Miracle of Chile
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The "Miracle of Chile" is a phrase coined by Milton Friedman to describe the neoliberal, monetarist economic reforms implemented in Chile under General Augusto Pinochet. Friedman did not advise or personally support Pinochet, though he had given some lectures advocating monetarist economics to a private foundation in Chile. Friedman has that "The real miracle in Chile was not that those economic reforms worked so well, because that's what Adam Smith said they would do. Chile is by all odds the best economic success story in Latin America today. The real miracle is that a military junta was willing to let them do it." (The Drug War as a Socialist Enterprise by Milton Friedman (http://www.druglibrary.org/special/friedman/socialist.htm)). Some critics disagree with Friedman's assessment, arguing that the Chilean economy went into decline (or perhaps even collapsed) between 1973 and 1983.
Pinochet, under the advice of a group of Chilean economists who had studied at the University of Chicago Department of Economics (the Chicago Boys), implemented a set of economic reforms that included deregulation and privatization. They abolished the minimum wage, rescinded trade union rights, privatized the pension system, state industries, and banks, and abolished taxes on wealth and profits. Pinochet justified such reforms by promising to "make Chile not a nation of proletarians, but a nation of entrepreneurs." The copper mines, however, remained in state hands -- revenues were used to support the Chilean military.
Supporters of Friedman's view argue that subsequent events in Chile have vindicated his monetarist philosophy: Chile's economy is noticeably stronger and more advanced than those of other Latin American nations. Chile's annual growth in per capita real income from 1985 to 1996 averaged 5%, far above the rest of Latin America. [1] (http://www-hoover.stanford.edu/publications/digest/974/bckr3.html). Critics counter that this did not happen until Chile changed to a more Keynesian economic policy after an IMF bailout.
Friedman's detractors use the term Miracle of Chile in a sarcastic fashion, "Cinderella's pumpkin did not really turn into a coach. The Miracle of Chile is just another fairy tale." (1 -- p.72). The unemployment rate in Chile also increased from 4.3% in 1973, to 34.6% in 1983. Meanwhile, real wages declined by 40%. However, Chile recovered from the economic recession of the early '80s, and unemployment and poverty were not at their high point in 1989, when Pinochet was defeated in a plebiscite. Again, some critics argue that this was a result of a shift in economic policy following the IMF bailout.
Critics point out that the monetarist economic policies did not take place in a democratic environment; rather, Pinochet had come to power in a coup d'état that had overthrown Socialist president Salvador Allende and immediately began a campaign of terror against those labelled leftist "subversives" or supporters of the previous government.
The experience of Chile in the 1970s and 1980s, and more particularly the model of authoritarian political control combined with neoliberal economic policies, has influenced the policies of the Communist Party of China and been invoked as a model by economic reformers in other countries.
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See also
References
External links
- Chile's Economy, Apec 2004 (http://www.apec2004.cl/index.asp?CatID=11&idioma=ing)
- Chile-U.S. Free Trade Agreement (http://www.chileusafta.com/backgrounders/bgs_economic-achievments.html)
- Unemployment Protection in Chile, Wayne Vroman, August 2003 (http://www.urban.org/UploadedPDF/410841_Chile.pdf)
Articles
- The Millennium Adventure - From Top to Bottom - 6 Oct 2001 (http://www.jimrogers.com/content/stories/articles/venezuela.html)
Criticism
- The Chicago boys and the Chilean 'economic miracle' (http://www.parallelo-distance.net/shared/The_Chicago_boys.html) by Steve Kangas; criticism of the Chilean experiment.de:Wunder von Chile