The Chicago Boys’ plan failed in Chile. Brazil wants to give it another shot

On January 1st, Jair Bolsonaro will take office as Brazil’s 38th president. He will do so on a platform chock full of brash and heavy-handed social policies, yet one underpinned by ultraliberal economics and the vesting of extensive power into the hands of economist Paulo Guedes, a University of Chicago graduate.

In 1973, General Augusto Pinochet seized power in Chile after a military coup. While imposing his brutal regime on the Chilean people, General Pinochet also handed the reins of the country’s economy to a group of economists, fresh off the plane from the very same University of Chicago.

While there are plenty of caveats, the comparisons between the two are too close to resist.

The Chicago school of economics

The foundations for Chile’s economic experiment date back to 1950s U.S. and the establishment of a school of American economic liberalism within the University of Chicago. Led by Milton Friedman and George Stigler (both of whom would later go on to win the Nobel Prize in Economics), the Chicago School became known around the world as the hub of liberal economic thought.

Opposed to the state intervention of the New Deal and Marshall Plan, the group’s economic theory was based on the maxim that when left to its own devices (read, without any intervention from the state), the market would take care of itself.

Meanwhile, afraid of the spread of communism throughout Latin America, the U.S. State Department organized the “Chile Project,” funded by the Ford Foundation, which sponsored economics students from Santiago institutions Universidad Católica and Universidad de Chile to go abroad and study in Chicago.

“The idea was to help Universidad Católica improve the level of economics that it was teaching,” claimed economist Arnold Harberger in Carola Fuentes’ 2015 documentary Chicago Boys. “The broader idea was to improve the level of economics in Chile.”

On their return, these Chilean students became known as the Chicago Boys, stepping off the plane in Santiago with brains full of liberal economic theory and carrying “El Ladrillo,” (The Brick) their economic manifesto for their home country, so named because of its unreasonable size.

Shock treatment

In 1970, socialist Salvador Allende was elected president of Chile. Already nervous about a red tide south of its borders, U.S. President Richard Nixon told...