Chile Earthquake

The Chicago boys and the Chilean earthquake

Did Milton Friedman's legacy save hundreds of thousands of lives?

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The Chicago boys and the Chilean earthquakeA woman stands in front of a damaged house after an earthquake in Pelluhue, some 322 kms, about 200 miles, southwest of Santiago, Sunday, Feb. 28, 2010. A 8.8-magnitude earthquake hit Chile early Saturday. (AP Photo/Roberto Candia)(Credit: AP)

The ghost of Milton Friedman, writes Bret Stephens in the Wall Street Journal, “was surely hovering protectively over Chile in the early morning hours of Saturday.”

Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.

Stephens’ logic is simple. After the U.S.-backed coup in 1973, in which Gen. Pinochet seized power from the democratically elected president Salvador Allende, a group of Chilean economists mentored by Friedman, and known to history as “the Chicago boys,” instituted a series of radical free market reforms. Since that point, averaged over the decades, Chile has experienced the strongest sustained economic growth in South America. Rich countries, argues Stephens, are more likely to institute and enforce building codes. Q.E.D. Milton Friedman saved lives.

Some might find it intellectually provocative to cite Milton Friedman’s authority in an argument that depends on the foundation of successfully enforced government-mandated building code regulations. The building inspector is not exactly a libertarian hero. Others might wonder if a more important factor in Chile’s relatively tough building codes might be the devastating 9.5 earthquake the country endured in 1960. Haiti hadn’t experienced an earthquake as bad as the one this January in 240 years. Earthquake resistant building codes tend to be taken more seriously in regions that are accustomed to regular bouts of annihilation.

But the earthquake is just a side show for the opinion page of the Wall Street Journal — just another opportunity, however shameless, to push free market fundamentalism. One of the great blemishes on Milton Friedman’s legacy is his association with the Pinochet government, which has been held responsible for murdering some 2, 000 to 3,000 people during its 17-year tenure, along with arresting tens of thousands of other citizens and enforcing harsh controls on the press and other civil liberties. Friedman’s acolytes have long tried to wish away the complicity of the Chicago boys and their guiding light in one of the darkest chapters of modern Chilean history, but the stain is tough to get out. If trampling all over the democratically expressed wishes of the people and instituting an authoritarian reign of terror are what it takes to achieve economic growth, is it really worth it?

But a more pertinent question might be to ask just how much credit really is due Chicago-school economics for Chile’s current relative prosperity? Mining alone accounts for 20 percent of Chile’s GDP, and it is very much worth noting that the country’s crown jewel, the copper industry, is completely dominated by one state-owned company, Codelco. Ponder that, for a second: Latin America’s poster child for Chicago school economics features state control of the single most important economic resource. Huh.

Chile also suffers from some of worst income inequality in the world, and in fact, only began to take serious steps to address income disparities after the plebiscite that ended Pinochet’s rule. And how did the government do that? By raising taxes and social spending.

But it’s a job that’s hardly finished, as evidenced by the reports of serious social disorder currently emanating from Chile, which some observers have compared unfavorably with Haiti.

Vast extremes in income equality do not make people happy, especially in the aftermath of huge disasters. That might be the true lesson of Chile, and it’s one that the Chicago boys who make their home in the United States might do well to mull over.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

Strong quake jolts Chile; magnitude 6.8

The quake's center is exactly the same spot as last year's 8.8 earth shaker, but no tsunamis were spawned this time

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Strong quake jolts Chile; magnitude 6.8More than 500 people died in the 8.8 earthquake on Feb. 27, 2010. No casualties have been reported in today's quake.

A magnitude-6.8 earthquake struck central Chile Friday, centered in almost exactly the same spot where last year’s magnitude-8.8 quake spawned a tsunami and devastated coastal communities.

Electricity and phone service were disrupted and thousands of people fled to higher ground following Friday’s quake, but the government quickly announced that there was no risk of a tsunami, and there were no reports of damage or injuries.

President Sebastian Pinera appealed for calm and praised his government and Chileans in general for responding quickly.

“Today we’re better prepared,” Pinera said. “I think we’ve learned the lesson of Feb. 27, 2010.”

Rodrigo Ubilla, the vice interior minister, said the navy had “totally discounted any risk of a tsunami.”

Still, the strong earthquake frightened many Chileans, especially along the coast, where people quickly moved to higher ground.

“There was a preventive self-evacuation,” said Vicente Nunez, who directs the National Emergency Office, ONEMI. But he said Chileans could safely return home.

Residents fled their homes in Talcahuano, a port city whose center was ravaged last year by huge walls of water that sent shipping containers and fishing boats into downtown buildings and streets, municipal spokesman Javier Gonzalez told The Associated Press.

Skyscrapers swayed in the capital of Santiago, and in the inland town of Cauquenes, mothers ran into the streets carrying babies in their arms.

The earthquake struck offshore, about 30 miles (45 kilometers) north of the city of Concepcion. The epicenter was relatively close to the coast, at 36 degrees south latitude and 73 degrees west longitude — almost exactly where the Feb. 27, 2010 earthquake was centered. Friday’s quake was half as deep, at 11 miles (18 kilometers), as the devastating temblor of Feb. 27, 2010.

And while last year’s massive quake killed at least 521 people and left 200,000 homeless, this time it seemed that Chile emerged relatively unscathed.

People in Talcahuano weren’t taking any chances in any case. The compact city center is at the base of a bay and surrounded by hills, forming a bowl where the ocean drained and then came back with a vengeance last year.

Friday’s quake caused a blackout in Concepcion, another city still recovering from last year’s disaster. And across the country, Chileans jammed cell phone networks trying to make sure their families were OK.

In Cauquenes, a small town almost directly west of the epicenter, mothers ran into the streets carrying babies in their arms.

“I was really frightened. This is one of the strongest aftershocks we’ve had since last year’s earthquake,” said Ana Alarcon, who closed her small shop and took her two children in a search for her husband, who she couldn’t reach by phone.

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Biggest aftershock hits Chile on inauguration day

The temblor rocked buildings as dignitaries arrived for the swearing-in of a new president

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The largest aftershock since Chile’s devastating earthquake rocked the South American country Thursday minutes before the inauguration of President Sebastian Pinera.

The 7.2-magnitude aftershock was stronger than the Jan. 12 quake that devastated the Haitian capital. It happened along the same fault zone as Chile’s magnitude-8.8 quake on Feb. 27, said geophysicist Don Blakeman at the U.S. Geological Survey in Golden, Colorado.

“When we get quakes in the 8 range, we would expect to see maybe a couple of aftershocks in the 7 range,” he said.

Blakeman said Chile now can expect to feel “aftershocks of the aftershock.”

“It’s not a sign of anything different happening. But what does occur when you get these large aftershocks, typically we have a whole series of aftershocks again,” Blakeman said.

The temblor rocked buildings and shook windows in the capital, and provoked nervous smiles among dignitaries arriving for the ceremony at the congressional building in coastal Valparaiso. Bolivian President Evo Morales seemed briefly disoriented and Peru’s Alan Garcia joked that it gave them “a moment to dance.”

Buildings emptied and streets crowded with people seeking higher ground in coastal Constitucion, a city wiped out by the tsunami that followed the quake. Pinera planned to visit the city shortly after his swearing-in.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

SANTIAGO, Chile (AP) — Two strongly felt earthquakes have rocked central Chile as dignitaries arrive for the inauguration of President-elect Sebastian Pinera.

The U.S. Geological Survey says the first quake had a preliminary magnitude of 5.1 and the second registered at 7.2. Both rocked buildings in the capital, shook windows and provoked nervous smiles among dignitaries arriving for Thursday’s ceremony at the congressional building in coastal Valparaiso.

Bolivian President Evo Morales seemed briefly disoriented. Peru’s Alan Garcia joked that it gave them “a moment to dance.”

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Deadly quakes are coincidence, scientists say

Recent earthquakes are not a sign of impending apocalypse

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Experts say there is nothing unusual about the latest spate of earthquakes in Haiti, Chile and now Turkey, but their devastating effects illustrate how increased construction up and down the world’s fault lines can translate into massive casualties.

And seismologists say that although one powerful quake can conceivably make others slightly more likely elsewhere, the string of quakes is probably just coincidence.

Bob Holdsworth, an expert in tectonics at Durham University, said Monday that “I can definitely tell you that the world is not coming to an end.”

Many quake survivors look to new president

After a destructive earthquake, Chileans hope their new leader is up to the tough job ahead

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Chile’s earthquake and tsunami smashed this pretty little tourist town into splinters, leaving little more than immense piles of wreckage and an awful stench. Rooting through the remains Thursday, Dichato’s residents said they are pinning their hopes for renewal on the new president, a conservative billionaire who takes office next week.

Nothing short of mammoth reconstruction can return Dichato to a semblance of what it was, and survivors here — and throughout the disaster zone — said they’re hoping President-elect Sebastian Pinera is up to the job.

“Chile is a country on the rise, economically strong, with many businesses. And because of this we expected more” of President Michelle Bachelet’s leftist administration, said Amanda Ruiz, a secretary in a construction firm. “We’re disillusioned.”

“I think he has the ability to do it,” said Luis Omar Cid Jara, 66, whose bakery and roast chicken shop on Dichato’s main street were destroyed.

Critics said Bachelet initially was reluctant to summon the military to stop looting and deliver aid, given the armed forces’ brutal repression of the Chilean left in the past, especially during the 1973-1990 dictatorship of Gen. Augusto Pinochet.

Pinera, who takes office March 11, stepped up his criticism of the outgoing president. He called Thursday for a sweeping modernization of Chile’s disaster system to eliminate what he called “the lack of coordination and the weaknesses that this tragedy has uncovered with brutal eloquence.”

Pinera named new governors for the six hardest-hit regions and told them to get to work even before his inauguration.

His immediate priorities: Find the missing; ensure law and order; restore utilities; and tend to the injured. Pinera said his administration will work more closely with the military on disasters than Bachelet, and he pledged to rebuild “with the most modern and efficient standards.”

Bachelet, whose approval ratings were sky-high before the quake, bristled at the criticism and insisted “Chile will rise” from the devastation.

Touring an aid distribution center in the heavily damaged city of Concepcion, Bachelet denied any delays or indecision in the hours following Saturday’s pre-dawn quake. Top military officers had complained they couldn’t deploy troops to quash looting or deliver aid until Bachelet finally declared a state of emergency more than 24 hours after the temblor.

Rescue and recovery were in full swing in Dichato, where firefighters used long poles to probe for bodies in huge piles of muddy sand and beach wreckage. The navy ferried troops ashore to help unload 86 tons of food.

Volunteers canvassed camps up in the hills created by people who abandoned their ruined property in town, fearing another tsunami because of frequent aftershocks. They handed out carloads of clothing and food.

The magnitude-8.8 quake — one of the strongest on record — and the tsunami that followed ravaged a 700-kilometer (435-mile) stretch of Chile’s Pacific coast and killed at least 802 people. Authorities have not said how many are missing but do say 2 million people were affected.

Bachelet said it could take at least three years to bring the region back.

“The country doesn’t deserve this. It’s going to be — it’s going to be very hard moving ahead,” she told ADN radio.

The army was flying in 320 tons of aid, and the navy was shipping 270 more tons to coastal towns cut off from the rest of Chile.

Dichato is nestled between pine-forested hills and a lovely sheltered bay where colorful fishing boats served coastal communities and export companies. Its residents proudly note their beach is the only one in the region where children could swim safely in the ocean. Its population of 4,000 triples each January and February with tourists — many were in town when disaster struck — and residents count on that brief summer vacation for much of their income.

The quake and tsunami killed at least 19 people in Dichato and smashed neat wooden houses and small hotels into huge splinter piles. The surge ruined most other buildings in town, which stank Thursday with decomposing fish. One fishing boat marooned far inland was full of rotting octopus.

The Bachelet government had made a difference in Dichato, building 130 neat mustard-yellow duplexes in a public housing project that just opened in September and providing 60 million pesos — $120,000 — to restore the facades of businesses along main street, said Mabel Gomez, president of the local chamber of commerce.

Gomez, 29, ran several small businesses, providing public baths on the beach, an Internet and phone center, and several small cabanas to tourists. But Dichato doesn’t have a bank, and like many business owners, Gomez lost the entire season’s profits — 6 million pesos, about $12,000 — she had planned to deposit later this month.

“Just like the government has helped other countries, now it has to help us here,” said Cid, the bakery and chicken shop owner. Booming profits from the state-owned Codelco mining company — which Bachelet zealously husbanded even as she spent more on social programs than any previous president — will have to be spent by Pinera on reconstruction, Cid said.

Chile has asked other countries and the United Nations for temporary bridges, field hospitals, satellite phones, electric generators, water purification systems, field kitchens and dialysis centers. Some 36 hospitals were either severely damaged or destroyed, Bachelet said Thursday.

U.N. Secretary-General Ban Ki-Moon planned to meet both Bachelet and Pinera on Friday and tour Concepcion.

Pinera now plans an austere inaugural, with only brief stays by foreign dignitaries to enable police to focus on quake duty, and will fly to the disaster zone immediately after he is sworn in. Bachelet has canceled a farewell dinner planned for the eve of the inaugural.

——

Associated Press Writer Federico Quilodran in Santiago contributed to this report.

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Another Milton Friedman Chile quake aftershock

Naomi Klein points out that Salvador Allende's government was responsible for the country's tough building codes

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In the introduction to his book, “Pinochet’s Economists,” Juan Gabriel Valdes, a Chilean political scientistist who served as his country’s foreign minister in the post-Pinochet era, observes that Chile’s abrupt transition from radical socialism to radical Milton Friedman Chicago Schoolism has excited the enduring interest of outside parties of all political persuasions.

After the military takeover, and the abuse of human rights on a massive scale that it engendered, Chile retained the curiosity of diverse political and intellectual circles. The tragic example of a shattered democracy provided the spark for heated discussions and controversies in various countries. Chile’s sudden shifts in orientation yielded a relentless supply of fascinating political and economic phenomena and fueled the wider debate on development, democracy, and social change.

Valdes’ point is underlined and emphasized by the argument currently raging across the Internet concerning what credit to give Milton Friedman for the relatively low loss of life registered in Chile after the devastating earthquake of Feb. 27. The question of who might be responsible for Chile’s tough building codes is just the latest proxy for a much larger battle over ideology — the economic equivalent to the “culture wars” that have ravaged American society since at least the ’60s. The financial crisis has given this age-old struggle new juice. Few events have done more damage to the Chicago school’s intellectual primacy than the economic collapse of the past few years. On the old guard free market fundamentalist front, nerves appear to be stretched to the breaking point, perhaps explaining Bret Stephens’ foolhardy attempt to recover some ground by rehabilitating Friedman through a comparison between the government-enforced building codes, or lack thereof, existing in Chile and Haiti.

Naomi Klein, while reprising some points from her chapter on Chile in “The Shock Doctrine,” brings us the latest datum on that specific issue.

Chile’s modern seismic building code, drafted to resist earthquakes, was adopted in 1972. That year is enormously significant because it was one year before Pinochet seized power in a bloody US-backed coup. That means that if one person deserves credit for the law, it is not Friedman, or Pinochet, but Salvador Allende, Chile’s democratically elected socialist president.

Chile’s building codes were further extended and revised in the early ’90s, well after Pinochet lost power. But again, the real story here is not about building codes, it is the legacy of the kind of “natural experiment” that economists rarely get the opportunity to investigate in the real world: The first time extreme free market reforms were imposed on a society by fiat.

The Chicago boys, unhindered by dissent or pesky labor unions or a critical press, had a free hand and did not waste it. Greg Palast offered a pithy summary back in 2006.

“… the General abolished the minimum wage, outlawed trade union bargaining rights, privatized the pension system, abolished all taxes on wealth and on business profits, slashed public employment, privatized 212 state industries and 66 banks and ran a fiscal surplus.”

Tyler Cowen, the libertarian-minded economist at George Mason University, responded to Palast’s piece with his own report card on Pinochet, which he recently linked back to while disputing Paul Krugman’s take on Chile. Cowen pans Pinochet’s currency policies and is unenthusiastic about the privatization of Social Security but gives him high marks for opening up trade and privatizing major industries, agricultural diversification and restoring “the economic credibility of Chile.” He also argues that although “many economic mistakes were made” Pinochet’s “moderate and left-wing successors left virtually all of his economic policies in…”

But Cowen somewhat elides the fact that Pinochet was forced to reverse or at least partially roll back many of his reforms because their social cost was simply too great. The disparity in interpretations of Chile’s economic development is truly staggering but I don’t see too many people disputing that, particularly in the first ten years after Pinochet seized power, real wages fell for most Chileans, and unemployment and income inequality rose drastically. Per-capita GNP fell 6.4 percent over the course of the entire Pinochet regime. According to Palast, in response to a brutal recession in 1982, Pinochet restored the minimum wage, allowed collective bargaining, and instituted a classic Keynesian government jobs creation program.

That’s what Milton Friedman called “the miracle of Chile.” It’s really hard to imagine anything less deserving of the word.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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