Neoliberalism in Chile--Charlie McGill
Charlie McGill
Mr. Roddy
GPHC
12/9/2019
The theory of development I will be discussing is neoliberalism, specifically neoliberalism in Chile and its effects. Chile has been a poster boy for neoliberalism and the free market since the military coup that removed democratic socialist Salvador Allende and appointed Augusto Pinochet as President. Before we dive into the effects of the coup and how neoliberalism transformed the Chilean economy, we must examine what neoliberalism is and come to a general consensus on its definition.
Neoliberalism, as defined by the IB Global Politics textbook, “assumes that the free market is the most fair and efficient way to foster economic growth and development.” By this logic, government interference should be avoided at all costs since neoliberalism believes it invariably has negative long-term consequences. This is due to corrupt officials having many opportunities to take public money for themselves and artificial, sudden economic growth created by the government that is unsustainable. The trickle-down theory--that as the rich get richer they will spend more money on goods and services which creates jobs and economic growth in the classes below them--is a fundamental idea of neoliberalism. Whether or not you agree with its beliefs, it is indisputable that neoliberalism has had a profound effect on economics in the modern era.
Right around the time of the reorientation of the Chilean economy, neoliberalism began to take hold as the dominant economic theory around the world. Because the timing of these events was parallel, huge names in neoliberal theory became interested in cultivating an ideal free market world. Milton Friedman and his Chicago Boys, a group of Chilean economists who trained under Friedman at the University of Chicago, became economic advisors for Pinochet once he became President. They are generally credited with transforming Chile’s economy. Whether or not Friedman and the Chicago Boys experiment was a success is a hot debate. It is incontrovertible that neoliberalism has increased Chile’s GDP and made them the best performing economy in South America, however it is also important to note that Chile has some of the highest economic inequality in the world: their Gini coefficient is 46.6. 70% of employees earn less than $825 a month ($9,900 a year), which equates to U.S $15,600 if you take purchasing power into account. Along with that, after the banking crisis of 1982 the state controlled more of the economy than it did under the previous socialist regime. Although many would argue that some state control of resources and the economy is a positive, it was the goal of Friedman and the Chicago Boys to make the economy almost entirely privatized, making the aftermath of the banking crisis the antithesis of what the Chile was trying to accomplish.
Mr. Roddy
GPHC
12/9/2019
Neoliberalism in Chile
The theory of development I will be discussing is neoliberalism, specifically neoliberalism in Chile and its effects. Chile has been a poster boy for neoliberalism and the free market since the military coup that removed democratic socialist Salvador Allende and appointed Augusto Pinochet as President. Before we dive into the effects of the coup and how neoliberalism transformed the Chilean economy, we must examine what neoliberalism is and come to a general consensus on its definition.
Neoliberalism, as defined by the IB Global Politics textbook, “assumes that the free market is the most fair and efficient way to foster economic growth and development.” By this logic, government interference should be avoided at all costs since neoliberalism believes it invariably has negative long-term consequences. This is due to corrupt officials having many opportunities to take public money for themselves and artificial, sudden economic growth created by the government that is unsustainable. The trickle-down theory--that as the rich get richer they will spend more money on goods and services which creates jobs and economic growth in the classes below them--is a fundamental idea of neoliberalism. Whether or not you agree with its beliefs, it is indisputable that neoliberalism has had a profound effect on economics in the modern era.
Right around the time of the reorientation of the Chilean economy, neoliberalism began to take hold as the dominant economic theory around the world. Because the timing of these events was parallel, huge names in neoliberal theory became interested in cultivating an ideal free market world. Milton Friedman and his Chicago Boys, a group of Chilean economists who trained under Friedman at the University of Chicago, became economic advisors for Pinochet once he became President. They are generally credited with transforming Chile’s economy. Whether or not Friedman and the Chicago Boys experiment was a success is a hot debate. It is incontrovertible that neoliberalism has increased Chile’s GDP and made them the best performing economy in South America, however it is also important to note that Chile has some of the highest economic inequality in the world: their Gini coefficient is 46.6. 70% of employees earn less than $825 a month ($9,900 a year), which equates to U.S $15,600 if you take purchasing power into account. Along with that, after the banking crisis of 1982 the state controlled more of the economy than it did under the previous socialist regime. Although many would argue that some state control of resources and the economy is a positive, it was the goal of Friedman and the Chicago Boys to make the economy almost entirely privatized, making the aftermath of the banking crisis the antithesis of what the Chile was trying to accomplish.
As divisive as the Chilean economy is, it was the perfect neoliberal experiment. Any person with an interest in neoliberalist theory should research Chilean economics, Friedman and his Chicago Boys, and the lasting effects of the great neoliberal experiment.
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