Popular Unity (Chile)

Popular Unity (Spanish: Unidad Popular or UP) was the coalition of Chilean political parties that coalesced behind the successful candidacy of Salvador Allende for the 1970 Chilean presidential election.

As president of Chile, Salvador Allende sought to implement the Popular Unity's "anti-imperialist" program of building socialism within a democratic and constitutional framework. The key aspect of this approach, known as "the Chilean path to socialism" , was a reorganization of the Chilean economy into three areas: i.) a socially owned sector, which was to become the dominant sector, made up of firms to be expropriated or already owned by the state; ii.) a privately owned sector, where the rights or workers and employees to fair wages and working conditions would nevertheless be guaranteed; and iii.) a mixed domain, composed of enterprises combining both state and private capital.

However, when Allende and the UP came to power in November of 1970, Chile was in the midst of an economic crisis. The nation was still suffering from a depression which had begun in 1967 and which only reached its nadir in 1970. Bent on creating economic chaos, certain members of the opposition began deliberately to exacerbate these difficult conditions: the political victory in September set off a large exodus of capital, a cessation of private investment, and an extensive withdrawal of bank deposits. With national production falling and unemployment rising, the government had to take economic recovery as its primary immediate goal.

As his means to this end, Allende initially raised wages and froze prices, adopting a populist approach to the economic problem which had the incidental political objective of both consolidating and widening support for the government. The result was a substantial increase in consumer spending which, in turn, effected a notable redistribution of income downward.

The minimum level of taxable income was raised, a measure which benefited 35 percent of the people who had paid taxes on their earnings in 1969. The armed forces actually received the full increase in pay that had been promised them by the previous government of Eduardo Frei. Over 330,000 small proprietors were relieved of capital taxes. In joint ventures with private firms, the government increased public works, further reducing unemployment. Between 1970 and 1972, the incomes of 300,000 retired pensioners were raised. And labor insurance was extended to cover 360,000 small-shop owners and manufacturers, market vendors, artisans, transport workers, and other small owners —the very social groups, the "petty bourgeoisie," which were most vocal in their opposition to the Allende government.

By November 4, 1971 —the Popular Unity's first anniversary in power— the state had come to control 90% of what had previously been private banking. More than 70 strategic or monopolistic enterprises had been expropriated, nationalized, or subjected to state intervention, including the copper, coal, iron, nitrates, and steel industries. Under the agrarian reform, 2.4 million hectares had been taken over in order to settle landless farmers and make the land more productive. The indigenous people of Chile had benefited from the founding of the Indian Development Corporation and the Mapuche Vocational Institute. The government financed a plan providing free milk to children. And in reponse to Allende's plea to support "the people's governement," the industrial workers had increased output by 14 percent in the course of that first year. In September of 1970, the Chilean unemployment rate had stood by 8.4 percent; by September of 1971, it had dropped to 4.8 percent.

After the first year of the Popular Unity government, however, the economy began to regress. Merchants' inventories shrank as a result of the earlier increase in consumer spending, and fresh supplies of merchandise were not easy to come by: many producers put production on hold, waiting to see how long price controls would prevent them from recouping their increased expenses.

The expected shortages in the agrarian sector during the period of reform necessitated a use of foreign currency in order to import foodstuffs. But Chile's buying power on the international market had shriveled, since 70 percent of its export earnings rested on the sale of a single commodity, copper, the price of which was established abroad: consequently, the country had little control over the level of its reserves.

The nationalizations of American and other foreign-owned companies had sharply increased tensions with the United States, giving the Nixon administration all the excuse it needed to orchestrate an international financial blockade, restricting economic credit to Chile. (9) At the same time, C.I.A subsidies were flowing to right-wing media, politicians, and organizations, helping to accelerate a campaign of domestic destabilization. By 1972, then, the UP government was having to cope with a crumbling economy. Attempts at controlling the prices of an increasing number of products only led to a drop in their supply or expanded the black market. By the middle of the year, the political climate had darkened, as large mobilizations of both pro- and anti-government groups became frequent, often leading to clashes.

The C.I.A.'s sponsorship of the opposition continued, financing the production, publication, and distribution of articles that foretold the inevitable economic collapse of the government. This propaganda campaign in newspapers and magazines, aimed at the middle classes and the most anti-Allende sectors, was supplemented by more popular presentations on television and radio. Every action in opposition to UP efforts was massively publicized. The ultimate audience, however, was intended to be the armed forces —the aim being to generate a general atmosphere of military insubordination to the constitutional government.

By early 1973, as a result of all the aforementioned developments, inflation had gone out of control, soaring to an annual rate of 150 percent and more. The crippled economy was further battered by prolonged and sometimes simultaneous strikes on the part of such middle-class groups as physicians, teachers, students, truck owners, copper workers, and shop owners.

Allende's efforts to maintain some degree of working consensus with the opposition began to fail: talks with the Christian Democrats reached an impasse in August and then broke down altogether. His appointment of several members of the military to important cabinet posts was not well received by a number of officers in the high command of the armed forces. After the “tanquetazo” a trail run by the putchists to see the reaction of the government. In late August General Carlos Prat resigned as Allende's Defense Minister and Army Commander. Generals Pickering and Sepúlveda also submitted their resignations. The way was now cleared for the putchists in the military to undertake the overthrow of a constitutionally elected government.