Republicans Have Crashed a National Economy Before To Enable Power Grabs and Privatizations

Lessons from Chile during the military dictatorship of Augusto Pinochet

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I have been reading the questions you have been sending me over the past week, and preparing several essays in response. Many of you asked about the damage that could result from the so-called “Department of Government Efficiency” that will supposedly cut waste and bureaucratic drag through deregulations, cuts to social assistance and entitlements, and privatizations of public goods. The “savings” from this pirating of our hard-earned Social Security and other funds will underwrite tax cuts for billionaires and other ultra-wealthy individuals.

Plunderer-in-chief Elon Musk, the richest man in the world, has blithely warned Americans that there will be temporary “hardship” for ordinary Americans.

As so often with measures supported by Donald Trump, there is a precedent in authoritarian history (as well as from libertarian and other radical subcultures of the American right). Here is a revised version of a 2023 Lucid essay that tells the story of the disastrous outcomes of the University of Chicago-designed neoliberal policies that were implemented during the U.S.-backed military dictatorship of Augusto Pinochet in Chile. Republicans have a template for crashing a national economy to facilitate right-wing rule.

"Make the Economy Scream"

The economic destruction in Chile happened in two stages. From 1970 to 1973, the Richard Nixon administration, with Henry Kissinger as National Security Advisor, waged economic warfare on Chile to build support for the 1973 U.S.-backed coup that removed democratically elected president Salvador Allende.

Allende, a non-aligned Socialist, alarmed United States and Chilean conservatives with his anti-imperialist economic and social programs. He nationalized Chile’s copper mines, expropriated 50% of farmlands and businesses to redistribute wealth, and targeted multinational corporations in Chile with a 1971 law against “excess profit.”

Yet plans had been made to end Allende's government as soon as he was declared the victor of the Sept. 4, 1970 election. Kissinger made contact with CIA director Richard Helms about coup planning just eight days later, and a Sept. 15, 1970 meeting of Helms, Kissinger, and Nixon produced the fateful directive to “make the economy scream.”

The campaign to unseat Allende brought together far-right elements within the Chilean military, the CIA and other American government agencies, Chilean media and financial elites, Chilean extremist grassroots groups, and Brazilian military officials who had participated in Brazil's 1964 U.S.-backed coup.

Henry Kissinger on the cover of TIME, Feb. 7, 1972, as he unleashed economic, psychological and other warfare to wreck Chile’s democracy. TIME.

Crashing the national economy involved a credit freeze and an embargo on international loans to Chile. CIA-assisted truck driver strikes in 1972 and 1973 (a precursor of the 2022 convoys meant to sow chaos in Canada and the US) severely disrupted the food supply, causing unrest and fears of scarcity.

On Sept. 11, 1973, Nixon's intention to "give Allende the hook" came to fruition when the Chilean military went into action. Allende refused to flee as Hawker Hunter jets bombed the presidential palace. He committed suicide rather than surrender. Weeks later, Kissinger was promoted to secretary of state for a job well done.

At his first press conference, Pinochet told the public that the government would "normalize and heal the country" from the political and economic ruin and social disarray Allende had allegedly caused. Thousands were tortured and imprisoned during the seventeen years of that "healing," and more than 300,000 Chileans went into exile, depriving Chile of intellectual and other capital.

In today’s America, as in Pinochet’s Chile, some of the most prominent prophets of privatization as part of a project of autocratic control have ties to Opus Dei, such as Project 2025 architect and Heritage Foundation CEO Kevin Roberts. Jaime Guzmán, a neoliberal lawyer and top Pinochet adviser, acted as a liaison with Catholic business elites who viewed wealth creation as a path to salvation.

Neoliberal reforms also benefited big capital and created what the Chilean Christian Democrat politician Genaro Arriagada called “one of the most accelerated processes of concentration of economic power” Latin America had ever seen. In classic autocratic fashion —and something to watch for in America—, the leader’s family and inner circle profited through control of businesses privatized by the regime. Pinochet’s son-in-law Julio Ponce, who ran the government agency in charge of those privatizations, was given a chemical company with a $67 million annual profit (a gift that later made him a billionaire), and Jorge Aravena, another son-in-law, got a large insurance agency.

The Chilean press was decimated by the combination of political and economic crackdowns. The Catholic Church Vicariate of Solidarity’s radio and press survived as sources of alternate information, as did the Christian Democrat-linked Radio Cooperativa. But eleven daily newspapers shrunk to four, and 50% of Chilean journalists lost their jobs in the months after the coup, with many killed or imprisoned and dozens more prosecuted in the 1980s.

A captive press helped cover up the disastrous consequences of neoliberal austerity and consolidation: an economic crisis that manifested by the early 1980s, with 30% unemployment and banks unable to pay their heavy foreign debt loads. To avoid even more distress, Pinochet's government had to purchase the defaulted loans of the banks and financial institutions. By 1983, 7 of 19 commercial banks and 8 of 22 investment banks in Chile were state-owned.

This outcome is conveniently left out of accounts of how the military dictatorship and its neoliberal policies supposedly saved the Chilean economy. It is absent from the narratives of those who want to repeat the experiment, whether in Argentina (President Javier Milei, “Mr. Chain Saw”) or the US.

Protecting American multinational corporations had originally motivated these destructive policies, and American businesses that operated globally cashed out from Chileans’ misery. Television and advertising agencies benefited from the end of state funding for Chilean television; a door opened for them to compete for the Chilean audience. By the 1980s, shows like The Brady Bunch and Hawaii Five-0 had a 60-80% market share.

American lobbyists also prospered from whitewashing the regime. Marvin Liebman and William F. Buckley ran the American-Chilean Council, which was partly funded by the junta. The Council’s “carefully planned program of international propaganda” downplayed the regime’s violence and emphasized the supposed stability brought to Chile by neoliberal economic policies, creating a narrative full of half truths and decontextualized transitory successes, and empty of news of failures such as those described here.

It is no accident that Trump administration plans to capture the economy and plunder it for the rich have gone hand in hand with threats to stifle press freedoms. History shows that the more corruption lies behind the urge to “drain the swamp,” the greater is the concealment of the economic and social disasters of privatizations and the knowledge of who profits from “efficiency” measures.