Beyond  /  Book Review

How Pinochet's Chile Became a Laboratory for Neoliberalism

The Chicago Boys and the tragedy of the Chilean coup.

Ultimately, The Chile Project wants to defend the legacy of Chilean neoliberalism and to stop it from being dismantled by a new generation. But the tragedy of 1973 matters to the world primarily because of what was lost. After the globalization of neoliberalism by myriad other means, the path taken by the Chicago Boys is less important than the dream they were invited to help kill.

Before Pinochet and the coup, there was the “Chile Project.” It began in 1955, as the US Department of State sought to train Chileans in the ways of Chicago-style economics. These privileged young students—people like Sergio de Castro, Rolf Lüders, and Miguel Kast—learned about the power of self-interested, rational markets and the folly of state economic planning, and they were trained to view the welfare state with deep suspicion.

After the victory of the Cuban Revolution in 1959, the Chile Project became an important part of Washington’s Cold War strategy in the hemisphere, even if most of its economists puttered along far from the spotlight. But then, with Allende deposed in 1973 and a new US-backed anti-communist dictatorship established, the neoliberal economists could finally get to work. In this sense, the Chicago Boys were in the right place at the right time: They were well-connected, relatively well prepared, and very willing to take on running the economy. They had not been trained with the stated intention of supporting a murderous dictatorship that would crush labor rights, as Edwards takes pains to establish. It just worked out that way.

In fact, when Milton Friedman—one of the principal architects of the so-called Chicago School of economics—traveled to Chile in 1975, it was still not clear whether Pinochet would fully embrace the Chicago School’s economic program. It was only after Friedman met personally with the dictator that Pinochet was persuaded to fight inflation with “shock treatment”—that is, steep budget cuts that would cause high unemployment but, Friedman promised, would also put the country on a more secure economic path. Soon after Pinochet announced a version of this plan, he tapped Sergio de Castro to take over at the Ministry of Economics. Thus began the most radical phase of neoliberal policy in Chile (or anywhere else in the world at that point). Pinochet forced through a new national constitution that made Allende-style socialism basically impossible and asserted that the state should not provide any services that the market might conceivably address. Chile aggressively privatized education and its social security program, and Pinochet’s 1980 Constitution made it illegal for public sector workers to strike.