Chile's Socialist Rebar

05/03/2010 05:12 am ET | Updated May 25, 2011

Ever since deregulation caused a worldwide economic meltdown in
September '08 and everyone became a Keynesian again, it hasn't been
easy to be a fanatical fan of the late economist Milton Friedman. So
widely discredited is his brand of free-market fundamentalism that his
followers have become increasingly desperate to claim ideological
victories, however far-fetched.

A particularly distasteful case in point. Just two days after Chile
was struck by a devastating earthquake, Wall Street Journal columnist
Bret Stephens

According to Stephens, the radical free-market policies prescribed to
Chilean dictator Augusto Pinochet by Milton Friedman and his infamous
"Chicago Boys" are the reason Chile is a prosperous nation with "some
of the world's strictest building codes."

There is one rather large problem with this theory: Chile's modern
seismic building code, drafted to resist earthquakes, was

It does seem significant, however, that the law was enacted even in
the midst of a crippling economic embargo ("make the economy scream"
Richard Nixon famously growled after Allende won the 1970 elections).
The code was later updated in the nineties, well after Pinochet and
the Chicago Boys were finally out of power and democracy was restored.

Little wonder:

After the coup and the death of Allende, Pinochet and his Chicago Boys
did their best to dismantle Chile's public sphere, auctioning off
state enterprises and slashing financial and trade regulations.
Enormous wealth was created in this period but at a terrible cost: by
the early eighties, Pinochet's Friedman-prescribed policies had caused
rapid de-industrialization, a ten-fold increase in unemployment and an
explosion of distinctly unstable shantytowns. They also led to a
crisis of corruption and debt so severe that, in 1982, Pinochet was
forced to fire his key Chicago Boy advisors and nationalize several of
the large deregulated financial institutions. (Sound familiar?)

Fortunately, the Chicago Boys did not manage to undo everything
Allende accomplished. The National copper company, Codelco, remained
in state hands, pumping wealth into public coffers and preventing the
Chicago Boys from tanking Chile's economy completely. They also never
got around to trashing Allende's tough building code, an ideological
oversight for which we should all be grateful.

Thanks to CEPR for tracking
down the origins of Chile's building code.