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Los “Chicago Boys”: a Powerful Exchange of People and Ideas Between Chile and Chicago Josephine B

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Los “Chicago Boys”: a Powerful Exchange of People and Ideas Between Chile and Chicago Josephine B Bates College SCARAB Honors Theses Capstone Projects Spring 5-2012 Los “Chicago Boys”: A Powerful Exchange of People and Ideas between Chile and Chicago Josephine B. Reinhardt [email protected] Follow this and additional works at: http://scarab.bates.edu/honorstheses Recommended Citation Reinhardt, Josephine B., "Los “Chicago Boys”: A Powerful Exchange of People and Ideas between Chile and Chicago" (2012). Honors Theses. 41. http://scarab.bates.edu/honorstheses/41 This Open Access is brought to you for free and open access by the Capstone Projects at SCARAB. It has been accepted for inclusion in Honors Theses by an authorized administrator of SCARAB. For more information, please contact [email protected]. s Los “Chicago Boys”: A Powerful Exchange of People and Ideas between Chile and Chicago An Honors Thesis Presented to The Faculty of the Department of History Bates College In partial fulfillment of the requirements for the Degree of Bachelor of Arts By Josephine Burnett Reinhardt Lewiston, Maine March 23, 2012 Acknowledgements I would like to thank my advisor, Karen Melvin, for her patience, insight, and encouragement. I especially appreciate my parents’ support and intelligent understanding and my sister’s commiseration, as she perseveres through her high-school junior research paper. My nine lovely housemates, on Elm St., have listened intently for seven months—and I am sure they are ecstatic that the end has finally come. Joe Hall, my history advisor, inspired me to join the History department and I am so grateful for his unremitting praise and wisdom. I also want to extend my gratitude towards my host family in Chile for making my abroad experience so inspiring. And to the various Chicago Boys and knowledgeable figures with whom I spoke in Chile, thank you for making this experience one of the most learned and fulfilling of my life. Table of Contents ABSTRACT ........................................................................................................................ 5 INTRODUCTION .............................................................................................................. 6 CHAPTER 1: POLITICS AND ECONOMICS IN CHILE BEFORE CHICAGO .......... 17 Peaceful Transitions of Power .................................................................................. 17 Copper and Nitrate ................................................................................................... 18 The Great Depression ............................................................................................... 19 Government Intervention and Broad Political Participation ................................... 20 Trade Protectionism 1938 - 1958 ............................................................................. 21 Hyperinflation ........................................................................................................... 22 Nationalization of the Copper Mines and Agrarian Reform .................................... 23 1970 Election of Allende ........................................................................................... 25 Allende’s Economic Policies ..................................................................................... 25 Political and Social Tensions.................................................................................... 27 Anti-Nationalization and a Constitutional Crisis ..................................................... 29 U.S. and CIA Involvement ......................................................................................... 31 The 1973 Coup .......................................................................................................... 32 The Chicago Boys ..................................................................................................... 33 CHAPTER TWO: THE PATH TO CHICAGO: THE PROGRAMS, CONTRACTS, AND DISCUSSIONS BETWEEN THE UNITED STATES AND CHILE .............................. 35 Early Foreign Assistance and Policies Towards Latin America .............................. 36 Assistance After WW II and the Threat of Communism ............................................ 38 Chile—Especially Attractive For the United States.................................................. 39 Emphasis on Education as a Form of Assistance ..................................................... 40 Economic Education and Development: a Priority for the U.S. in Chile ................. 43 The Klein-Saks Mission............................................................................................. 44 The Chicago Exchange: Early Discussions .............................................................. 47 The Chicago Exchange: Legitimized in U. S. Policy ................................................ 48 The Chicago Exchange: La Universidad de Chile, La Universidad Católica and The University of Chicago ............................................................................................... 50 The Chicago Exchange: On Its Way ......................................................................... 53 CHAPTER 3: FROM CHICAGO TO SANTIAGO: PEOPLE AND IDEAS IN TRANSIT ........................................................................................................................................... 56 The “Chicago School” .............................................................................................. 57 Choosing Students ..................................................................................................... 59 Life At Chicago ......................................................................................................... 63 Return to Chile .......................................................................................................... 67 Tensions Within La Universidad Católica ................................................................ 68 Chicago Thought Moves Outside La Universidad Católica ..................................... 70 The Chicago Boys Disperse and Regroup ................................................................ 73 Conservative Writings ............................................................................................... 75 El Ladrillo ................................................................................................................. 76 CHAPTER FOUR: THE CHICAGO BOYS IN ACTION .............................................. 78 Phase One: 1973 – 1982 (the ‘naïve’ phase) ............................................................ 79 Phase Two: 1982 – 1990........................................................................................... 87 3 Phase Three: 1990 – present .................................................................................... 89 CONCLUSION ................................................................................................................. 91 BIBLIOGRAPHY ............................................................................................................. 96 4 Abstract On September 11th, 1973, Chile broke with its strong democratic history when the military bombed the presidential palace and Augusto Ugarte Pinochet began his 17-year dictatorship. On the day of the coup, a team of Chicago-educated Chilean economists presented a document they had been asked to draft by the Chilean Navy. It called for the abolition of the statist economy that characterized Chile at that time and the implementation of a free-market model. The free-market model that emerged under the dictatorship brought Chile to its position as one of the strongest economies in Latin America and its fundamentals are still in place in present-day Chile. The model is glorified by some and criticized by others because of the authoritarian atmosphere in which it was introduced. But the forced exit of Pinochet in 1990 and return to democracy provides an example to other Latin American countries that a free-market can only be sustained alongside a democratic regime. Drawing from personal interviews, archival material, and historical documents, I examine how and why an exchange between Chilean Universities and the University of Chicago began in the mid-1950s and how these ideas have carried through to reshape Chile’s economy. I focus on the context in which the exchange emerged and how the Chicago Boys’ policies infiltrated Chile. Ultimately, the longevity of the free-market policies demonstrates that they have been effective in bringing Chile to its superior economic position in Latin America today. 5 6 Introduction Chilean army general Augusto Pinochet took power in a coup d’ etat from Socialist Salvador Allende in 1973 and ruled the country for seventeen years until he was replaced in a democratic election in 1990. His legacy is colored by extreme violence in the treatment of his political opponents. But Pinochet’s long tenure and relatively consistent economic policies allowed for an uninterrupted evolution from “la vía chilena al socialismo” (the Chilean Path to Socialism) to the free-market policies espoused by Milton Friedman and his young Chilean acolytes, the so-called “Chicago Boys.” Their economic plan was adopted by Pinochet in 1973 and, with important corrections, has formed the basis for Chile’s superior performance on most economic measures as compared with its Latin American peers. This generally accepted view is contested by some of Pinochet’s opponents, whose opinions are discussed in this thesis. Chile is a unique country in Latin America because of its relatively stable political
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