Lehman, David - The political economy of Armageddon Chile, 1970–1973

Journal of Development Economics 5 (1978) 107423. 0 North-Holland Publishing lCompaw
THE POLITICAL ECONOMY OF ARMAGEDDON:
CHILE, 1970-1973
David LEH MANN*
Cambridge University, Cambridge, England
Received April 1977, revised version received November 15’77
1. The programme
The election of Allende, supported by a coalition called Popular lrnity
(UP.), in September 1970 was a product of divisions in the Chilean ruling class.
Although ruling class groups, fractions and sectors had united with middle
class and even some popular sectors to support Frei in 1964, landlords. big
business and foreign capital had been frightened by his mild reformism ; they
were furthermore irritated by his exclusion of all but the members of his own
Christian Democrat Party and a fen* ‘independents’ from a government elected
with their support. In 1970, therefore, they supported ex-President Jorge
Alessandri’s candidature, provoked a three-way contest and allowed Allende
to scrape home with only 37% of the vote.
Popular Unity was a coalition which sollght to represen: rural and urban
workers, peasants, and some middle classes. The dominance within the coali lion
of the Communists and Socialists ensured that it would be very different from
superficially similar Popular Fronts formed in the 1930s in Europe, and in 1938
in Chile, in which parties of the working class had taken a subordinate position.
The one experience it did recall, though few cared to point this out, was that of
Spain, immediately before the Civil War. The exphcit objective, expressed in
formal statements such as the painfully elaborated Programa Basico de Gobierno,
was not revolution, but revolutionary changes: ‘a replacement of the present
economic structure, doing away with foreign and national monopoly capital and
the latifundio in order to initiate the construction of Socialism.’ Socialism was
a prospect in the distant future for the Communist Party, but a more immediate
one for the dominant factions in the Solz’alist Party. Nevertheless the policies of
the Frei and Al!:nde governments differed more in degree than in kind; behind
them lay the same interpretation of Chilean development. of the structural
*The author wishes to thank Sergio Bitar f.x drawing his attention to crucial weaknesses
in the argument of an e;lslier draft. Remaining weaknesses are, c f coLx+sc,his own respmsibiiity.
A
108
D. Lehmann, Chile, 1970-1973
pr&l~ms it had produced in the past and would encounter in the future. Both
programmes stated that the existing income distribution in the society was a
major obstacle both. to raising living standards and to economic growth,
drawing from this the conclusion that by changing the structure of demand a
new dynamism could be infused into the economy. This strategy had grown out
of the ‘structuralist’ thesis, which had emerged in the United Nations Economic
Commission for Latin America since the 1950s and in various writings on the
inflationary process in Chile.’ Both the U.P. and the Christian Democrat
programme were based on the assumption that the unequal distribution of
income prevailing in Chilean society constituted an obstacle to growth of any
kind, that the unequal distribution of land in the agricultural sector was as much
a cause of inflation as was monetary policy; both programmes allowed a role
for domestic and foreign capital in the development process, albeit subject to
government contr$ and with noticeable differences in emphasis. One fundamental difference was to be found in policy towards the copper companies: the
Christian Democrats sought joint ventures (first ‘Chileanization’, later negotiated nationalization with compensation), a concept now practised all over the
world, but first applied in Chile in 1965; U.P. sought total nationalization with
compensation but added a deduction from compensation of ‘excess profits’ - a
notion which was anathema to the international business community but which
found unanimous support in the Chilean Congress, where U.P. was a minority.
Yet U.P. did not want to break off relations completely vfith either domestic
non-monopoly capital or foreign capital, and hoped to harness them to a new
pattern of devek>pment &rough joint ventures, turnkey projects and the like,
and through the division of the economy into social (state), private and mixed
sectors. A further diffesence lay in diplomacy; Flrei had re-established commercial
and diplomatic relati.lns with the People’s Democracies of Eastern Europe and
with the Soviet Union, but drew the line at Cuba - timidly bat innovatively
establishing commercial relations with the ‘4Jand in the latter years of his
government. The restoration of full diplomatic relations with People’s China
and, above all, with Cuba in the early months of the Allende government was
thus a continuation of Frei’s policy, although symbolically it signified an
affront to the United States.
A crucial, and .:nnflictive, difference between the U.P. programme and the
platform on which the Cristian Democrats had fought in 1964 concerned the
nationalization of nl anufacturing industries. Frei and his party had spoken
mildly of ‘part.icipatian’, ‘co-management’, profit-sharing and workers’ ,Jwner-
‘See Osvaldo Sunkei: ‘:La Inflation Chilena: un enfoque heterodox,n’, Ei Trimestre
Ecunolnico, 100, Oct.-&c. 1958; Nicholas Kaldor: ‘Froblemas Economicos de Chile’, ibid.,
102, April-June 1959, an.d a summary in Joseph Guunwald: ‘The “StructB~alist” School on
Price Stabilization nnd Economic Development: The Chilean Case’, in Allot Hirschnan (ed.):
Latin American Is,suess:Essays and Comaients, New Yolk, the Twentieth. Century Fund, 1961.
D. Lehmann, Chile, 3570-1973
109
Ship;* the possibility that industrialists would be expropriated, as opposed to
landlords, was not seriously considered. However, the Frei programme was
ambiguous, and different party factions had emphasised different aspects of it
during the campaign for Frei’s election. Of the slogan ‘Revolution in !Jberty’
some emphasised ‘Revolution’, others ‘Liberty’ - which in th2 Chile? ‘I context of 1964 meant keeping the left out of power. Later, in 1967. with the
left faction in control of the party apparatus (though not of the go Jemment),
a detailed ‘Political-Technical Report’ was produced by the Christian Democrats which sought to revive the ‘non-capitalist development path’ which Friel
had once spoken of: the report proposed much stricter controls on private
industry in the mining, capital goods and specific monopolistic sectors,
sometimes recommending nationalization, sometimes merely tighter controls ‘.
The report also proposed a gradual and experimental process whereby
workers would participate in decision-making in their enterprises, although
to&l workers’ control was postponed to a distant future. This was rejected, as
was the report as a whole, by Frei and his faction, who soon recaptured control
of the party apparatus. The internal divisions of the party came to a head when
several of the authors of the report left the Christian Democratic Party in 1969
and formed a party of their own (the Movimiento de Action Popular Unitaria M.A.P.U.) which joined in the coalition of Communists, Socialists and, later,
Radicals. It is not without interest to note that it was the M.A.P.U. intellectuals
who drafted the original document on the basis of which the various parties of
the left negotiated their Programme of Government. Where the Report of the
Politico-Technical Commission hao been less a radicalized version of Frei’s
original programme than a call to apply it consistently, the U.P. programme was
a more radicalized version of the R.eport, in which controls were replaced by
outright nationalization of the financiii system and of monopolies (only),
while a harder line was adopted towards foreign capital. These subtleties of
emphasis, however, reflected a morz profound and even dramatic debate in the
Christian Democrat party was part of a far more concrete deba.te concerning
electoral strategy in the forthcoming Presidential elections of 19X.
Since 1968 the right-wing National Party had supported the candidature of
ex-President Alessandri (Frei’s predecessor) in these elections, and it seemed
inevitable that the Christian Democrats would lose them. Belief that Alessandri
would v2n was widespread on account of the privileged access of ruling class
interests to the media., No one took seriously the indications of electoral trends,
which were that in a three-way contest the coalition of the left would stand a
sporting chance, at the least. Since relations with the right were bad, the
Christian Democrats had to choose between negotiating an alliance with the left
%ee the Party’s Declaration of lDrincigles.
3The title of the report was ‘Proposiciones para una action politica en el pmiodo X967-70
de ma Via No Capitalista de Desarrollo’, published in the party journal dd!tica y Eyiritu.
no. 303, October 1967.
110
D. Lehmann, Chile, 19704973
and losing power. For Frei, it was better to let Alessandri win rather than share
power with Cortrmunists and Socialists, and he therefore tried to engineer a
dual coup to discredit his main rival in the Christian Democrat Party and to put
Alessandri in power. He imposed a strategy of ‘going it alone’ (the camino
p~+o@o),
and also forced a situation in which the rival, Radomiro Tomic, would
be the candidate; this despite Tomic’s protestations that he would never accept
nomination without an alhance with Communists and Socialists (under his
leadership, and therefore unthinkable, for the left would have nothing to do
with a former Ambassador to Washington) and despite the inevitability of his
losing the election. Tomic fought and lost, but so did ,Alessandri.
There was little in the U.P. programme which could be regarded as authentically or specifically marxist; pious talk about economic planning was little more
threatening tbsn that heard in other underdeveloped clountries, and indeed Frei
had already established a National Planning Office. The ‘dictatorship of the
proletariat’ was totally absent. This might resemble the domestic programme of a
Eurocommunist party, despite the very orthodox line of the Chilean C.P. in
international affairs.
The genealogy of the U.P.‘s initial programme lies in E.C.L.A. and in
Christian Democratic thinking, and when the U.P. programme is compared
to Tomic’s in 1970, the differences are slight indeed. The differences between the
programmes of the two political forces should be seen more in terms of language
than content: where the one speaks of a ‘communitarian society’ the other
speaks of ‘revolutionary changes’ and ‘socialis:m’; where the one says ‘marginality’ the other sdys ‘exploitation’ ; on the whole the U.P.‘s language was closer to
that of Christisrn Democrac:i than to marxism. Yet symbols are important in
politics, and in the sophisticated world of Chilean politics, the significance of such
subtle diflerences was not lost either on the elite or on the mass of the people.
Both governments inherited an economy ir recession; both sought to pull it
out of the recezslon by increasing wages, and in both 1965-67, and 1971 a
‘cushion’ of unused productive capacity and a favourable foreign exchange
position permitted the miraculous and fugitive combination of growth, declining
inflation, and dec::ning unemployment; but in both cases this process encountered an investment crisis and a foreign exchange crisis; and in both cases a
more orthodox ‘mcnetarist’ policy was lhen app!ied to reduce demand through
price inflation; th: difl’ering class bases of the respective governments explain
the success of Frcrr and the failure of Allende in imposing the discipline of
monetary orthodo?cy. When inflation began to mount after his expansionist and
redistributive first vears, Frei applied an orthodox monetarist policy, managed
from the central Bank by Jorge Cauas, later the architect of the Junta’s far more
savage econoaic repression. Facing a crisis similar in structure, though far
larger in ita proportions, th2 U.P. government was powerless.
Some criiics said t’rlat U.P.‘s redistributive policy was a form of populism,
and had little to do with socialism. To this, Pedro Vuskovic, Minister of Econo-
D. Luhmann, Chile, 19704973
111
mic Affairs, replied npi*rely that the installation of ‘socialist relations of
production’ in nationalized iuaustries was a guarantee of the Transition to
socialism, and income redistribution was a prerequisite for the transition
process4 The middle classes were optirristically seen as essentially progressive,
and the whole programme was intended to harm only the interests of a very
small minority of foreign and local monopoly capitalists. One Important theme
in the U.P. period was the Communist Party’s repeated, desperate ;rnct impossible attempts to construct an alliance with the ‘middle sectors’.
The programme then stated the coalition’s intention to fully nationalize
the largest copper companies and all domestic and foreign monoF,,lies. Three
‘areas’ of property would be created : state, private and mixed owner ,hip sectors.
Institutional changes involved the creation of a single-chamber Glngr:ss, and
various administrative reforms in the hope of decentralising tht: pcnderous
state machine and democratizing its administration. Repeatedly thl: programme
refers to the organization of the people as a guarantee for its fuldilrrent. This
idea harks back to the Christian Democratic ‘Revolution in Libcrt!’ and the
‘communitarian society’, now to become effective as a result of concomitant
changes in the structural and institutional context.
Apart from the usual intentions to raise living standerds, reduce the r-ate of
inflation and improve social services and social security, the programme also
emphasised the emergence of a new culture from ‘the struggle fcr fra;temity
and against individualism, for the valorization of human work anal against its
denigration . . .’ - again, a language reminiscent of the ‘Revolution in Liberty’.
The provisions of Frei’s Agrarian Reform Law (in force since 1’167)were to
be applied to the maximum. Ideally, the U.P. would have liked tc pass a new
Law, but it did not have the necessary parliamentary majority ant1 meAnwhile
the existing Law oEered very wide scope for expropriation.
Like the Christian Democrat programme of 1964, the U.P. programme
proclaimed the need for radical social change within the existing institutional
framework, but income redistribution simply could not be accomplished on the
scale envisaged by either government within the existing institutional order, even
if the government had all the majorities it required. The Christian Democrats a party with a bourgeois leadership, a middle class membership a:ld a working
class and peasant following - drew back well before reac,$ing the brink, whereas
when eventually some of the U.P’s leaders wanted desperately to draw back
they uould find their retreat cut off. The thre;it to the institutional c rder during
both governments came from two sources: ,>ne, obviously. was the Army, hut
there wars also the danger that the prospect of a redistribution of Income and
power would provoke political mobilization on an unpreccdes?ted scale, ClnS.5
conflict in which institutions, not wages, were at stake, radically different from
4Centro de Estudio:; Socio-Economicos
and Centro de Estudics de la Rea,idad Narional
(CESO(CEREN):
Trmsicion al Sclciaiisrno y Espcriencia Chilena, 1972. The refewncr is to
Vuskovic’s intervention in a conference reported in this volume.
112
D.Lehmann, Chile, 1970~19513
the corporate type of class confXct to vlhich Chilean organizations were
accustomed. ChiEe:anpoliGcs has long hinged on a large and flexible centre, and
on the absence ol’ a thyeat to the gradually improving economic status cf the
middle classes. The deepening political crisis fuelled and was fuelled by
the polarization and disappearance of that centre, and the political activation
of the threatened middle classes in the face of the heady process of popular
mobilization. 5
The M.I.R.,6 in particular, and the Socialist leader Carlos _4ltamirano, as
well as individuals such as Wegis Debray,’ announced the inevitability of a
confrontation, and their analysis, if not their prescription, was more realistic.
How would the people deal wifh the confrontation when it came? In general,
the political parties of the left, accustomed to many years of parliamentary
practioe, were not structurally capable of leading the people in extra-institutional
situations, let alone in a miiitary conflict. The very apt slogan ‘Convertir cl
gobierno en pode:r:’is almost umtrans;atable, referring to the aim of transforming
an institultional authority restricted to one branch of the state machine into
hegemonic power in civil society. But its achievement required a revolutionary
party which was a.bsent.
The substantive: difference,, then, lay less in the programme than in the
determination to apply it, and above all in the radically different class composition of the fences which brought the respective governments to power. Frei,
in his own right, did have at multi-class support base of capitalists, middle classes,
workers and peasants, but he would never have been elected without the votes
of the upper strata who:, in e:ntremis, gave him crucial last-minute support, on
account of their fear that Allende v:ould win the 1964 election. Faced with
crucial choices, he chose repression - economic in the monetarist policies of his
later years, and political in his use of police and army against workers and
squatters. In the years of expansion he was prepared to redistribute income or
expropriate estates, for at that point these policies did not contradict the logic
of the economic system. But when the pursuit of income distribution threatened
to undermine the private control of industry, or when expropriation of estates
begzrn to encounter hostiiity among commercial farmers and industrialists, the
two processes wzrc respectively halted or slowed down. Frei’s commitment to
law and order was stiff when. workers were on the streets or squ,atters illegally
occupying land. But it was less stiff when commercial farmers blocked the Pan
American highway. And t’here is some evidence that he turned a blind eye to
the unsuccessful attempt to prevent Allende’s accession, which led to the murder
of the Commander-in-Chief of the Army in late 1970. Under Frei, people died
5This noint is we:i made in Manuel A. Garreton and Tomas Moulian:Procesos y Bbques
Santiago, PLACSO, 1977.
Vhe Left Revolutirmary Movement.
‘Regis D&ray: Cmver,mtions with Alted, New Left Books, London, 1971. SW ~SO, for
examlple, the declaratilon cf the M.I.R. published in Pmto Find, no. 114, September 29, 1970.
Poiitkus x la Crisis chikna, 19704973,
D. Lehmunn, Chile, 19704973
113
in repressive army and police actions in the mming town of El %alvadors, in
Puerto Montt, and in the Santiago suburb of La Florida. Allende, on the other
hand, had his only solid support in the urban’working class, with a substantial but not overwhelming - number of rural workers and peasants, and a m nority
of the middle classes. He was lenient almost to a fault, anJ publicly apologized
for the one incident which marred his government’s non-rzpreessive record at
La Hermida, a Santiago shanty-town. Since his political co; .tzc1 of the repressive
forces was partial and decreased as time went by, he cannot br held responsible
either for their leniency towaros the para-mili!ary groups of the right, or ;‘x the
abuse of the army’s right to search for arms when, during 1973, they used that
right as an excuse to repress workers, peasants and government officials.
Similarly, in economic policy, the U.P.‘s class base was manifest in the government’s inability to carry through consistently a monetarist retrenchment from
mid-1972, after the redistributi;re efforts of 1571. The r:>tegration of the Chilean
state machine in the capitalist system as a whole is manifested by this: by the
maintenance of its centralization and autonomy when its repression is directed
at workers and peasants, and by its disintegration aud the colonization of its
agencies by forces arising in civil society when an attempt is made by the
civilian executive to point its guns - real and metaphorical - in the opposite
direction. Much depends on the ‘margin for manoeuvre’ offered by the economy
as a whole, but it would appear that in a period of financial crisis in an economy
heavily dependent on imports and foreign credits, the brunt of the burden of
retrenchment cannot but fall on the working cla:;ses; an attempt to preserve gains
in income distribution while retrenching implies making industries operate under
totally new conditions which a.re likely to contradict the prevailing logic of
capital accumulation - a redistribution which in a period of expansion could
just fit into that logic. Yet the retrenchment is probably-in
the knife-edge
conditions of a primary commodity exporter on the periphery of the world
economy - an inevitable consequence of an attempted income redistribution
and its concomitant, monetary expansion. Political forces seeking to undertake
a redistribution of income could learn this one lesson from the Chilean experience: to be on the safe side, plan for austerity, not for a consumption boom.
This finds support in the experience of a long list of countries which have passed
through and sustained an equalization of their economl~c structure: the Soviet
Union, Cuba and Tanzania are obvious examples.
In contradicting the ic,gic of capital accumulation, government finds itself
forced to redirect radiahy th.: activities of the state, to ta.ke over direct,
centralized control of production and final demand, and thus impose, under
necessarily harsh conditions, a different logic of accumulation. If this different
logic is unavailable, or if the ;!ower to impose it is not available, this hypothetical strategy is ir terrupted in mid-stream: the colonization of the state by
the class forces of civil society which support or oppo!se the government, and
which the governmeltlt cannot repress, will be expressed in the fragmentation of
control over nomjnally nationalized industries and farms, subject to no single
new rationality. “The accumulaL,,n process is thus reversed while forces
disparately seeking an ill-defined “new order’ wrestle unequally with the laws of
capitalist circulation: Chilean inflation was, in this period, no more than a
reflection of that underlying battle.
It may appear paradoxical that, despite the differences, I insist also on the
similarities between Allende’s and Frei’s original programmes, and above all
on the similarity between the interpretations of Chilean history on which ,hey
were based. The explanation lies in their common assumptiou that Chilean
income distribution was an obstacle to growth, and that therefore redistribution
would not enter into contradiction eventually with economic cantinuity, that
indeed it would improve the economy’s growth performance’ without upsetting
the logic of capital accumulation.. U.P. presented many new measures, but not
a new model, let slone a socialist model of accumulation. The coalition’s
socialism operated at the level of mstitutions, not at that of the economic
mechanism.
2, Economic policy
Within a short time, the U.P. had passed to the olfensive on all fronts; on
January 1, 1971 wage increases were awarded in such a way as to f’avour the
lowest-paid workers in industry and agriculture, and many prices were held
down. With 40 percent of industrial capacity apparently lying idle industrialists
could respond to tne expansion of demand, although the structural bottlenecks
which explained some underutilization of capacity continued to have their
effects, as did the f:wtreme political uncertainty. As in 1965-67, when the
Christian Democrats carried out a simila; programme, profits per unit of
production may not have risen, but total profits presumably did. rise. During
1971 Gross National Product rose by 8 percent and industrial production by
15 percent. The share of wages in ldational Income rose to 59 percent, having
stood at S1.7 percent on an average between 1960 and 1969.9 In the municipal
elections of March 1971the U.P. won almost 50 percent of the vote:,” in contrast
to the 37 percent it had won in the Presidential elections the previous Sep..
tember. During 1971 the complete and unanimous nationalization by Congress
of foreign-owned or part-owned copper mines was achieved, and 130 important
sThis is especially notable in the absurdly optimistic forecasts in U.P.‘s hastily assembled
Economic Plan, which pruJected concurrent increases in i,ncome equality, GNP, employment
and produciivity. For a critique see Alejandro Foxley and Oscar Muiioz: ‘Income Retlistribution, Economic Growth and Social Structure’, O.xford Bulletin of Economics and Statistics,
XXXVT, 1, February 1974.
‘ODEPLAN (Oflicina de Planificacibn National): Antecedentes sobre ei desarrollo Chileno,
19m-1970,1971,
p. 43.
,“74 percent of registered voters participated in these elections.
D. Lefimann, Chile, 19704973
115
enterprises passed either by purchase or by ‘intervention”’ into the hands of the
State.” By July 1972, 3,278 farms had beer, affected by the agrarian reform
process, in addition to the 1,,412 expropriated under Frei. The number of
peasants benefitted by that time was of the order of 75,000 - rather more than
10 percent of the rural labour force, Nationalised industries were placed under
the control of administrative councils on which workers’ representatives sat
side by side with government appointees - the latter numbering one more than
the former but not forming a homogeneous bloc. It was difficult to control
seizures of industries, and even more so to limit wage increases. The government
reached agreements with the C.U.T. (the Central Organization of the Trade
Unions) in 1971 and 1!?72 at the national level, but the wage increases agreed
were surpassed in almost all factories. r3 Wages were rising with particular speed
in the nationalised industries, and the only imaginable way of limiting them
would have been through rationing or massive inflation: this latter was to ct Jme,
but only became a successful method of reducing demand after the putsch.
By mid-1972, the Communist Party in particular, frightened of alienating
the middle sectors., was advocating a policy of consolidatien, involving a
slow-down in nationahsation, monetary restriction and an increasingly shrill
attack on the ultra-left.
The money supply increased by 113 percent in 1971; overall consumption
increased by about I3 percent between 1970 and 1971 ;I4 the effect of demand
generated among low-income groups on food products was disproportionate
given income elasticities and price subsidies. Exchange rate policy permitted an
unprecedented increase in food imports even at a time when world copper
prices were declining aad world food prices were rising astronomically. Food
imports, which had cost an average of 11.7 percent of export earnings in 196%
70, rose to 15.7 percent and 33.1 percent in 1971 and 1972; from $125 million
per year in 1945-70 to $180 million in 1971 and $364 million in 1972; the prices
of these imports rosle 8 percent in 1971 and 41 percent in 1972.
Domestic food production, which had grown by 3.5 percent per annum in
“This term refers to government take-over of the management of a factory or farm without
actual take-over of ownership. It was possiblein virtue of a law decreed by the 100~fray
Socialist Republic 1931-2. According to this legislation - which had lain dormant and forgotten on the statute books -the government could, in the case of social conflict or similar
difficulty, ‘intervene’ in the ;lirm or farm c.,ncerned.
12The passing of many industries into rhe hands of the State was a haphazard affair in
some cases: groups sometimes not controlled by the U.P. -and perhaps not control%
by
anyone - would create a faitaccompli by occupying a factory, for example, and more or less
forcing the Ministry of Labour to ‘intervene’ simply in order to avoid lengthy halts in production. Thus a number of firms in tr,e Area de Propidd
Social (State Sector) wer; not
really ‘wanted’ in it, while some ninety large and important monopoiies were still in private
hands, awaiting more conventional ConstiFutionaf procedures to be taken over - proceJurcs
for which the necessary Congressional approval was not forthcoming.
‘Wages increased by about 50 percent in 1971 and about IO percent in 1972.
14Prper by Edgardo Hoto, Cambridge, 1977.
116
D. Lehmunn, Chile, 19704973
1965’10, grew by 4.7 percent in 1970-1, ;and 1.3 percent in 1971-2. Total
agricultural production grew slightly more in 1970-72 bu5 in any case the figures
conceal marked variations in certain crops and in livestock. Wine and grape
production grew by some 30 percent in 1970-71, and crop production by
10.3 percent, while livestock barely increased at all, partly due to contraband
exports in the south, to Argentina. If the ,eBect of the increase in wine and
grape producti:on in 1970-71 is discounted, the increase for that yea.r is 2.9
percent.‘5 In 1971-2, cattle production declined, due perhaps to inflation,
which encouraged farmers to keep cattle on the Ihoof, while livestock products
such as eggs, chickens and pigs increased substantially. Thus total lives.uck
production rose some 6.6 percent; but crop production fell by 4 percent
(in spite of a 2.6 percent increase in area sown). Wheat declined 13 percent,
maize 12 percent and sugar beets 14 percent. Thanks to ,the use of idle industrial
capacity, to price control, and to agricultural imports, inflation in 1971 was
much lower than in 1970 (22.1 percent compared to 54.9 percent). However,
b:y the beginning of 1972 black markets, shortages and queues were beginning
to appear, and inflation started its march up to three figures,.
It is very difficult to understand the ratioma le bebind the policies of Vuskovic
and his team. Of course, Frei had followed! a similar policy in 1965-66, but he
had reimposed orthodoxy when a continuation of the redistributive process
came into conflict with political stability. ‘Erskovic claimed that he sought to
reactivate an economy depressed by Frei’s monetary orthodoxy by expanding
demand and using up idle capacity, while at the same buying popularity for the
g;.;vernment and support for further structural changes. That is one account.
Airother, less charitable account might be that Vuskovic and his team knew the
probable consecduences of th.eir actions, and were seeking to force the governxnent
iut.0 I position where it would have to either impose orthodox,y anu ally with its
enemies to do so, or else impose (another orthodoxy) central planning and
r.a:tioning, and thereby risk a revolutionary confrontation. It should be added
th.at the policy did not, as far as can be leen, have much efFect on overall income
distribution, since it raised the incomes (>falmost all classas. These included the
middle classes, some of which were eventually to be the warhorses .of the
blourgeoisie in the counter-revolutionary
movemerrt. Also, much of the purported idle capacity arose from bottlenecks in the economic system which could
not be eliminated 0vernight.l’
The judgement one passes on Popular Unity’s, strategy as a 3whole must
depend fundamentally on one’s evaluation of the economic policy (or, more
’ “Source: UNDO-FAO-ICIRA: .Diagnkfko de la Refirma Agraria Chikwa (Ndembre
i’9ALJunio 1972), 1972. This report was co-ordinated by Solon Barraclough. It differs little
in the eswxce of its tidings on production from reports put out by the Agricultural Econjomics
IDepartment of the Catholic University at a simiku time.
160n bottlenecks see Edgardo Floto’s wpublished paper. On income distribution see
Alejandoo Foxky and Oscar Mufioz, op. cit.
D. Lehmann, Chile, 19704973
117
strictly, the incomes and financial policy) fc-llowed during the government’s
first six months, because there is a strong argument for saying that as a result
thereof the g0vernmen.t lost its initial freedom of manoeuvre, and that only
afterwards did disaster become inevitable, Now suppose one believes, as I
increasingly believe, that incomes policy in this period was controlled by EL
particular group of technicians with no firrr party affiliation within the stete
apparatus, who did not explain the probable consequences of their actions
fully to the President and to the leaders of the various parties. Then it is possible
to conclude that the strategy of structural change within the institutional order
was nbt allowed to be tested in practice because the retreat essential to the
maintenance of that orcler was cut off from the outset. Faced with a choice
‘between institutional collapse and the continiled pursuit of income distribution,
%he policy of the dominant forces at Cabinet level (but not on the ground)
was clear: retrenchment and consolidation. Vuskovic’s policy had made this
impossible. If, on the other hand, one believes that the eccnomic policy followed
in the early months was an inherent feature of the government’s strategy (even
though it was not spelt out in the Programa de Gobierno), then clearly the
strategy as a whole stands indicted, For the principal consequence of the policy
was that the government lost control ; by generating high inflation (130 % in 1972)
it generated high wage demands, especially in the nationalised and ‘intervtined”
industries, and by holding food prices down and operating a very low exchange
rate for wheat and even rnea::,it provoked such a pressure on the foreign exchange
position that within little time a relatively comfortable position had been turned
into a very uncomfortable one indeed.’ ’
Despite a barely spoken a.wareness of this problem, the government continued
to try to use the existing institutions; indeed it had little choice,’ since the
option of creating different ones was not open. Congress, in which the opposition
parties had an ample majority, refused necessary legislation either to advnnce
further on the road to socialism or to halt the process and ‘consolidate’.
Rationing might have enabled a preservation, and indeed a reinforcement, of
apparent gains in income distribution while ensuring that scarce food supplies
reached the consumer, ‘but the opposition parties resolutely refused to allow
anything of the sort. In any case, it was probably bureaucratically unfeasible
on a large scale. In thecry, inflation could play the role of a ‘tax’ but it would
’ % his book Ablende’s Chile: the Political Econonly of the R,:w and Fall of Unidad Popular,
Cambridge ‘UniversityPESS, 1976, Stefan de Vylder specificallystates that despite boycotts
by traditional sources of aid and credit in the U.S. and in the IDB and IBRD, Popular Unit!,
was able to find as much credit as previous Chilean g,overnments had found in Western and
Eastern Europe The problem was the ‘bottomless’ den,and for imports in the economy. It is
not uninterestin:,: to note that Eastern European countries were singularly unsympathetic to
requests for cre& for current, consumption to buy cff the mIddIe classes. They were sympathetic to requests; for capital aid, but this was for long-term projects and few if any ever got
off the ground. Thus the economic boycott cannot be blamed for very much, though the
government could well have done without the dislocations it provoked.
118
D. Lehman,
Chile, 1970-1973
only be eflective if it could be controlled in such a way as to channel resources
into a centrally planned state sector’” -- and legislative facilities for this were
most certainly not available. In practice, from Vuskovic’s removal in mid-1972
until the coup in September 1973, economic policy consisted of a series of
attempts to return to fiscal orthodoxy and tcb reduce demand which could not
achieve their aims. They could not achieve their aims because the government
could not and would not complement them with the political repression which
forms an essential part of the application of monetary orthodoxy in CI,sis
siituations in peripheral economies.
The opposition, after its first few months of disarray, was far from ‘loyal’.
They conducted a highly sophisticated campaign of harrassment in parliament,
in the streets, in the wild scare-mongering of the (CIA-financed) press. The CIA
most probably finauced the lorry-drivers’ strikes,‘” and lhad connections with the
para-military fascist groups which eventually operated with almost total
impunity. It was a classic case of the application of the slogan once coined by
Stalin: ‘th;: worse, the better’.
The powerlessness of the authorities w3s, however, not only a result of
dishonest opposition: the machinery of government itself was in a state of
increasing disorganization.
Jobs in the government apparatus had been
allocated on a quota basis to the various parties in the coalition. With the
exception of some particularly effective prc. *ammes - such as the improvement
in health services, the distribution of free milk to small children, which led to a
remarkable decline in infant mortality rates, and the expropriation of land - it
was exceedingly di5icult to implement any policy at all. Individuals depended
for their jobs on party patronage and not on bureaucratic hierarchy, and thus
the possibility of applying one single policy was limited. Apparent unity at the
Cabinet level concealed rivalries and deep disagreements at all levels between
piarties and within the bureaucracy they had colonized. Similarly, a problem of
authority arose in the relationship between the bureaucracy and its environmlent.
:For example, the parties were not in a good position to exercise control in
nationalized industries, even in the copper mines.20
In earlier crises, politicians had found ways of compounding their difhrences
in the interests (ofthe preservation of institntlons. Conflict between the Executive
and a Congress controlled by the opposition had after a!1 been the rule, not the
exception, in rescent Chilean history. Now,, however, with every day that passeu,
‘*On the ro!e of inflation during a transition period, see E. Preobrazhensky:
The New
Clarendon Press, 1965. Krvnes once described inflation as ‘a: form of
taxation which the public find hard to evade and even the weakest government can enforce
wlhen it can enforce nothing else’. The trouble ir that a u*eak government cannot actually lay
its hands on the tax in a systematic way.
“Wl~y else wordd the spiralling descent, of tt : escudo’s black market exchange rate have
been reversed durjng the strikes?
‘ONorman Gall: ‘Copper is the wage of Chiie’, Anrericun Universities Field .%q.trReport.~,
Clkst Coast, South American Series, XIX, 3, August 1972.
Economies. Oxford,
.D. Lehmann, Chiie, 1970-1973
119
the re-establishment of stability on the basis of minimum consensus between
even the C.P. and the C‘nristian Democrats become more and more remote.
Every farm or factory legally expropriated or illegally and spontaneously
seized raised the costs of a cleal for the government and reduced its benefits,
in the short term, for the opposition. Every new seizure meant that much more
repression in the event cf a deal, while offering the opposition Ihe opportunity
and the temptation to arouse the fears of the middle classes. Class conflict
therefore continued to develop in intensity beyond the scope of institutions,
making a violent solution inevitable - a solutitin which could only be fascism or
revolution.2i The Christian Democrats are today paying the price of their
irredentism.
It would be highly misleading to leave the story there, for, side by side with ir
disorientated and fragmented government, remarkable movements grew up
among the urban and rural proletariat and the peasantry which demonstrated
a far clearer understanding of what W;LSat stake than did the leaders of the main
left-wing political pasties. Unfortunately, these movements did not have the
orcap;?ation or the leadership which might have enabled them to carry out a
swcessful revolution. It is all too easy to blame these movements - the ‘extreme
left’ as they are vulgarly known - for the failure of Popular Unity. They are
better interpreted as a reaction by certain sections of the rural and urban
proletariat and the peasantry to the weakness, indecisions and contradictions
of a government which they fervently supported.
3. The rise of autonomous revolutionary movements
The disconcerting feature of the process was that mass mobilisation was
not a prerogative of the left. There came a point, perhaps with the prolonged
lorry-drivers’ strike i.1 October 1572, when all formal political orgsnisatiorl;
lost control of what w’as happening OR the ground, though some did choose, by
their verbal violence, to encourage it, Even the Christian Democrats and rightwing Nacionales werf: having to follow movements initiated by lorrydrivers,
shopkeepers, bus-drivers, entrepreneurs., doctors and other groups organised
in gremios. 22 No doubt there was quite an effec:tive conspiratorial organisarion
behind the upstart leaders of these organisations, but it was evidently successful
in canalising the discontent of gro+VFW
I_whose distrust of politician ; and political
institutions affecl;ed the Christian Democrats and Nacionales ;.s well as the
U.P.
21A,:~ndamentalerror of many ;ibera.lswho oppose the Pinochet regime is their implicit
belief that a moderate solution was available. After 1971, it wasn’t.
22This word is a generic term for any kind of corporate interest group: thus in the past
normal trade unions (sindica~os) also called themselves gremius. ?hc right appropriated the
term an,i generalised ,its use in order to unde:line their claim to be without any political
affiliations.
120
D. Lehmann, Chite, 19704973
On the left, there was an absence of co-ordination of extra-insti,tutional
aci-ion (let ~ln?e co,+racyj,
either from within the institutional parties, or from
tha M.T.R., or frown any other source. During the electtiral campaign of 1970
Cornit& de Unidad Popular had been formed in workplaces and on street
blocks, especially in urban areas; they were multi-party affairs, but operating
In an electoral and oppositional context where it was not hard to maintain
nnity. .After the election, these committees lost their momentum as parties,
and their militants turned their energies to staffing the state machine, and
trying to implement government policy.
In contrast, during the succeeding years, the popular organisations w%cb
grew up were increasingly independent of any political party, and of the MAR.
as well, and they arose as much from conflicts with the State machine as from
conflicts with capitalists. Th.ere may also be some substance in the hypothesis
that the people who participated in these new forms of organisation were drawn
from social categories which had not previously been signitlcantly involved in
sustained organised political or corporate activity: unemployed rural workers,
women, young workers. (Certainly, this phenomenon of ‘newness’ was very
evident on the other side: the lorry-drivers seemed at fist to emerge from
nowhere and the housewives of the middle class were remarkably active.)
New organisations sprang up in nationalised or ‘intervened’ enterprises, and in
the countryside in the shape of Peasant Councils (Consejos Cuntpesinos).
Ih the towns, the homeless continued a movement of seizures of land which had.
been going on throughout the sixties; with government, help in providing
resources, new ca~npamentos were formed and some h;ad a high level of
participation in inaernal organisations, covering health, education, the maintenance of public order and so 0n.l 3 Hn 1972 and 1973 autonomous ‘Comandos
Comunales’ anid ‘Cordones Inldustriales’ were formed in industrial suburbs in
Santiago, Conception and other towns. A high level of popular organisation
was achieved to cope with the October 1972 lorry-drivers’ and shopkeepers”s
strike, preventing the country from be:ing brought to a complete standstill, but
after the strike was over things were ‘brought back to i?ormal’ amid much
criticism from the M.I.R.. and :pome Socialists that the coalition was again
renouncing a revolutionary form of organisation as it bad abandoned the
Unidad Popular Committee:s. But as the class war developed wit.h renewed
vigour after the March 1973 Congressional elections, these forms of popular
organisation returned to the fray, seizing factories, carrying (out various forms of
protest such as road blocks and strikes, and also trying to organize production.
‘“The best-known campamentos wete Nueva la Habana and Lo Hermida. But one’s vision
this phenomenon is distorted betause the M.I.R. was adept at publicising its activities.
An overview is to be found in Joaquin Duque and Ernest0 Pastrana: ‘La movilizaci6n
reivindicativa en 10s se43ores popular~ en Chile, 19fi4-1972’, RevMa Latinoan~ericanade
Ciencks So&&s, &amber 4,1972.
D. Le~ann,
Chile, 19704973
121
During the failed coup of June 197324 many factories were seized, but the
government, especially t.he C.P., desperate to pacify the opposition, gave instructions to hand the factories back after the storm had, provisionally, passed.
Another example of popular organisation was found in the Jzlntas de
hzstecimien@ JJ Precios (Supply and Price Boards) set up in working class
suburbs in order to channel goods at fixed (i.e. non-black-market)
,>riccs to
these areas. They were administered by peop!c living in the suburbs, \+ith
varying degrees of cooperation from the political parties of the left, and rece ved
their supplies through a state marketing corporation This seems to have arisen
as a popular initiative, and the government was able to cooperate er%ciently
enough to make it work ts some extent, though I do not know whethera bal.anced
evaluation is possible,
All this activity represented a darger to the established parties of thl: left,
especially the Communists who were incapable of guiding it and felt rhreatccec!
by it: they were accustomed to students taking up revolutionary views, but no;
to workers doing so. Jn the CommLnnist Party, all levels of organisation ~,vere
closely tied to national directives, and there was little room for legitimate
autonomous action at the level of the cell or Regional Committee. Although
union activists in the party had some autonomy because they had an independent
base of power, the evidence is thai they remained largeiy within the confines of
conventional union acuvity: this had net troubIed the party - so long as it was a
party of the opposition. 25 But organisations which uere capable cf dealing with
ncgotiatlons for wages encountered many difficulties whet1 faced with the
democratization of factory manager? -nt. Thus, in a number of nationalized
or ‘intervened’ factories in the region of Conception after 1970, the same
group might elect a pro4Z.P. leadership for their union, and an Administrative
Council more sympathetic to the M.I.R. Many C.P. unionists did ignore the
wage guidelines agreed by the government and the C.U.T. (the central Trade
Union body dominated by the C.P.) in 1971 and 1972, while the M.i.2 operly
encouraged their violation with enormous wage claims.
The reaction of the Communists to the emergence of institutions of workers’
power independent both of the state and of the pa??y or trade union apparatus
was to turn their backs on it, and conduct campai&ms against the extreme left
and against irresponsible wage demands, calling upon the workers to recogni:;e
that their most important role was in production.26 In a peGod when the issue
240r was it a dress rehear&? It was known as the ‘tancazo be-awe :‘l WAS I:.&ed out by a
tank regiment.
2%ee Allan Angell: PO&tics and the Lobow Move.ment in Chik~, Lor dor, Ox ford University
Frcss, 1972, pp. 148-151.
*6See the important article by Odando hl’ilias, member of the Political 0,mmittee of the
C.P., aod subsequently Minister of Finance, El S&lo, 5/6/72: ‘Revollrtionary participation
is effective if it operates above all in the field of production and ~aages, s:~:ctly based on :I
realistic economic plan which fixes very clear targets of increas.ed productivity and expanded
reproduction and which has been discussed section by section, and drawn up democratically... ’ And on the role of unions: ‘We Communists must WEto it that there is a unitair.
representation of the workers #andthat the trade unions carry out the r-ore important role.’
122
D. Ldmmn, Chile,19704973
of power lay behind tb.at of pay, some sought to keep pay tlown while maintaining an institutional structure geared to the annual round of wage demands,
while others sought to use a new structure of workers’ control in order to demand
wage levels and regah (perquisites) which were fuelling inflation, and (more
important) eating into the economy’s surplus.‘“’
The Socialist Party was a party of urban and rural caudillos, old-time social
democrats, old-time trotskyites, and revolutionaries who had more in common
with the M.P.R. and were often members of both parties. But the party did have
a strong representation in the trade ucfon mov’ement,. The Secretary-General,
Altamirano, had ever since 196’7espoused the position that revolution withcut
violence was impossible, and ahhough he formally kept the party within &e
U.P. coalition, he did little and perhaps could not do much, to keep his rank and
file in line. Socialists operated without much central control, with the result
that they were perhaps more active than the M.I,R. in encouraging indepe-rdent
grass roots action - for the M.Y.R. did have a structure of command, and was
aware of the dangers of adventurism. The Communist Party’s more strident
attacks on the ultra-left were often directed at the (unnamed) Socialists rather
than at the M.I.R., and Allende const.antly disassociated himself from this, his
own, part~j, aligning himself with the C.P. Socialist Party members stimulated
much grass ralots action, but did not offer the’leadership it desperately needed.
The Sinai word can be found in Gramsci :
At a certain point in their history, social g:roups separate themselves from their
traditional parties . . . the men who constitute, represent and lead the parties
are no longer recognised as the true expression of their class or sub-class
tfraziune di chse). When such crises occur, the immediate situation becomes
delicate and dangerous, because the field! is open to violent solutions, to the
activities of bidden. forces (potenze osctwe) represented by providential or
charismatic leaders . . . the content (of the situation) is the crisis of the hegemony of the ruling class, which occurs either because the ruling class has failled
in that v’ast enterprise where:by it has sought or imposed by force the consensus of the masses (such as a war) or because the masses themselves
(especially the peasantry and the petty-bourgeois intelligentsia) have suddenly
passed from 3. state of political passiveness to a certain degree of activeness
(artiuitb) and have put forward demands which, though inorganic, when
taken together constitute a revolution. One speaks of a ‘crisis of authori.ty’
and this is the crisis of hegemony, or the crisis of the State in its entirety.
“On these questions sramsci, with his ‘experience of the workers’ councils in Turin after
the First Worlri War, had mulch t\r say. The Council was the embryo of the workers’ state,
and the sindrcuro s$ould rem,ain independent of it, though the Counci3 would, he hoped,
bring about a change, if not a dissolution of the union. He conceived of a deep contradiction
between that !egality represented by the unions, and the new legality represented by the
Councils. (See Martin Clark: ‘II con&to ;_~ams;ia~o di rivoluzione (1919-1920)‘, in Pietro
Rossi (ed.) GIWZSC~’
e r’aCuttura Conttmqwrunea, Rome, Editori Riuniti, 1969.) These vi’ews
were expressed in articles in the Ordine Nuovo during the period of the Turin events.
D.
Lehtnann,
Chiie,
1970-1973
123
Of course, as he says, the process varies from country to country, but rhe
(content is always the same and the outcome is some form of Bonapartism,,
unless the ruling classes cau create a single party of their own - in which case
;the outcome is fascism,”
5 “Note
B
ml
Macchimelii,
Rume, Editori Riuniti,
1971, p. 74.