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Published on February 5th, 2011 | by Yellow Magpie

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Milton Friedman: The Man Whose Philosophy Brought The World To Its Knees (Part One)

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2008 was a chaotic year, it was a period of unprecedented economic devastation.

Never before had there been such a global meltdown as the disadvantages of interlinked economies and interlinked banks became apparent for all to see. Over the past three years it has now become obvious that many countries are facing unprecedented difficulties. So how did this happen? Who or what is to blame and why did this come about?

The Instigators

When the banking crisis first emerged people immediately started to question just how exactly a highly contagious financial system had been put in place and who was responsible. Amid the chaos a narrative strand was starting to loom out of the foggy financial abyss. A thread that would find its origin nearly 60 years in the past.

In it, the role of a group of similar thinking individuals, and one man in particular, became evident and was subsequently exposed by the author, Naomi Klein. This group, which became known as The Chicago Boys, set in place a disastrous chain of events that would irrevocably change the landscape of the world and lead to the events of 2008 which are still causing grave damage to this day.

When scrutiny was applied to the the genesis of this economic crisis  it soon became clear just how much of a leading role a small group of powerful individuals began to play in shaping the economic policies of the world.

Milton Friedman And The New School Of Economics

Milton Friedman was a lecturer in economic theory at the University of Chicago. It was this man who would lead the world in a new method of economics.

Friedman would spend three decades cultivating a group of like-minded economic theorists, some of whom would go on to become Nobel Prize winners.

Milton Friedman

Friedman was an advocate for deregulated capitalism with governments allowing businesses to be free from constraints and bureaucracy. He adhered to Adam Smith’s economic philosophy maintaining that the market should be the sum total of individual effort as opposed to public corporations. Milton believed that a self-correcting economy would result in the absence of regulation. He also held the belief that virtually all state bodies should be privatised.

New Things Get Done In A Crisis

Friedman had bold economic ideas but no way of getting these implemented. What he really needed was a crisis situation in which a country would adopt these bold ideas out of desperation. ‘Only a crisis, actual or perceived, produces real change. When that crisis occurs the actions that are taken depend on the ideas that are lying around.‘, Friedman wrote.

Chile And The Chicago Boys

The seeds of a new economy were sown when a group of Chilean students from the Catholic University at Santiago came over to Friedman’s Chicago university to study. This group fully imbibed Friedman’s philosophy and subsequently became known as The Chicago Boys.

Salvador Allende

However, The Chicago Boys hit a stumbling block in Salvador Allende, a right-wing politician who favoured regulation and state owned bodies. After failing to stop Allende getting elected president, The Chicago Boys, their cronies and the CIA tried fouler means.

Their influence never to be underestimated, The Chicago Boys sought to put someone in Allende’s place and this task was taken on by the United States President Richard Nixon who ordered the CIA to prevent Allende from remaining the Chilean President.

CIA backed Coup d’etat.

Nixon, a close friend of Friedman, charged the CIA with turning Chile into a deregulated economy as ‘The Brick’ policy was delivered. ‘The Brick’ was a huge 500-page economic document that was drafted up by a ten-man panel. Eight of whom were Chicago Boys.

To implement the new economic model several stages had to be put in place. The first of which was a strike by truck drivers which ground the country to a halt.

The next stage happened on September 11, 1973, with the assault on the Presidential Palace by General Augusto Pinochet. Once Pinochet was in power the removal of price controls, the sale of semi-state bodies and the removal of import barriers occurred.

The Damage Done To Chile

The Chilean Crises was the perfect opportunity for Friedman and The Chicago Boys to replace a government that was in favour of regulation with a government that supported free market economies. What resulted was the dictatorship of Augusto Pinochet, chaos and oppression for Chileans.

During his reign, Pinochet was responsible, according to the Rettig and Valech Reports, for the death of up to 3,000 people, the imprisonment of 80,000 people and the estimated torture of over 30,000 people.

Augusto Pinochet

The Truth Behind Chile’s ‘Free Market’

It has been maintained that the privatisation of semi-state bodies led to a huge boom in Chile.

However, a more cynical and realistic interpretation would be that money simply changed hands from the general population into the upper echelons of society. The wealthy got very rich while the general population became a horrendously poorer.

Chile experienced huge inflation. Chileans who lived on the average industrial wage spent in excess of 74% per cent of their salaries on just bread alone.

The Invisible Threat Of Communism And Torture Tactics

Friedman and his fellow economists stepped in to help advise Pinochet’s government in what Naomi Klein describes as a ‘shock policy’. It was clear that Pinochet’s efforts and non-regulation were not working.

So to get the people to accept unpalatable living standards Pinochet turned to the bogeyman of communism. Pinochet’s totalitarian dictatorship was the perfect platform to launch a witch-hunt and control the population through fear. Those that dissented from the Pinochet philosophy were either interned and tortured or simply killed.

Proponents of de-regulation often cite the fact that open economic policy go hand in hand with democracy but this was far from being the case in Chile.

Coup of Chilean President Salvador Allende

South American Interference

Once the Chilean experiment was in force, the agenda moved towards converting other South American countries to embrace de-regulation and completely free market economies.

Brazil and Uruguay, under the disciples of Friedman adopted de-regulation. Another coup saw a dictatorship installed in Argentina in 1978 which allowed the perfect opportunity for The Chicago Boys free market economists to influence economic policy.

Deregulation’s Legacy On Argentina

One year after the coup d’etat occurred Argentina was already beginning to be ripped apart. Wages fell to 40% of what they were one year previously and poverty began to become the norm for many Argentinian families. The dictatorship led by General Jorge Videla followed the same blueprint as Chile and steadily people began to disappear as a wave of terror kept the population in line.

‘You Have To Do This, But We Don’t’

Under Nixon, America had supported all these policies in South America.  Despite supporting free market deregulation in the South American dictatorships, Nixon was opposed to doing anything similar domestically despite the country experiencing a severe economic downturn.

Richard Milhous Nixon

Instead Nikon imposed Keynesian fiscal policy putting a price and wage control policy into practice with the result that the United States economy soared.

The Pitfalls Of A Globalised Economy

The effect of non-regulation in a global market means that while everything is going well every country does well. However, when things go badly everyone is affected.

Rather like dominoes, all economies suffer and suffer badly. Arguably, the best working example of this philosophy is the Euro. The huge market and the usage of a single currency has many wonderful benefits. But this system is interdependent, it is only as good as its weakest link. If one country begins to go wayward all the other countries are affected too.

Highly Recommended Get The Book Through Amazon

You can read Yellow Magpie’s The Legacy Of Milton Friedman: The Economic Virus Spreads To Europe And The US (Part 2) and The Legacy Of Milton Friedman: A Bankrupt Ireland (Part 3) here.

You can obtain The Shock Doctrine here from Amazon.

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For people living in Ireland or the United Kingdom you can access The Shock Doctrine here.

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For those living in Canada you can obtain The Shock Doctrine from here.

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For Germany: The Shock Doctrine.

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For France: The Shock Doctrine.


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