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Is Neoliberalism Dead?

Chicago Boys circa 1957, left to right: Luis Arturo Fuenzalida, Alberto Valdés, Larry Sjaastad, Pedro Jeftanovic, and Sergio de Castro (Image credit: Ernesto Fontaine)

The Chilean Miracle of the 1990s is usually pointed to as a win for the Chicago School of economics, which advocated laissez faire capitalism, limited regulation, and cuts in government spending. But that was then, and this is the era of Bidenomics and a “post-liberal” New Right. Are free markets as dead as General Pinochet?

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Louis Menand wrote a curious article for the New Yorker called “The Rise and Fall of Neoliberalism.” The article is curious on two fronts: First, though published in a progressive magazine, the article is largely judicious and fair to the concept of neoliberalism. Second, like many other recent articles, the essay sounds the death knell of neoliberalism, which is being replaced, apparently, by what has been called “Global Bidenism.”

This Global Bidenism is itself strange, as it’s a response to Trumpism, which promised to use the government to help create jobs and regulate trade. Global Bidenism is also an about-face for the Democratic Party, which, since Jimmy Carter, has used the language of social democracy to gain votes but has generally proved to be just as neoliberal as the Republican Party.

Prior to adopting millennial “woke” progressivism, which is largely focused on race and gender issues, more radical American progressives had taken the Democrats to task for abandoning the working class and embracing neoliberalism—especially during the Clinton era. One of the most popular radical liberal or “social democrat” critiques of neoliberalism during the era of George W. Bush is Naomi Klein’s 2007 The Shock Doctrine: The Rise of Disaster Capitalism. Written at a time when radical Democrats were still anti-war, anti-corporate, and pro-working class, Klein’s book chronicles the rise of neoliberalism’s Chicago school of economics and depicts what she sees (rightly or wrongly) as its destruction of many of the world’s economies.

One of Klein’s chapters deals specifically with one of the most pronounced targets of New Left and social democrat anger: the Chilean regime of General Augusto Pinochet. The standard New Left reading of Pinochet’s regime, which Naomi Klein depicts, is that of a horrific amalgamation of South American fascism and American capitalism working in tandem to torture an entire country.

Now we come to The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism, written by UCLA economics professor Sebastian Edwards, which provides a much more nuanced and multilayered depiction of the rise and fall of neoliberalism in Chile. While Naomi Klein begins her Shock Doctrine with a discussion of CIA experiments under psychiatrist Donald Ewen Cameron, Sebastian Edwards begins his Chile Project with the U.S. Department of State’s program of the same name. Begun in 1955, the State Department’s “Chile Project” was intended to train Chilean economists in free market principles at the University of Chicago and was part of a wider effort to tilt Latin America in an anti-communist direction.

Given the derisive and intentionally Anglo moniker “Los Chicago Boys,” the University of Chicago–trained economists had little influence during the 1950s and ’60s. However, with the toppling of Salvador Allende by General Augusto Pinochet in 1973, the Chicago Boys came into prominence and helped to import the ideas of Milton Freidman and other neoliberal economists into Chile. It is at this point that most left-wing writers craft the narrative of a seamless garment of Friedmanite economics and Latin American authoritarianism. However, Edwards, with ample evidence and anecdotes (Edwards is himself a University of Chicago–trained Chilean economist), shows that the economic policies of the Chicago Boys should not be seen as synonymous with the life and work of Milton Friedman, and, more importantly, what is understood as the authoritarian nature of the Pinochet regime should be distinguished from that economic school.

Edwards provides a rich history of not only recent Chilean (and American) history but also elements of wider 20th century economic history. As Edwards notes, the term “neoliberal” was developed in the shadow of the rise of communism and fascism. He cites Walter Lippmann’s work The Good Society, which argued, as Friedrich Hayek would, for a return to the liberal principles of Adam Smith and Jeremy Bentham. Lippmann’s key point is that what made neoliberalism different from 19th century liberalism was the alleged social benefits of liberalism. The term was used after World War II for the policies of West German leaders Konrad Adenauer and Ludwig Erhard. In America, Milton Friedman, in 1951, penned “Neo-liberalism and Its Prospects.” In the piece, Friedman, like Lippmann before him, touted the alleged economic and social benefits of liberalism. It wasn’t until the 1990s, Edwards argues, that the neoliberalism label earned its now largely negative connotation.

In his discussion of Chile, Edwards does refer to the laissez-faire reforms of the Chicago Boys in Chile as “shock treatment,” a term that Milton Friedman did formulate himself. However, Edwards notes that, with the return of democracy in 1990, Chile had developed into what appeared to be a successful capitalist economy, which has been called the “Chilean miracle.” In fact, Chile would become the richest country in Latin America by 2000. Edwards further notes that, although Augusto Pinochet was accused of numerous human rights abuses and acts of corruption even during his lifetime, the Chilean democratic reformers of the 1990s nevertheless retained the “shock-treatment” economic reforms that were undertaken under his regime (even if some Chicago School economists distanced themselves from Pinochet).

However, despite economic success (achieved at a very high human cost), Chile was overtaken by a radical revolt in 2019. Although earlier revolts had been focused on economic issues, this one, like those throughout the world in the past decade, focused on race and even gender issues. Protestors called for the return of land to the indigenous natives of Chile and demanded a new constitution. In 2021 there was a successful referendum for a new Chilean constitution, which some called an “anti-neoliberal constitution.” In December of that year, Chile elected as president Gabriel Boric, a youthful radical made famous for his casual dress and love of American rock music. Boric attempted to push through the new constitution, but it ultimately failed, and recent electoral developments in Chile have seen a rightward shift.

Neoliberalism may or may not be dead. It may or may not be true that the Democratic Party, under Joe Biden, is no longer the party of Clintonian neoliberalism. But it is certainly true that the Republican Party is no longer solidly the party of Reaganite laissez-faire economics. Conservative critics of at least certain elements of capitalism are no longer marginal figures in the Republican Party and have a prominent voice—both online and on the stages of Republican rallies. There is a general consensus among the New Right at least that the government should have some hand in controlling the market. At the same time, advocates of neoliberalism are not wrong (and even mild critics of neoliberalism will admit) that free market capitalism has given us the comforts of modernity and tremendous abundance and prosperity. The key question for all conservatives moving forward is how to have economic prosperity as part of a larger political program that does not neglect higher human values.

Jesse Russell

Jesse Russell has written for a variety of publications, including Law and Liberty, The New Criterion, and The American Conservative. His book, The Political Christopher Nolan: Liberalism and the Anglo-American Vision, is available from Rowman and Littlefield.