Chicago Boys

The Chicago Boys were a group of Chilean economists, primarily trained at the University of Chicago under the tutelage of Milton Friedman and Arnold Harberger, who played a pivotal role in shaping Chile’s economy during the military dictatorship of General Augusto Pinochet (1973–1990). Influenced by neoliberal economic principles, they implemented free-market reforms, including privatization, deregulation, and trade liberalization, which transformed Chile into a laboratory for Chicago School economics. The privatization of industrial capacity in countries that experienced CIA back coups is a pattern. The United States corporation, in this case mining, PepsiCo and ITT were threatened by nationalization of their respective industries so they pressure the US government (CIA) to act on their behalf, alleging communist influence usually where there is none. Post coup, additional US corporations buy access and influence as well as companies in the targeted country.

Background and Formation

University of Chicago Connection: The Chicago Boys emerged from a U.S.-funded exchange program between the University of Chicago and Chile’s Catholic University (Pontificia Universidad Católica de Chile) in the 1950s. Initiated in 1956 through a "U.S. Agency for International Development" (USAID) grant, the program aimed to counter 'Marxist' economic influence in Latin America by training Chilean students in free-market principles. In most cases, there were no Marxist economic influence but a trend toward nationalism and away from US corporation's control of their economies. Approximately 25–30 Chileans studied under Friedman, Harberger, and others, earning master’s or doctoral degrees between 1957 and 1970.

Neoliberal Ideology: The Chicago School emphasized minimal government intervention, free markets, and monetarism (controlling money supply to curb inflation). The Chicago Boys adopted these ideas, advocating for privatization of state enterprises, reduction of trade barriers, and fiscal austerity, contrasting with Chile’s statist economic traditions under presidents like Eduardo Frei Montalva and Salvador Allende. This theory promoted US corporations expansion and imperialism using economic means.

Pre-Pinochet Influence: Before the 1973 coup, the Chicago Boys were a marginal group within Chile’s economic circles, overshadowed by structuralist and nationalist policies. They worked in academia, think tanks like the Center for Social and Economic Studies (CESEC), and advised conservative politicians like Jorge Alessandri. Their blueprint, “El Ladrillo” (The Brick), a 1973 economic plan drafted for the opposition, outlined neoliberal reforms later implemented under Pinochet.

Key Members of the Chicago Boys

Below is a list of prominent Chicago Boys who shaped Chile’s economy under Pinochet, based on their roles in government, academia, and private sectors:

Sergio de Castro Spikula (1930–) Education: Master’s and Ph.D. in economics, University of Chicago (1957–1960).

Roles: Minister of Economy (1974–1976), Minister of Finance (1976–1982).

Contributions: As Pinochet’s chief economic architect, de Castro implemented “El Ladrillo”, overseeing privatization of state enterprises (e.g., banks, utilities), trade liberalization (reducing tariffs from 94% to 10%), and monetary policies to curb hyperinflation (1,000% in 1973). His “shock therapy” stabilized the economy but caused a 1975 recession, with 20% unemployment.

Legacy: De Castro’s policies laid the foundation for Chile’s market-driven growth, but critics, including Letelier, argued they enriched elites while impoverishing workers.

José Piñera Echenique (1948–)

Education: Ph.D. in economics, Harvard University (1974), but influenced by Chicago School mentors via Catholic University.

Roles: Minister of Labor and Social Security (1978–1980), Minister of Mining (1980–1981).

Contributions: Piñera designed Chile’s privatized pension system (1981), replacing state-run pensions with individual accounts managed by private firms (AFPs). He also deregulated labor markets, weakening unions impoverishing the Chilean workers, and privatized mining assets.

Legacy: The pension system became a global model but faced criticism for low returns and high fees, exacerbating inequality, as Letelier noted in his 1976 Nation article. The pension funds were primarily a tool of the US corporations.

Miguel Kast Rist (1948–1983)

Education: Master’s in economics, University of Chicago (1970–1971).

Roles: Minister of Labor (1978–1980), Minister of Planning (1980–1982), President of the Central Bank (1982–1983).

Contributions: Kast spearheaded labor reforms, reducing union power, and implemented targeted social programs to mitigate neoliberal reforms’ social costs. His planning ministry prioritized fiscal discipline and poverty alleviation through market mechanisms. The 'labor reforms' ensured no strikes against the US corporations running the mining in Chile and keep wages low so their profits were high.

Legacy: Kast’s early death at 34 cut short his influence, but his reforms shaped Chile’s social policy framework, criticized for prioritizing efficiency over equity.

Sergio Fernández Fernández (1939–)

Education: Law degree, University of Chile, but trained in Chicago School economics via Catholic University.

Roles: Minister of the Interior (1978–1982, 1987–1988), advisor to Pinochet’s economic team.

Contributions: As a political operative, Fernández ensured Chicago Boys’ policies aligned with Pinochet’s authoritarian governance, suppressing dissent to implement reforms.

Legacy: His role bridged economic and political repression, enabling neoliberalism’s enforcement under dictatorship.

Cristián Larroulet Vignau (1953–)

Education: Master’s in economics, University of Chicago (1977–1978).

Roles: Advisor to the Ministry of Economy (1970s–1980s), later Minister of the Presidency (2010–2014) under Sebastián Piñera.

Contributions: Larroulet contributed to privatization and deregulation policies, particularly in education and healthcare, shaping long-term neoliberal structures.

Legacy: His influence extended into Chile’s democratic era, reinforcing Chicago School principles.

Jorge Cauas Lama (1934–)

Education: Master’s in economics, Columbia University, but aligned with Chicago School via Catholic University.

Roles: Minister of Finance (1974–1976).

Contributions: Cauas initiated austerity measures to curb inflation, slashing public spending and devaluing the peso, which triggered economic contraction but stabilized prices by 1976.

Legacy: His policies laid groundwork for de Castro’s reforms, though their social costs fueled Letelier’s critiques.

Pablo Baraona Urrutia (1935–)

Education: Master’s in economics, University of Chicago (1960s).

Roles: Minister of Economy (1976–1978), President of the Central Bank (1981–1982).

Contributions: Baraona advanced trade liberalization and banking privatization, strengthening Chile’s export-driven economy.

Legacy: His reforms boosted growth but deepened inequality, as noted by Letelier.

Other notable Chicago Boys included Juan Carlos Méndez, Ernesto Fontaine, Alvaro Bardón, and Rolf Lüders, who held roles in finance, planning, and academia, reinforcing neoliberal policies through think tanks and universities.

Work Under Pinochet

Economic Reforms (1974–1982): After the 1973 coup, Pinochet, initially focused on consolidating power, turned to the Chicago Boys to address Chile’s economic crisis (hyperinflation, nationalized industries). Their reforms included:

Privatization: Over 200 state enterprises, including banks, utilities, and pensions, were sold to private investors, often at below-market prices, benefiting Pinochet’s allies and US oligarchs.

Trade Liberalization: Tariffs dropped from 94% in 1973 to 10% by 1979, opening Chile to global markets and boosting exports (copper, fruit).

Fiscal Austerity: Public spending was slashed, and subsidies eliminated, reducing inflation from 1,000% to 10% by 1980 but causing unemployment to peak at 20% in 1975.

Labor Reforms: Union rights were curtailed, and collective bargaining weakened, aligning with Pinochet’s authoritarian control.

Economic Outcomes: By the late 1970s, Chile’s economy stabilized, with GDP growth averaging 7% annually (1976–1981) and inflation under control. However, the 1982 banking crisis, triggered by over-leveraged private banks, led to a 14% GDP contraction, exposing neoliberal vulnerabilities. Recovery by 1985 cemented Chile’s market-driven model, but inequality soared, with the top 10% capturing most gains, as Letelier’s 1976 Nation article critiqued.

Political Context: The Chicago Boys operated under Pinochet’s dictatorship, which suppressed dissent through Operation Condor, torture, and disappearances. Their economic reforms relied on this authoritarian framework, as noted by historian J. Patrice McSherry, enabling rapid implementation without democratic oversight.

Orlando Letelier’s Critique

In his August 28, 1976, Nation article, “Economic Freedom’s Awful Toll,” Letelier, a former Allende minister and exile, sharply criticized the Chicago Boys’ policies:

Inequality: Letelier argued that neoliberal reforms enriched a small elite while impoverishing workers, with real wages dropping 40% by 1976 and unemployment hitting 20%. He cited the Gini coefficient rising from 0.45 to 0.55, reflecting stark inequality.

Repression: He linked economic policies to Pinochet’s human rights abuses, asserting that “repression for the many and economic freedom for the few” were intertwined. The Chicago Boys’ reforms required silencing labor and opposition, facilitated by Condor.

U.S. Influence: Letelier highlighted the Chicago Boys’ U.S. training and USAID funding, framing their policies as an extension of American imperialism, aligned with Milton Friedman’s 1975 visit to Chile, where he advised Pinochet.

Impact: Letelier’s article, published weeks before his assassination by DINA operative Michael Townley, exposed the social costs of neoliberalism, galvanizing international criticism of Pinochet. His murder on September 21, 1976, underscored the regime’s intolerance for dissent, as detailed in The Pinochet File by Peter Kornbluh.

Connections to Operation Condor and Related Entities

Operation Condor: The Chicago Boys’ economic reforms coincided with Operation Condor (1975–1983), a U.S.-backed campaign by Southern Cone dictatorships to eliminate leftists, including Letelier’s assassination. While the Chicago Boys were not directly involved in Condor’s operations, their policies relied on Pinochet’s repressive apparatus, including DINA’s Condortel network, which used Crypto AG devices for coordination, per a 2020 Washington Post report. Letelier’s critique explicitly linked their economic agenda to this repression.

CIA: The CIA supported Pinochet’s 1973 coup (Operation FUBELT) and Condor’s infrastructure, including Condortel and Crypto AG, as noted in declassified cables (National Security Archive). The Chicago Boys’ USAID-funded training at Chicago, part of U.S. anti-communist efforts, indirectly aligned with CIA goals.

Schools of Americas (SOA): The SOA trained Chilean officers, including DINA’s Manuel Contreras, who executed Condor operations. The Chicago Boys benefited from this military repression, which silenced opposition to their reforms, but no records connect them to SOA training.

The role of the Catholic Church via Catholic University and United State Agency for International Development in supporting a CIA installed dictator engaged in mass genocide, torture, and kidnapping as well as international terrorism is notable.