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August 14, 1975 - Image 4

Resource type:
Text
Publication:
Michigan Daily, 1975-08-14

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FRIEDMAN DISCIPLES SET POLICY
Chicago School branch
By FRANK MAUROVICH the first half of 1975. threw Allende in September
SANTIAGO, CHILE (PNS) - . Unemployment, officially 1973, General Augusto Pino-
Turning its economy away from placed at 13.3 per cent, is more chet's government installed a
socialism has not turned Chile than double that in poorer free market and free capital
away from bankruptcy. areas. system in an attempt to cure
Almost two years after the . The Chilean escudo has the country's economic ills.
coup that overturned the Marx- been devalued 31 times since
ist government of Salvador Al- the coup. THIS SYSTEM is a literal
lende, the ruling military junta's . Export income is down due adoption of the philosophy of
problems are rapidly reaching to the drop in the world market the "Chicago School," the Eco-
the critical stage: price of copper - Chile's only nomics Department of the Uni-
* Inflation continues at 1974's basic export - w h il e import versity of Chicago where many
rate of 375 per cent-the high- costs, especially for vital food of Chile's leading economists
est in the world. and oil, are up sharply. trained under Milton Friedman.
0 Prices rose 125 per cent in When the military junta over- Finance Minister Jorge Cauas,

The Michigan Daily
Edited and managed by Students at the
University of Michigan
Thursday, August 14, 1975
News Phone: 764-0552
Park closing. unnecessary
UNFORTUNATELY, City Council last Monday night
voted 7-3 to close Dolph Park from use by the general
public after hearing heated arguments from area resi-
dents who complained of continued gang fights, drunken-
ness, "skinny-dipping" and other forms of "rowdyness."
Just as important in Council's eyes was the inability of
area police agencies to effectively control the situation.
We feel that Council took overly drastic action in
completely closing the popular park, commonly known as
the "Gravel Pit," as many persons indeed use the park as
it was designated to be used-for wildlife observation.
And there is no evidence to show that those who used it
illegally in the past will not continue to do so now that
Council has directed police to arrest any trespassers.
A compromise motion made by the Human Rights
Party and the Democrats to close Dolph Park at dusk
would have at least allowed those city dwellers without
cars a haven where they could relax and enjoy nature
during the hot and humid daylight hours.
WE WOULD URGE those on City Council who voted
against the motion to further examine the "prob-
lems" and possible solutions and see if keeping the park
open during the daylight hours is feasible-the summer
is quickly coming to an end.
1 4
-b - -3

a Friedman disciple and one of
the few civilians in the military
government, is rigorously ap-
plying the Friedman. "shock
treatment" formula to inflation
-no price controls, restriction
of the money supply, reduction
in government spending and
generous guarantees for foreign
investors.
Yet foreign investments have
not materialized, despite gener-
ous incentives.
And Friedman himself recent-
ly startled a Santiago TV audi-
ence when he explained in an
interview that the country's
economic problems were caused
in part by the armed forces,
gulping down 43 per cent of the
national budget.
At present, Chile is a bad
economic risk. Aside from cop-
per, Chile is not rich in re-
sources, as are Bolivia and
Peru. With a population of only
15 million, equal to that of Illi-
nois, Chile does not have a large
internal market to induce in-
vestments.
AND EVEN though the mili-
tary government rules with an
iron fist, it has not firmly es-
tablished its ability 'to govern,
thus discouraging investors who
demand stability to ensure long-
term profits.
Chilean investment figures in-
dicaterthat even wealthy Chile-
ans are not investing in pro-
duction. "Get them after a
drink or two," one Chilean eco-
nomics reporter says, "and they
will tell you that they don't
have confidence in this govern-
ment's ability to control the
economy."
THE MILWAUKEEOURNAL
TWNw Y"."10

in Chile
Another factor inhibiting in-
vestment is that the free capi-
tal system has removad all re-
strictions on interest r a t e s.
Thus, a minimum deposit of
$208 earns 17 per cent interest
and can be withdrawn in 30
days. Big depositors can make
their own private deals with
banks for even more liberal in-
terest rates.
Industrialists reportedly are
content to reap bank interest
rather than invest profits in
production. With high prices for
their products and a fall in de-
mand, there is no incentive to
produce more.
IN FACT, IT IS reported that
whenever industrialists n e e d
money to meet payrolls and
production costs, they often bor-
row from banks rather than
take it from company accounts
-and pass along the high 21 per
cent loan rate to the consumer
in higher prices.
There is also a moral factor.
Representatives of various in-
ternational organizations, in-
cluding the United Nations, Am-
nesty International and the Or-
ganization of American States,
have reported serious violations
of human rights in Chile, includ-
ing the torture and killing of
political prisoners.
The military government ad-
mits it detained 41,759 persons
during the first 18 months of
the coup, but claims the foreign
press has grossly exaggerated
reports of torture and death of
prisoners.
In May, the government an-
nounced that 703 political pris-
oners were still in jail. Reliable
sources inside Chile dispute
these figures. Based on reports
from families of prisoners and
missing persons, they say the
government has detained more
than 80,000 persons since the
coup and that the number of
political prisoners still in jail is
close to 5,000(.
THE POLITICAL prisoners
are only part of the story. In
its fanatical drive "to eradicate
the cancer of Marxism," which
the government blames for all
its problems, the military has
left hardly any sphere of social
life untouched:
* Twenty months a f t e r the
coup, a state of siege with its
nightly curfew is still in effect.
* In the country with the
longest democratic tradition in
Latin America, the Congress is
closed, political parties and
trade union activities suspended.
* Military rectors are in
charge of all universities, mili-
tary "advisors" have been ap-
pointed to all high schools, and
the teaching of all "conflictive
subjects" including Marxism
and rationalism in philosophy
courses is forbidden.
With few exceptions, self-
censorship has gagged the re-
maining media n o t already
closed down by the junta.
Reports of repression have
had some effect on the U.S.
government. The House Foreign
Affairs Committee Approved a
military-aid ban in October
without dissent. Kissinger can-
celed his proposed trip to Chile
even before he decided not to
visit Latin America.
IN EUROPE, the Club of
Paris, an informal group of 14
creditor nations, met in May and
agreed to renegotiate Chile's
foreign debt-but England and
Italy refused to attend and two
other countries attended only as
observers.
While the forces that support-
ed Allende have left the coun-
try, gone underground or dis-

appeared, new critics of the re-
gime are making their first
cautious appearances.
Recently, Eduardo Frei, the
Christian Democrat President

Gen. Augusto Pinochet
who ruled before Allende (1964-
1970), broke the long silence he
has maintained since the coup
to criticize the current govern-
ment's economic policies. He
called on the government to
impose controls over what he
claimed we r e privately-owned
monopolies-saying "A supply-
demand market cannot be regu-
lated without competition, which
does not exist in Chile."
Private monopolies are ac-
cumulating as the result of the
State's drive to reduce its role
in the economy. As the govern-
ment divests itself of the 519
state-owned companies acquired
under Allende, a group of about
So favoredafinanciers and indus-
trialists have bought up for a
song everything from textile
plants to bottle companies.
IN A RECENT holiday ser-
mon, Cardinal Raul Silva of
Santiago called on businessmen
to recognize that people were
more important than profits and
"make a real reform of the
business system."
Unemployment h a s already
become such a problem that
Catholic parishes rhave sponsor-
ed some 300 comedores (lunch-
rooms) in the poorer areas so
children can get at least one
hot meal a day.
Now the government has an-
nounced massive layoffs of pub-
lic employes to cut its expendi-
tures.
Additional layoffs are expect-
ed in the steel, construction and
mining industries - but even
workers who keep their jobis
have trouble feeding their fami-
lies. Prices that rose 504 per
cent last year are still rising,
and workers' buying power is
not keeping pace with inflation.
There are no wage controls,
but with no unions and a great
number of Chileans still on gov-
ernment payrolls set by the
State, workers have little chance
for pay hikes.
THE JUNTA is obviously pay-
ing dearly in popular support
for its economic policies, not
only among the workers but
also the middle class. One con-
servative truck owner who sup-
ported the 54 - day transport
strike that set the stage for the
military takeover told a report-
er, "It is incredible how a gov-
ernment which rode in on such
a wave of popular support could
alienate the public in so short
a time."
While the military, having
c r u s h ed dissent, is well en-
trenched, the fate of General
Pinochet is intimately bound up
with the economic condition. In
Santiago observers predict that
unless the condition improves in
the next few months, the mili-
tary junta will gently push
Pinochet aside and call in a new
doctor.
Frank Maurovich, a vet-
eran observer of the eco-
nomic scene, former editor
of the Catholic Voice in
Oakland, Ca., currently edits
Latin Am e r i c Press in
Limo, Peru.

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