Under a declared state of siege, Pinochet ruled the country with a mix of terror and radical free market ideology. Pinochet established a secret police, the National Intelligence Directorate(DINA), which used national information networks and concentration camps to implement its terror. The economy was put under the control of the “Chicago boys,” free market economists trained under Milton Friedman at the University of Chicago. They applied a “shock treatment” to the economy, which, after lowering wages and reducing the GNP, did lead to growth rates of about 8 percent between 1977 and 1980. The recovery was fueled by massive loans from abroad.
With foreign exchange reserves dwindling as copper prices fell, bankruptcies multiplied, and unemployment grew by 30 percent. By 1986 the GNP was close to 1970 levels, with consumption actually below that of 1970.
In the first National Day of Protest, the 22,000-member Copper Workers Confederation, led by Rodolfo Seguel, launched a strike. In the following months, clashes between police and protesters multiplied, with membership in the newly formed Democratic Workers Union(UDT) reaching over one-half million. These protests were supported by a growing Chilean exile community, led by writers such as Ariel Dorfman and Isabel Allende.
