September 11 and “No al lucro”

This post is featured in part of an ongoing blog. For the last entry from this blogger, see “The standard theory of inequality in Chile.”

by Tomas Bradanovic

Salvador Allende, Photo credit: Argentinian magazine "Siete días ilustrados"

September 11 still divides opinion in Chile. Thirty-eight years after the coup, few people know how it was Chile in 1973. I remember those years well when I was an 18 year old Allende supporter. Unidad Popular was a weird attempt to expand socialism within the democratic system and I think that the figures who followed demonstrate why it was a failed experiment and why some of those policies may not be replicated as some people are advocating now.

The first year of the Allende government was devoted to setting prices to below production costs, duplicate salaries (teachers received a bonus equivalent to four months’ salary), to increase the amount of government employees and to accelerate agrarian reform, expelling the land owners and replacing them with peasant committees. The result was that Chile, which normally imported about 140 million dollars in food, in 1973 had to import over 700 million, leaving the state without dollar reserves and the country without food.

In early 1973, the government’s economic committee reported that 34,000 small and medium business were  taken over by the government, with a result similar to the agrarian reform: national production came close to disappearing. Not a single property title was given to peasants nor ownership to business workers; they were used as means for the state to appropriate the production system. With this combination of prices under cost, wages multiplied and the production system broke. In 1973 all goods began to disappear: no bread, food or anything. All we had was a lot of bills; it was the first major inflation in Latin America.

In 1973 the economy had declined by 3.5 percent and the deficit of state factories was five billion dollars, equivalent to the sale of copper, the main and almost the only export of the country, for the past 7 years. The official inflation rate that year was 740 percent and the fiscal deficit was 50 percent of the national budget. The losses of state enterprises –in those years, almost half of the national production system- amounted to a full national budget and the Central Bank’s reserves fell from US$450 million to US$3.5 million. Foreign debt rose US$1 million a day. The balance of payments deficit was US$885 million in 1973

Social housing was built by the government’s CORVI, almost all health was served by the National Health Service, almost all colleges and universities were owned and administrated by the Ministry of Education. The housing deficit was huge and most of the poor lived in “villas miseria,” now eliminated decades ago. The infant and adult mortality was very high as well as infectious diseases and only one in ten secondary school graduates could study at a university.

“No al lucro” or “no to profit,” championed now by some leaders of students, means, in practical terms, to come back to 1973 with the government in charge of more than half of the national economic and teaching system. They never knew that time, but still there are people who remember; we do not march nor throw stones but we are determined to prevent such a huge step back.

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