Pinochet adopted shock therapy partly because it preserved his monopoly on power

Evidence

Just as important for this watershed appears to be the curious fact that Pinochet and his closest advisers distrusted the politicians of the right, whom they considered a serious potential threat to their own position of power. Therefore, they disapproved of demands for a restoration of “oligarchic” order and land tenure (Martínez and Díaz 1996). Neoliberal free market ideas thus meshed nicely with junta calculations of preservation of a monopoly of political power. The Chicago-gremialist coalition of economists also had a competitive advantage owing to its previous work on a coherent economic recovery plan (“El ladrillo”). Apart from these internal factors, a number of external conditions argued for shock therapy. As a result of the ongoing economic crisis, Chile had to rely heavily on the external inflow of capital. Multinational lenders like the Paris Club were reluctant to lend to Chile, however, mainly because of the regime’s human rights abuses. The appointment of the economic reform team mitigated this consideration: through their university background, they had personal and professional ties to officials from international organizations, which increased the credibility of Chile’s government with lenders. Pinochet’s leading academics thus served as “intellectual brokers” between the government on the one side and the International Monetary Fund (IMF) staff and international capital on the other (Teichman 2001). — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1575

Categorization

• XREF: Connects to the general claim about why authoritarian regimes adopt radical market reforms — and to Milgrom’s ‘institutions restore information’ logic: the academics functioned as credibility brokers with lenders. — connects to: Military coercion, not free markets, secured the submission Chilean shock therapy required — Jessica Whyte, The Morals of the Market: Human Rights…, 342; Crisis-driven political consolidation enabled Friedman’s radical shock-therapy model to shape Chile’s reforms. — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 1574; Policy continuity in Pinochet’s Chile survived ministerial turnover through direct loyalty to Pinochet — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 1571
• DEFINE: Introduces the ‘intellectual broker’ concept — how credentialed academics substitute for institutional trustworthiness in international lending.
• ADDENDUM: Relevant to ‘On Sacrifice’ in a thin way only — the human-rights-abuse deterrence of lending. More usefully, the brokers-as-credibility point stands as a follow-up to the Milgrom trade-institutions material.

Broader Connections

• Policy continuity in Pinochet’s Chile survived ministerial turnover through direct loyalty to Pinochet #corroborates (0.78) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1571