Development of the neoliberal economy in Chile from 1973 to 2020

Abstract

In 1973, the Chilean army led by General Augusto Pinochet, with the support of Chilean right-wing formations and the United States, overthrew the world's first democratically elected leftist regime - the regime of Salvador Allende. In addition to strong political reforms, embodied in the banning of the Communist Party of Chile and the persecution of left-wing dissidents, Pinochet immediately began intensive economic reforms inspired by the neoliberal, the so-called shock therapy that originated at the famous Chicago School. The reforms were aimed at dissolving Chile's short-lived socialist legacy, which was reflected in the country's nationalization of land and natural resources, the improvement of workers and trade unions rights, and an accessible health, education and social system. Nationalized goods have been returned to their owners or redistributed to individuals in general, union work has been limited, and the principles of doing business in the market have been extremely liberalized in order to attract as many foreign investors as possible, usually powerful multinational corporations. An important segment of the reforms was the stabilization of the inflation rate. In this paper, we will follow two waves of reforms - from 1973 to 1990 (when Pinochet was overthrown) and from 1990 to 2019, when there were strong riots on the streets of Chile due to the announced increase in subway transportation prices, and in fact, driven by the overall dissatisfaction of citizens with the end effects of reforms - unequal income redistribution, austerity measures, a large number of extremely poor and expensive public services in the fields of education and health. Despite that, we will also point out the positive effects of the reforms - long-term positive macroeconomic trends, high average salary for Latin American conditions, significant inflow of foreign investments, etc. In this paper, we will use the method of analysis and the case study method.