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Friedman`s Myth

We should ask what economic model do we have in our country?

In Chile for example, the economic processes, for which our country has passed, have been based on a model from the eighties that was implemented in Chile to move from a closed economy (protectionism) to a free open economy with the help of the World Bank. Based on an export model, with an open and free market economy mixed, self-contained, and with a Central Bank that was supposed to manage monetary policies between the framework of an autonomous Central Bank, of which there are only five in the world, the Federal Reserve Bank (FED), the Central Bank of Switzerland, New Zealand, Germany, the Central Bank of Chile and the EU Central Bank and fiscal policies.

When monetary policies failed to meet the economic goals, fiscal policies are applied to maintain balance and stability. In other words, a model of a mixed, and, an open free market economy at that time.

As I have stated in many of my lectures, seminars, articles, the subject of "Chicago boy` s ", is a myth, because they were not the ones who left the country with the macroeconomic policies we have today, they tried to implement the policies of an free open market economy, but never thought they would face a global financial crisis and unknowingly they were implementing policies that increased the economic and social crisis and stepped back Failing with their attempt and the world bank had to step in. This, never spoken in Chile, and the three structural adjustment loans from the World Bank that gave us to get us out of the deep economic and social crisis affecting the country, it was our only salvation.

It should be noted that in the period of the transition to democracy, nobody never quite knew anything of the agreements signed by the government of Chile with the World Bank. Chile`s return to full democracy in 1990, with its first president Patricio Aylwin continued the previous economic model, adding themes from the Social Market Economy (SME) used in Germany (second world war), since they were very similar to what the World Bank had implemented under the gaze to solve the great social inequality that crisis (Chicago Boy`s in full) had left with the policies of M. Friedman`s paradigm.

This model continued until 2010 when assumes the current president that reinstates the model of the Chicago Boys 's where he thinks, is the way to solve economic and social problems, with free-market capitalism, big mistake, because the world changed and instead of solving the economic and social issues thinking that supply and demand will solved all the problems, he did create false expectations to the people and citizens went in so much discontent, because any economist in the world, knows that using only one of the equations allows abuses and externalities that here and there allowing economic abuses to exceed any moral standard, and state moderate intervention was not even considered, and that is why conservatives or the right parties lost the past elections.

In Europe, the SME, gave great results after second world war, and when The European Union took form as well. Today the model is failing, not because, Spain, Portugal, or Greece and other coutries did not do their job well. It failed, because polititians got in economic affairs and forgot the basics of the model, goverment must intervine. Capitalism itself and Mr. Friedman legacy does not work. With austerety measures the EU will go no where, and Politians will not pull out. Social Business prof. Yunus paradigm is the only way out. Neither public nor private sector will do what social business does. People are tired of the abuses of the old system and want the new global revolution give them an oportunity. Ms. Merkel lead with the example.

Bernardo Javalquinto Economist

 

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