Creative Destruction?: Economic Crises and Democracy in Latin America

7. Institutions: Demise of Military-as-Government and Higher Costs for Action

The Great Depression led to the breakdown of the existing regimes in the three Southern Cone countries. What was different about the situation in and effects of the 1982 and 1997–2002 crises that allowed democracy to eventually survive? 1982 debt crisis: return of a restricted democracy in chile As recently as early 1978, there were only three democratic regimes in Latin America (Colombia, Costa Rica, and Venezuela).1 When the financial and economic shocks of 1982 took place, the entire southern half of South America remained under military rule (Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay). So, just as it did on the eve of the Great Depression, the democratic causein1982hadmoretowinthantoloseinLatinAmerica,basedonitsgrowth potential. (Remember that it was their weaknesses, not their potential, that caused Latin America’s only two democracies to fail during the Depression.) Given the baseline for comparison in this volume, the 1930s, it makes sense to concentrate on Chile for the 1982 crisis, since this country was under military rule on the eve of both the financial shocks of 1929–31 and 1982. In contrast, Argentina and Uruguay were democracies just before the Great Depression but were under military rule prior to the 1982 financial shock. In Chile, the authoritarian regime headed by General Ibáñez was brought down by middle-class protests in mid-1931, but the military regime under General Augusto Pinochet was not, despite the fact that the country’s military regime faced a broader multiclass mobilization against its mismanagement of Institutions Demise of Military-as-Government and Higher Costs for Action chapter seven i n s t i t u t io n s : de m i s e o f m i l i ta r y-a s - g ov e r n m e n t 135 the economy in 1982–84 than in 1930–31. The question here is, Why did Chile experiencedifferentregimeoutcomesinthefaceofthesetwoeconomicshocks and crises? As pointed out in the introduction, this outcome is at odds with the general argument in this volume, according to which dictatorship should have survived or been installed during the early 1930s, while it should have collapsed in the early 1980s. Several factors could have contributed to these outlier, or unexpected, outcomes . For example, an economic viewpoint could highlight the difference in the sheer magnitude of the collapse. In the 1930s, annual GDP in Chile declined four years in a row and accumulated more than 50% of its annual growth between the peak and the trough (1928–34); in the bust of the early 1980s, annual GDP declined three years in a row, but it amounted to just over 20% of annual growth between the peak and the trough (1979–82). Still, if we follow the criteria spelled out in chapter 1 regarding the difference between recessions and depressions, the busts in both the early 1930s and the early 1980s produced depressions in Chile. A political perspective could highlight the unity and cohesion of the army under General Pinochet, and the fact that the regime over which he presided established institutional bases through the 1980 constitution, which generated arelativelywidespreadcoreofsupportamongtheupperandmiddleclasses.2 In contrast, in the late 1920s and early 1930s the army remained fiercely divided between radical left-wing supporters of the Socialist Republic, reformistpopulist ibañistas, and traditional conservative officers. General Ibáñez did not create a new constitutional order; instead he pretended to ground his rule on the 1925 constitution. The regime was based on Ibáñez’s strongman, populist control style in a society undergoing rapid urbanization and industrialization. As president, Ibáñez generated substantial working- and middle-class support, but he lost the support of the professional middle and upper classes once the economy fell off a cliff in 1930–31. His foreign backers either could not or decided not to fight in support of his continuation or reinstatement in power. My own analysis contains a mixture of political and economic factors. Concentrating firstoninstitutions,Iarguethatinthedomesticsphere,thecostsfor organizing and exercising pressures in favor of a shift to full electoral democracy remained high in Chile—the military regime was willing and used force systematically to clamp down on the explosion of social mobilization that followed the 1982 economic collapse3 —while the 1980 constitution provided the institutional means that lowered the costs for engagement between the regime incumbents and the opposition. The opposition’s strength crystallized, however, in the revival of Chile’s traditionally strong...