The designation “Chicago Boys” refers to a group of approximately twenty-five Chilean economists who studied free-market economic theories under Milton Friedman, Arnold Harberger, and other members of the University of Chicago economics faculty beginning in the late 1950s. These Chilean students went to Chicago as a result of an exchange program between the University of Chicago and the Catholic University of Chile (Santiago) sponsored by the U.S. government and private foundations (Ford Foundation, Rockefeller Foundation). The first three Chicago Boys were Sergio de Castro—who served as minister of finance and minister of economy early in General Augusto Pinochet's dictatorship (1973–1990)—Carlos Massad, and Ernesto Fontaine. The Chicago-trained economists gradually took over the economics department at the Catholic University.
During the military dictatorship of Pinochet, who came to power after a coup in 1973, the Chicago Boys became the predominant influence in economic policies that emphasized restoration of the market as the principal instrument of economic decision-making, stabilization through monetary and fiscal restraint, privatization of public firms, and reliance on the private sector as the main engine of economic growth. Between 1973 and 1981 the Chicago Boys directed the opening of the Chilean economy to foreign investment, imports, and financial flows. They also implemented a drastic reduction in government subsidies and other market “distortions” that discriminated against, or favored, selected sectors of the economy, while promoting the development of efficient financial markets and deregulation of the economy. The Chicago Boys also emphasized elimination of most price controls and radical reform (partial privatization) of the health care and social security systems.
The Chicago Boys' model became the first well-known implementation of a liberal (some say “neoliberal”) economic program in a polity and economy known for statism, protectionism, and heavy degrees of regulation of the domestic economy. This program has since been influential, though not fully adopted, in other parts of Latin America, Asia, and the former Soviet Union. Reformers in Eastern Europe and Russia, in particular, have sought to emulate some of the apparent successes of the Chilean model for economic reform.
The program put in place by the Chicago Boys remains controversial in Chile and around the world. Some analysts credit the Chicago Boys' program with rescuing Chile from its history of statist economic policies and long-term stagnation. Reference is common to the “Chilean miracle.” The military government boasted in 1980:Five years ago Chile boldly embarked on a course to revitalize its weakened economy, replacing protectionism with free market policies…. A diversified economy capable of functioning at an internationally competitive level has now been established, thereby assuring economic stability and offering excellent opportunities for domestic and foreign investors.(Chile 1980: Economic Profile (New York: CORFO, 1981))Critics of the Chicago model point to the dramatic decline in real wages after the Chicago Boys introduced a radical austerity program known as “shock therapy” in 1975, the disastrous economic crash in Chile in the early 1980s, the growing inequality of distribution of income and wealth, the destruction of the labor movement, and the negative environmental consequences of an economic system that emphasizes export-led growth relying on the exploitation of natural resources (forests, oceans, rivers, mines, and farmland).
Critics urge those assessing the impact of the Chicago Boys' policies to see “the other side of the miracle.” They also remind would-be emulators of the Chilean model that it could be implemented only under a harsh dictatorship that violently repressed political and social opposition. In contrast to the military government's boasts of 1980, the Chilean writer Pablo Huneeus spoofed the Chicago Boys with his “New Economist's Creed,” which read in part: I believe in the all powerful dollar, creator of heaven and earth; I believe in Milton Friedman, His only son, our God, conceived by the grace of the University of Chicago;… I believe in selling the factories, mines and forests of the country;… I believe in the communion of the market… (pp. 36–37).
