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WSJ Columnist Attributes Low Death Toll In Chile Quake To Friedman, Pinochet

First Posted: 05/02/10 06:12 AM ET Updated: 05/25/11 04:40 PM ET

Chile Earthquake

In the aftermath of the Chilean earthquake, it was inevitable that somebody would pen a piece crediting the comparatively low casualty rate (next to the Haitian earthquake) to Milton Friedman and Augusto Pinochet. So here's Bret Stephens, carrying water for gangster economists and blood-soaked dictators. Hey, at least they made the trains run on time enforced building codes!

Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.

Yes, but who knows what might have happened if the advice of Friedman and the "Chicago Boys' had taken deep root and influenced extant policies on the day of the earthquake? Friedmanism is generally credited with boosting Chile's GDP over the course of Pinochet's dictatorship, but it came at a cost and true improvements to the Chilean economy are more accurately owed to the policies of those who preceded Pinochet in power.

Friedman-style economic policies actually had Chile on a steep, downward path into Haitian-style privation. This is all ably documented by James Petras and Steve Vieux in "The Chilean 'Economic Miracle': An Empirical Critique". Under the guidance of the Chicago Boys, Pinochet concentrated wealth in the hands of the upper class, while wages and social services budgets declined. The authors similarly document a massive unemployment crisis in Chile during the Friedman period, which rose as high as 30%. Chileans generally credit Pinochet for putting more people in homes, but as a 1985 Mother Jones article points out, this was largely due to effective PR -- the housing rate under Pinochet "was actually slower than it was under" the two previous governments.

And wow, the banks. Greg Palast documents the carnage wrought by gangster speculators:

Pinochet sold off the state banks - at a 40% discount from book value - and they quickly fell into the hands of two conglomerate empires controlled by speculators Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers - then leveraged these assets with loans from foreign investors panting to get their piece of the state giveaways.


The bank's reserves filled with hollow securities from connected enterprises. Pinochet let the good times roll for the speculators. He was persuaded that Governments should not hinder the logic of the market.

By 1982, the pyramid finance game was up. The Vial and Cruzat "Grupos" defaulted. Industry shut down, private pensions were worthless, the currency swooned. Riots and strikes by a population too hungry and desperate to fear bullets forced Pinochet to reverse course. He booted his beloved Chicago experimentalists. Reluctantly, the General restored the minimum wage and unions' collective bargaining rights. Pinochet, who had previously decimated government ranks, authorized a program to create 500,000 jobs.

In other words, Pinochet ordered up a stimulus package! Javier Vial and Manuel Cruzat ended up being prosecuted for fraud.

Palast notes that, in reality, credit for Chile's comparatively robust economy should be attributed elsewhere:

To save the nation's pension system, Pinochet nationalized banks and industry on a scale unimagined by Socialist Allende. The General expropriated at will, offering little or no compensation. While most of these businesses were eventually re-privatized, the state retained ownership of one industry: copper.


For nearly a century, copper has meant Chile and Chile copper. University of Montana metals expert Dr. Janet Finn notes, "It's absurd to describe a nation as a miracle of free enterprise when the engine of the economy remains in government hands." Copper has provided 30% to 70% of the nation's export earnings. This is the hard currency which has built today's Chile, the proceeds from the mines seized from Anaconda and Kennecott in 1973 - Allende's posthumous gift to his nation.

Agribusiness is the second locomotive of Chile's economic growth. This also is a legacy of the Allende years. According to Professor Arturo Valenzuela of Georgetown University, Washington DC, Allende's land reform, the break-up of feudal estates (which Pinochet could not fully reverse), created a new class of productive tiller-owners, along with corporate and cooperative operators, who now bring in a stream of export earnings to rival copper. "In order to have an economic miracle," says Dr. Valenzuela, "maybe you need a socialist government first to commit agrarian reform."

Of course, one thing that Pinochet was really, really good at was murdering his own people. According to the Rettig Report, "2,279 persons were killed for political reasons." That means one thing that has proven better at killing Chileans than an 8.8-on-the-Richter earthquake that knocked the Earth three inches off its axis was Augusto Pinochet.

If Bret Stephens believes that's an appropriate cost for earthquake-proof infrastructure, we can all be glad he's just some simpering newspaper columnist. And if the "spirit of Milton Friedman" truly is "hovering" over Chile today, it better bug out with all deliberate haste before it's devoured by the ghosts of the Desaparecidos".

UPDATE: Naomi Klein, whom Stephens calls out in his piece, emails the Huffington Post with an inconvenient fact: the seismic building codes that were adopted in Chile to preserve its infrastructure against earthquakes were put in place in 1972. Credit to Allende: the Pinochet coup took place in 1973.

P&C National Underwriter has more:

AIR Worldwide mentioned that Chile has a long history of building code evolution, beginning in 1928. A year after its 1985 magnitude 8 quake, the government of Chile asked the Chilean Institute of National Standards to revise the 1972 building codes, and revised codes were released in 1993.

So, the extant codes, codified under Allende, weren't revised until 1993? Pinochet left power in 1990.

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