The Chicago Boys Come Home

September 25, 2007

In their efforts to sell privatization and deregulation in the United States, conservatives have found inspiration in the free-market extremism of the Chilean military dictatorship. "If Texas were Chile," reads the conclusion of a 1992 book, If Texas Were Chile: A Primer on Bank Reform, "there would be no Federal Deposit Insurance Corporation, no Federal Savings and Loan Insurance Corporation, no Resolution Trust Corporation for bailing out its financial system. Chileans have already undertaken fundamental banking reform with their 1986 banking law; Texans still wait for Washington."

If Texas Were Chile arose out of a seminar conducted during the final year of the Chilean military dictatorship and funded by the U.S. Agency for International Development (U.S.AID). It brought together high-level economic-policy officials of the dictatorship and professors at Chile's Catholic University with U.S. academics and financial policy experts. The idea was to offer the free-market economic model elaborated under the Pinochet dictatorship as a model for the United States.

About 30 years earlier, a similar cast of characters introduced the free-market doctrine associated with the University of Chicago Economics Department to Chile. The U.S. International Cooperation Administration, the forerunner of U.S.AID, brokered a 1956 agreement between the University of Chicago and Chile's Catholic University which led to the training of Chilean economists at Chicago and the replication of the Chicago curriculum at the Catholic University. After the military coup of September 11, 1973, the Chilean Navy was placed in charge of economic policy, and set out to recruit a team of economic experts in the service of the dictatorship. So many of the prominent figures in this group had been trained at Chicago that they became known derisively as "los Chicago Boys."

The Chilean military dictatorship was determined to restore order after three years of profound social conflict. During its 17 years in power, its single-minded goal was to create an atomized, individualistic, apolitical society in which such conflict would be impossible. José Piñera, the Harvard-trained minister of labor and social security under the dictatorship, credits Chile's private pension system with promoting this end—making a worker's retirement income "depend on his own efforts, not on the government or on pressures brought by special interest groups," thereby "depoliticizing a huge sector of the economy" and lessening "political conflict and election-time demagoguery." The generals despised the discord of democratic and pluralist politics, and associations like labor unions and political parties which they blamed for social conflict. In place of these discordant voices the generals placed themselves as the embodiment of the national interest and of social stability. They spared no form of terror in their efforts to "depoliticize" Chilean society.

In the pursuit of this agenda the generals found people like Piñera—the architect of the dictatorship's labor code and privatized pension system—useful. Empowered to spin their thoughts into reality, the U.S.-trained free marketeers showed little concern for their employers' bloody methods. While Piñera and company spoke the language of freedom, they reduced the concept to nothing more than consumer choice. Allowing pensioners to choose among mutual funds was what gave Pinochet's former labor minister the temerity to boast of "empowering workers."

This perspective is not limited to Chilean technocrats. A description in the U.S. Senate of Chile's privatized pension system by Sen. Rod Grams (R-MN), for example, is imbued with the same language. Arguing for a privatized U.S. social security system, Grams talks about Chilean workers being "empowered." Under the Chilean system, says Grams, "workers can choose." Privatization, he says, has "brought personal freedom."

In Chile, a country with egalitarian traditions and strong mass organizations, the triumph of this vision of "personal freedom" required the methods of terror. If Texas were Chile, the implementation of this vision would obviously not require that the horrors of the National Stadium be replicated in the stadiums of Texas. But the free-market agenda takes back from Chile what the Chileans got from Chicago in the 1950s: an economic model in which the values of equality and mutual aid expressed through the social obligations of the state are trampled over by the "freedom" of some to enrich themselves at the expense of others.

Born in Chile and raised in the United States, Alejandro Reuss is a member of the Dollars and Sense editorial collective.

Tags: Chile, Augusto Pinochet, Chicago Boys, neoliberalism, economy

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