Tightening the Belt

Just eight months ago, President Salvador Allende Gossens bragged that "the Chilean road toward socialism has been reached with the least cost of any other revolution in the world." Unfortunately for Marxist Allende, Chile's socialist road now seems to be rather bumpy. Last week, in the wake of continuing economic decay, Allende announced a sweeping austerity program of "work, sacrifice and savings."

The new program is a mix of populist palliatives and sensible economic reforms. Allende promised to double chicken production to 100 million birds a year by 1975 and build a new sugar refinery as well as two milk-bottling plants. More significantly, he promised that the government would bolster Chile's sagging economy with the help of $400 million in loans from Communist countries. In all, Allende plans to inject more than $760 million into Chile's economy and agriculture.

To combat inflation, which may spiral to 50% by the end of this year, he plans to seek legislation raising wages by 25%, in the hope that this will forestall labor demands for even bigger hikes. Allende has also ordered the formation of "supply and price committees" in local neighborhoods, plus union "welfare committees," farm cooperatives and retail-merchants' cooperatives. All these organizations are designed to help keep prices below inflationary levels. "If workers have to take in one notch of the belt" to make the new programs work, said Allende, "the rich will have to take in four."

Such advice can scarcely hearten Chile's workers, who already have sacrificed much for Allende's brand of socialism. Food prices have soared, and many commodities are in short supply. Beef is available in stores only on weekends. If the government has its way, only a dribble of the country's wine output will be available in Chile; the bulk will be sold abroad to provide badly needed foreign-currency reserves.

Poor Risk. Allende blames much of his country's problems on the U.S. He accused Washington of "deliberately restricting" Chile's lines of credit, which have dropped from $220 million in mid-1970 to $32 million in June. In fact, the credit was tightened by commercial banks, which regard Chile as a poor credit risk. Many of Chile's woes, however, are traceable to the government's freewheeling spending to provide across-the-board salary increases and promote "public works" schemes that have eaten up more than $300 million in currency reserves in the 21 months since Allende came to power. To keep pace with inflation the government has cranked out more and more escudos. As a result the official exchange rate has jumped from 12.5 to 42 escudos to the dollar while the black-market rate has risen from about 28 to 175.

Chile's economic stagnation has been caused mainly by overzealous nationalization. Thus far about 250 firms have been taken over; many were "intervened" (as Chilean official jargon puts it) in the wake of often phony labor disputes or charges that production is faltering. Hundreds of foreign technicians have left the country, contributing to a sharp drop in productivity. In the nationalized copper industry, Chile's largest source of income, production this year is projected only marginally higher than last, despite a plant-capacity increase of 40%.

As Chile's problems deepen, anti-Allende jokes increase. One has him expropriating the Sahara Desert. After a month, all the wells have gone dry; after two months, all the camels have died; after six months, Allende has begun to import sand.

Allende's political opponents are in no mood to compromise. Last week the opposition-dominated Senate voted to impeach Interior Minister Hernan del Canto, a staunch socialist who is first in line of succession to the presidency. A far heavier blow has been aimed directly at the heart of Chile's socialist movement. Aided by the rightist National Party, the Christian Democrats have voted to override Allende's veto of a constitutional-reform law that would strip the President of his power to nationalize by decree.

Given the power of the opposition, Allende could be in even deeper trouble next March, when national elections will be held for all members of the Chamber of Deputies and half the members of the Senate. When the last municipal elections were held, in April 1971, Allende's Popular Unity Coalition narrowly defeated opposition party candidates. But back then the government had money to spend and the Chilean people had full stomachs.

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