"The Chicago Boys in Chile: Economic Freedom's Awful Toll"

Orlando Letelier
August 28, 1976

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The Economic Prescription and Chile's Reality

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These are the basic principles of the economic model offered by Friedman and his followers and adopted by the Chilean junta: that the only possible framework for economic development is one within which the private sector can freely operate; that private enterprise is the most efficient form of economic organization and that, therefore, the private sector should be the predominant factor in the economy. Prices should fluctuate freely in accordance with the laws of competition. Inflation, the worst enemy of economic progress, is the direct result of monetary expansion and can be eliminated only by a drastic reduction of government spending.

Except in present-day Chile, no government in the world gives private enterprise an absolutely free hand. That is so because every economist (except Friedman and his followers) has known for decades that, in the real life of capitalism, there is no such thing as the perfect competition described by classical liberal economists. In March 1975, in Santiago, a newsman dared suggest to Friedman that even in more advanced capitalist countries, as for example the United States, the government applies various types of controls on the economy. Mr. Friedman answered: I have always been against it, I don't approve of them. I believe we should not apply them. I am against economic intervention by the government, in my own country, as well as in Chile or anywhere else (Que Pasa, Chilean weekly, April 3, 1975).

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A Rationale tor Power

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Until September 11, 1973, the date of the coup, Chilean society had been characterized by the increasing participation of the working class and its political parties in economic and social decision making. Since about 1900, employing the mechanisms of representative democracy, workers had steadily gained new economic, social and political power. The election of Salvador Allende as President of Chile was the culmination of this process. For the first time in history a society attempted to build socialism by peaceful means. During Allende's time in office, there was a marked improvement in the conditions of employment, health, housing, land tenure and education of the masses. And as this occurred, the privileged domestic groups and the dominant foreign interests perceived themselves to be seriously threatened.

Despite strong financial and political pressure from abroad and efforts to manipulate the attitudes of the middle class by propaganda, popular support for the Allende government increased significantly between 1970 and 1973. In March 1973, only five months before the military coup, there were Congressional elections in Chile. The political parties of the Popular Unity increased their share of the votes by more than 7 percentage points over their totals in the Presidential election of 1970. This was the first time in Chilean history that the political parties supporting the administration in power gained votes during a midterm election. The trend convinced the national bourgeoisie and its foreign supporters that they would be unable to recoup their privileges through the democratic process. That is why they resolved to destroy the democratic system and the institutions of the state, and, through an alliance with the military, to seize power by force.

In such a context, concentration of wealth is no accident, but a rule; it is not the marginal outcome of a difficult situation -- as they would like the world to believe -- but the base for a social project; it is not an economic liability but a temporary political success. Their real failure is not their apparent inability to redistribute wealth or to generate a more even path of development (these are not their priorities) but their inability to convince the majority of Chileans that their policies are reasonable and necessary. In short, they have failed to destroy the consciousness of the Chilean people. The economic plan has had to be enforced, and in the Chilean context that could be done only by the killing of thousands, the establishment of concentration camps all over the country, the jailing of more than 100,000 persons in three years, the closing of trade unions and neighbourhood organizations, and the prohibition of all political activities and all forms of free expression.

While the Chicago boys have provided an appearance of technical respectability to the laissez-faire dreams and political greed of the old landowning oligarchy and upper bourgeoisie of monopolists and financial speculators, the military has applied the brutal force required to achieve those goals. Repression for the majorities and economic freedom for small privileged groups are in Chile two sides of the same coin.

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