#72 Toward a Free Market Economy: Chile, 1974-1979
By Alejandro Foxley
From the Introduction
The economic policy of the Chilean military regime is attracting interest and stirring up controversy beyond Chile's boundaries. The international press dedicates long articles to the analysis of what is being called "the Chicago experiment." Why this interest, which is disproportionate if one considers Chile's limited influence in the world economy?
There are several reasons. Some see in this "Chilean experiment" a test of the consistent and sustained application of the monetarist approach to the problems of economic instability and chronic inflation which have affected most of the western economies during the last decade. For others, it represents the "most im£ortant reforms in the underdeveloped world during recent history, a view which implicitly attributes validity to the "Chilean model" as an alternative to the economic policies applied by many developing countries during the postwar period. A third factor is that, given the context of political authoritarianism in which these policies are applied, and their high social cost, the "Chilean experiment" raises the issue of the interrelationship between economic orthodoxy and political freedom in developing economies. A thesis favorable to the authoritarian formula suggests that the promotion of economic freedom is a prerequisite to the attainment of effective political freedom. An opposing thesis focuses on the basic contradiction generated in a developing economy between ultra-orthodox liberalism and the real democratization of society.
The importance of monetarism, the search for new development models, and the significance of authoritarianism in the economic stabilization process are subjects constituting an important part of the agenda of discussion in contemporary economic policy, and the policies of the Chilean military government provide an especially suitable case study to enlighten the discussion of some of these topics. The most obvious questions arising with regard to the Chilean case are the following: Has this economic experiment been a success or a failure? What is the nature of the policies applied: are they merely policies of short-term economic stabilization or policies intended to alter the long-term development pattern? What is the impact of these policies on the productive structure, on distributive patterns, and on the ownership of assets? We shall approach some of these subjects in this paper.
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