In this article I analyze Salvador Allende’s economic program and policies. I argue that the explosion of inflation during his administration (above 1,500% on a six-month annualized measure) was predictable, and I show that the government’s response to it was political. I postulate that runaway inflation generated major disaffection among the middle class and that that unhappiness paved the way to Pinochet’s coup d’état in 1973.

The 1970 election of Salvador Allende as president of Chile gained international attention, as a declared Marxist came to power through elections, offering an alternative to Castro's Cuba. In Argentina, governed by a right-wing dictatorship, the initial fear was transformed into a policy of rapprochement. In the midst of the Cold War, the historical Argentine–Brazilian rivalry was stronger than both military regimes' anti-communism. General Alejandro Lanusse decided to support Allende's Chile to balance Brazil's influence, but also as a way to control the domestic repercussions of Allende's victory, especially the rise of revolutionary slogans and the circulation of guerrillas. This article traces the network of national, international and transnational factors that influenced a surprising bilateral relationship.

Conflicts resulting from the dual legitimacy problem of presidential systems (where the president and the legislature are elected by different majorities) sometimes result in legislative gridlock – a point made by those who criticize the alleged perils of presidentialism. The socialist government of Salvador Allende (1970–73), that ended with the breakdown of democracy, is often used as a poster child for legislative gridlock. With information on the 23,798 bills and 12,809 laws enacted in Chile between 1932 and 1973, we compare the passage of legislation in eight presidential terms and demonstrate that not to be the case. Legislative output showed an upward trend after the 1943 constitutional reform but was on a downward trend since the mid-1960s, before the 1970 constitutional reform restricted the scope of bills that legislators could introduce. Under Allende, while 1653 bills were introduced (438 of which were presidential bills), 642 laws were passed (38.8% and 68.2%, respectively) – compared to 53.8% and 39.9% for all presidents in the period, respectively. The evidence does not justify the claim that there was legislative gridlock under Allende. Instead, variations in legislative output across presidential terms in Chile can be explained by changes in the rules of the legislative process.

With polling and municipal level data, we analyse the determinants of Salvador Allende's presidential election victory in 1970 and the change in political and electoral support for his government (1970–3). Support for Allende is explained by ideology more than by social class, socio-demographic variables or the economic performance of the country. Allende won in 1970 as an opposition candidate when the outgoing Frei administration enjoyed high approval and the country was experiencing favourable economic conditions. In 1973, when Allende had 49.7% approval, ideology remained the strongest determinant of presidential approval. Economic variables and social class are less important in explaining electoral support for Allende and for his Popular Unity coalition.

This article unveils the continuous and productive relationship that developed between Chile and the IMF during Salvador Allende's presidency (1970–73). This counter-intuitive relationship was made possible by the systematic depoliticisation and technocratisation of the ties between them. By downplaying ideological discrepancies and keeping a high degree of autonomy, the IMF and Chilean technocrats blurred rigid Cold War divides and circumvented the US-imposed embargo against Allende's regime. The examination of this relationship sheds new light on Allende's positioning in the international arena and provides a unique prism to reconsider dichotomist perceptions of the Cold War in Latin America.