Goodbye, Uncle Miltie

now just Pinochet and Thatcher to go…

To be honest, I was a bit astounded that everybody’s hailing Friedman, from Gordon Brown to the liberal blogs. I’m no economist, but as a social democrat, Friedman’s policy advice stood for everything I always despised and I don’t think the majority of his ideas have lead to the greater good of all. Have I missed a convergence towards some undisputed consensus as far as modern economics are concerned? Are e.g. Keynsian economics hopelessly outmoded? I ask in good faith.

Both Nietzsche and Plato are as responsible as anyone for the rise of Nazism.

As responsible as, say, Hitler? I smell a bit of an overstatement.

Keynsian economics as Keynes himself practiced it is outdated, but “New Keynesianism” (which takes rational expectations and microfoundations into acount) is alive and well.

And one day it too will be slain…until neo-neo-Keynesianism is born. And so forth. Keynes is going to be around for a while, because even though he wasn’t ‘right’ he had key insights that are going to be relevent to future work for a long time to come.

Jordan: I don’t really have a dog in this fight, I just prefer my tbooks read to me while I look at cartoons.

Just need the time zone for posts…Thanks!

thetruth,

You fail to mention that the poverty rate of free-market Chile has plummeted to 18%.

You also fail to even consider the fact that before the coup, Allende had commandeered much of Chile’s economy, had engaged in Zimbabwe-like land seizures, had frozen prices, and induced runaway inflation of 140%. Do you think such economically suicidal idiocy would only have short-term effects?

Pinochet was a wicked man. But that doesn’t make Milton Friedman’s economic liberalism any less sensible, or dirigisme any less baleful.

Zimbabwe-like land seizures

Oh, please. I know invoking Mugabe makes the claim sound more dramatic, but Latin American land reforms hardly resembled the overt corruption that characterized Zimbabwe’s expropriations.

thetruth: Please provide some kind of source or at least name a country and a time period, because I don’t believe it.

Please provide some kind of source or at least name a country and a time period, because I don’t believe it.

God damn. OK, try Google. Or Wikipedia. The local library would work as well.

What do you say to the people who excuse their inaction by their willful ignorance?

No, you are not excused.

thetruth? 18% poverty? Chile, today? Hello?

Look at what Friedman’s kind of “murderous policies” have done for the infant mortality rate in pro-market China, the economic growth of post-Soviet Estonia, the standard of living in post-Thatcher Britain, and the ascent out of squalor of post-reform India.

Compare that with the achievements of the economic left’s “humanitarian policies” in Great Leap Forward China, the post-Bolshevik Revolution famine in Russia, the economic standstill of Marx-enamored post-war Britain, and the wretched poverty of License Raj India.

Thankfully, ‘trueliberal’, the choice isn’t between Friedman’s views on the one hand and Mao’s and/or Stalin’s on the other. Should we consider, say, the massive famines in Norway? I guess there wern’t any, and they didn’t follow Friedman at all. No one here favors any of the views you put up as alternatives. That would strongly suggest that you’re presenting a strawman argument.

I know I was just a kid at the time, but I seem to remember that the Tories quietly dropped the basic tenets of monetarism some time in the early 1980s. Cos they didn’t work when applied to the real world.

A contrarian view of Friedman and his legacy/impact

http://commentisfree.guardian.co.uk/richard_adams/2006/11/post_650.html.printer.friendly

Note particularly the last three paragraphs.

Greg,
Do you think that the Ubermensch had no influence at all on Nazi ideology? I know that the Nazis totally misinterpreted Nietzsche’s ideas, but that’s the point: good ideas can be hijacked and twisted. Same thing with Friedman.

As for ‘thetruth’, all I have is the anecdotal evidence of my family. When Salvadore Allende was in power, my mother and aunt waited in line for hours to get a loaf of bread to eat and saw people starve to death. After Salvadore Allende, this didn’t seem to be a problem.

For trueliberal:

“In 1973, the year the General seized the government, Chile’s unemployment rate was 4.3%. In 1983, after ten years of free-market modernisation, unemployment reached 22%. Real wages declined by 40% under military rule.

In 1970, 20% of Chile’s population lived in poverty. By 1990, the year “President” Pinochet left office, the number of destitute had doubled to 40%. Quite a miracle.

Pinochet did not destroy Chile’s economy all alone. It took nine years of hard work by the most brilliant minds in world academia, a gaggle of Milton Friedman’s trainees, the Chicago Boys. Under the spell of their theories, the General abolished the minimum wage, outlawed trade union bargaining rights, privatised the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatised 212 state industries and 66 banks and ran a fiscal surplus.

Freed of the dead hand of bureaucracy, taxes and union rules, the country took a giant leap forward … into bankruptcy and depression. After nine years of economics Chicago style, Chile’s industry keeled over and died. In 1982 and 1983, GDP dropped 19%. The free-market experiment was kaput, the test tubes shattered. Blood and glass littered the laboratory floor. Yet, with remarkable chutzpa, the mad scientists of Chicago declared success. In the US, President Ronald Reagan’s State Department issued a report concluding, “Chile is a casebook study in sound economic management.” Milton Friedman himself coined the phrase, “The Miracle of Chile.” Friedman’s sidekick, economist Art Laffer, preened that Pinochet’s Chile was, “a showcase of what supply-side economics can do.”

It certainly was. More exactly, Chile was a showcase of de-regulation gone berserk.

The Chicago Boys persuaded the junta that removing restrictions on the nation’s banks would free them to attract foreign capital to fund industrial expansion.

Pinochet sold off the state banks – at a 40% discount from book value – and they quickly fell into the hands of two conglomerate empires controlled by speculators Javier Vial and Manuel Cruzat. From their captive banks, Vial and Cruzat siphoned cash to buy up manufacturers – then leveraged these assets with loans from foreign investors panting to get their piece of the state giveaways.

The bank’s reserves filled with hollow securities from connected enterprises. Pinochet let the good times roll for the speculators. He was persuaded, as Tony Blair said this month in another context, “Governments should not hinder the logic of the market.”

By 1982, the pyramid finance game was up. The Vial and Cruzat “Grupos” defaulted. Industry shut down, private pensions were worthless, the currency swooned. Riots and strikes by a population too hungry and desperate to fear bullets forced Pinochet to reverse course. He booted his beloved Chicago experimentalists. Reluctantly, the General restored the minimum wage and unions’ collective bargaining rights. Pinochet, who had previously decimated government ranks, authorized a program to create 500,000 jobs. The equivalent in Britain would be a government program for 4 million workers.

In other words, Chile was pulled from depression by dull old Keynesian remedies, all Franklin Roosevelt, zero Margaret Thatcher. (The junta even instituted what remains today as South America’s only law restricting the flow of foreigncapital.)”

http://www.gregpalast.com/tinker-bell-pinochet-and-the-fairy-tale-miracle-of-chile

Neel: PKT is the legendary Post Keynesian Thought e-list, now defunct. I was just passing on Bruce’s little joke. As I’m sure he would agree there’s smart and interesting work going on under the “New Keynesian” banner. It’s just not clear what makes it particularly Keynesian.

My main point was that there is flourishing scholarship around Keynes and Post Keynesian thought, work which should be distinguished from the “hydraulic” Keynesianism of the textbooks as well as from “New Keynesianism.” Hyman Minsky’s work is one introduction to it.

Along the lines of our main thread I can recommend _Milton Friedman’s Monetary Framework: A Debate with His Critics_ (Chicago 1975) one of whom is prominent Post Keynesian theorist Paul Davidson.

This is from Makiw’s essay:

he wrote, “I do not regard it evil for an economist to render technical economic advice to the Chilean government to help end the plague of inflation, any more than I would regard it as evil for a physician to give technical medical advice to the Chilean government to end a medical plague.” He also notes that years later, when he offered similar economic advice to China, there were no similar protests, even though the left-wing Chinese dictators were no less oppressive than Pinochet.

illiberal,
Giant sudden reforms create economic shocks. And in the short term, markets hate shocks. But despite the back-pedaling you cite, Chile remained largely a liberalised economy. The privatised industries stayed privatised, the abolished price controls stayed abolished. That remains true today. Chile is at the same time the most liberalised and the most successful economy in Latin America today. I cannot believe that that is just a coincidence.

To me, the most repugnant and clearly anti-freedom aspect of Friedman’s attitude towards Chile is that attitude, reflected by trueliberal, that the dictatorship is solely responsible for the good things that are happening now. Friedman even had the incredible gall to say that Pinochet’s economic reforms provided the impetus for democracy in Chile, when in fact Pinochet was responsible for the longest break in democratic rule in Chile since it was owned by Spanish kings.

With respect to the nonsensical Nietzsche comment:

If i am an advocate of misogyny and sexism and enjoy raping women and i said that i received such extraordinary insights about the opposite sex from Shakespeare what might be your response?

Can you conclude that Shakespeare is just as guilty as anyone of providing the fuel for my fire?

Such nonsense is not worth the 0s and 1s.

Here is a good overall summary of the effect on Chile. As the numbers on that page shows, the wages went down during Pinochet, so it would seem likely that poverty rates would increase at the same time.

Perhaps ‘engels’ can tell us why he uses the name of a man whose intellectual heirs ‘disappeared’ 10,000 times more people than Pinochet did. Or perhaps he could just try not to change the subject, which was not Pinochet’s brutality (unquestioned by anyone on this thread, or anyone I know, for that matter) but his economic policies.