Harberger: A Deadly Naivete

THERE ARE MANY PEOPLE Arnold Harberger loves in Chile. He married a Chilean. By his count, 100 to 150 of his students are economists there. He consulted for the Central Bank of Chile during Alessandri Frei's rule in the '60s, and for the Pinochet government's electric company in the past two years. His ties with Chile go all the way back to the '50s, when the University of Chicago, his home base, started an exchange program with Catholic University in Santiago. Arnold Harberger sincerely loves Chile.

The story of his inability to see the truth of what his ties with the Pinochet dictatorship mean for the people of Chile is one of naivete, myopia and poignance. It is also the story of a man's deeply flawed moral judgement. In essence, Harberger puts the welfare if the people he knows and loves before the welfare of an entire people; he fails to imagine the suffering of people he does not know.

The personal consequences of the Pinochet government's systematic repression of its opposition have touched even Harberger's life. His wife's brother, who served as Allende's cultural attache, is now a Chilean poet in exile. He publishes a literary magazine out of Los Angeles-- Literatura Chilena en El Exicilio-- and organizes efforts against the Pinochet government there. Harberger says the government branded his brother-in-law's passport with an L, which means that he can never return to his homeland while the Pinochet junta is in power.

Yet not once during any of his visits to Chile has Harberger publicly spoken out against the government's policy of torturing, exiling, jailing or executing its opposition. He has never raised a word of protest about the silenced voices of many of his colleagues.

"People that I love are in high positions in that government. Am I going to pull them down? Will that help Chile?" he asks.

He also points out that he has expressed his disapproval of the political repression in private at numerous cocktail parties. But what about the people who weren't at the cocktail parties, the people who were imprisoned on Dawson's Island, the people who lay in the gutters of Santiago? He said he counseled at least 20 generals that they should give their power back to the people.

And what did the generals answer? They smiled and nodded their heads, says Harberger.

HARBERGER CANNOT see himself as other people see him, yet the way other people see him would be critical if he became director of the Harvard Institute for International Development (HIID). "I'm totally identified with the notion of constitutionality in Chile," he says. But throughout Latin America and within the community of American scholars who study international development, Harberger and his Chicago school of economics symbolize economic policies that require brutal tyranny.

By failing to speak out against repression in Chile and by praising the Pinochet regime's economic policies, Harberger strengthened the government's reputation with foreign credit institutions and foreign investors, for whom the word of the chairman of the economics department at a very prestigious American university carried great weight. On each trip of Chile, Chilean newspapers--notably EL Mercurio--ran huge spreads on what the American economist said.

Harberger also implicitly justified the repression. He felt the socialistic economic policies of the Allende government had helped destroy freedom in Chile; he still subscribers to the 19th-century belief that a free market in the economic and political realms are interdependent. "The restoration of political freedom is impossible without a restoration of economic health," he wrote (Wall Street Journal, December 10, 1976). The paradox is that Harberger promulgated with missionary zeal his belief in the free economic market in a place where the free marketplace of ideas had been decimated.

THE ROLE OF Harberger's approach to economics in causing the repression is, however, a much more serious issue. The field of international development is now in a state of intellectual crisis. One of the reasons is the failure of market economics to solve the economic problems of developing countries. In the '50s and '60s economists were confident they could get the economies of poor countries moving if only their governments would follow a good economist's advice.

Many economic advisers, however, have come to believe that these policies tend to foster repression rather than progress. Because of the enormous gap between rich and poor within underdeveloped countries, and because of the gap between rich and poor nations, a policy intempered by considerations of equity, promoting unfettered competition, would tend to widen the income gap. Any advantages that did come about would flow to the small group which already own land and capital.

Market-oriented policies are not apolitical in underdeveloped countries; they consolidate the power of an elite, creating discontent among the poor. In order to continue the polices, the government must resort to repressive measures. For example, when the Chilean government went full throttle on the "shock treatment" which Harberger's and Milton Friedman advocated on their 1975 visit to Chile, the Christian Democratic Party criticized the approach and called for alternatives that would ease its dire social consequences. In March 1977, the Christian Democratic Party was outlawed.

ALBERT O. HIRSCHMAN, professor at Princeton's Institute for Advanced Studies, long had faith in "economic development." In 1963, he wrote the highly influential Journeys Toward Progress. In an essay published last year, though, he epitomized contemporary disenchantment with the field, changing Toqueville's famous epigram from "A close tie and necessary relation exist between these two things: freedom and industry," to "A close tie and a necessary relation exist between these two things: torture and industry."

Harberger has never questioned his faith in the market economy as the solution to the problems of poor countries. "I preach an approach I call good economics," he says. His approach measures success with the ledger of an accountant; questions of who gets what have no place in the economist's calculus.

We may agree that the poor should be helped, but who are the poor? Is income a test? Most graduates students are poor by that standard. We want to help alleviate the human sufferings connected with unemployment without inducing people to go casually and habitually "on the dole"--as many do. We want to see to it that the needy have an adequate standard of medical care, but who is to say that the long waiting lines observed in the public clinics of many countries do not perform a quite useful function in restricting the beneficiaries of a free service to people who are really poor and really ill?

All that need be said here is that distributional weights, as commonly understood in out professional literature, simply do not enter these dimensions.... In the end, then, we cannot condemn as crass or unfeeling the idea our profession's moving towards-a consensus based on the traditional criterion of efficiency. (Journal of Political; Economy, April 1978).

Harberger goes on the Blind faith, belied by reality, that pursuit of the "efficiency criterion" will somehow produce national prosperity and political liberty. His students know better. Pablo Barona, president of the Central Bank of Chile, said the fact that "more than 90 per cent of the people are against our policies is proof that the model is working" (The New York Times, December 8, 1976).

The effects of the policies this economic model requires--among them the lowering of trade protection, the deregulation of interest rates, the private domination of agriculture and industry--have worsened the living conditions of the majority of Chileans. According to a 1979 report of the Inter-Church Committee on Human Rights in Latin America:

The economic model has produced increased misery for the majority of the Chilean population. Real unemployment is estimated between 20 and 30 per cent. [The government distorts these figures by not counting as unemployed those on the Minimum Employment Program, which pays a meager $26 per month.] Inflation continues to undercut the real incomes of working people. Cuts in government support for health, housing, education and social services reduce their social wage.

A dramatic illustration of the social consequences of the economic model is the widespread malnutrition in today's Chile. Per capita intake of calories and proteins has decreased seriously since the military came to power. The attitude of the military authorities towards this social msiery is as shocking as the statistics. Admitting that "221,000 children are living in extreme poverty, which implies undernourishment," the minister of health commented that "those children are not a source of power, but a dragging weight."

THE FAILURE OF HARBERGER and the Chicago School is in one sense epistemological. They have constructed a metaphor for how the world can be made to work-the market economy-but the metaphor doesn't fit the world. As a result, Harberger is unable to connect political repression with his economic policies. He dismisses the connection as "absolute nonsense. There is not a single component of Chile's economic policy that has not flourished under a democratic regime."

Harberger is not the person to lead the intellectual community into new theoretical realms. His is a set and anachronistic view of the world. If he comes to the HIID, he will train a multitude of foreign and American students in his way of thinking. "The thing Harvard can do is to train students from all parts of the world in the science and arts of good economics," he says. The "Chicago Boys" will become the "Harvard Boys."

If he comes, he will probably ally the HIID with military governments strong enough to carry through his policies. "You need a strong government to make strong changes of any kind," he says, nothing that it is difficult to advise a country where "the economic policies keep changing all the time like a strobe light."

In addition, countries looking for a more human approach will shun the HIID. If Harberger comes, he will give advice that will contribute to brutal political repression and to economic injustice. Harvard would make a worthier and wise decision if it chose someone who would encourage a ferment of ideas, and someone with the breadth of imagination to envision an approach that will help put an end to the suffering and starvation.