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Old January 20th, 2013, 06:34 PM   #61

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Pinochet was a far-right dictator, similar to many dictators in Latin America and in other parts of the world. Propped by the CIA to contain the rise of leftists in their backyard, he overthrew the democratically elected Marxist government of Salvador Allende and embarked on setting the country 'right', exterminating many Chileans in the process. He was not a fascist, but this is hardly any consolation to his victims; it never is for the countries that have experienced military juntas.

Pinochet offered his country as the perfect laboratory for Milton Friedman's ideas. The Chicago Boys became the economic mentors of the Chilean economy. It may sound strange that economic liberalism coexisted with political authoritarianism, but it isn't. Extreme economic liberalism (Friedman's doctrine) can never be applied to any society without the victim society fighting back. It requires oppression, or a strong shock to justify the violent uprooting of any protection of its weaker members in favour of its stronger ones. It took millennia for humanity to come up with structures offering some social balance; Friedman's ideas sought to re-establish the laws of the jungle: no interference whatsoever from the collective organisation of humans, in other words, from the state.

Both extremes, be it a central planning regarding everything and the meddling of the state in every aspect of the economy, or the complete absence of it, are unnatural to humanity and bound to fail. And despite the aspirations of Friedman, complete absence of the state does not lead to greater civil liberties, but to the opposite. It simply allows the big fish to devour the smaller ones at their leisure, gain more and more power, and effectively establish a plutocracy.

No free country implemented Friedman's dogmas to their full extent. Neither Thatcher, nor Reagan, both admirers of his, had the ability to pass the full scope of the 'reforms' proposed by this ideology. And this is where the IMF comes in. The IMF is the bishop of this economic theory, known as 'neoliberalism'. Countries under the financial shock of a looming bankruptcy accept their sovereignty sustained, and in exchange for economic assistance accept those Friedmani(a)c measures of "everything must go" privatisations, deregulation, abolition of labour laws, and so on. The more the IMF stays, the more crippled the state becomes, with health, education, quality of life suffering accordingly.

Not that the IMF is comprised by 'evil' people. Not at all. It's just what they have been taught, and what they believe is the right thing to do. Because Friedman's ideas have, in fact, become an ideology, sponsored by those that have every interest in promoting it around the world. A very, very dangerous ideology, and perhaps the biggest scam of the 20th century: how one of the most destructive, unworkable economic theories became mainstream policies, despite their failure again, again, and again. And how to present repetitive dismantling of societies and sell-off of countries as success.

Friedman theories were a massive failure. Wherever his extreme dogmas were implemented, economy, as well as society, teetered on the brink. No country visited by the IMF recovered because of its intervention; many simply went bankrupt, others broke away from it and regained their economic sovereignty again, and recovery. Argentina implemented extensive neoliberal reforms from the early 90's, under the infamous Menem presidency and the IMF guidance. A decade later, it went spectacularly bankrupt. Guatemala is under the thumb of the IMF from 1981; its macroeconomics appear spectacular, and yet it is one of the most unequal and impoverished countries of Latin America. There are two separate Guatemalas, one private paradisiac for the few, and one hellish for the many. Chile succeeded only when the Chicago Boys were sent home, renationalisations of the country's wealth took place, and some of the neoliberal reforms were reversed.
Eastern Europe, South-east Asia, Latin America, Africa. And now Southern Europe. The list of Friedman-inspired failures is endless. In fact, prior to the Euro crisis, the IMF was an organisation heading to dismantling, hated and with its status severely depleted by repetitive failures. Pity, because it was an organisation completely differently envisioned by Keynes.

The bottom line is that the sooner the myth around Friedman is dismantled, the better for humanity. And for those protesting that liberalisation does indeed work, I'd say yes, indeed, but if done within limits. Not if done as Friedman envisioned it, who took economic laissez faire to the extreme, creating a theory that was Utopian in promise, nightmarish in practice.
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Old January 20th, 2013, 06:55 PM   #62
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Are you referring to Hitler's or Brüning's policies? The latter adopted an IMF style of financial policy, with extreme austerity that plunged the German people into further misery; it was the final push that Hitler needed to get to power.

Since Brüning abandoned office in 1932, you must be referring to the financial policy of the Nazis. I find the notion that it was economic problems that drove Hitler to war an incredible one. Is this what you're saying, or am I misunderstanding something?

The crash of 1929, which was partly due to a decade of "wild", deregulated capitalism in the US, was the coup de grace of the fragile Weimar Republic, allowing Hitler to take advantage of a population too tired, battered, humiliated and impoverished from a punitive Versailles treaty; as the economy was beginning to stabilise, and perhaps the Republic had some chances to survive the onslaught of the political extremes, the Great Depression struck Germany with devastating force. It was the final push, starting a series of events that would cost the lives of millions.

Massive financial problems propped Hitler to power alright. But from then onward, it was the Nazi ideology that caused the war, not Keynesian-style economics, nor any other economic reason for that matter.
Can you explain why this decade of "wild" deregulated capitalism was any different to the capitalism in the US and UK that had gone on for 120 years beforehand? The 1920's was not a decade of experimental free-market policies.

As for the Versailles treaty. Ideologically it may have been humiliating for Germany. Financially it was not. The Germans paid almost nothing back in reparations. If Germany was poor it was not because of war reparations.
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Old January 20th, 2013, 11:03 PM   #63

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He was not a fascist, but this is hardly any consolation to his victims;
Exactly. But again, killing people or running a country in an authoritarian way is not a proper definition of fascism. Then Stalin, Attila, Louis XVI and Erszebet Bathory would all be fascists.

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Friedman's ideas sought to re-establish the laws of the jungle: no interference whatsoever from the collective organisation of humans, in other words, from the state.
Obviously, and contrary to Friedman's statement that the government "plays a smaller role" in Chile of the time as opposed to the Eastern European single-party states, the state plays a huge role in any dictatorship.

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Both extremes, be it a central planning regarding everything and the meddling of the state in every aspect of the economy, or the complete absence of it, are unnatural to humanity and bound to fail.
You're equating minarchism to anarchism, which is hardly fair. Complete absence of a state in a current setting is certainly bound to fail (and rebounce into authoritarianism), but that isn't the same.

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No free country implemented Friedman's dogmas to their full extent. Neither Thatcher, nor Reagan, both admirers of his, had the ability to pass the full scope of the 'reforms' proposed by this ideology.
Agreed. Hardly, I don't think either wanted to. In terms of foreign policy, they broke with Milton's non-interventionism in most of every possible regard.

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Chile succeeded only when the Chicago Boys were sent home, renationalisations of the country's wealth took place, and some of the neoliberal reforms were reversed.
Check up the Economic Freedom Index of Latin American countries. Chile is, by far, the freest and most de-regulated still. I would hardly account it's success vis-a-vis to the detriment of other countries due to "neoliberalism" being less present in Chile.
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Old January 21st, 2013, 08:54 AM   #64

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Very few countries enjoy inviting the IMF in. The reason the UK had to do it in the 70's was because we ran out of money. The international markets were refusing to lend to us. Or if they did it was at an astronomical interest rate. The moral of the story - a government ought to spend within its means. During the IMF crisis the Labour Govt reluctantly implemented cuts. Cuts which it politically couldnt/or wouldnt implement beforehand.

The US only borrows its money from China as long as the Chinese wish to lend it money. If the international financial markets ever lost confidence in the US ability to finance its debt then these loans would very quickly dry up. The markets lost confidence in the UK's ability to finance its debt in the 1970's. Thats why they had to call in the IMF.
This is Freudian economic theory or confidence fairy economic theory.The idea that health if economies depend on what the market thinks.

Malaysia never bothered to turn to the IMF for a bailout during the Asian crisis. They did just fine. The dollars borrowed by the British government from the Imf was printed by the American federal reserve in the same way that the Bank of England could print its own pounds.

It just makes no sense to say a government accruing debt in a foreign currency makes more sense than the alternative. And the reason why America borrows dollars from China is because these dollars are American dollars.
When the world's superpower tells you to lend it its own dollars being used as a reserve currency, you don't say no, at least not right away. I don't see what it has to do with China being confident in the American economy. They are a bunch of communists who interfere with their market when and however they find it necessary or convenient.

The whole world has become restless trying to find an alternative to the American dollar as world's reserve e currency.
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Old January 21st, 2013, 05:02 PM   #65

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After discussing the Nazis, civil rights in Chile and the CIA, IMF bailouts and Fascism which would have nothing to do with Milton Friedman and Liberalism if it wasn't by the promiscuity with which Communists and Socialists have been using political denominations over the last century, and it's amazing the amount of disparate things they put under the label of fascism or neoliberalism, maybe it's time to mention Hong Kong which was Milton Friedman's ultimate example of liberalism. And we might very well say the true experiment on economic freedom undertaken by Hong Kong's governor John James Cowperthwaite. I imagine nobody would deny that Hong Kong has been an economic success.

Positive non-interventionism - Wikipedia, the free encyclopedia

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Old January 21st, 2013, 05:23 PM   #66

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So here is the man himself in loco:

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Old January 21st, 2013, 09:11 PM   #67

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I have respect for Friedman as a thinker but as a public intellectual trying to affect public policy he is a disaster.
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Old January 21st, 2013, 10:01 PM   #68

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I have respect for Friedman as a thinker but as a public intellectual trying to affect public policy he is a disaster.
Well said!

What I think was the point was that whereas one tends to point to the hells to reinforce the view of someone as a looney, Friedman himself upheld Hong Kong as an actual example of his preferred degree of economic freedom and independence. Personally I think it's a great model, however I dare say it will not work everywhere, and beyond the welfare of men because of the issues of conservation. Of course, then again most countries have more natural resources than Hong Kong.

Hong Kong has universal healthcare coverage, by the way. And a 15 % flat income tax. That is new liberalism/welfare liberalism to me.
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Old January 21st, 2013, 10:57 PM   #69

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The most amusing aspect of present global economy is that China, in its internal market, is following neoliberism, keeping the socialist control of the social / political spheres of the country.

The only state intervention we can complain about in China is the control of the exchange rate of the money [not a little intervention!]. But the internal market follows [and I would say in a pure and rude way] the laws of the demand and offer.

According to Wang Hui the last "silent earthquake" [accident of Chongging related with Bo Xilai, denied by present leaders at Beijing] in the Chinese establishment would just aimed to favor a further reform in neoliberist sense of the internal market.

It's a decade that I hear the curious expression "market socialism" when I discuss about modern Chinese economy.
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Old January 22nd, 2013, 08:12 AM   #70

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Can you explain why this decade of "wild" deregulated capitalism was any different to the capitalism in the US and UK that had gone on for 120 years beforehand? The 1920's was not a decade of experimental free-market policies.

As for the Versailles treaty. Ideologically it may have been humiliating for Germany. Financially it was not. The Germans paid almost nothing back in reparations. If Germany was poor it was not because of war reparations.
IIRC unemployment was declining just 6-9 months after the crash. I thought it was the raising of tariffs and the retaliatory raising of tariffs that exacerbated the problem.
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