Salvador Allende - Presidency

Presidency

Upon assuming power, Allende began to carry out his platform of implementing a socialist programme called La vía chilena al socialismo ("the Chilean Path to Socialism"). This included nationalization of large-scale industries (notably copper mining and banking), and government administration of the health care system, educational system (with the help of an U.S. educator, Jane A. Hobson-Gonzalez from Kokomo, Indiana), a programme of free milk for children in the schools and shanty towns of Chile, and an expansion of the land seizure and redistribution already begun under his predecessor Eduardo Frei Montalva, who had nationalized between one-fifth and one-quarter of all the properties listed for takeover. 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 nationalised enterprises or on public work projects.

Allende’s first step in early 1971 was to raise minimum wages (in real terms) for blue-collar workers by 37%-41% and 8%-10% for white-collar workers. Educational, food, and housing assistance was significantly expanded, with public-housing starts going up twelvefold and eligibility for free milk extended from age 6 to age 15. A year later, blue-collar wages were raised by 27% in real terms and white-collar wages became fully indexed. Price controls were also set up, while the Allende Government introduced a system of distribution networks through various agencies (including local committees on supply and prices) to ensure that the new rules were adhered to by shopkeepers.

The new Minister of Agriculture, Jacques Chonchol, promised to expropriate all estates which were larger than eighty “basic” hectares. This promise was kept, with no farm in Chile exceeding this limit by the end of 1972.

The Allende Government also sought to bring the arts (both serious and popular) to the mass of the Chilean population by funding a number of cultural endeavours. With eighteen-year olds and illiterates now granted the right to vote, mass participation in decision-making was encouraged by the Allende government, with traditional hierarchical structures now challenged by socialist egalitarianism. The Allende Government was also able to draw upon the idealism of its supporters, with teams of "Allendistas" travelling into the countryside and shanty towns to perform volunteer work.

Social spending was dramatically increased, particularly for housing, education, and health, while a major effort was made to redistribute wealth to poorer Chileans. As a result of new initiatives in nutrition and health, together with higher wages, many poorer Chileans were able to feed themselves and clothe themselves better than they had been able to before. Public access to the social security system was increased, while state benefits such as family allowances were raised significantly.

Chilean presidents were allowed a maximum term of six years, which may explain Allende's haste to restructure the economy. Not only was a major restructuring program organized (the Vuskovic plan), he had to make it a success if a Socialist successor to Allende was going to be elected. In the first year of Allende's term, the short-term economic results of Minister of the Economy Pedro Vuskovic's expansive monetary policy were highly favorable: 12% industrial growth and an 8.6% increase in GDP, accompanied by major declines in inflation (down from 34.9% to 22.1%) and unemployment (down to 3.8%). However by 1972, the Chilean escudo had an inflation rate of 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 . The combination of inflation and government-mandated price-fixing, together with the "disappearance" of basic commodities from supermarket shelves, led to the rise of black markets in rice, beans, sugar, and flour. The Chilean economy also suffered as a result of a US campaign against the Allende government. The Allende government announced it would default on debts owed to international creditors and foreign governments. Allende also froze all prices while raising salaries. His implementation of these policies was strongly opposed by landowners, employers, businessmen and transporters associations, and some civil servants and professional unions. The rightist opposition was led by National Party, the Roman Catholic Church (which in 1973 was displeased with the direction of educational policy), and eventually the Christian Democrats. There were growing tensions with foreign multinational corporations and the government of the United States.

Allende also undertook Project Cybersyn, a system of networked telex machines and computers. Cybersyn was developed by British cybernetics expert Stafford Beer. The network transmitted data from factories to the government in Santiago, allowing for economic planning in real-time.

In 1971, Chile re-established diplomatic relations with Cuba, joining Mexico and Canada in rejecting a previously-established Organization of American States convention prohibiting governments in the Western Hemisphere from establishing diplomatic relations with Cuba. Shortly afterward, Cuban president Fidel Castro made a month-long visit to Chile. Originally the visit was supposed to be one week, however Castro enjoyed Chile, and one week turned to another.

October 1972 saw the first of what were to be a wave of strikes. The strikes were led first by truckers, and later by small businessmen, some (mostly professional) unions and some student groups. Other than the inevitable damage to the economy, the chief effect of the 24-day strike was to induce Allende to bring the head of the army, general Carlos Prats, into the government as Interior Minister. Allende also instructed the government to begin requisitioning trucks in order to keep the nation from coming to a halt. Government supporters also helped to mobilize trucks and buses but violence served as a deterrent to full mobilization, even with police protection for the strike breakers. Allende's actions were eventually declared unlawful by the Chilean appeals court and the government was ordered to return trucks to their owners.

Throughout this presidency racial tensions between the poor descendants of indigenous people, who supported Allende's reforms, and the white settler elite increased.

Allende raised wages on a number of occasions throughout 1970 and 1971, but these wage hikes were negated by the in-tandem inflation of Chile's fiat currency. 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%.

Export income fell due to a hard hit copper industry: the price of copper on international markets fell by almost a third, and post-nationalization copper production fell as well. Copper is Chile's single most important export (more than half of Chile's export receipts were from this sole commodity). The price of copper fell from a peak of $66 per ton in 1970 to only $48–9 in 1971 and 1972. Chile was already dependent on food imports, and this decline in export earnings coincided with declines in domestic food production following Allende's agrarian reforms.

Throughout his presidency, Allende remained at odds with the Chilean Congress, which was dominated by the Christian Democratic Party. The Christian Democrats (who had campaigned on a socialist platform in the 1970 elections, but drifted away from those positions during Allende's presidency, eventually forming a coalition with the National Party), continued to accuse Allende of leading Chile toward a Cuban-style dictatorship, and sought to overturn many of his more radical policies. Allende and his opponents in Congress repeatedly accused each other of undermining the Chilean Constitution and acting undemocratically.

Allende's increasingly bold socialist policies (partly in response to pressure from some of the more radical members within his coalition), combined with his close contacts with Cuba, heightened fears in Washington. The Nixon administration continued exerting economic pressure on Chile via multilateral organizations, and continued to back Allende's opponents in the Chilean Congress. Almost immediately after his election, Nixon directed CIA and U.S. State Department officials to "put pressure" on the Allende government.