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Neoliberalism in Chile
2
Transcript
RESTORATION OF CLASS POWER
WHY IS IT IMPORTANT?
CHILE AND NEOLIBERALISM
- Increasing gap between the wealthy and the poor perpetuated by neoliberal ideals
- Privatization of public companies and reduction of government control allowed for higher profits for corporations and lower wages for workers
- Highest income inequality in Latin America; in 1989, the richest 10% took in 46.8% of the national income while the bottom 50% of income earners took in 16.8%
- "Chicago Boys": economists from the University of Chicago who advocated neoliberal policies under the tutelage of Milton Friedman
- Implemented these policies in the mid-1970s, which were successful for several years until the recession of the 1980s
- Program was sponsored by the IMF and World Bank as a precondition to further loans
- Moral and social obligation to provide aid to the less fortunate
- Those eligible for aid must follow guidelines and regulations established by international institutions such as the IMF
- Cold War time period: image of unity, harmony, and humanitarian assistance
- Who is really benefiting?
RESULTS
- Period of rapid, temporary growth of the economy in 1978-1981; labeled the "economic miracle" of Chile
- 1982 recession hit Chile hard and resulted in worsened economic conditions; unemployment was at a high of 34%
- IMF offered loans with conditions attached - must guarantee foreign debt
TAKEAWAY POINTS
Sources
- David Harvey, A Brief History of Neoliberalism, November 1, 2005.
- Steve Kangas, "A Critique of the Chicago School of Economics: Chile - The Laboratory Test"
- Orlando Letelier, "The Chicago Boys in Chile: Economic Freedom's Awfull Toll," The Nation, August 28, 1976.
- Chile set an example for what aspects of neoliberalism was successful and what was not
- Development and growth was not sustainable or long-term
- Widespread unemployment and the depression of wages resulted in greater poverty and income disparity
Conclusion
Neoliberalism
- Should the Western world intervene in developing countries?
- How effective and productive are loans and foreign aid in developing countries?
- Should a country sacrifice welfare in exchange for economic growth?
- Shift from embedded liberalism, which focused on the creation of welfare systems and "full" employment
- Reactions: neoliberalism and socialism
- Idea of fundamental freedom
- Adherence to the free trade/market principle and Adam Smith's "invisible hand"
- Laissez-faire approach
- Enhanced privatization and overall reduction of government control of the economy
Neoliberalism in Chile
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