While economists laud the recently deceased Milton Friedman for being â€œa champion of freedom whose work transformed economics and changed the world,â€ as a full-page advertisement in the New York Times put it, people in the South will remember the University of Chicago professor as the eye of a human hurricane that cut a swath of destruction through their economies. For them, Friedman will long be associated with two things: free-market reform in
Soon after the coup against the government of Salvador Allende on September 11, 1973, Chilean graduates of Friedmanâ€™s economics department, who were soon dubbed the â€œChicago Boys,â€ took over the helm of the economy and launched a program of economic transformation with doctrinal vengeance. In light of his much-quoted assertion about political freedom going hand-in-hand with free markets, the irony that in
Yet Friedman visited
The Chilean Experiment
After his disciples were done with it,
Free market policies subjected the country to two major depressions twice in one decade, first in 1974-75, when GDP fell by 12 per cent, then again in 1982-83, when it dropped by 15 per cent.
Contrary to ideological expectations about free markets and robust growth, average GDP growth in the period 1974-89–the radical Jacobin phase of the Friedman-Pinochet revolution–was only 2.6 per cent, compared to over 4 per cent a year in the period 1951-71, when there was a much greater role of the state in the economy.
By the end of the radical free-market period, both poverty and inequality had increased significantly. The proportion of families living below the â€œline of destitutionâ€ had risen from 12 to 15 per cent between 1980 and 1990, and the percentage living below the poverty line, but above the line of destitution, had increased from 24 to 26 per cent. This meant that at the end of the Pinochet regime, some 40 per cent of
In terms of income distribution, the share of the national income going to the poorest 50 per cent of the population declined from 20.4 per cent to 16.8 per cent, while the share going to the richest ten per cent rose dramatically from 36.5 per cent to 46.8 per cent.
In terms of the structure of the economy, the combination of erratic growth and radical trade liberalization resulted in â€œdeindustrialization in the name of efficiency and avoiding inflation,â€ as one economist described it, with manufacturingâ€™s share of of GDP declining from an average of 26 per cent in the late 1960â€™s to 20 per cent in the late eighties. Many metalworking and related manufacturing industries went under in an export-oriented economy that favored agricultural production and resource extraction.
The radical Friedman-Pinochet phase of the Chilean economic counterrevolution came to an end in the early 1990â€™s, after the Concertacion came to power. In violation of classic Friedmanism, this center-left coalition increased social spending to improve
However, with the social democratic regime unwilling to challenge the upper classes, the basic neoliberal contours of economic policy were kept, including the emphasis on agricultural and natural resource exports. This focus on primary product exports has created tremendous environmental stresses. Overfishing along
Exporting the â€œRevolutionâ€
Structural adjustment policies (SAPs), which set the stage for the accelerated globalization of developing country economies during the 1990â€™s, created the same poverty, inequality, and environmental crisis in most countries that free-market policies did in
Yet free-market and structural adjustment policies have been institutionalized so thoroughly that, despite their being now universally seen as dysfunctional, they continue to reign. The legacy of Milton Friedman will be with the developing world for a long time to come. Indeed, there is probably no more appropriate inscription for Friedmanâ€™s gravestone than what William Shakespeare wrote in Julius Caesar: â€œThe evil that men do lives after them, the good is oft interred with their bones.â€
*Walden Bello is professor of sociology at the University of the