This isn't the first time that trickle-down economics has ruined an economy. See the article farther down.
economic success is not a right or left thing. It is universal
healthcare, minimum wages and progressive taxation; combined with low
total taxation as a percent of the total economy. In other words
keeping money out of the hands of the super-rich and the government.
See?, and you thought math was hard. :)
- Universal, single-payer healthcare is cheaper and better than anything else.
December 11, 2006.
Pinochet And The Fairy Tale Miracle Of Chile
Augusto Pinochet, the CIA-installed army general and dictator of
Chile who ended the Salvador Allende led period of democratic
government in that country, recently died at age 91. Victims of Pinochet's human rights abuses are celebrating his passing.
Photo credit: Jonathan Franklin
"I think that the death of Pinochet permits us to let
go of the past and now we can look forward at the future with much more
optimism and the desire to reconcile," said Maria Angelica Prats, the
daughter of a Carlos Prats, an army general who was murdered by
Pinochet security forces in a car bomb attack.
But Pinochet's heritage is not only characterized by Human Rights
violations. He also all but ruined the economy of Chile, listening to
the crème de la crème of the US economic establishment. "The
miracle of Chile" and similar phrases which described the experiments
of economic liberalism are just so much propaganda. In reality, the
economy of Chile took a hard hit and only recovered later, with a
profound change of policy.
Greg Palast has the story and it makes for an interesting read.
- - -
Tinker Bell, Pinochet And The Fairy Tale Miracle Of Chile
by Greg Palast
Palast is the author of the New York Times bestseller, Armed Madhouse. (Signed copies available for the holidays at www.palastinvestigativefund.org)
Chile's former military ruler General Augusto Pinochet has died
at the age of 91 - a week after entering hospital in Santiago to
receive treatment for a heart attack.
Cinderella's Fairy Godmother, Tinker Bell and General Augusto Pinochet had much in common.
All three performed magical good deeds. In the case of Pinochet, he
was universally credited with the Miracle of Chile, the wildly
successful experiment in free markets, privatization, de-regulation and
union-free economic expansion whose laissez-faire seeds spread from
Valparaiso to Virginia.
But Cinderella's pumpkin did not really turn into a coach. The
Miracle of Chile, too, was just another fairy tale. The claim that
General Pinochet begat an economic powerhouse was one of those
utterances whose truth rested entirely on its repetition.
Chile could boast some economic success. But that was the work of
Salvador Allende - who saved his nation, miraculously, a decade after
In 1973, the year General Pinochet brutally seized the government,
Chile's unemployment rate was 4.3%. In 1983, after ten years of
free-market modernization, unemployment reached 22%. Real wages
declined by 40% under military rule.
In 1970, 20% of Chile's population lived in poverty. By 1990, the
year "President" Pinochet left office, the number of destitute had
doubled to 40%. Quite a miracle.
Pinochet did not destroy Chile's economy all alone. It took nine
years of hard work by the most brilliant minds in world academia, a
gaggle of Milton Friedman's trainees, the Chicago Boys. Under the spell
of their theories, the General abolished the minimum wage, outlawed
trade union bargaining rights, privatized the pension system, abolished
all taxes on wealth and on business profits, slashed public employment,
privatized 212 state industries and 66 banks and ran a fiscal surplus.
Freed of the dead hand of bureaucracy, taxes and union rules, the
country took a giant leap forward … into bankruptcy and depression.
After nine years of economics Chicago style, Chile's industry keeled
over and died. In 1982 and 1983, GDP dropped 19%. The free-market
experiment was kaput, the test tubes shattered. Blood and glass
littered the laboratory floor. Yet, with remarkable chutzpah, the mad
scientists of Chicago declared success. In the US, President Ronald
Reagan's State Department issued a report concluding, "Chile is a
casebook study in sound economic management." Milton Friedman himself
coined the phrase, "The Miracle of Chile." Friedman's sidekick,
economist Art Laffer, preened that Pinochet's Chile was, "a showcase of
what supply-side economics can do."
It certainly was. More exactly, Chile was a showcase of de-regulation gone berserk.
The Chicago Boys persuaded the junta that removing restrictions on
the nation's banks would free them to attract foreign capital to fund
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
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, Chile was
pulled from depression by dull old Keynesian remedies, all Franklin
Roosevelt, zero Reagan/Thatcher. New Deal tactics rescued Chile from
the Panic of 1983, but the nation's long-term recovery and growth since
then is the result of - cover the children's ears - a large dose of
To save the nation's pension system, Pinochet nationalized banks and
industry on a scale unimagined by Communist 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, "Its 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
Agribusiness is the second locomotive of Chile's economic growth.
This also is a legacy of the Allende years. According to Professor
Arturo Vasquez 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. Vasquez, "maybe you need a socialist government
first to commit agrarian reform."
So there we have it. Keynes and Marx, not Friedman, saved Chile.
But the myth of the free-market Miracle persists because it serves a
quasi-religious function. Within the faith of the Reaganauts and
Thatcherites, Chile provides the necessary genesis fable, the ersatz
Eden from which laissez-faire dogma sprang successful and shining.
In 1998, the international finance Gang of Four - the World Bank,
the IMF, the Inter-American Development Bank and the International Bank
for Settlements - offered a $41.5 billion line of credit to Brazil. But
before the agencies handed the drowning nation a life preserver, they
demanded Brazil commit to swallow the economic medicine that nearly
killed Chile. You know the list: fire-sale privatizations, flexible
labor markets (i.e. union demolition) and deficit reduction through
savage cuts in government services and social security.
In Sao Paulo, the public was assured these cruel measures would
ultimately benefit the average Brazilian. What looked like financial
colonialism was sold as the cure-all tested in Chile with miraculous
But that miracle was in fact a hoax, a fraud, a fairy tale in which everyone did not live happily ever after.
posted by Sepp Hasslberger on Monday December 11 2006
updated on Monday March 3 2008
Microcredit - You Can Help Break the Cycle of Poverty
Without donating a penny, you can help to break the
cycle of poverty in a very real way. Simply by placing a $1,000
microcredit investment you can pull several families in the developing
world out of poverty for every year your money is invested. This is not
a donation or charity. Like other investments, you eventually get all
of your money back. You even earn a small amount of interest... [read more]
October 23, 2005 - Sepp Hasslberger
New Economics: The Scourge of Interest Rates
Interest is steering us towards non-sustainability,
argues Jeremy Wakeford, writing for the South African New Economics
Network, a group described on their site as an independent network for
the creation of a humane, just, sustainable and culturally appropriate
economic system in South Africa. Not only does interest act as a
constantly active mechanism for the transfer of value from the poor to
the rich, it is also an incentive for... [read more]
August 15, 2005 - Sepp Hasslberger
Third World Economy: Is Foreign Aid Destructive?
Foreign Aid comes with a feel-good factor. We can be
satisfied that we are - our countries are - contributing to the
economic well-being of starving people in the Third World. Even if only
a small percentage of our money goes to that aid, at least we did
something positive. Or did we? Zambian writer Evans Munyemesha does not
think so. In an article titled International Aid, published in The... [read more]
June 04, 2005 - Sepp Hasslberger
Argentina Defies Monetary Fund - Gives Economic Lesson to Big Finance
Three years after the collapse of Argentina's economy
under IMF and World Bank recipes for development, the South American
country's budding recovery is stunning international observers. Defying
the IMF's prescriptions, president Kirchner and his economic advisers
have told creditors to get in line and wait, while building the economy
from the bottom up. An excellent article in the New York Times relates
the story. The looting of Argentina by international... [read more]
December 30, 2004 - Sepp Hasslberger
Deficits, Free Trade and Privatization - How to Finance Empire
The aggressive designs for global control of the
current US government are supported through a hidden financial supply
line from economic players the world over, through their respective
countries' Central Banks, right into the US Treasury. This is, in
essence, what Michael Hudson, Distinguished Professor of Economics at
the University of Missouri and author of Super Imperialism: The Origin
and Fundamentals of U.S. World Dominance - explains in a highly... [read more]
November 19, 2003 - Sepp Hasslberger