It was to be an economy based on private banking, foreign investment, and financial services. The Chicago boys under Pinochet privatized everything from state banks to welfare services. And by the end of the experiment, the percentage of Chileans living in poverty doubled from 20% to 40%.
Yes, I agree the installment of Pinochet was wrong, and "Chicago boys" style of economics completely misses the mark.
Sure, the idea there was to privatize all of those industries, but it was destined to fail because the population itself was being held under strict rule, and the entire system was being tied into other markets that also, were not free (i.e. the US and others).
Pinochet, and the "Chicago boys" were stupid to think that privatization whilst keeping the people under their thumb would result in a sustainable economy, and it didn't.
A truly free market cannot work without a truly free society. In other words, you cannot will a private entity to work as a free enterprise or capitalistic entity...if it "works" from a free market standpoint, it's as a consequence of the liberalities that surround it.
It didnt prevent rightwing ideologues from using Chile as a model for globalizing the new liberal capitalism. Scientists are telling us that if the other 85% of humanity adopts "this", the consumption based economies here in the west, then humanity will strip world resources bare in nothing flat and choke on the pollution.
I would agree with this if we're talking in terms of what's been passed off as a "free market" here in the west. In my opinion, what we've had is a two-headed monster of over-sized, spend-crazy government - merged with over-sized, plundering corporations. i.e. not true free market capitalism.
And I agree, if the rest of the world adopted that same form of collusion in the form of mandated consumption...well, we'd have to find another planet to live on.
Hooverites claimed to have tried Keynesian methods by raising taxes. But they actually raised taxes for the middle classes and poor and lowered them for the rich.
I agree, that was just as short-sighted.
The Hooverians claimed that the depression was due to supply side problems - that manufacturers werent producing enough for people to buy. New Dealers like Galbraith claimed the opposite- that there wasnt enough demand. And that rich people had too much money and the poor and middle classes not enough.
Either of those ideas leads to government intervention where none is needed, in my opinion.
The first experiment in laissez-faire capitalism lasted about 30 years from turn of the last century to 1929. The Chilean experiment occurred from 9-11-73 to 1985, about 16 years.
I think we might differ a bit on our definitions of "laissez-faire". To me, laissez-faire means the government should not interfere with the function of the markets.
I think the roughly 30 years from the turn of the century to 1929 is not a good example of laissez-faire, as it was during this period of time that our western governments became more involved in the markets. For instance, the United States instituted the income tax in 1913, and Canada followed suit shortly thereafter in 1917.
Likewise in 1913, the US government decided to allow the newly created Federal Reserve a private monopoly on the creation of money. It was the existence of the Federal Reserve, and the government's allowance of that body to keep interest rates artificially low, i.e. fix/interfere with the price of money no matter what the market was trying to indicate - that inflated the credit bubble in 1929.
When that bubble burst in 1929, Hoover - as you've correctly pointed out - interfered with the market correction by raising taxes on people who were already hurting, and by trying to prop up businesses that were poorly managed in the first place and should have been allowed to fail.
Unfortunately, the Roosevelt administration came in and also prolonged the problem by increasing taxes on would-be employers, and by trying to keep the bubble inflated with the creation of more credit, more debt, and with price-fixing.
Both sides proved very well that government interference in the market only prolongs the suffering. Too bad the governments of today fail to see that.
This experiment in new liberal capitalism in the more robust mixed market economies lasted about 30 years with Nicholas Sarkozy announcing, "Le laissez-faire, c'est fini"
Sarkozy, like other world leaders, is mistaken in his belief that what we've seen as far as an economy over the past 30-35 years is "laissez-faire". Actually what we've had in the west is quite the opposite.
Our current crisis was not caused by a lack of government oversight and regulation, but by principles of economics that have nothing to do with allowing the market to work, free of interference.
Principles such as centralized banking i.e. interest rate manipulation, and easy creation/access to credit, coupled with an irresponsible adherence to fiat currencies, are big components of how we've gotten ourselves into this mess.
You put that together with the fact that we have a service-based economy, relying on consumption/spending (70% of U.S. GDP is based on consumption), as opposed to a production/savings based system...and it's clear why we're in so much trouble.
Our system has never been laissez-faire, and we may want to think about trying it if we're ever to see ourselves out of this mess. You cannot get out of debt by spending money aka creating more debt.
Some economists would argue that re-regulation, bank nationalisations, and global "financial disarmament" are needed today.
I agree, I think guys like Paul Krugman are among them. I don't agree with them, however.
Capitalism has been tried in various experiments since 14th century Italy. What we need today is a more robust economic model not based on consumption and debt-driven growth. "If something cannot go on forever, it will stop" - Herb Stein
I completely agree, which is why I believe governments have to stop this unsustainable practice of "stimulus" spending, as all that is doing is depreciating the value of their own currencies. Governments have it backwards...they think that by spending money, throwing money into this broken system that they'll somehow get it going again, but really we're in this mess because we've over-spent and over-consumed...and doing more of the same certainly won't solve that problem.
I'm not sure who said it...but there is that old saying about the defintion of insanity...and I think it definitely applies to the decision-makers in pretty much all our western governments.
"Where the military is, prices are high" - old Chinese proverb
Totally agree...that's why we should be cutting military spending big time, in my opinion.
This whole war in Afghanistan is ridiculous, and a ridiculous waste of money. The US...that's a whole other ballgame...they spend something like a trillion a year to maintain their empire. Insane!
If the US were serious about fighting their economic troubles they'd recognize they've become a military industrial complex that spends waayy too much on their "defence". If they really want to be a "world leader" they would set a good example and close all of their bases around the world, end the occupations and bring their troops home. The way they have things set up is totally unsustainable.
"When money arrives, all is green, bustle and abundance. And when it leaves, all is trampled down, barren and bare" - an even older Chinese proverb
I agree with that one too.