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Paul G. Buchanan: On Markets and Murderers

On Markets and Murderers

by Paul G. Buchanan

The death of Agusto Pinochet Ugarte has reopened old wounds in Chile and rekindled debate about the relative merits of his rule versus that of socialist authoritarians like Fidel Castro. A majority in and out of Chile considers him to be a poster boy for despotism, a tyrant who ordered the murder, torture and exile of thousands who dared to challenge his authoritarian fiats. Others, including a significant number of New Zealanders, hold him up as a champion who saved Chile from Communism and set the bases for a stable market democracy. This is worth considering because it strikes much closer to home than one might think.

From the 1960s through the early 1990s, market-oriented macroeconomic prescriptions for national development were pursued throughout the so-called Third World. The wrinkle was that the pursuit of such policies was most often carried out by US-backed anti-communist military-bureaucratic authoritarian regimes pursing so-called “technocratic” solutions to underdevelopment prescribed by such as the infamous “Chicago Boys,” that is, economists trained in the monetarist philosophy prevalent at the University of Chicago at the time. Be it in Latin America or South East Asia, acolytes of liberal Chicago economists like Milton Friedman (who died a few weeks ago), joined with conservative military high commands to overthrow popularly elected governments opposed to market steerage of their national economies. The majority of the electorate that supported the ousted governments opposed neo-liberal economic reforms (as they came to be called), because they entailed losses of jobs and public services such as welfare benefits, pension and health schemes if the economy was turned over to the (mostly foreign-controlled) private sector in pursuit of efficiency and deeper integration into the increasingly globalised system of production.

However, since these elite prescriptions were considered “harsh medicine” that had to be applied “without anesthesia” (in the words of another similarly minded dictator, General Jorge Rafael Videla of Argentina), this meant that repression needed to be used against the majority who would be, at least over the short term, hurt by the turn towards market directives. The use of repression allowed the market-oriented reforms to operate in the laboratory vacuum created by the outlawing of unions, strikes, political parties, demonstrations and any other means of collective redress. It also allowed the military regimes of the era to engage in a cultural cleansing of social “undesirables” that it deemed subversive of traditional values in their societies. Hence, it was the forced silence imposed on civil society that allowed these unpopular reforms to be implemented.

Thus was ushered in the era of state terror, where the military-dominated state turned on its own citizens to “extirpate the cancers” of communism, socialism, feminism, homosexuality, atheism and anything else that challenged the Roman Catholic, patriarchic parameters of “traditional” society in Chile and elsewhere in Latin America. With small modifications that accounted for cultural and resource differences, the same occurred in places like El Salvador, not to mention South Korea, Indonesia and Taiwan.

In effect, the turn to market capitalism in much of the developing world in the latter half of the twentieth century took place under authoritarian rule, more often than not backed by major capitalist powers as part of the Cold War struggle. Interestingly enough, socialist dictators also justified their rule by control of production, only in an anti-capitalist vein. Authoritarianism on both sides of the ideological divide was more about control of production and distribution than about political freedom and expression.

What hits closer to home is that, for all its condemnation of Chile for human rights abuses and acceptance of Chilean political refugees in the 1970s and 1980s, as of 1984 New Zealand policy-makers used the Chilean economic reform project undertaken by the Pinochet dictatorship as a model for their own efforts to turn towards market-driven efficiencies in national development. Gone were the think big import-substitution-industrialisation policies Muldoon copied from the populist regimes of Vargas and Peron, and in were the policies of the dictators who ousted them. “Rogernomics”, via Treasury officials in particular, was as much inspired by the Chilean “Chicago Boys” as it was by Friedrich Hayek, Friedman and the Thatcher/Reagan supply-side “voodoo economics” (as they came to be called) of the time. This inspiration is evident in the draconian way in which the economic reform package was implemented, referred to as the “Blitzkrieg” approach by Sir Douglas himself, and as close to authoritarian executive decree as is possible without suspending parliament and canceling elections. It bore fruit in legislation like the Employment Contracts Act, which copied almost verbatim major sections of the 1979 Labour Plan imposed in Chile, and in the way the banking industry was deregulated (in fact, the architect of the Chilean Labor Plan, Pinochet’s Labour Minister Jose “Pepe” Pineda, was a frequent and welcome visitor of the Business Round Table and Treasury in the late 1980s and 1990s). This was, in effect, a Kiwi version of Pinochet’s approach to economic reform.

Many of those who regret Pinochet’s passing are still leading voices in both Chilean and New Zealand economic and political circles (to say nothing of Margaret Thatcher). Many of those who celebrate his demise focus on his personal corruption and the atrocities committed by his regime. But perhaps the most important legacy he bequeaths is the fact that the undemocratic means by which he achieved the turn to market economics in Chile provide proof that whatever the rhetorical condemnation they receive, market authoritarians have proven more often than not to be capitalism’s best friend in the developing world and beyond. In fact, one could say that they made the world “safe for democracy” (to abuse Woodrow Wilson’s phrase) by removing indigenous sources of resistance to the capitalist global project. For a world now seeing the resurgence of socialism and populism in Latin America and elsewhere, this may prove a cautionary tale. For New Zealand it should make us consider the ongoing influence of the market authoritarians in our midst.


Raised in Argentina, Brazil and Chile, Paul G. Buchanan is Director of the New Zealand Centre for Latin American Studies at the University of Auckland. Imprisoned by the Chilean secret police (DINA) for working at a free food kitchen (olla popular) in Santiago in 1975, he survived and later became Regional Policy Analyst for the Western Hemisphere in the Office of the US Secretary of Defense and authored three books and over forty professional articles, monographs and reviews that cover the subject of comparative and international politics.

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