Neoliberalism in Latin America: Lessons for Nationalists in the Age of Globalization

by Yaro Deli

Yaro Deli discusses the legacy of the Chilean leader Augusto Pinochet in connection with contemporary Argentinian firebrand Javier Milei.

With Javier Milei in power since December 2023, Argentinians have opted for a radical solution to the economic malgoverno that plagued their country for decades. Milei, in the mainstream media often described as a populist and/or ‘far-right’, is much better characterized as a Latin-American Margaret Thatcher. With far-reaching neoliberal proposals, he hopes to steer his country out of the economic depths and decades-long corruption towards growth and prosperity. The recipes he wants to employ to make that happen, however, have already been shown to be a double-edged sword — to say the least. That was the case for the UK under Thatcher. But closer to Argentina, these neoliberal ideas have also already been tried out. In Chile, dictator Augusto Pinochet oversaw the implementation of neoliberal economic policies of the same sort Milei is such an enthusiastic proponent of.

But what exactly did these policies look like in the case of Chile? Are there many similarities between the path Chile took and the direction that Milei is taking Argentina today? And how are we to judge these policies and their results from a nationalist perspective?

The Legacy of Pinochet and What It Means to Be a Nationalist

In order to answer these questions, I would like to assess the Chilean regime under the leadership of General Pinochet that lasted from September 1973 to March 1990. In so doing, I will focus on the years that are known as the ‘Chilean miracle’ and the recession that followed it, zooming in on the economic policies of the regime. First, because it is the most debated topic. Second, because the ‘economic miracle’ is framed as the main source of the regime’s legitimacy by its supporters. And thirdly, because this forms the aspect from which we can draw lessons for today. I will make my analysis from a nationalist perspective. I understand nationalism as consisting of some basic premises. A nationalist wants first and foremost the best for his own nation. Additionally, a nationalist wants his nation to be as sovereign and independent as possible. Globalization is thus antithetical to nationalism, because it breaks up political sovereignty in favor of supranational institutions. But it also breaks down any form of national control over domestic production.

Chile in the Grip of the Chicago Boys

In order to get a good view on the historical period in question, not only the national, but the international context as well has to be analyzed. In the year of the coup, 1973, there was a worldwide economic crisis happening, following a worldwide recession and the famous oil crisis of the same year. The solution that was pushed by the industrialized countries to combat this economic malaise was to assist military coups all around the Third World which enabled a restructuring of the world economy.

The industrialized countries, with the United States in the lead, imposed a demand-based economy (domestic monetarism coupled with a focus on export for foreign markets), after the ideas of the American neoliberal economist Milton Friedman. This was done through the support of different military regimes. There is ample evidence for CIA involvement in both the downfall of Allende and the rise and support of Pinochet.

In Chile, these neoliberal ideas were put into practice by the so-called ‘Chicago boys’, Chilean students who went to the University of Chicago and who later held leading positions in the Chilean government and economic elite.

The Marxist Threat

That is not to say that there weren’t also internal factors that moved the military to act. Robin Harris, in his article ‘A Defamed Counter-Revolutionary’¹, makes this point very clear. Left wing chaos and violence, lawlessness and banditism (by mobs and the state alike) under and before Allende were definitely present. Communist vigilantes, whom Allende and his party were unable or unwilling to control, seized pieces of land, which turned into leftist-controlled zones, spreading violence along the way. Chilean democratic institutions, such as the different courts and the Chamber of Deputies, tried to resist the steady usurping of power by Allende (in the same way as they later tried to resist the autocratic rule of Pinochet).

It is important to note that Allende’s party did get the most votes in the election of 1970, but never got any majority in any election during the following three years. What’s more is that Allende shouldn’t necessarily be granted presidentship. According to the Chilean constitution, any of the top two presidential candidates can technically become president. Allende scored only 1.3% more than the runner-up. So why did he become president? Because the responsible institutions wanted to give him a chance, after he pledged to uphold the constitution. However, it became soon clear that he had broken this promise.²

Chile turned into a hotspot of revolutionaries from all over the world. Their number swelled to such proportions that they represented the threat of a communist army, ready to violently lead Chile towards communism. And this isn’t an unthinkable scenario: through his personal ties with Castro, the Cuban leader gave Allende crates filled with weapons. The bloody and gruesome history of Latin American civil wars is well known to all, and the Chilean communists were preparing their country to join that list. The military coup thus surely had its reasons. That the Americans, however, “were, in fact, not directly concerned” with the coup, as Harris put it, is demonstrably false. There is more than enough evidence in the form of official CIA documents that undeniably show this.³

Still, the fabrications and exaggerations on Pinochet and his regime, together with the classic double-standard hypocrisy of the left, are indeed deceitful annoyances that frustrate anyone caring for truth and nuance. I therefore agree with Antony Daniels⁴ when he talks about the romanticization of Allende and Latin American socialism in general, and the double standards and selectivity of left-wing intellectuals. However, all this does not mean that we should gloss over the serious flaws of Pinochet and his government.

The Monetarist Experiment

So the question is: how well did the monetarist experiment go? Since the legitimacy of the regime was and still is largely based on the assumption that it saved Chile’s economy, the answer to this question is crucial for its final verdict. Concerning the state of the economy, opinions vary from very positive to very negative. Let us begin with the positive.

Over the years, the regime did manage to bring inflation down significantly. The government deficit was reduced to 2.6% of the GDP in 1975 (from 24.7% in 1973), which was achieved by the reduction of government expenditures. The junta was also able to expand the industrial fruit sector to one of the major sectors of export. Indeed, the export of fruit remains a vital part of the economy for Chile even to this day. Together with fish, timber and wine, the export of fruit meant a breakthrough in the economic dependency on copper as an export product, which had long been a weak spot of the Chilean economy. This is also a point that Harris makes in his piece. With regards to social policy, the government initiated antipoverty programs that directly aided those who needed it the most. This point was made rather triumphantly by Gonzalo Cordero⁵ and Robin Harris, although in reality, poverty levels remained high. Additionally, large improvements were made in the reduction of illiteracy, which were more successful than under Allende’s rule. Infant mortality also decreased steadily.

There was, however, a heavy price to be paid for these policies in the form of an economic recession. Unemployment rose to more than 20% in 1975 (which in the period of Allende was only 3.8%) and domestic production plummeted. The Chilean economy recovered between 1976-79. The GDP grew with an average of 4% per year, although this growth was bittersweet because of rising inequalities that accompanied it, constantly threatening the social order.⁶ This period is commonly referred to as ‘the Chilean miracle.’ But then the economic crisis of 1979 hit the world stage. For Chile, this meant that necessary productive investments in the country’s economy did not come. The debt burden rose, which resulted in liquidity problems and ultimately the bankruptcy of multiple banks.⁷

The so-called ‘economic miracle’ turned out to be a mere recovery from the recession of 1975, and a prelude to that of 1981-83, which destroyed all the gains that were made earlier. It is not surprising that the government had to experiment a bit with the new economic model before they got things on track. Better and more consistent growth was realized from 1984 onwards, although the growth of the GDP per capita remained pretty much stagnant. All in all, the economic growth of the Pinochet era was quite mediocre⁸, while the social consequences — even when taking the difficult inheritance of socialist hyperinflation into account — were disastrous. Therefore, maintaining the idea of an ‘economic miracle’, as so many neoliberal enthusiasts do, has no basis in reality whatsoever.

So why should anyone speak of an economic miracle then? Because there is nothing miraculous about a developing country experiencing a slight rise in economic output over a period of almost two decades. More so, a 2022 paper⁹ in the Latin American Research Review by Edwar E. Escalante showed that Chile’s remarkable economic growth during the period 1985–1997 was not due to Pinochet’s autocracy. This goes completely against the narrative presented by the neoliberal fanboys of the regime’s economic policies. That is not to say that Chile is doing very good nowadays. With socialism in power, it’s reasonable to think that things would be much different now.

The Perils of Globalization

But there was another big problem. The neoliberal policies had as a goal the privatization of the economy, thereby making it even for every player (domestic as well as international) and to give Chile a more competitive position in the global market. But besides the failed promises, the economic policies resulted in more economic monopolization instead of a more and broader economic participation. The result was that Chile’s industry became completely monopolized by five big economic groups.

We should also observe in more detail the kind of gigantic debts with which Chile had to deal with in this period. 1981 marked the year in which the government had problems with paying back debts, which in turn led to a plummeting of foreign investments. The debts, as of 1983, were even more than 3.4 billion dollars, 45% of which consisted of interest. Increase in export was the prescribed neoliberal solution. In practice, this meant that the national production was being phased out, because all the goods were destined for foreign markets. Food, for example, was good for 20% of the total import packet of 1984. The same story was true for industrial production.

The banks, however, had little choice but to keep giving out credits. This was because both the corporations that requested them as well as the banks that paid for them were owned by the same economic group. In the end, the government had to plan the paying back of the debts. For this aim, it controlled the administration of all the banks, and with that 85% of the Chilean financial system. The government control under Allende, then, was of quite a different nature!

Furthermore, the sectors that fared well were mainly those controlled by the bourgeoisie and the middle class. This meant that most Chileans did not share in the economic growth. However, the recession of 1979-83 showed that even the sectors which initially were doing well were doomed because of the new economic policies. This was due to a drop in demand for raw materials and industrial products, which meant less export for Chile and the Third World in general. The saying ‘do not put all your eggs in one basket’ applies very well here. If a countries’ economy is dependent on export only, a drop in demand can be, and in the case of Chile was, catastrophic. These countries had to undergo massive austerity measures. The neoliberal dream to save the national economy by integrating it in the globalized economy turned into an economic nightmare. Chile thus not only lost its democracy, but also a big part of its economic independence.

Pinochet: A Critical Conclusion

It is well observed that Pinochet was not an economic genius. His policies were constructed by a group of neoliberal economists inspired by Milton Friedman. This economic theory saw state intervention as the main cause of persistent inflation, inefficient production, and unemployment. ‘Export’ was the magic word that would solve all of Chile’s problems. But the opposite happened, and the neoliberal recipes under Pinochet failed.

Was this all Pinochet’s fault? Not entirely. I am convinced that the General honestly believed that what he did (or let other people do) was in the best interests of his country. And I also believe that there were some genuine improvements made. This, however, does not mean that what he did was right. And if we place his rule in a wider context, the verdict becomes rather condemning, especially when we take all the human rights abuses into account.¹⁰

Pinochet was helped to power by the Americans, in the interest of their own country. Chile might have experienced some mediocre economic growth (although nothing of an ‘economic miracle’ ever happened) and stopped a socialist revolution (at a great social cost) but the country lost its political and especially its economic independence to the United States and the wider Western world. And although I am not necessarily pleading for full-on economic protectionism and autarky (which in the case of Chile would be impossible anyway), a nationalist stance is irreconcilable with the undermining of a country’s autonomy and sovereignty, economic or otherwise.

I agree with The European Conservative’s Editor-in-Chief, who called for “looking through the lens of civilization”,¹¹ when judging regimes like Pinochet’s. But what civilization? One run by all-powerful bankers and military men? Where so many Chileans were being oppressed, tortured, and terrorized?¹² What kind of civilization is that? The communism of the past is dead. The main enemy now is globalism. Both Allende and Pinochet represented this enemy. The first politically, and the latter economically. And for all the things Pinochet did right, that was his major mistake.

And What with Milei?

Milei is no Pinochet for obvious reasons. But I do think insightful comparisons can be made from which we can draw the necessary lessons for today. Globalization is always a story of victors and losers. But in this story, victory or defeat is not determined by the virtues as our best and oldest European literature, from the Odyssey to the Edda, proscribe. Victory here means not the triumph of these heroic virtues, but the triumph of profit, which befalls almost exclusively to a wealth-hungry oligarchy. This was the case in Chile 50 years ago, and it is the same in Argentina today. As Hans Vogel wrote in his article on the subject, the richest of the country go to wealthy foreigners and a corrupt elite.¹³

In both the case of Chile and that of Argentina, that wealthy foreigner is mainly the United States. Indicative in this context is the dollarization that Milei wants to enroll, where he wishes to replace the peso with the dollar. He also wants to put Argentina’s trade relations with the US over those with Russia, China and Brazil. However, there is an important difference with Chile under Pinochet that has to be noted. In the case of Chile, there were clear political machinations coming from the US, who lobbied for neoliberal economic policies going hand in hand with anti-communist political authoritarianism throughout the Third World. In the case of Argentina, no such manipulative interference from the side of the US happened. It was also not necessary; there were more than enough internal factors that got Milei elected. Staggering inflation was the most important one, which was even worse than in Chile. Needless to say, the social consequences of these policies likely will be the same.

And what about the other side? What about the losers? It is not the untalented and mediocre who will lose, but the People. The People in its entirety is always on the losing side of globalization. As Alexander Markovics notes, Milei has carried out massive social cuts to alleviate the national debt. However necessary some policies in this regard may be, it will be “ordinary Argentinians [who] are expected to pull the cart out of the mud”. Besides, the neoliberal policies of Milei form a fake alternative, threatening to turn Argentina into “a US stock exchange colony”, as Markovics so aptly puts it.¹⁴ This brings us to the second similarity: the loss of sovereignty.

For politics to be possible, a people (or whatever political subject) must be able to take decisions freely, as well as have the power to act on these decisions. It follows that sovereignty is both a prerequisite for and a necessary outcome of any real politics. Sovereignty is thus the foremost virtue to measure whether a nation holds its destiny in its own hands and therefore is truly free. It is critical to note that both Chile and Argentina under the dictates of neoliberalism and globalization are not sovereign and therefore not free. The primacy of economics has crippled politics into the maidservant of (international) capital and has thrown all monetary and economic autonomy out the window.

The Future of Argentina

So what way should Argentina go instead? The second most popular candidate besides Milei in the presidential elections was Sergio Massa, a Peronist. The legacy of Peronism is complex.¹⁵ A lot of the economic mismanagement in Argentina’s contemporary past was due to corrupt Peronists. However, it is crucial to separate the legacy and significance of Perón and his wife Eva, and politicians who claimed to be following in his footsteps but failed to deliver. As Professor Cristián Barros observed in his piece for Arktos about Milei, ‘the dirigiste program of import substitution and, contradictorily, the need to buy technology abroad, imposed on the Casa Rosada, the seat of government, a chronic need for loans, first in pounds sterling and then in dollars, to finance its own infrastructure.’¹⁶

When Argentina switched to liberal policies to try to alleviate said economic problems, similar perverse effects occurred as in Chile under Pinochet: an accumulation of foreign loans and accompanying debts, the scrapping of domestic industry and harsh austerity measures. The Peronist dream of full autarky proved difficult in a developing Latin American country such as Argentina. Again, I am not propagating such a strategy. However, going too far in the opposite direction, like Pinochet did, is likely to yield the same problems of insolvency of the banks, a chronic need for loans and economic plunder by Washington and other powerful players. And I think it is reasonable to argue that Argentina under Milei will face similar problems.

In conclusion, there are a number of important lessons to draw from these histories and current events. Authentic nationalists should be distrustful of neoliberal capitalism, which is inevitably connected to globalism and as a rule undermines exactly that which nationalists want to preserve and protect: their people and its cultural heritage. Because of the fact that the term ‘right-wing’ is standardly used to describe ideologues pushing for these policies, the word has been subverted and in many cases has been rendered useless to identify oneself with. Besides, many political commentators, especially those belonging to the French New Right following Alain de Benoist, have long since noted that the binary ‘left-right’ is outdated, unusable and intellectually limiting. Therefore, we nationalists should think and analyze in terms beyond the left-right dichotomy if we want to avoid the neoliberal-capitalist trap, that is, if we want to avoid shooting ourselves in the foot.

Footnotes

1. Harris, Robin, ‘A Defamed Counter-Revolutionary’, in: Fall edition of The European Conservative.

2. Packenham, Robert A. and Ratliff, William, What Pinochet Did for Chile | Hoover Institution What Pinochet Did for Chile

3. Chile (globalsecurity.org).

4. Daniels, Anthony, ‘The Revolutionary Worldview’, in: Fall edition of The European Conservative.

5. Cordero ,Gonzalo, ‘The Paradox of Modernizing Authoritarianism’, in: Fall edition of The European Conservative.

6. The structural economic inequality inherited from the regime remains the primary reason for social unrest in Chile in 2019. See ‘How Pinochet's economic model led to the current crisis engulfing Chile’ | Chile | The Guardian.

7. For a critical study of Chile under Pinochet, with a focus on its economy and from a Marxist perspective, see Frank, André Gunder and Aravena, Oscar Catalan (eds.), Chile onder Pinochet. Een Latijnsamerikaans volk in gijzeling, Sua/Novib: Amsterdam – Den Haag, 1984. The book is in Dutch and unfortunately not translated into English. However, Prof. André Gunder Frank has published multiple works in English on this topic.

8. Smith, Noah, ‘Pinochet's economic policy is vastly overrated’ (noahpinion.blog). See also Fiori, José Luís, ‘The myths about Pinochet's Chile that persist in Brazil today’ | openDemocracy

9. Escalante, Edwar E., ‘The Influence of Pinochet on the Chilean Miracle’, in: Latin American Research Review (2022), vol. 57, 831–847. Retrievable online via the following link: The Influence of Pinochet on the Chilean Miracle (cambridge.org).

10. Human rights abuses in Chile under Augusto Pinochet - Wikipedia, Rettig Report - Wikipedia

11. Fantini, A.M., ‘Another September 11th’ ━ The European Conservative

12. Vogel, Hans, ‘Javier Milei: The Empire Strikes Back’ – Arktos

13. Markovics, Alexander, ‘Against Milei’ – Arktos

14. An interesting article on this topic, which takes a positive view of Peronism, is E. Ravello, ‘Los tres momentos del Peronismo’. English translation by Thomas White for Dissident Hub: The Three moments of Peronism – Dissident Hub (wordpress.com)

15. Barros, Cristián, ‘Farewell, Argentina’ – Arktos