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The Uses of Chile: How Politics Trumped Truth in the Neo-Liberal Revision of Chile's Development

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The trail of recent hemispheric history is littered with Latin American countries that have adopted the radical model of economic policy termed "neo-liberalism" and subsequently seen dramatic reductions in their rates of income growth and a widening of their social cleavages. Against this continent-wide trend of economic disaster, Chile runs on, seemingly alone in its economic progress.

In country after country in Latin America, voters are electing candidates that ran on platforms that reject neo-liberalism. A recent study by researchers at the Inter-American Development Bank found that, of a total of 66 presidential and 81 legislative elections in 17 Latin American countries during the 1985-2002 period, incumbent parties that pursued trade liberalization and privatizations while in office lost between 25 to 50 percent of their previous votes when pursuing reelection.

This paper examines:

  1. In response, neo-liberalism’s defenders are attacking these new progressive governments’ policy initiatives by pointing repeatedly to Chile’s economic "success" – namely decades of steady per capita growth rates that they attribute to Chile’s strict adherence to the neo-liberal model.
  2. The policies actually implemented by Chile during the recent decades of growth and finds that Chile, far from being a model of successful neo-liberal policies, is in fact a case study in the virtues of many non-neo-liberal policies.
  3. The resulting economic outcomes beyond the impressive per capita growth rates and finds steadily-high income inequality as essential services were privatized; export-led growth based on exploitation of a few natural resources – 90 percent being fisheries, copper, wood and other primary products – continued at an unsustainable rate; and the manufacturing sector continued to contract as a share of output.

The paper concludes that many of the neo-liberal policies that the Chilean government did adopt have caused economic harm or have not helped needy sectors of society and the environment, while much of Chile’s success in terms of per capita income and export growth can be attributed to the successful use of non-neo-liberal policies.