Thirty Years of Chilean Socialism

by Alejandro Reuss

Dollars and Sense magazine, January/February 2001

In 1988, the Chilean Socialist leader Ricardo Lagos dared to go on national television to denounce the country's military dictatorship. Lagos pointed an accusing finger at the camera as he said that Chileans would no longer tolerate General Augusto Pinochet's repressive rule, then in its fifteenth year. It was a high point of the "Campaign for the 'No"' - the campaign to defeat the dictatorship in its own referendum, reject another eight years with Pinochet as "president," and force general elections - and the key moment in Lagos's rise to national prominence. A cabinet minister in the two Concertacion (center-left coalition) governments since the end of the military dictatorship in 1990, last year Lagos became the first Socialist to win the coalition's nomination for president. On January 16, 2000, he narrowly defeated his right-wing opponent in the presidential run-off election, becoming the second Socialist to win Chile's presidency.

It had been nearly 30 years since the election victory of Chile's first Socialist president, Dr. Salvador Allende, and over 26 since the military coup that overthrew Allende and his "Popular Unity" (Socialist-Communist) coalition government. Lagos, whom Allende named ambassador to the Soviet Union shortly before the coup, had been a close associate of the president's during the Popular Unity years. Perhaps Socialist deputy Isabel Allende was thinking of this history when she commented, at Lagos's March 2000 inauguration, "Obviously, I'm reminded of my father." The Socialist Party, however, is very different now from what it was in 1970. Seventeen wrenching years of military dictatorship followed the 1973 military coup, and a decade of Concertacion government has followed the 1990 return to civilian rule. During this period, Lagos and others have pulled the Socialist Party towards the political center. The Socialists backed the moderate Christian Democratic Party's presidential candidates in the first two post-dictatorship elections, and served as junior partner to the Christian Democrats during the first two Concertacion administrations. While Lagos's nomination as the Concertacion's candidate in the 2000 presidential election put the Socialists at the head of the coalition, the candidate took pains to distance himself from the legacy of the Popular Unity. On the campaign trail, he declared that, if elected, he would govern not as Chile's second Socialist president, but as its third Concertacion president.

NEOLIBERAL "SOCIALISTS"

The military dictatorship imposed many limits on Chile's "democratic" transition. For the sake of unseating the dictatorship, the opposition decided to work within these constraints. Politically, this meant working within the authoritarian framework of the military dictatorship's 1980 constitution, during the transition and after the restoration of civilian rule. Economically, it meant keeping government policy within the general "free market" framework imposed by the dictatorship. During the "Campaign for the 'No,"' the opposition emphasized not only the dictatorship's human-rights violations, but also the way its "neoliberal" economic program had plunged millions of Chileans into poverty. The first two Concertacion administrations did make a serious effort to reduce poverty, mostly through expanded employment and social-welfare programs, but they did not attempt to change the economy's basic "free market" orientation. As second fiddle to the Christian Democrats in the Concertacion, the Socialists accepted this. As the leading party in Chile's new government, they show no signs of changing course.

The new Socialist-led government's economy minister is a conservative MIT-trained economist. Its finance minister is a Harvard-trained former International Monetary Fund bureaucrat. So the heavy dose of "free market" orthodoxy in its economic program is hardly surprising. The Lagos administration has worked to accelerate Chile's integration into the world capitalist economy, seeking a NAFTA-like "free trade" agreement with the United States. It has pledged to step up the privatization of state assets. The government's plans for the state copper company, which accounts for nearly 20% of Chile's export earnings, include joint ventures with multinational corporations and investment by private mutual funds. Meanwhile, one of Lagos's key economic advisors has called for the privatization of the state oil company. The government has also made it a top priority to balance the budget, whose 1999 deficit was equal to 1.5% of Chile's gross domestic product (GDP), in order to keep inflation and interest rates down - in other words, to make Chile a profitable place to invest.

Chile is just coming out of a major recession. In 1999, unemployment topped out at 11.5%, as the economy contracted by over 2%. When Lagos was elected, unemployment still stood at 8.4%, while the inflation rate was less than 5%. The president has pledged a $14 billion public works program, in an effort to create jobs and reduce unemployment. He has also proposed increased social-welfare spending. These are the main ways in which the new government's program departs from the neoliberal model. These aims, however, are constrained by the government's commitment to a balanced budget and rejection of tax reform. The resources for increased government programs will come from increased economic growth, or they will not come at all. Despite the fact that over three million (21.7%) of Chile's people fall below the official poverty line, no major redistribution of income or structural reform of the economy is on the government's agenda.

FROM THE "CHILEAN ROAD" TO THE "THIRD WAY"

The conversion of the Chilean Socialists to the "free market" religion, in part, reflects a worldwide trend. Lagos and other moderate Socialists emulated Felipe Gonzalez, the former Socialist prime minister of Spain, in reshaping Chilean socialism. Gonzalez was the real pioneer of the "Third Way" - embracing "free market" economics while proposing mild redistributive and social-welfare measures - now championed by U.S. President Bill Clinton and British Prime Minister Tony Blair. The fall of the East bloc and the ensuing crisis of "socialism" worldwide set the stage for the triumph of the "Third Way" where social democracy or communism had been strong. The strategy, however, became especially prominent where neoliberalism was strongest. It is not surprising, then, that standard bearers for the "Third Way," like Lagos, Blair, and Clinton, hail from the same countries as Pinochet, Thatcher, and Reagan. In each case, the way that neoliberalism engulfed its onetime opponents is rooted in the country's specific history. In Chile, the conversion of the Socialists has roots going back even before the military dictatorship and its imposition of the neoliberal model, to the demise of the Popular Unity.

The Popular Unity came to power on a platform of radical economic and political reform - the start of a peaceful revolution called "the Chilean road to socialism." Its economic program included the nationalization of Chile's banks and largest private companies; the nationalization of the copper industry (owned mostly by big U.S. mining companies); a redistribution of land from the country's largest estates to the rural masses; a redistribution of income favoring workers and the poor; and the free public provision of basic foods, health care, and education. The first year of the Popular Unity was, economically and politically, by far its most successful. Increased wages and public spending created an economic boom, the land reform gained momentum, and the program of nationalization boasted several major successes, including the nationalization of the banks. By April 1971, when the Popular Unity won over 50% of the vote in nationwide municipal elections, the dream of socialism seemed close at hand. That was, however, to be the zenith of the "Chilean road." The Popular Unity's remaining years were marked by deepening political conflict, social polarization, and economic crisis.

The government's economic plans foundered under the force of supply shortages and inflation, which reached an annual rate of 300% by the government's last year. Critics of the Popular Unity have often characterized this economic crisis as an inevitable result of the government's "expansionist" economic policies, which had brought about big increases in mass purchasing power. The causes of these problems, and the nature of the Popular Unity's errors, however, were as much political as economic. The government expected that increased demand would boost profits, which would in turn cause increased investment. This scenario greatly underestimated the political element in investment decisions. Chilean capitalists were little inclined to invest for an uncertain future in the new Chile. Economic disruption, in fact, became a major political weapon wielded by opponents of the Popular Unity. The economic crisis did not, by itself, bring down the Popular Unity government. It did, however, contribute to the overall atmosphere of "chaos" that provoked the military coup of September 11, 1973.

The economic crisis of the Popular Unity period is to Chile's political culture what the hyper-inflation of the Weimar Republic is to Germany's. In each case the purely economic consequences were less important that the political fallout - the rise of the Nazis in Germany, the destruction of democracy in Chile - and in each country there is a primordial fear that these events will be repeated, no matter how distant that prospect may seem from the outside. (In the years after the restoration of civilian rule in Chile, the Armed Forces repeatedly went on "maneuvers" whenever the civilian authorities dared to act against their wishes. These menacing gestures never failed to provoke fears of another military coup.) The economic radicalism of the Popular Unity is, in the consciousness of the Chilean left, the "original sin" of Chile's tragic history- the transgression that brought the fall. For a quarter century, the left has blamed itself for unleasing the course of events that brought the military dictatorship to power. (The military actually carried out the coup, the right fomented it with violence and economic sabotage, and the center was complicit in it - though they all seem strangely immune from self-blame.) As a result, the left recoils from anything that could make it responsible once again for such events. It has learned the lesson, taught by the military dictatorship, that "utopian" dreams end in disaster.

A FUTURE FOR CHILE?

Chile's "transition to democracy" remains incomplete. After a decade of civilian rule, Chile remains under the military dictatorship's 1980 constitution. To his credit, Lagos has proposed constitutional amendments eliminating such "authoritarian holdovers" as clauses granting lifetime senate seats to former officials of the dictatorship, including Pinochet, and preventing the civilian president from sacking Armed Forces branch commanders. On one recent occasion, Lagos even dressed down the Armed Forces high command for its vocal opposition to Pinochet's prosecution on human-rights charges. Like his two civilian predecessors, however, the president has generally taken care not to inflame the still-powerful Armed Forces. He has largely taken a hands-off attitude towards the prosecution of Pinochet. He has insisted that his relations with the Armed Forces are "excellent," and that they can work together for Chile. And he has declared that Chileans should stop worrying about the past, concentrating instead on their future together.

Fortunately, some Chileans have continued to worry about the past, and the shadow it casts over their future. Only two years ago, when Pinochet was arrested in Britain on human-rights charges, it seemed to most observers that he would never face prosecution in Chile. Today, he and his accomplices are beginning to lose the legal immunity they granted themselves. Thanks largely to the efforts of human-rights campaigners, especially relatives of those "disappeared" (kidnapped and assassinated) by the military dictatorship, the courts have opened the way to the prosecution of several prominent human-rights violators, including Pinochet himself. Pinochet could face trial, he could find some legal escape (as he did in Europe), or he could escape judgment in death. The aura of invincibility once enjoyed by the military, however, has begun to erode.

Unveiled by Lagos in June 2000, a statue of President Allende now stands in front of Chile's presidential palace, one small symbol of the changes now afoot in Chile. The meaning of the Popular Unity period - expunged from the history books by the dictatorship - remains to be rediscovered. Though symbolized by Dr. Allende's election, the "Chilean road to socialism" was not just a change in who ruled Chile. Like the Prague Spring, it was a glimpse of what a democratic and socialist society could look like - and a direct challenge to the Cold War ideology that socialism and democracy were incompatible. It sought not only to preserve the measure of democracy that already existed in Chile but also, in the words of the Popular Unity program, to institute "a new system of power in which the working classes and the people are the ones who really exercise power." More than any specific set of policies, that should be the Popular Unity's legacy to Chile - and Chile's legacy to the world.

Resources: James D. Cockroft, ed., Salvador Allende Reader: Chile's Voice of Democracy; Peter Winn, Weavers of Revolution: The Yarur Workers and Chile's Road to Socialism; Clifford Krauss, "Ricardo Lagos Escobar: A Chilean Socialist in the Clinton-Blair Mold," New York Times, January 18, 2000; Clifford Krauss, "Chile's President-Elect: A Pro-Market Socialist," International Herald Tribune, January 24, 2000; "President-elect says country's economic prospects are good," El Mercurio, January 26, 2000; Clifford Krauss, "Socialist is Charting Middle Way for Chile," New York Times, February 11, 2000; Bill Cormier, "New president vows comeback for Chile's role-model economy," Associated Press, March 9, 2000; "A wary socialist, the general and Chile's future," Economist, March 11, 2000; Richard Chacon, "Chile Leader Takes Oath, Backing Free Market," Boston Globe, March 12, 2000; "Socialist Takes Office in Chile With Nod to Poor, and the Market," New York Times, March 12, 2000; "Chilean president kicks off post-Pinochet constitutional reform," Agence France Presse, April 5, 2000; "President Lagos annoyed over commanders' meeting, opposition remarks," Television Nacional de Chile, May 16, 2000; Federico Quilodran, "Chile unveils Allende monument amid demands for Pinochet trial," Associated Press, June 26, 2000; "Lagos to distance himself from Pinochet case, focus on jobs, security," La Tercera web site, August 11, 2000; "President Lagos urges people to leave past behind," El Mercurio web site, August 11, 2000; "President says relations with armed forces could be better 'as with everything,"' Television Nacional de Chile, August 21, 2000.

Alejandro Reuss is a co-editor of Dollars & Sense.

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