Economist's View: "The Chicago Boys and the Chilean Earthquake"

Economist's View: "The Chicago Boys and the Chilean Earthquake"

Andrew Leonard takes on an op-ed in the WSJ lauding the Chicago Boys:

The Chicago boys and the Chilean earthquake, by Andrew Leonard: The ghost of Milton Friedman, writes Bret Stephens in the Wall Street Journal, "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.

Stephens' logic is simple. After the U.S.-backed coup in 1973, in which Gen. Pinochet seized power from the democratically elected president Salvador Allende, a group of Chilean economists mentored by Friedman, and known to history as "the Chicago boys," instituted a series of radical free market reforms. Since that point, averaged over the decades, Chile has experienced the strongest sustained economic growth in South America. Rich countries, argues Stephens, are more likely to institute and enforce building codes. Q.E.D. Milton Friedman saved lives.

Some might find it intellectually provocative to cite Milton Friedman's authority in an argument that depends on the foundation of successfully enforced government-mandated building code regulations. The building inspector is not exactly a libertarian hero. Others might wonder if a more important factor in Chile's relatively tough building codes might be the devastating 9.5 earthquake the country endured in 1960. Haiti hadn't experienced an earthquake as bad as the one this January in 240 years. Earthquake resistant building codes tend to be taken more seriously in regions that are accustomed to regular bouts of annihilation.

But the earthquake is just a side show for the opinion page of the Wall Street Journal -- just another opportunity, however shameless, to push free market fundamentalism. One ... pertinent question might be to ask just how much credit really is due Chicago-school economics for Chile's current relative prosperity? Mining alone accounts for 20 percent of Chile's GDP, and it is very much worth noting that the country's crown jewel, the copper industry, is completely dominated by one state-ownedcompany, Codelco. Ponder that, for a second: Latin America's poster child for Chicago school economics features state control of the single most important economic resource. Huh.

Chile also suffers from some of worst income inequality in the world...

The part where the op-ed said that we should be thankful that Milton Friedman caused more regulation, isn't Milton Friedman great for doing that, caught my attention as well. After all, from a Chicago perspective, markets don't need external guidance, they're are almost always self-regulating. Markets create the incentives needed to ensure that nobody would ever build unsafe financial assets cars buildings.