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The "Miracle of Chile" is a phrase coined by Milton Friedman in 1982 to describe the liberal, monetarist economic reforms implemented in Chile under the government of President Augusto Pinochet. Milton Friedman (July 31, 1912 – November 16, 2006) was a prominent American economist and public intellectual. ...
The liberal theory of economics is the theory of economics begun in the Englightenment, and believed to be first fully forumulated by Adam Smith. ...
Monetarism is a set of views concerning the determination of national income and monetary economics. ...
Face-to-face trading interactions on the New York Stock Exchange trading floor. ...
Captain General Augusto José Ramón Pinochet Ugarte[1] (November 25, 1915–December 10, 2006) was a general who was military dictator and President of Chile from 1973 to 1990. ...
When Pinochet's coup d'État succeeded in 1973, Pinochet came into power bringing under his arms an economic plan called El Ladrillo [1], which had been secretly prepared in May 1973 [2] by economists who opposed Allende's government, with the help from a group of economists which were called by the press, at that time, the Chicago Boys. This document, El Ladrillo, was avaliable in the offices of the Chilean Armed Forces Generals on the very September 12th, 1973 [1], and contained the backbone of what would later on become the Chilean neoliberal economic policy.[2] General Augusto José Ramón Pinochet Ugarte1 (born November 25, 1915) was head of the military government that ruled Chile from 1973 to 1990. ...
Year 1973 (MCMLXXIII) was a common year starting on Monday (link will display full calendar) of the 1973 Gregorian calendar. ...
The Chicago Boys (c. ...
The term neoliberalism is used to describe a political-economic philosophy that had major implications for government policies beginning in the 1970s – and increasingly prominent since 1980 – that de-emphasizes or rejects positive government intervention in the economy, focusing instead on achieving progress and even social justice by...
Friedman did not advise nor personally support Pinochet, though he had given some lectures advocating free market economic policies in the Catholic University of Chile.
At several later occasions, Friedman stated that he had actually intended the miracle to refer to the political developments in Chile, rather than the economic ones. For instance, during an interview held in 1991, he said that the real miracle consisted not in the economic policies adopted by Chile, but in the fact that the Chicago Boys "convinced" a military junta to adopt them.[1], a curious explanation, given the fact that "El Ladrillo" was in the offices of the military junta on September 12th, 1973 [1]. In 1992 he said that the miracle consisted of the fact that Chile returned to democracy peacefully.[2] However, the phrase "Miracle of Chile" continues to be used to refer to economic aspects. The Chicago Boys (c. ...
Augusto Pinochet (sitting) was an army general who led a military coup in Chile in 1973. ...
Augusto Pinochet (sitting) was an army general who led a military coup in Chile in 1973. ...
Two miracles ?
Some analysts divide the neoliberal economic experiments of Chile in two distinct phases: the first phase, or "first miracle" (1973 - 1982), during which the Chicago Boys and the monetarist ideals of the Chicago School reined absolutely, and which ended in the famous depression of 1982, and a "second miracle" (1985-89), which was the creation of Hernán Büchi, the finance minister Pinochet succesfuly chose to take Chile out of the depression. The term neoliberalism is used to describe a political-economic philosophy that had major implications for government policies beginning in the 1970s – and increasingly prominent since 1980 – that de-emphasizes or rejects positive government intervention in the economy, focusing instead on achieving progress and even social justice by...
The Chicago Boys (c. ...
Monetarism is a set of views concerning the determination of national income and monetary economics. ...
There are several Chicago schools, a name derived from programs and departments at the University of Chicago and not the city of Chicago itself. ...
General Augusto José Ramón Pinochet Ugarte1 (born November 25, 1915) was head of the military government that ruled Chile from 1973 to 1990. ...
Hernán Büchi's miracle Büchi obtainded his MBA from Columbia University and had a different formation from the Chicago Boys. While sharing most of their principal economic views, Buchi used a more pragmatic, and perhaps less "dogmatic", approach to take Chile out of the crisis. Columbia University is a private research university in the United States. ...
The Chicago Boys (c. ...
Buchi reversed most of the keynesian measures taken by Luis Escobar Cerda, his immediate predecessor, but not all of them: he forced an artificial over-devaluation of the Chilean peso, (favoring exports and containing imports), instituted Central Bank controls on interest rates, and promoted a controlled reduction of import duties. On his first report as a Minister he justified his interventions in the economy: Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ...
| “ | An economic policy is necessary to correctly direct the efforts of savings and investments. Experience has taught us the importance of adequate regulation of macroeconomic variables because, without regulation, markets disorient themselves and savings are mis-spent, flow out of Chile, or are invested in non-productive activities, or speculations. [3] | ” | Mixing masterly his free-market beliefs with interventionist policies like the expressed in the above declaration, (which could had been taken from a keynesian textbook), the pragmatic Hernán Büchi pushed economic ideologies and dogmas aside to be able to find the exactly correct mix of economic policies that would finally bring Chille back to growth, thus creating the foundations of the "second", and definitive, Chilean miracle. Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ...
Political Ideologies Part of the Politics series Politics Portal This box: An ideology is an organized collection of ideas. ...
For the film Dogma, see Dogma (film) Dogma (the plural is either dogmata or dogmas, Greek , plural ) is the established belief or doctrine held by a religion, ideology or any kind of organization, thought to be authoritative and not to be disputed or doubted. ...
Debate over the "Miracle" As a recent economic analyst has noted: | “ | Pinochet's despotic but economically successful legacy remains troublingly ambiguous to many Chileans. Led by young, free-market policy makers, Pinochet privatized everything from mines to factories to social security. He welcomed foreign investment and lifted trade barriers, forcing Chilean businesses to compete with imports or close down. The reforms were wrenching. At one time, a third of the labor force was unemployed. But since the mid-1980s, the economy has averaged almost 6 percent annual growth, raising per capita income for the 16 million Chileans to more than $7,000--making them among the most prosperous people in South America--and creating a thriving middle class. Today; only 18.7 percent of the population lives below the poverty line, compared, for example, with 31 percent in Brazil and 62 percent in Bolivia [4]. At this pace, Chile, within a generation, will become Latin America's most prosperous nation.[5] | ” | However the social costs of Pinochet's experiments were enourmous: Privatization (sometimes privatisation, denationalization, or, especially in India, disinvestment) is the process of transferring property, from public ownership to private ownership and/or transferring the management of a service or activity from the government to the private sector. ...
Social security primarily refers to a field of social welfare service concerned with social protection, or protection against socially recognized conditions, including poverty, old age, disability, unemployment, families with children and others. ...
A trade barrier is general term that describes any government policy or regulation that restricts international trade, the barriers can take many forms, including: Import duties Import licenses Export licenses Quotas Tariffs Subsidies Non-tariff barriers to trade Most trade barriers work on the same principle: the imposition of some...
Unemployment rates in the United States. ...
Per capita is a Latin phrase meaning for each head. ...
Map of countries showing percentage of population who have an income below the national poverty line The poverty line is the level of income below which one cannot afford to purchase all the resources one requires to live. ...
Generation (From the Greek γιγνμαι), also known as procreation, is the act of producing offspring. ...
Latin America consists of the countries of South America and some of North America (including Central America and some the islands of the Caribbean) whose inhabitants mostly speak Romance languages, although Native American languages are also spoken. ...
General Augusto José Ramón Pinochet Ugarte1 (born November 25, 1915) was head of the military government that ruled Chile from 1973 to 1990. ...
| “ | In the 1982 and 1983 (depression) Chile's GDP fell by 16 percent. The collapse of the financial sector cost Chilean taxpayers between 30 and 40 percent of GDP. Unemployment shot up to 30 percent. Around 50 percent of the population fell below the poverty line. Extreme poverty affected 30 percent of the population. Starting in 1985, the focus of economic policies shifted toward financial solvency and economic growth. Exports grew rapidly and unemployment went down. On the poverty front, however, results were less successful. People living below the poverty line still represented 45 percent of the population in 1987.[6] | ” | Former President Pinochet, under the advice of a group of Chilean economists who had mostly studied at the University of Chicago Department of Economics (the Chicago Boys), implemented a set of economic reforms during the dictatorial period that included deregulation and privatization. Among others, they privatized the pension system, state industries, and banks, and reduced taxes. Pinochet's aim was to "make Chile not a nation of proletarians, but a nation of entrepreneurs." The main copper company, Codelco, remained in government hands due the nationalization of copper established by Salvador Allende, however, private companies were allowed to explore and develop new mines. Economists are scholars conducting research in the field of economics. ...
The Chicago Boys (c. ...
Deregulation is the process by which governments remove, reduce, or simplify restrictions on business and individuals in order to (in theory) encourage the efficient operation of markets. ...
This article does not adequately cite its references or sources. ...
A pension is a steady income given to a person (usually after retirement). ...
“Banker†redirects here. ...
A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, tribes, secessionist movements or revolutionary movements). ...
The proletariat (from Latin proles, offspring) is a term used to identify a lower social class; a member of such a class is proletarian. ...
For the computer game previously called Entrepreneur, see The Corporate Machine. ...
CODELCO (full name in Spanish: Corporación Nacional del Cobre de Chile; in English: Chilean National Copper Corporation) is a state-owned company in Chile and the worlds largest copper producer with estimated 200 years of copper reserves. ...
Salvador Allende Gossens[1] (July 26, 1908 – September 11, 1973) was President of Chile from November 1970 until his suicide during the coup détat of September 11, 1973. ...
Supporters of Friedman's view argue that subsequent events in Chile have vindicated his free market 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 7%, far above the rest of Latin America. [3] On the other hand, from the beginning of the reforms of the Chicago Boys in 1973 through 1986, there was no economic growth. Real salaries (mean) have declined by 10% since 1986 and by 18% from what they were during the Allende administration. Median salaries have fared even worse, declining by 30% over the same period, signalling a transfer of wealth from the poor and middle class to the rich. When Allende was in power, less than 20% of the country lived in absolute poverty; by 1990 40% did. That figure has remained largely constant since. A third of the nation now survives on less than $30 per week. The Chicago Boys (c. ...
Chile had a strong economic recession in 1982-1983, its second depression in eight years (in 1975, when GDP fell by 13 per cent, industrial production plunged by 27 per cent, and unemployment shot up to 20 per cent). Real economic output declined by 19% just in 1982 and 1983 and most of the recovery and subsequent growth took place after Pinochet left office [7] While enacting certain changes, the four successive civilian administrations that followed Pinochet, including that of current Socialist president Michelle Bachelet, have not tried to dismantle the Chicago Boys' policies, but they have been making several efforts to reduce the social inequity present in the country. The Socialist Party of Chile (Spanish: Partido Socialista de Chile or PS) is a political party in Chile, and part of the ruling Coalition of Parties for Democracy coalition. ...
Verónica Michelle Bachelet Jeria (born September 29, 1951) is a center-left politician and the current President of Chile—the first woman to hold this position in the countrys history. ...
Some people have criticized Friedman for assisting the Pinochet dictatorial government with economic reforms, citing the regime's human rights record and authoritarianism (see Chile under Pinochet). Friedman has defend himself against such criticisms, stating that he had given nearly similar speeches and promoted the same policies in China and Yugoslavia, and pointing out that his visit was unrelated to the political side of the regime and that during his visit to Chile he even stated that following his economic liberalization advice would help bring political freedom and the downfall of the regime. . [4] Human rights are rights which some hold to be inalienable and belonging to all humans. ...
Bold text:This article applies to political ideologies. ...
General Augusto Pinochet was head of the military dictatorship that ruled Chile from 1973 to 1990. ...
This article or section does not cite any references or sources. ...
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 has been invoked as a model by economic reformers in other countries, such as Boris Yeltsin in Russia and in other Eastern European post-Communist societies.[citation needed] The Chilean social security reform has been followed by 30 countries around the world, including Poland and Sweden, and has been invoked by President George W. Bush and former Fed Chairman Alan Greenspan in the U.S. as an example to follow. This article or section does not cite its references or sources. ...
The Communist Party of China (CPC) (Simplified Chinese: ; Traditional Chinese: ; Pinyin: ), also known as the Chinese Communist Party (CCP), is the ruling political party of the Peoples Republic of China, a position guaranteed by the countrys constitution. ...
Boris Nikolayevich Yeltsin (Russian: ) (February 1, 1931 – April 23, 2007[1]) was the first president of the Russian Federation, serving from 1991 to 1999. ...
Map of Eastern Europe Pre-1989 division between the West (grey) and Eastern Bloc (orange) superimposed on current national boundaries: Russia (dark orange), other countries of the former USSR (medium orange),members of the Warsaw pact (light orange), and other former Communist regimes not aligned with Moscow (lightest orange). ...
According to the 2007 Index of Economic Freedom, Chile is the world's 11th most free economy today. Chile is ranked 3rd out of 29 countries in the Americas and has been a regional leader for over a decade. Chile had GDP growth of 6.1% in 2004, and has averaged a 4.0% annual increase in GDP over the last five years for which data is available. [5]
However History registers that the present time Chilean bonanza was obtained at a very heavy cost:
| “ | (...)Following the teachings of Milton Friedman of the University of Chicago, Chilean leaders and their economists (called the Chicago Boys) converted Chile into a market-oriented economy at a price. Inflation reached 3,000%, destroying the savings and earnings of all but the rich and large institutions. In short, the regime instituted a "trickle down" theory of wealth creation. This theory holds that helping the wealthy get wealthier meant that the wealth they acquired would trickle down to everyone else. The transition would adversely affect 90% of the citizenry. Very quickly, the rich got richer; the top 5% in income increased its share of total national income from 25% to 50% between 1972 and 1975. Wage earners' share dropped from 64% to 38% from 1972 to 1977. Malnutrition among children jumped top 50%. And similar indices attested to the fact that the average person was paying to enrich the wealthy. Foreign loans and foreign investments propped up the economy, which grew.(...) [8] | ” | Milton Friedman (July 31, 1912 – November 16, 2006) was a prominent American economist and public intellectual. ...
The University of Chicago is a private university located principally in the Hyde Park neighborhood of Chicago. ...
The Chicago Boys (c. ...
Bibliography - COLLIER, Simon and Sater, William F. A History of Chile, 1808-2002, New York and London, Cambridge University Press, 2004.
- CONSTABLE, Pamela and Valenzuela, Arturo. A Nation of Enemies: Chile Under Pinochet. New York, W. W. Norton & Company, 1993.
- PALEY, Julia. Marketing Democracy: Power and Social Movements in Post-Dictatorship Chile. University of California Press, 2001
Additional information
See also The Chicago Boys (c. ...
Salvador Allende Gossens[1] (July 26, 1908 – September 11, 1973) was President of Chile from November 1970 until his suicide during the coup détat of September 11, 1973. ...
Prisoners outside the La Moneda Palace after their surrender during the coup (1973). ...
JoaquÃn LavÃn in a telecasted debate of Canal 13 and CNN en Español JoaquÃn José LavÃn Infante (b. ...
The Best Democracy Money Can Buy (ISBN 0452283914, Penguin Plume USA) is a 2002 book written by left-wing investigative journalist Greg Palast. ...
Greg Palast is a New York Times-bestselling author and a journalist for the British Broadcasting Corporation as well as the British newspaper The Observer. ...
For album titles with the same name, see 2002 (album). ...
External links Dollars & Sense is a magazine dedicated to providing left-wing perspectives on economics. ...
The University of Chile (Spanish: Universidad de Chile) is one of the oldest universities in the Americas, and is the largest and arguably the most prestigious in Chile. ...
Articles
Criticism
References - ^ a b c (Spanish)El Ladrillo: Bases de la Política Económica del Gobierno Militar Chileno. Santiago de Chile: june 2002, ISBN 956-7015-07-4
- ^ a b >(Spanish) VILLAROEL, Gilberto. La herencia de los "Chicago boys". Santiago do Chile: BBC Mundo.com - América Latina, 10/12/2006.
- ^ BÜCHI, Hernán. Exposición sobre el estado de la hacienda pública, monografías. Santiago, Chile : Ministerio de Hacienda, 1985, diciembre. 92p, Solicitar como: 351.72 B919 1985
- ^ Country Comparison > Population below poverty line
- ^ Kandell, Jonathan. Chile's Driving Force. Smithsonian. Nov 2006, Vol. 37, Issue 8.
- ^ Chile: Successes and Failures in Poverty Eradication. World Bank
- ^ BELLO, Walden Bello and KELLY, John. The IMF and Chile A Parting of Ways? International Finance, The Multinational Monitor, April 1983, Volume 4, Number 4
- ^ Pinochet's Legacy. MABRY, Donald J. Historic Text Archive
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