Milton Friedman and Chile

By Megan McArdle

Oh, Lordy, the nuts with a shaky knowledge of history, but the talismanic word "Pinochet" have crawled out of the woodwork to assert that Milton Friedman did, too, cause a dictatorship!

There are several problems with this theory:

1) Milton Friedman spent all of an hour with Augusto Pinochet

2) This occurred years after the coup.

3) The "Chicago Boys" reforms didn't even start until 1975, although I believe they did hand the brick to Pinochet the day after the coup. The Chicago Boys were not behind the coup; rather, they helped Pinochet undo the Allende nationalizations after he had already taken power. Early Pinochet economic reforms were along standard right wing Latin American crony capitalism lines. In fact, many of the reforms that the Chicago Boys put in place, such as opening trade, acted against traditional entrenched business interests.

Chile's economic miracle was indisputably the product of a vile dictatorship that overrode normal political considerations to make sweeping reforms before inexplicably dissolving itself in 1980. But the policies that led to the economic miracle did not cause the dictatorship, which would have been just as horrible without the Chicago Boys; indeed, as far as I know the worst abuses occurred right after the coup, as the regime was consolidating power.

Perhaps even more bizarrely, a few people in the comments are citing China as an example of how capitalism undermined democracy. Apparently I missed the section in history class where we covered the vibrant democracy that existed in China prior to pro-market reforms. Because in the history I learned, the openness and transparency required to support the market reforms have enabled what little movement towards liberalization China has had.

This article available online at:

http://www.theatlantic.com/business/archive/2008/07/milton-friedman-and-chile/3841/