3: The Free Market vs. US Congressional Dish

This episode is a history of free market policies implemented around the world for the last fifty years. The Basics Corporatist system: Its main characteristics are huge transfers of public wealth to private hands, often accompanied by exploding debt, an ever-widening chasm between the dazzling rich and the disposable poor and an aggressive nationalism that justifies bottomless spending on security. Chicago School Theory -advanced by Milton Friedman: The starting premise is that the free market is a perfect scientific system, on in which individuals, acting on their own self-interested desires, create the maximum benefits for all. It follows ineluctably that if something is wrong within a free-market economy- high inflation or soaring unemployment- it has to because the market is not truly free. There must be some interference, some distortion in the system. The Chicago solution is always the same: a stricter and more complete application of the fundamentals. The economic agenda of the neoconservative movement: First, governments must remove all rules and regulations standing in the way of the accumulation of profits. Second, they should sell off any assets they own that corporations could be running at a profit. Third, they should dramatically cut back funding of social programs. Specifics to watch for: Taxes, when they exist, should be low, and rich and poor should be taxed at the same flat rate. Corporations should be free to sell their products anywhere in the world, and governments should make no effort to protect local industries or local ownership. All prices, including the price of labor, should be determined by the market. There should be no minimum wage. Historical Evidence Free Market in Chile Chile before Chicago School infiltration: Strong social safety net Protections for national industry Trade barriers Controls on prices Chicago School infiltration: 1953: The Ford Foundation fundeda plan to send Chilean students to study economics at the University of Chicago on Chicago School fundamentals. Students returned to the Catholic University in Chile to teach in their Economics Department These students-turned-professors were called the "Chicago Boys". 1970 Elections: All parties wanted to nationalize the copper mines then controlled by U.S. mining corporations (the U.S. corporations had invested $1 billion over fifty years in the Chilean mining industry but had collected $7.2 billion in profit). Salvador Allende won the election. A group of U.S. mining companies and the Internatioal Telephone and Telegraph Company (ITT) (which owned 70% of Chile’s soon-to-be nationalized phone company) tried to collapse Chile’s economy. ITT prepared an eighteen point strategy for the Nixon administration that contained a clear call for a military coup. Meanwhile, a the Chicago boys and the CIA created “The Brick”, an economic program based on Milton Friedman’s free market ideas. Allende’s government was overthrown in a CIA backed coup who then installed Augusto Pinochet; Pinochet followed the Chicago Boy’s economic plan. Augusto Pinochet: Privatized some banks. Opened the borders to foreign imports. Cut government spending by 10 percent, except the military which got an increase. He eliminated price controls. A small clique of financiers known as the “piranhas” made a killing on speculation. People were pissed. Pinochet took to murder and torture to keep the population under control. Friedman told Pinochet it was not enough. He told him to cut government spending by 25 percent within six months across the board while adopting pro-business policies moving toward “complete free trade”. He knew that hundreds of thousands of people would be fired in the public sector. 1975: Pinochet cut public spending by 27 percent; by 1980, they had cut it in half. The results: Chile lost 177,000 jobs public sector jobs. Unemployment went from 3 to 20 percent. Public school was replaced by vouchers and charter schools