76-07-B5
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Milton Friedman and Chile
TranscriptA great many people in America and the world have been sold a bill of goods with regard to one of our Latin American neighbors. Chile. This was evident recently when protesters demonstrated against the awarding of the Nobel Prize for economics to Dr. Milton Friedman. Dr. Friedman's qualifications for being named a Nobel laureate are beyond question and certainly more outstanding than many who have received that honor in the past. But the demonstrators weren't challenging his award on the grounds that he lacked stature in his field. No, the good and eminent leader of the Chicago University school of economics, was a target because he accepted an invitation to go to Chile about two years ago. Chile is on the liberal's list of places not to go because a military junta overthrew the government of President Allende. Allende, it is true, was elected to office and the present government of Chile seized power by force. Apparently that is only acceptable in some circles if the overthrowing is done by communists -- Castro in Cuba, North Viet Nam's conquering of South Viet Nam, Russian tanks rolling into Czechoslovakia. The military rulers of Chile don't meet that qualification. Just for the record the late, supposedly democratic (with a small "d") Allende was a Marxist and proved it by seizing businesses, industries, bank and agriculture, making them state owned. Then he ordered great wage increases while refusing to allow price increases. There was, of course, a brief period of seeming prosperity followed, of course, by the inevitable inflation. Money was virtually worthless, but then there wasn't anything to buy with it because production had fallen off. At the time the Allende regime was overthrown, the inflation rate had reached 1000 percent. That means a dollar by the end of the year was worth a dime and in the second year the dime was worth a penny. Sales and production were at an all time low. More than 400 industries were government owned, as were all the banks. After the junta assumed power, Professor Friedman and some associates -- sneeringly called by some, "the Chicago boys" -- were invited by some Chilean universities to talk to them about economics. In true Friedman tradition, twenty months ago the Generals of the junta took the drastic action politicians find so impractical. They set out to balance the budget, slashing spending ruthlessly. Austerity was the order of the day. They began selling to private citizens the banks and industries Allende had seized. The 400 government owned industries were reduced to 50 and all the banks are back in private ownership. The deep recession bottomed out a year ago and slowly, but surely, the economy is improving. The rate of inflation is no longer 1000%. Last year it was down to 340% and this year it's only half that much. Unemployment is down by one fourth and real wages -- (purchasing power of workers) -- have gone up 10% over last year. The new Chilean government is inviting foreign capital to invest and, in a kind of man bites dog twist, is pressuring business to be more free and less dependent on government. It seems when Milton Friedman talked, someone in Chile listened. Wouldn't it be nice if just once someone in Washington would ask, "What did he say"? This is Ronald Reagan. Thanks for listening. |
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