Keynesian economics in Allende’s Chile

The reign of President Salvador Allende was a short one - only three years - but it was disastrous for the people of Chile. Allende was a committed Marxist and Socialist and he proceeded to nationalize and collectivize the nation causing untold hardships and shortages. He was ousted by the military, his office was surrounded, he gave a speech and then committed suicide.

I just ran into this interesting academic paper (PDF):

Designing Freedom, Regulating a Nation: Socialist Cybernetics in Allende’s Chile
Abstract. This article presents a history of ‘Project Cybersyn’, an early computer network developed in Chile during the socialist presidency of Salvador Allende (1970–1973) to regulate the growing social property area and manage the transition of Chile’s economy from capitalism to socialism. Under the guidance of British cybernetician Stafford Beer, often lauded as the ‘father of management cybernetics’, an interdisciplinary Chilean team designed cybernetic models of factories within the nationalized sector and created a network for the rapid transmission of economic data between the government and the factory floor. The article describes the construction of this unorthodox system, examines how its structure reflected the socialist ideology of the Allende government, and documents the contributions of this technology to the Allende administration.

In other words - bad models, stupid theories, political agenda, fail, fail and more fail.

The paper is chock full of gems like this:

At the heart of Beer’s work stood the ‘viable system model’, a five-tier structure based on the human nervous system, which Beer believed existed in all stable organizations – biological, mechanical and social. Allende, having trained previously as a pathologist, immediately grasped the biological inspiration behind Beer’s cybernetic model and knowingly nodded throughout the explanation. This reaction left quite an impression on the cybernetician. ‘I explained the whole damned plan and the whole viable system model in one single sitting - and I’ve never worked with anybody at the high level who understood a thing I was saying.

Emphasis mine - maybe that is because your model is a failure and nobody had the heart to tell you to your face. You were supposed to be a leader in the brand-new field of cybernetics and nobody felt comfortable telling you that your model was a joke.

A bit more:

After Allende’s inauguration in November 1970, the government used the first few months to implement policies grounded in structuralist economics and Keynesian ‘pump priming’, whereby economic growth would be achieved through increased purchasing power and higher employment rates in order to pull the Chilean economy out of the recession that the Allende administration had inherited. Land reform programmes and the inception of government-sponsored assistance to rural workers augmented the purchasing power of individuals in the impoverished agrarian sector, while workers in Chilean factories enjoyed a 30 per cent average increase in real wages during Allende’s first year in office.27 Initially, these initiatives to redistribute income succeeded in creating a growing segment of the population with money to spend, stimulating the economy, increasing demand, raising production and expanding the popular base of support for the UP coalition. In the government’s first year GDP grew by 7.7 per cent, production increased by 13.7 per cent and consumption levels rose by 11.6 per cent.28 These economic policies, however, would quickly return to haunt the UP government in the form of inflation and massive consumer shortages.

Emphasis mine - you pillaged the economy by spending cash willy-nilly and you are surprised to see a short-term gain followed one year later by shortages and inflation? You spent the nations money on bread and circuses that was supposed to be spent on infrastructure and schools and hospitals.

The final two paragraphs seal the fate of this new socialist sicence and go a long way to explain why our Universities are in such trouble these days:

Following the coup, the military made several attempts to understand the theoretical and technological aspects of the Cybersyn Project. When these efforts failed, they decided to dismantle the operations room.

Almost every Cybersyn participant who contributed to this study has claimed that the project changed his or her life. Most now hold high positions in either universities or tech-related industries, and have continued to use knowledge acquired from the project to this day. However, despite Cybersyn’s contribution to Chile’s technological history as well as to the political history of this well-studied period, until very recently it had all but vanished from wider Chilean memory. Like the many other casualties of the Pinochet dictatorship, Cybersyn disappeared.

Any military organization is nothing if not completely practical. Boots on the ground, observations and not theory, facts. Nothing in military is based on theory unless that theory has been backed up by years of practice and verification.

They could not understand it because there was nothing there to understand - it was a philosophical construct - a theory of operation presented by an academic mind to a political mind with neither minds having any real-world experience.

The participants were imbued with the aura of cutting edge science and were treated by outsiders as participants in a noble but failed experiment - we just need to study the theory more... Hence the reason why most Universities are detrimental to common society.

As for Cybersin disappearing - it had no commercial value and the market treated it as such.

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This page contains a single entry by DaveH published on August 16, 2015 1:15 PM.

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