Milton Friedman: Knowledge, Public Culture, and Market Economy in the Chile of Pinochet
No quiero dejarles con falsos conceptos o con equívocos: no se logrará ponerle fin a la inflación sin pagar costo alguno, pero continuar con una inflación tiene también altos costos. En el hecho, Chile es un país muy enfermo y un enfermo no puede esperar recuperarse sin costo.
[I do not want to leave you with any false impressions or ambiguities: there is no way to end inflation without some cost, but continuing with inflation will also have high costs. The fact is, Chile is a very sick country, and the sick cannot expect to recover without cost.]
—Milton Friedman, Santiago, 1975
Economist Milton Friedman’s March 26, 1975, lecture in Santiago, Chile, constituted a pivotal moment in the symbolic transformation experienced by Chilean society during the years of the Pinochet regime. Although organized by the School of Management and Economics at the Universidad Técnica del Estado (State Technical University) in Santiago, the lecture actually took place at the Diego Portales building, which served as the military junta’s headquarters during its first years of government. Friedman’s speech was published some months later under the emblematic title “Chile y su despegue económico” (“Chile and Its Economic Take-Off”).1 It was an event during which certain symbolic components of state culture became detached from their historical frames of reference, thereby laying the groundwork for a market-centered matrix within Chilean society — that is, a market culture.2 This abandonment of the state planning model of previous decades and the shift toward a free-market economy in Chile were historically coupled with the violent military coup led by General Augusto Pinochet on September 11, 1973, against the socialist government of Salvador Allende. This political event dramatically interrupted the country’s democratic life by instituting a dictatorship that would last nearly twenty years. The Chile that Friedman visited in 1975 was a country ruled by the heavy hand of military authoritarianism, which had imposed political repression and severe restrictions on free speech: hundreds of people were in prison or concentration camps, were subject to torture, or were obliged to seek asylum in foreign territories.3
Set against this scenario, Professor Friedman’s visit to Chile marked a crucial turning point for the country’s economy: at the time, the military junta was trying to decide between continuing the old state-centered economic model or shifting toward a free-market economy. Friedman was certainly not an activist, but at this juncture he performed the role of adviser in a highly publicized fashion. His visit had major consequences for the economic life of the country. His various activities in Santiago, including a face-to-face meeting with General Pinochet, tipped the balance in favor of a structural adjustment to the economy much more drastic than the military regime had previously been willing to risk. In essence, a shock treatment. This facilitated the victory within the regime of advisers who favored economic liberalization.4
The lecture in Santiago by the prominent University of Chicago economist heralded the symbolic dislocation of categories that were critical to state culture, such as the notion of a national economy, the concept of a welfare state, and the idea of the university. His speech, as both discourse and performance, reframed these iconic images within new configurations of knowledge and culture.5 Friedman’s presentation not only described (and endorsed) the structural adjustment purportedly entailed by the transition to a free-market society, it staged what I will refer to as a cultural adjustment within the symbolic universe of Chilean society. Simply put, economic discourse, in this scenario, functioned as a cultural discourse in which economists played the role of active producers and disseminators of meaning.6 In this sense, I want to illuminate the cultural dimension of Friedman’s visit in Chile, reading it as a performance that exceeded the language of economic advice and staged a cultural turn in society.
Friedman and the Chilean technocrats of the mid-1970s maintained an explicit distance from the Platonic guardians of the university as an ivory tower. They would in no way invest themselves in the symbolic and administrative maintenance, let alone the restoration, of the old academic order of knowledge. This attitude was made evident in Friedman’s opening remarks on March 26, 1975. César Sepúlveda, speaking on behalf of one of the event’s sponsors (Banco Hipotecario de Chile), introduced Friedman by way of Platonic philosophy, calling him “a man in whom real wisdom stands out, the kind that Plato demanded from the leaders of his utopian State” (Friedman 1975: 7). In an apparently unrehearsed response to Sepúlveda’s words, Friedman attempted to distance himself from the Platonic vision of the ivory tower scholar by delineating a radically different approach:
Muchas gracias por tan generosa y espléndida introducción. Sin embargo, debo confesar que me siento un tanto incómodo con toda alusión que se haga a la Filosofía de Platón, puesto que en una sociedad libre no hay un lugar para el tipo de élite filosófica que Platón supone.
[Thank you very much for such a generous and splendid introduction. I must confess, however, that I feel somewhat uncomfortable with any allusion to Plato’s philosophy, for in a free society there is no place for the type of philosophical elite that Plato envisioned.] (1975: 9)
Friedman’s neoliberal ideology clearly set out to displace Sepúlveda’s attachment to Platonic thought, a philosophical current deeply embedded in Chile’s traditional intellectual circles. To illustrate his notion of a free society (a somewhat paradoxical term given Chile’s authoritarian regime), Friedman insisted on the difference between his opinions and those of the philosophical elites in Western societies. Friedman’s vision of knowledge and of the market society would be spread widely throughout Chilean public culture, both through his own intervention and through that of his local followers, namely, the Chicago Boys.7 For this influential circle of economists, la ciencia económica, or economic science, consisted of technical expertise coupled with the lived experience of citizens participating in the marketplace. In general terms, then, the opening lines of Friedman’s lecture were more philosophical and cultural than economic, yet they also suggested that academic and intellectual production needed to be conceptualized as part of a market society. In fact, Friedman’s insistence on the symbiosis between economic science and market logic could be read as an attempt to establish the bases of productive linkages between academic inquiry, governmental decision making, and economic policy. Such a vision obviously debunked the venerable old idea that knowledge resided, metaphysically, in the high spheres of the spirit.
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Many thanks to Brad Epps, June Erlick, José Falconi, Joseph Florez, Catalina Ocampo, and Shirin Shenassa for the generous sharing of their time and intellect. I would also like to thank Silvia Alvarez- Curbelo, John Coatsworth, Fernando Coronil, Sebastián Edwards, and María Clemencia Ramírez de Jara for reading parts of my work and for bibliographic and terminological suggestions. An earlier version of this paper was published in Spanish as “El discurso de Friedman: mercado, universidad y ajuste cultural en Chile” in Revista de Crítica Cultural 23 (November 2001).
All translations within the essay are mine.
- In the course of my investigation, I was not able to find a tape of Friedman’s live speech (most likely presented in translation from English to Spanish); therefore I have based my work on the transcript of the speech (published in Spanish in Friedman’s 1975 Chile y su despegue económico).
- By market-centered matrix, I mean a socioeconomic philosophy or perspective like the one proposed by Milton Friedman, wherein the logic of the market economy constitutes the axis of all social interactions. Referring to “the power of the market,” Milton and Rose Friedman wrote in Free to Choose, “Adam Smith’s flash of genius was his recognition that the prices that emerged from voluntary transactions between buyers and sellers — in short, from a free market — could coordinate the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off” (Friedman and Friedman 1990: 13).
- During 1991, in the new context of democracy, the National Commission for Truth and Reconciliation (an entity created in April 1990 and also known as the Rettig Commission) examined 2,920 deaths as a result of human rights violations and political violence under the military regime in Chile. In August 1996, the successor of this commission, the National Corporation for Compensation and Reconciliation, confirmed 899 cases in addition to those documented by the Rettig Commission, bringing the total number of dead and disappeared victims to 3,197 (Roniger and Sznajder 1999: 26 – 28).
- According to historians Simon Collier and William Sater, “in April 1975, after hearing the arguments and counterarguments of economists at a weekend conference at Cerro Castillo, Pinochet threw caution to the wind, coming down decisively in favor of the Chicago Boys,” conferring extraordinary powers on his finance minister Jorge Cauas, and appointing Sergio Castro as minister of economy. All were strongly convinced that “market relations had to be imposed throughout society” and “entrepreneurial culture had to replace habitual dependence on the state” (Collier and Sater 1990: 365 – 66).
- Methodologically, the category of discourse allows me to privilege the role of language in the domain of political economy. Although my use of the concept of discourse is undoubtedly borrowed from Foucault’s The Archaeology of Knowledge (1972), this does not necessarily imply an endorsement of Foucault’s tendency to reduce every aspect of social life to a discursive operation. The notion of performance is used here to emphasize the productive role of language in social and historical events, as well as the inherent theatrical aspects of such moments as the 1975 Friedman lecture. In this respect, performance “can be defined as an activity which generates transformation” (Sayre 1995: 91 – 104).
- Writing from within the hegemonic tradition of neoclassical economics, Deirdre McCloskey states, “Science requires more resources of the language than raw sense data and first-order predicate logic” (1998: 19). Moreover, “economics . . . can be seen as an instance of literary culture. That it can also be seen as an instance of scientific culture is no contradiction. It shows merely how the official rhetoric of science narrows the field, demanding that it honor the one and spurn the other” (McCloskey 1998: 34). Even though McCloskey has her own stake in promoting the ideology of market capitalism, the rhetorical, yet analytical perspective she offers helps to complicate the essentialist claims of her colleagues in Chile who regard the free-market economy as something purely factual. McCloskey’s work shows how even these neoconservative approaches are symbolically and linguistically constructed.
- “The Chicago Boys” was a nickname coined by Chile’s local media to describe those who were trained in the doctrine of monetarism at the University of Chicago (Meller 1984; Stepan 1985; Valdés 1989; Délano and Traslaviña 1989). According to Alfred Stepan, in the particular case of Chile, “the Chicago School of Economics was most influential in 1973 – 78” and later, between 1979 and 1981, “the ‘Virginia school’ of political economy (Buchanan, Tullock, and to a lesser extent Brunner) had the most impact” (1985: 323).