In 1982, Friedrich von Hayek, father of the Austrian school of economics, godfather of neoliberalism and one of the architects of 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 Chicago School economists had applied in that Andean society. In the letter, Von Hayek encouraged the British to implement Chile's drastic reforms in the United Kingdom. Thatcher's response is in a brief letter kept in the archives of her personal foundation:
“I am sure you will agree that in Britain, with our democratic institutions and the need for a high degree of consensus, some of the measures adopted in Chile would be quite unacceptable,” she told him. That is to say, Chile was one thing and the United Kingdom another. One thing was a democracy, another a dictatorship.
Thatcher revered Von Hayek. When the Austrian visited her in her London office in 1975, she received him with one of her books in her hand: “This is what we believe in,” she told him. In her gesture and in her subsequent politics 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 harsh in personal relationships and doctrinaire. She agreed with Von Hayek's creed, according to which economics was the discipline that allowed correct moral decisions to be made. Like him, she always talked about freedom, but she distrusted the judgment of the people. It was the values and taste of the upper classes that should guide the rest of humanity.
However, Thatcher was also a smart politician. She knew that shock therapy like the one she proposed by the Austrian was not possible in the United Kingdom. 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 companies, deregulated the labor market and lowered taxes, but she did it gradually and with the complicity of British institutions. There was her skill.
These days, in Buenos Aires, we are talking about shock therapy again. The medicine proposed by President Javier Milei is as abrupt and profound (in some aspects more so) than that practiced in Chile in the eighties, but it is difficult to digest in a democracy and Milei does not even seem to have the desire (due to doctrinal convictions). ) nor 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 price and currency controls, the withdrawal of subsidies, the immediate commercial opening of a country and the large-scale privatization of its public ownership. Its application implies personal suffering and a high social cost.
When the measures that Milei plans for Argentina and their unpopularity began to become 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 reinforces its powers and has shielded itself against street protests. There will be no military coup in Buenos Aires, but there will be a regression in which the extent to which the Argentine right of Mauricio Macri and Patricia Bullrich is involved is unknown.
If shock therapy seems far away, remember the policies of austerity. Austerity shares the neoliberal desire to reduce the state (the welfare state), deregulate labor markets and emphasize private markets as drivers of growth. This week Wolfgang Schäuble, the wheelchair-bound German politician, Minister of Finance between 2009 and 2017, who will be remembered as the great supporter of the implementation of austerity policies in those years in the Union, died at the age of 81. Europe.
Austerity had a great prestige 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 well-known cuts). Greece was forced into cuts so severe that they plunged the country into a long recession.
The effectiveness of austerity is in doubt (the IMF has studies with divergent conclusions) and it has a high component of ideology dressed up as objective truth. Yanis Varoufakis, Greek Finance Minister, says in his memoir Behaving Like Adults that the German confessed to him that he was not sure that austerity would work, but that he did it for ideological reasons. We will never know if that conversation took place: Schäuble died before clarifying it.
Austerity, in the EU limited to limits on public spending (3% of the deficit and 60% of public debt in terms of GDP), returns to Europe. It has been hibernated for four years because Europe could not get out of the covid crisis with it. Now come back. The party is over, if you ever noticed.
