Tuesday, March 2, 2010

How Milton Friedman Saved Chile

Interesting piece in today's WSJ with the above title written by Bret Stephens. He notes that in the mid-70s, Chile was in economic shambles, with a 1000% inflation rate, no foreign reserves, and a per-capital GDP that trailed the likes of fellow basket-case Argentina. Enter Milton Friedman and the "Chicago Boys." They made a number of recommendations for liberalizing Chile's economy (aka "common sense") that included big reductions in government spending and the money supply, privatizations, more free trade and foreign investment, etc.

Chile actually listened. The result? They are now Latin America's richest country. In a more immediate sense, the reforms saved lives last week. Chile's wealth made possible stricter (i.e. more expensive) building codes possible, which has kept the death toll from the 8.8 earthquake to under 1000. Contrast this to Haiti, whose earthquake was five hundred times less powerful, and yet they lost 250,000 lives.

On a somewhat related note, one of the greatest YouTube videos I've ever seen has Friedman debating an unctuous, intellectually unarmed Phil Donahue about the nature of greed. You can see it here:


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