Chile’s Economic Transformation
In the past 40 years, Chile’s economy has undergone a radical transformation. Throughout a good portion of the 20th century the Chilean economy was based on structuralist and Marxist ideas, and the government played a central role in controlling major industries and the market in turn, as well as dictating the economic activity of the country. In 1973 Chile underwent a coup d’etat in which the Unidad Popular (UP), a leftist coalition headed by Salvador Allende, was thrown out of power and replaced by military rule. General Augusto Pinochet headed the dictatorship, which lasted until 1980 when a plebiscite was approved that instituted a new constitution and declared Pinochet was to continue ruling as president for a term of 8 years. Pinochet renounced his presidency at the end of this term and from 1988 to the present, the Chilean president has been elected democratically.
Pinochet’s legacy is a very controversial one as he was accused of committing numerous human rights violations and is said to be responsible for the “disappearances” of over 3,000 Chilean citizens. Nevertheless, the changes made in economic policy during Pinochet’s time in power drastically reshaped Chile’s economy.
Throughout his rule, Pinochet appointed various Chilean economists who completed their graduate work at the University of Chicago to major positions in the government including the Minister of Finance, Minister of Economy, Budget Director and so on. These economists, commonly referred to the Chicago boys, were inspired by the teachings of American economist Milton Friedman. Friedman was a monetarist and a strong advocate of free enterprise. The Chicago boys played an integral role in the decentralization of the economy through partial denationalization of key resources like copper and oil, encouraging foreign investment, and an increased emphasis on free trade. Prior to the early 1990’s Chile, like most South American countries, was subject to constant economic turmoil and inconsistency. Since then their situation has improved in leaps and bounds.
In my next post I will give a current overview of the components that make up Chile’s economy and examine its performance over the past decade. Stay tuned!