Senatorial candidate Sharon Angle riled the left by noting that sometimes dictators have good ideas, citing Chile’s switch to a sustainable pension system.
Eric at Classical Values, clarifies how that reform came about.
Angle is of course a convenient target of the leftosphere — not so much for praising just any old dictator, but because the dictator involved was Pinochet. If a left wing politician praised an idea of Fidel Castro (as many have), that would be considered just peachy.
The moral lesson being imparted here is that saying “sometimes dictators have good ideas” is fine if you say that about Fidel Castro, but evil and deranged if you say it about Pinochet.
But that’s just the standard “double standard defense” — which isn’t really a defense on the merits of the idea being praised. And while I would be willing to come to the defense of Angle on the merits, I am not sure that she is entirely accurate in characterizing what happened to the Chilean pension system as Pinochet’s idea. More likely, it would have been alien to the man’s rigid statist thinking. Here’s what happened:
On November 4, 1980, under the leadership of Jose Pinera, Secretary of Labor and Pensions under Augusto Pinochet with the collaboration of his team of Chicago Boys, the PAYGO pension system was changed to a capital funded system run by investment funds.
Jose Pinera had the idea of privatizing the pension system for the first time when reading the book Capitalism and Freedom from Milton Friedman There have been implemented several (private) pension funds the so-called Administradoras de Fondos de Pensiones (AFPs).
For all citizens who are legally defined as workers, employers must pay a proportion of the earnings to a pension fund. Workers who had already paid in the old system, got an option to continue to pay into the old system. But the statutory minimum contribution to the new private pension funds was set 11% lower than the contributions to the old pension system, therefore most workers changed to the new pension system.
If anyone should receive credit for the idea, it was Milton Friedman, not Pinochet. Friedman was much maligned for meeting with Pinochet and giving him advice, although he never understood why:
Friedman has wondered why some have attacked him for giving a lecture in Chile: “I must say, it’s such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country. I later gave a series of lectures in China. When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said, ‘It’s curious. I gave exactly the same lectures in China that I gave in Chile. I have had many demonstrations against me for what I said in Chile. Nobody has made any objections to what I said in China. How come?'” He points out that his visit was unrelated to the political side of the regime and that during his visit to Chile he even stated that following his economic liberalization advice would help bring political freedom and the downfall of the regime.
It is quite clear that Friedman had no delusions about the nature of the Pinochet regime, but that he hoped economic freedom might help lead to political freedom. From a 2006 piece by Reason’s Brian Doherty:
….[Friedman] tried to move the world in a freer direction from the point reality presented him with.”I have nothing good to say about the political regime that Pinochet imposed,” Friedman said in 1991. “It was a terrible political regime. The real miracle of Chile is not how well it has done economically; the real miracle of Chile is that a military junta was willing to go against its principles and support a free-market regime designed by principled believers in a free market….In Chile, the drive for political freedom that was generated by economic freedom and the resulting economic success ultimately resulted in a referendum that introduced political democracy.”
It may have been more morally satisfying to have no relationship with Pinochet, merely condemn him from afar. But in choosing to let his economic advice rise above political revulsion, Friedman almost certainly helped Chile in the long term–though it’s important to remember that the “Chicago boys” were more responsible than Friedman himself, and that they were not following his prescriptions relentlessly or in any way under his direct instruction.
Whether Angle was correct in attributing a libertarianish idea to Pinochet, I’m more interested in the way these stories are used to undermine free market ideas, by conflating them with dictatorship, when in fact free markets tend to undermine dictatorship.