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The Chilean coup just one link in a complicated right-wing economics agenda to empower capital

Several related strands have come together in the last week of work and thinking. Today (September 11, 2023), of course, is a massive day in history and I am not referring to the year 2001. Today marks the 50th anniversary of the overthrow of the Salvatore Allende’s democratically-elected government in Chile by the US CIA and there local puppets under the leadership of General – Augusto Pinochet. I have also been following a trail of the antecedents of the Powell Manifesto (thanks to Jonathan for a tip), which helps understand how the neoliberals infested every institution in the US and beyond. And the Chilean coup d’état in 1973 was followed by – Operation Condor – which together with the coup demonstrated the principle terrorist organisation in the world has been the US government and its agencies. Tracking the Powell trail also took me to old research about the so-called ‘Manne Programs in Economics for Federal Judges’ – which was a program mostly taught by Chicago School economists that indoctrinated US judges into free market economic thinking and has distorted US judicial decisions ever since. And the circle closes when we investigate the role played by the so-called – Chicago Boys – who were Chilean PhD graduates from that school, who went back to Chile and ravaged the prosperity of the people with their extreme neoliberal ideas. All interlinked events on the path to global neoliberal domination. History is worth studying and it is striking how interrelated all these things are that have come together in my work the last week or so.

The Communist Menace

I was referred to this pamphlet the other day (Thanks JK) published in September 1946 by the Chamber of Commerce of the United States – Communist Infiltration in the United States Its Nature and How to Combat It – which is a precursor to the Powell Manifesto, which I wrote about in this blog post – The right-wing counter attack – 1971 (March 24, 2016).

The US Chamber of Commerce sponsored Powell’s work but were active well before that was published in advancing their Right wing agenda.

It rails against what it calls:

… the worship of the State.

Which it equates with “the denial of the rights of the individual.”

Its grasp of the history of ideas is poor – equating Communism with “complete State ownership”, which anyone who has read anything knows really is about the ‘withering away’ of the State after a transition from Capitalism via Socialism.

The authors claim that in the US, “labor is free” but that freedom leads them to form trade unions which “abuse its power to the detriment of the national welfare”.

While mounting a case of how scary Communism is, the authors claim that:

The successful working of free enterprise may make it difficult for Communism to gain recruits …

Which seemed to suggest the purpose of the Pamphlet was futile.

It argues that the global Communist International was intent on manipulating the politics of countries all around the world including the Middle East, Asia, “practially all Latin American countries” – “the guiding forces behind the 1946 elections in Chile”, “a powerful radio station” in Cuba and skilful organisations in Mexico.

It made predictions that Sweden would fall to the Soviet influence as would Germany – “would bring all German technology within the Soviets phere.”

Relevant to the theme today, it claimed that “American Communists both in and outside of the gov¬ ernment were pressuring our government to attack Perón”, who was the President of Argentina from 1946 to 1955.

It was shocking that these Communists would try to induce America to interfere with the internal politics of a foreign nations.

Hypocrisy was not a word in the authors’ dictionary.

In trying to understand the motivation for people who are attracted to Communist ideas, the authors conclude that:

Some people are personally maladjusted and are chronic rebels.

Others are just misguided and fantasise about “life in the Soviet Union”.

Others operate in a sense of “confused good will”.

In other words, they all exhibit aberrant behaviour.

They said the communists had infiltrated the labour movement and stirred discontent – as a pretext to overthrow the system rather than express justified grievances about working conditions and pay.

They asserted that ‘businessmen’ knew that workers were being manipulated by “outside forces” – in other words, there was no inherent class conflict in America, just evil, manipulative external forces intent on creating trouble to further their own ends.

The Pamphlet traced Communists to “lobbyists” – including the “left-wing press” which had political influence and other “Communist fronts’ and controlled organizations”.

And these external forces had “Inside Contacts … their lieutenants within government offices”.

And so on.

It proposes a “Counterattack” – to “get the facts before the American people” and:

In so far as the system is an attack upon free enterprise, the American businessman has a duty to show both in theory and in practice the superior merits of our present way of life.

But more was needed.

Research.

Publicity.

Infiltrate the education system.

Exposure of Communist members by government through the Department of Justice.

In other words, if we were to change a few words here and there, the critique would describe the way the US itself operates around the world to suppress freedom and manipulate and lull the public into supporting a system that delivered benefits to the elites at the expense of the workers.

Which leads us to the manipulation of the US judiciary by the Chicago School of Economics

I came across an NPR Planet Money program from last year (September 23, 2022) – Econ’s Brush with the Law – which discussed the way in which the Chicago School of Economics and some additional orthodox economists were involved in a training program for US federal judges offering crash courses in economics.

The programs began in 1976 through the efforts of – Henry Manne – who began the ‘Manne Programs in Economics for Federal Judges’ – which was a program mostly taught by Chicago School economists that indoctrinated US judges into free market economic thinking.

The motivation was to provide judges, who would make rulings on many matters relating to government regulations and corporate control, with an orthodox understanding of economics, which eschewed government control.

The classes were taught by the likes of Milton Friedman, Paul Samuelson, Gary Becker, Orley Ashenfelter and the like who were “big believers in the free market” and who thought that the market would resolve all problems.

The NPR program examines the pollution example:

Do we need the government to, like, ban pollution? Maybe we can just let people hash this problem out for themselves.

… And so the idea is that, like, all you need to do is give people the right to not be polluted and then give them the ability to sue and enforce that right against a company.

… You don’t need to, like, force companies to adhere to certain pollution standards. You just need to give the people the power to sue these companies, and that’ll solve it. That’ll make the company not really want to pollute?

Which was all core material in curricula to do with property rights and markets.

And, of course, these ideas lead to demands that organisations such as the EPA in the US be scrapped so the market than work things out to the benefit of all.

That is what was taught in these programs.

At the time, the Chicago School of Economics was getting into topics such as the ‘Economics of Crime’ and the idea was that punishment had to be sufficient to make the rational criminals make different choices.

Recent research suggests this way of thinking led to heavier prison sentences for impoverished criminals.

Moreover, Henry Manne’s Schools were funded by the likes of DuPont, Exxon, Ford etc who were keen for significant reductions in government regulation.

And the Schools partnered with other right-wing think tanks to spread a ‘free market’ doctrine.

All part of the US Chamber of Commerce/Powell Manifesto strategic agenda to strengthen the position of capital and weaken the capacity of workers.

Some further research uncovered a large literature on this topic including a recent NBER Paper – Ideas have Consequences: The Impact of Law and Economics on American Justice – which was the motivation for the NPR program and more recently (September 7, 2023), a column in the Economist Magazine – How Chicago school economists reshaped American justice.

The latter article carried the sub-title “The 50th anniversary of a groundbreaking work” which resonates given that today is the 50th anniversary of the Chilean coup d’état, which also had links to the Chicago School of Economics (see below).

For an earlier (and sympathetic) analysis of the Manne Schools for Judges see this article – The Manne Programs in Economics for Federal Judges – from 1999.

The NBER paper notes that there is:

A growing literature in economics has documented the effects of exposure to information and ideology in electoral politics and public opinion.

The question they seek to answer is “whether exposure to powerful new ideas can directly affect policymakers’ policy decisions” and they use the Manne example as a case study.

I won’t go into their analytical techniques, but they find that:

1. “Manne attendance is associated with harsher criminal penalties – whether a defendant is given any prison and the length of prison sentences imposed – consistent with an emphasis on severe punishment for guilty offenders favored by deterrence theory.”

2. “With many instructors like Milton Friedman advocating against the drug war, it is notable that we find no increase in sentencing harshness for drug crimes.”

3. “these results are consistent with a large and signifcant impact of law and economics – as delivered by the Manne program – on the federal judiciary”

They ask: “How did the Manne program change judge decisions?”

If you have ever studied economics formally – in particular, microeconomics, then you will have little trouble answering that question.

While the mainstream (neoclassical) microeconomics holds itself out as being ‘value free’ (they use the term ‘positive’ as opposed to ‘normative’), the opposite is true.

I recall the main microeconomic text in the 1980s discussed the issue of welfare payments by government in terms of a juxtaposition between “robustly independent income earners” and “welfare dependent individuals” who valued leisure more than work and we being subsidised in that choice by the welfare payments.

Very loaded language and imagery.

Government regulation was always taught as being destructive of individual welfare, the latter which thrived on being set free to do what they wanted, when they wanted.

Businesses were constructed as being objective institutions that maximised welfare if left to pursue their own ambitions.

Trade unions were constructed as temporary ‘frictions’ rather than necessary institutions designed to protect the interests of the workers.

So when judges are trained in these ideas and come up to judge a regulative matter, of course they will tend to err on the side of deregulation.

The entire literature that the judges would be taught as representative of best-practice in economics has been shown to:

1. “Economics students are less redistributive of potential lottery winnings …”

2. “view surge prices more fairly …”

3. “favor profit maximization in business vignettes …”

4. “Economics professors are less ideologically liberal and less likely to be registered Democrats … than professors in other social sciences”.

The authors find that:

Economics-trained judges significantly shift legal outcomes in U.S. courts … the impacts of economics ideas were in a conservative policy direction …

The infiltration of conservative economics into the courts was one of the central strategic planks advocated by Louis Powell, who himself became a conservative US Supreme Court judge.

The School of Economics at Chicago also advanced the interests of capital in other ways.

After the Chilean coup d’état

Please stop for a little moment and reflect on what happened 50 years ago today in Chile.

I last wrote about it in this blog post – Remembering Tuesday, September 11 (September 13, 2021) – and I won’t repeat that narrative.

Effectively and elected democracy became a tyrancial dictatorship under General Augusto Pinochet (from 1973 to 1990) under the orchestration of the US government.

Salvatore Allende had actually appointed Pinochet as the Commander-in-Chief of the Chilean Army a few weeks before the coup d’état.

Thousands were murdered in the early days of this regime and tens of thousands imprisoned and tortured.

Soon after (in November 1975) Chile launched (with other Right-wing regimes in Latin America) the infamous terror campaign – Operation Condor – which was a classic demonstration of global terrorism orchestrated and financed by the US government.

Tens of thousands were murdered and tortured.

Enter the Chicago School of Economics.

After the coup, Chile became the plaything of the Chicago School of Economics, via the so-called – Chicago Boys – who were Chilean PhD graduates from that school, who went back to Chile and ravaged the prosperity of the people with their extreme neoliberal ideas.

This multipronged strategy pushed by the US Chamber of Commerce was spreading globally.

The ‘Chicago Boys’ were indocrinated in the extreme views of their academic masters.

They forced extreme forms of deregulation and pro-business policies, which saw wide-scale privatisations in education, health care and welfare retrenchment including ravaging the pension system.

Income and wealth inequality rose dramatically as the rich took the material banefits of economic growth for themselves.

If we examine the data we see that Chile is now among the most unequal nations in the world and there was a sharp rise in income inequality following the coup.

Far from creating a ‘free market’, the Chicago Boys transferred control of capital into the hands of a few corporations and so-called ‘magnates’.

And through control of the media, these power elites effectively were able to substantiate their anti-competitive power bases.

Chile had been marked in the 1960s for US aggression.

I have read the 1961 book = The Voice of Latin America – written by the Democratic Senator William Benton.

He argued that the poverty in the rural areas of Latin America coupled with the movement of the poor into the cities in search of work, which not only reduced agricultural output but added to the unviable urban slums, had created conditions ripe for exploitation by Communists or as he called it ‘Fidelismo’.

Benton claimed that unless the US “blunted” the rise of Communism, Latin America would make Cuban revolution look like a picnic when assessing the impact on American interests.

At one point Benton wrote:

… a grave problem in Chile has been posed by the Marxist, left-wing-oriented economists who have come from the university economics departments and who have infiltrated into the Chilean government and economy.

The genus of the Chicago Boys followed this pressuring.

They were part of a US government exchange program where students from the PUC (Pontificate Catholic University of Chile), which was where the elites in Chile sent their children, would be welcome at the University of Chicago.

Students and academic staff were involved in this program.

The Chicago Boys then returned and took control of the top positions at the PUC and by the time the coup was executed they were rampant and fully supported by the top corporate bosses and financial interests.

The election of Salvatore Allende in the 1970 election as president shocked the Chicago Boys into rapid action and a manifesto, the so-called ‘Program for Economic Development’ (El ladrillo or ‘The Brick’) was published.

Pinochet was the first to implement that program and appointed key Chicago Boys into high ranking government positions including the position of Economic Minister (to – Sergio de Castro Spikula – the leading Chicago Boy).

They implemented Milton Friedman’s – Shock Therapy – which became the norm in the 1980s.

I will write about that another day.

Remember Chile – Pressure Drop

Here is my band – Pressure Drop – recalling the event (I wrote this song in 1978, this version was recorded live in May 2011).

Conclusion

All these interrelated linkages show how hard it is to change the existing system.

That is enough for today!

(c) Copyright 2023 William Mitchell. All Rights Reserved.

This Post Has 9 Comments

  1. “sufficient to make the rational criminals make different choices”

    Rational Criminals?

    Is that another oxymoron dreamt up by regular morons.

  2. “It argues that the global Communist International was intent on manipulating the politics of countries all around the world including the Middle East, Asia, “practically all Latin American countries” – “the guiding forces behind the 1946 elections in Chile”, “a powerful radio station” in Cuba and skilful organisations in Mexico.” and on and on.

    What a great lesson in projection where the US transfers its motives and actions onto their opponents when all the while actually telling the audience what path they are pursuing for themselves.

  3. Dear Neil Wilson (At 2023/09/11 at 5:29 pm)

    The Economics of Crime literature assumes criminals are rational and make cost-benefit decisions using marginal decision-making – that is, if the benefits from committing the crime outweigh the costs (including their evaluation of the costs of capture and imprisonment) then they will execute the crime.

    Criminality is thus a consumption decision in the mainstream framework just like the calculus they claim you would use to select some fruit at the supermarket.

    The application of this framework in that period to all sorts of things – marriage, racial discrimination, sexual activity (before you proceed from petting to heavy petting they claim we do the sums!), etc reflected the growing poverty of the framework.

    all the best
    bill

  4. I am still completely amazed to find new depths to the depravity that a few men inflicted upon the world – with plenty of help, of course, both opportunistic as well as well-intentioned.
    No wonder how much they sputter and thrash when a realistic threat appears – not without its own monumental problems, but where, at least, some hope can still live of a hegemony free world that just might not destroy itself.

  5. Chile was the first Latin American country to democratically elect a socialist president in a free and fair election – Salvador Allende in September 1970 – despite clandestine US efforts to prevent it.

    In response, the Nixon administration ordered a massive covert operation to prevent Allende from taking power and, failing that, to overthrow his government.

    The aim was to weaken and destabilize Chile through economic strangulation and diplomatic isolation and to foment internal dissension and public disorder leading to a coup.

    We now know from declassified documents that the CIA set about creating “a coup climate by propaganda, disinformation and terrorist activities”, including planting false stories in the media, creating fictitious groups, sending CIA officers to Chile posing as foreign (non-US) businessmen to handle local agents and funding neo-fascist thugs in an effort to provoke the government into retaliatory violence.

    A plan to kidnap the head of the armed forces was bungled and the target was murdered, prompting a state of emergency to be declared. The CIA reported that “an excellent job (was done) in extremely difficult and delicate circumstances”.

    Although Chile was of no strategic value to the US, several major US companies dominated the local economy (notably Anaconda and Kennecott Copper). And the US was determined that a socialist Chile shouldn’t become an example for other countries (especially Italy).

    CIA head William Colby later testified that the CIA’s activities in Chile were seen as a prototype or lab experiment to test techniques which could be used to discredit and bring down governments.

    They worked 50 years ago today with the bloody overthrow of Allende’s government, followed by years of dictatorship and hardship for the Chilean people and many more CIA-backed coups around the world.

    Source: The Pinochet File by Peter Kornbluh (a National Security Archive book, 2003)

  6. A Chilean friend of mine who came here to the Netherlands to study saxophone, but has since returned to Chile, had an older brother ‘spirited away’ under Pinochet; he was 7 at the time and never really knew him. He invited me to a concert here of Chilean folk music held at the Instituto Cervantes, largely Violeta Parra and Victor Jara. The Chilean ambassador was present (a woman whose name I can’t recall) and she spoke about ‘the other 11th of September’. To many there, especially the younger attendees, it was completely unknown. Or the date hadn’t been registered, I admit I hadn’t made the link initially.

  7. I haven’t forgotten what happened to Chile. I started a welfare work course at Sydney Tech in the 1970’s with a refugee from Chile who became a good friend.

  8. Bill, correct spelling would be Salvador Allende instead of “Salvatore Allende” . Thanks for one more great post!

  9. The left to the centre right are in alliance if you all haven’t realised it yet and this includes most of defence and the defence industrial complex of the US and the wider West bar a few extreme fruit loops. The far right only has Rupert, the Libertarianists, Big Oil and most of the mainstream media which makes them powerful but they have already lost strategically because they are way too off the planet psychologically. The global fight between those with a good heart and those that prioritise greed for money and/or power over everything else is ultimately an unequal fight but nevertheless we must all work together to prevail and to minimise the losses in whatever form on both sides.

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