An ‘Implacable Enemy’: Milton Friedman and the ‘Chilean Miracle’
On October 6th, 2019, the Chilean government raised the price of rush hour metro tickets by 30 Chilean pesos (about 0.04 USD) in its capital, Santiago. It was not the first time this year. University and high school students, dependent on the city’s public transportation, responded with civil disobedience; jumping over the turnstiles and vandalising their stations. Clashing with local police the conflict escalated; spilling out onto the streets, and into a series of mass demonstrations. On October 25th, over a million people rallied in Santiago’s streets. On Tuesday, November 12, the demonstrators were joined by a nationwide strike of one of Chile’s major labour unions, and Chile’s national football team has withdrawn from an exhibition match in solidarity. Effectively, the country has been brought to a standstill.
The reaction of Chilean authorities has garnered worldwide controversy. According to Al Jazeera, their conduct constitutes the worst violence the country has seen since the reign of dictator Augusto Pinochet. To date, at least 18 protestors have been killed, with several hundreds injured and thousands arrested. In a unique and traumatic aspect, over 100 people have sustained eye damage after being shot at close quarters with rubber bullets. Activists have since drawn on the symbolism of inflicted blindness; particularly as a major demonstration chant is ‘Chile Despertó,’ or ‘Chile has woken up.’
The anger and frustration fuelling the conflict stem from far deeper than public transportation prices. The issue instead represents simmering dissatisfaction with high prices, low wages and pensions, and inaccessible health care and education. The hiking of metro fares was the final straw in a tradition of social inequality that has persisted for decades. Another popular slogan of the movement is ‘it’s not 30 pesos; it’s 30 years.’
Chile has been long since considered a beacon of prosperity and success in an otherwise tumultuous Latin America. Indeed, it is one of the wealthiest countries in the region and one of only two OECD member states. However, it is also one of the most unequal. Despite a high GDP per capita, its levels of inequality grow far beyond what is expected of a ‘rich’ country. According to a Chilean source, the nation experiences European costs of living with Latin American wages and services – a surefire recipe for desperation. Chile’s economic inequality is linked to its oft-touted economic system: an almost radical form of neo-liberalism characterised by mass economic liberalisation and privatisation of public services. Believed to have ‘saved’ the country from the failed Socialism of the preceding regime, its genesis in the 1970s came to be called ‘the Chilean Miracle.’
This system undoubtedly brought great wealth. However, it has failed to reach most Chilean citizens. Moreover, those very policies were the ones put in place by the violent Pinochet dictatorship, and which have experienced little alteration since then. The dictatorship fell in 1990, but its reforms remained, and for that reason the country suffers now.
This is well-known within political and economic spheres. However, less known are the ‘Chilean Miracle’s origins – and the role of American elites in the system vehemently protested today.
In 1955, a partnership was established between the University of Chicago and the Pontificia Universidad Católica de Chile. Sponsored by the United States Agency for International Development (USAID) and later the Ford Foundation, economics Masters and PHD students from Universidad Católica were invited to the University of Chicago on exchange. At the time, the latter school was well known for the focus on its economics department on free-market values and monetarism: the belief that governments should restrict their involvement in regulating their markets. There, they were exposed to the ideas of figures like Arnold Harberger and, most notably, celebrated economist and political advisor Milton Friedman. Upon returning to Chile, the careers they established in economics introduced monetarist and free market thought within a predominantly leftist Chilean status quo. When Pinochet seized power, the ‘Chicago Boys’ assumed posts as economic advisors to the new regime. Their ideas, acquired through deliberate sponsorship by US thinkers and institutions, were largely responsible for the dictatorship’s sweeping neoliberal reforms. One Chicago Boy, Sergio de Castro, became Pinochet’s Minister of Finance, and his office was largely credited with an influx of foreign investment, restrictions on labour rights, and a raised GDP.
The ‘Chilean Miracle’ has been associated with Friedman in particular. It was, in many ways, Friedmanite thought in its purest form: minimal government intervention, low or nonexistent taxation, and an openness to foreign investment. After Chile, Friedman went on to hold positions as advisor to US President Ronald Reagan and UK Prime Minister Margaret Thatcher; further entrenching his ideas in their respective economic platforms. In 1976, three years after the Chilean dictatorship was founded, he was awarded the Nobel Prize for Economic Sciences.
Despite widespread success, Friedman’s legacy was marred by his association with the Pinochet regime. These sentiments are intensified by the fact that no one seems to know exactly how it all went down. The affair is shady, and the weight of ideological bias hangs over virtually all who dare discuss it. However, several things seem to be true: that Friedman’s ideas formed at least part of the material of the ‘Chicago School’ curriculum, that he consented to a series of lectures in Chile, and on at least one occasion provided in-person economic advice to Augusto Pinochet. Beyond that, the exact nature and scope of his impact is obscure. As a result, speculation ranges from portrayals of Friedman as a well-meaning humanitarian to smears as an aider and abettor of a murderous despot.
Committed Friedmanites make two camps: those who contest Friedman’s very involvement with the ‘Chilean Miracle,’ and those who acknowledge his contribution but see it as positive. The former points out that Friedman only met Pinochet once, had limited contact with the Chicago Boys, and that the reforms did not start until two years after the coup. The latter stresses the need to separate economics from politics in the Pinochet regime; claiming that his human rights abuses occupy a separate sphere from his quest for economic freedom. On the opposite end of the debate, hardline anti-fans allege that Friedman helped ‘create’ the Pinochet regime as a puppet for US dominion.
The middle ground is most credible. Celebrated American elites like Friedman saw the situation in Chile as an opportunity; one that would enable them to test their economic hypotheses while remaining removed from political spillover. Despite preaching free and democratic society in his book Capitalism and Freedom, he was happy to see his reforms implemented in a nation whose citizens did not choose them, and whose dictator relentlessly pursued economic freedom while eschewing all other forms. Quoted in Newsweek, Friedman argued: “In spite of my profound disagreement with the authoritarian system of Chile, I do not consider it as evil for an economist to render technical economic advice to the Chilean government, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean Government to help end a medical plague.’ This position, meant to mitigate his actions, actually reinforces them. Though with no direct hand in the regime itself, he viewed his own ideas as salvation and was eager to see them instated by a country not his own. Friedman was hardly a pundit of a right wing conspiracy of mass executions, but he may have forgone ethical principles in exchange for a chance to see his ideas put into practice.
This week, Chile’s disgraced government agreed to a referendum on the possibility of a new, citizen-driven Constitution; scrapping Pinochet’s 1980 model at last. This move came grudgingly, with President Sebastián Piñera previously having lamented his position as a ‘war against a powerful and implacable enemy, that has no respect for anything or anyone.’ Chile’s protestors may have attained some legitimacy, but there is still a long way to go. Chile’s disgraced government has made every effort to frame the conflict as an abstract one; a fruitless fight against an ideology. But the roots of the nation’s desperation lie in the very real impacts of a very real group of American elites, who went on to live lives untouched by the impacts of their very own ideas. Hero, villain, or simple opportunist, the far-reaching hand of American economic interests should not be underestimated. Decades later as the conflict reaches its breaking point, there remains a price to be paid for economic freedom.
Cover Image Source: https://upload.wikimedia.org/wikipedia/commons/7/7a/Marcha_Mas_Grande_De_Chile_2019_Plaza_Baquedano_Drone.jpg
