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Chile and Milton Friedman

Reason magazine’s Brian Doherty (he of Burning Man fame) has written a nice piece looking at the controversial role the late Milton Friedman played in advising economic reforms to the government of the late, and not-very-lamented, Augusto Pinochet of Chile.

The New York Times columnist Anthony Lewis declared in 1975 that “The Chilean junta’s economic policy is based on the ideas of Milton Friedman…and his Chicago School…if the pure Chicago economic theory can be carried out in Chile only at the price of repression, should its authors feel some responsibility?” Such attitudes haunted Friedman to his death and beyond.

The reaction of some of the usual conservative suspects to Pinochet’s death didn’t help debunk this unfortunate association. Since he was a pro-American autocrat, who ultimately honoured a plebiscite and stepped down, portions of the American right have always had an unhealthy affection for the general. National Review ran both a symposium and a stand alone piece by former editor John O’Sullivan marking Pinochet’s passing, neither of which were much outraged about his crimes. O’Sullivan explicitly said , in the sort of bizarre moral prisoner exchange that partisan squabbling generates, that sure, Pinochet should suffer for his villainy – but only if Castro and Allende’s associates do as well.

I agree with pretty much every word of Doherty’s analysis, and his punchline is good:

Undoubtedly, Friedman’s decision to interact with officials of repressive governments creates uncomfortable tensions for his libertarian admirers; I could, and often do, wish he hadn’t done it. But given what it probably meant for economic wealth and liberty in the long term for the people of Chile, that’s a selfish reaction. Pinochet’s economic policies do not ameliorate his crimes, despite what his right-wing admirers say. But Friedman, as an economic advisor to all who’d listen, neither committed his crimes, nor admired the criminal.

Those leftists who nitpick at the late economist for his role in advising the Chilean regime have only the tiniest of legitimate reasons for bashing Friedman, I think. Considering that he was a man who made the case for abolishing the draft, decriminalising drugs, promoting school choice and so forth, his credentials as a pro-liberty guy were pretty much impeccable.

27 comments to Chile and Milton Friedman

  • CFM

    Those leftists who nitpick at the late economist for his role in advising the Chilean regime have only the tiniest of legitimate reasons for bashing Friedman, I think.”

    Not even the tiniest. Ideas of liberty predated Pinochet, and are still around after his demise.

    Are highways and those who use them complicit in the Holocaust because Hitler supported development of the autobahn?

    Correlation does not equal causation.

  • Funny, but Friedman was invited to, and spoke in, some repressive leftist hellholes, and I don’t see the leftists pitching a fit about that.

    - Josh

  • Johnathan Pearce

    Josh, good point. Which places was he invited to? Did he not go to China at some point?

  • Jacob

    “late, and not-very-lamented…”

    By you.

    He is quite lamented by a very big chunk of the Chilean popuplation. They remember the catastrophe they lived through under Allende, and their current wellbeing.
    But, of course, you are free to lament whom you like…

    As to Friedman’s policies and recommendations: no country in the world ever implemented such a big part of Friedman’s policies (or rather free market policies, of which Friedman is the most popular disseminator, but not the only author).
    When you implement some theory in practice all kind of problems arise, and it never looks exactly as anticipated. But Chile’s “Chicago boys” (not Friedman himself) did an impressive job.
    It dindn’t have to happen under a harsh dictatorship, but it did. And Pinochet implemented it, not Frei (former president) or Aylwin (next one)…

    What upsets the Left, more than the human rights abuses (of which they are quite tolerant in leftist dictatorships) is precisely – the implementation of free market policies like privatizations… free trade… privatization of the Social Security… etc.
    That is poison to the lefties, that’s a red rag. And what they hate even more is the success of these policies… others might emulate the Chilean solutions….

  • Johnathan Pearce

    He is quite lamented by a very big chunk of the Chilean popuplation. They remember the catastrophe they lived through under Allende, and their current wellbeing.

    I presume the “chunk” of the Chilean population who had their relatives tortured or killed may take a different view, but hey, you cannot make an omlette without breaking eggs, eh? You continue to adopt a utilitarian argument that says that because the consequences of Pinochet’s rule were in some respects benign, that makes his methods in acquiring power defensible. That argument gets kind of weak if you look at those changes that have occured without need to brutalise people.

    It dindn’t have to happen under a harsh dictatorship, but it did.

    So you concede that the dictatorship was harsh.

    Oh and Jacob, I will be just as tough on Castro when he goes.

  • I don’t hold Friedman responsible for Pincohet — there are far more obvious & guilty enablers available and I do respect your admission that Friedman does have some responsibility for legitimizing Pinochet . (I assume that’s what you mean by “…tiniest of legitimate reasons..”

    But I wonder how you would view Friedman had he advised Castro. Same result?

  • Kit

    Jacob, also, leftists were more likely to be persecuted in Pinochet’s Chile than Castro’s Cuba, as long as they weren’t in a trades union (both dictators anti independent union). Castro also replaced a right wing dictatorship, versus an elected Marxist one, and it’s not good PR for you ideas to bear fruit under an authoritarian regime. I’d say some of the usual self interest is at work. I’m unconvinced that mustache twirling total market haters are the majority of leftism.

    The venerable Tyler Cowen has a review of Pinochet-era economic policies. (Link)

    Anti-Allende, thumbs up for free trade (of course) copper nationalisation (the government needed money and this was the least distortionary source), enterprise privatisation, international credibility and a larger welfare state. Thumbs down for pension “privatisation” (perhaps a good idea at the time, but created long term problems) and (shock horror) monetary policy, school vouchers made no difference.

    He supplies a graph that compares South Korea, Chile, OECD average and Latin American average. (Link) South Korea flattens everyone. That country has had a complex mix of a small state and economic planning.

  • Johnathan Pearce

    But I wonder how you would view Friedman had he advised Castro. Same result?

    Same result, although it is so obviously not plausible that that example does not really fly.

  • Jacob

    “I presume the “chunk” of the Chilean population who had their relatives tortured or killed may take a different view…”

    Of course. There is also a chunk of Chilean population that hates him. Hates him intensly. But while those thst suffered personally are relatively (relatively!) not so numerous, those that benefitted are practically everybody. (But Pinochet haters will not concede that they benefitted or that Pinochet is to be creditted with the improved economy).

    My point is that your “not_so_lamented” utterance does not sum up correctly the man. He did bad things and good things. He brought a lot of progress to Chile and saved it from marxism. Justice requires that this be mentioned along with the other facet.

  • Jacob

    As to Tyler Cowen’s economic summary:

    It’s mostly correct, but not entirely.

    The 1982 crisis (I was in Chile at that time): it wasn’t a catastrophic as depicted. There was a recession worldwide, with oil prices rising, and copper dropping more than 50% in world markets. It was a global event, not a Chilean one. Chile suffered maybe more than others, in part because of the mistake of sticking with the pegging of the currency to the dollar for too long.

    The main mistake of Tyler concerns the most important feature of the Chilean free market reforms: social security privatization. It was revolutionary, and was a big (as in BIG) success. Tyler says the private system was installed on top of the public one. Wrong. It was not on top, but on the side. People got the option to choose to remain in the old state system, or to join the new, private one. That is a cardinal point: people got to choose ! And they did choose – about 75% or 80% (number quoted from memory) joined the private system.
    The old state system was at that time totally worthless, inflation of 1000% having rendered it meaningless. (Note that the US social security system is broke too….).

    I recommend that you all study the details of Chile’s social security system, it is fascinating, though purist libertarians will always find faults, as it isn’t 100% libertarian. Go to CATO institute’s site, Jose Pinera, the main author of the Chilean system is now a CATO fellow, and there are lots of articles there.

  • Brian

    Friedman advises Pinochet on Chilean economy. Result: repressive regime and functioning economy.

    Friedman does not advise Pinochet on Chilean economy. Result: repressive regime and fucked-up economy.

    Only in the minds of the totally insane (i.e. socialists of all sorts) is the second option preferable.

  • Gabriel

    If you were to be magically transported to Pinochet’s Chile you would find youself a great deal freer than you are today. You would pay less tax, have less regulation to face when setting up a business, be allowed to smoke in a pub etc. and so on Now, it goes without saying that if you subsequently developed a prediliction for revolutionary socialism you’d find yourself much less free and in some fairly acute physical discomfort.
    Nevertheless, it remains a fact that the average Chilean was freer than the average Briton today (or then). Free Speech is an important freedom, especially for intellectuals, but I can’t see why it should be regarded by reasonable people as of any more worth than the right to choose one’s occupation, engage in voluntary contracts, dispose of one’s property etc. (Of course, the ‘right’ to vote isn’t a freedom in any meaningful sense of the word.)

  • Kim du Toit

    We covered a lot of the Chile stuff in the earlier post.

    As for Friedman’s championing of drugs legalization, all I can say is this proves that even the most brilliant men can sometimes get things wrong.

  • Jacob

    Gabriel: correct !

    “if you subsequently developed a predilection for revolutionary socialism you’d find yourself much less free and in some fairly acute physical discomfort.”

    “predilection” alone didn’t put you in jeopardy. You needed to actually get involved in subversive schemes, that is – form, or assist, cells of armed terrorists.

  • Johnathan Pearce

    Free Speech is an important freedom, especially for intellectuals, but I can’t see why it should be regarded by reasonable people as of any more worth than the right to choose one’s occupation, engage in voluntary contracts, dispose of one’s property etc.

    Freedom is indivisable. If you start ranking certain freedoms as being more or less important than any others, then I think one has a problem.

    Sorry, but I cannot be bothered to rehearse the points made on the other main thread about Chile, but I find it really odd that the worthy commenters here are using what amounts to a post-facto justification for a pretty nasty regime, based on the wisdom of hindsight. Torture is a no-go zone for me, and I really cannot see how people who presume to be bothered about liberty can contemplate its use with anything other than revulsion.

    Anyway, I have gone over this ground enough.

  • Gabriel

    Freedom is indivisable. If you start ranking certain freedoms as being more or less important than any others, then I think one has a problem.

    http://www.samizdata.net/blog/archives/2006/12/why_are_so_many.html

    To the barricades then.

  • Jacob

    Johnathan,
    “Freedom is indivisable. If you start ranking certain freedoms as being more or less important than any others, then I think one has a problem.”

    I’ll join Gabriel….

    “freedom is indivisible….” wonderful, laudable sentiment….

    In practice freedom IS divisible, and in ALL societies there is some degree of freedom and some degree of coercion and nastiness. When faced with a real situation you examine it, and analyse to what degree it is free; in practice freedom isn’t an either/or case – either there is or there isn’t.

  • Lefties pick on Friedman’s links with Pinochet for one reason and one reason only.

    They don’t have any arguments that stand up to his actually theories. So throwing mud is so much easier.

  • Jacob

    Quiz:
    Whom do lefties hate most ?

    1. Pinochet
    2. Friedman
    3. Thatcher
    4. Bush

  • Paul Marks

    Sadly the “Chicago boys” in Chile did not listen to Milton Friedman as much as they should have – for example they tried to rig the exchange rate to the Dollar (ignoring all Friedman’s lectures and writings against efforts to have “fixed” exchange rates) and thus set up Chile for the slump of the early 1980′s (which cost Pinochet the majority support he may have had in 1980).

    Really the “Chicago boys” in Chile were Professor Arnold Harberger’s (not that I am saying that he supported rigged exchange rates – I have no idea what his opinion was) students (not Milton Friedman’s), but clearly expecting the left to do any research is expecting too much.

    As for the 1975 visit to Chile. Milton Friedman also visited the People’s Republic of China in the same year (he delivered the same lecture- on inflation, how it is nothing to do with “exchange rates” or other such but is about the money supply).

    In Chile Milton Friedman was a guest of a private foundation and in his one meeting with Augusto Pinochet and his letter to him made it clear that he opposed the idea of military government – yet there was a fire storm of attacks by students, academics and media people people in various parts of the world.

    In China Milton Friedman was the official guest of the government of the greatest mass murderer of human history – Mao.

    Mao was responsible for the deaths of many tens of millions of innocent people (even more than Stalin was), yet (as far as I know) the “liberal” elite in North America, Europe, Australia and New Zealand never attacked Milton Friedman for being his guest.

    It would appear that the claimed concern of the elite with “human rights” is a total fraud.

  • Paul Marks

    I have read Kit’s comment.

    Government “pensions” for the general population are Ponzi schemes – they are not based on productive investments, they are chain letters.

    Saying that an effort to move to pensions that are based on real investments (although, sadly, a compulsory scheme) causes “problems” is like saying that using water on a house fire is a bad thing because it makes things wet.

    Again there is a repeat of “copper nationalization” as if it was what the Allende government was about. Copper nationalization was put well under way under the Christian Democrat party administration of 1964 to 1970 (one that came to power, in part, because the Americans backed the Christian Democrats against the National party in the 1964 elections).

    Allende and his allies were about the taking over of EVERYTHING (not just copper). How many times does this have to be pointed out before some people understand it?

    And, of course, any resistance by property owners (or non property owners who wished to help property owners) would have been used as an excuse for mass extermination (the Marxists, of all the various factions, made that quite clear).

    On Kim du Toit’s point.

    Milton Friedman may have been wrong about many things but drugs were not one of the them.

    Firstly the Federal government has no constitutional power to ban drugs. The 18th Amendment gave the Congress the power to ban booze (not other drugs) – and has been repealed (by the 21st Amendment) anyway. There has never been any drugs Constitutional Amdendment.

    The “war on drugs” is only “constitutional” in the way that other government abuses (Social Security, Medicare, Medicaid and so on) are “constitutional”. Either by pretending that the PURPOSE of the powers given to Congress “the common defence and general welfare” is somehow a “general welfare power” in-its-self or that “regulate interstate commerce” gives the Congress the power to ban certain forms of commerce (which is dubious – but supportable) and that it gives the Congress to the right to ban a commercial transaction that does not cross a State line (which is absurd – although upheld by various World War II Supreme Court judgements). Slavery is nothing to do with the above (both because it is covered by the 13th Amendment and because, as Salmon P. Chase was fond of pointing out, “slavery” is in fact just a series of common law offences anyway).

    As for drug prohibition as policy (what Milton Friedman was really interested in).

    There might be an antiliberatian argument for it if it worked (on the grounds that drug use leads to nasty consequences) – but it clearly does not work. Drugs are on sale within a block or two of the D.E.A. buidling in Washington D.C. – and every major police force in the United States has officers who are involved in the drug business in one way or another (either taking bribes or selling the stuff themselves).

    Millions of people have been sent to prison, but who goes to prison is not really a matter of what they do – it is a matter of who they are. A drug user from a wealthy family is unlikely to go to prison.

    The “puritanical” Victorians were not so stupid as to think they could prevent people using things that were bad for them by passing statutes against them (no such drug laws existed in the United Kingdom till after World War II).

    If people wish to destroy their health with booze or other drugs that is their business. All prohibition does is hand over the profits of the drug trade to criminal organizations and vastly boost crime (as people seek to gain the money for the inflated prices they have to pay for black market drugs).

    I am certainly not “pro drugs” or pro any vice. However, the idea that sins are crimes and can prevented by statutes is one of the great fallacies of our age.

  • Paul Marks

    I apologize – I meant “till after World War I”

    The Americans (mainly “Social Gospel” types who had lost faith in God and had started to worship the government instead) started to force through international agreements on drugs after World War I – and Britain went along with these agreements.

  • Paul Marks

    Four comments in a row? Well if people will make a lot of mistaken points I face a choice of either leaving them unchallenged or writing a comment of vast length.

    Adolf Hitler – an ardent collectivist (the term “National Socialist” was not for show) see Ludwig Von Mises “Omnipotent Government” or F.A. Hayek’s “The Road to Serfdom”.

    Only a minority of businessmen supported Hitler (see Turner’s “German Big Business and the rise of Hitler”) and those that did soon regreted it when he turned them into shop managers of their own enterprises (see Fritz Thysson’s [spelling] “I Paid Hitler). Endless rules and arbitary commands made them “owners” in only a notional sense.

    If “rightwing” means “like Adolf Hitler”, Pinochet would have to be considered a leftwing person in his economic policy. Also there is the matter of killing millions of Jews and invading other countries.

    At least the National Socialists sat on the right hand side of the German Parliament – to call the pro union popularist Batisita “rightwing” does not even have that excuse. Batista came to power in the sergeants revolution of 1932 (the government that was overturned was also interventionist – but it was not as bad as the new regime, it was also less corrupt than the new regime).

    Batista ruled (on and off – and sometimes from behind the scenes) till 1959. To call him “right wing” only makes sense if one calls anyone who is not a card carrying member of the Communist party “rightwing” – in which case Allende was “rightwing” (as he was an independent Marxist – not a party member).

    The Americans did fling money at Cuba at some points during the time of Batista – but they flung money at a lot of Progressive regimes (the old doctrine of President Wilson and F.D.R. – although F.D.R. added his normal cynical edge), but they gave up on Batista eventually – even though they were warned that Castro was pro Communist.

    I have sometimes wondered whether Batista’s origins (he had some negro “blood”) caused him some problems with the Americans in the 1950′s.

  • Uain

    It’s interesting how if you repeat something enough, it becomes fact. I recall reading of the hell hole Chile had become before Pinochet took over. Judges and police being murdered, business owners murdered or kidnapped for ransom, etc. ad. nauseum.
    I knew a lad from Chile in 1989 – 1993 when I was involved at University of Vermont, and his view was one of disdain and good riddence for Allende. But then again, this lad was smart, self reliant and hard working.
    I seem to find much in the hapless main stream media on how bad Pinochet supposedly was, but little on the specifics that so many Chileans were more than happy that his policies ended the terror spree of those lovable stalinistas that wanted to bring a workers paradise to Chile.

  • Tim

    It would be interesting to imagine what the reaction of Friedman’s leftist critics would have been had he wrote a forward to (say) a Chilean edition of his “Monetary History” book remotely like Keynes’s Forward to the 1936 German edition of his “General Theory”. This is discussed by historian James J Martin here and full copy of Keynes’ 1936 Forward is here.

  • tex

    I see several people criticizing socialism in favor of the “free market system” promoted by Friedman. I believe that Milton Friedman was the “rainmaker” for western capitalists. He consulted with some of the most murderous, abusive dictators of our time (Pinochet, Idi Amin, Mao) in an effort to open their borders to trade with western industrialists. These dictators were highly compensated for their cooperation and death and destruction followed the footsteps of Milty.
    While western governments (often with the aid of CIA and MI6) were knocking down doors to get to the resources of third world countries, they moved our countries more and more toward Socialism. That’s the irony of the whole Friedman concept. The country who promoted him as the Guru of economics (National Medal of Science, Presidential Medal of Freedom, Nobel Prize) used his economic platform to plunder sovereign countries resources through economic policy while, at the same time implementing progressively more socialist policies at home.
    We have essentially waged war against Socialism, spending TENS of TRILLIONS of taxpayer dollars over the last 50 years while converting our own country TO Socialism. All we have left here is an illusion of a free market. We have labor unions, welfare, food stamps, public housing, unemployment compensation, government subsidies for every major industry, a progressive income tax that penalizes higher income earners, and imminent domain laws, just to name a few.
    It seems to me that the whole purpose of endorsing Friedman’s economic policies was to rationalize the plunder, by force if necessary, of third world nations as well as our own.
    Look at our current situation. U.S. citizens have lost their life savings, their homes, their spirit, and their jobs. ALL because of economic policies and monetary theory that Friedman promoted. Our National debt is north of $9 trillion with unfunded future social security and medicare benefits in the $40-$50 trillion range. Our current direction is completely hopeless for anyone EXCEPT the world bankers. They are in hog heaven.

  • Johnathan Pearce

    I see several people criticizing socialism in favor of the “free market system” promoted by Friedman.

    Why the scare quotes? Are you saying that Friedman did not support free markets? What are you smoking?

    I believe that Milton Friedman was the “rainmaker” for western capitalists. He consulted with some of the most murderous, abusive dictators of our time (Pinochet, Idi Amin, Mao) in an effort to open their borders to trade with western industrialists.

    Your belief is mistaken. I am not aware that he “consulted” with such people, and certainly not Idi Amin. It is true that he advocated free markets around the world, and as a result, the situation in places such as Chile and China is a damn sight better today than it was during the heyday of say, Chairman Mao.

    These dictators were highly compensated for their cooperation and death and destruction followed the footsteps of Milty.

    Bullcrap.

    While western governments (often with the aid of CIA and MI6) were knocking down doors to get to the resources of third world countries, they moved our countries more and more toward Socialism. That’s the irony of the whole Friedman concept. The country who promoted him as the Guru of economics (National Medal of Science, Presidential Medal of Freedom, Nobel Prize) used his economic platform to plunder sovereign countries resources through economic policy while, at the same time implementing progressively more socialist policies at home.

    What is all this shit about “plundering” sovereign countries’ resources, pray? Are you saying that if a US firm builds a refinery in say, Nigeria, with the consent of the Nigerian government or whoever, that it is robbing good Nigerians of what is rightfully theirs? Sounds like you are indulging a protectionist, nationalist argument. Which does rather blunt your declared aim to be against socialism, which often goes hand in hand with nationalism.

    U.S. citizens have lost their life savings, their homes, their spirit, and their jobs. ALL because of economic policies and monetary theory that Friedman promoted.

    I thought Friedman was a man who warned of the dangers of boosting the money supply and the creation thereby of asset bubbles; yes, there are differences between the Chicago and Austrian schools of banking and finance but those differences are not very big.

    I am afraid I find your comments to be totally incoherent.