Chile’s slow thaw: Benny Pollack on the "NO" campaign

30 September 1988.

25 years ago Benny Pollack covered the lead up to the 1988 democratic Chilean referendum, which saw Pinochet loose the presidency, ending 15 years of military rule. Pollack had been heavily involved in Chilean politics while the regime was in power, and published a book, Revolutionary Social Democracy - The Chilean Socialist Party, in 1986.

The referendum gave Chileans a simple choice: let Pinochet continue for another eight years or hold a new presidential and parliamentary election. It turned out a 56 per cent NO vote on Pinochet. In the piece below Pollack describes the heavy split and intense political turmoil the country faced before the vote.

NO, a 2012 film directed by Pablo Larrain, covered the same topic from the perspective of the creative manager of the No campaign, played by Gael García Bernal. the movie reveals how René Saavedra managed to convince to public to vote against Pinochet. Despite suffering from heavy government intimidation Saveedra created an upbeat colourful campaign with focus on themes such as happiness and joy, a clear opposite to his opponent candidates defending a brutal dictatorship.

Introduction by Christian Jensen

Chile's Slow Thaw

When I left in 1973, after the overthrow of the Allende government by the military, Chile was a country which, in spite of its limitations, showed a proud record of respect for fundamental human rights and a practicing, though far from perfect, democracy. It had also built, through a painful consensus, one of the best welfare systems in Latin America, providing health, social security, education and culture to its population according to need rather than money. A dynamic State had supported a wide industrial infrastructure, both public and private, through subsidies, protective tariffs and favourable exchange rates. The "law of comparative advantage" so dear to monetarist economists had not yet had an opportunity to be tested. After 1973, Chile was to become the first guinea pig in the social laboratory mounted by Milton Friedman's "Chicago boys".

What I found on my return after 15 years is the result of that experiment—which seven and a half million voters will judge on 5 October. YES or NO is all that is being offered. But the result will determine not only the political system for the foreseeable future but, more importantly, a value-system which could imprint generations of Chileans for years to come.

The two options on offer have so far divided the country like the Dreyfus affair divided France at the turn of the century. The polarization of Chilean society is in evidence every-where: in the streets where young people wear SI and NO badges freely; in the imaginative graffiti inundating the walls washed by the military after the 1973 coup; and in the universities, traditional centres of political activism. Families are divided, father from son, friend from friend; lunch and dinner are again the battlegrounds for political argument they used to be. Chile has begun a long and painful process of re-discovery. It is slowly becoming the political animal of the good, old times.

But Chile is no longer "the Britain of Latin America". After 15 years of military rule, a country once praised as a model democracy is only mentioned when brutalities of one kind or another are inflicted upon its long-suffering population. Year after year, the United Nations' General Assembly and its Commission for Human Rights have condemned the Chilean regime for gross violations of human rights, the first time in 1973, the last in 1987. But it has not been enough. The World Council of Churches, Amnesty International, the Catholic Church, the International Commission of Jurists, and the Organisation of American States, among others, have joined in a sad chorus of denunciation, to no avail. True, the repression has now become more selective, even sophisticated: there are at the moment an estimated 500 political prisoners "only" (many held without trial), and fewer people disappear without trace in 1988 than in the mid-seventies, when the use of State terror was at its peak. But this meagre progress hides a balance that shows in the clearest way ever, anywhere, what the dogmatic implementation of extreme political authoritarianism matched to extreme economic liberalism can do to a country and its people.

Arriving back in Chile in the middle of a political campaign which will culminate on 5 October with a plebiscite was like re-enacting the somewhat surrealist scenes which made the last 10 years of Chilean democracy so notorious. Under both the centrist Christian Democratic and the left-wing Popular Unity governments, from 1964 to 1973, robust waves of social and political mobilisation took place. These increased real popular participation and provided grass-roots support for the modernising and redistributive policies which both administrations favoured. To witness again vigorous political debates and street arguments between conflicting camps was reinvigorating, but as an experience it contained not just hopes but also fears. For what I saw my very first day back here a few weeks ago is the result of the most radical right-wing experiment in social engineering the world has seen since the end of the second world war. The "Chilean experiment" throws ominous warnings to those elsewhere, including Britain, who consciously or by default are succumbing to monetarist fundamentalism.

What the Chilean people are being asked to decide is whether they want President Augusto Pinochet to continue for another eight years (giving him a total of 23 years in power, the longest period for any head of state in Chilean history), or would rather have an election next year in which the government's candidate (not necessarily Pinochet) could be opposed. Under severe pressure from the United States and Western Europe, the regime has allowed the opposition a relatively free hand, but there are still many limitations to its action. Compulsory exile, the scourge of the Pinochet era in the international scene, has been lifted, prompting the return of former Popular Unity leaders anxious to contribute to the NO campaign. The prominence among these of communists and socialists has not been lost on the government's propagandists. Their arrival every day is portrayed prominently in the YES TV spots. In this way, the government is exploiting many people's fears and insecurity. Visual and sound tracks keep reminding the population of the "uncertainties" and "tensions" under the Popular Unity administration. What they are not told is that these were mainly manufactured by those now in power. The government's case rests generally in negative messages and symbols, trying to inflict fear of the past. There is very little, if anything, in terms of the future.

The opposition's message, by contrast, is based on positive statements which are a promise of better times to come. Hope, happiness, freedom, equality and fairness feature frequently in their propaganda. All of these have been taken away by a harsh, uncompassionate government, but would be available to all under a democratic regime.

The opposition has been given a nightly 15- minute space in a national television network in which all channels participate, and the same time has been allocated to the government. Though this was a significant concession (given under duress) it does not go far enough: the regime uses all TV channels at will anyway, and news departments know only too well how to behave. Radio is not very different: only two stations (out of about 17 with national audiences) accept the opposition's publicity, and this because they belong to the Christian Democratic party and the Catholic Church.

The opposition is acting with one voice in the campaign. By successfully agreeing to postpone their differences, it is now a broad coalition embracing various parties and representing a wide social spectrum and most democratic ideologies on the right, left and centre. It includes former Pinochet supporters of the National party and prominent independent right-wingers disenchanted with the regime, the Humanist (ecologist), Christian Democratic, Radical, Social Democratic, Radical Democratic, Communist and Socialist parties (both factions). It is also supported by a significant section of the MIR, the Movement of the Revolutionary Left,. group not generally sympathetic to "bourgeois elections. Many of these parties have joined in the Party for Democracy (PPD), whose central. preoccupation is the restoration of a democratic system. This formidable political front should defeat Pinochet, if only on purely arithmetical considerations. Most surveys carried out by independent academic institutions concede victory to the opposition. Percentages range from a majority of 52 per cent to an overwhelming 70 per cent. Only one survey, just published by the National Police (and designed and carried out by them) gives the government the edge (47 per cent, to 42 per cent for the opposition).

The opposition's triumph is a certainty, provided there is no fraud, another coup or other irregularities. This would be a fair outcome for these 15 years of social engineering with the Chilean people. One million exiles, 30 thousand killed, and several thousand tortured and disappeared later, this country shows a set of striking statistics: 50,000 small and medium enterprises bankrupted through drastic reductions in subsidies and tariffs and exchange rate changes: an official unemployment rate of approximately 23 per cent (and an unofficial one of 35 per cent); 5 million people below the poverty line (out of a total population of 11 million); totally destroyed education, social security, pension and health services; absolute control of the media; and considerably weakened trade unions and political parties. Furthermore, knowledge and culture are persecuted and whatever there was of a popular culture" is still, after so many years of repression, considered suspect.

The sorry statistics are contested with accusations of "communist propaganda". They are also counter-balanced by its excellent record in Paying off the country's huge foreign debt. Indeed, Chile is now the bad boy made good of international financing and banking. If only Peru, Brazil and Mexico behaved like Chile.

Walking the streets of Santiago I think of the two Chiles I have known. The one I once knew and the "new" country the military have created. The Chile I knew was imperfect, with significant social deprivation and insufficient political representation. But it was a fairer Chile than the Chile of today. This second country is apparent to any objective observer through the greediness, selfishness and ruthlessness of its dominant elites, the arrogant affluence of its rich, and the almost inhuman indifference of the Powerful towards the weak and the poor. You just need a few minutes to descend from European, modern, developed Chile to underdeveloped, backward, miserable Chile. The first is full of opportunities, the latter full of hopelessness. The Chile of the poor is no more than a living monument to human stupidity and cruelty, only made possible by an unholy alliance of die-hard fascists, monetarist fundamentalists, yuppie opportunists and right-wing libertarians. Joined by the military, they offered a recipe nobody could afford to resist.

Can full, unrestricted economic freedom really be achieved without political repression? Is economic freedom a pre-condition of political democracy? Those who pretend that the answer is simply a "technological" one are either deluding themselves or else deluding others out of their own prejudices and dogmas. For these questions, and their answers, are at the core of the most ideological of arguments. Chile is the best available example to date, after the war, of what can happen to a nation when determined right-wing zealots take total control of society and abuse the monopoly of power which they enjoy, to impose their rigid model on everyone, whatever. To those who have succumbed to the monetarist religion, and those who are about to succumb, Chile can offer a thought or two.

The outcome of the plebiscite next Wednesday will depend on several factors. Firstly, the opposition's success in presenting a united front is a major achievement, especially after years of factional infighting. Even the Communist party and a substantial section of the Movement of the Revolutionary Left (MIR) came finally to the support of the NO vote after calling for an abstention. Secondly, the attitude of the Catholic Church is becoming increasingly important. From the very beginning of the military government, the Church has been in the forefront of the fight for the respect of basic human rights. This inevitably clashed with the government's obstinacy in denying that any rights were being ignored, and led to accusations of the clergy becoming "pro-communists". Lately, the church has played an important role in bringing together the opposition parties; Marxists and Catholics put their differences aside to join in their rejection of the military regime. Another relevant issue is that of the government's true adherence to fair play. One of the problems in creating a united opposition was that some of the parties thought that participating in a plebiscite organised within the government's own rationale and set of rules would lend legitimacy to the regime.

Indeed, these doubts still persist, but the presence of about 400 foreign journalists and several teams of ob-servers should provide some guarantees.

But perhaps the most important factor, and one with a special psychological dimension, is the loss of fear. This will enable many people to come out into the open to voice their opposition in a way yet unknown under the military regime, and could eventually prove decisive.

Against all odds, the opposition seems to have a good chance of winning the plebiscite. Last-minute attempts to intimidate the undecided and insecure have included clumsy gestures like the denial of the O'Higgins Park to the NO campaign, which wished to hold their public rally there, and the holding of the most impressive military parade of the last 15 years. The government's ominous reminder that it was still very much in charge did not go unnoticed. But, on the other hand, Inti Illimani's tone and lyrics, "el pueblo, uniclo, jamas sera vencido" (the people united will never be defeated), sung with them by the thousands that welcomed the folk music group on their arrival back from exile, hinted at a hope and a promise.

The NO campaign's "happy" approach. Photo: Getty Images
Ralph Orlowski / Getty
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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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