Monday, November 20, 2006

Milton Friedman and 'the miracle of Chile'

Margaret Thatcher summed up the feelings of many on the political right on hearing of the death of economist Milton Friedman - pictured left - last week:

'Milton Friedman revived the economics of liberty when it had been all but forgotten,' she argued. 'He was an intellectual freedom fighter.'

And perhaps the best case study of the kind of 'freedom' he fought for is Chile during the years of the savage Pinochet dictatorship, under which the state murdered at least 3,000 political opponents on the left.

Friedman visited the country in 1975, two years after the military coup in which the general took power, to give a series of lectures on economics. He even et the dictator personally.

Meanwhile, several professors from Chicago University, where Friedman taught and dominated the economics faculty, became advisers to the Chilean government. Many PhD graduates served in Chilean ministries, becoming known as 'the Chicago Boys'.

Chile provided laboratory conditions for Friedman's ideas to be put into practice, in one of the first and most dramatic experiments in what later became generalised worldwide as neoliberalism.

Pinochet abolished the minimum wage, took away trade union bargaining rights, privatised the pension system, abolished all taxes on wealth and profits, slashed the public sector and privatised 212 state companies and 66 banks.

Friedman was clearly impressed, coining the phrase 'the miracle of Chile' to describe what was happening.

The result? As detailed by the excellent Greg Palast here, after ten years of dicatorship, unemployment had risen from 4.3% to 22%. Real wages fell 40%.

'In 1970, 20% of Chile's population lived in poverty. By 1990, the year "president" Pinochet left office, the number of destitute had doubled to 40%. Quite a miracle,' Palast notes.

Britain under Thatcher adopted a watered down version of the same programme, which brought about a watered down version of the same results. It's called the economics of liberty, stupid.

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