I took a course about US Intelligence this semester because I was interested in how a foreign secret agency influences domestic policies, especially recalling the Chilean dictatorship era where economic policies were shaped by Chicago Boys supported by US intelligence to proliferate neoliberal philosophy against socialist ideology in the region. The course have met its end and I passed the course summiting two papers during the course. My idea was to investigate the relevance between US Intelligence and Chicago Boys as in academic and policy outcome, but since the direction of the course headed not to academic paper-writing but to policy-recommendation-writing which is practical, I didn’t have much chance to discuss and investigate further about such matter. Assuming that any intelligent agency lays on secrecy that hinders empirical academic research on such matter, I just hereby display what I have collected arbitrarily about such relevance.
In this era, where transparency is considered as a higher moral than secrecy, and where international cooperation weighs more than delusive handshakes with a knife holding hand on the back, such influence is still standing?
Chicago, 1960. The United States is bogged down in a long, expensive and dangerous Cold War with the Soviet Union. Inside the Economics Building at the University of Chicago, two academics are engaged in a private, intense conversation. Theodore Schultz is tall and lanky. Raised on a South Dakota farm and pulled out of school by his father, he’d still managed to scale the heady heights of academia, first as chairman of the Economics Department in 1944 and then as president of the American Economic Association in 1960. Schultz has strong connections with the Ford Foundation, an important front for CIA programmes during the Cold War… His younger sparring partner is Milton Friedman who in 1946 joined what became known as the ‘Chicago school’. Although Friedman was of diminutive stature, measuring only 1.52 metres tall, he already enjoyed a fierce reputation as a verbal opponent. Friedman will flirt with the CIA in due course too, training Chilean economists in the art of neoliberal ‘shock therapy’. His know-how came in handy after the US-sponsored overthrow/death of Chile’s Marxist president Salvador Allende in 1973. Richard Nixon said he wanted to hear the Chilean economy scream.
Actual political power is the composition, the joint outcome, of de jure and de facto power. To see how this works out in practice, consider the situation in Chile in the early 1970’s. Salvador Allende was elected President with a majority of the popular vote. The formal political institutions of democracy in Chile allocated power to him to propose legislation, issue decrees, etc. Consequently, even though he did not have an absolute majority in congress, Allende had a great deal of de jure political power. Political power is not just de jure however; it does not simply stem from political institutions. Allende, despite being empowered under the Chilean Constitution, was overthrown by a military coup in 1973. Here, the military under the leadership of General Pinochet, were able to use brute force and guns to over-ride the formal political institutions. The ability to use force is one example of de facto political power.
To see why political institutions are so important as a source of political power think of a situation where a group, say the Chilean army in the early 1970’s, has a great deal of de facto power. Indeed, it has so much de facto power that it can overrule the Chilean Constitution, making the political institutions largely irrelevant. In fact in Chile the de facto power of the military was able to overthrow the legitimate government and completely reverse the economic policies and economic institutions chosen by the Allende government (including land reform and mass nationalization of industry). Not only did the military reverse the economic institutions preferred by Allende and the groups who elected him, they then implemented their own preferred set of economic institutions, in particularly deregulating the trade regime and the economy. Yet the Pinochet regime was heavily concerned with formal political institutions, and in 1980 Pinochet re-wrote the constitution.
If de facto power was decisive in Chile what is the role for political institutions? If
the constitution can be overthrown, why bother to re-write it? The secret to this lies in the intrinsically transitory nature of de facto power. Yes, the military were able to organize a coup in 1973 but this was only because times were uniquely propitious. There was a world-wide economic crisis, and factions of the military that opposed the coup could be marginalized. Moreover, the United States government at the time was happy to encourage and endorse the overthrow of a socialist government, even if it had been democratically elected. The coming together of such circumstances could not be expected to happen continually, hence once Chilean society re-democratized, as it did after 1990, the military would not be able to continually threaten a coup. In response to this Pinochet changed the political institutions in order to attempt to lock in the power of the military, and thus the economic institutions that he/they preferred. Therefore, the important role for political institutions is that they inﬂuence the future allocation of political power. This dynamic role is crucial because it explains the major desire of agents to change political institutions when they get the chance–this is how they can attempt to enduringly alter the balance of political power in their favor.
*The last three paragraphs were cited from Acemoglu and Robinson, 2003.