/ 19 February 2024

How public influence over economic matters is eroded

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Chilean Ex-Allende government Cabinet Minister Carlos Briones (C) partly obscured by microphone, speaking to a crowd during the memorial organised by the Communist and Socialist parties on the 12th anniversary of the death of the deposed Socialist President Salvadore Allende (Photo by Robert Nickelsberg/Getty Images)

Marxist theorists contend that history follows a spiral trajectory, repeating itself while introducing new layers of complexity with each iteration. Drawing from this spiral analogy, I posit that discernible repetitions occur across time and space, contributing to the persistence of imperialism in a territory now called South Africa. 

Despite its imperfections, criticisms of the ANC might be exaggerated, considering the influence of external actors who contribute substantial layers to the already imperfect situation. Since 1994, South Africa has been undergoing experimentation in terms of economics and human rights, and the focus on eradicating apartheid was given a subsidiary role. South Africa continues to go through its own spiral trajectory: economic imperialism is strong and deepens wounds created by apartheid.

At the United Nations General Assembly in December 1972, Chile’s president Salvador Allende expressed his frustration with embedded forms of imperialism that posed threats to his country. Allende’s powerful speech is an illustration of a recurring pattern in the Global South: the gradual erosion of public influence over economic matters. This “deterritorialisation’”manifests through an ever-growing separation between economic concerns and public debate, both domestically and internationally.

In simpler terms, economic factors such as investment and natural resource exploitation are increasingly divorced from the realm of public debate. They are instead controlled by the private sphere (including transnational and international arenas). As the public-private divide widens, it normalises the exclusion of economic matters from democratic discourse and decision-making, reinforcing inequalities and eroding public good.

As the Global South progresses through its historical “spiral”, informal discourses championing capital interests alter the language used to frame crucial issues. Terms such as nationalisation are reframed as “expropriation”, and sovereignty over natural resources and the right to economic development towards the apolitical human rights terminology. 

Also, concepts such as business and human rights due diligence championed by the developed North present a problematic narrative. They position old imperial powers as the “saviours” of “pagans” they exploited, thereby obscuring historical power dynamics and raising concerns about neo-colonial intentions. The civilised world is suddenly concerned about the soulless, uncivilised people who were once deemed to bear real rights because of their apportioned sub-human status.

This gradual linguistic shift normalises “deterritorialisation”, the erosion of national economic control, often achieved through increasingly informal interventions or external mechanisms imposed at the international level. Presently, numerous soft-law and hard-law approaches aim to separate economic interests as a public good from states and their populations. Some notable examples include trade agreements, UN Guiding Principles, the Kimberley Process and Organisation for Economic Cooperation and Development Guidelines for Multinational Enterprises. 

All this unfolds under the pretext of dubious international law principles originally designed to safeguard the interests of old powers at the expense of the Global South. Rather than overt aggression, the modern twists in this rapidly turning spiral involve embedded economic and diplomatic pressure, subtly swaying countries towards policies favouring external capital.

The Chilean experience and economic subversion

On 21 September 1970, Allende was elected president and implemented significant economic reforms that affected the interests of the United States and the Chilean elite. This led to internal and external pressures against Allende’s government. 

Nonetheless, Allende continued to nationalise industries aiming to benefit the state and promote social welfare. His economic agenda and potential threat to external interests culminated in a US-backed coup in 1973. Allende took his life during the coup, ushering in the dictatorship of Augusto Pinochet. 

Pinochet’s policies deepened Chile’s economic dependence and facilitated exploitation by foreign corporations, representing another twist in the spiral of imperialism persisting even post-colonialism. This pattern continues to be observed in the Global South, with corrupt leaders enabling continued imperialist influence. Conditions are nurtured for an adversarial relationship between “savages” (dictators) and “victims” (citizens), requiring the saviour from the North in the shape of old powers, the UN and international civil society. 

Knowing his economic reforms faced opposition domestically and abroad, Allende sought solidarity from the Global South during his UN address. This coincided with prevalent Third World economic considerations and decolonising rhetoric at the UN, particularly reflected in General Assembly Resolution 1803 (XVIII) on the permanent sovereignty over natural resources. Allende warned against a “reflex modernisation” model excluding millions from progress and condemning them to suffering. 

Furthermore, Allende drew parallels between Chile and other developing countries facing similar problems, suggesting a broader struggle against a system perpetuating inequality. His speech played a significant role in galvanising support for the developing world and its economic struggles. His words resonated with many countries and his call for solidarity helped to lay the groundwork for the New International Economic Order (NIEO) movement, which was short-lived.

Nevertheless, the Chilean coup and its aftermath continue to spark debate, particularly regarding the implementation of neoliberal policies by the Chicago Boys, a group of Chilean economists trained at the University of Chicago.

Make the economy scream

In his book The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism, Sebastian Edwards attempts to separate the neoliberal project from the brutal Pinochet regime that first put it into practice. He argues that the policies brought relative prosperity to Chile and defends the Chicago Boys’ reputation. But critics say he downplays the human rights abuses and negative social consequences of neoliberalism under Pinochet.

Chileans in Chicago-style economics did not start in Chile but gained expression and prominence there. Otherwise known as the Chile Project, local students were indoctrinated with the power of self-interested, rational markets and the folly of state economic planning. They were also trained to view the welfare state with deep suspicion. After the Cuban Revolution in 1959, the Chile Project became integral to Washington’s Cold War strategy, which has been the case long after the Soviet Union collapsed. 

With Allende’s overthrow in 1973 and the establishment of a US-backed anti-communist regime, the Chicago Boys, now well-connected and prepared, played a pivotal role in implementing neoliberal policies, unintentionally supporting a dictatorship that curtailed labour rights. In this regard, Chile pursued vigorous privatisation of education and its social security programme, with Pinochet’s 1980 constitution criminalising strikes by public sector workers.

At the macroeconomic level, Chile abandoned efforts to build a diverse and resilient national economy, opting to specialise in low-value exports such as fruit. This neoliberal experiment handed control of prices to market forces, potentially leaving the country vulnerable to external shocks and exploitation. In a surprise turn of events, Chilean industry leaders were pleasantly stunned when Finance Minister Sergio de Castro permitted them to charge whatever price they wanted for basic consumer goods such as cooking oil. 

Despite his general support for neoliberalism, Edwards admits the harsh realities of Chile’s economic transformation. The “shock treatment” caused immense unemployment, failed expectations and led to a devastating recession. He recognises the irony of implementing these reforms under a dictatorship and concedes the privatisation programme enriched regime allies through undervalued asset sales. Moreover, the lauded pension system fell short, and inequality worsened even by South American standards. Edwards even refers to an “apartheid” fuelled by neoliberalism.

Siyabonga Hadebe is a PhD candidate in international economic law and a labour market expert based in Geneva.