Oh dear George, oh dear

Taking Naomi Klein\’s word on matters economic is certain to lead you into error.

The first such opportunity was provided by General Pinochet\’s coup in Chile. The coup was plotted by two factions: the generals and a group of economists trained at the University of Chicago and funded by the CIA. Their ideas had already been comprehensively rejected by the electorate, but now the electorate was irrelevant: Pinochet used the crisis he had created to imprison, torture or kill anyone who dissented. The Chicago School policies – privatisation, deregulation, massive tax and spending cuts – were catastrophic. Inflation rose to 375% in 1974; the highest rate on earth.

You see, the thing is, the Chicago Boys didn\’t take the economic reins until 1974/5.

In 1972, Chile\’s inflation was at 150%.[4] According to Hernán Büchi, several factors such as expropriations, price controls, and protectionism led to economic problems.[5] The Central Bank increased the money supply to pay for the increasing deficit. Büchi states that this increase was the primary cause for inflation.[5]

Immediately following the Chilean coup of 1973, Augusto Pinochet was made aware of a confidential economic plan known as El Ladrillo [6] (literally, \”the brick\”), so called because the report was \”as thick as a brick\”. The plan had been quietly prepared in May 1973 [7] by economists who opposed Salvador Allende\’s government, with the help from a group of economists the press were calling the Chicago Boys, because they were predominantly alumni of the University of Chicago. This document contained the backbone of what would later on become the Chilean economic policy,[7] recommending a set of economic reforms that included deregulation and privatization. Among others, they privatized the pension system,[8] state industries, and banks, and reduced taxes. Pinochet\’s stated aim was to \”make Chile not a nation of proletarians, but a nation of entrepreneurs.[4]

[edit] Reforms

The first reforms were implemented in three rounds – 1974-1983, 1985, and 1990.[2]

So what was actually happening to the economy in 1974 was the holdover from the previous regime: from Allende and his socialists.

9 thoughts on “Oh dear George, oh dear”

  1. To blame the wrong government is normal, isn’t it? The Coaltition will be blamed for whatever they do to cope with Labour’s decade of folly; Thatcher got blamed for having to deal with a previous Labour (+ Ted Heath) bequest . The consequences of Clinton’s sins of omission get blamed on W, some of W’s follies on O, and some of O’s follies will be blamed on whoever succeeds him. It’s just that in the “mainstream media” the injustice of this habit will be carefully amplified for the Right and attenuated for the Left.

  2. “Immediately following the Chilean coup of 1973, Augusto Pinochet was made aware of a confidential economic plan known as El Ladrillo [6] (literally, “the brick”), so called because the report was “as thick as a brick”.”
    I speak pretty good Spanish and I don’t think that that works as an insult in Spanish. I could be wrong but I doubt it. I have never hear “grueso” being an insult that is used in Spanish.

    So this can not be true.

  3. G Orwell, I think that could mean that the report had so many pages that, in a purely material sense, it was as thick as a brick.

  4. OK, so what happened as a result of the reforms? I’ve looked at data back to 1980 and inflation was still at 35% then, and carried wildly swinging in the 20-30% region until 1990 – 16 years after the first reforms were instituted – after which it declined to single figures.
    So whatever they did may not have been a disaster, but it certainly wasn’t a magic bullet either.

  5. ok John Davis…how long would YOU like the time to pass between swinging from 375% inflation to a mere 25%? You raised the question and your answer is?…. can you imagine the shock to any economy from such a massive change! Since you asked the questionwithout any supporting narrative, you probably cannot even imagine what might ensue.

  6. “Tracy W // Oct 19, 2010 at 11:51 am

    G Orwell, I think that could mean that the report had so many pages that, in a purely material sense, it was as thick as a brick.

    Sorry now I have read it again – I realise my mistake.

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