The Other September 11

9/10/2011 @ 10:36PM 

James S. Henry, Contributor

I report on global issues as an economist, attorney and journalist.

(Note: for the Spanish language version, look here.)

Almost every American, and indeed many non-Americans, can remember exactly where he or she was on September 11, 2001.  Oddly enough, I happened to have been  at Boston’s Logan Airport that morning, boarding a prop plane for an American Eagle flight to Long Island’s Islip Airport.

My flight was leaving at 8 am from Gate 22, at almost the exact same time that Mohammed Atta and four other reputed Saudi hijackers of American Airlines Flight 11 were reportedly taking off from a nearby gate in the very same Terminal B, along with 86 other passengers and crew.

We probably passed close by one another, but I don’t remember. I do have a distinct recollection that security at the check-in  that morning was very lax. Other than that, my own flight was completely  uneventful until we landed in Islip and heard the shocking news.  So “death  reached by and took another…..”

I’ve had several close friends who lost loved ones in those buildings that morning, and I have tried to comprehend their pain, without ever really being able to do so.  My heart goes out to all those who lost loved ones on that awful morning. May we redouble our efforts to  determine the full story. While I’m no conspiracy buff, I’m convinced the full story is still untold.

But it is also very important to put our own “9/11″ in context.Unfortunately for me, this is not the only September 11 that is etched indelibly in my memory.  Nor is it the only 9/11 event in the history of  international terrorism that has claimed  more than 3000 victims.

In the first case noted above, Americans were  among the nearly 3000 terror victims.  In the second case described below, however, it is disturbing to recall that the US Government actually helped to cause them – at least 3065 dead and disappeared, and thousands more who were tortured.

In this hour of remembrance,  as we recall our own fallen victims of terror, let us also have the strength of  character, compassion, and honesty to look this history in the eye, and recall these other victims of terror.

This will not be easy. But it may help us to prevent a recurrence of the unself-critical, self-righteous, and ultimately self-defeating retributive excesses that we’ve seen throughout this very painful decade.

SEPTEMBER 11, 1973

I distinctly recall the Chilean coup of September 11,  1973  very clearly.  I was attending a graduateeconomics course at Harvard University that was taught by a protégé of  the University of Chicago’s Professor Milton Friedman. One of my fellow  students was Sebastian Pinera, a member of one of Chile’s oldest families, a future billionaire owner of Chile’s airline LanChile,  and since December 2009,  the President of Chile.

Back then, Sebastian had somehow  gotten word halfway through our class that President Allende  had been overthrown.  He was  jubilant — “We won!,”  he cheered.

Our economics professor apparently shared Sebastian’s delight. Like  many other American economists, he viewed Pinochet’s overthrow as a great victory for the neoliberal economic doctrines that had been preached  by for decades by leading Chicago economists like Professor Friedman and Arnold Harberger — at that point, still without much acceptance in First World countries.  Both of them later consulted actively for General Pinochet’s junta — just like neoliberal Harvard Professor Michael Porter recently did for Libya’s equally horrendous Colonel Gaddafi.

Over  the next twenty years, these “Los Chicago Boys” cameto  excert  a strong influence on Chilean  economic policy.   The label was  perhaps a little  un fair  to Chicago — there was certainly no shortage of Harvard  disciples of  their brutilitarian free-market doctrines.

For example,   Jose Pinera,  Sebastian’s classmate’s brother,  was also Harvard- trained.  He became one of the main architects  of Pinochet’s labor policies,  which included a  ban on strikes and  closed shops,  the privatization of all pension funds, and sharp cuts in  real wages, jobs, and  unemployment benefits.

In hindsight,  General Pinochet’s little laboratory actually conducted the very first in a  series of   experiments by the New Right  that culminated in the neoliberal programs of Margaret Thatcher  and  Ronald Reagan  in the First World and a lengthy list of Third World imitators.

Among  First World democracies,  these programs were  at first somewhat moderated by the need forpopular support. But  in countries like  Chile, Brazil, Mexico,  and Argentina,  where the lines between rich and poor were starker  and the political systems were basically rigged,  much  less time was wasted on democratic  niceties.

More recently, we’ve lately seen calls  on the New Right, and some actual examples, of  yet another round of experiments with such “tough neoliberal medicine” in many First World countries. It may be helpful to remember how much their in extremis versions really depend on dictatorship for implementation — and how often these policies have completely back-fired, in practice.

CONSCIENTIOUS CONSERVATIVES?

To their credit, quite a few principled  conservatives were bothered by the resulting dirty little alliance between these right-wing brutilitarian dictatorships  in Latin America and  liberal economic reform.

But  many others — including Sebastian Pinera, who would later  actively oppose  holding popular plebiscites on General Pinochet’s policies   in 1980 and 1988 —   got lost in the thorny thicket of Jeane Kirkpatrick’s ultimately quite indefensible distinction between so-called “authoritarian” and“totalitarian” regimes.

In Chile’s case,  the resulting repression produced at least 3065 murders, disappearances and extra-judicial killings, about the same number as 9/11/2001 produced in this country.

There were also thousands of secret arrests and tortures, including more than 35,000 identified victimsof torture and abuse . All told, Chile spent six teen long  years without  free elec tions, in what had previously  always been  one of Latin America’s  most  democratic countries.

Of course we now know that all this state terrorism was tolerated, supported and indeed encouraged by the Nixon Administration and its dictator friends elswhere in Latin America — presumably on the cocka-mamie theory that othewise we’d have Fidel running Santiago.

In fact it is now pretty clear that the narrowly-elected Allende would have held elections when his term was up,  he would probably have lost because of the sheer unpopularity of his economic policies, and he would have yielded power to the Christian Democrats.

Furthermore, in hindsight, this intervention was entirely gratuitous. It came at a time when the Center/Right was firmly in power everywhere else in South America — from Argentina, Brazil, and Uruguay to Bolivia, Colombia, and Venezuela — and the Soviet Union was actually urging left-wing radicals all over Latin America to “cool it.” Like Reagan’s bloody interventions in Nicaragua and Grenada a decade later, the Chilean coup was basically undertaken by Chile’s generals and supported by Washington securocrats, not because of the “Cold War” or a serious Soviet menace to the region, but precisely because the Left was so irresistibly  weak.

In short, the only “revolution” that threatened Chile in the 1970s was the anti-democratic, extreme neoliberal one that the US and its allies among the generals and the academic economists helped to foster.

We have thankfully finally succeeded in bringing Bin Laden, as well as many of his allies and followers, “to justice.”

Very few of the perpetrators and instigators of the 1970s Chilean terror have ever been “brought to justice,” and quite a few are enjoying quiet, distinguished retirements  in Santiago, Miami, Washington D.C., and New York.

“FREE” MEANS YOU DON’T PAY FOR IT

However, these points are pretty general — repression is very concrete. As Herr Friedman reportedly told General Pinochet at a Santiago audience in l975,  “When you cut the tail off a dog you don’t cut it off inch by inch. You cut it off at the root.”

I especially remember a 1974 lecture by another Chilean economist, Orlando Letelier, who was killed  in l976 by a car bomb  planted by the DINA, Pinochet’s secret police, in Washington D.C.  And I remember  Victor Jara, a  talented Chilean guitarist whose music I greatly admired.   When the junta seized power he was arrested and transported  to a soccer stadium in Santiago where “political”  prisoners were held.

The police took him out in front of the crowd  and they cut off his hands………

***

Sebastian Pinera’s reaction was not untypical — the overthrow of Salvador Allende’s elected Popular Unity government in September  1973  was greeted with  absolute jubilation by Chile’s propertied  classes.

Allende had been elected with a 36 percent plurality  in l970, and  the Popular Unity coalition’s  support in creased to 44 per cent in the March 1973 Congressional elections. But   the  elite  was  eager for a change by any means.  From l968 to l973, at first under the Christian Democrat  Eduardo Frei Montalva and then Salvador Allende,   government spending as a share of GNP had in creased from fifteen  to forty percent.  A third of  large farms and many  private companies had been nationalized at  low prices; there was  700 percent inflation and frequent shortages of consumer goods; Chile’s foreign debt  had reached the un precedented  level of $2.5 billion. Foreign investment dried up and  flight capital was pouring into  accounts at Bankers Trust, Chase and JPMorgan, Chile’s leading creditors.

The good old CIA, multinationals like ITT, and the USG certainly played a prominent role in 1970-73 coup activity that followed — with a hefty dose of financial chicanery, in order to, in Nixon’s words’ “make the economy scream.” But the intervention had not started there.

For example, according to former CIA agent Philip Agee, who had been stationed in Uruguay in theearly 1960s, future Bush Pioneer and Presidential Library trustee John M.Hennessy, Chairman of Credit Suisse First Boston (CSFB) from 1989 to 1996, had been the Assistant Manager at Citibank’s Montevideo branch in 1964, and reportedly helped to transfer substantial funding to the campaign of Eduardo Frei Montalva,  who was running for President against Allende that year. Frei won the election, and served as President from 1964 to 1970.

In the early 1970s, Hennessy  became Assistant Secretary of the Treasury for International Affairs in the Nixon Administration, reportedly coordinating economic pressures against Allende’s government.  In 1974, having succeeded at that Hennessy returned to Wall Street, where he became Managing Director of First Boston Corp., which was later acquired by Credit Suisse.

In any case, despite the CIA’s involvement, the sufficient conditions for the 1973 coup against Allende were victims provided by a “Francoist” alliance of military officers, the Catholic Church’s hierar chy, the top ten percent of landowners and industrialists, and the next twenty per cent of the income distribution, the so-called “middle class.”

Immediately after the coup  these folks really began to get almost everything  they really thought they wanted. As we sometimes have to learn the hard way, that’s something to beware of.

LOS CHICAGO BOYS

The junta turned to a small band of inexperienced but supremely self-righteous  economists, nicknamed “los Chicago boys”  because their mentors  included University of Chicago economist and future Nobel laureate Professors Milton Friedman and  Arnold Harberger.

After Pinochet took power, there was a prolonged period when several different economic camps competed for the junta’s favor. But Friedman and Harberger,  who was Dean of the Chicago Economics Faculty,  really seem to have tipped the balance when they visited Chile in March 1975.

Since the 1950s, with the support of the Rockefeller and Ford Foundations, Harberger had been developing a close relationship between the University of Chicago  and Chile’s Catholic University, where he had taught as a Visiting Professor.  With support from Rockefeller and Ford, scholarships were provided for bright young Chileans who wanted to study economics.  Many of these Chicago-trained economists eventually returned to Catholic University to teach, and later served in Pinochet’s government.

The trips by Harberger and Friedman were often sponsored by the leading Chilean businessman JavierVial, head of the business group BHC, one of the country’s largest conglomerates,  and the eventual owner of Banco de Chile, the country’s largest private bank at that time, and 60 other companies. He was also a very strong supporter of Pinochet’s dictatorship, on personal terms with the General.   Friedman got $30,000 for one three-day trip. His wife Rose  reportedly objected to the visit because Pinochet’s hard right regime and the goose-stepping Chilean military  reminded her of Nazi Germany. But Professor Friedman tried to assuage her  by requesting the release of two Jewish political prisoners who were in the custody of Pinochet’s police.

Just one month after Professor Friedman’s visit, in April 1975,  the junta introduced an orthodox monetarist “shock plan,” along the very lines that Friedman and Harberger had recommended. Professor Friedman’s  Chicago-trained protégé Sergio de Castro replaced Fernando Leniz as Minister of the Economy. Other key Right-neoliberals  on Pinochet’s economic team included Pablo Baraona, President of the Central Bank, Alvaro Bardon and Jorge Cauas Lama at Treasury, Rolf Lüders as Treasury Minister and Minister of the Economy, and Juan Carlos Mendez as Director of the Budget.

As for the two Jewish prisoners, they were never located.

NEOLIBERAL LABORATORY

In any case this tiny U-Chicago band’s shared vision for Chile’s future was one that later became common among neoliberal Third World governments — sort of a low-wage, export-oriented  Asian tiger, complete with weak unions, low inflation, privatized pension funds, and a minimal state —  apart from the police, the military, and the national copper company, of course, whose income went to the military.

To pursue this anti-Marxist utopia the economists started out by engineering a sharp recessionary  shock. They banned strikes, abolished price con trols for  food and housing, and slashed tariffs from 100 percent to 10 percent in just two years.

The  junta also introduced Latin America’s most radical  privatization program ever — probably one of the world’s most radical up to that point.  In l973-74, more than  250 nationalized companies were returned to  their former owners and 200 more were sold off at bargain prices.  These were not the  middle-class privatizations  of France, Japan, or  the UK, where the buyers usually  included  millions of small investors.  Like other developing countries,  Chile had a very  thin capital market, and hard times had  made it even thinner. So the big buyers at this fire sale were a handful of closely-held   grupos like  Javier Vial and Cruzat-Larrain, which owned most of the local banks,  and also had very strong ties to foreign  banks.

All these changes set the stage for the dictatorship’s 1977-81 phase,  which was described at the time by the Wall Street Journal’s  editorial page in even more glowing terms than it reserved for the Argentine junta —  as “the Chilean economic miracle.”

Indeed, during this brief period, when the economy was recovering from the sharp recession that los Chicago Boys had engineered,  growth did indeed average  5-8 percent a year. In hindsight, such recovery-period growth rates have occurred in many developing countries, and they have been sustained much longer. But at the time much of  the rest of the developing world was not only growing slower, but was going much less deeper into debt.

But what soon turned out to be  most miraculous about the Chilean anti-liberal dictatorship, however, was its  inability to foresee  that its  economic policies — in addition to creating soaring poverty and inequality —  were about to cave in on each other, completely bankrupting the country and forcing  the nationalization of the entire private sector.

THE CHICAGO ROAD TO SOCIALISM

By 1977,  General Pinochet’s junta had murdered, jailed, exiled, or otherwise completely surpress all organized political opposition.  On the basis of the “free hand” permitted by this political dominance, it had also achieved many  of its neoliberal advisors’  economic goals. But the neoliberal  ideologues  pushed  it on to  even greater new extremes.

Under José Pinera’s 1979 radical right “Plan Laboral,” the Pinochet government abolished closed shops for unions and tried to privatize everything from  health care and pensions to education.

His 1980-81 pension fund privatization substituted a “fully funded” system administered by privately-managed pension funds – managed by institutions like Citigroup and Aetna, which came to dominate the highly-concentrated private system –  for the old “pay-as-you-go” government system. This  was probably the most successful of the “reforms.”  This basically substituted a privately-funded system for the traditional “pay as you go” government system. Of course it was “enabled”  by the fact that its military government could simply mandate this substitution. (Subsequent attempts at privatization in more democratic countries have proved  to be less successful.)

Many other neoliberal reforms succeeded only  in cutting social spending, while sacred cows like mili tary spending and the nationalized copper company were  spared.

The national copper company, in particular, was famous because of the uproar provoked when Allende had seized it from Anaconda in 1971. But  General Pinochet kept it nationalized, partly just because   a secret law  gave the military  ten percent of its profits.  That meant that even under the junta, Chile’s largest  enterprise and exporter remained “socialist.”

The Wall Street Journal, the FT, and other admirers in the international business press would later often recall Pinochet’s  pension reforms and his early privatizations fondly.  But  they developed a kind of selective memory when it came to his other neoliberal experiments — and worst mistakes. Curiously, these  concerned macroeconomic policy,  especially the policies thatlos Chicago boys chose to fight inflation.

Seen from a 2011 perspective, this gave the world a “first look”  at the dire hazards of the private banking sector unfettered freedom to borrow, lend, and invest.

NOT FIDEL BUT DE CASTRO

The real point man for Pinochet’s macroeconomic policies was  Sergio  de Castro,  another los Chicago Boy who became Pinochet’s second Finance Minister in l979. Like the Argentin General’s famous Finance Minister “Wizard”  de Hoz,  De Castro was a strict believer in the monetarist view that the best way  to fight inflation in “small” economies like Chile  was  by  eliminat ing tar iffs, deregulating capital and trade, and maintaining a fixed exchange rate.

This theory, espoused by other arch-monetarists like Colombia University’s Nobel laureate Robert Mundell, argued that such a policy would constrain inflation to the world rate by making a large share of the money supply endogenous.  It basically ignored exchange rate specu­lation and capital flight completely.  That was fine for the mathematical models and the journal articles; it worked less well in reality.

So to fight inflation, de Castro fixed Chile’s peso at 39 pesos to the dollar and held it there  from July l979 until June l982.   With copper prices in a slump and the size of the state sec­tor shrinking,  this was only possible be cause foreign banks were willing to lend money hand-over-fist to Chile’s private sector.  Foreign  banks were sympathetic to  Pinochet’s conservative economists, much as they had been to the Argentine junta’s de Hoz;  they were also flush with cash and  very competitive, given Chile’s high real domestic interest rates.

Just as in Argentina, then,  many domestic borrowers took advantage of  fixed exchange rates and the temporary generosity of their foreign bankers to make lucrative  back-to-back deals.

For example,  Javier Vial, the sponsor of Friedman’s 1975 visit whom we met above,  and Chile’s richest man as of 1978, acquired control over Banco de Chile in the late 1970s and used it as a front to borrow heavily from foreign banks like Bankers Trust and  Chase. When he was its President,  Banco de Chile, in turn, reloaned the dollars to Vial’s many other private companies, including sev eral that were based in Panama, like Banco Andino.

All these shenanigans became public after Vial’s empire cracked in 1983.  In 1997, after a 14 year investigation, he was sentenced to 4.5 years in jail for bank fraud, and former Economy and Treasury Minister  Rolf Lüders, who’d owed 10 percent of BHC, was sentenced to four years.[vii]  Chile had gotten  stuck with his debts when the bank failed and was nationalized.

All this was no surprise to his foreign bankers — as one former Bankers Trust officer who had personally  handled Vial’s Panama accounts told me, “We knew he was lending to himself, but  no one wanted to pull the plug.”

As a result of de Castro’s policies,   Chile’s private foreign debt boomed  during  the “miracle” years.  In  l981 alone,  $6 billion of new credits were issued by foreign banks, a huge amount for this small economy, mainly  to  the leading domestic private banks like Banco de Chile, Banco de Santiago,  Banco Internacional, and Banco Colocadora, whose grupos,  in turn, owned a huge equity stake in Chile’s private sector.  From l980 to l982, private  foreign debt doubled; by l982  the total foreign debt had ap proached $20  billion,     two-thirds of  it private.  The Central Bank re peatedly warned  that it was not responsible  for the  private debt, but  it  al lowed the spree to continue.  Given   all the “cheap” dollars and low tariffs, im ports  also soared —   luxury imports became  Chile’s equivalent of flight capi­tal.

THE WORLD’S FIRST NEOLIBERAL CRISIS

This whole situation  finally began to  unravel in  May  1981  when Crav, a leading sugar company, failed.  The crunch came in the summer of l982  when the Latin American debt panic dried up new loans, forcing  Chile to devalue and tighten interest rates, a lethal combination.  By January 1983 unemployment   was thirty  percent,  and the six top private banks and the country’s two largest private “grupos,” Vial  and Cruzat-Larrain, had also both folded.

At this point Finance Minister de Castro began to get  intense pressure from foreign banks  like Chase and Bankers Trust to “nationalize”  the private foreign debt.  For a while he stuck to his free-market principles, reminding them of his  earlier warnings — that such a move  would be no more justified than Allende’s nationalizations, and that this was, after all, private foreign debt, freely contracted, presumably with compensation for the risks of default built into the interest rates.

But  the great big banks were not concerned with  such abstract princi ples — any more than they are today.   In January 1983,  they  quietly cut off  all Chile’s foreign trade credit lines – to the point where oil tankers en route to Santiago started to turn around and head home.   De Castro was forced to resign, and his replacement quickly declared that, indeed, the junta would as sume responsibility for the private foreign debt (though not its offshore flight assets!) after all.

In the words of one Chilean banker, “Pinochet achieved what Allende only dreamed of — the complete so cialization of  our private sector.”

Nor was this  the end of the story. When Pinochet’s fourth Finance Minister, a de Castro protégé named Hernan Buchi, took office in l985, he had to em bark on  yet another, even larger  round of privatizations, simply  to rid the government of all the debt-ridden companies that the government had just acquired through the forced nationalization.

(To his credit, General Pinochet did support the compulsory nationalization of Chile’s largest banks — as compared with the far more generous, CEO-friendly bailouts that the US Treasury has recently employed.)

Subsequently,  foreign bankers, the World Bank, Wall Street, and the IMF all gave Buchi  and the Pinochet regime rave re views for their brilliant privatization strategy,  designed to attract foreign investment, boost savings,  and downsize Chile’s state.  But they never seemed to acknowledge why his privatization program  had been necessary  and possi ble  in the first place  – because  in 1983, neoliberal policies had produced a disaster, and   the junta and Chilean taxpayers had been forced by its  foreign credi tors to take the fall for so many bad debts.

Finally, capping it all,  whom do you suppose were the main beneficiaries of Chile’s latest round ofprivatizations?  To  avoid the insider-trading outrages that had characterized many of the 1970s privatizations – helping groups like Vial and Cruzat to grow quickly —   Buchi did offer low-cost loans to workers and pension funds to help them buy stock.  By l988 worker-owned funds owned 14 percent of the privatized shares,  not a bad achievement in worker control for an ostensibly right-wing regime.

But two other kinds of investors became even more important.  The first were  foreign  investors, especially Sergio de Castro’s old friends, the foreign banks. In l986, under the  Central Bank’s “Chapter 19” program,  they  were allowed to swap their  (dubious) nationalized loans for equity in state-owned companies that were  priva tized on very  favorable terms.

As a result,  Bankers Trust obtained forty percent  of Provida, the country’s largest pension fund, plus  Pilmaiquen, a power plant, for   half its book value;   Aetna Insurance bought the country’s second largest pension fund;   Chase, MHT, and Citibank  also acquired major  local interests. Already by 1990,  a handful of foreign-managed pension funds   controlled seventy percent of  Chile’s pension system,  its largest pool of  capital.

Alan Bond, an erratic  Australian investor whose  financial empire  later collapsed,  was even permitted to buy the famous telephone company that ITT  had fought Allende so hard for.  COPEC, Chile’s oil company, which had been privatized for a song to Grupo Cruzat-Larrain in 1976, had since turned into a debt-ridden conglomeration of fishing, mining, forestry, and finance companies, including half of Banco de Santiago.

When Cruzat cratered in 1983, Chile’s government re-acquired ownership of the now-heavily indebted COPEC, which was also by then Chile’s largest private enterprise. Four years later, it reprivatized COPEC to Grupo Angelini, another leading Chilean private conglomerate, again at fire-sale prices. And so the cycle continued…..

All told, this  “Chapter 19”  debt-equity swap program was credited  by its supporters — especially the banks — with reducing Chile’s debt by more than $2 billion.

Of course it was a little ironic for the banks to be praising this achievement. Many others saw  the program  as a dead give-away.  By assuming  all the private foreign debt in the first place, Chile had rewarded bad lending.   And after a decade of tight-fisted government  many of the  privatized assets had actually been in pretty good shape.  Except for the copper company and a few military suppliers, the only ones the government retained were “dogs” that no one else wanted.  It made little sense to let foreigners trade dubious loans for valuable equity  at rock-bottom prices  – maybe even less sense than Allende’s    nationalizations.  It seems that Chile hadn’t really eliminated state intervention; it had merely inverted its class bias. But apart from fundamental inequities like these, the policy  was widely reported to be a “success.”

The other key investor in Buchi’s  privatizations was the good old Chilean elite — including my classmate Sebastian Pinera and his brother.   As we’ve seen, while the government nationalized  private debts,   it didn’t touch  private foreign assets.  And Buchi now offered flight capitalists  a gener ous tax amnesty  if they brought their money  home.  His “Chapter 18” program  allowed them to buy   debt from the banks and swap it for  government bonds or equity in state companies at very  favorable prices.

By 1990,  this program had brought in another $2 billion. Again, the banks and their clients  naturally sang Chapter 18’s praises. However,  it rewarded tax evasion, and also effectively swapped foreign  for domestic debt that may  well prove more costly to service in the long run. Such criticisms meant little to the  officials in charge of the program, however — some of them even benefited  from it personally.

Soon after he left government, for example, Jose Pinera be came president of an electric utility that had been privatized. And, as noted, Sebastian ended up owning the privatized national airline – which he proceeded to turn into quite a profitable enterprise, even while serving in Chile’s  Senate. That, in turned, gave him the financial base he needed to run for President — and win.

So the circle was complete:  having been bailed out of their foreign debts by the government,  Chile’s  private elite and their allies among the foreign banks now bought back their assets at well under than fifty cents on the dollar, often with the very same flight dollars  that the original loans had financed!

Here we have one of the purest cases of abusive banking,  one that poses the ques tion of the foreign banks’ responsibility very clearly.

For  Chile’s  1983 debt crisis obviously had little  to do with  inefficient public enterprises, excessive public debts,  godless Marxists, welfare-state liberals,   or  all the other usual suspects blamed by neoliberals.  After all, by then,  fully two-thirds of  its  foreign debt was  private, and Pinochet and Co. had long since eliminated much of the state’s inefficiency, not to mention the political opposition.  Yet by the end of l983,  Chile  ended up with one of the highest per capita foreign debts in the world, as well as  one of the developing world’s largest state sectors.

In the end, therefore, it seems that this “Chicago road to socialism” was taken to a great extent precisely because there was no  political opposition and no accountability – no one to say “enough” to the foreign banks, the domestic elites, their unregulated domestic banks, and the generals.

So perhaps democracy has its uses, after all. Perhaps “free markets” alone are not sufficient even if they can be useful, and even necessary.

But let’s ask Sebastian Pinera how he feels now about “the other September 11.”  True —  it ultimately made him President, as well as rich.   But was it really necessary for so many of my friends to die?

***
(c) JSH 2011

http://www.forbes.com/sites/jameshenry/2011/09/10/the-other-september-11/