Corey Robin has written extensively about this.
Libertarians will blanch at that association: whatever resonance Hobbesian ideas may find in their writings, the Hobbesian state is a good deal more repressive than any government they would ever countenance. Except for the fact that it's not. As Greg Grandin points out in Empire's Workshop, Milton Friedman met with Chilean dictator Augusto Pinochet in 1975 to advise him on economic matters; Friedman's Chicago Boys worked even more closely with Pinochet's junta. Sergio de Castro, Pinochet's finance minister, made the observation, reminiscent of Hobbes and Berlin, that "a person's actual freedom can only be ensured through an authoritarian regime that exercises power by implementing equal rules for everyone." Hayek admired Pinochet's Chile so much that he decided to hold a meeting of his Mont Pelerin Society in Viña del Mar, the seaside resort where the coup against Allende was planned. In 1978 he wrote to the London Times that he had "not been able to find a single person even in much maligned Chile who did not agree that personal freedom was much greater under Pinochet than it had been under Allende."
"Despite my sharp disagreement with the authoritarian political system of Chile," Friedman would later claim, "I do not regard it as evil for an economist to render technical economic advice to the Chilean Government." But the marriage between free markets and state terror cannot be annulled so easily. As Hobbes understood, it takes an enormous amount of repression to create the type of men who can exercise their "Liberty to buy, and sell, and otherwise contract with one another" without getting stroppy. They must be free to move--or choose--but not so free as to think about redesigning the highway. Assuming an all-too-easy congruence between capitalism and democracy, the libertarian overlooks just how much coercion is required to make citizens who will use their freedom responsibly and not ask the state to alleviate their distress.
http://www.thenation.com/article/first-counter-revolutionary?page=full#And then followed up on Hayek and Pinochet in a blog post last year.
It’s no secret that Friedrich von Hayek was a warm supporter of Augusto Pinochet’s bloody regime. As I wrote in The Nation a few years back. ... I had thought there wasn’t much more to say about Hayek in Chile, but a new article in the American Journal of Economics and Sociology—”Preventing the ‘Abuses’ of Democracy: Hayek, the ‘Military Usurper’ and Transitional Dictatorship in Chile?” by Andrew Farrant, Edward McPhail, and Sebastian Berger—provides some fresh details. ... Farrant et al demonstrate that Hayek’s support of Pinochet was not contingent or begrudging—an alliance of convenience due to Pinochet’s embrace of free market economics—but was rather the product of two longstanding ideas and commitments.
First, a belief that welfare/socialist states of modern democracies have a tendency toward totalitarianism. ... Second, a belief in the virtues of temporary dictatorships as a means of saving these totalitarian-bound democracies from themselves.
http://coreyrobin.com/2012/07/08/hayek-von-pinochet
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