Sergio de Castro became finance minister in December 1976 and surrounded himself with Chicago Ph.D.s who proposed textbook answers to the various problems. These became, quite soon, the stockin-trade of the Western world, from the Atlantic to Turkey. There would be liberalization of foreign trade, and an end put to the practice of import substitution; the peso would be devalued as far as might be necessary to promote exports. On the other hand, credit would be restricted and interest rates put up in order for inflation to be stopped. These two aims were not always easy to combine, because high interest rates could push up the value of the peso, which might damage exporting. There was a further problem, that the course of privatization brought, at least in the short term, unemployment, although to some extent public works were used to counteract this. Given the overwhelming strength of the army, there was of course nothing that the trade unions could do while the reforms went ahead. Wages fell in purchasing power by half. Then matters began to improve, as the end of inflation meant that people started to save again.
The regime then had to contend with the ‘second oil shock’, when, in 1979, petrol prices doubled, and the country suffered from further difficulties when, in 1979, the British and Americans launched their own inflation cures, with a great fall in demand in 1980 and 1981. The rise of the dollar disrupted the exchanges, and in Chile, in 1982, there were many bankruptcies - 824, as against twenty-four in normal times, and unemployment reached beyond 20 per cent, while output fell by over 14 per cent. In 1983 the unemployment figure rose to 28.5 per cent and inflation also went up, from 9.9 per cent to 27 per cent. One problem was that the peso had been overvalued, and there had not been proper supervision of banks, which took dollar loans and lost the money in speculation. The de Castro team imagined that there would be some automatic adjustment, but by 1983 Pinochet himself realized that he must contain the crisis by state action. The claim was that the rich grew richer and that the gap between them and the poor widened - a not improbable claim. By 1978 conglomerates had emerged in force - Vial controlling twenty-five companies, Cruzat-Lorrain thirty-seven of the 250 largest ones, and six conglomerates held over half of their assets; there were press empires, and two of them took over 75 per cent of social security arrangements. Banks borrowed heavily from foreign fringe banks and then somewhat later ran into difficulties. In the later seventies interest rates were low and there was much borrowing once inflation had been halted: imports, debts and interest costs grew in 1980-81 as the dollar rose, and by 1982 a debt problem had emerged (in 1973 it had stood at $3.67bn but by 1982 it was over $17bn). The
gremios
- new private companies - suffered from foreign competition and in the last years of the seventies there were 1,338 bankruptcies. Even Vial and Cruzat-Lorrain went bankrupt and some bankers were prosecuted.
De Castro left office, succeeded by a more flexible man, José Piñera, who reorganized the entire world of pensions and welfare, devalued by 35 per cent and imposed tariffs again - not part of the original programme at all. Some of the banks were taken over, and their debts were underwritten by the State. Real wages were held down; they had fallen by one third between 1973 and 1975, and even in 1989 were still 90 per cent of the 1970 level. There was some labour unrest in 1983 and the copper workers staged a day of protest against the police, but wages were generally held down, and growth, at over 7 per cent, returned. Now, trade opened up: for instance, Chilean wine could be exported, and enterprising farmers worked out how they might grow new fruit - kiwi for instance. Once recovery was in place, by 1986, there was more privatization - utilities, mining and some services, and the banks that had been taken over were also sold off, as going concerns, this time with military money involved as ‘people’s capitalism’.
After that, recovery happened, as it did, famously, throughout the Atlantic world, and by 1986 Pinochet was confident enough to introduce the transition back to democratic practices. Pinochet had appointed the mayors and had organized local government to favour his rule - thus municipal change meant that in Santiago there were very rich boroughs and also very poor ones that could not pay their way. The number of boroughs went up from sixteen to thirty-two and the Santiago area was enlarged for development, out of which of course money was made; and the poorer elements were shifted in much the same way as was done with Glasgow, as the boundaries stretched to the Andes and farmland was cleared. The
pobladores
were moved out of middle-class areas, and their old areas gentrified: 150,000 people were moved out of shanty towns, where they had sometimes been squatters. The
población
of La Hermida was shifted away from middle-class Ñuñoa to a new area called Peñalolén with a per capita income under 1 per cent of Ñuñoa’s. A prosperous area such as Providencia with a population of 116,000 did well from the decentralization money and in the five years after 1982 built health clinics and night schools, whereas La Florida, with nearly 200,000 people, could hardly have a wooden day-centre for children. Self-help groups started. The rich, in the eighties, had the life of their equivalents in every other country, mobile telephones, jeans and business schools well to the fore.
With education there came a certain militarization, with soldier-rectors in the Catholic University and the University of Chile; patriotism was to be stressed, and there were purges. As an American writes, ineffably, the generals ‘disagreed with the vision of a university as a place for the free exchange of ideas’. Beyond twelve specialist areas the universities lost their monopoly in the sense that any private entrepreneur could offer any subject. Business schools proliferated (some sixty). Readers of
Eighteenth Brumaire
complained into their beards; tuition fees were introduced and the state support for universities fell from two thirds to half. The exiles went to town: they now understood how dangerous for their cause was the growing prosperity of the country. Perhaps this accounted for the stupid chasing of the prominent exiles by DINA, the Chilean secret police.
Early in 1988 a ‘No’ (to Pinochet) campaign started (with American help for the opposition, at least with computers). In October 1988 the ‘No’ campaign succeeded; the architect of the recovery in 1983-6 joined the ‘No’ campaign, and in the election Pinochet lost. A middle-road Catholic, Patricio Aylwin, at the head of a sixteen-party coalition, formed the government in March 1990, having become president elect in December 1989. Soon, there was a woman president, and, a few years down the road, the ancient, wheezing Pinochet was arrested in a small-hours raid on his hospital bed in London. Margaret Thatcher went into battle on his behalf, and he was released after a few very embarrassing months. As he left England she gave him a silver Armada Plate, originally designed in celebration of the defeat of the Spanish Armada by Sir Francis Drake in 1588. The Spanish were very angry indeed. But, in the end, the arrest of Pinochet was the best comment on his reign. He was not a man of much interest in himself, but he deserved well of his country, and pursuing him in old age to London was childish vindictiveness.
Turgut Özal in Turkey was in some ways a comparable figure. He was the product (indirectly, and not the cause) of a military coup, and his problems and solutions were Pinochet’s, although the Turkish army conceded free elections quite quickly, such that octroyed solutions, as in Chile, were not, in anything other than the short term, possible. As with Pinochet, the intelligentsia were very hostile, and with the two films
Midnight Express
and
Yol
they produced damning, superbly made and, as with most political films, mendacious evidence. But as the outcome of the Turkish coup of 1980 the country was on the map again, and a figure or two spells it out. Turkey, in 2000, counted as twentieth economic power in the world. F16s made in Kirikkale, in the middle of Anatolia, won prizes. Istanbul had become an important financial centre, and the standard of living, overall, was such that Russians migrated to Turkey. At home, they died at sixty; Turks died at seventy. Back in 1923, when Turkey started off, she had been very backward. In the 1970s, the country was still in large part backward, and almost torn by civil war. By 1990 there had been a transformation, and Turkey was the only country between Athens and Singapore that attracted refugees - 2 million of them.
The repression after the Turkish coup followed Pinochet lines. The army had bided its time, and then moved massively. From 1980 to 1984 there were 180,000 arrests; 65,000 people were imprisoned, 40,000 were sentenced, and there were 326 death sentences (though in the end only twenty-seven executions). On the other hand, twenty-six rocket-launchers and 750,000 handguns were seized, and the casual killings stopped overnight. Meanwhile the politicians were kept aside - the nationalist Alparslan Türkeş with the Islamist Necmettin Erbakan on Uzunada near İzmir, the others at a village near Gallipoli. Hundreds of the politicians were banned. A new constitution was adopted, by referendum, in November 1982, and an election was held a year later; but this time the politicians were supposed to act under severe restriction. The system of proportional representation was abolished, because it had allowed small parties to make the running, and a vote of 10 per cent was needed for any representation at all in parliament. There would be State Security Courts with great powers, and order was at last restored. On previous occasions the generals, taking power, had tended to scratch their heads and drift, but now, in 1980, they had a strategy in mind: the political confusions must be stopped, and that meant coherent behaviour. There was one very significant difference with Chile: it was not a general who took power, the senior one, Kenan Evren, contenting himself with the mainly ceremonial presidency, and spending his time painting (at which he was good).
The overall idea seems to have been to collect moderates of the Demirel and Republican sides perhaps under the leadership of one of the generals’ trusted Republicans, such as the veteran Turhan Feyzioğlu. Oddly enough, the old politicians, even in internment, held to illusions, perhaps precisely because their internment was so mild; they never imagined that the National Security Council could do without them, and Demirel, especially, was constantly being telephoned by senior civil servants and politicians whom the generals consulted. One man was essential - Turgut Özal, the international money-man. He was not particularly keen to have any sort of state-oriented political team in charge. The generals, for their part, despised the politicians, and when they found they could not easily re-form a civilian government, on 18 September they simply handed full powers to the commanders of the martial law districts and nominated an admiral as prime minister. Özal was happy enough with this solution, for he could push through the economic reforms that he and his business friends wanted to see. Authority tended therefore to settle lower down in the pyramid, and Özal found it coming his way, as under-secretary of the plan.
Özal did not believe in plans - he used to laugh, as to how, coming back through the customs at Istanbul airport, he waddled, because he had worn layers of smuggled tights for his wife in thick layers, to avoid paying duty. He had worked at the World Bank and been an irrigation engineer. Turks older than him would also have been engineers or economists, but they would have been from the urban middle (or higher) classes, and secular. Özal was the product of the Turkey that they had created, in so far as education and mobility had reached far into the depths of Anatolia, and had affected places such as Malatya, where he came from. He was part Kurdish, and in religion belonged to one of the stricter orders (
tarikat
: the often-used ‘sect’ is a mistranslation, because the differences are in practice, not theology). An engineering training, at the Istanbul Technical University, had not dented the piety, and when he was at the World Bank he had his prayer mat at the ready. No drink, of course, but far too much to eat, and far too many cigarettes (the combination killed him almost absurdly early, in 1993: as with Atatürk, who had also died far too early, this time from cigarettes and
rakı
, you wonder what would have happened if he had gone on longer, for he was a great creative force). Özal was obviously the Americans’ man, and he could deliver the IMF. He might just have remained as the vital cog in the generals’ machine, but events pushed him into prominence. The generals did not, on the whole, like him: they were very firm secularists, were generally from Western-leaning Thrace or the Aegean, and were even sometimes of Alevi origin, regarding ultra-pious Islam as so much ju-jitsu. Besides, they, without complaint, worked within the State and did not in their heart of hearts see why the economy could not be run like the army, orders issued and obeyed. They even tried to run politics through a dummy party, with two others to represent a sort of
emredersin
(‘yessir’) opposition.
The reforms announced on 24 January 1980 had followed lines that the IMF and Washington had been recommending with increasing insistence since they had proved to be successful in Pinochet’s Chile. Price controls were at least relaxed, and the state enterprises lost less - $62m as against $290m earlier. Quota lists for imports were cut to six months, as against the earlier twelve, and the trade deficit continued, but the IMF gave a standby credit of $1.25bn - the greatest ever given to date. An essential was to stop the inflation, which meant initial pain, as it did in Chile or for that matter England. There would be serious devaluation - in effect, almost by half - and there would be reliance on an export-led recovery. This would mean freeing foreign exchange from controls - and in Turkey these had been very onerous indeed. You even paid a tax if you left the country. Taxes in general were heavy, and if you bought anything at all, you were required by law to keep the sales record. There was very widespread evasion, the black economy accounting for a good half of sales, and at some stage the system would have to be overhauled, but the budget must first of all be brought nearer to balance. Of course these things were difficult to achieve, and the civil service was deeply unsympathetic; the generals were very irritable, and the large private concerns would much have preferred to co-operate with Demirel, whom they knew (not least as a Mason) from old. Özal, in the eyes of the establishment a rough peasant, though nominated deputy prime minister, was quite isolated, and when the generals sensed his ambition, they drove him out. But he came back, for an odd reason.