Development of Chile’s Economic Model

William Rodriguez

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Bibliography B: ‘Formal’ (post-colonial) economic and social development policies, plans, programs and projects, from the dawn of the ‘development era’ up to the present time in Chile.


To obtain a complete perspective and framework of the economic and social development of Chile after the independence to the present time it is essential to see the evolution of the political forces and policies that have shaped the country throughout history. After independence, the institutions and the economy showed no substantial changes for the reason that the revolutionaries were the “Landowners”, therefore the political power and economy remained oligarchic and centralized. However through time, Chile has had dramatic changes in the social, economic and political structure (Luders, 1993), furthermore sharing similar circumstances with other countries in Latin America such as, social inequality, economic inequality, inflation and dictatorial governments. This bibliography B will analyse the different periods in the history of Chile, going through the changes that the country has experienced since the independence in 1818 to the institutional rupture in 1973 to the transition and consolidation of democracy in 1990.


PETRAS, J. 1969. Chapter 1: Economic development and Social Change; Chapter 4: The Middle Class; Chapter 6: Christian Democracy; Chapter 9: The Future of Chilean Politics. Politics and social forces in Chilean Development. Berkeley, University of California Press.
Petras presents an interesting narrative of all political parties and forces that shaped the development of Chile before the institutional rupture in 1973. In this book, the author argues that the economic and political control was run by the usual elites and middle-class industrialists, however, obvious signs of agricultural and proletarian groups demanding more participation were increasingly visible.
According to Petras, Chilean society was a democratic society. However, very few people were involved in the political process because they were controlled by the elite with the socio-economic power, the political parties driving the country according the author were: the Popular Action Front (FRAP) and the Christian Democratic, usually sharing interests and giving no participation to the lowest in the social strata.
During the nineteenth century and the twentieth century each president appointed his successor by controlling the ruling classes and elections, political and social reforms were directed by the political class, and society basically was divided into the owners of properties and farmworkers. However according to the author, industrialization has played a role in the development of sectors such as the middle class sectors, strengthening this working class and giving them a more participatory role in Chilean politics and society.
The author claims that, the working class must lead the way to change, integrating and becoming a significant force for political and economic development in the country. However, modernization and industrialization created a big difference in the social structure, promoting uneven development between classes during that period.
GIL, F., LAGOS ESCOBAR, R. & LANDSBERGER, H. 1979. Chapter 1: The Difficult Road to Socialism: the Chilean Case from a Historical Perspective; Chapter 2: The evolution Of the Chilean Political System 1952-1970; chapter 3: The Unidad Popular: A Historical Vision of the Transition to socialism. Chile at the Turning Point, lessons of the socialist years 1970-1973. Philadelphia, institute for the Study of Human Issues.
According to the authors, until 1973 Chile had a political stability and the economy before 1952 was characterized by the expansion of the industrial sector. This apparent stability change with the election of Allende in 1970 and what he called “the second round to socialism”.
Allende’s socialist strategies and the actions taken by his government by the nationalization of businesses, industry and banking system, gave way to a political unrest encouraging a system of confrontation; Government run out of options losing control of the country thus facilitating a military coup in 1973.
The end of the democracy came with the authoritarian military rule in Chile in 1973, consequently, new policies for inversion, market and international trade, were created. New forms of transforming the economy took place, as well as changes in foreign policy, health services, education, industry and political system.
VALDEZ, J. 1995. Chapter 1: Authoritarians without a Project; Chapter 9: In search of Politics; Chapter 10: The elusive Hegemony. Pinochet’s Economists: The Chicago School of Economics in Chile. Cambridge University Press.
The social and political repression of the Pinochet period managed to make possible the implementation of economic changes in 1973, a commitment to free markets and the union of economists with similar ideals enabled the economic growth of the country.
The book presents a description of how the government changed the economy of Chile during the Pinochet period, explaining how the group called “the Chicago boys” took control of the economy, initiating economic neo-liberal free trade and radical development strategies to improve the economy.
According to the author many of these strategies remained active even after the return to democracy. Valdez (1995), claims that the measures taken by this group of economists represented a record growth in the economy furthermore showing that a highly political environment and ideas provide a solid foundation for the implementation of public policies.
BORZUTZKY, S. & OPPENHEIM, L. 2006. Chapter 1: The Arduous Road to Democracy; Chapter 2: The consolidation of the Market. After Pinochet: The Chilean Road to Democracy and the Market. University Press of Florida.
This book is a collective work of 8 professors, focusing on the period after the Pinochet government and the path to the democracy of Chile, the authors analyse the effect of institutions, market, health care, foreign policy, pensions, and public policies in the Chilean economy and society.
Concentrating on the period of 1990-2006 this book is a view on all the factors involved in Chilean society during the twentieth century, including human rights, external politics, openness to market, economic policies, abortion, divorce, political institutions, church and the process of consolidation of democracy through democratically elected governments after the Pinochet regime.
Contrary to what other authors argue, Borzutzky (2006) claims that the health policies adopted by Pinochet created a discriminatory system by reducing the budget in the public sector, consequently reducing the quality of the health services. Thea author also argues that the open market philosophy and privatization of the industry constituted a setback for those peasants who legally obtained and worked the land during that period.


“In the last decades, Chile has suffered drastic changes in its economic, political, and social structure” (Santos, 2005), therefore, to have a detailed understanding and a comprehensive framework of the development of the country it is necessary to analyse the different periods in its history. Petras (1969) and Gil (1979) present a vision of the economy and society before the institutional rupture in 1973, Valdez (1995) poses a vision of the economy and society during the authoritarian military rule, and Borzutzky & Oppenheim (2006) focus on the period after the military rule. This diversity of authors presents a complete view of all the elements that have shaped the economy and society in Chile.

Petras (1969) and Gil (1979), agree that the economic and political power of Chile before 1973 was in the hands of “elites” and industrial merchants leaving no participation to the working class in politics, however, this centralized power helped maintain the political stability in the nation for many decades. According to the authors, projects and programs during this period were focused on benefiting the elites, but by the time of the 1970’s, development had increased the gap in the social structure producing a marked inequality in social and economic sectors.

Democratic recovery, political stability, and economic growth seem to be the keys for the recent development of the nation (Santos, 2005). However, According to Valdez (1995), Borzutzky (&) Oppenheim (2006), the political repression of the Pinochet period and the implementation of social and economic reforms, created the basis for the development and economic growth of the country. The reforms made aˆ‹aˆ‹in order to obtain equal opportunities for citizens in terms of health, education, macroeconomic policy, openness to market, and mass privatization of enterprises were key achievements for the reactivation of the economy.

A large-scale privatization occurred in Chile by 1974, approximately 550 companies were privatized (Luders, 1993). Consequently the private sector became responsible for growth and also was in charge of financing most of the investment in the country. Furthermore, a greater emphasis was placed on improving exports, avoid monopoly, strengthen the industry, and opening the economy to market. Valdez (1995) suggests that the rapid growth in that period, was due measures taken by “the Chicago boys” a group of young economists who implemented neo-liberal economic policies in the country.

In conclusion, Chile is today a clear proof of the imposition of the liberal model upon the economic and political (Moulian, 1997), the effectiveness of the Chilean economic model has become internationally recognized, the low rates of inflation, its policy of Foreign Trade, high investment, trade liberalization, search for social equality, competitiveness, success on social programs in health and education, improvement of labour relations, aid to low-income families, economic Growth, and high levels of internal investment have marked Chile as one of the most successful developing countries in the Latin American area (Munoz, 1993).


LUDERS, R. 1993. The success and failure of the state-owned enterprise divestitures in a developing country, the case of chile. . The Columbia Journal of World Business.

MOULIAN, T. 1997. Chile actual. Anatomia de un mito. Santiago: Arcis-Lom.

MUNOZ, H. 1993. La politica economica en la transicion. Santiago: CIEPLAN. In: MCMAHON, J. A. M. Y. G. (ed.) Chile en transicion: Estrategia economica y politica.

SANTOS, A. 2005. The Chilean dilemma: between economic development and the deepening of democracy Oxford University Press.