Chile’s inflation under Allende stemmed from political commitment to the poor, not economic ignorance

Evidence

The consequent price rises are generally represented, even by sympathetic commentators, as evidence of the government’s economic incompetence. It is true that the government was unable to fulfill its earlier Keynesian hopes that higher wages and public spending would stimulate demand without serious inflation. In 1973, a government member of the Central Bank laid out the following options: ‘reduce the speed of societal change; detain the redistribution of income; lower the level of employment; reduce the growth rate; decrease the level of capital accumulation – or increase inflation’. By 1972, he noted, the Allende government, ‘with much regret, had to opt for sacrificing monetary stability’. Chile’s inflation was the consequence not of economic ignorance in the context of a basic unanimity of values, but of a political commitment to Chile’s poorest people in dramatically constrained circumstances. The Chicago Boys would make precisely the opposite choice. Pinochet’s economic miracle was to preserve monetary stability by sacrificing Chile’s poor. — Jessica Whyte, The Morals of the Market, 340

Categorization

• XREF: Connects to the reader’s work on austerity/neoliberalism: the same framing maneuver (blaming victims of inflation for policy failure) recurs in later austerity debates, e.g., Greece and the Eurozone crisis. — connects to: The Allende government displaced market allocation to remedy material inequalities — Jessica Whyte, The Morals of the Market: Human Rights…, 317; Monetarist anti-inflation doctrine is politically motivated moral condemnation of welfare-state demands — Jessica Whyte, The Morals of the Market: Human Rights…, 337; Chilean business associations organized economic sabotage to overthrow Allende — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 1560
• DEFINE: Defines the core trade-off in the Chilean experiment: monetary stability versus redistribution, a lens for reading all subsequent ‘shock therapy’ debates.

Broader Connections

• Monetarist anti-inflation doctrine is politically motivated moral condemnation of welfare-state demands #corroborates (0.80) — Jessica Whyte, The Morals of the Market, 337
• Chilean business associations organized economic sabotage to overthrow Allende #complicates (0.75) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1560