Could Chile Turn Its Back on Freedom?
Editors’ Note: Chile is a beautiful country, as is the United States of America. This article is clearly about America as much as it is about the potential loss of liberty and a far leftist takeover in Chile. The parallels are stunning with actors like Elizabeth Warren, Bernie Sanders and the radical progressives (Obama inspired) driving the out-of-control Biden presidential bus. It is an important read and an important message for freedom loving, hard working, and law abiding American citizens who believe in the foundational principles of individual sovereignty and the rule of constitutional law that has guided the greatest experiment in governing by consent of ‘We the People’.
Most people outside of South America do not follow trends there very closely. You may not be aware that democracy and freedom are being threatened in the most successful country in Latin America: Chile. That development threatens us here as well.
A quick history lesson. In 1970, Chile became the first country to freely elect what became a Communist government under Salvador Allende. The Chilenos did not want Communism. Allende was elected with only a little more than a third of the total votes when the other two candidates split the Conservative vote. Allende quickly became a puppet of the extreme left, and the country spiraled into chaos, pushed along by Henry Kissinger and the CIA. Things got so bad in terms of inflation, unemployment, etc. that on August 22, 1973, Congress by a large majority asked the armed forces to put an end to multiple violations of the Constitution. General Augusto Pinochet staged a coup d’etat on September 11, 1973, ousting Allende who shot himself in the Presidential palace.
Pinochet became dictator until 1989 when he freely relinquished office after honest elections. He gets a bad press in the U.S. because of the brutal methods he used to suppress the Communists, who were not about to give up power easily. It was during the Pinochet era that I was traveling regularly to Chile. The reality on the ground was quite different from what we NorteAmericanos were told by our media.
Anyone could walk around the cities and talk freely about politics and the government, as long as you did not promote insurrection. If you did, you might find that the Police would come down on you with una mano dura (an iron fist). But for the most part, there was no censorship. Restaurants were full. Most people led normal lives and were comfortable speaking their minds.
Most people liked Pinochet. He quickly restored order from chaos. I asked friends how they felt about the allegations of brutality, which were true. None approved of it, but generally, I was told, “You weren’t here. Anything is better than how it was under Allende.” What was so bad about him? It was largely the fact that he promised everything to everyone for free, all at Government expense. Naturally, this was popular with the poor and the uneducated, but it was totally unsustainable. The economy collapsed.
Pinochet hired a group of economists from the University of Chicago, disciples of Milton Friedman, to come down and tell him how to straighten things out. Among other things, they revamped their Social Security System which was bankrupt. Taxes were still collected, but instead of turning the money over to the politicians to spend, a group of companies was allowed to compete to be managers of the pension funds that were seen to belong to the individual citizens. This was how I became involved, as my company became one of those investment managers.
The program was wildly successful. Chile became one of the few countries anywhere that had a public pension system that was not built on smoke and mirrors. Among other things we established a system where individuals could go to a public kiosk, punch in their Social Security ID, and learn exactly how much they had accumulated on their behalf.
Not everyone was happy, however. The Pinochet reforms primarily benefited those who worked. Chilenos are serious people. If you work, you benefit. If you don’t, you can’t look to the Government to take care of you. This is anathema to people who see society as a global village where everyone is responsible for everyone. Politics is usually about the division of the spoils, and inevitably the pendulum of power swings back and forth between those who are content with the way things are and those who would like things to be more favorable to their interests.
After Pinochet, Chile tried Governments of the Left and of the Right over the next 30 years, but generally, they did not stray too far from the precepts of Milton Friedman. People always speak of Chile as a model for South American governments, which historically have tended to be either corrupt or inept.
In the last few years, however, the gap between the Haves and the Have-nots has widened dangerously. This is a global phenomenon that threatens to topple Governments. With the Internet, social media, and cell phones ubiquitous, public opinion and public action can be mobilized rapidly.
In Chile, the Have-nots are rising. Not surprisingly, they resent the fact that those who have been contributing and saving for retirement are in better financial condition than they are. Chile’s social safety net is not satisfactory. With rising power, those on the political Left have forced a Constitutional rewriting. Recently, a 600-page draft was released which, if adopted, would put the country back on the path they abandoned when Allende fell.
Among other things, the draft calls for a more socially just allocation of retirement assets. Put bluntly, that would mean giving the Government the power to seize all the accumulated retirement assets of individuals and spread the money around to the less fortunate. Another name for confiscation is “theft”, but to the apostles of social justice, this is dismissed as just an excuse for keeping poor people down.
In today’s world, to be poor is seen as being a victim of elites in an unjust society, which is translated into having rights denied. As more and more people come to see themselves as victims, they are increasingly using the political system for a redress of grievances over rights denied.
“Rights” are things to which one has a proper claim. Some, like freedom of religion, if enshrined in law, are ours to enjoy without regard to anyone else. But many rights also place obligations on others to facilitate or pay for those benefits or alter their behavior. The so-called right to health care, or the right to security in old age, involve costs that have to be paid for somehow by someone. In other words, many rights are affected by the political process that determines obligations associated with those rights.
Increasingly, politicians and judges have invented rights like the right to privacy, the right to an abortion, etc. It is not so much a matter of appropriateness as it is a matter of funding. This largely depends on political power. This is what is playing out in Chile. The proposed new Constitution is full of rights, but vague on how they will be financed. Chilenos will vote in September. Most likely, few will have actually read the entire document, relying instead on political slogans.
What has this to do with the United States? Politicians like Bernie Sanders and Elizabeth Warren are at the forefront of politicians proclaiming the existence of many rights on the grounds of morality. Their answer to the question of who pays is the greedy rich and greedy corporations. Chilean politicians make similar arguments. Isn’t it immoral for some to have so much more than they could ever need when so many are currently in desperate need? The BLM movement argues that many of the great corporations and great fortunes were built on the backs of slaves, and therefore reparations are in order to right old wrongs. Proposed “wealth taxes” are merely confiscation by another name.
These are powerful arguments that swing voters, ignorant of the fatal flaws inherent in what is essentially a Communist core belief. (“To each according to his needs from each according to his ability.”)
There are no easy answers. However, I was disturbed by a recent article in the Wall Street Journal that highlights the potential fragility of Capitalism in our time. Jamie Dimon, the popular CEO of JPMorgan-Chase Bank was awarded a $52.6 million dollar “special” bonus on top of his regular compensation of $32 million. That doubled his pay from the previous year. Now Dimon had not invented a cure for cancer or “saved” JPM in a time of great financial peril. He had simply done a good job, as he usually does.
Shareholders overwhelmingly refused to approve the special bonus. However, the Journal calmly reported that it is doubtful he will give it back. Jamie is not like a baseball pitcher who argues he should get a bonus because when he pitches the attendance always goes up. Dimon manages a large bank and does it well. It is unquestionably a challenging task. But $80+ million dollars?
I don’t believe that Chilean corporations pay their CEOs as lavishly. But the Dimon incident gives ammunition to those who find the “wealth gap” intolerable. As political power shifts back and forth, those of us who believe in Capitalism would be well advised to minimize examples of excesses that fan the flames of resentment. The mob always has the power of numbers.
Watch the Chilean referendum on the new Constitution carefully. The vote will be on September 4. The betting is that it will not be approved because it goes too far to the Left. But you never know. The winds of change will still be blowing even if it is defeated.