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Shenzhen Alarm Switch The Chilean economic miracle, the "Chile miracle", is a term coined by the famous economist Milton Friedman, used to describe Chile under Augusto Pinochet's rule, by the "Chicago Guys "Leading liberal economic reforms. The three main goals of Chile’s economic reforms are:...
Shenzhen Alarm Switch
The Chilean economic miracle, the "Chile miracle", is a term coined by the famous economist Milton Friedman, used to describe Chile under Augusto Pinochet's rule, by the "Chicago Guys "Leading liberal economic reforms. The three main goals of Chile’s economic reforms are: economic liberalization, privatization of state-owned enterprises, and stabilization of inflation. These market economic policies have continued to be used and strengthened after Pinochet stepped down.
The succession government has continued for nearly 20 years. Today, Chile has become one of the most prosperous and stable countries in Latin America. In the context of Latin America, Chile has a high level of competitiveness and quality of life, a stable political environment, a globalized, free economic environment, and a low perception of corruption and a relatively low rate of poverty. Chile has also achieved a high ranking in terms of freedom of the press, human development index, and democratic development. From a per capita GDP perspective, Chile has become the richest country in the region. (Based on market price and purchasing power parity standards) However, from the Gini coefficient data, Chile still has a high level of income inequality.
The head of Chile’s military government, Pinochet, adopted the advice of a group of Chilean economists known as “Chicago guys” (most of whom had studied at the University of Chicago’s economics department) and implemented measures including deregulation and privatization. A series of economic reforms. It also includes the privatization of pension systems, state-owned industries, state-owned banks, and tax reduction policies. Pinochet once claimed that his ultimate goal was "not to turn Chile into a proletarian state, but to turn it into an entrepreneurial country."
1972 was the second full year of Allende's administration. During the year, Chile’s inflation rate reached 150%. There are many factors that have contributed to the formation of high inflation rates, such as price controls on necessities, multiple exchange rates, US pressure on the Allende government, etc. (Nixon once claimed to destroy the Chilean economy under Allende's rule). . By 1973, Chile had a serious shortage of food and consumer goods.
Shortly after the Chilean coup in 1973, Pinochet soon received a secret economic plan called El Ladrillo (ElLadrillo literally means “brick”), which was so called because of this report. Thick like a brick." The plan was already quietly prepared by some economists who opposed the Allende government in May 1973. These scholars were called "Chicago Boys" by the media at the time because most of them were alumni of the University of Chicago. ElLadrillo was handed over to senior officials of the Chilean military government on September 12, 1973. This document contains the backbone of the future neo-liberal economic policy in Chile.
The Pinochet government almost privatized all state-owned enterprise sectors (such as mining, factories, and pension systems). He encouraged foreign investment and eliminated protectionist trade barriers, forcing local Chilean companies to compete with foreign companies on equal terms. However, Codelco, Chile’s main copper mining company, remained in control of the Pinochet government after being fully nationalized by Allende. Despite this, private companies are allowed to explore and develop new mines. However, in Chile’s 1980 Constitution, copper resources were still declared “inalienable”. Average of South American (orange) per capita GDP in Chile (blue) (1945-2003).
Average of South American (orange) per capita GDP in Chile (blue) (1945-2003).
Effective economic reform policies have caused the right-wing industrial oligarchs, which originally rely on trade protection and subsidies to maintain their economic status and political power, to suffer a heavy blow and to die. However, among El Ladrillo, only one proposal has not been implemented: the floating exchange rate system. Chile’s finance minister, Sergio de Castro, deviated from Friedman’s theory of support for free floating exchange rates. In June 1979, he implemented a fixed exchange rate system of 39 Chile pesos to 1 US dollar. The result was a serious trade imbalance. Since Chilean peso inflation cannot keep up with the inflation rate of the US dollar, the purchasing power of Chile’s foreign goods increases each year, while loans are basically foreign loans in the form of US dollars. The bubble eventually burst at the end of 1982, and the Chilean economy fell into a serious recession that lasted more than two years.
Friedman’s supporters believe that Chile’s economic reform is a strong testament to the success of his liberal market economic philosophy, because Chile’s economy has far exceeded the level of other Latin American countries. Opponents prefer to use the Chilean economy of the Pinochet era as a negative proof of the failure of Friedman’s policy.