Despite a dictatorship, Chile's "Chicago Boys"make good
Chile," says a U.S. State Department 'official grudgingly, "is a casebook study in sound economic management." Chile? The country where two months ago the Catholic Church demanded an investigation into the identities of more than 300 bodies found crammed into unmarked coffins in a Santiago cemetery? Chile? The international pariah that refuses to extradite to the U.S. the former head of the Chilean secret service and two other army officers indicted for murder by a federal grand jury? Yes, Chile, where Military Dictator Augusto Pinochet is simultaneously tightening his grip on the government and freeing up the economy.
Today a six-block stretch of Calle Ahumada in Santiago is one of South America's busiest commercial malls. Brightly painted signs pull shoppers into new boutiques stuffed with madras dresses from India, art supplies from Germany and motorcycles from Japan. The adjoining streets are jammed with honking hordes of shiny cars and trucks of every modern make. Workers are digging trenches for an extension of the Santiago subway. However, La Moneda palace, where Pinochet's predecessor, Marxist Salvador Allende, was killed in 1973, remains begrimed and run down.
Repressive political regimes do not normally dictate laissez-faire economic systems, but that is what is happening in Chile. The result is that inflation, which was as high as 1,000% in 1973, has been beaten back to about 38%. Real growth spurted 7.3% in 1978 and rose another 7.5% or so last year. Per capita income is up to $1,500; in real terms, the people are at least back around the income levels of 1970. That was when Allende was elected and began to crank up the printing presses to cover spiraling government deficits that led to economic disaster.
Chile's economy, which was highly protected under Allende, has become much less restricted and more entrepreneurial. The transformation has been largely the work of those whom Chileans call the "Chicago Boys," a handful of officials and academics led by Planning Minister Miguel Kast, 30, Finance Minister Sergio de Castro, 49, and Central Bank President Alvaro Bardon, 39. All have graduate degrees in economics from the University of Chicago, the spiritual home of Free Marketeer Milton Friedman. Like most Chilean economists, the Boys were fervent opponents of Allende, and the military junta picked many of them for top jobs. They were given broad authority to cope with emergency in 1975, when the country lay in ruins, hammered by three blows in succession. First there was the economic chaos that preceded and immediately followed Allende's bloody ouster, then the surge in oil prices, and finally the collapse of the price of copper, which accounted for more than 80% of Chile's exports.