demand, provided the government balanced its
own budget and kept the supply of printed money
in check. Ideologically, the father of this eco-
nomics was Friedrich Hayek, who saw in socialism
and its central controls the modern road to slavery.
The attitudes and expectations of workers and
employees could best be changed by the sharp
shock of changing the protectionist system quickly.
Paradoxically, it was a nation that had fallen under
a vicious dictatorship, the kind of state Hayek most
abhorred, which now provided the laboratory.
In Chile the technocrats did not have to worry
about the immediate practical consequences:
workers would be cowed and trade unions would
not be allowed to interfere. In a less authoritarian
regime, the severity of Chile’s inflation (it had
reached 500 per cent in 1973) would have
ensured that the remedies were applied with more
circumspection. Looked at in the short term, the
economic policies adopted in Chile were success-
ful. People even talked of a ‘Chilean miracle’;
inflation was down within a few years to less than
10 per cent; the growth rate in the 1970s was
healthy. But the price paid in terms of distress
experienced by the poorest was equally spectacu-
lar; there was large-scale urban unemployment
and mounting debts. The bankers had miscalcu-
lated in their belief that good profits could be
earned from Latin America’s most repressive
regimes which had a record of keeping their coun-
tries stable and which repaid their foreign loans
punctually. Then the decline in commodity prices
in the early 1980s hit Chile hard, dependent, as it
still is, on exports of copper; servicing the foreign
loans places an increasing drain on an economy.
The Pinochet regime also came under mount-
ing pressure, not only from opposition at home
expressed in massive strikes, but from the Reagan
administration, which in 1986 sponsored a UN
resolution criticising Chile’s human-rights record.
Even his fellow generals opposed Pinochet when
he declared he would stay in office until 1997. In
September 1986 he narrowly survived an assassina-
tion attempt; this he countered with another bout
of severe repression, which included arresting lead-
ers of the opposition. The left-wing guerrilla
group, the Patriotic Front, planted bombs. The
papal visit of John Paul II in 1987 brought more
criticism on Pinochet’s head and the generals were
openly calling for a hand-over to a civilian presi-
dent. Violent street demonstrations accompanied
Pinochet’s 1988 campaign for the plebiscite
designed to confirm him in the presidency until
1997, but the general was sufficiently confident to
lift the state of emergency and to allow the oppo-
sition to campaign against him. In the event the
Chileans rejected Pinochet by the surprisingly
small majority of 463,833 votes out of a total of
just over million. No doubt the improved econom-
ic situation, with substantial growth from 1985 to
1988, and memories of the chaos Allende had left
behind him had persuaded nearly half the voters
to back Pinochet – better the devil you know. But
the result was decisive enough. In December 1989
Patricio Aylwin Azócur, a 71-year-old lawyer, won
the presidential elections and was inaugurated in
March 1990. Pinochet did not retire but confined
himself to the role of commander-in-chief. In
November 1990 he celebrated his seventy-fifth
birthday – too old, one might hope, to turn the
constitutional clock back again, but it remained to
be seen whether the army would resume its former
role of respecting representative constitutional
government. Although the price paid in human
terms was considerable, the Pinochet years trans-
formed the national economy.
In the aftermath of the military regime, the
country learnt the grisly truth about the years of
dictatorship. Nearly 2,300 had died, many by
shooting and torture, and nearly 1,000 had simply
disappeared (at least one unmarked mass grave
was uncovered). One of the hardest tasks con-
fronting Chile in the 1990s was to come to terms
with its past, and to keep the military in check. It
also faced the challenge of reforming its social and
economic structures – including health provision,
education and housing – while at the same time
ensuring employment and maintaining a free-
market economy. The ghosts of the Pinochet
years are receding, Pinochet old and ill has slipped
into irrelevance. The democratic government is in
control. Constitutional reforms in 2003 elimi-
nated the life senators and the army will no longer
be permitted to play a leading role in politics. The
amnesty for the part played in the ‘dirty war’ was
also annulled.