Thinking Back to Chile, 1973
Jude Wanniski
January 20, 1999


Letter To: New York Times Magazine
From: Jude Wanniski
Re: Isabel Allende's Uncle Sal

[The following was sent as a letter to the editor of the Sunday NYTMagazine.]

In the account of her uncle Salvador Allende's demise in 1973 at the hands of the Chilean military and Gen. Augusto Pinochet, Isabel Allende says it was the opposition party, backed by the CIA, that "undertook a series of actions intended to destabilize the economy... The ensuing economic crisis reached staggering proportions."

The economic distress that brought the Allende "communists" to power with 36% of the vote had more to do with the high progressive tax rates and sky-high protective tariff. As a Wall Street Journal editor at the time, I was then in the midst of formulating a supply-side economic model that understood the impact that monetary inflation combined with tax progressivity would have in wrecking capital formation. This was happening in Chile. In her article, Ms. Allende does note her uncle's government "nationalized the banks, many industries and the copper mines." This further accelerated the capital flight which was taking place when Allende came to power over Chile's oligarchic establishment.

The real culprit, though, was the Nixon administration's August 1971 decision to sever the dollar's link to gold. With its peso tied to the dollar, Chile quickly imported the dollar inflation through the soaring price of copper, while U.S. wage and price controls temporarily checked inflation here. President Allende never knew what hit him.

[My editorial, appended below, was published in The Wall Street Journal during my tenure as Associate Editor, Editorial Page.]

The Wall Street Journal
February 8, 1974
Perspective on Chile

With the passage of a few months in time it seems clear that the coup in Chile will not go down in history, despite the efforts of some, as a rape of democracy perpetrated by the CIA and ITT. Rather the dominant s American view is that the destruction of Chilean democracy was a tragedy, probably not soon to be repaired, brought about chiefly by President Salvador Allende and his Marxist government.

Now, that is not to excuse the sins of Chile's present government. The junta that toppled Mr. Allende has made some progress in coping with the economic chaos it inherited; production is growing and international credit is better, though inflation continues. But with the equally momentous task of political rebuilding the junta is off on the wrong foot. A year ago, for example, the annual survey of the world by Freedom House, a politically centrist American group, ranked Chile among the free nations, like the United States and Switzerland. Today it ranks Chile among the not free, like Haiti or the Soviet Union.

Even worse, continuing summary executions and instances of torture have been charged by Amnesty International, which has a good track record with such charges. Even after the junta decreed the end of summary executions, there apparently have been suspiciously frequent shootings of "fleeing prisoners." The Amnesty mission reported that Chilean officials gave the equivocal assurance that "no one was being executed unless found in flagrante delicto using firearms against civilian t or military personnel."

While this is scarcely a good start, all may not be lost. The Amnesty mission reported that it was well received by the government, that high government officials may not be aware of some of the grossest abridgments of freedom, that the situation had improved from the days shortly after the coup, and that the officials are sensitive to international remonstrations. Similarly, one Freedom House commentator regards the junta as a "caretaker government," and says that eventually "the Chilean people, so deeply committed to the democratic process, will themselves explore steps by which this great tradition will be restored."

Whatever success the junta may have in meeting that hope, the historical lesson in this coup is anything but one of military greed for power. Writing for Freedom House, Rutgers Professor Robert J. Alexander says that the destruction of democracy was a tragedy, but that "Salvador Allende, martyr of the frustrated 'Chilean Road to Socialism,' as the most important actor in the tragedy must bear the greatest blame."

Mr. Allende took the presidency, Professor Alexander observes, proclaiming that "I am not the president of all Chileans." His failure to uphold the right of private property against seizures by elements of his own party alienated even small property owners. Though he took office  with only a 36% plurality, he was unwilling to agree on limits to his program to remake the economy, government and social order. His denunciations of the Congress and the Supreme Court intensified fears that his party's professed commitment to "dictatorship of the proletariat" would outweigh his repeated professions of democratic intent.

In Foreign Affairs, Paul E. Sigmund of Princeton recites a similar list of failings, with more emphasis on economic collapse. He dismisses suggestions that U.S. policy toward Chile was basically responsible for this collapse or the coup. The lesson, he concludes, is that a government like Allende's cannot "blame all its problems on foreign imperialists and their domestic allies, and ignore elementary principles of economic rationality and effective political legitimacy in its internal policies." In short, Mr. Allende's failing was not providing for and reassuring the Chilean people.

There is room to be pessimistic about the junta's ability to undo rather than compound this damage, but there is also room to wonder whether democratic government is at all compatible with Marxist professions of class war and revolution. We suspect that Mr. Allende proved there is no democratic route to what he had in mind by socialism, but about that one can argue. What does seem to us beyond reasonable argument is that 36% plurality is not a mandate for remaking the basic institutions of a nation, and that a government that behaves as if it were is bound to cause deep and lasting trouble.