“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.
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