Milton Friedman and Chile

Oh, Lordy, the nuts with a shaky knowledge of history, but the talismanic word "Pinochet" have crawled out of the woodwork to assert that Milton Friedman did, too, cause a dictatorship!

There are several problems with this theory:

1) Milton Friedman spent all of an hour with Augusto Pinochet

2) This occurred years after the coup.

3) The "Chicago Boys" reforms didn't even start until 1975, although I believe they did hand the brick to Pinochet the day after the coup. The Chicago Boys were not behind the coup; rather, they helped Pinochet undo the Allende nationalizations after he had already taken power. Early Pinochet economic reforms were along standard right wing Latin American crony capitalism lines. In fact, many of the reforms that the Chicago Boys put in place, such as opening trade, acted against traditional entrenched business interests.

Chile's economic miracle was indisputably the product of a vile dictatorship that overrode normal political considerations to make sweeping reforms before inexplicably dissolving itself in 1980. But the policies that led to the economic miracle did not cause the dictatorship, which would have been just as horrible without the Chicago Boys; indeed, as far as I know the worst abuses occurred right after the coup, as the regime was consolidating power.

Perhaps even more bizarrely, a few people in the comments are citing China as an example of how capitalism undermined democracy. Apparently I missed the section in history class where we covered the vibrant democracy that existed in China prior to pro-market reforms. Because in the history I learned, the openness and transparency required to support the market reforms have enabled what little movement towards liberalization China has had.

Comments

Good post. Chile isn't the only case where intelligent economic reforms were pushed through under a rightist autocracy. Another Latin American example is Brazil, where the policies that led to energy independence (sugar cane-based ethanol, flex-fuel cars, etc.) were instituted under the rightist military government. In both Chile and Brazil, subsequent left-of-center governments were smart enough to leave in place some intelligent policies that were instituted during periods when the respective countries were ruled by rightist autocracies.

Posted by DaveinHackensack | July 15, 2008 7:35 PM

As I noted in the other thread, Friemdan spent a lot more time advising the Chinese Communists of the Deng Era than he ever did Pinochet.

The Chinese Communists! Killers of 65 million people and impoverishers of a billion.

Nobody on the left has had a word of complaint about it yet. Nor did the Chicagoans.

It seems none of them are up on their Black Book of Communism, or don't care to be.

Posted by Jim Glass | July 15, 2008 7:42 PM

On the historical question regarding Chile, I'm not qualified to say.

In general, it's fairly easy to see how capitalism can undermine democracy. It's a simple question of competing power-aggregators. In a democracy, votes (the expression of the people) have power. In capitalism, currency has power. When you've got both, as we do, they are frequently in competition. The problem is that our ideology maintains that in questions of public policy and leadership, each individual should have equal say. And that clearly isn't true with the influence that money can have in given political campaigns.

I'm fully ready to concede that in developing nations market reforms are more likely to result in increased democracy than not. (Though there are certainly countries where free markets don't lead to liberal political orders.) But I think that as a country reaches a certain saturation point, that equation flips, and the more money a populace has, the more undue influence the wealthy have on what should be democratic decisions. I'm agnostic on campaign finance reform but I do believe that past a certain point of affluence capitalism becomes an impediment to egalitarian political decision making, and I'm open to policies that could fairly curb that.

Posted by Freddie | July 15, 2008 7:45 PM

That is, Friedman advised the Chinese Communists.

Friemdan advised Antiguan monarchists, I think.

Posted by Jim Glass | July 15, 2008 7:46 PM

I read somewhere that Pinochet clerked for Richard Posner after law school. Figures.

Posted by Rally Monkey | July 15, 2008 7:47 PM

Freddie,

So you would like to see the influence of billionaires like George Soros, Ted Turner, etc., lessened? How would you propose to do that? It seems that campaign finance reform has only made them stronger.

Posted by Steve.D | July 15, 2008 7:51 PM

Friemdan and the Antiguan Monarchy-- it's a dissertation waiting to happen.

Posted by Freddie | July 15, 2008 7:52 PM

I don't know, SteveD. I find the practical limitations of campaign contribution caps to be a steep hill to climb-- there's just too many ways around them. And I'm at least conflicted about the free speech implications of such a policy. But I do think that there are some severe negative consequences from the influence of so much money from individuals, consequences that can't help but distort our democratic process.

Posted by Freddie | July 15, 2008 7:59 PM

Freddie,

Under "capitalism," currency only has power insofar as the economy is not capitalist, rightly understood.

In other words, lobbying is a natural consequence of a mixed economy. In fact, the more control the government has to regulate economic transactions, the greater the incentive for economic actors to influence it.

I think you're right to say that free markets don't necessarily lead to liberal political orders. But your "saturation point" when a country becomes too rich, thereby undermining democracy, is a rather odd notion. Whatever the phenomenon, it can't fairly be ascribed to capitalism or wealth in and of themselves.

Posted by Clay | July 15, 2008 8:07 PM

Don't bother, Megan that freak show of cluelessness in the U of Chicago post. It will continue forever and ever.

Those clueless people will always say the same things...things they can't elaborate on and demonstrate. You'd think they would notice the total lack of anything resembling a strong argument. It's all innuendo and simply saying Friedman and Pinochet in the same sentence. You'll never see anything real. Naomi Klein spent hundreds of pages doing it. I read it.

These people should be ashamed of themselves for being so empty in their argumentation.

Posted by John V | July 15, 2008 8:21 PM

Freddie,

Interestingly, campaign finance regulations allegedly aimed at fighting the disproportionate impact of the rich are also aimed at curbing efforts by the non-rich to band together for political purposes. When McCain-Feingold was being debated, liberal members of Congress repeatedly discussed the need to curb the influence of the NRA*--I guess because it's bothersome to have to contend with citizens who disagree with you and organize effectively to enhance their political power.

Of course, the same process can work just as well against any other group--the AARP, the Sierra Club, PIRGs, unions--anyone who aggregates small donations to influence policy.

So while I agree that money might bring corruption, it's important to remember that efforts to quash it really do have--and are intended to have--a negative impact on ordinary people's influence, too. And that is to me more fearsome that the occasional sweetheart deal for some company somewhere.

* For those of you who think the NRA is the tool of gun companies, the organization you're looking for is the National Shooting Sports Foundation.

Posted by Rob Lyman | July 15, 2008 8:21 PM

Freddie:
I'm agnostic on campaign finance reform but I do believe that past a certain point of affluence capitalism becomes an impediment to egalitarian political decision making, and I'm open to policies that could fairly curb that.

What point? Gates and Buffett have $60 billion each, and they don't seem to be causing any problems. So how much does it take?

Posted by Brandon Berg | July 15, 2008 8:31 PM

Freddie,

Such in the social democratic conundrum:

More power for the government to do the "people's will" by intervening in the economy without ever saying what that will is and who those people are.

Coupled with:

Less influence for interest group and interested parties to influence policy that affects them through many interventionist policies.

Result?

Exactly what you don't want.

Solution?

Exactly what you don't want.

Posted by John V | July 15, 2008 8:35 PM

Friedman was only following the wisdom of P.G. Wodehouse's Uncle Fred: "How can I leave this foul hole a better and happier foul hole than I found it?" Barring some way of fixing everything about a country at once, it's the best approach.

Posted by Paul Zrimsek | July 15, 2008 8:37 PM

James,

You have no point.

Friedman did not cause the dictatorship, nor support the atrocities, nor suggest the atrocities nor cause the atrocities nor did Friedman help the dictatorship through any of his reform ideas nor did those of the Chicago boys'.

Pinochet's atrocities were his own. Nothing in anything Friedman said or did caused those atrocities. Nothing, zilch, nada.

Quite to the contrary, Friedman's economic ideas, insofar as they were even implemented help take Chile out of dictatorship because true political freedom comes out of economic freedom.

What part of any of that do you dispute or not understand?

If the answer is "nothing", then you have no case.

Friedman should be commended for what he did. Suggesting reforms to dictators that help lead to their own demise as dictators is good.

Posted by John V | July 15, 2008 8:43 PM

"In general, it's fairly easy to see how capitalism can undermine democracy. It's a simple question of competing power-aggregators ... In capitalism, currency has power ... the more money a populace has, the more undue influence the wealthy have on what should be democratic decisions ...

The evidence shows that economic development is strongly associated with the development of democracy ... but the development of democracy has ambiguous effects on economic development, sometimes good, sometimes very bad.

Poor societies of any size are almost always under the thumb of feudal lords, warlords, the guys with the gun, whomever. Economic growth tends to lead to their demise by distributing economic power increasingly through the initially "lower" classes, who then bring the top dogs to heel or topple them.

Look at our own history. The British Kings initially had "absolute" power ... then they had to call the first Parliaments to *get money* from the Lords and commercial classes below them, submitting to explaining themselves and making deals ... then the Kings agreed to become "subject to law" after a couple who refused to pay back their debts found their lenders putting knives to their throats (and worse) ... then with the growth of the middle class power shifted from the Lords to the Commons, etc.

Fast forward to the 20th Century, the "women's rights" movement finally succeeded in getting the vote after women were freed from vast amounts of hugely time-consuming labor by washing machines, vacuum cleaners and all the rest, becoming able to get education, get jobs, travel to new opportunities, politically organize, etc. (Anyone see "1900 House"?)

Meanwhile on the other side of the world, Communism was finally toppled by the political demand for Western-quality consumer goods and services in Eastern Europe (East Berliners watching "Dallas" on TV while driving Trabants and carrying coal up the stairs of their walk-up flats to heat their water in the 1980s -- I knew those people personally).

OTOH, the development of democracy sometimes is good for economic development. In the US, the "Anglosphere" and Western Europe it has generally, mostly, aligned the interests of governments and polticians with favoring generally beneficial economic policies (yes, with limitless specific exceptions, but generally).

But there is no shortage of examples where political democracy has freed the noxious sides of populism, racism, sect-ism, tribalism, oligarchic cronyism, etc. to work through the political system to strangle economic growth and impoverish nations.

Mugabe was popularly elected. Hitler's Nazis came to power through free elections.

So if you want to develop a healthy democracy, support economic development by all means.

If you want healthy economic development, support democracy carefully, on a case-by-case, aspect-by-aspect basis.

("Moneyed interests" in places like the US are the least of the threats to healthy political democracy. The US middle class vastly outvotes Bill Gates. Even if George Soros was sent into US politics by Satan, is anybody politically afraid of him? AARP on the other hand...)

Posted by Jim Glass | July 15, 2008 8:44 PM

In a democracy, votes (the expression of the people) have power. In capitalism, currency has power.

In real life, currency -- and wealth in general -- has power. It has nothing to do with capitalism, unless you define "capitalism" as "any system which allows private property" (i.e. every system to the "right" of the Khmer Rouge).

Given that wealth always has and always will have political power, the only question is whether or not you allow people to freely acquire and transfer wealth (i.e., power) or whether you let the State attempt to control the flow of that power within the country.

Posted by Dan | July 15, 2008 8:50 PM

So you've established that he didn't start the dictatorship (glad we arent debating that), but he was willing to meet and give help to someone who was clearly known by then to be a dictator.

So meeting with dictators is out of the question? Somebody should tell Obama. :)

As for "helping" Pinochet, the reforms championed by Friedman helped the people of Chile enormously. They probably also "helped" Pinochet in the sense that dictators ruling over people whose lives are steadily improving are somewhat less likely to be killed by an angry mob, but their primary effect was to improve the lives of the common people. Are you really arguing that it harms Friedman's reputation to have improved the lives of people living under a dictatorship?

Posted by Dan | July 15, 2008 8:54 PM

Are you really arguing that it harms Friedman's reputation to have improved the lives of people living under a dictatorship?

No, Dan. James isn't arguing anything that concrete or easy to understand...however wrong it may be.

He's simply saying he doesn't like Friedman...just because.

Posted by John V | July 15, 2008 8:58 PM

I take James is among those not bothered at all by Friedman spending a lot more than an hour advising the Chinese Communists.

They killed 8 times the entire population of Pinochet's Chile ... but I guess a Chinese life is worth a lot less to an anti-Friedmanite.

Posted by Jim Glass | July 15, 2008 9:00 PM

Funny how the assumption that these policies 'worked' is being aggressively pushed; you'd think that the record would speak for itself. Oh. _That's_ why it's being aggressively pushed, as a quick glance at the wiki shows.

Or consider this with regard to the people trying to dismantle SS:

The Chilean retirement system is only a success to those companies who are pulling down outrageous profits from it. For the working people of Chile, it is a disaster in the making. According to SAFP, the government agency which regulates the private pensions, 96 percent of the known work force were enrolled in the private pensions as of February, 1995, but 43.4 percent of the account owners were not adding to their funds. Perhaps as many as 60 percent do not contribute regularly. Given the rising poverty in Chile, it is not difficult to understand why. Unfortunately, regular contributions are necessary to receive full benefits.

By 1988, about one fourth of Chilean workers were contributing enough to make the program's minimum benefits: $1.25 a day! (40) Critics charge that only 20 percent of the contributors will actually receive good pensions.

Worse, much of the plan's supposedly higher benefits are projected from the surging economic growth rates of the late 80s. But this growth followed a deep economic depression in 1983, and was bound to be high for many years following. Now that actual growth has caught up to potential growth, the Chilean economy is slowing down. The pensions are therefore not going to be as profitable as their cheerleaders claim.

When the current system was created in the early 80s, the government gave the people their choice: stay in the public program, or start contributing to private pensions. Over 90 percent of the people switched over to the private plan. This was carried out, however, under a mixture of threats, coercion and short term incentives. Many employers simply switched their employees' plans for them. The cash-starved public also received short-term pay increases by switching to private pensions, whereas the cost of the public programs went up for those who stayed in them.

"With the information I now have," says Cecilia Prado, a 17-year public employee, "I never would have switched. Under a democratic government they never could have imposed it on us. And if they ever passed a law allowing people to go back, there would be a great exodus." (41)

What many defenders of Chile's current program do not reveal is that under the old public plan, workers received not only pensions, but health care, low-interest housing loans from pension funds, and many other benefits. And that program covered 75 percent of all Chileans. When the private pensions went into effect, all these other services were dropped. As a result, Chile's "welfare pensions" for the desperately needy quickly rose 400 percent — up to the legal limit.

It is also extremely telling that when Pinochet introduced the program, his army and police were allowed to keep their own generous public plans. The private plans that were suitable for the masses apparently weren't good enough for those in charge of the country.

And so on and so forth.

Posted by ScentOfViolets | July 15, 2008 9:08 PM

"inexplicably dissolving itself in 1980"

No, the dictatorship of Pinochet didn't "inexplicably dissolv[ed] itself". There was a referendum that Pinochet won in 1980. In 1988 there was another referendum that he lost and because of that Chile became a sort of democracy on 1990. From the Pinochet entry on Wikipedia (http://en.wikipedia.org/wiki/Augusto_Pinochet): "After stepping down, he continued to serve as Commander in Chief of the Chilean Army until March 10, 1998, when he retired and became a senator-for-life in accordance to the 1980 Constitution.

As for the inexplicability part of it, there as always a huge external pressure on the regime and a very, very long democratic tradition on Chile.

Posted by Eduardo Ramos | July 15, 2008 9:09 PM

SOV,

Good wiki link. It's totally undermines the anti-Friedman argument.

As for the private pension system, it is entirely possible that is was poorly implemented. I'm not surprised. The Chicago Boys had a mixed record. Failing to float their currency was a big part of where they came up short. It's not a coincidence that their recession in the early coincided with Volker jacking up interest rates to end stagflation. The Chilean currency was pegged to the dollar and it was bound to cause problems.

But overall, it's really hard to argument with the market based reforms that Chile generally embraced and has now become part of their economic success. Chile is probably the freest and least corrupt country in Latin Amercia. Market based reforms are the reason for that.

Posted by John V | July 15, 2008 9:29 PM

Scent of Violets:

Social Security is an income transfer program, not a pension program which pays returns from investments.

Your quotation and reference is interesting. Were it me, I would be quite careful about taking this fellow Huppi's writing at face value. His endnotes cite no academic literature in economics, though there do appear to be some reference works there. Also, if you look here (http://www.huppi.com/resume/resume.pdf), you will see his formal background in the subject at hand is minimal; I would be skeptical he knows how to read the literature in question all that well.

Posted by Art Deco | July 15, 2008 9:30 PM

Sorry, James but meeting Pinochet is not and should not be a blot on Friedman's record. I don't care what those with hard left economics think of it. It's a simple thing to understand without ideological blinders. Like Jim Glass said, he also met with Chinese leaders and in much more detail. The fact that they have nothing to say about that shows their problem is ideological and based on nothing else. It was not a deplorable thing to do to meet with Pinochet. It's nobody's fault but their own if they can't see that.

As I recall, he was in Chile anyway to give a speech at the Universidad Catolica. Pinochet asked for a visit so he went. Big deal.

hat bears no resemblance to the facts whatsoever.

The hell it doesn't.

Posted by John V | July 15, 2008 9:35 PM

Chile is probably the freest and least corrupt country in Latin Amercia. Market based reforms are the reason for that.

One of the difficulties Latin Americn countries have faced (which Hernando de Soto and others have written about) in the realm of economic development is a sclerosis in the market for real estate (and hence credit) due to fuzzy and insecure land tenure. Chile has a long history (from 1831 to the present, with three notable interruptions) of legal order in its political life, with the opportunity to develop a court system and civil service that are more organized and regular in their operations than is usually the case in Latin America. The military regime did not create a court system that could effectively adjudicate disputes. It was already extant.

Posted by Art Deco | July 15, 2008 9:43 PM

james,

No. I'm not claiming that nor does that matter. We're talking about Friedman and his role in Chile. While the coup may matter in some other discussion, it doesn't here.

Spreading the argument into Pinochet's coup itself is irrelevant.

BTW, if you my remark doesn't pass for a rebuttal inlight of everything I've said, then you tell me how I'm wrong because telling that facts don't support what said is pretty weak when you nothing else.

Posted by john v | July 15, 2008 10:02 PM

Actually, I thought what was risible is the previous Friedman/U. Chicago post were the hackneyed cliches being thrown around about the signers of the petition and academics in general.

Megan for instance writes: "Uncle Miltie would be thrilled to see you shopping at farmer's markets and co-ops; their availability is a form of expanded consumer choice."

Yes, well Uncle Miltie had a rather less charitible view about unions, which he argued should be illegal. No doubt Pinochet found that particular chesnut quite agreeable, given his regime's very strenuous repression of any free union movement.

And while Chicago school academics (as a school of thought and as individuals) may not be responsible for overthrowing any democratic regimes or engaging in repressive activities, it does seem notable (or "it is not a coincidence" to use more doctinaire lingo) that so many of the regimes that have followed Chicago prescripts do seem to have been rather repressive and anti-democratic. Probably not surprising since the imposition of Chicago economics causes great hardship to the most workers, and especially to both workers and owners of capital in previously protected and favored sectors. This is often justified with the argument that the hardship today will lead to prosperity in the future. Stalin's apologiusts said the same, though I will grant that Chicago economics delivered much better on the promise. But then that's purely an instrumnental justification,not in keeping with the moral blather that libertarian economics types preen about.

Posted by Gene | July 15, 2008 10:07 PM

Good wiki link. It's totally undermines the anti-Friedman argument.

Er, John, I think you need to go back and reread. I really do. This is part of what earns you so much ire over on Thoma's blog.

Your quotation and reference is interesting. Were it me, I would be quite careful about taking this fellow Huppi's writing at face value. His endnotes cite no academic literature in economics, though there do appear to be some reference works there. Also, if you look here (http://www.huppi.com/resume/resume.pdf), you will see his formal background in the subject at hand is minimal; I would be skeptical he knows how to read the literature in question all that well.

Posted by Art Deco

You're absolutely right. It's not a particularly authoritative review. But Megan seems to want to try to get people to buy into the notion that there's some sort of general acceptance that Chile represents some sort of vindication for these polices. Actually, there isn't. And by some very objective measures, those policies were a disaster. The question is, which measure, or set of measures, do you use, and how much weight do you give them? It's only by taking a very prejudicial and after the fact set of measures that one can claim any sort of 'miracle'.

Posted by ScentOfViolets | July 15, 2008 10:21 PM

Gene,

Where did Friedman argue that unions should be illegal? My guess is that he argued that employees shouldn't be coerced into union membership, and you characterize that as arguing that "unions should be illegal." I could be wrong, though--I've just never heard of such a thing, and I've read most of his lay-person-geared work, I think.

Posted by Joe Bingham | July 15, 2008 10:23 PM

James, while I believe Pinochet regime was reprehensible, your contention that democracy was not just alive and well but thriving in Chile before the coup is laughably naive.

Posted by RW Rogers | July 15, 2008 10:27 PM

Joe
He argued that unions were essentially a form of combination in restraint of trade, analogous to a group of producers combining to limit supply and therefore force up the price of their output. I don't have the specific cite handy, I haven't read any Friedman in 20+ years.

You can make the case that it's actually a defensible position in terms of intellectual consistency, though it also can (and I think should) be attacked from other intellectually consistent positions.

But the comparison seems to me to fly in the face of reality in terms of who really wields economic power, workers or large business enterprises. Milton Friedman: pointy-headed ivory tower intellectual with no clue how economic power in the working world actually works!

Posted by Gene | July 15, 2008 10:35 PM

I have to say that I always find it interesting when my friends of a more leftist persuasion jump on the Pinochet bandwagon. They find much to criticize: CIA collusion, suppression of dissent, Operation Condor, the murder of political opponents, and of course Friedman and the Chicago boys. They can barely find limits to their condemnation. Nonetheless, when the discussion turns to the Castro family's 40-year rule of Cuba, they terrific "yes but" phrase is immediately employed. Castro did, after all, improve literacy, create a national healthcare system, stamp out Batista's corrupt influences, etc. All of a sudden, authoritarianism in the service of left-wing causes is imminently nuanced and shaded. Almost makes one want to read Jonah Goldberg's book. Almost.

Posted by John Farmer | July 15, 2008 10:40 PM

I was the one of the people that brought up Chile and China in the other thread. I never said neoliberalism causes fascism. I was stating that many of the reforms that passed were facilitated by a lack of democracy. Saying that the desire to impose neoliberal policies has at times come to a head with democracy/civil rights is not inaccurate.

This shouldn't be a controversial statement.

Posted by Eric | July 15, 2008 11:06 PM

Milton Friedman should just say that this is all a distraction. Then say that he could not give up Pinochet anymore than he could give up his own grandmother. Then he could say that this Pinochet is not the Pinochet he met for one hour.

If Milton did this (and its too late I suppose with him being dead) then he would be okie dokie with lefties.

Posted by Aaron | July 15, 2008 11:11 PM

Why are the neoliberals here going crazy trying to defend friedman's honor? The guy wasn't perfect. Working and associating himself with Pinochet,a man who converted football stadiums into torture chambers, was hardly a high point in his career.

Posted by Eric | July 15, 2008 11:21 PM

James,

It is well known that Milton Friedman believed that a free economy is fundamentally incompatible with an unfree political system, and that freeing the economy would help create the political dynamic that would eventually lead to greater political freedom.

And, in any event, anything that could be done to free the economy would make the people better off, regardless of the political system.

You might not agree with that, but it makes no sense to morally condemn Friedman for meeting with Pinochet, when Friedman considered the extent to which the Chilean government took his advice would serve to make the least well off people in Chili better off.

Posted by Scott Wood | July 15, 2008 11:24 PM

Indeed, it was Milton Friedman's belief that free market economic reforms introduced into countries under authoritarian governments would push them towards democracy. And did it work in Chile? Yes! Is China thinking of making concessions towards democracy? Yes!

Leftists betray their ignorance by condemning Friedman for working with Pinochet, because he explicitly believed free market reforms would assist in bringing him down!

Posted by Mercutio | July 15, 2008 11:30 PM

Pinochet did not relinquish power because of the free market or because Friedmans's ideas. In fact the CIA never intended for him to stay in power forever. It was strong international/national opposition and pressure that eventually led to the referendum.

Posted by Eric | July 15, 2008 11:43 PM

Well maybe some people were claiming that the Chicago Boys were somehow behind the coup in Chile - they are wrong, it was the CIA.

Nevertheless, the broader point stands that neoliberal reforms are almost always implemented under duress, whether it is at the barrel of a gun(as in Iraq), or in the form of emergency structural adjustment loans (as in say, pick your country). Whether these reforms "work" is debatable. Many of them did tame inflation - but with deleterious consequences for large swaths of the population. What is undeniable is that these reforms are incredibly popular and when democracy is allowed to flourish, as Milton Freidman claims it needs to, they are roundly rejected by the population. Even in Chile, its privatized social security is massively unpopular.

The posts on this blog and the comments are completely devoid of any statistics or arguments as to whether these reforms are desirable or not. That's okay, Megan generally lays in out elsewhere. But the question here to the supports of Milton and the boys is, why have they been so unpopular among those in developing countries that have had to live with their impact?

Posted by musa | July 15, 2008 11:44 PM

lobbying is a natural consequence of a mixed economy. In fact, the more control the government has to regulate economic transactions, the greater the incentive for economic actors to influence it.

That's the free market theory, but the reality seems to be that if regulating governments did not exist, then capitalists would create them. Outside of Rand's fantasies businessmen do not see the state as their enemy, but as their tool to get a leg up on their competitors.

Posted by JohnO | July 15, 2008 11:45 PM

Even in Chile, its privatized social security is massively unpopular.

The voucher school system is also heavily criticized I believe.

Posted by Eric | July 15, 2008 11:55 PM

How many who condemn Milton Friedman for advising Pinochet's government condemn Hernan de Soto for advising repressive dictators? I haven't heard a lot of criticism of de Soto on that score. Why not? Is it because he isn't American or associated with American conservatism?

Isn't utilitarianism supposed to be part of the moral foundation of leftist policies? If so, then, from a utilitarian perspective, were de Soto and Friedman wrong to advise repressive dictators, if they thought that the policies they advocated would ultimately help the majority of the respective dictators' subjects?

Posted by DaveinHackensack | July 16, 2008 12:21 AM

D'oh! I left the "do" off of the end of Hernando de Soto's first name in the previous post. My apologies.

Posted by DaveinHackensack | July 16, 2008 12:24 AM

James: You are getting ignored because your point is irrelevant at best, because we are talking about the ethics of Friedman giving Pinochet economic advice, and whether free market capitalism was responsible for Pinochet's dictatorship. It is irrelevant because Chile was certainly not a democracy after Pinochet took power! Do you project much, because you are certainly just chanting?

Friedman believed free market capitalism would undermine dictatorships.
Undermining dictatorships is justified.
Pinochet is a dictator.
Therefore, Friedman meeting with Pinochet and giving him advice on adopting free market capitalism is ethically justified.

You might not agree with these premises, but how on earth is it relevant that Chile was a democracy before Pinochet to these set of statements?

Chile did not adopt free market capitalism before Pinochet came to power, rather Pinochet came to power and then adopted free market capitalism.
Therefore, free market capitalism did not cause Pinochet to come to power.

How on earth is it relevant that Chile was a democracy to these set of statements?

Posted by Mercutio | July 16, 2008 12:28 AM

How many who condemn Milton Friedman for advising Pinochet's government condemn Hernan de Soto for advising repressive dictators? I haven't heard a lot of criticism of de Soto on that score. Why not? Is it because he isn't American or associated with American conservatism?

Isn't utilitarianism supposed to be part of the moral foundation of leftist policies? If so, then, from a utilitarian perspective, were de Soto and Friedman wrong to advise repressive dictators, if they thought that the policies they advocated would ultimately help the majority of the respective dictators' subjects?

THE PROBLEM IS THAT A MAJORITY IN CHILE DIDN'T WANT THESE POLICIES! That's why the country had democratically elected a hard left-wing president.

Stop acting like Friedman was handing out democracy. He was advising the passing of legislation that the country didn't support. He helped pinochet take advantage of the country when it couldn't have its say.

That's an ugly thing to do.

Posted by Eric | July 16, 2008 12:34 AM

That's the free market theory, but the reality seems to be that if regulating governments did not exist, then capitalists would create them.

You're creating a false dichotomy. The choice isn't between an interventionist state and no government at all. Another option is a laissez-faire state--one with the power to enforce a monopoly on coercion (and prevent corporations from imposing their own regulatory schemes), but constitutionally restrained from economic intervention.

The problem is that it's hard to get this in a democracy because of anti-market bias. Whenever the market fails to get everything exactly right, people demand that the government step in and make things better. But because of anti-market bias, they fail to take into account all the ways a government solution can fail.

Corruption feeds off anti-market bias. Voters give the government power to "fix" the market, assuming that it will work exactly as they want it to, when in reality the government almost always screws up or flat-out abuses the power it's been given, creating a situation worse than the original market outcome. The more power you give government, the greater the potential for abuse.

For democracy to work well, the voters need to understand the risks of government failure and abuse, rather than basing policy preferences on a comparison between a utopian government and a real-world market. Of course, that itself is a utopian scenario, because that's far too much to ask of most voters. So basically we're screwed no matter what.

Posted by Brandon Berg | July 16, 2008 12:51 AM

"It didn't undermine the dictatorship. The thing Chile needed to be a democracy (again) was to get rid of the dictatorship."

Congratulations, you've mastered the tautology! It's getting hard to take you seriously. Wow, I never realized it was so easy as "just need[ing] to get rid of the dictatorship"!

What naive thinking! The thing is, James, you can say "it just needed to get rid of the dictatorship", but this generally requires, you know, actually doing something. Like, encouraging conditions that undermine their power in some way so their abuse of power becomes untenable. Or you could do it by force, but I doubt you'd prefer that. Those things tend to sometimes work at least. Saying we "we just [need] to get rid of the dictatorship" is just a tad simplistic.

And you might want to actually demonstrate how the prior democracy is relevant to the arguments I posted, instead of just repeatedly insisting that it's "directly relevant". You wouldn't want to be accused of chanting, now would you?

Posted by Mercutio | July 16, 2008 1:08 AM

Eric, suppose a despotic ruler calls you and asks for your policy advice. You have reason to think that your advice, if followed, will substantially improve the lives of those despotically ruled, and afford them more freedom. You also have reason to believe that if the despotic ruler does not heed your advice, the lives of those he despotically rules will substantially worsen, and they will enjoy less freedom. Do you counsel the despotic ruler, or refuse to meet with him?

I think those that roundly condemn Friedman for acting unethically with regard to Pinochet are engaging in moralistic posturing without regard to real world outcomes. On a more despearte level, making nice with Stalin, to the point that he starts to be referred to as "Uncle Joe" by some in the United States, is about as revolting as it gets. I'm damned glad it was done, however.
These ethical calculations are not the clear-cut cases that the Friedman/Pinochet critics like to suppose. It is all preening in pursuit of feeling superior.

Posted by Will Allen | July 16, 2008 1:09 AM

"THE PROBLEM IS THAT A MAJORITY IN CHILE DIDN'T WANT THESE POLICIES!"

Perhaps you have poll data on the popularity of the specific policies at the time they were enacted, but in any case it's immaterial to the point about utilitarianism. A policy can be considered "good" from a utilitarian perspective even if it is not popular at the time it is enacted (e.g., if the advocates of the policy believe that, sometime after the policy is enacted, it will lead to the greatest happiness for the greatest number of citizens -- even if most of those citizens don't realize that now).

Posted by DaveinHackensack | July 16, 2008 1:11 AM

Glad to see McArdle's penchant for ideology over empiricism remains shared by the majority of her looney posters, while a frantic few foolishly attempt to inject facts.

I say foolish in the same admiring way I might speak of someone who spent time hanging around meth labs to preach about the purity of the bodily temple....mostly, they get ignored, but there is a Quixotic charm to it.

My own opinion on Friedman, based upon a moderate amount of reading during several years of graduate business school is that he had figured out some useful things, but that they are nowhere near as far-reaching or universal as he or his true believers might aver.

Unless one buys into the usual exceptionalism regarding China --which I do not -- his policies are clearly no guarantee of democracy.

Chile was a democracy before Pinochet's coup, whose aftermath killed far more innocent people than 9-11. There really was no excuse for Friedman having anything to do with him, except for the fact that he was rather the "thing" with right wing Republicans just then. (I remember my brother's endless plaudits). Friedman's dealings with Pinochet cannot --by any reasonable measure --be viewed as a last ditch effort to re-establish democracy.

And yes --sometimes dictatorships have successful economic policies. (Refer to Singapore and China).

On the other hand, he didn't cause the coup, although it may have been encouraged by elements of the American government.

So what do you end up with? The usual McArdle drivel. Some fool on the left said Friedman was responsible for Pinochet. This is used as some sort of basis to resanctify a pretty smart fellow who suffered from severe intellectual hubris. This would be similar to McArdle if you removed the term "pretty smart".

Lots of inane statements. A few suckers trying to inject facts. General chaos.

Welcome to the McArdle funhouse.

Entertaining, as long as you are not actually trying to do any reaql thinking.

Posted by Tim Connor | July 16, 2008 1:57 AM

Glad to see McArdle's penchant for ideology over empiricism remains shared by the majority of her looney posters, while a frantic few foolishly attempt to inject facts.

I say foolish in the same admiring way I might speak of someone who spent time hanging around meth labs to preach about the purity of the bodily temple....mostly, they get ignored, but there is a Quixotic charm to it.

My own opinion on Friedman, based upon a moderate amount of reading during several years of graduate business school is that he had figured out some useful things, but that they are nowhere near as far-reaching or universal as he or his true believers might aver.

Unless one buys into the usual exceptionalism regarding China --which I do not -- his policies are clearly no guarantee of democracy.

Chile was a democracy before Pinochet's coup, whose aftermath killed far more innocent people than 9-11. There really was no excuse for Friedman having anything to do with him, except for the fact that he was rather the "thing" with right wing Republicans just then. (I remember my brother's endless plaudits). Friedman's dealings with Pinochet cannot --by any reasonable measure --be viewed as a last ditch effort to re-establish democracy.

And yes --sometimes dictatorships have successful economic policies. (Refer to Singapore and China).

On the other hand, he didn't cause the coup, although it may have been encouraged by elements of the American government.

So what do you end up with? The usual McArdle drivel. Some fool on the left said Friedman was responsible for Pinochet. This is used as some sort of basis to resanctify a pretty smart fellow who suffered from severe intellectual hubris. This would be similar to McArdle if you removed the term "pretty smart".

Lots of inane statements. A few suckers trying to inject facts. General chaos.

Welcome to the McArdle funhouse.

Entertaining, as long as you are not actually trying to do any real thinking.

Posted by Tim Connor | July 16, 2008 1:57 AM

Glad to see McArdle's penchant for ideology over empiricism remains shared by the majority of her looney posters, while a frantic few foolishly attempt to inject facts.

I say foolish in the same admiring way I might speak of someone who spent time hanging around meth labs to preach about the purity of the bodily temple....mostly, they get ignored, but there is a Quixotic charm to it.

My own opinion on Friedman, based upon a moderate amount of reading during several years of graduate business school is that he had figured out some useful things, but that they are nowhere near as far-reaching or universal as he or his true believers might aver.

Unless one buys into the usual exceptionalism regarding China --which I do not -- his policies are clearly no guarantee of democracy.

Chile was a democracy before Pinochet's coup, whose aftermath killed far more innocent people than 9-11. There really was no excuse for Friedman having anything to do with him, except for the fact that he was rather the "thing" with right wing Republicans just then. (I remember my brother's endless plaudits). Friedman's dealings with Pinochet cannot --by any reasonable measure --be viewed as a last ditch effort to re-establish democracy.

And yes --sometimes dictatorships have successful economic policies. (Refer to Singapore and China).

On the other hand, he didn't cause the coup, although it may have been encouraged by elements of the American government.

So what do you end up with? The usual McArdle drivel. Some fool on the left said Friedman was responsible for Pinochet. This is used as some sort of basis to resanctify a pretty smart fellow who suffered from severe intellectual hubris. This would be similar to McArdle if you removed the term "pretty smart".

Lots of inane statements. A few suckers trying to inject facts. General chaos.

Welcome to the McArdle funhouse.

Entertaining, as long as you are not actually trying to do any real thinking.

Posted by Tim Connor | July 16, 2008 1:58 AM

So, given the moderated stance of many anti-Friedman commenters here, which is that Friedman is not responsible for Pinochet's regime but still shouldn't have met with him, I hope that they will now endorse the following thing -

When left-wing American intellectuals and development analysts are asked by the widely corrupt, undemocratic and downright dictatorial governments of Africa and Central Asia, they should tell the leaders of these governments to sod off and refuse to offer any economic policy advice. Let them rot and the people starve until they get a proper government.

Yet somehow this seems to me to be the policy territory of neoconservatives rather than the morally upstanding left.

Posted by DPT | July 16, 2008 2:23 AM

"are asked by" should be "asked for help by," to clarify. Sorry for the error and double posting.

Posted by DPT | July 16, 2008 2:26 AM

Tim, the irony is that you just wrote about 300 words without expressing a thought worth examining, and you did it without being entertaining, no matter whether one was trying to do any "real thinking" or not.

Did you practice pomposity while attending the "several years of graduate business school" you thought was worthwhile to inform us of, during which you read your moderate of amount of Friedman? Is there any other biographical trivia that you would like to waste our time with? The name of your hamster, perhaps?

Posted by Will Allen | July 16, 2008 2:44 AM

Tim Connor:
So what do you end up with? The usual McArdle drivel. Some fool on the left said Friedman was responsible for Pinochet. This is used as some sort of basis to resanctify a pretty smart fellow who suffered from severe intellectual hubris.

On the contrary, Friedman's policy recommendations were essentially applied humility. Hubris is believing that you know how people should spend their money, run their businesses, educate their children, what they drugs--recreational or medical--they should or shouldn't take, etc., and forcing your vision on them. It takes humility to let people make those choices on their own.

Posted by Brandon Berg | July 16, 2008 2:49 AM

Guess Brandon Berg has got that about right.

What is wrong with the original proposal for a U. Chicago Milton Friedman Institute is that it is likely to turn into a boring, useless shrine. Having looked at other such Institutes, and at Friedman's ideas and record I would be in favour of a University of Chicago Institute of Applied Macro-Economics dedicated to "Milton Friedman, who often got it wrong, but much less often than the rest of us." I would then finance it by public subscription, especially from China and Chile where millions of peole have a lot of reason to be grateful to him, but also allowing money from the rest of us whom he infuriated, amused and enlightened to some purpose.

As for the letter which disgraces so many of the Chicago faculty, and appalled Megan, it illustrates:
1. Inability to think coherently outside one's own discipline is a sad reality of much academic life.
2. A major part of the costs of idotic public statements is the drudgery of dealing with stupid and scelerotic responses to them.
3. Milton Friedman's habit of noting what had happened and is happening is not widely copied amongst his critics; whilst the responses show that it is not often followed by his admirers.
4. Megan's instinct that a stink in the intellectual drains like this one needs to be cleared is right; but one needs to put on a mental gas mask while the work is under way.

Posted by David Heigham | July 16, 2008 9:01 AM

That's the free market theory, but the reality seems to be that if regulating governments did not exist, then capitalists would create them.

Brandon did a good job of explaining why that's a false dichotomy. I'm still curious, though, as to what prompted you to make that claim? Why does that seem to be the reality? Where has a "regulating government" been absent, then created by "capitalists?" It seems to imply--and correct me if I've misunderstood--that all, or at least a majority of, regulations came about as a result of one or another business interest. Do you think this is the case?

Outside of Rand's fantasies businessmen do not see the state as their enemy, but as their tool to get a leg up on their competitors.

I'm not sure how this advances your argument, but it's nice to have an official spokesman for the views of businessmen on the blog.

Posted by Clay | July 16, 2008 9:20 AM

THE PROBLEM IS THAT A MAJORITY IN CHILE DIDN'T WANT THESE POLICIES! That's why the country had democratically elected a hard left-wing president.

Allende got ca 36 % of votes in a three-way race, only 40,000 votes more than his closest rival. In accordance with the Chilean constitution he was then elected by Congress.

The candidates to the right of Allende had gotten almost two thirds of the vote. While I leave further comments to people with a better knowledge of the country I think it's obvious that Allende's election does not mean that a majority wanted hard left-wing policies.

Posted by Heinz | July 16, 2008 9:30 AM

Tell all of this to the victims of the Chilean miracle:

http://www.amazon.com/Victims-Chilean-Miracle-Neoliberalism-1973-2002/dp/082233321X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1216215843&sr=8-1

Posted by rickm | July 16, 2008 9:46 AM

Heinz-

Maybe you should actually learn the history of the 1970 election before denouncing the ignorance of other people. The third party in the election, the Christian Democratic Party, won 27.8% of the vote. The Christian Democratic Party was a left wing party. Their politics were much closer to Allende's than Allesandri.

So yes, a majority of Chileans votes for left-wing parties in the 1970 election.

Posted by rick | July 16, 2008 9:51 AM

James,

I read it the first time. The point about Chili being a democracy before it was a dictatorship is irrelevant, as Friedman didn't have anything to do with it becoming a dictatorship.

"So you've established that he didn't start the dictatorship (glad we aren't debating that), but he was willing to meet and give help to someone who was clearly known by then to be a dictator."

To me, this makes no sense as a criticism. Friedman did not meet with Pinochet to give him advice about how to maintain his dictatorship. He gave advice about the legal regime (as pertains to the economy) that would make the average Chilean best off (and, as it happens, assist in the demise of the dictatorship itself).

Which situation is best for the average citizen:

1) live in a dictatorship which employs a (relatively) enlightened economic policy of (relatively) free markets, the inherent openness of which would enhance the social pressures for a freer government

2) live in a dictatorship which employs an unenlightened controlled economy which enhances the pressures for the dictator to hang onto power until his last dying breath (see Mugabe, Robert)?

Posted by Scott Wood | July 16, 2008 10:01 AM

All this debate is silly. The sole question is whether it was ethical for Friedman to meet with Pinochet. Not whether Friedman's advice to Pinochet had positive or negative effects.

Whether or not you believe Friedman's views were correct, the fact is that he believed that pro-market reforms would lead to political freedoms. Whether that belief was accurate or not is irrelevant to the question of whether meeting with a dictator is ethical given that belief.

Given Friedman's stated views on the effects of market reforms, his meeting with Pinochet could only be unethical if Friedman's stated views were lies in which he did not honestly believe.

Posted by Mark | July 16, 2008 10:30 AM

ScentofViolets,

Regardless of the strength of your arguments, please, please, please stop typing "er" and "sigh" in your comments. It gives your posts an unbelievably obnoxious tone.

Posted by josh | July 16, 2008 11:21 AM

Well, since I will die one day, it is time that revealed my darkest secret so that I don't suffer Milton Friedman's fate.

On a November day in 1975, I and some of my colleagues made a large map of South America. My task was to find out who the presidents of each of these countries was. I am the one that wrote Pinochet in the border of Chile.

Even though my group did win the third grade world geography prize of free chocolate milk after recess, I can't help but feel we should have done more to rid Chile of Pinochet. That black mark on my reputation was foreshadowed by the chocolate stain on my Fonzie teeshirt.

Posted by Yancey Ward | July 16, 2008 11:26 AM

rick,

I'm impressed. You really make up for your inability to read by lavishly dealing out insults.

If you want to be taken seriously try something else.

Posted by Heinz | July 16, 2008 11:28 AM

"He helped pinochet take advantage of the country when it couldn't have its say."

He spoke with him for an hour and sent him a letter on economic policy.

This whole thing is just silly. The amount of real advise that Friedman gave Pinochet was trivial.

Personally, I don't think it would have been wrong for Friedman to have given him more extensive advise if he thought that it was in the best interest of the Chilean people, but Friedman's personal involvment with Pinochet was trivial. Especially compared with advise he gave to China and others that no one seems to care about.

Posted by eccdogg | July 16, 2008 11:28 AM

Gene - Friedman was very anti-union, but I'm almost certain he didn't call for them being banned. Making statements about their negative consequences, or arguing against closed shops, and other union restraint of trade (or even arguing that those specific things be banned) isn't arguing that unions should be illegal.

Posted by Tim Fowler | July 16, 2008 11:57 AM

ScentofViolets,

Regardless of the strength of your arguments, please, please, please stop typing "er" and "sigh" in your comments. It gives your posts an unbelievably obnoxious tone.

Posted by josh

Let's just see where I applied this 'unbelievably obnoxious' grunt, "er":

Good wiki link. It's totally undermines the anti-Friedman argument.

Er, John, I think you need to go back and reread. I really do. This is part of what earns you so much ire over on Thoma's blog.

Looks to me like I was exasperated with someone behaving like a jackass. Do you agree he was being obnoxious, deliberately so? The only way this conversation is going to progress is if you admit that he was, indeed, behaving like a jerk. Then we can go on to the proper way to handle these situations.

If, otoh, you're going to try to say that John (who has something of a reputation on some other blogs) was perfectly proper, that his behaviour was not obnoxious in the slightest, then we really don't have that much to talk about, do we?

So, do you want to have a real conversation about the proper way to deal with snarky posters? I'm definitely up for that. Or do you just want to engage in a little extra bashing in the guise of judicious critic? I can do that too - and I can guarantee you won't much care for the 'tone'.

The ball is in your court.

Posted by ScentOfViolets | July 16, 2008 12:20 PM

Scent,

I was also referring to your comments in the last post. "Er" is the equivalent of an eye-roll. It indicates an unnecessary level of arrogance and not taking the other person seriously.

As for John's comment, it seemed unnecessarily sarcastic, but Stefan, on the other thread seemed like he was quite reasonable, while I found your tone to indicate unearned disdain for having to suffer such fools. "Unbelievable obnoxious" was unnecessary, however, I want to sincerely apologize.

Posted by josh | July 16, 2008 12:32 PM

Gene, your original statement was "Yes, well Uncle Miltie had a rather less charitible view about unions, which he argued should be illegal. No doubt Pinochet found that particular chesnut quite agreeable, given his regime's very strenuous repression of any free union movement."

In _Free to Choose_, in a summing-up paragraph of a section of the "Who Protects the Worker?" chapter, the Friedmans write "Unions can and often do provide useful services for their members --- negotiating the terms of their employment, representing them with respect to grievances, giving them a feeling of belonging and participating in a group activity, among others. As believers in freedom, we favor the fullest opportunity of labor unions to performan whatever services their unions wish, and are willing to pay for, provided they respect the rights of others and do not use force." This is consistent with what I remember of (Milton) Friedman's positions elsewhere, so I'll be surprised if you come up with something vastly different.

This position does freak out union supporters. In principle they tend to be angry when the right of outsiders going peacefully to work in their place is treated as more important than the union's right to their jobs. (Someday I'd love to see some scholar trace the intellectual history of how the left built its firewall between inheriting nationality and owning jobs, on one side, and the classic criticisms of property rights on the other. The law in its august majesty allows non-union members as well as union members to support the squatters rights of the union members? When Adam delved and Eve span, who then was the union man?) But I think it's like a critic of current political parties saying that there shouldn't be special rights for established parties: someone who says Democrats shouldn't get on the ballot for free while Green candidates have to file petitions could be summarized as "a less charitable view about parties" without being absolutely dishonest. But I don't see any honest way to get from there to "he argued [parties] should be illegal" or "no doubt Deng found that very convenient, given his regime's very strenuous repression of any free party movement."

I advise that you stick to something like "Friedman wanted to gut unions by allowing unions no other way to shut down companies and scabs other than by absolutely peacefully withholding their own labor." For extra credit: "And with his extreme views on freedom of contract he would even allow the companies not just to fire the strikers, but to maintain a blacklist to try to avoid hiring union people." (That one's an semi-informed guess, I don't have a cite.) Those accusations should be more than sufficient for whipping the choir into a frenzy of hate. And when your words leak out of the wonderful echo chamber acoustics of your church, they won't instantly identify you as one of the "the nuts with a shaky knowledge" to those of us who are tone-deaf to the special beauty of unions.

Posted by William Newman | July 16, 2008 12:56 PM

Tim "Triple Post" Connor wrote: Glad to see McArdle's penchant for ideology over empiricism remains shared by the majority of her looney posters, while a frantic few foolishly attempt to inject facts.

Well then, let's see how your attempt goes:

Chile was a democracy before Pinochet's coup,

Oooh...ouch! Allende was running amuck, having wrecked the economy and placed himself on the verge of taking undemocratic power for himself at the moment when Pinochet intervened. Chile had been democratic, but was actually teetering on the edge of a political no-man's land. So while it is technically correct that "Chile was a democracy before Pinochet's coup", it is not factually correct, since facts tend to have critical contex