SOCI 211 Lecture Notes - Lecture 7: Chicago Boys, International Financial Institutions, Mindwipe
3 May 2018
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Wednesday January 31st
Wallerstein: not nation state, but systems.
Neo-malthusian approach already came up when we asked ourselves what is development?
There are limits to the planet that we live in.
1990s: Neoliberalism
• Tax cuts; core idea of neoliberalism
Keynesianism
• Controlling inflation, unemployment
• State intervention in economy unchallenged for a while
Neoliberalism
• Private actors, businesses, NGOs
• Liit state iteretio i the eoo, ad the arket ill sort itself out
• Milton Fiedman, Fredrich van Hayek
Ideological Foundations
• Austrian economists:
o Ludwig von Mises (1881-1973)
▪ True founder of neoliberalism; wrote about banking theory
▪ Consumer interests count above all other interests, these interest are
haroized the arket, ad iiize state futio
o Fredrich van Hayek (189901992)
▪ Student of Mises, influential for Milton Friedman and Chicago Boys
▪ Pricing mechanism serves a function; signals to people, mechanism for
communication over long distances
• Spontaneous economic system can coordinate a whole economy
• State should not set prices
▪ Shunned in academic community; Keynesianism is the fashion
▪ Accepted to university of Chicago
• Mon Pelerin Society (MPS) founded in 1947
o Milton Friedman: sponsoring implementation across the world
o Trained a lot of students in the neoliberal approach Chicago Boys
o Chicago boys spread neoliberal ideas, working at the IMF etc.
Features of Neoliberalism
1. Faith i free arket ad its ratioalit arket fudaetalis MF
a. Free of obstacles; state, political entities
b. MF: Market ill take of eeroe’s eeds, rig greatest elfare alogside
individual freedom
2. Belief in free trade
3. Deregulation
find more resources at oneclass.com
find more resources at oneclass.com
a. Need to remove restraints to accomplish this
4. Low taxes or tax-cuts
a. Stimulate economy: people encouraged to earn more and invest more,
supposedly trickle-down
5. Spending on welfare should be minimized
a. When you spend more on welfare, you burden government, you harm the poor
i. Cut elfare, ou do’t hae to ta, the people ill iest i ore
productive undertakings
ii. Getting rid of safety net to stimulate economy
6. Limited government
a. Even sell off certain parts of government; transportation, telecommunication
etc.
i. Private businesses do this more efficiently
7. Privatization
Assumption that free markets also align with democratic governments all the freedoms go
together, freedom for everyone, everywhere. Neoliberalism as an ideology does not enter until
the 1980s, but there are things happening in the 70s that lay the foundation.
“hock Doctrine and the case of Chile
• “hok Dotrie: the sae id-wiping (psychology experiment with a shock) is happening
for neoliberalism
o The shok is the oup
o Shock needed to introduce new ideas, institutionalize economic theories
• Election of Salvador Allende and subsequent coup democratic
o US is uncomfortable
o Sponsored the coup via the CIA
▪ Richard Nixon: US funding to destabilize the economy
o Allende was killed and replaced by a dictator 3 years after the election
o Reprogramming after the coup: Chicago boys played a rule
▪ Ipleetig Frieda’s ideas
▪ presriig ediie
• Economic policies; benefitted the wealthy at the expense of the
poor
• Implementation of neoliberal ideas under General Pinochet; leader of the coup
o Overthrowing of democratic rule
• Some of the policies:
o Privatization of industry
o Deregulation of economy
o Reduction of spending on social welfare
• Winners and losers
o Losers = people who relied on social safety net, poor people
o Winners= rich people, business owners
find more resources at oneclass.com
find more resources at oneclass.com
• Greece: shock could have been Germany forcing Greece in a standoff, and the economic
crisis that followed, Greece had no choice to accept the neoliberal policies imposed by IMF
and World Bank
• Free market is an ideal; there is still regulation in the US
o The argument for neoliberalism has been that there is more deregulation to go
Entrenchment of Neoliberalism
• Rise of conservative politics in Britain and USA
o Thatcher and Reagan
• Collapse of Soviet Union
o Countries undergo shock therapy towards forced neoliberalization
• Debt crisis of 1980s
o ISI: limited model, falling commodity prices
o Countries getting GDP and growth from selling commodity
o Slowing down of the global economy (developed world needing less
commodities)
o Debt crisis need to pay large amounts of money, cannot pay them back
• Washington Consensus
o Policy prescriptions for developing countries
• International Financial Institutions and structural adjustment
o Conditional lending; receiving countries need to change economies along
neoliberal lines (SAPs)
▪ Deregulate economy, sell telecommunications owned by state etc.
▪ Only then will you be supplied by line of credit
• Solution: free-market, neoliberal policies
• Critiques
o Inequality, marginalization, lowest amount of growth
o Decline of state, instituted some corruption
o 2001 collapse of Argentina, Asian Crisis, Mexico people questioning the
policies by Washington Consensus
▪ Aedets for good goerae added in late 90s to IMF and
World Bank conditions
The End of History
• Francis Fukuyama
• Neoliberalism as the culmination of history
o We are to expect no major changes after this point
• Main weaknesses
o Ignoring the haves and have nots; the idea that everyone is content with the
system, coming from a privileged position
o Class issues have not been resolved in the West
o Accepts consumerism unquestioningly
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
There are limits to the planet that we live in. 1990s: neoliberalism: tax cuts; core idea of neoliberalism. Keynesianism: controlling inflation, unemployment, state intervention in economy unchallenged for a while. Neoliberalism: private actors, businesses, ngos, li(cid:373)it state i(cid:374)ter(cid:448)e(cid:374)tio(cid:374) i(cid:374) the e(cid:272)o(cid:374)o(cid:373)(cid:455), a(cid:374)d (cid:862)the (cid:373)arket (cid:449)ill sort itself out(cid:863, milton fiedman, fredrich van hayek. Assumption that free markets also align with democratic governments all the freedoms go together, freedom for everyone, everywhere. Entrenchment of neoliberalism: rise of conservative politics in britain and usa, thatcher and reagan, collapse of soviet union, countries undergo shock therapy towards forced neoliberalization, debt crisis of 1980s. The end of history: francis fukuyama, neoliberalism as the culmination of history, we are to expect no major changes after this point, main weaknesses. Increased inequality, deregulated environment, prone to financial crisis. The end of neoliberalism: the great recession (2008 financial crisis, questioning neoliberalism, let the market fail, sort it out -> neoliberalism as an ideal.
