Chicago Boys

3 Key Takeaways

• The Chicago Boys were influential in shaping Chile’s economic policies during the military dictatorship of Augusto Pinochet.
• They advocated for deregulation, privatization, and open markets, leading to significant economic reforms in Chile.
• The impact of the Chicago Boys’ policies is still debated, with both positive and negative consequences for Chile’s economy and society.

What are the Chicago Boys?

The Chicago Boys were a group of Chilean economists who received training at the University of Chicago’s Department of Economics, primarily under Milton Friedman and Arnold Harberger. They embraced free-market economic theories, including monetarism, which emphasized the importance of controlling inflation through monetary policy.

In the 1970s, following the military coup led by Augusto Pinochet, the Chicago Boys were appointed to key positions in the Chilean government, where they implemented a series of radical economic reforms. These reforms included deregulation, privatization of state-owned enterprises, trade liberalization, and the adoption of a fixed exchange rate.

Importance of the Chicago Boys

• Economic Transformation: The Chicago Boys’ policies transformed Chile’s economy from a state-controlled model to a free-market system.
• Economic Growth: These reforms led to initial economic growth and a decrease in inflation, but also increased inequality and social unrest.
• Influence on Economic Thought: The Chicago Boys’ ideas and policies influenced economic thinking and policymaking in other countries, particularly in Latin America.
• Controversial Legacy: The legacy of the Chicago Boys remains controversial, with debates about the long-term social and economic consequences of their reforms.

How the Chicago Boys’ Policies Worked

The Chicago Boys implemented a range of free-market policies in Chile, including:

1. Deregulation: They removed price controls, reduced barriers to trade, and liberalized the financial sector.
2. Privatization: They sold state-owned enterprises to private investors, leading to a reduction in the size of the government.
3. Trade Liberalization: They opened up the Chilean economy to international trade and foreign investment.
4. Fixed Exchange Rate: They pegged the Chilean peso to the U.S. dollar to stabilize the exchange rate and control inflation.

Real-World Applications

The Chicago Boys’ policies had a profound impact on Chile’s economy and society. While they initially led to economic growth and a reduction in inflation, they also resulted in increased income inequality, unemployment, and social unrest. The long-term consequences of their reforms continue to be debated, with some praising their economic achievements and others criticizing their social impact.

The Chicago Boys’ legacy serves as a cautionary tale about the potential consequences of radical economic reforms, highlighting the need for a balanced approach that considers both economic and social factors.