Miracle of Chile - Milton Friedman

Milton Friedman

Milton Friedman gave some lectures advocating free market economic policies in La Universidad Católica de Chile. In 1975, two years after the coup, he met with Pinochet for 45 minutes, where the general “indicated very little indeed about his own or the government’s feeling” and the president asked Friedman to write him a letter laying out what he thought Chile’s economic policies should be, which he also did. To stop inflation, Friedman proposed reduction of government deficits that had increased in the past years and a flat commitment by government that after six months it will no longer finance government spending by creating money. He proposed relief of cases of real hardship among poorest classes. In October 1975 the New York Times columnist Anthony Lewis declared that “the Chilean junta’s economic policy is based on the ideas of Milton Friedman…and his Chicago School”.

Commenting on his statement about the “Miracle”, Friedman says that “the emphasis of that talk was that free markets would undermine political centralization and political control.” Friedman stated that “The real miracle in Chile was not that those economic reforms worked so well, but because that’s what Adam Smith said they would do. Chile is by all odds the best economic success story in Latin America today. The real miracle is that a military junta was willing to let them do it.” Friedman said the “Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society.” The term Miracle of Chile is also commonly used to refer to the favorable economic results of economic liberalization in that economy.

Friedman has wondered why some have attacked him for giving a lecture in Chile: “I must say, it’s such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country. I later gave a series of lectures in China. When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said, 'It's curious. I gave exactly the same lectures in China that I gave in Chile. I have had many demonstrations against me for what I said in Chile. Nobody has made any objections to what I said in China. How come?'” He points out that his visit was unrelated to the political side of the regime and that during his visit to Chile he even stated that following his economic liberalization advice would help bring political freedom and the downfall of the regime.