Shock therapy transferred income from Chile’s poor to its richest five percent
Evidence
As Friedman had predicted, the junta’s ‘shock’ approach produced ‘severe difficulties’ – but not for all sections of the Chilean population. As he acknowledged, the immediate effect was ‘severe recession’, as Chile’s GDP fell by 13 per cent per annum. In an open letter to Friedman and Harberger, Andre Gunder Frank denounced ‘economic genocide’ in Chile. Frank pointed out that the removal of price controls, combined with the destruction of trade union power, had drastically reduced real wages, to the extent that, by December 1975, one hour of work at the official minimum wage purchased 160 grams of bread. From 1975, stark spending cuts and the ‘freeing’ of prices on two thousand commodities caused purchasing power to fall to 40 per cent of its 1970 level. While the real incomes of the poorest plummeted, the share of national income in the hands of the upper 5 per cent of income receivers rose from 25 per cent to 50 per cent. — Jessica Whyte, The Morals of the Market, 341
Categorization
- SEED: The 160 grams of bread measurement is a vivid concrete anchor for any essay on how to quantify the human cost of austerity policies.
- ADDENDUM: Could extend the sacrifice essay: shock therapy as a deliberate ‘sacrificing’ of Chile’s poor for monetary stability.
- XREF: connects to: Foreign credit masked the painful side-effects of Chile’s shock therapy — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 1577; Russian shock therapy shifted half the population into poverty while capital income soared — Clara E. Mattei, Escape from Capitalism: An Intervention, 359; Neoliberal reform in Chile depended on propaganda and a coercive military regime — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 1585 (+1 more)
Broader Connections
- Foreign credit masked the painful side-effects of Chile’s shock therapy
#qualifies(0.80) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1577 - Neoliberal reform in Chile depended on propaganda and a coercive military regime
#expands(0.75) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1585 - Russian shock therapy shifted half the population into poverty while capital income soared
#qualifies(0.70) — Clara E. Mattei, Escape from Capitalism, 359 - Neoliberals needed Chile’s dictatorship to find the means to depoliticize economies.
#corroborates(0.70) — Jessica Whyte, The Morals of the Market, 301