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Democratic Socialism in Chile and Peru: Revisiting the “Chicago Boys” as the Origin of Neoliberalism

Published online by Cambridge University Press:  28 June 2019

Johanna Bockman*
Affiliation:
Global Affairs Program, George Mason University

Abstract

In the 1950s and 1960s, the U.S. government paid the economics department at the University of Chicago, known for its advocacy of free markets and monetarism, to train Chilean graduate students. These students became known as the “Chicago Boys,” who implemented the first and most famous neoliberal experiment in Chile after 1973. Peruvian, Mexican, and other Latin American economics students followed a similar path and advocated a turn to neoliberal policies in their own countries. The Chicago Boys narrative has become an origin story for global neoliberalism. However, the focus on this narrative has obscured other transnational networks whose ideas possess certain superficial, but misleading, similarities with neoliberalism. I examine Chilean and Peruvian engagements with Yugoslavia's unique form of socialism, its worker self-management socialism, which was part of a worldwide discussion of anti-authoritarian socialism. I first introduce the Yugoslav socialist model that inspired those in Chile and Peru. I then examine socialist discussions in Chile and Peru that called for decentralized, democratic socialism and looked to Yugoslavia for advice. I conclude by examining the 1990s postponement of socialism in the name of a very narrow democracy and realization of neoliberalism. The Chicago Boys story assumes the easy global victory of neoliberalism and erases what was at stake in the 1988–1994 period: radically democratic socialism on a global scale.

Type
Democratic Socialism and Neo-Socialism: Santiago, Paris, Chicago
Copyright
Copyright © Society for the Comparative Study of Society and History 2019 

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References

1 It is unclear how many Chilean economists were trained in this program, but it was somewhere between thirty and one hundred. Biglaiser, Glen, Guardians of the Nation? Economists, Generals, and Economic Reform in Latin America (University of Notre Dame Press, 2002)Google Scholar; Silva, Patricio, “Technocrats and Politics in Chile: From the Chicago Boys to the CIEPLAN Monks,” Journal of Latin American Studies 23 (1991): 385410CrossRefGoogle Scholar, 390; Valdés, Gabriel, Pinochet's Economists: The Chicago School in Chile (Cambridge University Press, 1995), 127, 186–97Google Scholar.

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15 Neoclassical economics is central to the Chicago Boys narrative. Many scholars have pointed to the version taught in the University of Chicago's Economics Department as neoliberalism's decisive transnational ideological conduit. Valdés described the core of Chicago School economics as “a vanguard of neo-classicism” based on “its basic Walrasian general equilibrium origins” and advocacy of and faith in the market. According to Valdés, University of Chicago professors transferred this “general ideological model” to the Chicago Boys through core courses in price theory and monetary theory and workshops and research assistantships, who then extended this ideological transfer in Latin America. However, economist Léon Walras was a declared democratic socialist who called both for the end of private ownership of the means of production and for free market competition. East European economists had long used Walrasian neoclassical models as models for socialism. Bockman, Markets; Valdés, Pinochet's Economists, ch. 3, esp. 62, 73; Walras, Léon, Études d’ économie sociale (F. Rouge, Libraire-Éditeur, 1896), 144Google Scholar.

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20 Quoted in Ward, Benjamin, “The Firm in Illyria,” American Economic Review 48, 4 (1958): 566–89Google Scholar, 569. While some political factions supported the use of markets for socialism, others did not. Darko Suvin criticizes extensive market reforms for their anti-communist consequences, in Splendour, Misery, and Possibilities: An X-Ray of Socialist Yugoslavia (Brill, 2016).

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24 Neoliberals are primarily committed to private ownership, authoritarianism or expert rule, the narrowing or destruction of democracy, and the undermining of workers’ power. The dichotomy of state versus market does not help us to understand either neoliberalism or socialism. Some of these characteristics are explored in Slobodian, Quinn, Globalists: The End of Empire and the Birth of Neoliberalism (Harvard University Press, 2018)CrossRefGoogle Scholar.

25 This paragraph and the next, as well as the table, are revised from Bockman, Markets.

26 See the national reports on workers’ self-management and participation in Algeria, Bangladesh, Costa Rica, Guyana, India, Malta, Peru, Sri Lanka, Tanzania, Yugoslavia, and Zambia. International Center for Public Enterprises in Developing Countries, Workers’ Self-Management and Participation in Decision-Making as a Factor of Social Change and Economic Progress in Developing Countries: National Reports, vols. 1–3 (ICPE, 1980).

27 Rubinstein, Alvin Z., Yugoslavia and the Nonaligned World (Princeton University Press, 1970), 41Google Scholar.

28 Bogavac, Blagoje, “Yugoslavia and Technical Cooperation,” Review of International Affairs 19, 430 (1968): 2427Google Scholar, 26.

29 Rubinstein, Yugoslavia, 214.

30 Ibid., 94.

31 Ibid., 98.

32 Gonzalo D. Martner and Alfredo Joignant, “El Socialismo y los Tiempos de la Historia: Diálogos Exigentes,” Cuadernos Salvador Allende (June 2005), http://www.salvador-allende.cl/Biblioteca/Martner.pdf, 24–25.

33 Pollack, Benny, “The Chilean Socialist Party: Prolegomena to Its Ideology and Organization,” Journal of Latin American Studies 10 (1978): 117–52CrossRefGoogle Scholar.

34 Ibid., 137, original italics.

35 This quotation is in Martner and Joignant, “El Socialismo,” 25–26.

36 Waiss, Oscar, Chile Vivo: Memorias De Un Socialista, 1928–1970 (Centro de Estudios Salvador Allende, 1986)Google Scholar.

37 Julio César Jobet, “El Partido Socialista de Chile: Tomo II,” Cuadernos de Orientacion y Pensamiento Socialista 9 (2004), http://www.salvador-allende.cl/Cuadernos/Cuadernos9.pdf.

38 Arrate, Jorge and Rojas, Eduardo, Memoria de la Izquierda Chilena (Javier Vergara Editor, 2003), 347Google Scholar.

39 In 1961, the PS expelled Waiss; Waiss, Chile Vivo, 128. In 1969, it expelled Ampuero and its leadership declared the party Marxist-Leninist; Arrate and Rojas, Memoria, 350.

40 As Valdés demonstrates, the Ford Foundation changed the nature of the program when it began funding it; Pinochet's Economists, 186–97. According to the Foundation, the U.S. government program Alliance for Progress required countries to pledge to undertake national economic and social planning. Ford Foundation Archives (henceforth FF), reel 2677, PA 71–369, memo from John Strasma to Peter D. Bell, 15 Feb. 1971, p. 3.

41 Chile's National Accounts Section of the Development Corporation (CORFO) developed the first “sustained” national planning effort. FF, reel 2677, PA 71-369, Section 1 (Basic Documents), “Request for Grant (request no. ID-1010),” distributed 3 May 1971, “Support for the Center for National Planning Studies,” p. 3.

42 The Ford Foundation worried that the Allende government was making ODEPLAN and other economic agencies focus on short-run economic policies and did little long-term planning.

43 FF, reel 2677, PA 71-369, Section 1 (Basic Documents), Supplemental Grant Request (request no. ID-1711), approved 12 July 1973, $198,000. CEPLAN was created by the university on 26 January 1970 and began operations the following October; FF, reel 2677, PA 1-369, memo from John Strasma to Mr. Peter D. Bell, “Background Material to Support Request for ‘A’ Status, Pontifical Catholic University of Chile, Center of National Planning Studies (CEPLAN),” 15 Feb. 1971, p. 5.

44 FF, reel 2677, PA 71-369, Section 3 (Reports), memo from John Strasma to Mr. Peter D. Bell, CEPLAN's First Year under Our Grant (PA 71-369), 21 Aug. 1972, p. 8. Alejandro Foxley et al., Chile: Búsqueda de un Nuevo Socialismo (Ediciones Nueva Universidad, 1971).

45 FF, reel 2677, PA 71-369, memo from John Strasma to Mr. Peter D. Bell, 15 Feb. 1971, p. 24.

46 Before CEPLAN opened, Catholic University already had a cultural exchange agreement with the University of Belgrade focused on worker participation in management.

47 FF, reel 2677, PA 71-369, memo from Alejandro Foxley (CEPLAN) to Peter Bell—list of the academic contacts he made in England.

48 Archives of Serbia and Montenegro, fond 142, br. 10.3-32.1, “Čile 1970,” note about meeting of Ljubo Reljić (assistant director of the Federal Office) with Mr. Maximo Pachico (Chilean minister of education and culture), 23 Feb. 1970, p. 2.

49 Archives of Serbia and Montenegro, fond 142, br. 10.3-32.1, “Čile 1970,” information about study tour of group of experts from Chile in SR Serbia, 11 June 1970.

50 Pizarro, Crisóstomo, “Participación y desarrollo económico en la sociedad socialista,” in Foxley, Alejandro et al. , Chile: Búsqueda de un Nuevo Socialismo (Ediciones Nueva Universidad, 1971), 91Google Scholar.

51 Archives of Serbia and Montenegro, fond 142, br. 10.3-32.1, “Čile 1970,” information about study tour of group of experts from Chile in SR Serbia, 11 June 1970. Catholic University had an academic exchange program with the University of Belgrade, which sent at least one Yugoslav student to Chile in 1972.

52 FF, reel 2677, grant 71-369, “Informe a la Fundación Ford de las Actividades Desarrolladas por CEPLAN en el Periodo 1971–1973,” 26 Feb. 1974, p. 5 of financial section.

53 Ibid., 7.

54 Scurrah, Martín J. and Podestà, Bruno, Experiencias Autogestionarias en Chile y Perú: Problemas y Lecciones (University of Texas at Austin, 1984), 1Google Scholar. The Ford Foundation supported CEPLAN's work in this area, but at least one Ford Foundation official saw self-management as a possible addition to capitalism. In an excited report about the three-week visit of Jaroslav Vanek, a Cornell University economist and Yugoslav self-management expert, in 1969, Joseph Ramos understood labor-managed firms and capitalist firms coexisting as a “non-capitalist, non-communist” third way of development. FF, reel 2723, PA 65-96, 4 (General Correspondence), memo from Ramos to John P. Netherton, “Final Report on Vanek's Visit,” 7 July 1969, 4. In contrast, CEPLAN staff understood themselves as talking about socialism.

55 Scurrah and Podestà, Experiencias, 1.

56 FF, reel 2677, PA 71-369, “CEPLAN's First Year Under Our Grant,” 21 Aug. 1972, p. 17.

57 Seibel, Hans Dieter and Damachi, Ukandi G., Self-Management in Yugoslavia and the Developing World (MacMillan Press, 1982), 267–70CrossRefGoogle Scholar.

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59 According to the Ford Foundation, no other staff member was subjected to interrogation or detention for reasons connected to his academic work, but Sergio Bitar was interned on Dawson Island. FF, reel 2656, PA 71-369, FF, inter-office memo from Lovell S. Jarvis to Mr. Peter D. Bell, 27 Dec. 1973, pp. 1–2.

60 Knight, Peter T., “New Forms of Economic Organization in Peru: Towards Workers’ Self-Management,” in Lowenthal, Abraham F., ed., The Peruvian Experiment: Continuity and Change under Military Rule (Princeton University Press, 1975), 356–58Google Scholar.

61 Yugoslavia began to seek diplomatic relations with Peru in September 1956. Archives of Serbia and Montenegro, fond 142, 41 (Materijali komisije za medjunarodne veze), 1951, 1955–1957, 1959, “Bilateralni odnosi sa Peruon,” 22 June 1959. Victor Raul Haya de la Torre rejected the Third International in 1927, which might explain his interest in Yugoslavia (Klarén, Peru, 260).

62 Rodríguez told the Yugoslavs that four more Peruvian representatives would soon visit Yugoslavia from Vienna. Archives of Serbia and Montenegro, fond 142, 41 (Materijali komisije za medjunarodne veze), 1951, 1955–1957, 1959, “Zabeleska,” 1 Aug. 1959.

63 Klarén, Peru, 361.

64 Jane S. Jaquette and Abraham F. Lowenthal wrote, “No country in Latin America, and few anywhere in the third world, was the subject of more social science writing during the late 1970s and early 1980s than Peru.… What inspired this burst was … its experiment from 1968 to 1980 at militarily directed change. “Review: The Peruvian Experiment in Retrospect,” World Politics 39 (1987): 280–96, 280.

65 writes, McClintock, “Yugoslav influence was clear.Peasant Cooperatives and Political Change in Peru (Princeton University Press, 1981), 14Google Scholar.

66 Handelman, Howard, “The March to Civilian Rule,” in Handelman, Howard and Sanders, Thomas Griffin, eds., Military Government and the Movement toward Democracy in South America (Indiana University Press, 1981 [1979]), 100–31Google Scholar, 100; Knight, “New Forms”; McClintock, Cynthia, Self-Management and Political Participation in Peru, 1969–1975: The Corporatist Illusion, 1969–1975 (Sage Publications, 1977), 5Google Scholar.

67 For example, see Montecinos, Economists; Silva, “Technocrats.”

68 For example, see Klarén, Peru. Cynthia McClintock criticized both the corporatist argument and taking Velasco's words at face value, in her Peasant Cooperatives, 45–48.

69 Juan Velasco Alvarado, “Ni capitalismo ni comunismo,” Message to the nation on the 149th anniversary of independence, 28 July 1970, in Velasco, La Voz De La Revolución, vol. 1 (Oficina Nacional de Difusión del SINAMOS, 1972), 217–52.

70 Juan Velasco Alvarado, “Hacia una justicia social, donde la comunidad trabaje para el hombre y para ella,” speech at the closing ceremony of the 9th annual conference of ejcutivos (CADE), 15 Nov. 1970, in Velasco, La Voz De La Revolución, vol. 2 (Oficina Nacional de Difusión del SINAMOS, 1972), 5–28, 10.

71 Ibid., 11.

72 Juan Velasco Alvarado, “Enmarcada en una sociedad libre, justa, solidaria,” message to the nation on the 150th Anniversary of Independence, 28 July 1971, in Velasco, La Voz De La Revolución, vol. 2 (Oficina Nacional de Difusión del SINAMOS, 1972), 105–44, 110.

73 Juan Velasco Alvarado, “Aspiraciones, demandas y anhelos: Motivacion del que hacer revolucionario de pueblos hermanos del continente,” speech at a banquet for Dr. Salvador Allende, President of the Republic of Chile on 1 Sept. 1971, in Velasco, La Voz De La Revolución, vol. 2 (Oficina Nacional de Difusión del SINAMOS, 1972), 163–68, 166.

74 Ibid., 167.

75 Juan Velasco Alvarado, “Economia funamentalmente autogestora; predominio de la propiedad social; transferencia del poder politico a los sectores mayoritarios autonomamente organizados,” speech to the second ministerial meeting of Group 77 in Lima, 28 Oct. 1971, in Velasco, La Voz De La Revolución, vol. 2 (Oficina Nacional de Difusión del SINAMOS, 1972), 271–88, 271.

76 Scurrah and Podestà, Experiencias, 2.

77 Shari Berenbach, “Peru's Social Property: Limits to Participation,” Industrial Relations: A Journal of Economy and Society 18 (1979): 370–75, 371.

78 Héctor Béjar, La Revolución En La Trampa (Ediciones Socialismo y Participación, 1976), 129.

79 Knight discusses Vanek's visit. General Luis Barandiaran, head of National Integration Office, invited Vanek. Knight, “New Forms,” 378.

80 Knight, however, argues, “Although Peruvian policy makers listened to Vanek and Horvat, many of their suggestions were not adopted”; “ibid.,” 379.

81 Archive of Serbia and Montenegro, fond 465–431 (Popis 4), Naucno-Tehnicka Saradnju SFRJ-Peru, Zahtevi, 1974–1975, file 2, request for three experts (finance and planning), 1974; letter from Momčilo Vučeković at the Federal Secretariat for Foreign Affairs (office for Latin America) to Federal Office for cooperation, 4 Apr. 1974.

82 Ibid.

83 FF, “The Ford Foundation's Program in Peru: Economics and Agriculture,” by Peter T. Knight, May 1972, call number: Reports 011874, p. 1465.

84 FF, visit to Lima, 15–18 July 1973: Mr. and Mrs. David E. Bell and Mr. William D. Carmichael, call number: reports 015408, file 3.

85 Conaghan, Catherine M., “Stars of the Crisis: The Ascent of Economists in Peruvian Public Life,” in Centeno, Miguel A. and Silva, Patricio, eds., The Politics of Expertise in Latin America (St. Martin's Press, 1998), 145Google Scholar.

86 Ibid., 147.

87 Máximo Vega-Centeno, “Balance de la Especialidad de Economía,” 2001, 55–56, http://files.pucp.edu.pe/departamento/economia/LDE-2001-05-04.pdf.

88 Conaghan, “Stars of the Crisis,” 145.

89 FF, reel 2700, PA 72-410, Training and Research in Economics, “Informe Narrative y Propuesta de Renovacion del Departmento de Economia de la Pontificia Universidad Catolica del Peru sobre la Ayuda Financiera de la Fundacion Ford,” grant 720-0410ª, 1977.

90 Knight, “New Forms,” 379.

91 Luis G. Flores, “Organizational Goals, Growth, and Growth Strategy in the Peruvian Co-Determination and the Yugoslav Self-Determination Systems” (PhD diss., Texas Tech University, 1976).

92 Knight worked as the program advisor in economics and agriculture in the Ford Foundation's Lima office.

93 FF, visit to Lima, 15–18 July 1973, call number: Reports 015408, file 3, memo from Peter T. Knight to James W. Trowbridge, 3 July 1973, p. 3.

94 In 1975, Peter T. Knight published his own book on self-management in Peru for a Spanish-speaking audience: Perú: Hacia autogestión? (Editorial Proyección, 1975).

95 FF, visit to Lima, 15–18 July 1973, call number: Reports 015408, file 3, Peter Knight, “The Program in Economics and Development Planning,” pp. 3–4.

96 Archives of Serbia and Montenegro, fond 142, “Peru 1975,” report on talks regarding scientific-technical and cultural cooperation of leaders in Peru, Ecuador, Columbia, Panama, and Venezuela in the framework of a visit to these countries of a state-economic delegation of the SFRJ, 8 June–3 July 1975; 11 Aug. 1975.

97 Klarén, Peru, 359.

98 Seligmann documents the restructuring that resulted from the 1969 agrarian reform, while Klarén discusses the impact of Velasco governmental support of neighborhood organizing: Seligmann, Linda J., Between Reform and Revolution: Political Struggles in the Peruvian Andes, 1969–1991 (Stanford University Press, 1995)Google Scholar; Klarén, Peru, 351, 362.

99 Ostojić, Danica, “Jugoslavija kao poverilac,” in Babić, Blagoje S., ed., Jugoslavija u Međunarodnim Finansijama, vol. 1 (Institut za međunarodnu politiku i privredu, 1986), 191203Google Scholar.

100 Klarén, Peru, 374.

101 Scurrah and Podestà, Experiencias.

102 Berenbach, “Peru's Social Property”; Scurrah and Podestà, Experiencias.

103 Archives of Serbia and Montenegro, fond 465, popis br. 63, facs. br. 218, Peru, file 431–3/81, study visit regarding self-management, Institute for Research and Development of Self-Management.

104 Burt, Jo-Marie and Espejo, Cesar, “The Struggles of a Self-Built Community,” NACLA Report on the Americas 28 (1995): 1925CrossRefGoogle Scholar; Farnsworth, Elizabeth, “Peru: A Nation in Crisis,” World Policy Journal 5 (1988): 725–46Google Scholar; Mauceri, Philip, State under Siege: Development and Policy Making in Peru (Westview Press, 1998), 98Google Scholar.

105 Farnsworth, “Peru: A Nation in Crisis,” 735.

106 Santiago Roca, “The Mezzopolitical Economy of Production Cooperatives in Peru: The Sugar Experience” (PhD diss., Cornell University, 1982).

107 Susan Carol Stokes, Mandates and Democracy: Neoliberalism by Surprise in Latin America (Cambridge University Press, 2001), 50–51.

108 Conaghan, “Stars of the Crisis,” 159.

109 FF, reel 2677, PA 71-369, section 4 (General Correspondence), inter-office memo from Nita Rous Manitzas to Mr. Richard W. Dye, 5 Aug. 1974, p. 1. She said that Enrique Iglesias at CEPAL and Gabriel Valdés at UNDP encouraged Foxley in this work.

110 For details on the reorganization, see FF, reel 2677, PA 71-369, section 3 (Reports). FF, inter-office memo, from Jeffrey M. Puryear to Mr. Richard W. Dye, 31 Jan. 1977, subject: “Recommendation for Closing” (CEPLAN) (PA 71-389A), p. 2; Silva, “Technocrats,” 403. Valdés wrote, “CIEPLAN provides the best critical analysis of the Chicago Boys’ economic policy, and the evolution of the economy during the seventeen-year Pinochet regime”; Pinochet's Economists, 16 n1. Some of the works by CIEPLAN staff include Ricardo Ffrench-Davis, “El Experimento Monetarista en Chile: Una Síntesis Crítica,” Colección CIEPLAN 9 (1982); Foxley, “Experimentos neoliberales”; Tironi, Ernesto, “El Modelo Neoliberal Chileno y su Implantación,” Documentos de Trabajo 1 (1982)Google Scholar.

111 FF, reel 2656, PA 71-369. FF, inter-office memo from Lovell S. Jarvis to Mr. Peter D. Bell, 27 Dec. 1973.

112 Foxley, Alejandro et al. , Reconstrucción Económica Para La Democracia (Editorial Aconcagua: CIEPLAN, 1983)Google Scholar.

113 Bresnahan, Rosalind. “Introduction. Chile since 1990: The Contradictions of Neoliberal Democratization,” Latin American Perspectives 30, 5 (2003): 35Google Scholar.

114 See Atlagich, Fernando Alvear, “Genealogia de una Ruptura: El Proceso de la Renovacion Socialista en Chile,” Revista de Ciencias Sociales 36 (2016): 734Google Scholar; Arrate, Jorge et al. Siete ensayos sobre democracia y socialismo en Chile (Ediciones Documentas, 1986)Google Scholar; Puryear, Jeffrey. Thinking Politics: Intellectuals and Democracy in Chile, 1973–1988 (Johns Hopkins University Press, 1994)Google Scholar.

115 Wright, Thomas C. and Zúñiga, Rody Oñate, “Chilean Political Exile,” Latin American Perspectives 34, 4 (2007): 3149CrossRefGoogle Scholar, 42.

116 See, for example, Ortiz, La Perestroika.

117 Wright and Oñate. “Chilean Political Exile.”

118 Motta, Sara C., “The Chilean Socialist Party (PSCh): Constructing Consent and Disarticulating Dissent to Neo-Liberal Hegemony in Chile,” British Journal of Politics and International Relations 10, 2 (2008): 303–27CrossRefGoogle Scholar; Puryear, Thinking Politics, 66–67.

119 Eastern European, Central American, and South African socialists voiced these hopes in the period from 1988 to 1994 and experienced this narrow political democracy by 1995. Bockman, Markets.

120 Alvear Atlagich, “Genealogia”; Motta, “Chilean Socialist Party”; Puryear, Thinking Politics, 66–67.

121 Alvear, “Genealogia,” esp. 29; Montecinos, Economists; Silva, “Technocrats”; Escobar, Ricardo Lagos, Hacia la Democracia: Los Socialistas en El Chile de Hoy (Ediciones Documentas, 1987)Google Scholar, esp. 18. Similar kinds of cooptation can be observed in elites’ embrace of decentralization, participatory development, and other seeming attempts to undermine state and elite power. See Paley, Julia, Marketing Democracy: Power and Social Movements in Post-Dictatorship Chile (University of California Press, 2001)Google Scholar.

122 Motta, “Chilean Socialist Party,” 313.

123 For example, see Karl Polanyi's vision of socialism in “‘Socialist Accounting’ by Karl Polanyi; with Preface, ‘Socialism and the Embedded Economy,’” Ariane Fischer, David Woodruff, and Johanna Bockman, trans., Johanna Bockman, preface. Theory and Society 45, 5 (2016): 385–427.