Excerpts from Naomi Klein's "The Shock Doctrine" [View all]

[Zorro]

For those justifiably concerned (like me) about the threats being made by Musk et. al. about what must happen to our market economy to bring it back in balance (and the "short term pain" that will cause), I thought it might be of interest to read about what happened in Chile when Pinochet took over and gave Milton Friedman's Chicago School of Economics unfettered reign...
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"Pinochet held power for seventeen years, and during that time he changed political direction several times. The country’s period of steady growth that is held up as proof of its miraculous success did not begin until the mid-eighties – a full decade after the Chicago Boys implemented shock therapy and well after Pinochet was forced to make a radical course correction. That’s because in 1982, despite its strict adherence to Chicago doctrine, Chile’s economy crashed; its debt exploded, it faced hyperinflation once again and unemployment hit 30 percent – ten times higher than it was under Allende…

The situation was so unstable that Pinochet was forced to do exactly what Allende had done: he nationalized many of these companies…

It’s clear that Chile never was the laboratory of “pure” free markets that its cheerleaders claimed. Instead, it was a country where a small elite leapt from wealthy to super-rich in extremely short order – a highly profitable formula bankrolled by debt and heavily subsidized (then bailed out) with public funds. When the hype and salesmanship behind the miracle are stripped away, Chile under Pinochet and the Chicago boys was not a capitalist state featuring a liberated market but a corporatist one…

…What Chile pioneered under Pinochet was an evolution of corporatism: a mutually supporting alliance between a police state and large corporations, joining forces to wage all-out war on the third power sector – the workers – thereby drastically increasing the alliance’s share of the national wealth.

That war – what many Chileans understandably see as a war of the rich against the poor and middle class – is the real story of Chile’s economic “miracle”…

If that track record qualifies Chile as a miracle for Chicago school economists, perhaps shock treatment was never about jolting the economy into health. Perhaps it was meant to do exactly what it did – hoover wealth up to the top and shock much of the middle class out of existence."