The Shock Doctrine: The Rise of Disaster Capitalism

Content Warning: This section of the guide includes discussion of torture, including physical and psychological abuse, and death.

On September 11th, 1973, Chilean right-wing leaders backed by the US led by General Augusto Pinochet took over the Chilean government. President Allende died and his cabinet was imprisoned. Afterward, thousands of civilians were rounded up and detained, tortured, and executed, some of them publicly.

The Economic Front

The Chicago Boys set to work implementing the free-market fundamentalist policies laid out in their framework, “The Brick.” Most state-owned companies were privatized, price controls on necessities were abolished, markets opened to foreign trade and investment, and social services were cut. The Chicago Boys argued this would allow “the ‘natural’ laws of economics [to] rediscover their equilibrium” (79) and reduce inflation. 

However, by 1974, inflation reached record highs, unemployment spiked, and poverty deepened. In March 1975, Milton Friedman went to Chile to argue that the results were a necessary part of the “shock therapy” he prescribed and that Pinochet should continue to apply free market fundamentalist principles. By 1983, the economy shrunk, local businesses collapsed, and poverty soared. The theory of shock therapy is that it reduces inflation by sending a message to the market that “prices will not keep rising, nor will wages” (82) and that the economy will stabilize quickly once this is understood.