“Chicago Boys”

   The name for a large, diverse group of neoliberal economists, some of whom studied at the University of Chicago. Among them were many Chileans who had received fellowships in the 1960s to study under such Chicago monetarist theorists as Milton Friedman and Arnold Harberger. After the military coup in Chile in 1973, the generals wanted to transform the economy but did not know where to begin. Admiral José Toribio Merino Castro, the junta member in charge of economic policy, sought the advice of Chile’s Chicago Boys, who had produced a massive plan for instituting free-market reforms. The junta was not easily convinced, but after much spirited debate and a visit to Chile by Milton Friedman in 1975 (the first of a series of consultations), the Chicago Boys took control of the economy. Their recommended “shock treatment” called for drastically reducing the supply of money, expanding free trade, and encouraging private investment.

   The treatment was painful, especially for the working class. Chilean industry, accustomed to producing for domestic consumption, felt the pressure of foreign competition, and some companies went bankrupt. Industries that did adapt to competition became leaner, wages plummeted, unemployment and self-employment rose, and thousands entered government make-work programs. Trade unions lost much of their traditional bargaining power. By the end of the 1970s, however, the Chicago policies resulted in what many described as the “Chilean miracle.” Between 1973 and 1980, inflation dropped from 600 to 31 percent, growth was significant, and a fiscal deficit was transformed into a surplus. There was an increase in demand for consumer goods, mostly imports. The economic boom improved the lot of many Chileans. At the same time, its benefits failed to reach the large percentage of people living in poverty, particularly dwellers in Santiago’s poblaciones (shantytowns).

   The boom ended in 1982, a victim of worldwide recession, and the Chicago Boys fell out of favor. The government continued to embrace the free-market model, but from then on economic policy became less doctrinaire and more pragmatic.