Date: Thu, 19 Mar 98 10:50:07 CST
From: Tom Burghardt <email@example.com>
Subject: (en) Some Say Pinochet Wasn't Good for Economy
A - I N F O S N E W S S E R V I C E
Some Say Pinochet Wasn't Good for Economy
By Katherine Ellison, The Miami Herald foreign Staff
Wednesday 18 March 1998
SANTIAGO, Chile -- Like a modern Mussolini, Chile's former
military ruler Gen. Augusto Pinochet has defenders, here and
abroad, who excuse his brutal governing style since it brought
increased efficiency to a bloated and underproductive economy.
While Pinochet didn't make the trains run on time, he got
the telephones working, straightened out the messy pension system
and paved the way for Taco Bell and Chuck E. Cheese.
Yet his critics say Pinochet seriously damaged Chile's
economy -- leaving behind increased poverty, devastated social
services and a skewed distribution of wealth -- all of which have
received increased notice lately as leaders of Chile's eight-year-old
democracy struggle with the burden of his legacy.
"On Wall Street, they still say, `Oh, Pinochet, how
fantastic he was, what a miracle he made' -- but those guys are
wrong," said Genaro Arriagada, a longtime leader of the powerful
Christian Democratic Party and author of one of four books on
Pinochet being published this year. "If you look at the economic
record, it's not really such a miracle at all."
Last week, Pinochet stepped down as Chile's military chief
and assumed the post of senator-for-life, which was created for
him in the constitution that ended his dictatorship. Some
opposition lawmakers are trying -- without much success -- to
have him removed from the Senate.
In conservative circles around the world, it is heresy to
find fault with the economic revolution in this sliver of a South
American nation reborn as an emerging market long before the term
The changes began in earnest a couple of years after
Pinochet seized power in a violent 1973 coup and continued while
he remained president until 1990. Unproductive state-owned firms
were auctioned off, tariffs were slashed from 94 percent to 10
percent, triple-digit inflation was reduced to double digits and
the country positioned itself for a new era of growth.
It was all daring and novel for a region in which state
intervention was an article of faith. Pinochet's team of
economists -- christened the "Chicago boys" because most had
earned doctorates from the University of Chicago business school
-- became overnight heroes and well-paid international
But critics contend that a controlled press and repressive
climate exaggerated the glitter of Pinochet's regime and glossed
over the rough spots. By government count, nearly 3,200 Chileans
were killed by security services or disappeared under Pinochet's
Some of the victims were labor leaders protesting the social
costs of the transition, including mass unemployment and
rock-bottom wages. Yet the same economic overhaul transferred
wealth to a small, articulate and well-traveled group of
Chileans, who effectively sang its praises.
In the 1980s, several of Chile's neighbors rushed to follow
its example, often to their regret.
In a backlash from Mexico City to Buenos Aires, the
so-called neo-liberal model has been blamed for impulsive,
sometimes corrupt and sloppy privatization, and for record levels
of unemployment. In Brazil, which plans to privatize tens of
billions of dollars in state assets over the next two years,
President Fernando Henrique Cardoso often cites Chile as an
example to be avoided.
Arriagada, the author, notes that growth under Pinochet
averaged less than 3.5 percent annually -- half of what it has
been in the eight years of democratic government.
Pinochet's backers contend that he did the hard, essential
work, laying the foundation for Chile's record growth in the
1990s. But economists with the ruling center-left Concertacion
alliance say that foundation was unstable at best.
The general's most famous mistake was his alleged
mishandling of the privatized banking sector, which suffered such
a crisis in 1982 that the government again had to take it over,
only to reprivatize the banks a few years later.
"The banking bailout cost 20 percent of the gross national
product, a truly amazing amount of money," said a United Nations
regional economist, Ricardo Ffrench, a University of Chicago
graduate who worked for Pinochet's elected successor, President
"And where did the government get that money? From keeping
teachers' wages low, from keeping nurses' wages low, from having
lower pensions for poor people. Pinochet did not believe in
taking money from the rich."
By 1990, when Aylwin's government went to work, the decline
in social services was shocking, Ffrench said. "Public hospitals
didn't have sheets and were putting two people in a bed. Public
schools were a national embarrassment."
Most pernicious, Pinochet's critics say, was how rapidly
Chile's gap between rich and poor widened under Pinochet. Now,
the gap between rich and poor in Chile is one of the widest in
Latin America, which has the widest in the world.
"In the first years of Pinochet, two economic groups --
called the piranhas -- bought up all the media, insurance and
finance companies and manufacturing," Ffrench said. "Pinochet's
philosophy was that the market knows what's best, so we didn't
have to have anti-monopoly enforcement."
But the abuses soon became extreme, he said. In the first
years of democracy, officials discovered that at the Bank of
Santiago, one of Chile's two largest private banks, 44 percent of
the loans had been granted to bank owners.
Environmentalists say Chile's democracy also inherited
another headache: a modern tradition of environmental disregard.
Under Pinochet, native forests were plundered and mighty rivers
dammed, while mountain-ringed Santiago became one of the world's
In their first years in power after Pinochet, Chile's
democratic leaders raised taxes, boosted social spending and
wooed foreign investment while keeping caps on speculative
inflows, and hiked the minimum wage by 40 percent.
More recently, under President Eduardo Frei, Chile has
invested heavily in public education, adding three hours to the
school day. Ffrench says the government reduced the number of
Chileans living in poverty from 45 percent of the population to
Improvements have been painfully slow, suggesting to some
that democracy isn't much of an improvement over authoritarianism
in raising living standards.
In a recent address last week to the Organization of
American States, Jose Antonio Ocampo, executive secretary of the
UN's Economic Commission for Latin America and the Caribbean,
called Chile's income distribution problem "quite intractable,"
despite the sweeping reductions in poverty. And it's common these
days for Chileans of all classes to complain about crime, which
has increased notably since the dictatorship.
In what may be Pinochet's worst legacy, Chileans, once some
of the region's most faithful democrats, have largely lost their
faith in the system. A major survey in 1996 by Latinobarometro, a
respected polling firm, found that 35 percent of Chileans
answered "no" when asked, "Would you be ready to defend
democracy if it were threatened?" -- the worst showing of 17
"Sure, there's been growth, but as far as I can see, all
the benefits have gone to the people at the top," said Alfredo
Morales, 47, a locksmith who works out of a booth in downtown
Santiago. "I have no gratitude to Pinochet, but I'm not thrilled
with this government, either."
Copyright 1998 The Miami Herald. All Rights Reserved.