Draconian Neoliberalism

With the new Republican Congress being seated in January 2015 there is no doubt that there will be efforts to further expand neoliberal policies at the expense of us all. In fact, the rightwing has been trying to erode the government’s “collective” benefits of American citizens throughout the 20th century, but particularly and almost immediately after the New Deal policies of the Roosevelt administration and up to now. There are also parallels to the US domestic neoliberal and the disastrous international structural adjustment financial policies. Both were essentially thrust on all of us in the 1970’s. In this article I will connect the dots between domestic and international neoliberal economic initiatives.

Neoliberalism is what Milton Friedman, of the University of Chicago’s School of Economics and the American godfather of neoliberalism, wanted which is that his market-driven policies be imposed on the American people. With the new majority Republican Congress in place, the rightwing on the whole is likely pleased that the United States might finally be all the more the victim of these failed and tragic market driven economic policies espoused by Friedman and others. It’s a homecoming and not a pleasant one. Congress does after all serve the interests of corporate America. They are bought, sold and controlled as it were.

Friedman is probably smiling from his grave. As Filipino economist Walden Bello said of Friedman, “Indeed, there is probably no more appropriate inscription for Friedman’s gravestone than what William Shakespeare wrote in “Julius Caesar”:  ‘The evil that men do lives after them, the good is oft interred with their bones.’”

The pundits will stress that market-driven neoliberal policies mean that the market will solve our problems, as in, place no restraints on the market because as an entity it will determine what’s needed in terms of products and consumption and everyone will benefit as a result, economically and otherwise. This will bring efficiency they say. Yet, it’s a farce! It’s instead about greed, pure and simple!

“Neoliberalism” is generally referred to as the market-driven economic model in the “developed” Global North; “structural adjustment” however, refers to the same market-driven draconian model in the so-called “developing” or Global South.

International Structural Adjustment Policies in the 1970s

The austere structural adjustment model was ultimately enshrined as the leading paradigm in the policy guidelines of the World Bank and the International Monetary Fund. In fact, to receive loans, countries were required to curtail government programs that offer services to the people (as in education, health care, etc.) that are then privatized or ended altogether; tariffs that had wisely been in place to protect local business ventures were required to be lifted; and the country was generally required to provide the opportunity for foreign investment in their country, perhaps of land ownership, resource extraction and control of large scale business ventures by foreign interests. In other words, the end of local control and initiatives coupled with huge debt.

Regarding, the US itself, Friedman knew his neoliberal policies would essentially throw out the popular New Deal programs and that there was no way this would pass the U.S. Congress in the 1970’s.  He and others instead needed another country and most likely a crisis to test these neoliberal policies. Chile was it.

So, the neoliberal international model imposed on the Global South by the United States was “violently” launched in the 1970s with the assassination of President Salvador Allende of Chile. He was killed on September 11, 1973.

Allende was a socialist and a friend of Cuba’s Fidel Castro. When he became the Chilean president in 1970, he immediately began to restructure the economy with admirable socialist initiatives to advance opportunities for the Chilean masses. For example, his sweeping policies included the nationalization of some large-scale industries such as cooper mining and banking; he took under the auspices of the Chilean government the educational system, the health care system, and offered a free milk program for poor children; he was engaged in land reform and the raising of the minimum wage for Chilean workers. (And you’re right – some of this sounds like our own New Deal under President Franklin Roosevelt in the 1930’s that conservatives have always wanted to dismantle.)

At the time Allende took office, the three major American corporations in Chile were ITT and two American cooper-mining companies Anaconda and Kennecott. ITT owned 70% of the Chilean Telephone Company and funded the right-wing newspaper El Mercurio. They were not pleased with Allende and by all accounts complained to the American government and had, with US government knowledge, given money to Allende’s opponents. There are also reports that ITT channeled money to the CIA to help dismantle the Allende government.

Allende’s threat? It was apparently independence from the United States and offering a new democratic alternative in the region.

Allende also obviously thought Chile was a sovereign nation, but Henry Kissinger (Nixon’s Secretary of State) and the U.S. corporate investors in Chile thought otherwise.

Allende’s policies infuriated Kissinger, who, by all accounts, gave the CIA the green light to get rid of Allende. But Allende also alienated some of the Chilean middle class and some Christian groups who saw his policies of empowering the poor as a threat or as a Cuban style authoritarian state.

So Allende was assassinated, became a martyr, and what followed was devastating for Chileans on the whole.

With coup leader General Augusto Pinochet at the helm, thousands of Chileans became “disappeared”, activists were killed or tortured – tortured I am told to cleanse them of their collective “social contract” mindset.

There is no way a discussion about Chile in 1973 can be recalled without referring to Naomi Klein’s excellent 2007 book, the “Shock Doctrine: The Rise of Disaster Capitalism”. Shocks to countries, says Klein, offer a vacuum for “disaster capitalists” to sweep in for the kill to change and control what and how they want for their benefit. In her book she describes how on September 12, 1973 – the day after the Allende assassination – young economists in Chile had on their desks documents drafted by the Chicago School of Economics on neoliberal policies for Chile. Actually, these Chilean graduates of the Chicago School, known as the “Chicago boys”, under the tutelage of their neoliberal godfather Milton Friedman, were already well informed about the market-driven economic model.

These Chicago “boys” imposed the new policies with a vengeance, which was coupled with the ruthless and murderous Pinochet dictatorship. Allende’s insightful and helpful programs had been trashed. As Bello said, so much for “political freedom going hand-in-hand with free markets.” Yet, Friedman called it the “Chilean miracle.”

Walden Bello, who was a graduate student in Chile around this time, has also noted, after Pinochet’s 17 years of terror, that “Chile was indeed radically transformed…for the worse”. He said further that:

Chile was the guinea pig of a free market paradigm that was foisted on other third world countries beginning in the early 1980’s through the agency of the International Monetary Fund and the World Bank.  Some 90 developing and post-socialist economies were eventually subjected to free-market, “structural adjustment.”

Structural adjustment policies (SAPs), which set the stage for the accelerated globalization of developing country economies during the 1990’s, created the same poverty, inequality, and environmental crisis in most countries that free-market policies did in Chile, minus the moderate growth of the post-Friedman-Pinochet phase.  As the World Bank chief economist for Africa admitted, “We did not think the human costs of these programs could be so great, and the economic gains so slow in coming.”  So discredited were SAPs that the World Bank and IMF soon changed their names to “Poverty Reduction Strategy Papers” in the late 1990’s. (Bello, 2006)

Neoliberalism in the 1970s United States

The 1970’s were also a critical juncture in the initiatives by corporate America to privatize and enhance a market driven economy. They were not yet able to privatize the US government then as they have in recent years, as with prisons, schools, certain portions of the military, subsidies to corporate agribusiness, etc. but they found other ways to control workers and the middle class overall by attacking our wages. As economist Richard Wolff (2009) states:

Since the 1970s, U.S. employers stopped paying
their workers rising real wages even as worker productivity kept
rising. Over the previous century, U.S. workers’ real wages had risen
together with their productivity. …

“Workers had two choices: give up the [American] Dream of sending
kids to college, buying good health care, enjoying retirement, living
decently, or else borrow to pay for those things. Desperate to live the
dream, to be ‘successful,’ to do what every advertisement advised, U.S.
workers went on a 30-year borrowing binge. First they borrowed with the
collateral of their homes (if they owned homes). When that was not
enough, the credit card industry arose to make unsecured (no
collateral) consumer loans. By 2006, U.S. workers’ families had
multiple members working multiple jobs and staggering under mortgage,
auto, and credit card loans that their stagnant incomes could no longer
sustain. What collapsed in 2008 was an American economy built in good
part on a house of credit cards because employers stopped paying rising
wages for rising worker productivity.

Wolff’s analysis is quite revealing regarding what we have witnessed in the past 40 years coupled with increased globalization and loss of jobs. But Wolff himself told me in an interview in 2013 that since the “Occupy Movement” in 2011 Americans now at least have an understanding of the 1% versus the 99%. This means that they have a better realization of income disparities and that something needs to be done about these inequities. ‘Now is a time to organize’ he said. Since the “Occupy Movement” he has also found it easier to talk with audiences about economic issues overall. This is a good sign!

To quote the renowned organizer and songwriter Joe Hill, “Don’t waste any time mourning. Organize!”

HEATHER GRAY produces “Just Peace” on WRFG-Atlanta 89.3 FM covering local, regional, national and international news. She lives in Atlanta, Georgia and can be reached at hmcgray@earthlink.net


Walden Bello, “Eye of the Hurricane: Milton Friedman and the Global South” (2006) Foreign Policy in Focus (FPIF)

Chalmers Johnson, Blowback: The Costs and Consequences of American Empire (2000)

Heather Gray, “A Draconian Structural Adjustment for the US? America’s Corporate Capitalists Obviously Hope So”, Counterpunch, September 11, 2012

Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism (2007)

Richard Wolff, “Cause of Credit Card Debt: Stagnant Wages” Common Dreams, October 7, 2009.


Heather Gray is a writer and radio producer in Atlanta, Georgia and has also lived in Canada, Australia, Singapore, briefly in the Philippines and has traveled in southern Africa. For 24 years she has worked in support of Black farmer issues and in cooperative economic development in the rural South. She holds degrees in anthropology and sociology. She can be reached at hmcgray@earthlink.net.