Chile: the balanced view : a recopilation of articles about the Allende years and after

THE ALLENDE EXPERIMENT Chaos and Destruction from Inefficiency and Idealism(*) By MARKOS J. MAMALAKIS The emphasis in Chile on income distribution and on the derived transformation of production and capital accumulation is the outgrowth of latent forces of rising momentum and intensity prevailing throughout Latin America. Since 1970, the transformation in distri– bution has been manifold and far-reaching. Aiming to change the class, sectoral and international distribution, the government entered all major industries. JI assumed own– vership of the extractive industries -the primary source of fabulous but often transitory resource surpluses. It nationalized the banking system- the primary source of financial capital. It took control of and restricted private ownership of rural land -the alleged major source of pOlitical power and Ricardian rents. It also took over alllarge industrial enterpri– ses- 'the alleged source of monopoly profits and power. AII.of these largely irreversible ownership transfers were designed to wipe out the control 01 Chile's riches by a 1ew private individuals. Furthermore, elitist education, enter– tainment and health services, and excessive differences in wages, salaries, pension, insurance, health and other social security benefits -sources 01 unequal accumulation of human capital by social groups and intra-Iabor inequalities- were attacked, constrained and reduced. The changes portend events to come, possibly by diferent means and with different intensity, else where in the hemisphere and on the African and Asian continents. These changes and their effects on production were primarily responsible for the fall of President Salvador Mlende on September 11, 1973. ALLENDE'S INITIAL EMPHASIS WAS ON RAISING THE INCOME SHARE OF LABOR No other short-term objective was so important to Allende's program in 1970 as the rise in the income share of labor. Virtually all the tools available were used to redistribute íncome and destroy the usurpers of labor's surplus value. The resulting short-term income redistributíon was the most spectacular ín Chile's hístory. As shown by Chile's natíonal accounts, the participatíon of wage earners in íncome, including contributions by emplo– yers, rose from 54.9. percent in 1970 to 65.8 percent in 1971. Wíth inflation artifícially kept in bounds between January, 1971, and May, 1972, while nominal wages and salaries were strongly adjusted upward•. real wages and salaries spurted by 28.4 percent. Salaries rose fasterthan wages between October, 1970, and July, 1971, and in that same period, the combined wages-salary index rose by almost 100 percent in manufacturing and by between 46 and 56 percent in the public sector,.but fe 11 by 9.4 percent in mining. The labor share also rose, as unemployment was drastically reduced from 8.3 percent in O'ecember, 1970, to 3 percent in September, 1972, and 3.8 percentin March, 1973. {')Reprinled wilh permíssion from Res Publica. Vol. 2 N.O 3. 1974, a public affairs quarterly published by Claremonl Men's College, Califomia. 39