In September of 1970, Salvador Allende, Leader of the Chilean Socialist Party, won the Chilean election. Not only had he won the election but he also became the first politician with communist beliefs to take power over a country democratically. Although according to the Chilean constitution, the runner up in the election, an independent candidate, Jorge Alessandri could have also won the election, but had never promised to follow the constitution and Allende had promised to explicitly follow the constitution, but had broken that promise later in his presidency and even bragged about it around fellow party members saying he only said that to win the election. After the election, the economy had been doing good for one year and then for the next two years the economy had gone downhill. The inflation rate rose at a thirty percent rate, over twenty percent of the male population was unemployed, and half the kids below the age of fifteen were very malnourished due to failing food production. Many of this stemmed from the fact that businesses weren’t allowed to change prices, two American copper companies called Anaconda and Kennecott were taken over by the Chilean government and were nationalized, and so were the banks. To further his communist agenda, he re-established diplomatic relations with Cuba, China, and many other communist countries.
Due to these problems Allende had caused over his short lived term, during the March congressional election, Allende’s opposition felt that with the economy crashing and Allende breaking laws embedded in the Chilean constitution, he had very high chances of being impeached, during this vote Allende’s opposing coalition had gathered 55% of votes while Allende’s coalition had gathered 43% of the votes. Due to the right wing coalition only gathering 55% of the votes, Allende was not impeached and threats of uprising and riots from both the Left wing and Right wing coalitions had ensued.
In the aftermath of these congressional elections, tensions had escalated to a point where there were street riots almost every single day and people were asking for this problem to be solved. Left wing groups had started up neighborhood committees, while the right wing coalition was requesting help from the Chilean military. The earliest signs of a coup happening was in the summer of 1973 when Tank commanders attempted to start a coup but were stopped by the regular armed forces. Also during that same summer, there were government protests and the trucking industry decided to go on strike since the industry was being nationalised. Backing the protests and worker strikes were The Christian Democrats, and Conservative students who both believed that president Allende should resign or there should be intervention by the military to forcefully take him out of office. While all this was happening, the annual inflation rate rose just over 500%. In August centrist and right wing Chamber of Committees members undermined Allende since he had violated the constitution while only being in office for a few months and bragging about it to fellow party members.
On the morning of September 11th, the military had enough and decided that a coup was necessary and launched an attack on Allende and his socialist government. While defending against the military coup with an assault rifle, Allende had either committed suicide or was killed by gunfire coming from the Chilean military. Along with his death, several cabinet ministers were assassinated, and colleges and universities were put under military control. Following the military coup and Augusto Pinochet being made the new leader of Chile, there were meetings between him and his advisors regarding economic reforms and some new laws that were needed. From these meetings, there were more free market oriented reforms that still remain the foundations for Chile’s economic prosperity in South America, and an economic system that many countries around the world follow. This economic system, which is now called social capitalism, was a response to the financial crisis in the early 1980’s and also a financial crisis in the post civilian government 1990’s as well as the failed models that came before social capitalism. Namely, state capitalism (1938-1970) and state socialism (1970-1973). In a 1991 interview Alejandro Foxley, the successor to Pinochet’s finance minister, had said “We may not like the government that came before us. But they did many things right. We have inherited an economy that is an asset.” All the civilian governments that have succeeded Pinochet’s government have maintained the radically market oriented economy with some very minor changes, but the most positive changes came from the mid 1970’s and the 1980’s. Along with these free market reforms, came some nationalization within the economy. This came in the form of keeping the copper industry nationalized as it had been since the early 1960’s, and the banks becoming aggressively regulated in the 1980’s due to a financial crisis. Social programs for the poorest of the poor in Chilean society were implemented. In 1984, poverty levels were as high as 50 percent, but with these social programs, that poverty level had dropped down to 34 percent in a time span of around 5 years. This poverty rate is still falling and had hit a poverty level of 15 percent in 2005.
The significant economic implementations that Pinochet had put into Chile’s economic system are used all around the Americas and around the rest of the World going as far as Europe and all the way into the economics of Asian countries.
Many of the social reform programs that he supported and implemented are also the basis for countries all across the globe when they too are trying to make a social program for the poor that actually works.