Pinochet personally reviewed the penultimate document, making well over a hundred changes, then announced that citizens would have to vote a simple yes or no on whether to adopt the new constitution, in its entirety, in a plebiscite to be held within a month of its release. The balloting would take place during the prolonged “state of emergency” in which all political parties were outlawed, no voter rolls existed to prevent fraud (because the junta had had them burned), and no scrutiny or counting by foreign observers was to be allowed. When a group of moderate jurists and civic leaders composed a truly democratic alternative document, the regime prohibited its release. The mayors charged with running the plebiscite and counting the votes owed their jobs to the dictatorship.23
Election rules forbade electioneering by “no” activists. When some individuals flouted the ban by leafleting and inviting people to a speech by the former Christian Democratic president Eduardo Frei, nearly sixty found themselves arrested; some were tortured. “With my own eyes,” reports a political scientist and later ambassador, “I saw people being dragged off a public bus and beaten for shouting, ‘Vote “no” on the charter!’” The junta allowed only a single indoor gathering to oppose the document. More than ten thousand citizens filled every seat in the theater for the first legal rally in seven years, while as many as fifty thousand craned to hear from outside. Frei had opposed Allende yet also denounced the proposed constitution as “illegal” in its conception and “a fraud” in its content. A reporter from one of the few media outlets allowed to cover the rally was fired later that night for his refusal to read on the air a prepared report that smeared the speaker and lied about the event. Against such odds, “dissidents could not block the steamroller.” Only three in ten Chileans voted no on the transparent paper used for ballots; 67 percent assented.24
• • •
If Jim Buchanan had qualms about helping to design a constitution for a dictatorship or about the process by which the final product was ratified, matters widely reported in the press, he did not commit them to print. Instead, he wrote Sergio de Castro with thanks for “the fine lunch you held in my honor” and shared how he “enjoyed the whole of my visit to Chile.” Mrs. Buchanan, who accompanied him, appreciated “the nice gifts, the beautiful flowers, the Chilean jewelry, [and] the wine.”25
What’s perplexing is how a man whose life’s mission was the promotion of what he and his fellow Mont Pelerin Society members called the free society reconciled himself, with such seeming ease, to what a military junta was doing to the people of Chile. The new Chile was free for some, and perhaps that was enough, as they were the same kind of people who counted in Virginia in the era when Buchanan pledged to his new employer that he would work to preserve liberty. It was also, always, a particular type of freedom the libertarians cared most about. One Chilean defined it well in rejoicing to fellow members of the society that the “individual freedom to consume, produce, save and invest has been restored.”26
But perhaps above all, for Buchanan, the end justified the means: Chile emerged with a set of rules closer to his ideal than any in existence, built to repel future popular pressure for change. It was “a virtually unamendable charter,” in that no constitutional amendment could be added without endorsement by supermajorities in two successive sessions of the National Congress, a body radically skewed by the overrepresentation of the wealthy, the military, and the less popular political parties associated with them.27 Buchanan had long called for binding rules to protect economic liberty and constrain majority power, and Chile’s 1980 Constitution of Liberty guaranteed these as never before.28
The political economist also gained from this episode the adulation of his allies in the Mont Pelerin Society. The society showcased his thought by inviting him to present the main paper at its annual meeting that September at the Hoover Institution, in Palo Alto.29 Exhilarated by what had been achieved, the society’s leaders chose for the site of its November 1981 regional meeting the coastal Chilean city of Viña del Mar, where military leaders had hatched the coup and President Allende’s remains lay in an unmarked grave. Buchanan and two pro-junta Chilean colleagues together organized the program. The sessions they designed sounded like rationales—indeed, justifications—for the dictatorship’s choices. Among the panels were “Social Security: A Road to Socialism?”; “Education: Government or Personal Responsibility?”; and finally Buchanan’s own contribution, “Democracy: Limited or Unlimited?”30 For the society’s members, Chile was a beacon. The constitution, in the summary of one scholar, removed “major social questions—such as macroeconomic policy—from democratic influence.”31
Interestingly, Buchanan never spoke of the Chilean consultation in his later publications. He did include his multiple speaking commitments there in his center’s annual report to the Virginia Tech administration and to donors in 1980, likely as evidence of his increasing international stature.32 But he never mentioned the Chilean case in print as an example of the application of his thought. For someone who devoted the remainder of his scholarly career to constitutional analysis and prescription, it was a telling omission. Perhaps his conscience troubled him or he feared condemnation. After all, even a conservative newspaper condemned Jesse Helms for how he “doggedly ignored the country’s atrocious human rights record.” After the North Carolina senator visited with Pinochet in 1986 and came home defending the junta from critics, the Raleigh Times mockingly urged a public collection to buy him better glasses and a hearing aid, because the senator was “deaf, blind, and dumb to official policies of corruption and torture.”33 Whatever the reason, Buchanan’s enduring silence spoke loudly.
Looking back, though, one can only wonder what would have happened if someone had suggested to Buchanan that he apply his public choice analysis to the decision-making calculus of General Pinochet and his colleagues when they sought his counsel. Would he have been able to step back a minute and examine the military officers and their corporate allies as self-interested actors? As they set about devising binding rules to limit what other political agents could do, would he have seen that they might be using the rule-writing process to keep themselves in power? Buchanan would title one of his later books Politics by Principle, Not Interest.34 But there is no evidence that he ever recognized what was happening in Chile as naked interest-driven action, bereft of any classical liberal principle. Or that he acknowledged that his own counsel had encouraged it.
If he had treated his school of thought as the neutral analytical framework he proclaimed it to be, Buchanan should also have anticipated how General Pinochet—having done away with independent media, freedom of speech, political parties, and so many regulations—could easily purloin public monies to enrich himself and his family, as he did. In the wake of the 9/11 attacks on the United States, Congress began investigating foreign money-laundering and discovered that the very year after the Constitution of Liberty was ratified, Pinochet had established, under false names and with the collaboration of leading banks, 125 separate accounts in seven countries to stash what became an illicit fortune of at least $15 million—this for a man who had sworn that he had only $120,000 in savings when he took power. Even Pinochet’s Chilean loyalists were appalled. The disgraced general was indicted in his home country for tax evasion and tax fraud; theft was harder to prove. Yet two years later, after these exposures, James Buchanan ended his memoirs with the words “Literally, I have no regrets.”35
Nor did Buchanan ever publicly criticize the final constitution as promulgated by the junta. On the contrary, he continued to promote constitutional revolution, thereafter more single-mindedly, and to seek out support from wealthy funders who might help effect it. From this we can only conclude that he was well aware of the Pandora’s box he had helped open in Chile for the genuine, not merely metaphorical, corruption of politics, but he valued economic liberty so much more than political freedom that he simply did not care about the invitation to abuse inherent in giving nearly unc
hecked power to an alliance of capital and the armed forces.
His silence, it must be said, safeguarded his reputation. Buchanan had surely noticed that Milton Friedman never lived down having advised the junta on how to combat inflation: protesters disrupted the 1976 award ceremony in Stockholm at which he received the Nobel Prize and hounded his speaking engagements thereafter.36 Whereas Friedman’s name became permanently and embarrassingly paired with Pinochet’s, Buchanan, the stealth visitor, largely escaped notice for the guidance he provided. But, then, unlike Friedman, Buchanan never craved the spotlight. He was content to work in the shadows.
• • •
Meanwhile, predictable trouble loomed for the political-economic model imposed on Chile. The year after the Mont Pelerin Society celebrated in the resort city of Viña del Mar, Chile’s economy went into a tailspin, contracting by more than 14 percent. The devastation was so bad that, despite the dangers, a broad-based opposition emerged among workers, students, and homemakers that shook the regime as nothing else had to date. The causes of the crisis were not only internal; the world economy also stumbled that year. But the economic model urged by the society’s thinkers and implemented by their local colleagues made it especially disastrous. Chile’s now unregulated banks engaged in reckless lending that threatened to sink the entire economy when the reckoning arrived.37
The only thing that averted a total collapse was Pinochet’s firing of the Mont Pelerin Society zealots, in particular Sergio de Castro, Buchanan’s leading host, whose proposed solution to the free fall included cutting the minimum wage and other deflationary measures that seemed too risky even to a dictatorship. Pinochet replaced the ideologues with individuals who were willing to enlist government to right the ship. That November, the state took control of four banks and four finance companies to prevent “the collapse of the entire banking system.” The outcome will sound familiar to Americans who lived through a virtual replay in 2008: “During the boom, Chile’s economic gains had been privatized; now, in the crunch, the country’s losses were socialized.” Among those hardest hit were those who had invested their life savings in the new individual retirement accounts in corporate mutual funds that failed.38
Meanwhile, the opposition’s attention turned to the new constitution. Buoyed by the public outcry, they used its provision for a 1988 plebiscite to achieve surprising success—only to discover how its “tricky” mechanisms, in the words of one Chilean legal scholar, would block “channels for the majority to express itself or for just laws to be passed.” Voters were given only one choice: to vote yes or no on whether General Pinochet could rule for another eight years. Visiting to report on the worsening human rights situation, which now included aggressive attacks on the Catholic Church, the political scientist Alfred Stepan explained to American readers what was “really at stake.” The call for a yes vote was “an effort to institutionalize a new type of authoritarian regime that has not been seen in a Western country like Chile since the 1930s.”39
The whole process was so absurdly rigged in the dictatorship’s favor that at first, virtually all its opponents urged a boycott. But this was the only chance people had to register rejection of Pinochet at the polls, so most reconsidered. Joining together to form the center-left Concertación de Partidos por la Democracia (Coalition of Parties for Democracy), they urged a no vote, and worked so intently to register voters that 92 percent of Chileans regained the right to vote. On October 5, lines formed early and stayed late, until the stunning result was announced: despite a manifestly stacked deck, voters refused General Pinochet the additional term he sought by a margin of 55 percent to 43 percent. Ten of the nation’s twelve regions voted no, leaving the erstwhile potentate “humiliated.” As the new constitution stipulated, Pinochet held on to power for another year, until, in July 1989, after tireless work from activists, Chileans elected a president and a congress for the first time in nearly twenty years.40
The new Concertación government inherited a society of surging inequality and economic insecurity—and a constitution that made it all but impossible to change course. The document baked in the fundamental rules of Pinochet’s economic model, albeit as modified modestly by the pragmatists who took over after 1982. “The free market model as applied under Pinochet had an enormous social cost,” explains one political scientist. “Whereas in 1970, only 23 percent of the population was classified as poor or indigent, by 1987 that proportion had reached 45 percent—almost half—of the population,” while wealth had become more concentrated among the richest.41
The novel labor “flexibility” heralded by the regime’s enthusiasts had taken away protections that working people won over generations of organizing and political action. “Precarious and low-income work [became] the staple for over 40 percent of the Chilean labor force,” a marginality compounded by the fact that individuals were now forced to save the full cost of their retirement pensions, with no contribution by their employers, and pay for other goods that had previously come with citizenship. Not to mention those who had dutifully put away money only to have it lost in the downturn. One salesman who called himself part of the “white-collar poor” told journalists, “Today there are two Chiles”: “one with credit cards and computers, and one that is just trying to survive.”42 Yet “Pinochet’s sinister constitution,” as the acclaimed refugee author Ariel Dorfman has called it, by design “mak[es] urgently needed reforms especially difficult to carry out.”43
From the very beginning, then, the pro-democracy forces saw their task as twofold: mitigating the injustices the dictatorship had left and reducing the authoritarian aspects of the constitution. That first elected government proposed and won overwhelming approval of fifty-four amendments, among them one to eliminate the requirement that supermajorities of two successive sessions of the congress must approve any future constitutional amendments. Yet the skewed electoral system still remains in place, with its provision effectively granting the one-third minority of right-wing voters the same representation as the typical two-thirds majority attracted by center-left candidates.44
• • •
It is deeply troubling, then, that Chile is held up today as an exemplary “economic miracle” by the Cato Institute, the Heritage Foundation, and others on the U.S. right.
After the toppling of Saddam Hussein, National Review senior editor Jonah Goldberg went so far as to announce, “Iraq needs a Pinochet.” Trumpeted the Heritage Foundation’s country-by-country annual global ranking, “Chile’s economic freedom score is 78.5, making its economy the 7th freest in the world in the 2015 Index,” with no peer in South America. A global “example” of economic liberty, “Chile is second in the world in protecting property rights,” surpassed only by Hong Kong. Charles Koch, too, cites Hong Kong and Singapore as model “free societies.” Admitting that they lack the “social and political freedom” of other countries, he stresses what matters to him: “the greatest economic freedom” and “thus some of the greatest opportunities.” For whom, he does not specify.45
Few Chileans take pride in that standing, however; most deplore its effects but are stuck with it regardless of their wishes. A nation that once stood out as a middle-class beacon in Latin America now has the worst economic inequality it has seen since the 1930s—and the worst of the thirty-four member states in the Organization for Economic Cooperation and Development (OECD). Yet even among those who have profited most from the concentration of wealth, a feeling has spread that the chasm between those favored under the new rules and those hurt is “immoral.”46
The damage done during the Pinochet years by public choice economics goes beyond the legacy of economic inequality it left behind. The imposition of nationwide school “choice” had dire effects as well. Pupil performance diverged sharply, owing to “increased sorting” by income, which naturally took place with the voucher system. Meanwhile, college tuition costs now equal 40 percent of the average household’s income, making a hi
gher education in Chile the most expensive on the planet, relative to per capita income. A huge student movement began in 2011–12 that featured marches of up to 200,000 and had the support of 85 percent of Chileans. The young people demanded the end of “profiteering” in schooling and a free education system with quality and opportunity for all. What they were asking for “is that the state take a different role,” said one leader, Camila Vallejo. “People are not tolerating the way a small number of economic groups benefit from the system.”47
In 2015, prosecutors charged leaders of the Penta Group, among the top beneficiaries of pension privatization, with massive tax evasion, bribery, and illegal financing of right-wing politicians. The prosecution found that the company, with some $30 billion in assets, had become “a machine to defraud the state.” That case lifted a huge rock, leading to inquiries that are ongoing and involve numerous companies tied to the dictatorship and the political parties to which they give. “The depth of corruption is enormous,” observed a law professor at the University of Chile in 2016. “Public interest has been subordinated to private interest, and when there is no clear distinction between them, it opens the door to endless opportunities for corruption.”48
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