Chilean Neoliberalism: Born in Chicago and Buried in Santiago

“The Chile Project: The story of the Chicago Boys and the Downfall of Neoliberalism” is the title of a book just published in May this year. The author, Edwards Sebastian. has narrated the story of the genesis of neoliberalism in the academic world in Chicago, its imposition on Chile by the military dictatorship and its final burial in Santiago after the anti-neoliberal protests.  He has given an objective analysis of the experiment, the events, the cost and consequences.  

 

In November 1970, when Salvador Allende became the first Marxist politician to be freely elected as a head of state in any country, almost no one would have predicted that a few years later Chile would become the poster child for neoliberalism under a brutal dictator Pinochet. But after the restoration of democracy, the protestors assembled at Plaza de la Dignidad (Plaza of Dignity) in Santiago called for the end of the social injustice caused by the neoliberalism. The protests lead to the election of a leftist student union activist Gabriel Boric as president of Chile in Decemebr 2021. Boric declared, “If Chile was the cradle of neoliberalism, it will also be its grave.” So the circle has been completed. Allende should be smiling in his grave.

 

Chile used to be a relatively stable country politically and economically since its independence in 1810 for about 160 years. In November 1970, the Chileans created history in the world by electing Allende, a Marxist, as President in a proper democratic election. Allende had invited Fidel Castro, the icon of the Latin American Left, who spent a month in Chile in 1971. He had treasured an AK 47 gun gifted by Castro. Allende had certainly gone too far and asked for trouble by his blind idealism and provocation. He should have known that Chile was not ready for such an extreme leftist experiment at that time. The anti-communist America did not want this first democratic Marxist experiment to succeed in Latin America and set an example for others. So the Gringos set to work with their bagful of dirty tricks in collusion with the Chilean oligarchs who had much more to lose by Allende’s progressive programmes. They got the military to overthrew Allende by bombing the presidential palace. Allende used the AK 47 given by Castro to commit suicide. 

 

Pinochet brought in the Chicago Boys (students of the free market fundamentalism of Milton Friedman of the Chicago University) to build a fundamentalist capitalist state to protect, promote and perpetuate the interests of the oligarchy at the expense of the masses at large. At the heart of the Neoliberalism was the “subsidiarity principle” according to which the state should not be directly involved in the delivery of any services that could be provided efficiently and effectively by the market. 

 

CIA had financed the leading rightist daily newspaper El Mercurio whose owner was conspiring with the military and oligarchs. On September 15, 1970, barely ten days after the election of Salvador Allende, Agustín Edwards, the owner of El Mercurio met with President Richard Nixon, National Security Adviser Henry Kissinger and Central Intelligence Agency (CIA) director Richard Helms to discuss the future of Chile. These meetings were followed by significant amounts of money  transferred from the CIA to Edwards’s newspaper.

 

The Church provided the platform for the Chicago Boys with its Catholic University. So it was not just a military coup. It was a consortium of the Chilean Oligarchs, Catholic Church, Economists and media  on the one side and CIA, Chicago University and the State Department on the other side. It was a joint project planned and executed over a period of 35 years from 1955 to 1990. The Chilean business had colluded with the CIA to “make the Chilean economy scream”, after Allende came to power. The CIA had financed trade union strikes which paralysed the economy. It was an economic war before the airforce bombing.

 

Pinochet did not have to search or wait for Neoliberalists after coming to power. The US government had anticipated the need and had prepared and kept ready a group of neoliberal economists in the previous fifteen years. In 1955, during the peak of the Cold War, the US Department of State launched the “Chile Project”. The purpose was to train Chilean economists at the University of Chicago, the bastion of capitalist thought of Milton Friedman. Once they returned to Chile, the young graduates were put to work to tout the principles of free markets in the increasingly ferocious war of ideas that raged in Latin America at that time. Their adversaries in these intellectual battles were leftist economists who believed that the only way to defeat poverty and backwardness was by increasing the role of the state through nationalization, planning, and socialism. 

 

In June 1955, professors of the University of Chicago travelled to Chile and signed an agreement with the Pontificia Universidad Católica de Chile (Pontifical Catholic University of Chile, commonly known as Católica) in April 1956. Under this, Chilean students arrived in Chicago to study economics and after graduation went back to Chile to be the evangelicals of neoliberalism. 

 

In November 1970, when Allende took over as President, the Chicago Boys connected to the military and the business oligarchs and prepared a a blue print for turning the Chilean economy right. As planned, when Pinochet took over, he called the Chicago Boys, put them in positions of power and let them implement their neoliberalism. In March 1975. Milton Friedman travelled to Chile, met General Pinochet and spoke to industry groups and the military officers offering his vision of economic development. During the period of dictatorship of seventeen years, the Chicago Boys had a free hand to experiment on the Chilean economy. They privatized hundreds of state-owned enterprises, handed them over to the oligarchs close to the dictatorship, reduced the state’s role in education and healthcare and let the market have a free run.

 

When democracy was restored in 1990, the country looked very different from how it had looked in 1973, when President Allende was overthrown by the military. In less than two decades the Chicago Boys had created a modern capitalist economy with the highest per capita income in Latin America. Chile became a member of OECD and the country looked more like a southern European country, such as Portugal or Spain, than a Latin American nation. Chile was hailed as a ‘miracle’.

 

But ‘the miracle’ had an original sin: it was put in place by a bloody dictatorship, a regime that violated human rights and systematically and brutally persecuted, imprisoned, tortured, and assassinated its opponents. It was precisely for this reason that most observers were surprised when after the return to democracy in 1990 the model put together by the Chicago Boys was not scrapped by the country’s new leaders, many of whom had been persecuted by Pinochet. Instead of undoing the free-market policies, successive left-of-center governments tried to reform incrementally. For one thing, the civilians were still afraid of the barracks and the oligarchs. Secondly they learnt from the mistake of Allende and decided not to do anything too fast or revolutionary. 

 

But the masses were impatient and started protests against the high cost of education, transport and healthcare since 2011. They were also upset with the slow incremental loosening of neoliberalism by the leftist governments since 1990. The protests intensified and erupted violently in 2019. There were graffiti everywhere saying “ Neoliberalism was born and will die in Chile! No more Chicago Boys!”. The protests were not only about income inequality. It was also about social segregation, racism, and the way common people were treated by the elites. That’s why many of the protesters talked about “dignity” as a key goal. The protestors renamed the Plaza Baquedano, the main square in Santiago and the centre of protests as the Plaza de la Dignidad (Plaza of Dignity).

The right-wing president Sebastian Pinera agreed to the demand of the protestors to change the constitution. A new Constituent Assembly, elected in 2021 drafted a document which went overboard with idealistic aspirations and unrealistic goals with its anti-neoliberalistic draft constitution. . This was defeated in a referendum in September 2022.  There is a new council now doing the drafting. But this consists mostly of rightists, in an ironic twist.

 

In December 19, 2021. Gabriel Boric, a thirty-five-year-old former student activist and a member of the leftist coalition Apruebo Dignidad (Approval and Dignity), was elected as  president. Boric said, “If Chile was the cradle of neoliberalism, it will also be its grave.” Boric has pledged to reduce inequality by raising the minimum wage, reducing the cost of education and healthcare, expanding social safety net, fighting climate change and extending rights to native peoples.

    

Sebastian Edwards, the author of the book, is a Chilean economist himself. He had studied at the University of Chile, where he was a student activist affiliated with Salvador Allende’s Partido Socialista de Chile (Socialist Party of Chile). After the coup, the economics department was closedbecause, according to the military, it was a “nest of communist rats.” All students were suspended, some were expelled, and a handful just disappeared into the torture chambers of the dictatorship.  Edwards had emigrated to the United States and went to the University of Chicago where he had interacted with a number of Chicago Boys. He has personally interviewed a number of Chicago Boys for this book. 

 

Edwards clarifies that that Neoliberalism is used loosely as a catch all term for partisan perspective, either praising or criticizing. According to him it is not just black and white. There are variations and nuances. He defines neoliberalism as a set of beliefs and policy recommendations that emphasize the use of market mechanisms to solve most of society’s problems and needs. He has described how the neoliberalism had evolved in Chile sometimes as pragmatic and other times as inclusive. 

  

Edwards has made a point that a neoliberal economic revolution of the magnitude practised in Chile could not have been possible under a democratic regime. In 1982, Hayek, one of the fathers of neoliberalism, wrote a letter to Prime Minister Margaret Thatcher suggesting that the United Kingdom follow Chile’s path in implementing deep market-oriented reforms. The prime minister’s reply was polite but very clear in making a distinction between the United Kingdom and Chile: “I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable.”

 

After reading the book, I saw a documentary which has live interviews of some of the Chicago Boys. https://www.youtube.com/watch?v=hXMNyFrH8jQ.  Sergio da Costa, one of the main Chicago Boys who was the finance minister of Pinochet from 1976 to 82, says in an interview, “I do not know of anyone murdered or mistreated by the dictatorship”. He goes on to say “ it was alegria infinita” (immense joy) when he watched the bombing of the presidential palace during military coup. Costa has perhaps showed the true colour of the bloody neoliberalism in Chile.

It is interesting that both the imposition of Neoliberalism and its ending have been done by the Chilean students themselves. 

 

“Muerte Cruzada (mutually assured death) in President vs Congress battle in Ecuador

  
The Ecuadorian Congress, dominated by leftist parties tried to impeach the centre-right President Guillermo Lasso last month on corruption charges.  But the amount involved was insignificant and the alleged crime did not warrant impeachment. It was clearly a Congressional coup attempt to remove the president, democratically elected by millions of voters for a four year term from May 2021 to May 2025. The Congress wanted to get rid of him because they had the power to do so. It was an attempt to undermine the presidential mandate and abuse of power causing unnecessary political instability.

This was the second impeachment attempt of the Congress. They tried one earlier but could not manage the two third majority. But this time they got the numbers. Faced with this congressional threat, President Lasso resorted to "Muerte Cruzada" (mutual death) provision of the constitution and dissolved the Congress on 17 May, before they could pass the impeachment resolution. After this, he is obliged to leave the office at the end of six months and new elections are to be held within six months both for the presidency and the congress. The newly elected Congress and President will stay in office for the remaining period of the original mandate upto 2025 when the next regular elections are due. The elections are likely to be held on 20 August. 
 
The popularity ratings of President Lasso, a centre-right businessman is very low, given the ongoing crime wave, economic problems and protests of indigenous communities. He had held a referendum earlier to push through some reforms. But the referendum was defeated and his party lost seats in the local elections. Lasso has announced that he would not stand for reelection. 

 
In recent years, the Ecuadorian Congress had tasted blood by impeaching two presidents. It had impeached President Abadalla Bucaram in 1997 for “mental incapacity” within six months after his assumption of office in August 1996. He was a colourful and loud leftist. But he did not commit any serious crime warranting impeachment. In 2005, the Congress had impeached President Lucio Gutierrez for “abandoning his position”. He had stayed in power for just two years.
 
Since 1979, when democracy was restored after military dictatorship, five presidents of Ecuador had their terms cut short. In view of this history, President Rafael Correa had got the constitution amended in 2008 with the new provision of Muerte Cruzada to empower the presidency against a hostile congress. President Lasso was the first one to exercise this power. 
 
Some other Latin American countries have also witnessed unfair and unjustifiable impeachment of presidents by rogue congresses.
 
The Paraguayan Congress impeached the leftist President Fernando Lugo in 2012 on a trivial charge when a few protestors were killed by police during a protest. It was a hurried 24-hour express impeachment. The real reason for the removal of President Lugo was that the rightist oligarchic Colorado party which has been ruling Paraguay continuously for the last seven decades wanted to nip in the bud emerging Leftists seeking social justice with pro-poor policies. Lugo was the first and last leftist president in the last seventy years of one party dictatorship. 
 
Brazilian President Dilma was impeached unjustly because she refused to bail out Eduardo Cunha the president of the Lower House who was caught red-handed with several million dollars of illegal deposits in a Swiss bank account. She thought she had the moral right to let him face the law while the crooked Cunha had exercised his right to gang up his corrupt Congressional colleagues to pass the impeachment resolution. Rouseff was naïve and arrogant and refused to follow the established system of presidential deals with congressional leaders. Cunha was later convicted and jailed for corruption. 
 
Pedro Castillo, the Leftist President of Peru was removed from power in December 2022 by the rightist Congress when he had just completed 18 months of his four year term. The rightwing Congress was gunning for him from day one. Frustrated by the machinations of the Congress, he made an amateurish and feeble attempt to dissolve the Congress. But the Congress was faster and removed him from power before he could dissolve it. He has been imprisoned for his constitutional crime of attempt to dissolve the Congress. Poor Castillo was naïve and did not have the skills to deal with the corrupt and crooked law makers. He was played and trapped into a wrong decision and punished. He was a mere victim of the Congressional coup. 
 
Before Castillo, three other Peruvian presidents have been impeached: Billinghurst, Fujimori and Vizcarra. Of course, the authoritarian and abusive Fujimori was the most suitable candidate for impeachment The Congress had many other unsuccessful impeachment attempts against other presidents.. 
 
In the presidential system of the Latin American countries, Congress becomes the biggest challenge for presidents who do not have their own party with majority in Congress. With the fragmentation of political parties in the region, very few Presidents have their own parties in majority in the Congress. In such cases, the Congressional members start blackmail and extortion from day one. They threaten impeachment and refuse to pass bills unless they are given back room deals. So most presidents make deals with influential Congress members and let them indulge in corruption. In the notorious Petrobras corruption scandal, it was revealed that all the major political parties and leaders had got their share of the loot, besides the ruling Workers Party of Lula. In fact, President Lula had introduced during his first term “under-the table monthly payment” to Congressional members to get their agreement to pass legislation needed for the country. This was called as the Mensalao scandal. But when this became a public scandal, Lula managed to come out of it with more bribing of the Congress.
 
The Brazilian Congress should have impeached President Bolsonaro who had committed serious crimes by subverting democracy and causing thousands of deaths by not taking action during the Covid crisis. He mocked and imposed obstacles against vaccination. But the Congress loved him because he gave them a free pass for corruption.   
 
"Muerte Cruzada” could be a solution to other Latin American countries where presidents had become victims of the rogue congresses abusing their power for impeachment. It will deter the impeachment-trigger-happy Congresses from undermining democracy by unjust impeachment of duly elected presidents. It will bring back the balance between president and the congress, prevent political instability and strengthen democracy.
 

"Optic Nerve", an art novel by Argentine writer Maria Gainza

Argentine writer Maria Gainza in her novel “Optic Nerve” offers a kind of art lesson and appreciation for the readers. The protagonist is an art connoisseur, critic and guide. She frequents the art galleries and shares her feelings from seeing the paintings and art works of Argentine, European, Japanese and American artists. She weaves narratives connecting the beauty of the art with its power over emotions.
 

Gainza has filled the novel with real life stories of many artists and their adventures and eccentricities. She narrates the story of Argentine artist Candido Lopez who paints bloody scenes of the Triple Alliance War (Brazil, Argentina and Uruguay against Paraguay in the 1860s resulting in the killing of two thirds of the Paraguayan males) after he loses his right hand while fighting in the war himself. 
 
According to Gainza, “all of art rests in the gap between that which is aesthetically pleasing and that which truly captivates you”. Besides the artistic protagonist, Gainzo has created some fascinating characters who are colourful, funny and intriguing. 
 
Gainza explores the impact of art on life through her own experience and the way it is felt by other characters in the novel. Here are a few examples of the emotions evoked by some paintings:
 
How does it feel seeing a painting of Courbet? One is  being gripped by the urge to go running off down the streets, to incite the people, to have sex, or to eat an apple. The viewer is sent into a pictorial fever. Pictures which saturate the senses. When you stand before his painting “The Stormy Sea”, art disappears and something else rushes in: life, in all its tempestuousness. 
 
Alfred Dreux’s works pulses with atavistic symbolism: the struggle between good and evil, light and dark.
 
The works of Hubert Robert are like a premonition: a painter seeing what’s on the horizon and transferring it to the canvas in loose, open-ended brushstrokes.
 
Rothko’s works give “a sense of work that seeps into you bodily, not so much through your eyes as like a fire at stomach level. At points it even seems to me that Rothko creates not so much works of art as smouldering, endless blocks of fire; akin to the burning bush from Exodus. Something inexhaustible”. Gainza goes on to say, “often the most powerful aspect of any work of art is its silence, and that – as they say – style is a medium in itself, its own means of emphasis. Perhaps there is something spiritual in the experience of looking at a Rothko, but it’s the kind of spiritual that resists description: like seeing a glacier, or crossing a desert. Rarely do the inadequacies of language become so patently obvious. you might reach for something meaningful to say, only to end up talking nonsense. Standing before a Rothko, All you really want to say is ‘fuck me’.
 
Forget about standing before The Dream, one of Rousseau’s great works in MoMA which is capable of making the earth move. 
 
Piero della Francesca’s Madonna del Parto in Monterchi, Italy would apparently cause a German governess to emote. 

El Greco creates a struggle with oneself. As teenagers, we fall for him. As we become more informed and cynical, El Greco's unwavering dogmatism and his sensuality exasperates us. We have difficulty accepting their coexistence in a single image; the mutual exclusivity of flesh and spirit has been drummed into us by now.

Gainza has enriched the novel with interesting quotes of a number of writers, poets and artists. She quotes T.S. Elliot, " The more perfect the artist, the more completely separate in him will be the man who suffers and the mind that creates"
 
It is interesting to know that the translation of this novel from Spanish to English (by Thomas Bunstead) has been done with the support of the Argentine Ministry of Foreign Affairs.  
 
Gainza, like most Argentine novelists, goes deep in analysing the psychology of human beings intricately and intellectually. It is a typical characteristic of Argentine writers as well as the Argentine public in general. Every Argentine is a psychiatrist by nature and economist because of the periodic cycle of economic crisis. Argentines are the most well-read in Latin America. After reading, they sit in cafes for hours reflecting over what they have read and debating fiercely and loudly with others. Argentines have solutions to all the problems of the world, except to their own dear Argentina.

When the protagonist sees painting of a girl who looks like herself, she feels like throwing her arms around the picture. She then asks herself, " Isn't all artwork a mirror? Might a great painting not even reformulate the question 'what is it about to what I am about'? Isn't theory also in some sense always autobiography?
 
The heroine in the book goes to teach Spanish to a Japanese woman living in the twentieth floor of a building overlooking the Hippodrome (race course) in Avenida del Libertador in Palermo area of Buenos Aires city.. Hmm.. I stayed in the 40^th floor of the same building for four years and watched races through the front windows and polo matches from the windows on the right side. The wandering of the protagonist in the elegant parks and avenues of the city and her frequenting of the famous bars, cafes and restaurants made me feel nostalgic for Buenos Aires, the best city in Latin America.

Conservative Colorado party comes back to power in the elections in Paraguay

In the elections held on Sunday, Santiago Pena of the ruling Colorado party got elected as president of Paraguay with 43% votes. The opposition party candidates Efrain Alegre got 27% and Paraguay Cubas got 23%. 
 
The elections were peaceful and the results were accepted by the losers promptly unlike what happened in US or Brazil. 
 
Pena, relatively young at 44,  was finance minister from 2013 to 2018 when his mentor Horacio Cartes was President. He was a member of the board of the Central Bank of Paraguay. He was also in the board of a bank owned by Cartes who is the current chairman of the Colorado party. He had taught economics in a university in Paraguay and had worked in IMF. He went to Columbia University, New York for his post graduation.

 
Pena’s Colorado party has got majority in the senate with 23 out of 45 seats and in the lower house as well with 47 out of 80. The party has also won 15 of the 17 governorship of the provinces. This means that President Pena will rule comfortably for the next five years without any fear of impeachment by opposition parties in the Congress, as has happened in some Latin American countries including in Paraguay. President Fernando Lugo, the leftist president was impeached by the Congress dominated by Colorados in 2012 on a flimsy charge. He was the first and last outsider to be elected in 2008 as president of Paraguay which has been ruled by the Colorado party for the last seven decades. The Colorado party is a rightist conservative party of the oligarchs which has perpetuated inequality in the society. 
 
Paraguay, with a population of 6.7 million, is relatively a poor backward country. Its economy is stable with a vibrant agribusiness sector. It has surplus electricity from the Itaipu dam jointly owned with Brazil. It exports electricity to Brazil.
 
The victory of the ruling Colorado party stands out against the recent trend of anti-incumbency results in Latin America. The right-wing Colorado party’s win also goes against the regional trend of election of Leftists to presidencies of many countries in the region. 
 
The United States had publicly accused Cartes as corrupt and banned entry for him and his family into USA. The accusations include money laundering and links to Hezbolla terrorist organization. Although this had come in handy for the opposition campaign, it did not make any difference to the voters who are used to the corrupt political system of the country. 
 
Paraguay is the only South American country which continues to recognize Taiwan. The opposition candidate Alegre had promised to change recognition from Taiwan to China.  In early April, the outgoing president had inaugurated a Taiwan-financed road project for 24 million dollars. 
 
Paraguay is a member of the regional group Mercosur whose members include Brazil, Argentina and Uruguay. India has signed PTA (Preferential Trade Agreement) with Mercosur. 
Last year, India’s exports to Paraguay were 211 million dollars and imports 16 million. The trade will go up in the coming years with the recent opening of Indian embassy in Paraguay.