TO CONTINUED criticism of its harsh state of siege, Chile's government responds by pointing to the spread of terrorism in the country in recent months. In fact, terrorism was rampant. In the 10 months before Gen. Augusto Pinochet cracked down on Nov. 6, more than 400 bombings were reported and about 20 policemen were killed in explosions or shootings. But those grim numbers, far from proving the need for a stern hand, only set the stage for a serious inquiry. What has the state of siege, allowing mass arrests and a suppression of independent political, union and press activity, actually done to make the situation better?

Little or nothing, despite official claims to the contrary, Post correspondent Jackson Diehl reports from Santiago. Bombings occurred on seven of the first nine nights under the state of siege, and climbed into the 40 range in two weeks. Of the hundreds of Chileans arrested and either detained or sent into internal exile, none -- at least until yesterday's massive police sweeps -- has been charged as a terrorist. The independent organizations, meanwhile, are convinced that Gen. Pinochet exploited the threat of terrorism to default on his pledges of liberalization. The opportunities for recruiting terrorists can only have been improved. Foreign governments have recoiled. Washington, which had adopted a policy of sympathetic nudging, now questions whether leftist-inspired terrorism "is of such dimensions as to justify the extreme measures."

Leftist-inspired terrorism in Chile is real and is being perpetrated to this day, surely, by people whose interest was never to return to democracy but to provoke Gen. Pinochet into calling off his inadequate steps in that direction. If that were the only sort of terrorism in Chile, he might enjoy considerably more domestic and foreign support in his attempt to suppress it. There is also some identifiable right-wing terrorism, which could hardly go on without official connivance. Over a period of years, moreover, much of Gen. Pinochet's rule has deserved to be called state-sponsored terrorism: murders, disappearances, torture. The general's complaints about "subversives" have to be weighed against all that.

What is the right and effective way now for Chile -- with its history -- to fight terrorism? Gen. Pinochet's way does not seem to be diminishing terrorism and is bringing severe political and diplomatic costs. Would not the Chilean government do better to act in a way 1) to isolate the violent 1,000 on the left as the only practitioners of terrorism in Chile and 2) to earn the good faith of the great democratic majority of the country by allowing an open political system to be restored?