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Published by EH.NET (May 2004) 
 
Glen Biglaiser, _Guardians of the Nation? Economists, General, and Economic 
Reform in Latin America_. Notre Dame, IN: University of Notre Dame Press, 
2002. xi + 239 pp. $23.50 (paperback), ISBN: 0-268-03875-9; $45 (cloth), 
0-268-03874-0. 
 
Reviewed for EH.NET by William McGreevey, Director, Development Economics, 
Futures Group. 
 
For Latin America and the Caribbean (LAC) taken as a whole, GDP in real 
terms grew cumulatively by 1.6 percent per annum in the 1980s and 3.7 
percent per annum in the 1990s. In contrast, Chile, the country best 
typifying the arguments set forth by Glen Biglaiser in his book, _Guardians 
of the Nation?_, grew by 4.2 percent per annum and 7.9 percent per annum in 
those same decades (World Bank, _World Development Report 1999/2000_, pp. 
250-51). Chilean growth rates were more than double those of its neighbors 
in both decades. At least part of the reason for that difference lies in 
the happy conjuncture of sound economic advice and politico/military 
leadership willing to listen. 
 
The book focuses particularly on Chile and the rise of economists as a 
share of decisionmakers in Chilean governments. With the overthrow of 
Salvador Allende in 1973, General Augusto Pinochet succeeded to the Chilean 
presidency via military coup, a common mode of promotion in the LAC region 
for more than a century. He called on two U.S.-trained economists, Jorge 
Cauas (Columbia University) and Sergio de Castro (University of Chicago), 
to manage economic policy of his government. In short order, the former 
students of Milton Friedman and his associates were putting market-friendly 
policies into practice. 
 
Biglaiser writes, "Over the next few years, 'Chicago Boys' - economists 
trained in neoliberal doctrine at the University of Chicago - invited more 
economists into all levels of economic policy making. The proportion of 
neoliberal economists in economic policy-making positions jumped from 21.4 
percent in 1973-74 to 77.8 percent in 1975-83, with most having earned 
advanced degrees in the United States" (pp. 95-96). By the late 1980s 94 
percent of policymaking positions affecting the economy were held by 
economists (Chart 4.1, p. 96). 
 
The author looked closely at economic policymaking in two other Southern 
Cone countries, Argentina and Uruguay. In those countries, his data show a 
far less widespread presence of economists in policymaking positions. 
Between 1966 and 1983, the economiss' share of these key jobs exceeded 
fifty percent only briefly and not by much (Chart 4.2, p. 103). In Uruguay, 
a small economy largely dependent on its ties to Argentina and secondarily 
to European markets, economists got but 10 percent of the key jobs through 
the early 1980s (Chart 4.3, p. 107). 
 
By the 1990s, in the age of the Washington Consensus, an allegedly near 
universal agreement about the Magic of the Market, the Argentine 
governments gave more and more key positions to economists, 83 percent of 
the total in the mid-1990s (Chart 7.1, p. 167). Biglaiser shows that 
Colombia and Mexico similarly handed over the reins of policymaking largely 
to economists. (Uruguay, in contrast, continued to keep the neoliberal wave 
at bay, granting less than half the key jobs to economists.) 
 
Biglaiser is interested in whether economists, when 'insulated' from 
politics (read for the word politics, demands of articulate business and 
labor groups seeking a larger share of the pie) by a strong man, can have 
their way with government. Can they reduce the role of state-owned 
enterprises by privatization of state assets? Can they achieve labor market 
flexibility that might be opposed by the so-called labor aristocracy of 
urban, formal sector workers? Can they break down high-cost local 
monopolies by promotion of free trade via globalization? 
 
His analysis shows variable results. 
 
Where economists came into full flower in Chile, the Chicago Boys did free 
markets on many relevant dimensions. They did so, however, within an 
environment sensitive to the need to protect less-favored groups. Reforms 
of the pension system, now both admired and replicated in many other 
countries, constituted a variant on privatization, but also included a 
safety net for the poor. Reforms of health care, criticized in some 
respects for moving too far in the direction of private provision of 
services, still offered basic care through the public sector for those in 
need. Schooling reforms, still ongoing, also have aimed to increase quality 
and protect those most in need. There has been no Scrooge-like element in 
the Chilean version of that Washington Consensus. 
 
Far less successful have been free market adventures in some other settings 
examined by Biglaiser. As a World Bank economist, Desmond McCarthy 
(schooled at MIT, not Chicago!) told me some years ago, "In Argentina, 
everything has been tried twice and failed both times." No Argentine 
government has existed independent of a Peronist legacy. The government of 
Carlos Menem flirted with many neoliberal or 'orthodox' ideas, the worst of 
which was the strange notion of Professor Stephen Hanke (Johns Hopkins, not 
Chicago) that a Monetary Policy Board could manage a fixed dollar-peso 
exchange rate, come what may. The disaster that ensued is still in the 
mop-up stages. 
 
Uruguay, so dependent on its neighbor, can hardly be expected to operate 
independent economic policies, no matter how sound they may be. 
 
Biglaiser, it seems to this reviewer, avoids the larger question, "Can 
these neoliberal policies succeed in achieving objectives of economic 
growth and stability?" The tepid progress of LAC region economies over the 
past quarter century is dispiriting. China and some of its neighbors have 
regularly achieved per capita product increases of five percent per annum 
and more. Why not Brazil? Mexico? Argentina? Colombia? 
 
The East Asia and Pacific region (EAP) had gross national income per capita 
of US$900 in 2001; the LAC region's was US$3,580, four times as high. EAP's 
trade in goods as a share of GDP was 61 percent; the LAC region's was 38 
percent. EAP's manufactured exports were 32 percent of the region's total 
exports (the World Bank indicators refer to these as 'high-technology' 
exports). The LAC region's manufactured exports were 15 percent of its 
total exports (all figures from World Bank, "Little Data Book 2003," pp. 9, 
11). 
 
The EAP region, far poorer in terms of income than the LAC region, does 
remarkably better in opening up to active trade and in succeeding outside 
the traditional area of primary product exports. Greater equality, openness 
of opportunity, and a readiness to compete actively in the global system 
have set the East Asian countries on a course toward successful 
development. In contrast, the LAC region seems unable to seize what 
opportunities come its way. 
 
The inability of LAC region economists to break the grip of vested economic 
interests, namely the manufacturers aiming to keep the home market to 
themselves, and the urban labor aristocracy fearful of the costs of 
adjustment, is part of the story. The lack of progress, of the kind Chile 
has made, to extend benefits of education and health care beyond privileged 
groups is another part of the story. 
 
Biglaiser doubts that the neoliberal recipe offers a sound treatment for 
the LAC region. The independence of Pinochet from both the military and 
commercial groups offered him the chance to listen to reason. Other leaders 
were not so lucky; other countries and their governments' policies were 
tightly woven compromises between capital and labor, owners and workers. In 
most cases, populist rhetoric supported a status quo that left little help 
for the growing flow of poor rural workers heading into cities and finding 
limited opportunities barely better than near-subsistence agriculture. 
 
In the past year Bolivian protesters succeeding in ousting the government 
of Gonzalo Sanchez Lozada, principally because he had the temerity to 
propose selling natural gas to the U.S. after shipping it across Chilean 
territory. Thoughtful observers surely thought such sales would redound to 
the benefit of Bolivia and its people, perhaps especially the least 
advantaged. Populist rhetoric can readily drown out reason on such matters. 
 
Biglaiser generously provides a vision of what was in twentieth century 
Latin America an oft-repeated story. Government incompetence leads to 
military coup. Military coup can lead to paradigm shift but only when the 
Maximum Leader enjoys, as Pinochet did, unusual independence from other 
influences. Military coup then eventually gives way to a democracy of the 
few, often beneficiaries of a closed economy. Washington Consensus or no, 
populist sentiments often support further restive discontent. 
 
Will the twenty-first century also be a time of democratic failure and 
ineffective military reaction? Perhaps not. With luck, the Biglaiser story 
may be a story of the past and not of the future. Better economic training 
and especially the demonstration effect of success in East Asia, now South 
Asia, and perhaps even in Eastern Europe, may shock Latin Americans into 
changed economic policies. They will need to emulate two characteristics of 
the Chilean experience. They will need to open their economies to trade and 
exchange. With equal importance, they must open opportunities within their 
societies to the millions of rural and urban marginal peoples who have yet 
to benefit from what economic development the region has achieved. 
 
William McGreevey taught economic and social history of Latin America many 
years ago at UC- Berkeley (1965-71). He worked on social sector projects, 
especially health care financing, at the World Bank (1980-97) and has more 
recently focused on the economics of reproductive health and HIV/AIDS with 
Futures Group (1997-present) -- 1050 17th Street NW, Washington, DC 20036. 
He can be contacted at [log in to unmask] Like his teacher, Charles P. 
Kindleberger, he recognizes the need to adjust professional interests with 
the passage of time. 
 
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