Op-ed Spotlight: Milton Friedman Saved Chile?

Bret Stephens thanks the Chicago Boys for softening a disaster

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The common explanations for Chile's resilience after an 8.8 earthquake focus on infrastructure, a lack of corruption, and luck. But Bret Stephens of The Wall Street Journal--bastion of free-market supporters--thinks some credit should go to Chicago economic theorists who helped liberalize Chile's economy decades ago.

Stephens argues the "Chicago Boys," a group of economists led by Milton Friedman, laid the groundwork for Chile's success by proposing financial reforms to dictator Augustin Pinochet in the 1970s. "Thanks largely to [Friedman], the country has endured a tragedy that elsewhere would have been an apocalypse," Stephens asserts, launching into a column that's one part history lesson and two parts free-market cheerleading.

The Hand of Chicago Boys in Chile

Even before the 1973 coup, several of Chile's "Chicago Boys" had drafted a set of policy proposals which amounted to an off-the-shelf recipe for economic liberalization: sharp reductions to government spending and the money supply; privatization of state-owned companies; the elimination of obstacles to free enterprise and foreign investment, and so on.

What Happens When You Install Free Markets

By 1990, the year [Pinochet] ceded power, per capita GDP had risen by 40% (in 2005 dollars) even as Peru and Argentina stagnated. Pinochet's democratic successors—all of them nominally left-of-center—only deepened the liberalization drive. Result: Chileans have become South America's richest people. They have the continent's lowest level of corruption, the lowest infant-mortality rate, and the lowest number of people living below the poverty line.

How the Free Market Led to Stronger Houses

The quality and consistency of enforcement is typically correlated to the wealth of nations. The poorer the country, the likelier people are to scrimp on rebar, or use poor quality concrete, or lie about compliance. In the Sichuan earthquake of 2008, thousands of children were buried under schools also built according to code.
This article is from the archive of our partner The Wire.