In the same lecture, I mention that the CIA has recognized giving money and assistance to the Pinochet dictatorship in Chile.
“You mean, the CIA gave assistance to Allende,” a student corrects me.
“No, I mean Pinochet.”
“Are you sure?” the student insists. “This doesn’t make any sense.”
I offer quotes from the http://www.cia.gov to prove my point, including the following:
In the 1960s and the early 1970s, as part of the US Government policy to try to influence events in Chile, the CIA undertook specific covert action projects in Chile. . . The overwhelming objective—firmly rooted in the policy of the period—was to discredit Marxist-leaning political leaders, especially Dr. Salvador Allende, and to strengthen and encourage their civilian and military opponents to prevent them from assuming power.
“This is ridiculous,” the student says in an accusing voice. “Why would we support a military dictator’s plan to overthrow a democratically elected leader?”
“Well, don’t look at me!” I say.
Clarissa's Blog 
Mine are convinced that Allende privatized national assets and was therefore disliked by the rich.
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Oh God.
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USA is the best empire to support dictatorship. No surprise here.
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dictatorships
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And after I get tenure, I will be able to say this sentence in class freely and easily if that is what I want to do. 🙂 🙂
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😉 I don’t think anyone will stop you for this, even before your tenure. Unless you would be an economics professor at Chicago…
(For other readers, note that I changed my mind and I’m against the St. Louis project)
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I know, I’m just kidding. 🙂
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“USA is the best empire to support dictatorship. No surprise here.”
The U.S. is not an empire in the sense you’re making it to be, and remember that this was during the Cold War with the Soviet Union. Not saying it was morally right, but I mean the circumstances of the time were more then you make it sound.
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‘The U.S. is not an empire in the sense you’re making it to be,”
-Let’s not try to read each other’s thoughts.
“and remember that this was during the Cold War with the Soviet Union.”
– It’s like people don;t even read what I write. the Soviet Union disliked Allende and wanted him to fail.
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I was responding to David Gendron, not yourself in that post (if you think I was responding to you).
On the issue of Soviets and aid to Allende that you wrote (them not giving him aid), I did read that. One thing I wanted to ask you about though is I had read the opposite in that in 1998, General Nikolai Leonov, former sub-director of the KGB, gave a lecture in which he said that the Soviet Union did provide support to Allende: http://www.cepchile.cl/dms/lang_2/doc_1140.html
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“What happened to that boat, Mr. President?”
“It sank.”
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This was only for other readers. 😉
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I don’t think an economics professor at Chicago could say something like this, even with eir tenure.
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http://en.wikipedia.org/wiki/Chicago_Boys
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Regardless of Pinochet, it is because of the Chicago Boys that Chile is today one of Latin America’s most prosperous economies.
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“Regardless of Pinochet, it is because of the Chicago Boys that Chile is today one of Latin America’s most prosperous economies.”
– No, it’s not. It was a bubble that burst a long time ago.
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When did this happen? According to the CIA World Factbook on Chile’s economy:
“Chile has a market-oriented economy characterized by a high level of foreign trade and a reputation for strong financial institutions and sound policy that have given it the strongest sovereign bond rating in South America.”
Chile has suffered some from the current global economic downturn and also the earthquake and tsunamis they suffered.
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The Chilean bubble burst back in the 100s.
“Poverty rates remain much worse than before the neoliberals took over national economic policy. From 1970 to the early 1990s, the percentage of households living below the poverty and indigence lines skyrocketed. In 1970, before Pinochet took power, 17 percent of Chilean household incomes were below the poverty line; by 1990, the rate had doubled, with 35 percent of the households living in poverty; and in 1992 it was still 33.5 percent. After 10 straight years of economic growth, income distribution figures show little improvement. As his term came to an end in March 1994, President Aylwin became more openly critical of the neoliberal economic model over which he had presided. At a celebration of International Women’s Day, Aylwin remarked, “There is no point in [free-market-based development] if the majority of human beings see it only on TV.”
http://www.multinationalmonitor.org/hyper/issues/1994/08/mm0894_12.html
“If the myth of “The Chilean Miracle” is dying a slow death (among academics, at least), then Peter Winn’s edited volume Victims of the Chilean Miracle is akin to an anxious and skillful gravedigger. For three decades economists and political figures in and outside Chile have touted the neo-liberal economic reforms put in place by the Pinochet regime (1973-1990) and the so-called Chicago Boys—young Chilean economists trained at the University of Chicago under Milton Friedman and Arnold Harberger. Even Nobel Prize-winning economist Joseph Stiglitz, a strong critic of the “Chicago School,” neo-liberal economics in the developing world, and corporate-led globalization, identified Chile, in 2002, as what amounted to a neoliberal success story in a region replete with neo-liberal catastrophes.
Macro-economic statistics compiled during the Pinochet regime and during the subsequent democratic governments of Patricio Aylwin, Eduardo Frei and Ricardo Lagos are good enough to impress nearly everyone. However, Winn’s volume directs our attention away from such things as GDP (a gauge that does not adequately depict the social depth of economic wellbeing) and toward what happened to Chilean workers in a few key sectors of the country’s export economy during the period 1973 to 2002. In short, this collection of essays by Winn, Volker Frank, Joel Stillerman, Thomas Miller Klubock, Heidi Tinsman and Rachel Schurman not only questions whether workers benefited from the boom but also argues that the miracle came at a high social price.”
http://www1.tau.ac.il/eial/index.php?option=com_content&task=view&id=77&Itemid=113
The policies actually implemented by Chile during the recent decades of growth and finds that Chile, far from being a model of successful neo-liberal policies, is in fact a case study in the virtues of many non-neo-liberal policies.
• The resulting economic outcomes beyond the impressive per capita growth rates and finds steadily-high income inequality as essential services were privatized; export-led growth based on exploitation of a few natural resources – 90 percent being fisheries, copper, wood and other primary products – continued at an unsustainable rate; and the manufacturing sector continued to contract as a share of output.
The paper concludes that many of the neo-liberal policies that the Chilean government did adopt have caused economic harm or have not helped needy sectors of society and the environment, while much of Chile’s success in terms of per capita income and export growth can be attributed to the successful use of non-neo-liberal policies.
Chile’s economic inequality is among the worst in the world, even while targeted social policies aided those at the bottom.
Even considering the post-Pinochet period, income inequality in Chile remains startlingly high. Chile is one of the most unequal societies in the world, and has gotten more so since the 1960s, with the richest 10 percent of the population now accounting for nearly half the country’s income.12 Table 1 shows Chile’s relative inequality ranking among select countries. Of over 120 countries for which the United Nations reports this data, Chile ranks among the highest in terms of income inequality.
Click to access chilealternatives.pdf
“By far the hardest group affected by the Pinochet “reforms” was the working class, particularly the urban working class. By 1976, the third year of Junta rule, real wages had fallen to 35% below their 1970 level. It was only by 1981 that they has risen to 97.3% of the 1970 level, only to fall again to 86.7% by 1983. Unemployment, excluding those on state make-work programmes, was 14.8% in 1976, falling to 11.8% by 1980 (this is still double the average 1960’s level) only to rise to 20.3% by 1982. By 1986, per capita consumption was actually 11% lower than the 1970 level. Between 1980 and 1988, the real value of wages grew only 1.2 percent while the real value of the minimum wage declined by 28.5 percent. During this period, urban unemployment averaged 15.3 percent per year. In other words, after nearly 15 years of free market capitalism, real wages had still not exceeded their 1970 levels. Moreover, labour’s share in the national income fell from 52.3% to 30.7% between 1970 and 1989. In 1995, real wages were still 10% lower than in 1986 and 18% lower than during the Allende period!”
http://libcom.org/library/chile-anatomy-of-an-economic-miracle
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“Poverty rates remain much worse than before the neoliberals took over national economic policy. From 1970 to the early 1990s, the percentage of households living below the poverty and indigence lines skyrocketed. In 1970, before Pinochet took power, 17 percent of Chilean household incomes were below the poverty line; by 1990, the rate had doubled, with 35 percent of the households living in poverty; and in 1992 it was still 33.5 percent. After 10 straight years of economic growth, income distribution figures show little improvement.”
Two things:
1) Allende took power in November of 1970. So the Chilean economy in 1970, for the most part, was pre-Allende, and thus not yet wrecked by his socialist policies.
2) The poverty line is a statistical concept. It doesn’t display the actual levels of poverty. Same with income distribution. It doesn’t display the actual level of prosperity in society.
It is also interesting that the link ignores how bad things were under socialism but criticizes neoliberalism. And converting an economy from socialism into market capitalism can be very tricky in the early stages.
“If the myth of “The Chilean Miracle” is dying a slow death (among academics, at least), then Peter Winn’s edited volume Victims of the Chilean Miracle is akin to an anxious and skillful gravedigger. For three decades economists and political figures in and outside Chile have touted the neo-liberal economic reforms put in place by the Pinochet regime (1973-1990) and the so-called Chicago Boys—young Chilean economists trained at the University of Chicago under Milton Friedman and Arnold Harberger. Even Nobel Prize-winning economist Joseph Stiglitz, a strong critic of the “Chicago School,” neo-liberal economics in the developing world, and corporate-led globalization, identified Chile, in 2002, as what amounted to a neoliberal success story in a region replete with neo-liberal catastrophes.
Macro-economic statistics compiled during the Pinochet regime and during the subsequent democratic governments of Patricio Aylwin, Eduardo Frei and Ricardo Lagos are good enough to impress nearly everyone. However, Winn’s volume directs our attention away from such things as GDP (a gauge that does not adequately depict the social depth of economic wellbeing) and toward what happened to Chilean workers in a few key sectors of the country’s export economy during the period 1973 to 2002. In short, this collection of essays by Winn, Volker Frank, Joel Stillerman, Thomas Miller Klubock, Heidi Tinsman and Rachel Schurman not only questions whether workers benefited from the boom but also argues that the miracle came at a high social price.”
Things like worker abuse, speculative bubbles, etc…happen under both socialism and unregulated market capitalism. Calling for things like labor laws, regulations, safety nets, etc….to be created to adress these problems I think is fine. If you look at the United States during the Industrial Revolution, we see the same problems, workers getting horrendous treatment, being practically owned by big companies, and so forth.
If they mean to criticize neo-liberalism in that sense, okay, but I get the impression that many of these critiques are just critiquing market capitalism itself and ignoring what happened to Chile with socialism.
“The policies actually implemented by Chile during the recent decades of growth and finds that Chile, far from being a model of successful neo-liberal policies, is in fact a case study in the virtues of many non-neo-liberal policies.
• The resulting economic outcomes beyond the impressive per capita growth rates and finds steadily-high income inequality as essential services were privatized; export-led growth based on exploitation of a few natural resources – 90 percent being fisheries, copper, wood and other primary products – continued at an unsustainable rate; and the manufacturing sector continued to contract as a share of output.
The paper concludes that many of the neo-liberal policies that the Chilean government did adopt have caused economic harm or have not helped needy sectors of society and the environment, while much of Chile’s success in terms of per capita income and export growth can be attributed to the successful use of non-neo-liberal policies.
Chile’s economic inequality is among the worst in the world, even while targeted social policies aided those at the bottom.
Even considering the post-Pinochet period, income inequality in Chile remains startlingly high. Chile is one of the most unequal societies in the world, and has gotten more so since the 1960s, with the richest 10 percent of the population now accounting for nearly half the country’s income.12 Table 1 shows Chile’s relative inequality ranking among select countries. Of over 120 countries for which the United Nations reports this data, Chile ranks among the highest in terms of income inequality.”
IMO, they are over-simplifying and splitting hairs here. Income inequality is a statistic. The way they talk, they act as if there is some fixed, pre-existing supply of income that must be divided up among society, and that the richest are hogging most of it to themselves. But that’s not how a free economy works. Also, when discussing groups such as “the richest 10%,” usually that’s not a fixed class of people. It’s just a wealth bracket, another statistic, of which people move into and out of. Now one could make the argument that with Chile, said wealth bracket was more fixed due to the prevalance of oligopolies which formed in the Chilean economy, but that is why I said they are over-simplifying the issue.
They mention “essential services being privatized.” Which services? Because a lot of essential aspects of the economy had been nationalized by Allende and were just re-privatized. It’s not like Chile was a modern market economy with labor laws, regulations, etc…and then some free-market zealouts came in and privatized and deregulated everything and anything. The reality was different.
I do not get why they think that income is something that is supposed to be divided equally among society or something. Income is simply what one makes in exchange for what they trade in the economy. The so-called “income distribution” will thus always have a concentration among the highest-earners. What is a problem is if the lowest-earners are not seeing any increase in incomes or standard of living.
“By far the hardest group affected by the Pinochet “reforms” was the working class, particularly the urban working class. By 1976, the third year of Junta rule, real wages had fallen to 35% below their 1970 level. It was only by 1981 that they has risen to 97.3% of the 1970 level, only to fall again to 86.7% by 1983. Unemployment, excluding those on state make-work programmes, was 14.8% in 1976, falling to 11.8% by 1980 (this is still double the average 1960′s level) only to rise to 20.3% by 1982. By 1986, per capita consumption was actually 11% lower than the 1970 level. Between 1980 and 1988, the real value of wages grew only 1.2 percent while the real value of the minimum wage declined by 28.5 percent. During this period, urban unemployment averaged 15.3 percent per year. In other words, after nearly 15 years of free market capitalism, real wages had still not exceeded their 1970 levels. Moreover, labour’s share in the national income fell from 52.3% to 30.7% between 1970 and 1989. In 1995, real wages were still 10% lower than in 1986 and 18% lower than during the Allende period!”
They are grossly over-simplifying and twisting the statistics here. For one, Allende didn’t assume power until November of 1970. So they are comparing the Pinochet economy to the pre-Allende economy, which is unfair as Allende enacted a lot of socialist policies which began destroying the economy and which it had to be recovered from. Allende took the economy all the way up to 18.7% unemployment and 341% inflation (which was very hurtful to the working class). This was due to the labor unions constantly demanding higher wages and the nationalizations of the economy.
Then they cite 1976, three years into Pinochet’s rule. The thing they are ignoring is that the Chicago Boys had to enact a policy to fix the triple-digit inflation that the economy was undergoing at the time. This entailed triping interest rates, which had the side effect of tanking the economy into a severe recession. This same policy of hiking interest rates is what triggered the U.S. Great Depression in 1929 (it was a mistake to do it then) and the U.S. recession from 1981 – 1982 (when the Federal Reserve raised interest rates to kill the double-digit inflation).
Unemployment went up very high due to the depression, but in 1976, the economy began recovering. With nationalizations being un-done and business going back into private hands, foreign investment began flowing back in as a result (and also the laws restricting foreign investment were lifted), and tariffs on imports were lifted, which allowed for trade to occur.
However, due to the U.S. recession of 1981-1982 and the UK recession around the same period, demand for Chile’s exports dropped, and this combined with the already very high interest rates Chile as undergoing to kill the inflation, caused the Chilean economy to go into a worse recession then the one from 1975-1976. It then began recovering again in 1984. Had the American and UK recessions not occurred, the Chile economy likely would not have experienced the crash the way it did.
Comparing the unemployment rate in 1980 to the unemployment rate of the 1960s, pre-Allende socialism, I think is unfair, considering the extent of the damage done economically that had to be repaired. Same with comparing real wages in 1976 to those of 1970 and per capita consumption in 1986 to that of 1970.
Chile is just another example of a free economy that has had the same ups and downs and rough patches as any developing nation in its quest to develop a prosperous economy. One crash in 1982 as a result of outside factors doesn’t undo the benefits of market capitalism to Chile, no moreso than such crashes have undone the benefits of market capitalism in the history of the United States. And Chile in particular, considering the mess it had to recover from.
Despite its problems, Chile today is one of the most prosperous economies in Latin America, and that is because of the reforms from the Chicago Boys. It does not mean that the Chicago Boys were right about everything and pure neoliberalism is the answer. But Chile would be much worse if it had remained socialist via Allende. Such socialism in the UK is part of what caused the UK’s recession in the 1980s, as the country almost went over a cliff economically. Today the UK, since adopting neoliberal economic policies, is one of the stronger economies of Europe, but prior to that it had for years been known as the sick man of Europe.
I also wonder what the proposals would be of these academics critical of neoliberalism in Chile would have ben to fix the economy from the socialism. Unless one is a hardcore socialist, the basic things done to the Chilean economy would all be called “neoliberal,” i.e. liberalizing trade, privatizing (or in the case of Chile, re-privatizing) industries, using monetary policy to cure inflation, etc…what would have been the critics ideas to fix things?
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“Despite its problems, Chile today is one of the most prosperous economies in Latin America,”
– No, it isn’t. The economy in Chile sucks. Milton Friedman is so stupid that for the longest time I thought he wasa comedian. And then I discovered that there are people who take this diminutive clown seriously. That’s a scary thought.
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“No, it isn’t. The economy in Chile sucks.”
But it still is a lot better than other economies in the region. That doesn’t mean it doesn’t have its share of problems.
“Milton Friedman is so stupid that for the longest time I thought he wasa comedian. And then I discovered that there are people who take this diminutive clown seriously. That’s a scary thought.”
IMO, Milton Friedman was arguably the greatest research economist of the 20th century and who made seminal contributions to economics. He was one of the few people around who dared to point out the flaws of socialism, as socialism was the consensus of the time and many thought Friedman an extremist for questioning socialism. This does not mean he was correct on everything though.
Look at the Austrian school of economics. They are more free-market then Friedman was, but they understood that socialism doesn’t work. They were right in that sense, but they also believe in the gold standard, which does not work. And the Keynesian school. John Maynard Keynes was another brilliant economist and he made some great advancements to the field as well, but he was wrong in certain ways too.
Look at some of the famous Keynesian economists. John Kenneth Galbraith, he visited Mao’s China and praised it as a model of how to organize an economic system. And in 1984, he noted admiringly that, “for the first time in its history the Soviet leadership was able to pursue successfully a policy of guns and butter as well as growth…The Soviet citizen-worker, peasant, and professional—has become accustomed in the Brezhnev period to an uninterrupted upward trend in his well-being.”
That same year, Galbraith would also claim “that the Soviet system has made great material progress in recent years” and that “the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.”
Paul Samuelson, author of one of the most widely-read economics texts of the time and a Nobel Prize-winner in economics, wrote in 1985, “What counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth…The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.”
Now in hindsight we see how incredibly wrong both of these guys were. My point overall is that economists can make great points and advancements in economics in certain ways, but be totally wrong in certain other ways. Friedman I see as one of these.
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I am not interested by the great economical “miracle” of Chile. It’s possible to be economically solid without apologizing the oppression of people, but this was not the case with Pinochet.
Pinochet was a fucking fascist pig, and we should never forget that Chicago Boys and vulgar lie-bert-aryans like Friedtler have supported this fascist pig!
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“I am not interested by the great economical “miracle” of Chile. It’s possible to be economically solid without apologizing the oppression of people, but this was not the case with Pinochet.”
I agree with you here. I was just arguing about the merit of the economic policies themselves, not Pinochet’s oppression.
“Pinochet was a fucking fascist pig, and we should never forget that Chicago Boys and vulgar lie-bert-aryans like Friedtler have supported this fascist pig!”
I agree that he was an oppressive dictator. But Friedman never supported his oppressive policies, he just gave him advice on how to recover the Chilean economy. Friedman was also not a Libertarian as in the Libertarian party. He was a small-L libertarian who believed in universal human freedom.
One thing that is ironic about many of Pinochet’s critics (not accusing you of this, just saying in general) is that they had no problem with oppressive dictatorships that were socialist, but all-of-a-sudden they were hateful of an oppressive dictatorship because it was doing market capitalism. The same people who criticize Pinochet often were silent or even praising of people like Fidel Castro.
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A question for study would be: what is market capitalism and is that what Pinochet did? (Also: who benefits when, for example, Home Depot, Wal*Mart, etc., replace local business as in Chile and Mexico now? What do you mean specifically by “recover” the Chilean economy? What makes it good, or better than that of other Southern Cone countries? What indicators are used to qualify it as “good”? What indicators are disregarded?)
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I have a problem with all dictaroships and I have a problem when USA supports/creates many of them.
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