Modern Times: The World From the Twenties to the Nineties (144 page)

Singapore was notable for possessing no natural resources at all, other than its geographical position. Japan, Korea and Taiwan (but not Hong Kong) had some reasonably good agricultural land; otherwise none of these enterprise states began their ascent with any physical advantages, other than a potentially strong work-force. As one report put it: ‘The success is almost entirely due to good policies and the ability of the people, scarcely at all to favourable circumstances or a good start.’
⁸⁸
The way in which these rugged market economies flourished from the 1960s onwards encouraged better-endowed Pacific neighbours to switch to the free market for both agriculture and business. Thailand’s growth accelerated rapidly after it acquired a stable pro-market government in 1958, and achieved economic ‘takeoff in the 1960s with growth rates at one time of 9 per cent annually. It was one of the few Third World countries that managed to sustain its agricultural export position, by raising productivity by 15 per cent a year and expanding acreages.
⁸⁹
During the 1980s its
per capita
income had risen to $810 (1986), more than four times that of its once-richer but now long-socialist neighbour Burma, at $200 (1986). During the 1970s and 1980s Malaysia also did well, thanks partly to handsome natural resources but mainly to political stability and economic realism, pushing itself into the middle-income bracket with $1,850
per capita
(1986). Indonesia, one of the world’s best-endowed nations in natural resources, began to recover from a disastrous start under the Sukarno regime, and even the Philippines, bedevilled by Muslim-Catholic clashes, the pilfering of the monstrous Marcos regime and insurgency then and thereafter, made some progress, achieving a
per capita
income of $614 by 1986.

Hence during the quarter-century 1965–90, the Pacific, defying the tyranny of its vast distances, became the prime trade development area of the world, thanks to market economics. Former Pacific colonies like Fiji and New Caledonia leapt into the over-$l,000-a-year
per capita
income bracket. The tiny island of Nauru, rich in phosphates, was not only the world’s smallest republic, with a population of about 8,000, but became ‘acre for acre and body for body’ one of the world’s wealthiest nations, with average incomes of $9,091 (1985).
⁹⁰
There was a rebirth of the free-market spirit on
the eastern fringe of the Pacific. The most interesting case was Chile. In the mid-1960s, Christian Democrat Chile, under President Eduardo Frei, was regarded by the United States as the best hope, along with Romulo Betancourt’s Venezuela, for Kennedy’s Alliance for Progress. But Chile had chronic inflation: about 20 per cent a year in the late 1950s, 26.6 per cent in 1968, 32.5 per cent in 1970. Virtually the sole cause was government overspending and money-printing. In the 1970 elections, the reforming socialist Salvador Allende, at his fourth attempt, at last won the presidency because of a split in the anti-socialist vote, which nevertheless got 62 per cent combined against Allende’s 36.2. The new president had a mandate for nothing, and, on Thomas Jefferson’s principle that great innovations should not rest on narrow majorities, he should have concentrated on good housekeeping.

But Allende was a weak man with a divided, part-revolutionary following, which quickly slipped from his control. While he embarked on a programme of wholesale nationalization, which isolated Chile from the world trading community, the militants of his Left wing were not prepared to accept any of the restraints of constitutionalism. They launched ‘People’s Power’, consisting of Peasant Councils which seized farms in the countryside and Workers’ Assemblies which occupied factories.
⁹¹
The strategy was Leninist – ‘The task of the moment,’ said the Socialist Party, ‘is to destroy parliament’ – but the real parallel was with Spain in 1936, where the divisions on the Left and the drift to violence produced Civil War. Allende was caught in a nutcracker with his revolutionaries forming one arm and the other constituted by an increasingly outraged middle class, with the army, originally reluctant to intervene, gradually politicized by the collapse of order.

At the time Allende took over, in January 1971, inflation had actually fallen to about 23 per cent. Within months it was hyper-inflation. In 1972 it was 163 per cent. In the summer of 1973 it reached 190 per cent, by far the highest in the world.
⁹²
This was before the quadrupling of oil prices: the Allende inflation was entirely his own doing. In November 1971 Chile declared a unilateral moratorium on its foreign debts (i.e., went bankrupt). The banks cut off credit; capital fled; with the farms in chaos, producing little, the factories occupied, producing less, exports vanished, imports soared, then vanished too as the money ran out. The shops emptied. The middle class started to strike. The workers, finding their wages cut in real terms, struck too. The official price structure became irrational and then irrelevant as the black market took over. The Left began to smuggle in arms in July 1971 and began serious political violence in May the next year. They had in fact more
weapons (30,000) than the army, which numbered only 26,000 men plus 25,000 armed police.
⁹³
Allende oscillated between ordering the police to fight the Far Left and accusing the army of plotting a coup. But he also countenanced a plan to arm Leftist guerrillas and on 4 September 1973 permitted a demonstration by 750,000 on the anniversary of the elections. A week later his own appointment, General Augusto Pinochet, led a united
coup
by all three armed forces. Chile had hitherto had an exceptionally good record, by Latin American standards, for constitutionalism and stability. The coup was by no means bloodless. Allende was killed or committed suicide, and the official body-count at the Santiago morgue was 2,796.
⁹⁴
Most of the resistance came from non-Chilean political refugees, of whom there were 13,000 in Santiago at the time. The failure of the workers occupying factories, or the peasants on the seized farms, or even of the armed ‘revolutionary bands’ to fight seriously, suggests that the Far Left commanded little enthusiasm.

The opposition to Pinochet, though noisy, came chiefly from abroad, at least at the beginning of his rule. It was cleverly orchestrated from Moscow, though in fact Soviet Russia had flatly refused to bail Allende out with credits: he was more use to them dead than alive.
⁹⁵
Though foreign criticism concentrated on the repressive aspect of Pinochet’s military regime, the more important one was the decision to reverse the growth of the public sector, which Allende had merely accelerated, and open the economy to market forces, on the lines of the other Pacific economies. It was notable that virtually all the Pacific enterprise states, except Japan, had been accused at one time or another of running repressive regimes. But the degree to which the state was representative and elected was only one issue; equally important was the extent of national life it controlled. That was why, living as he did in a
laissez-faire
, minimalist state, Dr Samuel Johnson was able to declare with conviction: ‘I would not give half a guinea to live under one form of government rather than another. It is of no moment in the happiness of an individual.’
⁹⁶
Market economics by definition involved a withdrawal by the state from a huge area of decision-making, which was left to the individual. Economic and political liberty were inseparably linked. Freedom of the market inevitably led to erosion of political restraints: that was the lesson of Thailand, Taiwan and South Korea.

The lesson applied equally to Chile. The disaster of 1973 produced complete political and economic breakdown. The reconstruction of the economy had to begin against a background of world recession. The merit of the regime was that it was able to reverse a course of government-led inflation that had persisted for many
decades and become part of the structure of the Chilean economy.
⁹⁷
This was painful and unpopular and led initially to a falling
GNP
and high unemployment. But it allowed the economy to be refloated on a market basis with the help of
IMF
loans. During the later 1970s, with inflation at last under control, growth was resumed and by the beginning of 1980 the World Bank was able to report: ‘Under extra-ordinarily unfavourable circumstances, the Chilean authorities have engineered an economic turnaround without precedent in the history of Chile.’
⁹⁸
The economic improvement explained why, on 11 September 1980, a referendum showed 69.14 per cent of those Chileans who voted favouring an eight-year extension of Pinochet’s term. But as the 1980s progressed, economic freedom led to ever-increasing demands for political freedom. Pinochet was unwilling to grant it. In June 1983, there was nationwide rioting against the regime; two months later the government admitted that seventeen people had been killed in demonstrations. The victims of Pinochet’s political police, the Dina, were far more numerous. An official report, commissioned after democracy was restored, calculated that during the sixteen years of Pinochet’s rule, 1973–89, 1,068 people had been killed by the Dina or people working for them; a further 957 had ‘disappeared’.
⁹⁹
But fear of the Dina did not deter Chileans from following the logic of a free economy and pressing for a return to full voting rights. Pinochet agreed to hold another referendum on his presidency, and on 14 December 1989 the opposition candidate, Patricio Aylwin, won the presidential election with 52.4 per cent of the votes, bringing the dictatorship to an end, though Pinochet himself remained commander of the army. Aylwin not only commissioned the report into the regime’s excesses, he also set up a permanent foundation in March 1991 to investigate the fate of its victims case by case. But he was careful to continue, on the whole, the regime’s well-tried economic policies.

The success of the free enterprise economies of the Pacific undoubtedly helped to rekindle belief in the market system both in North America and in Europe. The 1970s, as we have seen, were a discouraging decade for capitalism. It became fashionable among the intelligentsia, including many economists, to speak of ‘zero growth’, of ‘late capitalism’ or even of ‘post-capitalism’, as though the system that had created, for the first time in history, what even its opponents dubbed the Affluent Society was now moribund. The most widely approved form of government in the West was the so-called ‘mixed society’, with the state sector absorbing between 40 and 60 per cent of the
GNP
, administering welfare services on a growing scale, and reserving the actual wealth-creating role to the private sector operating about half the economy. But the weaknesses
of this Euro-American formula were reflected in the low growth-rates, the phenomenon known as ‘stagflation’ which marked most of their economies as the decade progressed, and the evidence of widespread popular dissatisfaction reflected in a growing number of strikes. Towards the end of the decade, as high-quality, low-priced Japanese (and South Korean and Taiwanese) goods began increasingly to penetrate Western markets, there was a growing demand for changes which would bring about Japanese-style efficiency.

The watershed year was 1979, and the battlefield was Britain. After an unprecedented series of strikes, especially in the public sector, dubbed by the media ‘the winter of discontent’, Margaret Thatcher, the first woman to become leader of a British political party (in 1975), became Britain’s first woman Prime Minister on 4 May 1979, having led the Conservatives to a 43-seat electoral victory. Mrs Thatcher, soon dubbed by the Brezhnev regime ‘the Iron Lady’ (a title she relished), called herself a ‘conviction’ politician, as opposed to a consensus one. She implicitly repudiated much of Conservative post-war policy, and especially its tacit agreement with the Labour Party that whole areas of British public life, including the welfare state and the nationalized sector, were sacrosanct. Her first task was to curb the legal power of the trade unions which, as we have seen, had been growing steadily since 1945. A previous attempt at reform by the Conservative government in 1971, the comprehensive and ultra-complex Industrial Relations Act, had proved unworkable and had been promptly scrapped by the incoming Labour Cabinet in 1974. Mrs Thatcher’s government, having learned the lesson, set about the problem on a step-by-step basis, enacting in all five separate acts, over the space of three parliaments, which progressively ended a whole series of special union legal privileges, made many strikes and forms of picketing unlawful, and subjected unions that broke the law to severe financial penalties. Mrs Thatcher also made it clear that the police, in dealing with ‘mass’, ‘flying’ and ‘secondary’ pickets, which had made it virtually impossible in the 1970s for employers to resist strike demands and so inflicted grievous damage on both the private and public sector, would be fully backed by her government.

The new policy was soon put to the test. The trade unions had effectively destroyed the governments of Harold Wilson in 1968–70, Edward Heath in 1974 and James Callaghan in 1979. The National Union of Mineworkers, following aggressive tactics created by Arthur Scargill, leader of the Yorkshire miners, who became president of the
NUM
in 1981, had played a major role in these victories, which threatened to make syndicalism, rather than
parliamentary democracy, the ruling force in Britain, at least in a negative sense. The British coal industry had been taken into public ownership in 1946 precisely to create industrial peace in the mines. But the
NUM
had always treated the National Coal Board as if it were as grasping and antisocial as the worst private pit-owner, thus defeating the central object of nationalization. On 6 March 1984, the
NCB
, which was already losing over £100 million a year, announced the closure of twenty uneconomic pits. Scargill had twice failed to bring about a general miners’ strike, which under
NUM
rules required a 55 per cent majority in a national pit-head ballot. On this occasion, Scargill evaded the rule-book procedures. As his Vice-President Mick McGahey put it: ‘We shall not be constitutionalized out of a strike. Area by area will decide, and there will be a domino effect.’
¹⁰⁰
Hence the decision to strike was taken not by the union’s members but by the more militant delegates; and the strike having begun on 10 March, a special delegate conference on 20 April rejected demands for a national ballot by 69–54. The fact that the strike was called undemocratically and unconstitutionally was a strong point in the government’s favour in resisting it. Harold Macmillan had frequently observed: ‘There are three institutions in Britain so powerful that no government is wise to take them on: the Brigade of Guards, the Roman Catholic Church, and the National Union of Mineworkers.’ Margaret Thatcher was encouraged in defying this dictum by the attitude of the Nottinghamshire miners, who resented Scargill’s tactics, voted in a ballot four-to-one against a strike, kept their pits open, despite much intimidation, and eventually formed a separate union, thus splitting the
NUM
irretrievably; on 7 August 1985 they won a High Court action which, four months later, enabled the new Union of Democratic Miners to achieve legal status as a trade union.