The Chicago Boys Now And Then

Rebecca Liu
September 27, 2016

Following Augusto Pinochet’s coup of Salvador Allende’s Chile in  1973, a group of Chicago-trained economists, now known as the ‘Chicago  Boys’, were sent to Chile to restructure the nation’s economy. Trained  in the Chicago School of economic theory, this group pushed broadly for  free-market policies that were closely tied to the thought of Milton  Friedman, under whom many of these economists trained. Friedman visited  Chile for six days at the invitation of the Chicago Boys in 1975, where  he had a short meeting with Pinochet himself. Friedman’s entanglement  with Pinochet’s regime led to many criticisms in America; his Nobel  Laureate award ceremony was interrupted by scores of protests. When  interviewed about these in Newsweek in 1976, Friedman responded  that “for an economist to render technical economic advice to the  Chilean government,” was like “a physician to give technical medical  advice to the Chilean government to help end a medical plague.”[1]

Friedman’s simile is emblematic of a larger problem when it comes to  talking about modern economics. ‘Ideology’ is positioned in  contradistinction to ‘technical,’ which denotes a scientific order that  functions not on the ‘subjective’ beliefs but ‘objective’ expertise,  such as the medical expertise of the physician. Economic policy is thus  accorded a scientific status within Friedman’s positioning. It is a  technical order that is self-legitimating; that is, legitimated on its  own apparent scientific rigour. In the case of Pinochet’s Chile, the  rise of the ‘scientist’ form of economics meant that when it came to  questions about the complicity of the Chicago Boys – and of the United  States at large – in a politically repressive regime, its widespread  political abuses were separated from the ‘technical’ concern of economic  reform.

The divorcing of the ‘economic’ and the ‘political’ in these matters  can be seen in popular responses to working with the militant regime.  When the World Bank recommended a loan of $33 million to Pinochet in  1976, its President Robert McNamara justified the choice by stating  “there is no room for political considerations in that type of  situation.”[2]  Similarly, when US Secretary of the Treasury William Simon returned  from a visit to Chile in 1976, he praised the “economic freedom” he saw  in the regime, while noting Pinochet assured that “progress was being  made” on the question of human rights.[3]  Both these characterizations depoliticize the economic sphere,  resulting in a curious state of affairs in which politics thought of as  reprehensible could co-exist with a economic sphere that warranted  praise. One could, within this particular figuration, be theoretically politically repressed while economically free; how that worked in practice, was perhaps a question for those in another discipline.

Yet a closer examination into the historical realities that underpineed the Pinochet problem demonstrates how fragile this  economic-political distinction really is. Compare, for example, the  World Bank’s willingness to grant loans to Pinochet’s Chile on the basis  of ‘political neutrality’ against its suspension of loans to Salvador  Allende’s socialist Chile from 1970 to 1973.[4][5]  A choice made even more suspect, moreover, when considering that, at  the time, the United States funded 20% of the World Bank’s grants.[6]

Since-declassified US government documents reflect an intention to  consolidate Pinochet’s regime to prevent the re-emergence of Allende’s  populist leftism. When then-American Ambassador to Chile David H. Popper  presented an internal policy paper on American economic aid in 1976,  Foreign Service Officer Richard J. Bloomfield privately characterized  Popper’s stance as such: “we must provide economic and military  assistance; in fact by page 25, we are worrying about our  responsibilities for making the Junta’s economic program a success. Why?  Because preventing the re-emergence of a Chilean Government essentially  hostile to us is our chief interest and the human rights problem is  secondary.”[7]  The question of economic aid, in Popper’s reasoning, is deeply related  to the political question of Chile’s relationship with the United  States; economic aid is deployed as a political action in order to consolidate one ideological regime and prevent the emergence of another.[8]

The case of Chile shows the ostensibly ‘neutral’ role of economics  obscured the deeply political field in which the debate about Pinochet,  the Chicago Boys, and the United States Government took place. The  apparently sterile operation that was economic reform was, in fact,  enmeshed in a larger web of competing political objectives. While this  does not mean that the actors who touted the scientism of economics were  necessarily politically sympathetic to Pinochet per se, it is worth  questioning the limitations and implications of their logical reasoning.  The attempt to bracket questions of political ‘ideology’ when dealing  with ‘technical’ economic matters, it appears, only perpetuated existing  political hegemonies, which remained obscured yet effective by the  language of neutrality. Without a public, self-reflexive discourse about  how these economic considerations impinged on, and worked within,  a certain political order, the ‘technical antipolitics’ of economics,  rather than divesting ‘the economic’ from political implications, in  fact implicitly signed onto the continued perpetuation of existing  hegemonies through the guise of ‘neutrality’. Given the disparity  between the ‘technical’ language of economics, and the social and  political problems in which it always becomes entangled, today we need  to return to the basics; to reconceptualize the foundational assumptions  of economics.


The influence of the Chicago Boys demonstrates quite clearly what has  subsequently been described as an ‘ontological failure’ in economics;  the failure of economics to interrogate the very epistemic premises on  which the discipline is found. By casting a priori their work in a purely ‘technical’ realm, the Chicago Boys precluded any consideration or discourse about the political dimensions  of their work. Although the world, however, has changed drastically  since the 70’s, the impulse to regard economics as a self-regulating techne unto itself, has remained.

We are at a time marked by multiple crises. Inequality is rising to  levels beyond precedent; grassroots democratic action has proven to be increasingly impotent  in the face of finance capital; 2008 crisis has subsequently witnessed  not the dismantling, but reinvigoration, of neoliberal ideals. Economics  as a discipline has come to shape and inform the methods of other  disciplines, as there is an increasing convergence (or one might say,  absorption) between economics and the methods deployed by political  science, and the legal institution.[9]  Yet in spite of its ubiquitous reach, economics itself has remained  relatively impervious to external critique. What has made this possible  is the very sustenance of the narrative that positions economics as a  technical, ‘scientistic’ discipline predicated on a certain expertise; a narrative, the Chilean case demonstrates, that quite easily collapses upon further examination.

The lead-up and reactions to the Wall Street Crash – and to  financialization in general – has affirmed the almost untouchable status  of a discipline that bleeds into all frames of daily life. Headlines  are rife with examples of the ‘gatekeepers’ of economic knowledge  denigrating those who dare enter on the sweeping basis that these  ‘outsiders’ just don’t understand. Take, for example, JPMorgan Chase CEO Jamie Dimon’s infamous speculation  during a luncheon at Chicago’s Executives’ Club, held in June of last  year, that Senator Elizabeth Warren didn’t ‘fully understand the global  banking system’. Bernie Sander’s presidential campaign was commonly met  by liberals echoing the same sentiment; that his ‘pie-in-the-sky’ dream sounded nice, but was economically unviable.[10]  This was notably seen in a spat between University of  Massachusetts-Amherst economist Gerald Friedman and the former Chairs of  the Council of Economic Advisors, namely Alan Kreuger, Austan Goolsbee,  Christina Ro. After Friedman published a study  estimating the effect of Sander’s proposed economic plans, which  included optimistic calculations such as a 3% rise in GDP and an average  $22, 000 increase in  median household income, the Chairs responded  with an open letter  to Sanders and Friedman taking issue with the credulity of Friedman’s  claims; ‘as much as we wish it were so’, they write, ‘no credible  economic research supports economic impacts of these magnitudes’.

In her review of Anna Kornbluh’s Realizing Capital: Financial and Psychic Economies in Victorian Form  for the Los Angeles Review of Books, Michelle Chihara discusses the  Dimon-Warren dispute, observing that “his accusation lacks a crucial  element that’s usually part of mansplaining: the explaining. Dimon never  specified Warren’s mistake, nor was he expected to specify it”.[11]  A similar maneuver is made in the CEA’s dismissal of Friedman’s  research; while the open letter takes issue with Friedman’s study,  stating that it ‘undermines the credibility of the progressive economic  agenda’ and ‘runs against our party’s best traditions of evidence-based  policy making and undermines our reputation as the party of responsible  arithmetic’, notably missing is the explanation as to how Friedman  runs against the Council’s rigorous arithmetic sanctimony. James K.  Galbraith, former executive director of the United States Congress Joint  Economic Committee, responds to the CEA letter  noting ‘you write that you have applied rigor to your analyses of  economic proposals by Democrats and Republicans. On reading this  sentence I looked to the bottom of the page, to find a reference or link  to your rigorous review of Professor Friedman’s study. I found nothing  there’.

It could almost be a title of a mystery novel: ‘Modern Economics at  the Case of the Missing Explanation’. The proliferation of experts  wielding their expertise in a claim to authority without following up as to why, is  symptomatic of how economics itself has transformed into a  self-legitimating technical order that produces ‘objective’ knowledge  far from the reach of the general person. We see here echoes of the  Chicago Boys; to ‘know economics’ is to ‘know medicine’; you wouldn’t  question your doctor’s medical advice, so why not quiet your doubts and  listen when your economist or banker professes to ‘know better’?

Perhaps it is true; that Goolsbee knows better than Friedman; Dimon,  more than Warren (unlikely). Yet to merely shut your opponents down by  waving some authoritative flag stating that the others simply ‘don’t know enough’,  is lazy, unfair, and counter-productive to a conversation that puts in  the line the very livelihood of all people, even the ‘unenlightened  laymen’ evicted out of their homes in 2008. Perhaps, however, what is  more piqued in these encounters is not that Warren and Friedman have  their economics knowledge wrong, but that their very actions pull apart the fragile narrative bolstering the technical order of modern economics.

The ‘explaining’, in many cases, is supposed to be contained within,  and resolved by, the intricate technical ‘truths’ of economics itself.  The ‘technical expertise’ of economics represented in narratives  concerning the Chicago Boys has been further inundated with an  increasingly niche set of algorithms, formulas, and inextricable jargon  in our modern-day world of ‘finance’. Economics is thus rendered a  technical truth, but a ‘truth’ so complex that it cannot possibly be  explained to the layperson; or, in Warren’s case, to a Harvard Law  School professor, expert in bankruptcy law, and founding member of the  Consumer Protection Bureau. The result is a ‘fetish’ of the supposed  technicality of economics as a truth unto itself; one that cannot  possibly be explained, but whose intrinsic authority is so  unquestioned that it can be effectively wielded as a trump card. One  immediately thinks of James Carville’s oft-repeated (and arguably, often  misrepresented) slogan for the Clinton campaign, “[It’s] the economy,  stupid!”


In a podcast  with the Huffington Post, Warren refers to the Dimon incident, stating  “the problem is not that I don’t understand the global banking system. I  fully understand the system and how they make their money. And that’s  what they don’t like about me.” Perhaps the problem is not then that  Warren misunderstands the system, but rather that she  understands it to the point of its demystification. When figures like  Dimon and the Chairs of the Council of Economic Advisors shut out or  de-legitimate outside voices on the basis of a basic ‘misunderstanding’  while refusing to engage with the actual content of debate,  they too practice a decidedly unrigorous, incredulous epistemic  maneuver. It is here that one can also stake an intervention; not in the  murky morass of economics’s technical debates, but rather, starting  from the outside, question and challenge the a priori ontological assumptions of the discipline.

When questioned about the political implications of his work with  Pinochet, a Chicago Boy was quoted as saying: “I don’t understand what  political power the economic team could have”; “we are making a policy  in order to lose power, so how can we be concentrating it?”[12]  Here, this unnamed economist seems to be making two directly  contradictory maneuvers. First, he disavows the possibility that he may,  through his work restructuring the Chilean economy, any political power whatsoever; second, he then suggests that rather than concentrating state power, the Chicago Boys are rather promoting freedom through its loss. The understated assumption at work here is thus: expanding free markets expands the possibilities of political freedom.

Who best to help dismantle these artificial walls than the father of modern economics himself? In his 1962 book Capitalism and Freedom, Friedman himself writes about the intimate relation between economics and politics, noting:

“It is widely believed that economic arrangements are one thing and  political arrangements another, that any kind of economic arrangement  can be associated with any kind of political arrangement. This is the  idea that underlies such a term as “democratic socialism.” The essential  thesis, I believe, of a new liberal is that this idea is invalid, that  “democratic socialism” is a contradiction in terms, that there is an  intimate connection between economic arrangements and political  arrangements, and that only certain combinations are possible.

It is important to emphasize that economic arrangements play a dual  role in the promotion of a free society. On the one hand, “freedom” in  economic arrangements is itself a component of freedom broadly  understood, so “economic freedom” is an end in itself to a believer in  freedom. In the second place, economic freedom is also an indispensable  means toward the achievement of political freedom.”

The practice of economics, Friedman himself suggests, cannot be separated from the sociopolitical structures of the world in which it operates; it is, rather, through economics itself that political freedom can be secured.

This has not been an article critiquing the technical practices of  economics. It has not sought to delineate its empirical applications,  nor its disciplinary methods. It rather explores the way in which  ‘economic knowledge’ has been rhetorically deployed to foreclose and  de-legitimate certain political positions, while acting in the service  of others. To draw out the otherwise hidden political maneuvers that  underlie the public avowal of political neutrality and scientific  techne.

Antonio Gramsci’s theory of ‘hegemony’ famously positioned ideology  as something not only imposed by force from above, but also drawn from  ‘spontaneous consent’, that is, the insidious and invisible  manufacturing of assent by the dominant class. In Gramsci’s cultural  hegemony, subordinate classes do not face oppression through visible  means of coercion, but rather are induced to subconsciously accept a  state of affairs antithetical to their own interests. Ideological  positions become neutered and congealed into ‘common sense’; any thought  or speculation to the contrary are swept away as far-fetched phantasms.  And that is why external critique is so valuable; to sweep away the  clutter and assumptions masking self-evident truths. We must  continuously question and challenge positions taken to be self-evident  truths; that begins with expanding the parameters of discourse. The  insulated, privileged position of modern economics cannot stand so long  as it continues to inform and shape the very ways in which we live.  ‘Only Goldman’s money was treated as real in the last crisis’, Chihara  writes; we cannot let this remain as such.


[1] In An Interview With Newsweek, June 14 1976.

[2] Quoted In Philippines Daily Express, Manila, May 21 1976; Cited In Robin Broad’s Unequal Alliance: The World Bank, The International Monetary Fund, And The Philippines, 1988. 47.

[3] Tom Wicker, ‘a Two-faced Policy For Chile’ In The Spokesman Review, 16 June 1976, P. 4.

[4] Catherine Gwin, ‘u.S. Relations With The World Bank, 1945 – 1992’ In The World Bank: Its First Half Century, Volume 1, Ed. Devesh Kapur, John Prior Lewis, Richard Charles Webb (1988) Pp. 256.

[5]  When Prompted On This Apparent Double Standard In A New York Times  Interview In 1978, Mcnamara Once Again Distinguished Between The  ‘political’ And The ‘economic’, Responding That “We Do Not, We Have Not  In This Institution Allowed Our Lending Policy To Be Determined By Civil  Rights[…] Our Lending Policies Have Been Dictated, Both Under Allende  And Under Pinochet, Entirely By Economic Considerations.”[5]

[6] Nbc, ‘the Whole World’s Bank’ May 23, 1978.

[7] Richard J. Bloomfeld, Department Of State Memorandum. ‘ambassador Popper’s Policy Paper’ July 11, 1975. National Security Archives At George Washington University. Written In A Private Correspondence To Us Undersecretary Of State William D. Rodgers.

[8] In The World Bank: Its First Half Century, Catherine  Gwin Writes That “The Suspension Of Lending In 1970 – 73 Was Cited In  The 1982 Us Treasury Report As A Significant Example Of The Successful  Exercise On The Bank.”[8]

[9] As Explored In Bernard Harcourt’s The Illusion Of Free Markets, (Cambridge: Harvard University Press, 2011).

[10] ‘pie-in-the-sky’ Was A Common Rejoinder Used By The Hillary Clinton Camp Against Bernie Sanders.

[11] Michelle Chihara, ‘what We Talk About When We Talk About Finance’, In Los Angeles Review Of Books, September 18 2015.

[12] Julia Paley, Marketing Democracy: Power And Social Movements In Post-dictatorship Chile, (Berkeley: University Of California Press, 2001), 199.

All by
Rebecca Liu