Neoliberalism in Chile -- the

Neoliberalism in Chile -- the Miracle of the Marketplace and Milton Friedman? It is called "The Chilean Miracle," namely the ability of Chile to escape the hyperinflation and stagnation of many of that nation's Latin American neighbors. (Bidstrup, 2005) However, the neoliberal economic reforms that took root in Chile during the dictatorship of Pinochet and continued into the nation's present have their roots in America, namely the economists of the University of Chicago, led by Milton Friedman.

The term "neoliberal" derives from the original "liberal" economics of Adam Smith, who published the capitalist Bible the Wealth of Nations in 1776. Adam Smith argued that markets work best when there is minimal interference from government, and that government should not interfere with the unseen hand of the free market. This term was later radicalized to encompass an agenda of total government deregulation of controlled industries.

This idea was initially considered heterodox to most Latin American nations, which were by and large characterized by large bureaucracies and tight social safety nets designed to protect the large numbers of urban poor, a product of a highly stratified society. Chile's experimentation with neoliberal ideas started as early the 1960s, under the "Chicago Boys," a group of Chileans who had studied economics in Chicago and returned to implement some of these "economic truths" in Chile.

Although they met with little success during that era, the neoliberal model was thus introduced to the Chilean academic elite's ways of thinking and approaching economics early on. This sowed the seeds for neoliberalism within the structures of the Chilean university and government, enabling the later Chilean military regime to have a scientific as well as self-interested approach. (Bansal, 2005, p.16) This early introduction has since proved to have reaped many positive rewards.

For instance, because Chile embraced the possibility neoliberalism fairly early compared to its Latin American neighbors, it was more insulated from the debt crisis that afflicted other Latin American countries in the 1990s. (O'Neil, 2005) Yet the methods by which the Chilean economic reform was implemented call forth the question -- is it possible to implement such reforms in a stratified Latin American nation, as was Chile, in a political democracy? Although Augusto Pinochet may have embraced capitalism in his economic policies, he was surely not a democratic leader.

He only conceded to institute democratic reforms in the 1990's. When Augusto Pinochet came to power, he was determined to embrace the five cardinal points of neoliberal economics in Chile. The market was to rule supreme, unrestrained by the intervention of government or labor unions. To reduce government interference in the market and reduce government debt, the government of Chile withdrew itself from many social welfare programs. Deregulation, privatization, and the philosophy of rugged individualism were all-important.

(Bidstrup, 2005) However, one of the less salutary effects of the miracle under Pinochet was that any organizer or activist who questioned the wisdom implemented by the Pinochet regime was often never heard from again.

"Trade union organizers, economic justice advocates, leftists and anyone else who objected to the reforms began to disappear." By the end of his regime, Pinochet may have been responsible for the deaths "of at least 3,000 people and the disappearance of many thousands more." (Bidstrup, 2005) the unionization movements, such a critical part of other Latin American nations, had effectively been rooted out.

One might state that need not condone the horrors of the Pinochet regime, to grant that some economic successes did result from his policy, and that the reforms may have been necessary. In concrete policy terms, this change enabled an opening of Chile's economies to the world through free trade.

Tariffs were reduced and there was an elimination of state-sponsored subsidies of inefficient businesses, combined with an opening of capital markets, relaxation of restrictive labor laws, a reduction in public employees, privatization of state-owned enterprises and changes in formerly inflexible currency regimes and foreign exchange policies. (O'Neil, 2005) it is unlikely that such sweeping and foreign domestic reforms could have been accomplished so quickly, and been sustained in the 1990's in the absence of a military regime.

General Pinochet was a leader who was able to manipulate institutional changes in his favor, while simultaneously convincing the public that he was acting on their behalf. Instead of being constrained by negotiations with other societal forces, Pinochet maneuvered around them so that he was able to move his reform policies forward. (Bansal, 2005, pp.

5-6) Always, he remained inspired by long-standing economic advocates such as the 'Chicago Boys' from within the nation, as well as outsiders and a simple desire to hold onto his own power, although self-interest was certainly a factor in his regime's decision making. True, in 1990,.