Presidency of Salvador Allende

thumb|261px|Chile inflation rate 1971–1994

Salvador Allende was the president of Chile from 1970 until his death in 1973, and head of the Popular Unity government; he was a Socialist and the first Marxist elected to the national presidency of a liberal democracy in Latin America. In August 1973, the Chilean Senate declared the Allende administration to be "unlawful", and Allende's presidency was ended by a military coup before the end of his term.

During his tenure, Chilean politics reached a state of civil unrest amid political polarization, hyperinflation, lockouts, economic sanctions, CIA-sponsored interventionism and a failed coup in June 1973. Allende's coalition, Unidad Popular, faced the problem of being a minority in the congress and it was plagued by factionalism.

On 11 September 1973, a successful coup led by General Augusto Pinochet overthrew the government of Allende. During the bombing of the presidential palace by the Chilean Air Force, President Allende, after mounting a brief armed resistance against the military, eventually died by suicide. In Chilean historiography, Allende's presidency is the last one of the period known as the "Presidential Republic" (1925–1973).

Election and Inauguration

thumb|left|Chileans marching in support of Allende

In the 1970 election, Allende ran with the Unidad Popular (UP or Popular Unity) coalition.

Succeeding the FRAP left-wing coalition, Unidad Popular comprised most of the Chilean Left: the Socialist Party, the Communist Party, the Radical Party, the Party of the Radical Left (until 1972), the Social Democratic Party, MAPU (Movimiento de Acción Popular Unitario) (in 1972, a splinter group – MAPU Obrero Campesino – emerged) and since 1971 the Christian Left.

Allende received a plurality with 36.2% of the vote. Christian Democrat Radomiro Tomic won 27.8% with a very similar platform to Allende's. Both Allende and Tomic promised to further nationalize the mineral industry and redistribute land and income among other new policies.

Conservative former president Jorge Alessandri, standing for the National Party, received slightly under 34.9% of the vote.

According to the constitution, Congress had to decide between the two candidates who had received the most votes. The precedent set on the three previous occasions this situation had arisen since 1932 was for Congress simply to choose the candidate with the largest number of votes; indeed, former president Alessandri had been elected in 1958 with 31.6% of the popular vote.

In this case, however, there was an active campaign against Allende's confirmation by Congress, including clandestine efforts to prevent him taking office, and his presidency was ratified only after he signed a "Statute of Constitutional Guarantees". This statute was suggested as a means to convince the majority of Christian Democrat senators that favoured Allessandri, as they doubted Allende's allegiance to democracy, or at least the UP's. After signing the statute, members of the Christian Democrat party in the Senate gave their vote in favor of Allende. It has been argued that given that less than the majority of the voters voted for him, Allende did not have a clear "mandate" to embark in the policies put forward on his program; however, it is also true that in the post-World War II period three out of the four previous presidents of Chile had, like Allende, also been elected with less than 50% of the vote, due in part to Chile's multi-party system. Specifically, the winners of the four presidential elections prior to Allende's 1970 election had won with: 56.1% (the 1964 election of Frei), 31.6% (the 1958 election of Alessandri), 46.8% (the 1952 election of Ibáñez) and 40.2% (the 1946 election of Gonzalez Videla). The legality of the 1970 election itself is not in dispute.

On 4 November, Allende assumed the presidency in the National Congress. Afterwards he went to the cathedral to attend the ecumenical Te Deum celebrated by all the churches of Chile.

"The Chilean Way to Socialism"

thumb|250px|Salvador Allende and his [[Minister of State (Chile)|cabinet ministers in 1970.|left]]

In office, Allende pursued a policy he called "La vía chilena al socialismo" (Spanish for "The Chilean Way to Socialism"). This included nationalization of certain large-scale industries (notably copper), of the healthcare system, continuation of his predecessor Eduardo Frei Montalva's policies regarding the educational system, a program of free milk for children, and land redistribution. The previous government of Eduardo Frei had already partly nationalised the copper industry by acquiring a 51 percent share in foreign owned mines. The primary U.S. business in Chile at this time was copper mining. The Chilean government sought to fully nationalize U.S. mining operations and the Chilean constitution required "just compensation" to be made according to "minimum international standards." However, the Allende government chose to hold mining companies liable for damages they caused to the state. Subsequently, Chile made significant deductions in computing the amount of compensation due to the North American industries. Such deductions included charges for "loans invested poorly" and "excessive profits" among other reasoning. "Excessive profits" were assessed dating back to the 1950s. Ultimately, deductions for "social and financial malfeasance" when combined with other deductions resulted in the total deductions greatly exceeding the base book values of the mining enterprises. In effect, compensation to three of the five nationalized mines was wholly eliminated by subjective deductions determined by Allende's government. Allende also nationalized coal mining in 1971, a move that was welcomed by the miners of Lota. A system of clinics in working-class neighborhoods on the peripheries of Chile’s major cities was also set up.

The constitutional changes for the transition from capitalism to socialism that the government of Salvador Allende wanted to carry out have been referred to as the “Chilean path to socialism” or as the “peaceful path to socialism”. The Popular Unity Basic Government Program for Salvador Allende's candidacy included proposals organized around several axes. Among them were a new political constitution, the creation of a People's Assembly, the development of a planned economy, the nationalization of basic wealth in the hands of foreign capital and domestic monopolies, and the creation of a Mixed Area, a Private Area and a Social Property Area (APS), among several other points. The character of the “Chilean path to socialism” constituted a global novelty, since up to that point there had been no political experience advocating the development of socialism through electoral means. Regarding the state and its role, the Popular Unity government program contemplated three characteristics:

A gradual and peaceful transition to socialism
Rejection of the notion of the dictatorship of the proletariat as a transitional state form
Consolidation of the national character of the branches of the Chilean Armed Forces and their integration into social and economic development tasks

Chilean presidents were allowed a maximum of six years in office, which may explain Allende's haste to restructure the economy. He had a significant restructuring program organized.

At the beginning, there was broad support in Congress to expand the government's already large part of the economy, as the Popular Unity and Christian Democrats together had a clear majority. But the government's efforts to pursue these policies led to strong opposition by landowners, some middle-class sectors, the rightist National Party, financiers, and the Roman Catholic Church (which in 1973 was displeased with the direction of the educational policy). Eventually the Christian Democrats united with the National Party in Congress.

The Popular Unity coalition itself was far from unanimous. Allende himself said he was committed to democracy and represented a more moderate faction of his Socialist Party. He was supported by the Communist Party, thatdespite being ultimately less committed to representative democracyfavoured a cautious, gradual approach. For example, the Communists urged to find a compromise with the Christian Democrats and supported the application of reforms through Congress. In contrast, the radical leftist wing of the Socialist Party wanted to smash the capitalist system at once, even if that meant violent actions. If one includes smaller parties, Allende's moderate left-wing line was supported by moderate Socialists, Communists, Radicals (Social Democrats merged with that party in June 1972) and part of the MAPU (later: MAPU/OC), whereas the left-wing Socialists (led by Altamirano), the extremist elements of the MAPU, of the Christian Left and the MIR (not belonging to the Unidad Popular) represented the far-left.

Allende believed in peaceful change, arguing that capitalism could be ended in Chile through democratic means. As he noted in a 1972 speech

Allende also saw his government as representing a transition step between capitalism and socialism, stating in a 1973 speech

The land-redistribution that Allende highlighted as one of the central policies of his government had already begun under his predecessor Eduardo Frei Montalva, who had expropriated between one-fifth and one-quarter of all properties liable to takeover. The Allende government's intention was to appropriate all holdings of more than eighty basic irrigated hectares. Allende also intended to improve the socio-economic welfare of Chile's poorest citizens; a key element was to provide employment, either in the new nationalized enterprises or on public works projects.

Towards the end of 1971, Fidel Castro toured Chile extensively during a four-week visit. This gave credence to the belief of those on the right that "The Chilean Way to Socialism" was an effort to put Chile on the same path as Cuba.

Today, The Chilean Way to Socialism is often associated with the democratic road to socialism, a form of democratic socialism emphasizing representative democracy and the development of an organized working class.

According to the parameters established by the government of Salvador Allende, the national economy was to be divided into three areas: the Social Property Area (APS), the Mixed Area and the Private Area. First, the Social Property Area (APS) was to be the dominant sector of the economy, encompassing approximately 200 large monopolistic companies and state-owned enterprises. while the number of companies incorporated into the APS motivated the Allende government to apply a cybernetic management model known as Cybersyn Both APS companies and those in the Mixed Area would be managed by CORFO, which would classify its companies into four sectors: consumer goods, light industry, construction materials and heavy industry.

By the end of August 1971, the Allende government had transferred the largest mining companies and 68 of the most important companies in the private sector to the public sector.

The government of Salvador Allende proposed intensifying the expropriation of estates exceeding the established maximum size (80 hectares of basic irrigated land) within the framework of its own legal mechanisms and planning.

The agrarian reform process in Chile can be divided into three phases: the first under the government of Jorge Alessandri, the second under Eduardo Frei Montalva, and the last during the government of Salvador Allende. However, the implementation of the latter became complex due to the political polarization between sectors supporting the reform and those opposing it.

Another sector comprised political groups forming the so-called “revolutionary pole”, namely the Revolutionary Left Movement (MIR), the Christian Left (IC), the Popular Unitary Action Movement (MAPU) and the Socialist Party led by Carlos Altamirano. that expropriation be carried out without indemnity, and that all assets belonging to the expropriated hacienda be transferred to guarantee production.

The response from landowner and employer organizations intensified as well. They organized armed groups known as “white guards”, encouraged workers to occupy estates to resist expropriation and expelled peasants from occupied lands.

This situation led to three different expectations regarding settlement land tenure. The first, held by the government, saw them as a transitional stage toward state agricultural enterprises within a planned economy. The plan contained three main pillars: the nationalization of copper, an agrarian reform and the creation of the Social Property Area (APS), which was composed of the principal monopolistic companies in banking, industry and distribution. The nationalization of companies was carried out through the use of certain legal loopholes (Decree Law No. 520 of 1932), which dated back to the Socialist Republic of Chile and had fallen into disuse, although they still retained legal validity. The process consisted of allowing the state to intervene in companies considered key to the economy whenever they halted production so that they would resume operations. The system was judged illegal by the opposition but was ruled legal by the Comptroller General of the Republic.

The nationalization of mining, by contrast, was carried out with the unanimous support of all political sectors, with the law (No. 17,450 promulgated on 15 July) approved unanimously in the National Congress. The mining companies were to be paid compensation, but deducting the “excess profits” they had obtained in previous years due to the low (or nonexistent) taxes they paid, based on what was considered a “reasonable” profitability of 10% from 1955 onward. Under this system, the companies Anaconda and Kennecott did not receive a single peso and ultimately owed the Chilean state millions.

thumb|Queues due to shortages of products during the government of [[Salvador Allende in 1972.]]

During the first year of the Popular Unity government, the price freeze and wage increases worked: the money supply doubled. Support for the Popular Unity (UP) was also boosted when the national poet Pablo Neruda, a member of the Communist Party, received the Nobel Prize in Literature that same year. In this climate, Popular Unity obtained 49.731% of the vote in the municipal elections. A considerable redistribution of income was achieved, unemployment was reduced to 3.8%, and both production and consumption increased. More specifically, industrial production increased by 14% between July 1970 and July 1971, wages rose by 55%, annual inflation fell from 35% to 20%, and gross domestic product increased by 8.3%. Conversely, from the second year of Salvador Allende's term, inflation increased, a situation compounded by external and internal conspiratorial actions, the fall in the price of copper and the decline in overall production due to the state of general mobilization among sectors of Chilean society.

In 1972 the Chilean escudo changed 140%. The average Real GDP contracted between 1971 and 1973 at an annual rate of 5.6% ("negative growth"), and the government's fiscal deficit soared while foreign reserves declined. During this time, a shortage in basic commodities led to the rise of black markets which ended in late 1973 after Allende was ousted.

In addition to the earlier-discussed provision of employment, Allende also raised wages on a number of occasions throughout 1970 and 1971. These rises in wages were negated by continuing increases in prices for food. Although price rises had also been high under Frei (27% a year between 1967 and 1970), a basic basket of consumer goods rose by 120% from 190 to 421 escudos in one month alone, August 1972. In the period 1970–72, while Allende was in government, exports fell 24% and imports rose 26%, with imports of food rising an estimated 149%. However, although the acceleration of inflation in 1972 and 1973 eroded part of the initial increase in wages, the real minimum wage still rose (on average) during the 1971–73 period. Another study has asserted that during the last few months of the Popular Unity coalition’s time in office, "real wages were at least equal to, if not higher than, those of 1968–69."

The falls in exports were mostly due to a fall in the price of copper. Chile was at the mercy of international fluctuations in the value of its single most important export. As with almost half of developing countries, more than 50 percent of Chile's export receipts were from a single primary commodity. Adverse fluctuation in the international price of copper negatively affected the Chilean economy throughout 1971-72. The price of copper fell from a peak of $66 per ton in 1970 to only $48–49 in 1971 and 1972. In addition to the hyperinflation, the fall in the value of copper and lack of economic aid would further depress the economy.

Initially, the governing coalition expected the unearned wage increases and the consequent increase in government spending to be corrected once the 'structural changes' like nationalisation and agrarian reforms were completed. However, by June 1972, Allende was beginning to see the economic hazards. The minister of economy was changed and some austerity measures introduced, but to little avail.

Amidst declining economic indicators, Allende's Popular Unity coalition actually increased its vote to 43 percent in the parliamentary elections early in 1973. However, by this point what had started as an informal alliance with the Christian Democrats was anything but that. The Christian Democrats now leagued with the right-wing National Party and other three minor parties to oppose Allende's government, the five parties calling themselves the Confederation of Democracy (CODE). The conflict between the executive and legislature paralyzed initiatives from either side. His economic policies were used by economists Rudi Dornbusch and Sebastian Edwards to coin the term macroeconomic populism.

1973 economic crisis

The economic crisis in Chile in 1973 was a severe economic collapse caused by both exogenous and endogenous factors that occurred during the government of Salvador Allende. It was one of the catalysts of the political crisis experienced by the country during the government of Popular Unity and was also one of the most relevant factors that led to the 1973 Chilean coup d'état. This economic crisis was reflected in three-digit inflation–contemporary estimates calculate that it reached 606%, the highest in the history of Chile.

Causes

left|thumb|Minister [[Pedro Vuskovic with President Salvador Allende, architects of the Vuskovic plan.]]

To date, there are two main lines of interpretation to explain the economic crisis of the government of Salvador Allende. Some emphasize the little importance that the Popular Unity government gave to stabilizing the economy, specifically inflation (CPI), which had been rising since the previous government and reached 36.5% in 1969, in addition to external economic factors such as the international oil crisis.

In the days following Salvador Allende's narrow election as president of Chile on 4 September 1970, Henry Kissinger held a series of urgent telephone conversations on “how to do it” in Chile. “We will not let Chile go down the drain,” Kissinger said in one of those calls to CIA director Richard Helms, who replied, “I’m with you.” On 15 September, during a fifteen-minute meeting at the White House attended by Kissinger, President Nixon instructed CIA director Richard Helms that Allende’s election was unacceptable, ordering the agency to act with his well-known phrase “make the Chilean economy scream,” as Helms recorded in his notes.

thumb|[[Salvador Allende signs the promulgating decree of the constitutional reform that began the Chilean nationalization of copper.]]

The first major attempt to carry out a series of reforms to change the system had been made by Eduardo Frei Montalva and the Christian Democrats during his six-year term (1964–1970), with measures such as the agrarian reform, the Chilenization of copper, reduction of inflation, and others, which pointed to a third way between capitalism and communism. The program became known as the Revolution in Liberty.

Another cause was the economic boycott promoted by the opposition to destabilize the government, characterized by business closures, transport strikes, destruction and hoarding of products in order to generate shortages among the population, among other things. There was also the economic embargo imposed by the United States, which cut credit lines, blocked Chilean accounts in the U.S., and pressured financial institutions not to invest in Chile as retaliation for the nationalization of copper.

Fiscal deficit and loss of reserves

The public sector deficit went from -1.4% of gross domestic product (GDP) in 1970 to -22.9% in 1973.

Shortages and rationing of basic products

Allende's government systematically violated the constitutional guarantee of the right to property, by permitting and protecting more than 1,500 illegal “takeovers” of agricultural estates, and by promoting hundreds of “takeovers” of industrial and commercial establishments in order later to requisition or illegally intervene in them and thus constitute, by way of dispossession, the state area of the economy.

Nationalization of copper

The nationalization of mining by the Allende government angered the government of the United States and led Richard Nixon and his Secretary of State, Henry Kissinger, to promote a boycott against the Allende government by denying external credits and seeking an embargo on Chilean copper.

Measures implemented

thumb|350px|Real wages in [[Chile between 1967 and 1977. The orange lines mark the beginning and end of Allende's presidency.]]

The Chilean government favored the engulfment of the national economy by the state, as can be seen in the increase of state participation in mining (from 13% in 1965 to 85% in 1973), in industry (from 3% in 1965 to 40% in 1973), in transport (from 24.3% in 1965 to 70% in 1973), and in the “Product of all sectors” (except agriculture) (from 14.2% in 1965 to 39% in 1973).

Development of the industrial cordons

In response to the lockout initiated by organizations such as the Chamber of Commerce and the Confederation of Production and Commerce, factory occupations increased significantly. Previously, occupations of productive units had already occurred, but they expanded greatly beginning in October 1972 in order to "ensure the continuity of the productive process under workers' control and the defense of the government". The industrial cordons maintained contact in order to coordinate joint protest actions or to exchange raw materials needed to sustain production.

The bill and ministerial decrees of the ENU proposed a profound reform of the Chilean education system, with the objective of structuring education according to egalitarian and equitable criteria. which in turn derived from the French ecole unique or the German Einheitsschule, and proposed unity in the educational system, far removed from the existing hierarchizations between levels.

Characteristics of the reform

The ENU specifically meant the integration and consolidation, in a single type of establishment (School Units or Educational Complexes), of preschool, primary, and secondary education, identified respectively as Preschool Education, General Education, and Polytechnic Education. This latter modality would have important differentiating features in its 4 years. Administration would be in the hands of councils made up of the establishment's management, teachers, auxiliary or para-teaching staff, and guardians.

The Sindicato Único de Trabajadores de la Educación, which was the trade-union body of the national teaching profession (both in its Constituent Assembly, held in July 1970, and in the First National Congress, held from 13 to 16 December 1971), indicated the need for a reform, especially within the policies of social transformation being promoted by the recently elected Popular Unity government.

In 1971, a National Congress of Education was convened by the Unified Workers' Centre (CUT) and the Ministry of Education, with delegates from the ministry, the Superintendencia de Educación Pública and its Council, the teaching profession, trade unions, private schools, students, and guardians.

In January 1973, the Report on the National Unified School was published by the Superintendency of Public Education of the Ministry of Education, and by Revista de Educación in February 1973, beginning the public discussion about its scope and contents.

Development of the productive forces
Overcoming economic, technological and cultural dependence
Establishment of new property relations
Development of a genuine democracy and social justice guaranteed through the exercise of people's power

This system would offer educational services to the population regardless of age, since "in all phases of individual development there are needs that can and must be satisfied through education", according to the report, under the principle of permanent education.

Anti-democratic in character. Of every 1,000 children of workers entering primary education, only three entered higher education.
Unequal in opportunities. Although nearly one million students entered the education system between 1970 and 1973, the vast majority did not complete their studies.
Excessively theoretical, where technical education was considered subordinate.
Not aligned with productive needs to overcome underdevelopment.
Tending toward imbalance in the absorption of graduating professionals.
Rigid, as it made reintegration into the system difficult.
Conservative, as it did not incorporate scientific-technological advances or the training needs of workers and professionals.
Compartmentalized, where subsystems lacked a backbone that articulated them.
Individualistic, promoting competitiveness among students through grades based on individual rather than group performance.
Authoritarian in educational governance, since communities did not participate.

Criticism

The project generated resistance among opponents of Salvador Allende's government, as it was suspected that behind it lay the purpose of installing an ideologically socialist type of education.