For 16 years after Augusto Pinochet's coup on September 11, 1973, Chile was subjected to a military dictatorship, widespread human-rights abuses, and an extraordinarily successful free-market experiment. Today, Chileans are still grappling with a legacy that is as abhorrent as it is enviable.

On September 11, 1973, Chile's armed forces staged a coup to depose Salvador Allende, a socialist physician who had been elected president in September 1970. The presidential palace, La Moneda, was bombed by British-made Hawker Hunter fighter jets and assaulted by tanks and infantry troops. Inside, some 60 people, led by Allende, resisted the onslaught for several hours.

The mutiny, led by army General Augusto Pinochet, marked the beginning of a 16-year military dictatorship. The regime engaged in systematic human-rights violations, and subjected Chileans to a radical experiment in market economics, carried out by a group of followers of Milton Friedman known as the "Chicago Boys." The dictatorship finally ended in March 1990 with the inauguration of a democratically elected president, Patricio Aylwin.

Half a century later, Chileans are still trying to understand the tragic events that shattered so many lives. Many hoped that the 50th anniversary of the coup would be a time for reconciliation - that old enemies and adversaries would finally come together to condemn the suspension of democratic rule and the widespread abuses that followed. Surely politicians from both sides would vehemently proclaim that the nation must "never again" (nunca más) allow itself to be so traumatized.

Instead, far from bringing reconciliation, commemoration of the coup has rekindled old divisions and recriminations, with the left and the right pointing fingers at each other. From the left, the Communist Party has emphasized the United States' role and decried the speculators and black marketeers who destabilized the Allende administration. In response, politicians from the center and center right point out that it was Allende's own government that ruined the economy with runaway inflation, shortages, rationing, and a collapse in real wages.

As Allende's youngest daughter, Isabel, now a member of Chile's senate, said in a recent interview: "There will never be an official truth... But I don't understand why we cannot say 'we will never again break down our democracy'..."

Anatomy of a Coup

In the early hours of the day of the coup, Allende learned from an aide that the navy had taken control of Chile's major ports. Fearing the worst, and accompanied by a handful of bodyguards and his personal doctor, Danilo Bartulín, the president rushed to the presidential palace. At first, he thought the navy was acting on its own, and that the army, led by the recently appointed commander-in-chief, Pinochet, would defend the constitutional government. Arriving downtown, he was reassured to see that the gendarmerie, the famed Carabineros, were defending the palace.

As cabinet members and others began arriving at the palace, the president tried to contact Pinochet. Failing to do so, he feared the insurgents had taken the commander-in-chief prisoner. Meanwhile, Minister of Defense Orlando Letelier, a lawyer who would be assassinated by agents of Pinochet's junta three years later in Washington, DC, was arrested by the putschists.

At 8:20 AM, it became clear that Pinochet had betrayed the president and was leading the coup. Suddenly, the Carabineros changed sides and joined the insurgents, and the light Mowag tanks that were guarding the palace turned 180 degrees and left the Plaza de la Constitución. The government was isolated and cornered. The president and 60 of his supporters, including bodyguards, some cabinet members, and medical personnel, were on their own. Allende put on a helmet and moved from room to room, holding an AK-47 that Fidel Castro had given him for his birthday.

At 9:15 AM, Vice-Admiral Patricio Carvajal, one of the putsch leaders, called the president and told him that if he did not resign, fighter jets would bomb the palace. Allende refused to surrender, and at 9:37 AM gave his last radio address, which would become known as the "Great Avenues Speech." Toward the end of it, he said: "Workers of my homeland, I have faith in Chile and its destiny. Others will overcome this gray and bitter moment in which treason seeks to impose itself. Know that, sooner or later, the great avenues will open again, through which the free man will pass, to build a better society."

At noon, two Hawker Hunter jets bombed the palace, which was already being shelled by tanks. A ferocious fire engulfed the building and some of the walls began to collapse. In a later interview for the documentary Stronger than Fire, Bartulín, who was with Allende until the end, looks straight into the camera. His black hair is combed back, his thick black mustache is imposing, and there is a palpable sadness in his eyes. He speaks slowly, carefully modulating his words and using short phrases:

"The Presidential Palace was burning. Breathing was very difficult due to the smoke and tear gas. There were practically no more defensive positions left to fire from. The situation was decisive. Allende said to me, 'You have been my best and most loyal friend. If I am wounded, shoot me.' I told him, 'Mr. President, you are the last one here who should die.'"

Bartulín was not a member of a political party, but he was a steadfast and resolute man of the left. He was detained by the military on September 12, before being transferred to the national stadium, where thousands of political prisoners were held, and then to the Chacabuco concentration camp, where he oversaw the clinic that took care of 850 prisoners. He was released after a year, but couldn't find work. He sought asylum in Venezuela, then moved to Mexico and Cuba, before settling in Madrid. He would not return to Chile until 1989, when his name was removed from "the list" of those who were effectively barred from their homeland.

Bartulín appears in the most famous photo of September 11, 1973. He is in La Moneda, to the left of the AK-47-wielding president, who is wearing a helmet provided by Captain José Muñoz of the Carabineros. Allende is looking upward, possibly toward snipers, with a furrowed brow to match the gravity of the circumstances.

To the left of both doctors, slightly ahead, we see Luis Rodríguez of the Presidential Guard, holding a submachine gun. Young and handsome, dressed in a suit and necktie, he bears an expression of fear, anger, or both. Two days later, Rodríguez and 25 other palace defenders will be executed without trial, their remains dumped into the Pacific Ocean from air force helicopters. Rodríguez is one of the almost 1,500 "disappeared" whose bodies were never recovered.

After the Hawker Hunter rockets hit the palace, the president realized that all was lost. He gathered those who had stuck by him and told them to leave, forming a line with the women first, followed by the men. He asked one of the bodyguards to use a doctor's coat as a white flag, and to lead the group to the entrance on the eastern side of the building, on Morandé Street. After the last man had reached the stairs leading to the side entrance, Allende sat down on a sofa and, at 2:34 PM, turned the AK-47 on himself.

Minutes later, the junta issued Military Order No. 10, demanding that a group of about 50 leaders of the leftist Unidad Popular coalition report to the Ministry of Defense. Many complied, thinking it would be a mere formality, or that they might be detained for only a few days before returning to civilian life. Instead, they were imprisoned, tortured, and exiled.

What the President Knew, and When He Knew It

It is well known that US President Richard Nixon's administration did not welcome Allende's election in 1970. As then-National Security Adviser Henry Kissinger later recounted in his memoirs: "Allende's election was a challenge to our national interest... We were persuaded that it would soon be... making common cause with Cuba, and sooner or later establishing close relations with the Soviet Union."

Late last month, the US government declassified two pages from Nixon's daily briefing books from September 1973, adding further details of the view from Washington. On September 8, Nixon was told that there was a strong possibility of a coup attempt led by Chilean navy officers, and that Allende believed "the armed forces will ask for his resignation if he doesn't change his economic and political policies." Concerned about an "armed confrontation," Allende warned that "his supporters do not have enough weapons to prevail in such an event."

On the day of the coup, Nixon's daily briefing addressed the Chilean situation once again. The report, written the night before, said that "[a]lthough military officers are increasingly determined... they may still lack an effectively coordinated plan that would capitalize on the widespread civilian opposition." The authors of the brief were wrong. When the report hit Nixon's desk, Allende was already under siege in La Moneda.

The Nixon administration had opposed Allende from the start. On September 15, 1970, only 11 days after Allende had won a plurality in the presidential election, Nixon and Kissinger met with CIA Director Richard Helms and Attorney General John Mitchell, where it was decided that they would try to impede Allende's ability to govern. According to Helms's notes, the goal was to "make the [Chilean] economy scream."

For its part, the CIA had contemplated supporting a coup led by retired General Roberto Viaux. But after interviewing scores of retired and active military officers, the agency concluded that "a Viaux coup attempt carried out by him alone with the forces at his disposal would fail." Still, the agency provided arms - submachine guns and pistols - to a group that, on October 22, 1970, tried to kidnap General René Schneider, the commander-in-chief of the Chilean army. The plot failed, but the general was left seriously wounded.

Two days later, the Chilean Congress confirmed Allende's election as president by a 153-35 vote. The New York Times ran the story on its front page: "The president elect and his coalition have promised to nationalize Chile's mines and basic industry, its banking and insurance system, and foreign trade ... and to expropriate privately owned farmland ..." The next day, Schneider died, becoming an instant hero of the left.

On November 3, 1970, Allende was inaugurated. Six days later, Kissinger sent a top-secret memorandum to US government officials stating that "the public posture of the United States will be correct but cool... the United States will seek to maximize pressures on the Allende government to prevent its consolidation and limit its ability to implement policies contrary to US and hemisphere interests."

After Allende's election, declassified US government documents show, the US provided financial assistance to Chile's opposition political parties and organizations. For example, a CIA memo sent from Santiago, dated March 14, 1973, reports that while the Christian Democratic Party was using US financial support effectively, the conservative National Party was not very well organized and was wasting the agency's assistance.

When the US Senate "Church Committee" investigated CIA wrongdoing after Nixon's resignation, it found that the agency had been involved in an early attempt to keep Allende from becoming president (the Viaux plot). However, after reviewing thousands of confidential documents and cables, it determined that there was no evidence supporting the view that the CIA was directly behind Pinochet's coup.

Economic Collapse

Doubts remain about the full extent of the CIA's support for Pinochet and his co-conspirators. Nonetheless, the failure of Allende's economic policies was obvious and had contributed to widespread disaffection with the socialist experiment. The economy quickly collapsed under the Unidad Popular government. By August 1973, national output had declined sharply, inflation had reached almost 1,500% (measured as annualized six-month price increases), there were generalized shortages and black markets, and foreign-exchange reserves were exhausted. Not surprisingly, deteriorating conditions provoked a powerful backlash from the middle class.

Allende's economic program had two interrelated components: a short-run "recovery" program, and a package of revolutionary reforms designed to pave the way to socialism. The first element reflected five key ideas. First, the monopolistic structure of the economy meant that there was ample unused capacity in (almost) every sector. Second, it was assumed that aggregate demand would respond to massive fiscal and monetary stimulus. Such policies would support lower-income households by redirecting production from luxuries toward basic goods consumed by the working class.

Third, Allende's government believed the most efficient way to deal with inflationary pressures was through generalized and strict price controls, including control of the exchange rate, and that monetary largesse would not affect inflation. Large increases in central-bank credit could therefore be used to finance economic reforms.

Fourth, it was assumed that most firms already had a "liquidity cushion" made up of monopolistic profits, which would allow them to absorb a substantial increase in wages while prices were fixed or controlled. And, lastly, the government thought that Chile's ample foreign reserves - accumulated during the previous administration - would enable it to maintain a fixed exchange rate without generating a balance-of-payments crisis.

The second, more revolutionary component of Allende's economic strategy was to nationalize Chile's copper mines and other mineral resources (iron ore, coal, nitrate), as well as its banks, large trading companies, insurers, and several large manufacturing firms with monopolistic power. Millions of hectares of farmland were to be expropriated and transformed into cooperatives or state-owned farms.

According to the original plan, these policies would create a virtuous circle. Nationalized industries would increase output at a rapid clip, generating a large surplus that would help finance investment in other sectors, including housing for the poor. The newly nationalized copper mines would provide significant funds to finance social programs. Land reform would result in a rapid expansion of food production. Price and exchange controls would keep inflation under wraps, and higher wages would lift incomes among the poor. And ample international reserves would finance imports of food and necessities.

Allende and his advisers believed, moreover, that economic success would generate greater support for the government. The left often talked about improving the "correlation of forces," allowing it to move further with its revolutionary program and drive a swift transition to socialism.

Nothing of the sort happened. Investment dried up, leading to massive disruptions in production, because the government permitted indiscriminate takeovers of factories by their workers. Instead of the imagined virtuous circle, there were supply shortages, black markets, runaway inflation, and declining real wages.

Meanwhile, the lack of foreign currency made it harder to import spare parts, intermediate inputs, and machinery. Instead of generating surpluses, the expropriated factories faced large losses, which were monetized by the central bank. The government responded to the resulting inflation by mandating new wage increases, leading to even greater losses and a price spiral. By mid-1973, annualized official inflation had surpassed the 1,000% mark.

Instead of addressing the imbalance at its roots, the government further strengthened price controls, resulting in even more shortages. The vicious cycle intensified, as did popular discontent. Revisiting the economic collapse a few years later, Clodomiro Almeyda, Allende 's minister of foreign affairs and one of the country's leading Marxist intellectuals, wrote:

"There are those who believe that external factors were ultimately responsible for the frustration of the Chilean revolutionary experience. There is particular emphasis on the significance of the American financial blockade, the economic and technical assistance provided by the CIA to the adversaries of Unidad Popular, and the American influence and infiltration within the Chilean Armed Forces. These factors tilted the balance of power in favor of the counter-revolutionary coup. In the Chilean case, as in most cases, external actions aimed at promoting subversion worked upon pre-existing internal destabilizing factors, deepening and extending their negative effects, thus favoring the success of the coup d'état. Thus, the American financial blockade and the obstacles to Chilean-American trade worsened the balance of payments crisis and accentuated certain supply problems, but it cannot be said that they caused or originated them."

The Boys from Chicago

On March 21, 1975, Friedman, the most famous economist in the world at the time (he would be awarded the Nobel prize in economics the following year), met for one hour with Pinochet in Santiago. It had been 18 months since the coup, and Chile's economic prospects still looked dire. Although inflation had declined from its 1,500% peak, it had become stuck at an annualized rate of 400%. Output remained sluggish, unemployment was very high, and productivity was lagging.

During the meeting, Friedman told Pinochet that the only way to eradicate inflation and revive the economy was by applying "shock treatment": a 25% across-the-board budget cut. He warned the general that such a policy would entail substantial short-term costs in the form of high unemployment. But he anticipated that "the period of severe transitional difficulties would be brief - measured in months - and that subsequent recovery would be rapid." To support his arguments, Friedman cited West Germany and Japan after World War II.

Friedman's visit marked a turning point. Until then, Pinochet was undecided on whether to support the Chicago Boys' vision of a market economy, or to back the "state capitalism" model that nationalist officers had advocated. But Friedman was so vehement and articulate that Pinochet was sold on the strategy of extreme fiscal austerity coupled with market-oriented reforms.

Starting in April 1975, and for the next 15 years, the Chicago Boys had a free hand to experiment with the Chilean economy. They freed prices and interest rates, lowered import tariffs, privatized hundreds of state-owned enterprises, instituted school vouchers, created individual pension accounts, deregulated businesses and banks, and expanded markets everywhere. They applied Friedman's shock treatment to balance the budget and reduce inflation, reformed labor legislation, curtailed the power of unions, attracted foreign investors, and strengthened the rule of law.

When democracy was restored in 1990, the country looked very different. In less than two decades, the Chicago Boys had created a modern capitalist economy that, after some sputtering, produced a substantial improvement in social conditions, stable prices, and a rapid reduction in poverty. Nor did the country's new democratically elected leaders scrap the Chicago model. Four left-of-center governments actually deepened the free-market policies. While they did expand social programs, the so-called "neoliberal model" was still the foundation on which everything else rested.

By the early 2000s, after more than a century of mediocre performance, Chile had become the wealthiest country in Latin America by a wide margin, surpassing the rest of the region in health, education, life expectancy, and other United Nations Human Development Indicators. The share of the population living below the poverty line declined from 60% in the mid-1980s to just 8% in 2019. In terms of income and other economic indicators, Chile looks more like a Southern European country than a Latin American one. Many understandably speak of a "Chilean miracle."

Yet that miracle is rooted in an original sin: a dictatorship that systematically persecuted, imprisoned, tortured, exiled, and killed its opponents. The challenge for Chileans today and in the future is to continue modernizing the economic model to ensure widespread prosperity, while maintaining the strongest possible commitment to human rights and democracy.

From Project Syndicate

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