Who loves you well, will make you cry. The belief that pain precedes love also has its translation in the economy. Austerity policies and shock therapies are a good example.
In 1982, Friedrich von Hayek, father of the Austrian school of economics, godfather of neoliberalism and one of the architects of the reactionary thought of the 20th century, sent a letter to the British Prime Minister, Margaret Thatcher. The economist had traveled twice to Chile, a country in which he was keenly interested in the shock therapy that the economists of the Chicago School had applied to that Andean society. In the letter, Von Hayek encouraged the British woman to implement the drastic reforms of Chile in the United Kingdom. Thatcher's response is in a letter kept in the archives of her personal foundation:
"I'm sure you will agree that in Great Britain, with our democratic institutions and the need for a high degree of consensus, some of the measures taken in Chile would be quite unacceptable," he told him. In other words, one thing was Chile and another was the United Kingdom. One thing was a democracy, another a military dictatorship.
Thatcher revered Von Hayek. When the Austrian visited her in her office in London in 1975, she received him with one of his books in hand: "This is what we believe in," he told her. In his gesture and in his subsequent policy, he rehabilitated the figure of the Austrian, removed from the public sphere by decades of Keynesian hegemony.
Margaret Thatcher was not an easy person. Actress Gillian Anderson softened some of the features of her figure in the Netflix series The Crown about the British monarchy. She was rough in personal relationships and a doctrinaire. It coincided with Von Hayek's credo according to which economics was the discipline that allowed the correct moral decisions to be made. Like him, he always talked about freedom. But he distrusted the judgment of the people. It was the values and taste of the upper classes that had to guide the rest of humanity.
However, Thatcher was also a smart politician. He knew that shock therapy like the one the Austrian proposed was not possible in the UK. If it was done in Chile, it was because there was a military dictatorship in which even part of the generalate had doubts about its opportunity. Thatcher reduced the power of unions, closed unproductive mines, privatized large public enterprises, deregulated the labor market and lowered taxes. But he did it gradually. And with the complicity of the British institutions. That was his skill.
These days, in Buenos Aires, there is talk of shock therapy again. The medicine proposed by President Javier Milei is as abrupt and profound (in some aspects more) than the one practiced in Chile in the 80s. But it is difficult to stand in a democracy and Milei does not seem to have the desire (due to doctrinal convictions) ) nor the time (for political calendar reasons) to develop gradual change.
The term shock therapy comes from Milton Friedman (he called it shock policy) and means the sudden liberalization of prices and currency controls, the withdrawal of subsidies, the immediate commercial opening of a country, and large-scale privatization of its public property. Its application involves personal suffering and a high social cost.
When the measures that Milei plans for Argentina and their unpopularity became known a few weeks ago, some observers indicated that their application was only possible within the framework of an authoritarian regime. This week's decisions move in that direction. Milei has presented a "public emergency" project that strengthens his powers and has shielded himself against street protests. There will be no military coup in Buenos Aires, but there will be a democratic involution of which it is unknown to what extent the Argentine right of Mauricio Macri and Patricia Bullrich is involved.
If shock therapy seems far-fetched, remember the austerity policies. Austerity shares the neoliberal desire to reduce the State (the welfare state), deregulate labor markets and emphasize private markets as drivers of growth. Wolfgang Schäuble, the German politician in a wheelchair, Minister of Finance between 2009 and 2017, who will be remembered as the great champion of the implementation of austerity policies in those years, died this week at the age of 81. the European Union.
Austerity had a great predicament in the countries of northern Europe (it still does) as a formula to discipline the “wasteful” economies of the South, which had to reduce social spending (the so-called cuts). Greece was forced into such severe cuts that they plunged the country into a long recession.
The effectiveness of austerity is in doubt (the IMF has studies with divergent conclusions) and has a high component of ideology dressed as objective truth. Yanis Varoufakis, the Greek Minister of Finance, says in his memoir "Behaving like Adults" that the German confessed to him that it was not clear that austerity was going to work, but that he was doing it for ideological reasons. We will never know if that conversation took place: Schäuble died before clarifying it.
Austerity, encrypted in the EU in limits to public spending (of 3% of the deficit and 60% of the public debt in terms of GDP) is returning to Europe. She has been in hibernation for four years because with her it was clear that Europe was not coming out of the covid crisis. now come back The party is over, if you had noticed at some point.
