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Pinochet’s Chicago Boys versus Freedom

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Ever since the U.S.-supported military coup in Chile that brought Gen. Augusto Pinochet to power in 1973, American and Chilean conservatives have extolled the economic policies that the Pinochet regime brought to Chile. The policies, which conservatives have long described as “free-market,” originated within a group of Chilean economists known as the Chicago Boys, who accepted governmental positions in the Pinochet regime. The economic policies introduced by the Chicago Boys helped revitalize the Chilean economy, which has long been a source of pride for the conservative movement in general and the Chicago Boys in particular.

However, there are problematic aspects of what the Chicago Boys did, not only with respect to their service to one of the most brutal dictatorships in history but also with respect to what they describe as the free-market policies that the Pinochet dictatorship introduced into Chile.

Pinochet was not a benevolent dictator. Immediately after assuming power, his national-security state forces began rounding up people and herding them into military dungeons, concentration camps, and the national stadium. Some 60,000 people were taken into custody. Most of them were brutally tortured, raped, or sexually abused in the most horrific and unimaginable ways. Some 3,000 of those 60,000 were executed or disappeared.

No judicially issued arrest warrants or indictments. No jury trials. No due process of law. Just the raw power of the dictator and the military-intelligence forces that loyally carried out his orders and fulfilled his desires.

That’s the regime that the Chicago Boys enthusiastically went to work for. That’s the regime that they helped shore up with their economic policies. For when the Chicago Boys proudly extol what they did for the Chilean economy with their “free-market” policies, they conveniently omit that their policies were, at the same time, shoring up the tax revenues of the regime they were working for, revenues that were going to pay the expenses of the dungeons and concentration camps and salaries of the rapists, abusers, and murderers.

As an aside, think about how conservatives have long supported the U.S. economic embargo against the government and people of Cuba. One of the principal arguments that conservatives have made in support of the embargo is that if Americans were free to travel to Cuba and spend money there, that would increase tax revenues and, consequently, serve to shore up Cuba’s communist regime.

Yet conservatives and the Chicago Boys obviously tossed that argument out the window when it came to serving the Pinochet dictatorship. Shoring up the tax revenues of that tyrannical dictatorship with “free-market” economic policies obviously came with few or no moral reservations.

After all, the Chicago Boys did not have to go to work for the Pinochet regime. They certainly weren’t conscripted. They went to work for Pinochet voluntarily, willingly, and enthusiastically. And later many of them expressed pride for what they accomplished, even if periodically lamenting the “human-rights abuses” of the regime they served.

The Chicago Boys had received their economic education at the University of Chicago under free-market economist Milton Friedman and others. That’s how they got their name — the “Chicago Boys.”

When Pinochet assumed power and expressed interest in the economic ideas that the Chicago Boys were expounding, they were ecstatic. The Pinochet dictatorship offered them the opportunity to put their ideas into action. They knew that the Pinochet coup was a fait accompli and that Pinochet’s dictatorship was the new order of things in Chile. Nearly everyone assumed that the dictatorship would last a very long time and, in fact, it did last a long time — about 17 years. The Chicago Boys wanted to be part of that new order of things.

Not so, however, with their mentor, Milton Friedman. After being severely criticized in the international arena for supposedly advising Pinochet, Friedman did everything he could to distance himself from the dictator, even while his Chicago Boys were going to work for him. What the Chicago Boys apparently failed to realize was that Friedman’s position was an implicit condemnation of what they were doing.

Ousting Allende

In 2005 a movie titled Downfall was released. It was about the final days of the Hitler regime. The movie focused on a young woman named Traudl Junge, who went to work for Hitler as his secretary in 1942. At the end of the movie, the real-life Traudl Junge (i.e., not the actress who played her in the movie) appeared onscreen. She explained that when she went to work for Hitler, she perceived it as a great opportunity — the chance to serve the country and work for the chancellor. She said that after the war ended, however, when she learned about Sophie Scholl and the White Rose, she realized that she should have seen things differently.

What she was referring to was a group of German college students, including a brother and sister named Hans and Sophie Scholl, who formed a secret organization that they called the White Rose to oppose the Hitler regime. Secretly publishing and distributing White Rose pamphlets in the midst of World War II that called for Germans to oppose the Hitler regime, the students knew that they were risking their lives. And in fact, they were caught, quickly put on trial, and executed. (An excellent film about the White Rose is Sophie Scholl: The Final Days. Also, see my essay “The White Rose: A Lesson in Dissent,” which was later reprinted in a book on the Holocaust for high-school students.)

The Scholl siblings, of course, could have taken the same route as Traudl Junge and many other ordinary German citizens who enthusiastically went to work for the Hitler regime. Instead, they chose not only avoid such service, they even went a dangerous step further by actively opposing it.

That is what the Chicago Boys could have done. They could have declined to go to work for one of the world’s most brutal and tyrannical dictatorships. They could have continued expounding their economic philosophy and ideas by remaining in the private sector. Indeed, rather than enthusiastically accept positions within the Pinochet regime, they could have done what the Scholl siblings had done — actively exhort Chileans to oppose the Pinochet dictatorship.

Why didn’t they do that? Because like many other Chilean conservatives and, for that matter, American conservatives, they were ecstatic that Pinochet had violently ousted the country’s democratically elected president, Salvador Allende, from office in a military coup that was initiated by the U.S. government.

Allende was a self-described socialist and communist. A physician by trade, he had long been involved in Chilean politics before being elected in 1970. In the 1970 presidential election, he received a plurality of the votes but not the majority that was required to be automatically made president. Under the Chilean constitution, that threw the election into the hands of the Chilean congress.

U.S. officials went ballistic over the prospect of Allende’s becoming president of Chile. They considered his election to be a grave threat to national security. How so? In 1970 the Cold War and the fierce anti-communist crusade was still being waged by the entire U.S. government, especially the national-security establishment, i.e., the military, the CIA, and the NSA. The U.S. government had been convinced since 1959 that communist Cuba posed a grave threat to U.S. national security. A communist Chile terrified them into believing that the Red menace was slowly but surely making its way to the United States.

Richard Nixon and his national-security team set forces into motion to prevent Allende from taking power, including bribery attempts on Chilean congressmen and a CIA kidnapping-assassination plot that left the commanding general of the Chilean armed forces, Gen. Rene Schneider, shot dead on the streets of Santiago.

What was Allende doing to engender U.S. concern as well as the concern of Chilean conservatives? He was implementing socialist policies, such as nationalizing businesses that would then be run by the Chilean government. He was using tax revenues to fund socialist retirement, education, housing, and health-care programs. He was also using regulations to raise the nation’s minimum wage.

It was no surprise when Allende’s socialist economic policies plunged the country into economic chaos and crisis, which U.S. officials were citing as the reason that a coup was necessary to save the country. Even worse from their standpoint, Allende was reaching out to Russia and Cuba, two other nations with communist regimes, in a spirit of peace and friendship.

Tolerating tyranny

To help prepare the Chilean people for a coup, Richard Nixon ordered the CIA to make the Chilean economy “scream.” He told them to do everything they could to maximize the economic suffering of the Chilean people, on top of the suffering that was being caused by Allende’s socialist policies. For example, the CIA secretly paid truckers to go on a nationwide strike, with the aim of causing people across the country to starve, which then, presumably, would make them more amenable to the impending coup that was about to destroy their democratic socialist system.

U.S. interventionism in Chile from 1970 to 1973 came to light during congressional hearings in the mid 1970s. One of the fascinating aspects of the coup aftermath is that since those revelations came to light, some of the people who have criticized Allende for his socialist economic policies have seemingly displayed less eagerness to criticize the CIA for intentionally contributing to the economic suffering of the Chilean people as part of its efforts to make the Chilean economy “scream.”

In fact, rarely do Latin American and U.S. supporters of Pinochet criticize U.S. interventionism in Latin America in general. For example, there are numerous people in Venezuela and the United States who condemn the socialist regime in that country, headed by Nicolas Maduro and, before him, Hugo Chavez. At the same time, however, they rarely, if ever, demand that the U.S. government butt out of Venezuelan affairs.

Did the Chicago Boys know about the Pinochet regime’s roundups, disappearances, rapes, abuse, torture, and murders? There is no evidence that they did. But the Chicago Boys were not dumb people. On the contrary, they were extremely smart and well educated. As such, they had to know that military dictatorships historically engage in tyrannical actions. At a minimum, they would have known that the military had taken power in a violent, unconstitutional coup that resulted in the deaths of at least some people, including the democratically elected president of the country.

Is it possible that the Chicago Boys concluded that the end — i.e., saving Chile from communism and socialism — justified the means — i.e., a deadly and destructive unconstitutional military coup that nullified the outcome of the democratic vote in the 1970 presidential election? But even if that is what they concluded, that still doesn’t explain their decision to go to work for the Pinochet regime. At some point, they knew that their mentor, Milton Friedman, was doing his best to distance himself from Pinochet’s military dictatorship. The Chicago Boys could have chosen to do what Friedman did. They could have remained in the private sector fighting to restore democracy and freedom to Chile. They didn’t. They chose instead to go to work for an unelected military dictator who had taken power in an illegal coup. Why did they do that? Did saving or improving Chile with “free-market” economic policies morally justify that decision?

Finally, despite all the hoopla about the Chicago Boys’ so-called free-market economic policies, there was really nothing free-market about them, at least not in the libertarian sense of the term. Despite all the accolades for the Chicago Boys from American conservatives, the fact is that the Chicago Boys were nothing but central planners — conservative central planners. They may have done a better job than Allende’s socialist central planners but they were central planners nonetheless.

“Free-market” collaboration

The problem is that the conservative movement has long convinced itself and others, especially young people, that a free-market economic system is one in which government is reducing economic regulations, interventions, controls, and central planning.

But that’s not what a genuine free-market economic system is. Instead, a free-market system is one in which economic activity is free from governmental intervention, regulation, control, management, and planning. What makes it a truly revolutionary system is that throughout history, governments have intervened, either to a greater or lesser degree, into economic affairs.

What the Chicago Boys did was simply replace their socialist counterparts in the governmental bureaucracies that controlled, regulated, and planned economic activity in Chile. They didn’t abolish anything, not even the minimum wage. What they did was use their bureaucratic power as central planners to reduce the number of regulations and controls that the socialists had imposed on economic activity and to privatize some state-owned businesses, much as British conservative leader Margaret Thatcher did.

Of course, from the standpoint of economic prosperity, that was good and positive. Less regulation and control and fewer state-owned enterprises are better than more regulation and control and more state-owned enterprises. But make no mistake about it: It’s not freedom and it’s not the free market. Instead, it was classic central planning, conservative style.

Indeed, consider the following agencies that the Chicago Boys were managing, none of which would exist in a society based on genuine free-market policies: Ministry of Economy, Promotion, and Reconstruction; Ministry of Public Education; Ministry of Labor and Social Forecast; Ministry of Public Works; Ministry of Public Health; Ministry of Housing and Urban Planning; Ministry of Agriculture; Ministry of Transport and Communications; and Ministry of National Assets.

The Chicago Boys also kept Chile’s central bank in place. Moreover, if they ever publicly objected to the millions of dollars in U.S. taxpayer-funded foreign aid that were flooding into Chile, I have never come across it.

One of the most amusing aspects of the “free-market” policies that the Chicago Boys brought to Chile relates to social security. Under Allende, Chile had the standard socialist retirement program that the United States has — one in which the government taxes the young and productive and gives the money to seniors.

Under the Chicago Boys, Chile’s retirement system was changed to one where people were permitted to choose another type of government retirement program, one in which a portion of their savings would be forcibly taken from them and invested in government-approved investment accounts.

Why is that amusing? Because the American conservatives have long praised the Pinochet plan as another “free-market” program that the Chicago Boys brought to Chile when, in fact, it was nothing more than economic fascism, a type of economic system in which government controls what people do with their money through orders and edicts. Pinochet’s social security plan would have been well-received by Italy’s Mussolini, one of the leading economic fascists in the world.

Is economic fascism better than socialism? The proponents of Pinochet’s social security program certainly think so. But one thing is certain: fascism is as far away from freedom and free markets as socialism is. The only system consistent with freedom is one where people are free to keep their own money and decide for themselves what to do with it.

For people who are interested in learning the genuine principles of freedom and the free market, the place to go is to American libertarians, not to Augusto Pinochet’s Chicago Boys.

This article was originally published in the February 2018 edition of Future of Freedom.

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    Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.