The “Chilean Miracle” Lie

tulio notes, remarking on the “Chilean economic miracle” under Pinochet.

I have a Venezuelan…he fled Venezuela and now lives in Chile, a more free market country, and btw the most prosperous in Latin America. And Pinochet had a lot to do with Chile’s prosperity, even though he was a bastard. If it weren’t for him, it would be another 3rd world Latin American country. He turned that country’s economy around.

First of all, Chile is not the most prosperous in Latin America. Mexico is quite a bit wealthier than Chile. Mexico seem like a First World country to you? 27% of the population doesn’t even have sewage treatment.

Second, it’s debatable whether Chile is more free market than Venezuela. Chile has long had a deep social democracy in place, and Venezuela has never had crap. Much of Chavez so-called evil socialism is just him trying to put the basics of a social democratic system and a civilizational infrastructure in place where there never was one – he’s spending money on education, medical care, roads, literacy, land reform, food subsidies, housing, electrification, plumbing, sewage, water, etc.

At least in Venezuela, you have a President who is committed to the entire low income and working class portion of the population. There’s no need for him to care about, work for or help the well-off, since they’re already sitting pretty as it is.

In Chile, the low-income and working class population pretty much get a gigantic Fuck You. The state only works for the 1/3 or so upper middle class, and everyone else can buzz off. I imagine this is still the case under Bachelet, but I’m not sure.

Pinochet had nothing whatsoever to do with Chile’s “prosperity.” Truth is he ruined that country. His radical libertarianism from the Chicago School quickly caused one of the worst depressions in history. In order to climb out of it, he had to repudiate neoliberal orthodoxy and involve the state, government spending and labor in his economic project (Keynesianism).

Even that more statist project did not do well. All of that economic growth under that Pinochet clown was just the climback from the damned Depression that he caused at the start! Big deal! By the end of his term, in 1989, Chile’s GDP finally matched of Allende, the socialist whom he replaced. IOW, 16 years of total economic flatlining and failure.

To illustrate, let me give some hypothetical figures, since I don’t know the real figures. Say per capita income was $8,000/year when Allende left office. Pinochet so nuked the economy that in a few years, PCI was something like $2,000/year. From 1978-1989, there was huge economic growth, true, but they were just climbing out the rut. By 1989, his last year in office, PCI finally made it up back to $8,000 year again. Talk about spinning your wheels.

The upper classes did much better though under Pinochet, maybe the top 1/3. Everyone else got royally screwed. Average wages declined by 35% under Pinochet (!). He declared total war on unions and the working class, and workers got screwed, rude and tatooed.

Chile is doing ok now with a much more state-interventionist economic scheme under a Socialist President, Bachelet. Much of Chile’s relatively good human development figures are due to its deep socialist and social democratic, especially health care and education: Chile has been a pretty socialist state for a long time now. Chile has a decent national health care system, and that’s the reason for its commendable health figures. Malnutrition figures are also very low; Chile does a good job of feeding its people.

Education is another matter. About 1/2 of the public schools are literally falling apart. I mean literally, as in collapsing. There’s no agenda to fix them, because the pricks who run the country all send their kids to private schools (this is how it works all over Latin America).

It’s no surprise tulio has been brainwashed about Pinochet. The US media has told nothing but lies about the guy.

The gap between the rich and the poor in Chile is absolutely insane, and the racism and class hatred is rife and toxic. The light-skinned well to do live in gated compounds or with high walls around their sumptuous homes, often with barbed wire and guard dogs. They live that way because of the out of control crime rate, especially theft, by the darker-skinned lower classes. The crime rate is a symptom of the insane inequality and class hatred in that place. Chile is just another typical Latin American shithole, a little fancier than the rest of them.

I’ve known some Chileans; their contempt for poor and working class people was palpable, and they were openly and outrageously racist against Chilean Indians. And these people were supposedly “leftwingers.”

Update: In the comments section, the brilliant James Schipper adds some good hard figures to the argument. The rich-poor gap he talks about can be represented as a Gini coefficient.

The main thing about the Chile was that the upper classes, maybe the top 1/3 or so, totally cleaned up under Pinochet. Pinochet merely dramatically shifted income from the bottom 2/3 of the population to the to top 1/3, so obviously he’s wildly popular among the well to do in Latin America. As a socialist, I’m not supposed to support Reverse Robin Hood policies. Any socialist doing that may as well hang it up and just become a Republican. Or join the Democratic Leadership Committee (DLC), same thing.

It’s fascinating that neoliberals and libertarians continue to rave about this fake “miracle”. Either they’re lying, or they’re idiots.

Some people never learn.

Schipper:

Excellent post! In the early 1980s, the unemployment rate in Chile reached 25%. Pinochet was forced to nationalize the entire banking sector and reverse many of his policies.The Chilean economic experiment consisted of total liberalization of imports and capital inflows while maintaining a fixed exchange rate. This led to a massive trade deficit financed by money borrowed from abroad. Much of the imports consisted of consumption goods for the richest 1/3. In other words, Chile was going into debt in order to finance upper-class consumption.

Pinochet also privatized pensions, but guess what, the military kept their government pension plan.

According to the CIA World Factbook, the richest 10% of Chilean households have 41.7% of national income while the poorest 10% have 1.6%, which is a ratio of 26:1. Bear in mind that in poor households there are on average more people.

It seems that any government that pursues neoliberal economic policies will be praised by MSM in the West while any government that does the opposite will be excoriated.

11 Comments

Filed under Americas, Capitalism, Chile, Economics, Education, Fascism, Health, Hispanic Racism, History, Latin America, Latin American Right, Libertarianism, Modern, Neoliberalism, Political Science, Public Health, Racism, South America, The Americas

11 responses to “The “Chilean Miracle” Lie

  1. James Schipper

    Dear Robert
    Excellent post! In the early 1980s, the unemplyment rate in Chile reached 25%. Pinochet was forced to nationalize the entire banking sector and reverse many f his policies.
    The Chilean economic experiment consisted of total liberalization of imports and capital inflows while maintaining a fixed exchange rate. This led to a massive trade deficit financed by money borrowed from abroad. Much of the imports consisted of consumption goods for the richest 1/3. In other words, Chile was going into debt in order to finance upper-class consumption.
    Pinochet also privatized pensions, but guess what, the military kept their government pension plan.
    According to the CIA World Factbook, the richest 10% of Chilean households have 41.7% of national income while the poorest 10% have 1.6%, which is a ratio of 26:1. Bear in mind that in poor households there are on average more people.
    It seems that any government that pursues neoliberal economic policies will be praised by MSM in the West while any government that does the opposite will be excoriated.
    There is one thing to be said in Pinochet’s favor, he did hold an honest referendum in 1989.

    Cheers. James

  2. Dave M.

    “Pinochet had nothing whatsoever to do with Chile’s “prosperity.” Truth is he ruined that country. His radical libertarianism from the Chicago School quickly caused one of the worst depressions in history.”

    Can you plese elaborate? What do you mean by “the Chicago School”? – The Chicago school of thought on libertarianism??

    • Yes, Chicago School of Economics radical neoliberalism – libertarianism, whatever you want to call it. The acolytes of Milton Friedman. BTW, these dumbshits still think that this catastrophe was a smashing success, and they still keep trying to do it everywhere else. Like I said, some people never learn.

  3. tulio

    I’ll try to respond more in detail later as I’m busy at the moment, but just a couple quick things. If you look at the GDP PPP rates for Mexico and Chile, Chile is higher, (though Mexico isn’t too far behind). I just checked the latest CIA factbook record. And you mentioned the out of control crime rate in Chile. Chile is known as being the safest country in Latin America along with Uruguay. Where are you getting this from??

    http://www.nationmaster.com/graph/cri_mur-crime-murders

    There were 235 totals murders in Chile in this chart. Compare that to Mexico’s 13,144 and the U.S.’s 16,204. Now I know Chile’s population is small, but even adjusting for that, it’s a pretty safe country compared to Mexico. I’m just choosing murder here as a benchmark because it’s the most likely crime to be reported. Other crimes like theft and rape tend to be underreported in many developing countries so the stats may not tell you much. But it’s kinda hard not to call the police when you see a dead body.

    Corruption between the two countries isn’t even comparable. Offer a Chilean cop a bribe and you get taken to jail, no different than the U.S., unlike Mexico. The corruptions perception index show Chile as having corruption levels comparable to the West. Placing 25th rank on the list, right after France: http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table

    As for racism, it’s no more racist than anywhere else. They have issues with Bolivians and Peruvians, but I think that has less to do with their skin color than the fact that they’re poor. Like poor Mexicans flooding across the border here. Most Chileans are mestizos themselves from what I saw in the northern half of the country. The south is supposed to be more white, but I’ve never been down there.

  4. tulio

    Also:

    Second, it’s debatable whether Chile is more free market than Venezuela.

    You’re kidding me right? No, it’s not debatable. At all. Look at the index of economic freedom:

    http://www.heritage.org/index/Ranking.aspx

    Chile is ranked number 10. Venezuela is ranked 174. Between Denmark and the UK.

    Furthermore, for all your claims of Pinochet’s reforms being a failure, I don’t see them following the footsteps of Chavez and Morales.

    Chile has long had a deep social democracy in place, and Venezuela has never had crap. Much of Chavez so-called evil socialism is just him trying to put the basics of a social democratic system and a civilizational infrastructure in place where there never was one – he’s spending money on education, medical care, roads, literacy, land reform, food subsidies, housing, electrification, plumbing, sewage, water, etc.

    I’m not here claiming Chavez is Satan’s spawn, I’m just not holding him up as an ideal leader. I think you are well intentioned, but that you’ve bought into a lot of Chavista propaganda. If things are getting better under Chavez, explain why the murder rate quadrupled under his era! http://www.washingtonpost.com/wp-dyn/content/article/2010/03/11/AR2010031102490.html

    Caracas is now the most dangerous city in South America. This happened under Chavez. People used to flee the crime from Columbia and go to Venezuela. Now it’s the other way around. Only Ciudad Juarez in Mexico is more violent in Latin America.

    • Oh fuck the Heritage Foundation! I don’t place any creed in those statistics.

      Chile does not have to follow in the footsteps of Chavez or Morales because they already have a pretty socialist country. It’s not nearly as polarized, and the poor and low income have it much better in Chile than in Venezuela or Bolivia. However, Bachelet is an ally of Chavez and Morales, and she is a Socialist. She hasn’t exactly pursued rightwing economics since she has been in.

  5. Pingback: The Big Lie

  6. James Schipper

    Dear Robert
    A few more comments about Pinochet’s economic policy. When you go from protectionism to free trade, you have to do it gradually and you have to let the exchange rate fall. You have to do it gradually in order to avoid massive unemployment and you have to let the exchange rate fall to avoid a trade deficit. Tarifs and the exchange rate both influence the cost of imported goods and the exchange rate influences the cost of exported goods abroad.

    Let’s suppose that we have an economy that has a protectionist equilibrium. It imports 50 billion and it exports 50 billion. Now we want remove all tarifs. This makes imports cheaper, so the demand for imported goods will rise. Let’s say that the demand rises to 80 billion. How can you finance 80 billion of imports with 50 of exports? Answer: You can’t. That’s why the exchange rate will have to drop. That in turn will make exports cheaper and imports dearer. A new equilibrium may emerge with imports and exports both at, say, 65 billion.

    If you don’t liberalize trade gradually, there will be unemployment because jobs will start to disappear immediately in the import-competing sector while they’ll grow only gradually in the export sector. Job losses in the import-competing sector will exceed job gains in the export sector in the short term, and the result is a recession. In Chile, trade was liberalized way too fast.

    In addition to liberalizing trade too fast, Chile under Pinochet kept the exchange rate fixed, which created a trade deficit. To finance this trade deficit, they opened the Chilean economy completely to foreign capital. As a result, a lot of money poured in. This inflow of foreign money enabled Chile to have a trade deficit for a while. If you borrow, you can live beyond your means. Chile lived beyond its means by borrowing or selling of assets. That might not have been so bad if the borrowed money had been used to buy capital equipment that would lead to growth. Alas, much of the additional imports consisted of consumer goods for the rich.

    Pinochet’s Chile is an example of how you should NOT liberalize trade.
    Regards. James

  7. Michael

    The reason why Chile has appeared prosperous than most Latin American (what about Brazil?) or southern hemisphere nations (South Africa?), is the urgency to imitate far-flung western European cultures that Chileans have an affinity of. But the Argentines have a more European ethnology.

    Culturally the Chileans, like Argentines and Uruguayans, view themselves as transplants of Europeans (mainly in the upper middle class). Most famous Chileans are descendants of non-Spanish European and Arab immigrants, and the myth about Chileans are a mostly “white” race.

    Politically the Chileans spoke of developing an interest with social democracy, avoiding the kind of militarism associated with say, Peru and Paraguay, the Chilean saying “Balletes Si, Boletos No” or yes votes, no to bullets. Venezuela, like Chile, had a long period of “failed” democracy.

    It doesn’t explain why Allende won a presidential election if he’s a Marxist-the first to got elected in the western hemisphere, how come Pinochet was applauded while thousands were murdered and the recent resurgence of the neo-conservative right after 20 years of left-wing majority rule.

    And yes, the media depicts Chile as a rarity for Latin America: it has acquired newly “developed nation” status, well exhibited by Chileans elected an agnostic English/French-descended socialist single mom: Michelle Bachelet in an otherwise volatile conservative Catholic mestizo country. + -

  8. Paul

    idk if anyone said this.
    But Pinochet did a great job. now u might get upset with that comment but think about it he did a great job for the UPPER class. Unfortunately that is all that matters in the world. And if you can make the upper class happy, your chances of a revolution are lower. The risk of all the social classes uprising together is very low. So with that said, he only made Chile better for the people with the big bucks. That is the same for many countries. Your not gonna remove someone that is treating you well. and if you dont have the money to do anything about it nothing is gonna happen

    • Wade in MO

      “But Pinochet did a great job. now u might get upset with that comment but think about it he did a great job for the UPPER class”

      Exactly. That’s what I always say when people say Bush was a horrible president. He was a great president…for the right people. The only people who will be like by everyone are those that reigned so long ago that they have no relevance to modern times. I would say 1000+ or more after there reign they become ‘safe’ for everyone. Different groups have different opinions and interests. Without that there would be no class consciousness or ethnocentrism.

      “and if you dont have the money to do anything about it nothing is gonna happen”

      What about the Haitian Revolution or Spartacus. There was also an uprising in Bolivia in the mid 1950s that was successful too. The wealthy former ruling class are often a problem though. Many successful conquerors will kill off the upper class and rule the lower classes more fairly as a way to hinder revolution. I believe this was Genghis Khan’s method…along with a lot of violence as punishment for resistence.

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