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View Diary: Che Guevara Smacks Bush! (205 comments)

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  •  Good question (none)
    but not quite the right answer...

    In the 1950s, the Catholic University of Chile (the second most prestigious school in the country) established a doctoral exchange program in economics with the University of Chicago, under which the top Chilean students went to UC to complete their degrees.

    This exchange program happened to coincide with the development of the so-called Chicago School of economic theory, mostly at the hands of Milton Friedman and Friedrich von Hayek. The Chicago School is characterized by a rigid belief in free markets, and at least initially it promoted strict monetarist solutions to economic problems.

    When the Chilean coup came down in 1973, the Chicago-trained economists were the most intellectually sophisticated group of economic thinkers in the country. They developed a blueprint for "shock therapy" that they presented to the coup plotters, if I remember correctly about three or four months before the coup itself. Many historians believe the existence of the Chicago plan contributed to the success of coup organizers in winning support within the armed forces.

    After the coup, the Chicago economists were originally iced out of decision-making, but as the economic crisis worsened through 1974 they were finally called on to put their shock therapy into practice. They did so in 1975, and succeeded in stopping triple or quadruple digit inflation almost in its tracks. The cost, of course, was skyrocketing unemployment rates, in excess of thirty percent, and a year and a half of negative growth, but Chile did recover economically in the late 1970s. Of course, the country experienced a second depression in the early 1980s as a result of the global debt crisis, but that's another story.

    Chileans started calling them the "Chicago Boys" because they were all relatively young and they formed a clearly defined group. Many of them remain prominent members of Chile's nouveau riche.

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