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They did it in Chile after the coup (1973) and it worked...so...well. Overnight, we went from masses of public servants endlessly on strike, 400% inflation, an

They did it in Chile after the coup (1973) and it worked...so...well. Overnight, we went from masses of public servants endlessly on strike, 400% inflation, and halfway-to-Cuba socialism to tons of public servants getting fired (none of this furlough with back pay business) and the remainder shutting up and doing their work. There was a small downtick in the economy, shortly, not unlike the downtick in US after WWI that ushered in the roaring twenties. Naturally, the economy changed drastically because of the dictatorship and foreign loans make it slightly harder to analyze, and in 1982 the economy got hit badly for pegging the currency, which is a different story. But they cut spending, lowered taxes, and it worked fantastically. Ultimately, if, as a country, you're thinking of going down the tax-less spend-more road, you have to amass enough power in the hands of the people that will carry it out (in this case a dictator) that the public sector can't go on an endless tirade of strikes and sabotage. If not, guess what'll happen? The essentials from among the things the government provides will be the first to go in an attempt to rile the public up. But how many cushy do-nothing bureaucrats will get fired? That's where government spending is, in its vast majority—in the salaries of government employees. If you want to tax less and spend more, keep in mind that you'll be going toe-to-toe with the people that run government (more-so than politicians) and that it's a serious political battle for the country to take on. So in that sense you're right--expecting to politically shift over to tax-less spend-less policy may be fruitless and unrealistic, if only because the people one is trying to lay off will always sabotage the effort.

AlexanderDhoore 13y ago
You need some serious balls to defend Pinochet and his criminal gang. "Immediately after the coup the junta moved to crush their left-wing opposition. In addition to pursuing armed revolutionary groups it embarked on a campaign against opponents and perceived leftists in the country. As a result, according to the Rettig Commission, approximately 3,000 people are known to have been killed, 27,000[1] were incarcerated and in a great many cases tortured." [1] Reading "The Shock doctrine" by Naomi Klein opened my eyes. She would disagree with you on the "halfway-to-Cuba socialism": "As for the argument that Friedmanite policies are the reason Chileans live in "houses of brick" instead of "straw", it's clear that Stephens knows nothing of pre-coup Chile. The Chile of the 1960s had the best health and education systems on the continent, as well as a vibrant industrial sector and a rapidly expanding middle class." [2] [1] http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973) http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973... [2] http://www.theguardian.com/commentisfree/cifamerica/2010/mar/03/chile-earthquake http://www.theguardian.com/commentisfree/cifamerica/2010/mar...
- gaius 13y ago
  Just out of personal curiosity, what do you think of Castro?
- daniel-cussen 13y ago
  That's not at the center of the argument here, it being economic, but sure, let's discuss it. How many people has Cuba, which was the model for Chilean socialism, imprisoned, and killed? It's far higher. While still nowhere like Stalinism, which in fairness to Allende it looked unlikely to become, Cuban socialism is pretty grim. I sometimes defend Pinochet, mostly economically. So do millions of other Chileans. I'd guess about half. Hell, I know people who had champagne ready for when the coup came about. Did people die? Yes. Lawfully? No. But Allende's government had already been declared illegal by the Chilean Supreme Court, and was rapidly turning into Cuban-style communism. Pinochet didn't make the stakes higher than they already were. And economically, which was what we were talking about, again, it was a case of taxing less and spending less that worked very well.
- nhaehnle 13y ago
  To be fair, people defend Hitler on economic policy. Richard Koo (who got famous for his comparisons of the financial crisis to lessons from Japan) said something along the lines of Germany under Hitler unfortunately being the only European country with a successful economic policy at the time. I'd have to dig a bit for the link to his speech though, it was a few years ago.
- berntb 13y ago
  If there is a good counter to this discussion of the Shock Doctrine, I'd be interested: http://www.cato.org/blog/johan-norberg-vs-naomi-klein-round-3 http://www.cato.org/blog/johan-norberg-vs-naomi-klein-round-... (Besides, 3000 dead and 27000 incarcerated and many of those tortured -- sounds like a left regime rounding error... :-) )
  - berntb 13y ago
    I only got a down vote and no references to show why my reference is wrong? Despite that all the left idealists reading this very much wants to? :-) But it is wasted of course, no idealist changes his/her mind just because they learn that their empress is naked.
Marazan 13y ago
Yeah, the dictatorship and the death squads kind of put a crimp on trying to analyse the economic effect of the reforms.
firstOrder 13y ago
The post-coup economy in Chile was not so spectactular. Between 1972 and 1993, per capita GDP fell. GDP growth for the twenty years after the coup was lackluster compared to other South American countries. You did mention the economy getting hit bad in 1982 (and 1983, and 1984), you didn't mention Chile was bailed out by an IMF loan of over $7 billion. As Chile's GDP in 1986 was $17 billion, this was a rather big bailout from Uncle Sam. Speaking of Uncle Sam funding, you can read on the CIA's own web site a rather polished up version of its involvement in Chile at that time ( http://www.cia.gov/library/reports/general-reports-1/chile/index.html http://www.cia.gov/library/reports/general-reports-1/chile/i... ). While it mentions plenty of covert funding, what is not mentioned is how many of those strikes you speak of were bankrolled by the CIA, US AID, ITT affiliated organizations and so on. Many of the workers who were on strike were managers or professionals. Then of course there's the question of whether a democratically elected government should be overthrown with the heavy financial and military help of a foreign power, leading to a new system where a happy day for a young woman imprisoned in secret detention centers was where she would just be raped, as opposed to a host of the bizarre things that happened at the secret detention centers that came out in Chile's 2004 government Valech commission report. That aside, the GDP growth was less than Chile's neighbors were doing at the time and was fairly small anyhow.
- daniel-cussen 13y ago
  > The post-coup economy in Chile was not so spectactular. Yes it was. Keep in mind, the price of copper favoured Chile during Allende and disfavoured Pinochet--and it was, as we say, "el sueldo (salary) de Chile." I don't see what's wrong with the loan--Chile paid it back in full--and really, you're cherry picking when it comes to dates after the coup. At the center of the argument is the question: does spending less and taxing less work? Keep in mind, the tax regime, to this day, is almost identical to what it was in the eighties (very low), and now Chile is the only country in the region in the OECD.
  - moocowduckquack 13y ago
    and now Chile is the only country in the region in the OECD. It was only ratified in 2010 after being run by socialist governments for twenty years.

AlexanderDhoore 13y ago

You need some serious balls to defend Pinochet and his criminal gang. "Immediately after the coup the junta moved to crush their left-wing opposition. In addition to pursuing armed revolutionary groups it embarked on a campaign against opponents and perceived leftists in the country. As a result, according to the Rettig Commission, approximately 3,000 people are known to have been killed, 27,000[1] were incarcerated and in a great many cases tortured." [1] Reading "The Shock doctrine" by Naomi Klein opened my eyes. She would disagree with you on the "halfway-to-Cuba socialism": "As for the argument that Friedmanite policies are the reason Chileans live in "houses of brick" instead of "straw", it's clear that Stephens knows nothing of pre-coup Chile. The Chile of the 1960s had the best health and education systems on the continent, as well as a vibrant industrial sector and a rapidly expanding middle class." [2] [1] http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973) http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973... [2] http://www.theguardian.com/commentisfree/cifamerica/2010/mar/03/chile-earthquake http://www.theguardian.com/commentisfree/cifamerica/2010/mar...

gaius 13y ago
Just out of personal curiosity, what do you think of Castro?
daniel-cussen 13y ago
That's not at the center of the argument here, it being economic, but sure, let's discuss it. How many people has Cuba, which was the model for Chilean socialism, imprisoned, and killed? It's far higher. While still nowhere like Stalinism, which in fairness to Allende it looked unlikely to become, Cuban socialism is pretty grim. I sometimes defend Pinochet, mostly economically. So do millions of other Chileans. I'd guess about half. Hell, I know people who had champagne ready for when the coup came about. Did people die? Yes. Lawfully? No. But Allende's government had already been declared illegal by the Chilean Supreme Court, and was rapidly turning into Cuban-style communism. Pinochet didn't make the stakes higher than they already were. And economically, which was what we were talking about, again, it was a case of taxing less and spending less that worked very well.
nhaehnle 13y ago
To be fair, people defend Hitler on economic policy. Richard Koo (who got famous for his comparisons of the financial crisis to lessons from Japan) said something along the lines of Germany under Hitler unfortunately being the only European country with a successful economic policy at the time. I'd have to dig a bit for the link to his speech though, it was a few years ago.
berntb 13y ago
If there is a good counter to this discussion of the Shock Doctrine, I'd be interested: http://www.cato.org/blog/johan-norberg-vs-naomi-klein-round-3 http://www.cato.org/blog/johan-norberg-vs-naomi-klein-round-... (Besides, 3000 dead and 27000 incarcerated and many of those tortured -- sounds like a left regime rounding error... :-) )
- berntb 13y ago
  I only got a down vote and no references to show why my reference is wrong? Despite that all the left idealists reading this very much wants to? :-) But it is wasted of course, no idealist changes his/her mind just because they learn that their empress is naked.

Marazan 13y ago

Yeah, the dictatorship and the death squads kind of put a crimp on trying to analyse the economic effect of the reforms.

firstOrder 13y ago

The post-coup economy in Chile was not so spectactular. Between 1972 and 1993, per capita GDP fell. GDP growth for the twenty years after the coup was lackluster compared to other South American countries. You did mention the economy getting hit bad in 1982 (and 1983, and 1984), you didn't mention Chile was bailed out by an IMF loan of over $7 billion. As Chile's GDP in 1986 was $17 billion, this was a rather big bailout from Uncle Sam. Speaking of Uncle Sam funding, you can read on the CIA's own web site a rather polished up version of its involvement in Chile at that time ( http://www.cia.gov/library/reports/general-reports-1/chile/index.html http://www.cia.gov/library/reports/general-reports-1/chile/i... ). While it mentions plenty of covert funding, what is not mentioned is how many of those strikes you speak of were bankrolled by the CIA, US AID, ITT affiliated organizations and so on. Many of the workers who were on strike were managers or professionals. Then of course there's the question of whether a democratically elected government should be overthrown with the heavy financial and military help of a foreign power, leading to a new system where a happy day for a young woman imprisoned in secret detention centers was where she would just be raped, as opposed to a host of the bizarre things that happened at the secret detention centers that came out in Chile's 2004 government Valech commission report. That aside, the GDP growth was less than Chile's neighbors were doing at the time and was fairly small anyhow.

daniel-cussen 13y ago
> The post-coup economy in Chile was not so spectactular. Yes it was. Keep in mind, the price of copper favoured Chile during Allende and disfavoured Pinochet--and it was, as we say, "el sueldo (salary) de Chile." I don't see what's wrong with the loan--Chile paid it back in full--and really, you're cherry picking when it comes to dates after the coup. At the center of the argument is the question: does spending less and taxing less work? Keep in mind, the tax regime, to this day, is almost identical to what it was in the eighties (very low), and now Chile is the only country in the region in the OECD.
- moocowduckquack 13y ago
  and now Chile is the only country in the region in the OECD. It was only ratified in 2010 after being run by socialist governments for twenty years.