The Shock Doctrine 3: From Chicago to Santiago

by matttbastard

Chapter 2: The Other Doctor Shock: Milton Friedman and the Search for a Laissez-Faire Laboratory

(Series intro here, Sarah’s posts here, my previous two installments here and here)

In the first installment of this series, I noted that shock was “a theme Klein continually examines and reexamines throughout the book–and not simply  in a metaphorical sense.”  Last week we saw just how literal–and visceral–Klein’s thesis could be, as she recounted in agonizing detail the infamous CIA-sponsored McGill University shock therapy experiments. In the second chapter, Klein finally shines the spotlight on the key villain of the book who will eventually tackle shock therapy on a macro level: noted economist Milton Friedman of the highly influential Chicago School of Economics.

As Sarah notes in her examination of Chapter 2, “there’s a thread of commonality with religion running alongside the development of radical capitalism–not just through the uneasy relationship that the two formed with the rise of the religious right in the Republican party, but in the religious devotion to markets as a good in themselves.” Their mission was chilling in both its simplicity and, at the time, its revolutionary audacity: “stripping the market” of U.S. government ‘interference’–price-fixing, minimum wage legislation, public education–they believed “were actually doing untold harm to the market.” To save the integrity of the world economic system would require nothing less than, in the words of Klein, “a capitalist Reformation: a return to uncontaminated capitalism.”

Klein notes that Friedman’s charismatic ambition helped drive the efforts,  that it was his “energy that gave the school its revolutionary fervour” in its collective drive to return the world  economy “back to a state of “natural” health, when all was in balance, before human interferences created distorting patterns.” As an expression of their radical devotion, Friedman and his then-largely-marginalized acolytes made a concerted effort, with the financial assistance of government and corporate patrons, to quietly evangelize the global South, where in most nations the prevailing system was “developmentalism”–a nationalistic economic theory anathema to free-market fundamentalists so righteously preaching the doctrine of laissez-faire capitalism.  A number of Chilean citizens were eventually recruited and trained in Chicago in what became known as the Chile Project, later returning to staff high-level government positions that would eventually allow them to shape economic policies in directi0ns prescribed by Friedman in his book Capitalism and Freedom:

First, governments must remove all rules and regulations standing in the way of the accumulation of profits. Second, they should sell off any assets they own that corporations could be running at a profit.  And third, they should dramatically cut back funding of social programs.

The born-again laissez-faire faithful came back to Chile fully indoctrinated, as Klein observes, quoting economist Mario Zanartu,”more Friedmanite than Friedman.”  They began to establish themselves within local government and academic circles, quietly lying in wait as Nixon ascended to the presidency and the CIA began to work in concert with the Chilean opposition to plot the overthrow of the democratically-elected socialist regime of Salvador Allende.  Recent coup d’etats in Brazil and Indonesia would provide a template for violent, shocking regime change in Chile that would allow the vaunted tabula rasa so long desired by the Friedmanites to be established–by any means necessary, as we will soon discover.

Next Week: State of Shock The Bloody Birth of the Counter-Revolution

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