The Confidence Trap by Runciman David;

Author:Runciman, David; [Runciman, David;]
Language: eng
Format: epub
ISBN: 9780691178134
Publisher: Princeton UP
Published: 2014-09-15T05:00:00+00:00

REGIME CHANGE

Through 1974 the most visible sign of political instability was the difficulty governments had in holding on to office. Many saw inflation as the root cause. Milton Friedman, by now one of the leading lights in the Mont Pelerin Society, put it bluntly: “Inflation surely helped to make Mr Edward Heath Prime Minister in 1970 and, even more surely, ex-Prime Minister in 1974 . . . President Allende of Chile lost his life at least partly because of inflation. Throughout the world, inflation is a major source of political unrest.”19 However, despite Friedman’s attempt to link them, there was a big difference between these two cases. It was not simply that one man lost his job while another lost his life. Heath’s ups and downs represented routine change within a democratic system. Allende’s demise represented change from a democratic system to something else entirely: military rule.

In this difference there was a warning and also a temptation. The back and forth between Heath and Wilson appeared to typify the inability of a democracy to make adjustments commensurate with the scale of the problem: as the ship went down, the voters simply rearranged the deck chairs. Regime change in Chile at least reflected the seriousness of the situation. The transition was violent and unpleasant. It was not for the squeamish (Kissinger, who was anything but squeamish, had no problem with it). But for anyone willing either to stomach or to turn a blind eye to the brutality on the ground, regime change could be presented as an opportunity for a fresh start. The problems of the Chilean economy far exceeded those in Europe (inflation in 1974 was running at close to 1,000 percent). Rearranging the deck chairs wouldn’t do. When Pinochet began a series of radical free market reforms in 1974, largely inspired by a group of Chilean economists who had studied under Friedman in Chicago, it was tempting to think a clean break with the past might be the price to be paid for avoiding an even more unpleasant future.

To his credit, Friedman resisted that temptation. He never claimed that a Pinochet-style strongman was a price worth paying for anything (as opposed to the view, which he certainly endorsed and exported through his students, that if a strongman takes over anyway, you should encourage him to embrace the discipline of the market). Hayek was much more equivocal. He became something of an apologist for the new regime, arguing that it was better to have a dictator who preserved the rule of law than a democracy that ignored it. By the rule of law, Hayek meant above all the preservation of private property against the depredations of inflation. He viewed the socialist reforms of the Allende years as a way station on the road to serfdom. A dictatorial interlude offered a chance to get the country back on a path where democratic freedom was at least a future possibility.

In his own mind, Hayek had not given up on democracy. This was

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