Chile under Pinochet: military junta and market reforms (1973–1990)

Background

On 11 September 1973 the armed forces and the Carabineros overthrew the elected Popular Unity government of Salvador Allende, who died in the presidential palace, La Moneda. The coup came after three years of polarisation, nationalisations, price controls and a deep economic crisis: World Bank data put consumer-price inflation at about 353% in 1973 and show output falling. The military promised to restore order; it stayed in power until March 1990.

How it was governed

• The junta. A military government junta of the commanders-in-chief of the army (Augusto Pinochet), navy, air force and Carabineros assumed constituent, legislative and executive power. Congress was closed, parties were banned or declared in recess, and electoral registers were destroyed.
• Personalisation within a collegial body. Pinochet became head of the junta, then Supreme Chief of the Nation (1974) and President. Robert Barros shows that the junta nevertheless kept legislative power, decided by unanimity and wrote its own rules, so that the other commanders could block Pinochet; the regime was more institutionalised than a pure personal dictatorship. The air force commander Gustavo Leigh was removed in 1978 after disagreements with Pinochet.
• The 1980 constitution. Drafted under the junta and approved in a plebiscite in 1980 held without electoral registers or opposition freedoms, it gave Pinochet an eight-year presidential term and scheduled a further plebiscite on his continuation. Barros argues that its timetable later bound the regime itself.
• Security apparatus. The National Intelligence Directorate (DINA), replaced in 1977 by the National Information Centre (CNI), ran secret detention centres and operations abroad, including the 1976 car-bomb assassination of the former minister Orlando Letelier in Washington.

Economy

Economists trained at the University of Chicago through an exchange with the Catholic University, the "Chicago Boys" described by Juan Gabriel Valdés, gained control of economic policy from 1975. Their programme combined:

• a shock stabilisation in 1975, when GDP fell by about 12% according to the World Bank;
• privatisation of most firms nationalised under Allende and return of expropriated land, while the copper company Codelco remained in state hands;
• trade liberalisation to a low uniform tariff and opening to foreign capital;
• financial liberalisation and, from 1979, a fixed exchange rate;
• privatised pensions (individual accounts managed by private funds, from 1981), and vouchers and decentralisation in education and health.

The fixed exchange rate and lightly supervised banks ended in the 1982–83 crisis: GDP fell by about 11.5% in 1982 and 5% in 1983, the state took over troubled banks, and unemployment rose very high. After 1985 policy became more pragmatic, and growth recovered to between 5% and 10% a year in 1986–1989.

Feedback and accountability

There were no free elections, no independent legislature and censored media. The judiciary rarely accepted habeas corpus petitions. Dissent grew through the Catholic Church's Vicariate of Solidarity, which documented abuses, through mass protests from 1983, and through union and party networks operating semi-clandestinely. The regime's own constitutional timetable produced the decisive feedback: in the plebiscite of 5 October 1988 the "No" option won, and competitive elections in December 1989 brought Patricio Aylwin to office in March 1990.

Repression and rights

Repression was systematic and is officially documented.

• The National Commission on Truth and Reconciliation (Rettig commission), appointed by President Aylwin, released its report on 4 March 1991. It reached conclusions on 2,279 cases of political execution and disappearance and left 641 cases unresolved for lack of evidence.
• The National Commission on Political Imprisonment and Torture (Valech commission) recognised 28,459 victims of political imprisonment and torture in 2004–2005; a second commission (2010–2011) added 9,795, for a total of 38,254 survivors. After its report, the official count of people killed or disappeared stood at 3,216.
• A 1978 amnesty decree covered crimes from September 1973 to March 1978 and for years blocked investigation of most disappearances and executions. Tens of thousands of Chileans went into exile.

Outcomes

World Bank series show real GDP growing at an average of about 3.3% a year in 1974–1989 and real GDP per capita rising by about a third between 1973 and 1990, about 1.7% a year, with two deep recessions. Inflation fell from over 500% in 1974 to under 20% by the late 1980s. Income inequality was very high: the Gini index was about 56 in 1987. Chile left the dictatorship with an open, export-oriented economy, privatised pensions and a constitution with strong protections for property and many "authoritarian enclaves", such as appointed senators, that were removed only gradually.

Debates

• Did repression make the reforms possible? This is a disputed hypothesis. Valdés and others argue that the reforms depended on a technocratic group shielded from opposition by military power. Critics reply that other countries liberalised under democracy, that the dictatorship's growth record was mediocre for its first decade, and that Chile's fastest growth came in the 1990s under elected governments that kept the market framework but added capital controls, bank regulation and higher social spending (Ffrench-Davis). The repression documented by the commissions is not offset by economic outcomes in any of these accounts.
• Neoliberal model or pragmatic correction? Many economists credit the post-1985 adjustments, not the doctrinaire 1975–82 phase, for the recovery.
• Constitutional legacy. The 1980 constitution was amended many times; proposals to replace it were rejected in referendums in 2022 and 2023.

Lessons for institution design

• Authoritarian rulers can bind themselves. A collegial junta, unanimity rules and a written timetable created constraints that the opposition eventually used.
• Technocratic insulation is not neutral. Insulating economic policy from voters also removed checks on distributional costs and on the financial risks that produced the 1982 crisis.
• Truth commissions can document what courts could not. Chile's sequence of commissions, reopened over two decades, produced an official record of victims despite an amnesty.
• Market institutions survive regime change when they are renegotiated. Democratic governments kept the open economy but altered its rules.

Further reading

• Robert Barros, Constitutionalism and Dictatorship (Cambridge University Press, 2002)
• Carlos Huneeus, The Pinochet Regime (Lynne Rienner, 2007)
• Ricardo Ffrench-Davis, Economic Reforms in Chile: From Dictatorship to Democracy (University of Michigan Press, 2002)
• Juan Gabriel Valdés, Pinochet's Economists: The Chicago School in Chile (Cambridge University Press, 1995)
• Human Rights Watch, World Report 1992: Chile