The libertarian experiment failed in Chile, and now Chileans once-and-for-all, have said goodbye to the religion of Reaganomics. On Tuesday, Michelle Bachelet, a socialist, will take office as President of Chile. This is a great personal achievement for her. Bachelet was president before from 2006 to 2010, but because Chile’s constitution prevents presidents from serving for more than one consecutive term, she was unable to run in the 2009 elections, which were won by outgoing right-wing president Sebastian Pinera.
Bachelet now gets the rare opportunity to be president twice at two different times, something only one American (Grover Cleveland) has ever been able to do. But for Chileans, Bachelet’s inauguration is about more than just personal glory. It’s about finally putting to rest the legacy of one of South America’s most brutal dictators: General Augusto Pinochet, and the Chicago School of Economics that he brought with him when he took over the country.
As I pointed out in December when Bachelet was first elected, in the early 1970s Chile was one of the most progressive countries in South America. The democratically elected socialist president, Salvador Allende, nationalized big businesses and gave every Chilean access to free healthcare and higher education. GDP went up and income inequality went down. But not everyone was happy with President Allende’s 1970s Chilean version of the New Deal.
Behind his back, the Nixon administration and Chile’s corporate and military elite conspired to sabotage Allende’s reforms and destroy the economy. Although Allende’s policies were successful, Chile still needed foreign loans to survive - and so the Nixon administration got the International Monetary Fund (IMF) to suspend all aid. This decimated the economy and stunted the progress Allende had made over his first few years in office.
The US-backed sabotage campaign turned into outright treason on September 11, 1973 when, with the help of the CIA, General Augusto Pinochet overthrew Allende’s government and ushered in seventeen years of military rule. Pinochet’s dictatorship, which lasted from 1973 to 19980, was one of the most vicious in Latin American history.
His military government jailed, tortured, and executed dissidents with savage cruelty. Some were thrown out of helicopters into the ocean. Others were taken by death squads into the national soccer stadium in Santiago where they were executed by firing squads. The memories of Pinochet’s regime are so raw that to this day, many Chileans refuse to watch soccer matches at the national stadium because they don’t want to dishonor the general’s victims.
Of course, Pinochet didn’t just use the government to silence dissent. The whole purpose of his coup in the first place was to protect the economic interests of the Chilean elite from President Allende’s socialist policies, and so soon after he took power, Pinochet invited Milton Friedman and his libertarian-leaning Chicago Boys down to Chile to “reform” the economy.
The Chicago Boys slashed government spending and privatized industries, ushering in a new era of harsh austerity measures. Their policies were, to put it bluntly, a total disaster.
As I pointed out in my book The Crash of 2016, inflation reached as high as 341 percent, GDP decreased by 15 percent and Chile’s trade deficit ballooned to a whopping $280 million. Unemployment jumped from 3 percent to 10 percent - and in some parts of the country climbed as high as 22 percent?
Even though Chile returned to democracy in 1990, Pinochet’s experiment with libertarian economics has had a lasting and painful impact on that country’s economy. Inequality is still high and many Chileans don’t have access to affordable education. That’s why the presidency of Michelle Bachelet is so important. She lived through the Pinochet regime, and was even detained by the military during the 1970s. Bachelet saw firsthand the damage Pinochet and the libertarians did to Chile and now she wants to change it, promising to tax the rich and make education and healthcare free for all Chileans.
Coming on the heels of the first right-wing presidency since Chile returned to democracy in 1990, Bachelet’s second term marks a big turning point in that country’s history. Chileans have now had the chance to see what right-wing politics are like in the post-Pinochet world, and they’ve found them lacking. By electing Bachelet, they’ve chosen to abandon the legacy of Nixon, Pinochet, and conservative/libertarian economics. Instead, they’ve embraced real reforms, the kind of reforms that made their country the envy of South America during Allende’s short time in office.
Chileans have, to put it in terms Americans understand, rejected Reaganomics. And it’s time for us here in the U.S. to do the same.