Dawn of Neoliberalism

DAWN OF NEOLIBERIALISM

Before the introduction of Neoliberalism to Chile, the economy was struggling, there was a widespread

discount, and a hunger for change. After consecutive failed campaigns, Salvador Allendes’ socialist party

won the election by a plurality of 36% votes. A man with a vast amount of experience in politics, dating

over 30 years, co-founding Chile’s first socialist party in 1933. Allende was the first democratically elected Marxist in Latin America. Immediately, he implemented his social program “Chilena al Socialism.” A

radical attempt to nationalise the country and continue Chile’s trajectory of reducing the housing deficit.

Large scale industries like banking and copper mines returned to state control, to the dismay of the US.

One of the central objectives of the Salvador Allende government, in the face of housing policy was to

build and repair homes in poor condition and improve the urban conditions of the poorest sector. The

regulation of the application and housing allowance regime is modified through the Popular Savings

Plan. Allende was a Cuban sympathiser and had strong ties with the communist party of the Soviet

Union, reflected in 1972 when he received the Lenin Peace Prize. Despite their shared political interest

there were still fundamental differences in approaches. After the earthquake in 1972 the KGB’s support for Allende was further illustrated by their economic intervention. Over US$100 million in credit was

donated along with many natural and capital resources to help revive the shaken nation. Throughout

Allende’s premature career as President, the United States of America under Richard Nixon, wanted

him out, as it apposed their neoliberal ideologies and ordered covert CIA operations “to make the Chilean economy scream” (Kornbluh, P. 2003). The US played a significant role from the

start, in attempting to prevent Allende’s inauguration, this

was opposed by the Commander In Chief of the Chilean army,

Rene Schneider. As a constitutionalist, the decorated and

respected official, wished to continue the Chilean military’s

long apolitical history. In 1970 he was assassinated by CIA

funded coup plotters.

In 1973, Allende was advised to elect Augusto Pinochet to be

the commander in chief by his predecessor Carlos Prats, as he was convinced Pinochet was a constitutionalist (see fig. 2).

It was only a mere nineteen days in his new role when, the CIA orchestrated Pinochet execute the coup

against Allende. To Allende’s credit, he faced the immediate tyranny head on. A bombing commenced at

the presidential palace as the army surrounded. Armed with a Kalashnikov given to him by Fidel Castro,

he and his entourage managed to hold off the Chilean army for hours. Before surrendering, he recorded a speech that was his last address to the nation “I am not going to surrender, I will pay with the loyalty

of the people with my life.” Reports suggest that Allende shot himself, but there is compelling evidence

to accept he was assassinated. Cue the dictatorship.

On September the 13th 1973, the man who two years ago was a nobody, was now relishing his new position of power. Over the next sixteen years Pinochet would rule unchallenged [1]. Pinochet sought

out for help from Chilean native capitalist economists, The Chicago Boys. Chile was to become the most

extreme test laboratory for their free market ideas and the influence of neoliberalism. The aim was to de-

centralise Chile’s economy into a modern market economy. The US senate finally got what they wanted

and now were able to start buying many Chilean industries. These reforms stay largely intact in today’s

climate, with US figures claiming that Chile has one of the most open trading regimes in the world.

Neoliberalism has been the dominant ideology or political economic paradigm, that rose to prominence

in the last thirty years. It has been the force that has shaped our world. A belief in free markets, that

commerce should be able to travel from place to place freely, with as little regulation as possible. The

drivers of this neoliberal mindset are businesses, corporations, striving for financial globalisation via

the interconnection of countries. Not just through diplomacy, but through economy, commerce in the

form of ruthless capitalism. The champions of this mindset were Margaret Thatcher and Ronald Reagan,

they introduced reforms and fought the trade unions, who opposed this doctrine of neoliberalism. Their ideology expanded far beyond that on an international level, by working with the IMF (International Monetary Fund) to force privatisations and deregulations across the globe. The IMF is a group that

gives out loans to developing countries, having to comply to the demands of the richer countries, who in

fact fund the IMF, thus, are also funding the loans. These loaned countries have to adopt the policies by

the neoliberal politicians in power. If they didn’t comply, they face the fear of not receiving more loans,

diplomatic isolation and if necessary, invasion. As we have seen in the aforementioned case in Chile, CIA

covert operations.

They had to privatise their state assets, their services and give corporations free rein, by lowering taxes.

It was all about opening up their economies to western companies and this was the key to the success

of the neoliberal project. The arrangement it created meant that, corporations from the West were able

to go into the poorer developing countries to exploit the cheaper labour and natural resources. Evident in (fig. 3) with Chile’s copper mines. This was central financial globalisation of the world. As result there

was a transfer of wealth from the poor to the rich, forming neoliberal hegemony. This was shown in

the financial crisis of 2008 and later the eurozone banks, when they were given huge bailouts and the

poor were unfortunately just given austerity programs. They were forced to cut down on the welfare

schemes, jobs were lost, but wages went down as well. Neoliberal governmentality embraces individual

empowerment and the dilution of state power. Promoting entrepreneurship, competitiveness and self-

interest. Economists claim that free market principles work no matter what politicians are in office. They

have proven themselves in Chile and it facilitates the desire to create a land of opportunity, idealising the

perfect model to be that of America.

Fig. 3