The Chilean state socialized private debt while keeping the neoliberal framework intact

Evidence

The sharp rise in the price of the dollar forced the government to intervene in the private administration of pension funds and the banking system. The two largest banks, BHC of Vial and Banco de Santiago of Cruzat-Larraín, came under state control. At the beginning of 1983, three financial institutions were liquidated, another five were taken over by the state, and two banks were subjected to a special regime of state oversight. The Central Bank then assumed responsibility for their external debt. Huge amounts of private debt were thus transferred to the state. The state—otherwise considered the biggest threat to humankind in neoliberal and conservative critiques of the welfare state—bailed out the private capitalist class at home and abroad. In the face of looming economic collapse, the regime was forced to redirect economic policy. Nonetheless, the basic features of the neoliberal development model either remained in place or were resurrected after the crisis. What explains the resilience of the neoliberal economic framework and the maintenance of the neoliberal economic cadre? — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 1595

Categorization

• XREF: Connects to the book’s overall narrative that Mont Pèlerin-style networks required a strong state to impose market discipline — the ‘neoliberal state’ paradox. — connects to: A banking guarantee transformed private debt into sovereign debt overnight — Mark Blyth, Austerity: The History of a Dangerous…, 184; Household debt now sustains demand, survival, and economic governance in capitalism. — Paul Langley, Assets and Assetization in…, 30; Neoliberal deregulation replaced social protection with credit and indebtedness — Wendy Brown, Undoing the Demos: Neoliberalism’s…, 746 (+2 more)
• QUESTION: Worth chasing: how did the Chilean economists justify state bailouts that contradicted their stated anti-state ideology?

Broader Connections

• Neoliberalism pivoted from the economy to the framework encasing it #expands (0.82) — Quinn Slobodian, Globalists, 88
• Neoliberalism’s crisis strategy redirected blame from banks onto state debt #corroborates (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 475