Neoliberalism - Post-WWII Neo-liberal Currents - Chile

Chile

Further information: Crisis of 1982 and Miracle of Chile

In the 1960s Latin American intellectuals began to notice the ideas of ordoliberalism; these intellectuals often used the Spanish term neoliberalismo to refer to this school of thought. They were particularly impressed by the social market economy and the Wirtschaftswunder (“German miracle”) and speculated about the possibility of accomplishing similar policies in their own countries. Neoliberalism in 1960s meant essentially a philosophy that was more moderate than classical liberalism and favored using state policy to temper social inequality and counter a tendency toward monopoly.

In 1955 a select group of Chilean students (later known as the Chicago Boys) were invited to the University of Chicago to pursue postgraduate studies in economics. They worked directly under Friedman and his disciple Arnold Harberger, while also being exposed to Hayek. When they returned to Chile in the 1960s, the Chicago Boys began a concerted effort to spread the philosophy and policy recommendations of the Chicago and Austrian schools, setting up think tanks and publishing in ideologically sympathetic media. Under the military dictatorship headed by Pinochet and severe social repression, the Chicago boys implemented economic reform. The latter half of the 1970s witnessed rapid and extensive privatization, deregulation, and reductions in trade barriers. In 1978 policies that would reduce the role of the state and infuse competition and individualism into areas such as labor relations, pensions, health, and education were introduced. In 1990 the military dictatorship ended. Hayek argued that increased economic freedom had put pressure on the dictatorship over time and increased political freedom. Many years earlier, in The Road to Serfdom (1944), Hayek had argued that "economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."

Two decades after it was first used by pro-market intellectuals in the 1960s, the meaning of neoliberalism changed. Those who regularly used the term neoliberalism in the 1980s typically applied it in its present-day, radical sense, denoting market fundamentalism. Neoliberalism had not only become a term with negative connotations employed principally by critics of market reform, but it also had shifted in meaning from a moderate form of liberalism to a more radical and economically libertarian set of ideas. Scholars during this period had also ceased to identify the Germans as neoliberalism’s intellectual progenitors, tending instead to associate neoliberalism with the theories of Friedrich Hayek and Milton Friedman. Indeed, Pinochet’s 1973 coup emerges as some kind of a watershed in the usage of neoliberalism. Neoliberalism gained a negative, radical sense just after this date. Once the new meaning of neoliberalism was established as a common usage among Spanish-speaking scholars, it diffused directly into the English-language study of political economy.