free-market 
economy 
as a matter of principle. Chile is an economic miracle."</i> 
[<b>Newsweek</b>, Jan, 
1982] This viewpoint is also commonplace in the more mainstream right,
with US President George Bush praising the Chilean economic record
in 1990 when he visited that country.
<p>
General Pinochet was the figure-head of a military coup in 1973 against 
the democratically elected left-wing government led by President 
Allende, a 
coup which the CIA helped organise. Thousands of people were murdered 
by the forces of "law and order" during the coup and Pinochet's forces 
<i>"are conservatively estimated to have killed over 11 000 people in 
his first 
year in power."</i> [P. Gunson, A. Thompson, G. Chamberlain, <b>The 
Dictionary 
of Contemporary Politics of South America</b>, Routledge, 1989, p. 228] 
<p>
The installed police state's record on human rights was denounced as 
barbaric 
across the world. However, we will ignore the obvious contradiction in 
this 
"economic miracle", i.e. why it almost always takes 
authoritarian/fascistic 
states to introduce "economic liberty," and concentrate on the economic 
facts 
of the free-market capitalism imposed on the Chilean people.
<p>
Working on a belief in the efficiency and fairness of the free market,
Pinochet desired to put the laws of supply and demand back to work, and
set out to reduce the role of the state and also cut back inflation. 
He,
and <i><b>"the Chicago Boys"</i></b> -- a group of free-market 
economists -- thought
what had restricted Chile's growth was government intervention in the
economy -- which reduced competition, artificially increased wages, and
led to inflation. The ultimate goal, Pinochet once said, was to make 
Chile
<i>"a nation of entrepreneurs."</i>
<p>
The role of the Chicago Boys cannot be understated. They had a close
relationship with the military from 1972, and according to one expert
had a key role in the coup:
<p><blockquote>
<i>"In August of 1972 a group of ten economists under the leadership of
de Castro began to work on the formulation of an economic programme 
that would replace [Allende's one]. . . In fact, the existence of the 
plan
was essential to any attempt on the part of the armed forces to 
overthrow
Allende as the Chilean armed forces did not have any economic plan of 
their own."</i> [Silvia Bortzutzky, <i>"The Chicago Boys, social 
security and 
welfare in Chile"</i>, <b>The Radical Right and the Welfare State</b>, 
Howard 
Glennerster and James Midgley (eds.), p. 88]
</blockquote><p>
It is also interesting to note that <i>"[a]ccording to the report of 
the United 
States Senate on covert actions in Chile, the activities of these 
economists 
were financed by the Central Intelligence Agency (CIA)"</i> 
[Bortzutzky, 
<b>Op. Cit.</b>, p. 89] 
<p>
Obviously some forms of state intervention were more acceptable than 
others.
<p>
The actual results of the free market policies introduced by the 
dictatorship 
were far less than the "miracle" claimed by Friedman and a host of 
other 
"Libertarians." The initial effects of introducing free market policies
in 1975 was a shock-induced depression which resulted in national 
output
falling buy 15 percent, wages sliding to one-third below their 1970 
level
and unemployment rising to 20 percent. [Elton Rayack, <b>Not so Free to 
Choose</b>, p. 57] This meant that, in per capita terms, Chile's GDP 
only 
increased by 1.5% per year between 1974-80. This was considerably less 
than the 2.3% achieved in the 1960's. The average growth in GDP was 
1.5%
per year between 1974 and 1982, which was lower than the average Latin 
American growth rate of 4.3% and lower than the 4.5% of Chile in the 
1960's. 
Between 1970 and 1980, per capita GDP grew by only 8%, while for Latin 
America as a whole, it increased by 40%. Between the years 1980 and 
1982 
during which all of Latin America was adversely affected by depression 
conditions, per capita GDP fell by 12.9 percent, compared to a fall of 
4.3 percent for Latin America as a whole. [<b>Op. Cit.</b>, p. 64] 
<p>
In 1982, after 7 years of free market capitalism, Chile faced yet 
another 
economic crisis which, in terms of unemployment and falling GDP was
even greater than that experienced during the terrible shock treatment
of 1975. Real wages dropped sharply, falling in 1983 to 14 percent 
below what they had been in 1970. Bankruptcies skyrocketed, as did 
foreign debt and unemployment. [<b>Op. Cit.</b>, p. 69] By 1983, the 
Chilean
economy was devastated and it was only by the end of 1986 that Gross 
Domestic Product per capita (barely) equalled that of 1970. [Thomas 
Skidmore and Peter Smith, <i>"The Pinochet Regime"</i>, pp. 137-138, 
<b>Modern Latin America</b>]
<p>
Faced with this massive collapse of a <i>"free market regime designed 
by
principled believers in a free market"</i> (to use Milton Friedman's 
words
from an address to the "Smith Centre," a conservative Think Tank at 
Cal State entitled <i>"Economic Freedom, Human Freedom, Political
Freedom"</i>) the regime organised a massive bailout. The "Chicago 
Boys"
resisted this measure until the situation become so critical that they
could not avoid it. The IMF offered loans to Chile to help it out of
mess its economic policies had helped create, but under strict 
conditions. The total bailout cost 3 per cent of Chile's GNP for
three years, a cost which was passed on to the taxpayers. This follows
the usual pattern of "free market" capitalism -- market discipline for
the working class, state aid for the elite. During the "miracle," the
economic gains had been privatised; during the crash the burden for
repayment was socialised.  
<p>
The Pinochet regime <b>did</b> reduce inflation, from around 500% at 
the time
of the CIA-backed coup (given that the US undermined the Chilean 
economy
-- <i>"make the economy scream"</i>, Richard Helms, the director of the 
CIA -- 
high inflation would be expected), to 10% by 1982. From 1983 to 1987, 
it 
fluctuated between 20 and 31%. The advent of the "free market" led to 
reduced 
barriers to imports <i>"on the ground the quotas and tariffs protected 
inefficient
industries and kept prices artificially high. The result was that many 
local firms lost out to multinational corporations. The Chilean 
business 
community, which strongly supported the coup in 1973, was badly 
affected."</i> [Skidmore and Smith, <b>Op. Cit.</b>] 
<p>
The decline of domestic industry had cost thousands of better-paying 
jobs. The ready police repression made strikes and other forms of
protest both impractical and dangerous. According to a report by the 
Roman 
Catholic Church 113 protesters had been killed during social protest 
against 
the economic crisis of the early 1980s, with several thousand detained 
for 
political activity and protests between May 1983 and mid-1984. 
Thousands 
of strikers were also fired and union leaders jailed. [Rayack, <b>Op. 
Cit.</b>, 
p. 70] The law was also changed to reflect the power property owners 
have
over their wage slaves and the <i>"total overhaul of the labour law 
system 
[which] took place between 1979 and 1981. . . aimed at creating a 
perfect 
labour market, eliminating collective bargaining, allowing massive 
dismissal 
of workers, increasing the daily working hours up to twelve hours and 
eliminating the labour courts."</i> [Silvia Borzutzky, <b>Op. Cit.</b>, 
p. 91]
Little wonder, then, that this favourable climate for business 
operations 
resulted in generous lending by international finance institutions.
<p>
By far the hardest group hit was the working class, particularly the 
urban
working class. By 1976, the third year of Junta rule, real wages had 
fallen 
to 35% below their 1970 level. It was only by 1981 that they has risen 
to 97.3% of the 1970 level, only to fall again to 86.7% by 1983. 
Unemployment,
excluding those on state make-work programmes, was 14.8% in 1976, 
falling
to 11.8% by 1980 (this is still double the average 1960's level) only 
to
rise to 20.3% by 1982. [Rayack, <b>Op. Cit.</b>, p. 65]. Unemployment 
(including 
those on government make-work programmes) had risen to a third of the 
labour 
force by mid-1983. By 1986, per capita consumption was actually 11% 
lower 
than the 1970 level. [Skidmore and Smith, <b>Op. Cit.</b>] Between 1980 
and 
1988, the real value of wages grew only 1.2 percent while the real 
value 
of the minimum wage declined by 28.5 percent. During this period, urban 
unemployment averaged 15.3 percent per year. [Silvia Bortzutzky, 
<b>Op. Cit.</b>, p. 96] Even by 1989 the unemployment rate was still at 
10% (the
rate in 1970 was 5.7%) and the real wage was still 8% lower than in 
1970. 
Between 1975 and 1989, unemployment averaged 16.7%. In other words, 
after nearly 15 years of free market capitalism, real wages had still 
not 
exceeded their 1970 levels and unemployment was still higher. As would
be expected in such circumstances the share of wages in national income 
fell from 42.7% in 1970 to 33.9% in 1993. Given that high unemployment 
is often attributed by the right to strong unions and other labour 
market 
"imperfections," these figures are doubly significant as the Chilean 
regime, 
as noted above, reformed the labour market to improve its 
"competitiveness."
<p>
Another consequence of Pinochet's neo-classical monetarist policies 
<i>"was 
a contraction of demand, since workers and their families could afford 
to
purchase fewer goods. The reduction in the market further threatened 
the
business community, which started producing more goods for export and 
less
for local consumption. This posed yet another obstacle to economic 
growth
and led to increased concentration of income and wealth in the hands of 
a
small elite."</i> [Skidmore and Smith, <b>Op. Cit.</b>]
<p>
It is the increased wealth of the elite that we see the true "miracle" 
of
Chile. According to one expert in the Latin American neo-liberal 
revolutions,
the elite <i>"had become massively wealthy under Pinochet"</i> and when 
the leader 
of the Christian Democratic Party returned from exile in 1989 he said 
that 
economic growth that benefited the top 10 per cent of the population 
had 
been achieved (Pinochet's official institutions agreed). [Duncan Green, 
<b>The Silent Revolution</b>, p. 216, Noam Chomsky, <b>Deterring 
Democracy</b>, 
p. 231] In 1980, the richest 10% of the population took in 36.5% of the
national income. By 1989, this had risen to 46.8%. By contrast, the 
bottom 50% of income earners saw their share fall from 20.4% to 16.8%
over the same period. Household consumption followed the same pattern.
In 1970, the top 20% of households had 44.5% of consumption. This
rose to 51% in 1980 and to 54.6% in 1989. Between 1970 and 1989, 
the share going to the other 80% fell. The poorest 20% of households
saw their share fall from 7.6% in 1970 to 4.4% in 1989. The next 20%
saw their share fall from 11.8% to 8.2%, and middle 20% share fell from 
15.6% to 12.7%. The next 20% share their share of consumption fall
from 20.5% to 20.1%.
<p>
Thus the wealth created by the Chilean economy in during the Pinochet 
years did <b>not</b> "trickle down" to the working class (as claimed 
would 
happen by "free market" capitalist dogma) but instead accumulated 
in the hands of the rich. As in the UK and the USA, with the 
application
of "trickle down economics" there was a vast skewing of income 
distribution in favour of the already-rich.  That is, there has 
been a 'trickle-up' (or rather, a <b>flood</b> upwards). Which is 
hardly 
surprising, as exchanges between the strong and weak will favour the 
former (which is why anarchists support working class organisation and 
collective action to make us stronger than the capitalists).
<p>
In the last years of Pinochet's dictatorship, the richest 10 percent of 
the rural population saw their income rise by 90 per cent between 1987 
and 1990. The share of the poorest 25 per cent fell from 11 per cent to 
7 per cent. [Duncan Green, <b>Op. Cit.</b>, p. 108] The legacy of 
Pinochet's social 
inequality could still be found in 1993, with a two-tier health care 
system 
within which infant mortality is 7 per 1000 births for the richest 
fifth of 
the population and 40 per 1000 for the poorest 20 per cent. 
[<b>Ibid.</b>, p. 101]
<p>
Per capita consumption fell by 23% from 1972-87. The proportion of the 
population below the poverty line (the minimum income required for 
basic 
food and housing) increased from 20% to 44.4% between 1970 and 1987. 
Per capita health care spending was more than halved from 1973 to 1985, 
setting off explosive growth in poverty-related diseases such as 
typhoid, 
diabetes and viral hepatitis. On the other hand, while consumption for 
the 
poorest 20% of the population of Santiago dropped by 30%, it rose by 
15% for the richest 20%. [Noam Chomsky, <b>Year 501</b>, pp. 190-191] 
The 
percentage of Chileans without adequate housing increased from 27 to 
40 percent between 1972 and 1988, despite the claims of the government 
that it would solve homelessness via market friendly policies.
<p>
In the face of these facts, only one line of defence is possible on the
Chilean "Miracle" -- the level of economic growth. While the share
of the economic pie may have dropped for most Chileans, the right
argue that the high economic growth of the economy meant that they
were receiving a smaller share of a bigger pie. We will ignore the well
documented facts that the <b>level</b> of inequality, rather than 
absolute 
levels of standards of living, has most effect on the health of a 
population and that ill-health is inversely correlated with income 
(i.e.
the poor have worse health that the rich). We will also ignore other
issues related to the distribution of wealth, and so power, in a 
society
(such as the free market re-enforcing and increasing inequalities via 
"free exchange" between strong and weak parties, as the terms of any
exchange will be skewed in favour of the stronger party, an analysis 
which the Chilean experience provides extensive evidence for with
its "competitive" and "flexible" labour market). In other words, growth 
without equality can have damaging effects which are not, and cannot 
be, indicated in growth figures. 
<p>
So we will consider the claim that the Pinochet regime's record on 
growth makes it a "miracle" (as nothing else could). However, when 
we look at the regime's growth record we find that it is hardly a 
"miracle" 
at all -- the celebrated economic growth of the 1980s must be viewed in 
the light of the two catastrophic recessions which Chile suffered in 
1975 
and 1982. As Edward Herman points out, this growth was <i>"regularly 
exaggerated by measurements from inappropriate bases (like the 
1982 trough)."</i> [<b>The Economics of the Rich</b>] 
<p>
This point is essential to understand the actual nature of Chile's 
"miracle"
growth. For example, supporters of the "miracle" pointed to the period 
1978 
to 1981 (when the economy grew at 6.6 percent a year) or the post 1982-
84 
recession up-swing,. However, this is a case of "lies, damn lies, and 
statistics" as it does not take into account the catching up an economy 
goes through as it leaves a recession. During a recovery, laid-off 
workers 
go back to work and the economy experiences an increase in growth due 
to 
this. This  means that the deeper the recession, the higher the 
subsequent 
growth in the up-turn. So to see if Chile's economic growth was a 
miracle 
and worth the decrease in income for the many, we need to look at whole 
business cycle, rather than for the upturn. If we do this we find that 
Chile 
had the second worse rate of growth in Latin America between 1975 and 
1980. The average growth in GDP was 1.5% per year between 1974 and 
1982, which was lower than the average Latin American growth rate of 
4.3% and lower than the 4.5% of Chile in the 1960's. 
<p>
Looking at the entire Pinochet era we discover that only by 1989 -- 14 
years into the free-market policies - did per capita output climb back 
up to the level of 1970. Between 1970 and 1990, Chile's total GDP 
grew by a decidedly average 2% a year. Needless to say, these years
also include the Allende period and the aftermath of the coup and so,
perhaps, this figure presents a false image of the regime's record. If 
we look at the 1981-90 period to (i.e. during the height of Pinochet's 
rule, beginning 6 years after the start of the Chilean "Miracle"), the 
figure is <b>worse</b> with the growth rate in GDP just 1.84% a year. 
This 
was slower than Chile during the 1950s (4%) or the 1960s (4.5%). 
Indeed, 
if we take population increase into account, Chile saw a per capita GDP 
growth of just 0.3% a year between 1981 and 1990 (in comparison, the UK 
GDP per capita grew by 2.4% during the same period and the USA by 
1.9%). 
<p>
Thus the growth "miracles" refer to recoveries from depression-like 
collapses, collapses that can be attributed in large part to the free-
market 
policies imposed on Chile! Overall, the growth "miracle" under Pinochet 
turns out to be non-existent. The full time frame illustrates Chile's 
lack 
of significant economic and social process between 1975 and 1989. 
Indeed, 
the economy was characterised by instability rather than real growth.
The high levels of growth during the boom periods (pointed to by 
the right as evidence of the "miracle") barely made up for the losses
during the bust periods.
<p>
Similar comments are possible in regards to the privatised pension
System, regarded by many as a success and a model for other countries. 
However, on closer inspection this system shows its weaknesses -- 
indeed,
it can be argued that the system is only a success for those companies
making extensive profits from it (administration costs of the Chilean
system are almost 30% of revenues, compared to 1% for the U.S. Social
Security system [Doug Henwood, <b>Wall Street</b>, p. 305]). For 
working people,
it is a disaster. According to SAFP, the government agency which 
regulates
the system, 96% of the known workforce were enrolled in February 1995, 
but
43.4% of these were not adding to their funds. Perhaps as many as 60% 
do
not contribute regularly (given the nature of the labour market, this 
is
unsurprising). Unfortunately, regular contributions are required to
receive full benefits. Critics argue that only 20% of contributors
will actually receive good pensions. 
<p>
It is interesting to note that when this programme was introduced, the
armed forces and police were allowed to keep their own generous public
plans. If the plans <b>were</b> are good as their supporters claim, you 
would
think that those introducing them would have joined them. Obviously
what was good enough for the masses were not suitable for the rulers.
<p>
The impact on individuals extended beyond purely financial 
considerations, 
with the Chilean labour force <i>"once accustomed to secure, unionised 
jobs
[before Pinochet] . . . [being turned] into a nation of anxious 
individualists
. .  . [with] over half of all visits to Chile's public health system 
involv[ing] psychological ailments, mainly depression. 'The repression
isn't physical any more, it's economic - feeding your family, educating
your child,' says Maria Pena, who works in a fishmeal factory in 
Concepcion.
'I feel real anxiety about the future', she adds, 'They can chuck us 
out
at any time. You can't think five years ahead. If you've got money you 
can
get an education and health care; money is everything here now.'"</i> 
[Duncan
Green, <b>Op. Cit.</b>, p. 96]
<p>
Little wonder, then, that <i>"adjustment has created an atomised 
society, where 
increased stress and individualism have damaged its traditionally 
strong
and caring community life. . . suicides have increased threefold 
between 
1970 and 1991 and the number of alcoholics has quadrupled in the last 
30 
years . . . [and] family breakdowns are increasing, while opinion polls
show the current crime wave to be the most widely condemned aspect of 
life in the new Chile. 'Relationships are changing,' says Betty 
Bizamar, a
26-year-old trade union leader. 'People use each other, spend less time
with their family. All they talk about is money, things. True 
friendship
is difficult now.'"</i> [<b>Ibid.</b>, p. 166]
<p>
The experiment with free market capitalism also had serious impacts for
Chile's environment. The capital city of Santiago became one of <i>"the 
most 
polluted cities in the world"</i> due the free reign of market forces. 
[Nathanial 
Nash, cited by Noam Chomsky, <b>Year 501</b>, p. 190] With no 
environmental 
regulation there is general environmental ruin and water supplies have 
severe pollution problems. [Noam Chomsky, <b>Ibid.</b>] With the bulk 
of the
country's experts being based on the extraction and low processing of
natural resources, eco-systems and the environment have been plundered
in the name of profit and property. The depletion of natural resources, 
particularly in forestry and fishing, is accelerating due to the 
self-interested behaviour of a few large firms looking for short term 
profit.
<p>
All in all, the experience of Chile under Pinochet and its "economic 
miracle" indicates that the costs involved in creating a free market 
capitalist regime are heavy, at least for the majority. Rather than 
being transitional, these problems have proven to be structural and
enduring in nature, as the social, environmental, economic and 
political  
costs become embedded into society. The murky side of the Chilean
"miracle" is simply not reflected in the impressive macroeconomic
indictors used to market "free market" capitalism, indicators 
themselves
subject to manipulation as we have seen.
<p>
Since Chile has become (mostly) a democracy (with the armed forces 
still 
holding considerable influence) some movement towards economic reforms 
have begun and been very successful. Increased social spending on 
health, 
education and poverty relief has occurred since the end of the 
dictatorship
and has lifted over a million Chileans out of poverty between 1987 and 
1992 (the poverty rate has dropped from 44.6% in 1987 to 23.2% in 1996,
although this is still higher than in 1970). However, inequality is 
still
a major problem as are other legacies from the Pinochet era, such as
the nature of the labour market, income insecurity, family separations,
alcoholism, and so on.
<p>
Chile has moved away from Pinochet's "free-market" model in other 
ways to. In 1991, Chile introduced a range of controls over capital, 
including a provision for 30% of all non-equity capital entering Chile 
to be deposited without interest at the central bank for one year.  
This 
reserve requirement - known locally as the encaje - amounts to a tax 
on capital flows that is higher the shorter the term of the loan.
<p>
As William Greider points out, Chile <i>"has managed in the last 
decade to achieve rapid economic growth by abandoning the pure 
free-market theory taught by American economists and emulating 
major elements of the Asian strategy, including forced savings and 
the purposeful control of capital. The Chilean government tells 
foreign investors where they may invest, keeps them out of certain 
financial assets and prohibits them from withdrawing their capital 
rapidly."</i> [<b>One World, Ready or Not</b>, p. 280] 
<p>
Thus the Chilean state post-Pinochet has violated its "free market" 
credentials, in many ways, very successfully too. Thus the claims 
of free-market advocates that Chile's rapid growth in the 1990s is 
evidence for their model are false (just as their claims concerning 
South-East Asia also proved false, claims conveniently forgotten 
when those economies went into crisis). Needless to say, Chile is 
under pressure to change its ways and conform to the dictates of 
global finance. In 1998, Chile eased its controls, following heavy 
speculative pressure on its currency, the peso.
<p>
So even the neo-liberal jaguar has had to move away from a purely 
free market approach on social issues and the Chilean government 
has had to intervene into the economy in order to start putting back 
together the society ripped apart by market forces and authoritarian 
government.
<p>
So, for all but the tiny elite at the top, the Pinochet regime of 
"economic
liberty" was a nightmare. Economic "liberty" only seemed to benefit one
group in society, an obvious "miracle." For the vast majority, the 
"miracle"
of economic "liberty" resulted, as it usually does, in increased 
poverty,
pollution, crime and social alienation. The irony is that many right-
wing 
"libertarians" point to it as a model of the benefits of the free 
market. 
<p>
<a name="secc111"><h2>C.11.1 	But didn't Pinochet's Chile prove that 
"economic freedom is an indispensable means toward the achievement of 
political freedom"?</h2>
<p>
Pinochet did introduce free-market capitalism, but this meant real 
liberty
only for the rich. For the working class, "economic liberty" did not 
exist, 
as they did not manage their own work nor control their workplaces and 
lived under a fascist state. 
<p>
The liberty to take economic (never mind political) action in the forms 
of forming unions, going on strike, organising go-slows and so on was 
severely curtailed by the very likely threat of repression. Of course, 
the 
supporters of the Chilean "Miracle" and its "economic liberty" did not 
bother to question how the suppression of political liberty effected 
the 
economy or how people acted within it. They maintained that the 
repression of labour, the death squads, the fear installed in rebel 
workers could be ignored when looking at the economy. But in the 
real world, people will put up with a lot more if they face the barrel 
of a gun than if they do not.
<p>
The claim that "economic liberty" existed in Chile makes sense only
if we take into account that there was only <b>real</b> liberty for one 
class.
The bosses may have been "left alone" but the workers were not, unless
they submitted to authority (capitalist or state). Hardly what most 
people
would term as "liberty."
<p>
As far as political liberty goes, it was only re-introduced once it was
certain that it could not be used by ordinary people. As Cathy Scheider
notes, "economic liberty" has resulted in most Chileans having
<p> <blockquote><i>"little
contact with other workers or with their neighbours, and only limited 
time
with their family. Their exposure to political or labour organisations 
is
minimal. . . they lack either the political resources or the 
disposition
to confront the state. The fragmentation of opposition communities has
accomplished what brute military repression could not. It has 
transformed
Chile, both culturally and politically, from a country of active
participatory grassroots communities, to a land of disconnected,
apolitical individuals. The cumulative impact of this change is such 
that
we are unlikely to see any concerted challenge to the current ideology 
in
the near future."</i> [<b>Report on the Americas</b>, (NACLA) XXVI, 
4/4/93] 
</blockquote><p>
In such circumstances, political liberty can be re-introduced, as no 
one 
is in a position to effectively use it. In addition, Chileans live with 
the
memory that challenging the state in the near past resulted in a 
fascist
dictatorship murdering thousands of people as well as repeated and 
persistent violations of human rights by the junta, not to mention the 
existence of <i>"anti-Marxist"</i> death squads -- for example in 1986 
<i>"Amnesty 
International accused the Chilean government of employing death 
squads."</i> 
[P. Gunson, A. Thompson, G. Chamberlain, <b>Op. Cit.</b>, p. 86] 
According to 
one Human Rights group, the Pinochet regime was responsible for 11,536
human rights violations between 1984 and 1988 alone. [Calculation of
<i>"Comite Nacional de Defensa do los Derechos del Pueblo,"</i> 
reported in
<b>Fortin</b>, September 23, 1988]
<p>
These facts that would have a strongly deterrent effect on people 
contemplating the use of political liberty to actually <b>change</b> 
the 
status quo in ways that the military and economic elites did not 
approve 
of. In addition, it would make free speech, striking and other forms of 
social action almost impossible, thus protecting and increasing the 
power, 
wealth and authority of the employer over their wage slaves. The claim 
that such a regime was based on "economic liberty" suggests that those 
who make such claims have no idea what liberty actually is.
<p>
As Kropotkin pointed out years ago, <i>"freedom of press. . . and all 
the rest,
are only respected if the people do not make use of them against the
privileged classes. But the day the people begin to take advantage of 
them
to undermine those privileges, then the so-called liberties will be 
cast
overboard."</i> [<b>Words of a Rebel</b>, p. 42] Chile is a classic 
example of
this.
<p>
Moreover, post-Pinochet Chile is not your typical 
"democracy." Pinochet is a senator for life, for 
example, and he has appointed one third of the 
senate (who have veto power - and the will to 
use it - to halt efforts to achieve changes 
that the military do not like). In addition, 
the threat of 
military intervention is always at the forefront of political 
discussions. 
This was seen in 1998, when Pinochet was arrested in Britain in regard 
of a warrant issued by a Spanish Judge for the murders of Spanish 
citizens during his regime. Commentators, particularly those on the 
right, stressed that Pinochet's arrest could undermine Chile's "fragile 
democracy" by provoking the military. In other words, Chile was 
only a democracy in-so-far as the military let it be. Of course, few 
commentators acknowledged the fact that this meant that Chile 
was not, in fact, a democracy after all. Needless to say, Milton
Friedman considers Chile to have "political freedom" now.
<p>
It is interesting to note that the leading expert of the Chilean 
"economic miracle" (to use Milton Friedman's words) did not 
consider that political liberty could lead to "economic liberty" 
(i.e. free market capitalism). According to Sergio de Castro, the 
architect of the economic programme Pinochet imposed, fascism 
was required to introduce "economic liberty" because:
<p><blockquote>
<i>"it provided a lasting regime; it gave the authorities a degree of 
efficiency that it was not possible to obtain in a democratic regime; 
and it made possible the application of a model developed by experts 
and that did not depend upon the social reactions produced by its 
implementation."</i> [quoted by Silvia Bortzutzky, <i>"The Chicago 
Boys, 
social security and welfare in Chile"</i>, <b>The Radical Right and the 
Welfare State</b>, Howard Glennerster and James Midgley (eds.), 
p. 90]
</blockquote><p>
In other words, fascism was an ideal political environment to introduce
"economic liberty" <b>because</b> it had destroyed political liberty. 
Perhaps 
we should conclude that the denial of political liberty is both 
necessary 
and sufficient in order to create (and preserve) "free market" 
capitalism? 
And perhaps to create a police state in order to control industrial 
disputes, 
social protest, unions, political associations, and so on, is no more 
than to 
introduce the minimum force necessary to ensure that the ground rules 
the 
capitalist market requires for its operation are observed? 
<p>
As Brian Barry argues in relation to the Thatcher regime in Britain 
which was 
also heavily influenced by the ideas of "free market" capitalists like 
Milton 
Friedman and Frederick von Hayek, perhaps it is:
<p><blockquote>
<i>"Some observers claim to have found something paradoxical in the 
fact
that the Thatcher regime combines liberal individualist rhetoric with
authoritarian action. But there is no paradox at all. Even under the
most repressive conditions . . . people seek to act collectively in 
order
to improve things for themselves, and it requires an enormous exercise
of brutal power to fragment these efforts at organisation and to force
people to pursue their interests individually. . . left to themselves,
people will inevitably tend to pursue their interests through 
collective
action - in trade unions, tenants' associations, community 
organisations
and local government. Only the pretty ruthless exercise of central 
power
can defeat these tendencies: hence the common association between 
individualism and authoritarianism, well exemplified in the fact that 
the countries held up as models by the free-marketers are, without 
exception, authoritarian regimes"</i> [<i>"The Continuing Relevance of 
Socialism"</i>, in <b>Thatcherism</b>, edited Robert Skidelsky, p. 146]
</blockquote><p>
Little wonder, then, that Pinochet's regime was marked by 
authoritarianism,
terror and rule by savants. Indeed, <i>"[t]he Chicago-trained 
economists 
emphasised the scientific nature of their programme and the need to 
replace 
politics by economics and the politicians by economists. Thus, the 
decisions 
made were not the result of the will of the authority, but they were 
determined by their scientific knowledge. The use of the scientific 
knowledge, 
in turn, would reduce the power of government since decisions will be 
made 
by technocrats and by the individuals in the private sector."</i> 
[Silvia 
Borzutzky, <b>Op. Cit.</b>, p. 90]
<p>
Of course, turning authority over to technocrats and private power does 
not change its nature - only who has it. Pinochet's regime saw a marked
shift of governmental power away from protection of individual rights 
to 
a protection of capital and property rather than an abolition of that 
power 
altogether. As would be expected, only the wealthy benefited. The 
working
class were subjected to attempts to create a "perfect labour market" - 
and only terror can turn people into the atomised commodities such a
market requires.
<p>
Perhaps when looking over the nightmare of Pinochet's regime we should 
ponder these words of Bakunin in which he indicates the negative 
effects 
of running society by means of science books and "experts":
<p><blockquote>
<i>"human science is always and necessarily imperfect. . . were we to 
force
the practical life of men - collective as well as individual - into 
rigorous 
and exclusive conformity with the latest data of science, we would thus 
condemn society as well as individuals to suffer martyrdom on a
Procrustean bed, which would soon dislocate and stifle them, since life
is always an infinitely greater thing than science."</i> [<b>The 
Political
Philosophy of Bakunin</b>, p. 79]
</blockquote><p>
The Chilean experience of rule by free market ideologues prove 
Bakunin's
points beyond doubt. Chilean society was forced onto the Procrustean
bed by the use of terror and life was forced to conform to the 
assumptions
found in economics textbooks. And as we proved in the last section, 
only 
those with power or wealth did well out of the experiment.
<p>
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