Though there were a few exceptions, most of the Chicago Boys leaned to the right. They found Allende’s socialism offensive and were eager to get to work after the coup. But they began as just one group among several vying to influence Pinochet, including military officers who preferred to retain a role for the state in development plans, and business groups that preferred the protection offered by high tariffs. Two years into the regime, Chile’s economy was continuing to struggle with high inflation. On a short visit in 1975, Friedman had an audience with Pinochet, and advised him to follow the “Chicago” advice, applying a quick liberalization to which the economy would have to adjust. (Unemployment, it turned out, did not adjust quickly.) By 1976, three Chicago graduates had control of the economy—Sergio de Castro as minister of finance, Pablo Baraona as minister of the economy, and Álvaro Bardón in the Central Bank.
High rates of growth strengthened the hand of the Chicago Boys; de Castro’s authority was such that he was one of the only people who could talk back to Pinochet. By 1978, all but seven of the hundreds of the companies in state hands in 1973 had been reprivatized. But the deepest “neoliberal” phase began in 1979, with reforms that reduced the power of unions, decentralized the school system, and replaced pensions with individual retirement accounts. There were programs to address the needs of people in conditions of extreme poverty, but these were limited and strictly means-tested.
In 1982, however, the shiny jeep of a new Chilean economy drove into a ditch, resulting in a severe economic recession. Critics from the left have blamed this on an underregulated banking sector, the result of Friedmanite orthodoxy. Edwards argues that the mistake was more limited: a fixed exchange rate put in place by de Castro and contrary to the teachings of Friedman himself.
Whatever the case, the response to the crisis caused popular discontent. If Chile had been a democracy, the government would have fallen. De Castro lost his job, and Pinochet brought on new personnel (some of whom had been trained at other elite U.S. universities) who retained the open approach but were more flexible in reaching their goals. From the mid-1980s, Chile began to experience good growth and real reductions in poverty, though average wages in 1989 were still lower than those of 1970, and the income distribution was worse. The aggregate economic record of the dictatorship was not actually very strong, unless it gets credit for necessary restructuring, or the clock starts in the mid-1980s.