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Volume 61 / Social Sciences

ECONOMICS: CHILE


MARKOS J. MAMALAKIS, Professor of Economics, University of Wisconsin-Milwaukee


OVERALL, SINCE 1973, Chile has experienced a rapid rate of growth in its per capita output/income both in absolute terms as well as in comparison to other Latin American countries. The historically unprecedented introduction of orthodox, freedom-based and -oriented rules of the game in its collective market, first economic reforms (private enterprise and property; freedom in labor, capital, land, technology and output markets both internally and externally; an independent Central Bank; and price stability) and since 1990 also political reforms (reestablishment of procedural, electoral democracy) have catapulted Chile to the top of middle-income countries knocking at the door of the club of developed, modern, technologically advanced, sustainably democratic nations.

At the beginning of the new millennium, Chile's economic, social, and political landscape incorporates a collective market with stronger and closer procedural democracy and civil society components than ever before. Although not perfect, the degree of satisfaction of the collective needs for protection, safety, and security of life and property, freedom, pursuit of good life-happiness, and equal treatment by government and social harmony, which form the foundation of civil society and sustainable democracy, has been impressive. Only the satisfaction of the paramount collective need for environmental protection has left much to be desired.

Satisfaction of the collective need for security, safety, and protection of life and property has reached degrees almost unmatched in the history of Chile and the annals of Latin America. As a consequence, Chile was the only Latin American country to have earned, as of March 25, 2004, by Standard & Poor, a foreign currency sovereign long term rating of A with stable outlook. Furthermore, with an annual percentage change of the consumer price index of only 1.1 in 2003, the danger to private property and income from a redistributive impact of inflation has been minimal.

Moreover, there is no other Latin American country where the basket of economic, social, political, and human freedoms is as full as in Chile. The post-1973 spectacular rise in the degree of satisfaction of the collective need for economic freedom, and since 1990, political freedom as well, has precipitated impressive, economy-wide advances. GDP more than doubled between 1990–2003. Private investment rose to 22.00 percent of gross domestic product expenditure (GDPE) and gross domestic fixed capital formation grew to 27.5 percent of GDPE in 1997 (item #bi2003001297#). More specifically, as a consequence of the increased production of the collective service of freedom, annual telecommunications investment, which never exceeded 100 million dollars before 1988, rose to 600 million dollars annually during 1989–97 and was projected to exceed one billion dollars annually during 1998–2000 (item #bi2003001296#).

Third, there is ample evidence of improved satisfaction of the collective need for the pursuit of happiness-good life. The infant mortality rate (per 1,000 live births) fell from 18.5 percent in 1987 to 8.9 percent in 2000 (Ministry of Cooperation and Planning: MIDEPLAN). Furthermore, life expectancy at birth rose from 71.7 years in 1987 to 78.0 years in 2002 (MIDEPLAN). Also, real wages and salaries have increased continuously, in some years impressively, between 1988–2003. However, on the negative side, even though the unemployment rate had been reduced from 12.1 percent in 1986 to 6.1 percent in 1997, it rose to a troublesome 8.5 percent in 2003.

Chile has also attained an almost unique degree of satisfaction of the collective need for equal treatment by government. The typical to pre-1973 Chile, and eternal to Latin America, redistributive policies of sectoral coalitions and clashes, including preferential treatment of organized labor and selected corporate groups, are generally absent, to the great benefit of the common good. As of 2004, it appears that the Chilean government and the nation's constitutional foundations are strong enough, first, to resist populist, redistributive, pressures from interest groups to abandon the neutrality and equal treatment principles, and, second, to prevent a collective market collapse to its pre-1973, dysfunctional, conflictive, self-destructive, antisustainable democracy, condition.

All democratic regimes since 1990 have placed increased emphasis on satisfying the collective need for social harmony. The tool employed to attain this goal has been in-kind redistributive social policies augmenting final consumption in education, health, and housing of the traditionally excluded, underprivileged poor, including approximately one million indigenous people (item #bi2003001298#). Improved conditions for social harmony are revealed by a decline of the population below the absolute poverty line to 8.7 percent (only Uruguay has a lower percentage in Latin America) and of those living below the extreme poverty line to less than two percent (the lowest in Latin America matched only by Uruguay) (World Bank: 2003).

The satisfaction of the collective need for environmental protection (safety and security of commons) is suboptimal, however, exposing the Achilles' heel of the collective market and good life of all Chileans. The arguments advanced by Rayen Quiroga Martínez (item #bi2002004006#) suggest a potentially seismic threat to the environmental component of Chile's collective market, and thus, to sustainable development.

The equally high-quality studies reviewed in this essay make significant contributions in such topics as historical statistics; the regulatory state; manufacturing; public investment and production of collective services; forestry, fishing and viticulture; copper; formal and informal labor markets; women's studies; economic policy; social security; migration; interest rate structure, exchange rates, and monetary policy; environmental sustainability; changing economic order; welfare dimensions of fiscal policy; poverty; cyclical fluctuations; household saving behavior; nutritional status of children; empowerment; the cooperative sector; food demand functions; stock markets; export promotion; accounting systems of payments; globalization of agriculture; dollarization; and so forth.

At the beginning of the new millennium, the Chilean collective MARKET-AGORA is undergoing a healthy, gradual transformation as its key participants (individuals-households, corporations, nonprofit institutions including political parties, and general government) seek new and better means to satisfy their complementary collective needs in a manner that promotes the good life for all, especially those previously excluded and neglected.


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