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Volume 63 / Social Sciences


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

MICHELLE BACHELET became the first woman President of Chile on March 11, 2006. Bachelet is the fourth democratically elected president following Patricio Aylwin Azócar (1990–94), Eduardo Frei Ruiz-Tagle (1994–2000), and Ricardo Lagos (2000–2006). As a consequence of the historically radical transformation of collective markets initiated during the presidency of military dictator Gen. Augusto Pinochet (coup of Sept. 11, 1973–March 11, 1990), and reinforced during the subsequent democratic presidencies, the per capita output growth rate was 5.9 percent during 1986–2006 (among the 10 highest globally), absolute poverty fell from 39 percent in the early 1990s to 19 percent in 2003, and the rate of inflation fell from 343 percent in 1975 to 2.4 percent in 2004. Life expectancy at one year in 2004 is 75.94 years, the public debt is minimal, the central government enjoys a surplus, the price of copper is skyrocketing, the balance of trade surplus is phenomenal, the unemployment rate is high (8.8 percent in 2004), the infant mortality rate is 7.8 per 1,000 people (2003), there are 600 mobile phone users per 1,000 people (2004), and Chile is ranked 27th in the world in competitiveness (2006) and 74th in macroeconomic management (2006).

The publications reviewed here make important historiographic contributions to the study of Chilean economics by examining the performance of multiple dimensions of the economy and suggesting possible policy improvements. The works are profoundly professional, academic, objective, and rigorous, and display a remarkably high quality.


In 2007, Chileans are enjoying the highest level of per capita income and well being in their history. The satisfaction of the moral collective need for safety, security, and protection of life has reached impressive levels. Poverty has been reduced but not eliminated. The gap between the Chilean per capita income and that of developed countries has been reduced. Inequalities of income and in the quality of life within Chile have been reduced but remain at levels significantly higher than those prevalent in the developed world.

Overall, economic and political progress in Chile is the result of allegiance to two key tenets: first, the existence of civil society; and second, the coexistence and complementarity of advanced levels of electoral democracy and civil society. The success of civil society depends on the extent to which the seven fundamental collective needs (political freedom, economic freedom, protection and safety and security of life and private property, equal treatment by government, social harmony, and environmental protection) are recognized and the ability of the state to satisfy those needs. High levels of electoral democracy work to ensure that the power of the state rests with the people and is used to satisfy the moral collective need for political freedom. Both electoral democracy and civil society in Chile have advanced, but not enough to reduce the internal and international income and good life (well-being) gaps to the most desired levels.

The degree of economic progress is the subject of first-rate studies on a variety of topics: heterogeneous labor markets (item #bi2005002764#), cost of equity capital and corporate disclosure (item #bi2006000955#), the role of culture (item #bi2005005426#), productivity gains and information technology (item #bi2005002826#), the measurement of the value of life (item #bi2005002825#), tax administration (item #bi2004001537#), the demographic forces affecting labor supply (item #bi2003003889#), fiscal policy and capital accumulation (item #bi2005002801#), Chile's new economic order (item #bi2005001848#), copper market strategies (item #bi2005002815#), the potential of natural resource-based exports (item #bi2005002806#), the index of effectiveness of tax administration (item #bi2005002803#), the destruction (exit) of old and creation (entry) of new firms in free markets (item #bi2004003934#), the efficiency of market concentration (item #bi2005004893#), the effectiveness of controls of capital inflows (item #bi2007004577#), capital controls, inflows, financial regulations, and exchange rates (item #bi2007004580#), currency mismatches in nonfinancial firms (item #bi2007004578#), and multiple dimensions of saving (item #bi2007000927#).


It may not be an exaggeration to state that in post-1973 Chile, the moral collective need for economic freedom of all institutional units and sectors has been satisfied to a greater degree than in any other country. Ironically, during the Pinochet dictatorship, the moral collective need for political freedom was repressed, while the immoral need for political repression, deprivation of life and dignity, and abuse was satisfied. During the post-Pinochet 1990–2007 era, recognition and satisfaction of the moral collective need for economic freedom has been strengthened. In addition, political freedoms are being restored. Almost all the publications reviewed for HLAS 63 accept the premise of individual sovereignty, i.e., that the state exists to serve the people rather than the other way around, and of the fundamental role of economic freedom and competition in creating and sustaining civil society, sustainable democracy, and economic growth. The pioneering scholarly contributions of Chilean authors in this domain have exerted an influence far beyond the country's borders. The collective submarket where the moral collective need for economic freedom is being satisfied is highly advanced, but is by no means perfect. The following studies explore various aspects of this submarket: the sudden cessation of external capital inflows (item #bi2005007965#), the domestic demand for Chilean wine (item #bi2005004697#), export concentration in a few products and firms (item #bi2005005039#), water markets in agriculture (item #bi2005002760#), the impact of globalization (item #bi2006002222#), the electricity market (item #bi2006000380#), managerial skills flexibility provided by multinational enterprises (item #bi2005005417#), and political economy of protectionism (item #bi2005005418#).


The moral collective need for safety, security, and protection of private property was fully recognized and satisfied after 1973 through an unprecedented process of privatization of state- owned enterprises. Without price stability, however, the need for private property cannot be satisfied on a sustainable basis. After Herculean anti-inflationary policies, civil society has been solidified as the spectacular reduction of the rate of inflation during 2000–2007 to single-digit levels typical of developed countries strengthens its private property pillar. Critical contributions in this area are found in publications dealing with inflation targeting and flexible exchange rates (item #bi2006003333#), the establishment of an autonomous Central Bank and price stability (item #bi2006003339#), the dynamics of interest rate differentials (item #bi2006000383#), mechanisms of transmission of monetary and real exchange rate imbalances on the inflation rate (item #bi2006001691#), a review of privatization schemes (item #bi2006003334#), country-trust versus currency-trust, external shocks and internal imbalances (item #bi2006003332#), the difference between actual and target inflation as a primary criterion of monetary policy (item #bi2005002829#), the difficulties in creating efficient private property markets in infrastructure projects (item #bi2004003899#), interest rates and inflation (item #bi2005002809#), and dollarization as a defect of collective markets (item #bi2007004579#).


Satisfaction of the moral collective need for equal treatment of all institutional units and sectors by government, another building block of civil society and, by extension, of sustainable democracy, also attracts considerable scholarly research. Topics carefully examined in this area include: politics, social security, and inequality (item #bi2005005420#); barriers to medical services in the healthcare market, especially in respect to the elderly (item #bi2004002702#); microenterprises, informality, and women (item #bi2004003432#); and a policy blind spot regarding female workers in agroindustry (item #bi2004003426#).


Social harmony, a fundamental complementary pillar of civil society, sustainable democracy, and economic growth, falls to its lowest level in Chilean history during the 1970–73 Marxist experiment and the ensuing 1973–90 military dictatorship. The stellar success of Chile in satisfying the moral collective needs for protection of private property and economic freedom after 1973 contrasts with the dismal failure to satisfy the moral collective need for political freedom during 1973–90, and the low and uneven satisfaction of the moral collective need for social harmony as witnessed by declining but still excessively high levels of absolute poverty and the persistent inequality in the relative distribution of income since 1973. Governmental and other societal efforts to advance social harmony greatly increased during the post-1900 democratic presidencies. Vital scholarly contributions exploring multiple dimensions of recognizing and satisfying the moral collective need for social harmony deal with such topics as the persistence of poverty and inequality in the small- and medium-size enterprise sector (item #bi2006003343#), politics, social security, and inequality (item #bi2005005420#), poverty reduction in Chile 1994–98 (item #bi2005002812#), a blueprint for a development strategy (item #bi2005005425#), the informal sector and poverty (item #bi2004002533#), unequal distribution of income and poverty (item #bi2004002352#), education, years of experience, family, and geographic background and unemployment probability (item #bi2004000946#), the implications of the heterogeneous morphology of microenterprises (item #bi2004003429#), rural backwardness and inequality (item #bi2004003431#), collective, semipublic health and education markets, decentralization and poverty reduction (item #bi2004003433#), institutions and competitiveness (item #bi2004003406#), globalization and rural poverty (item #bi2004003427#), transformation of collective markets leading to reduced poverty but not reduced inequality (item #bi2005002812#), heterogeneous subordination (item #bi2005004404#), and the need for mesoeconomic policies to accelerate productivity growth and reduce income gaps (item #bi2007000570#).


Civil society, the complementary to the procedural democracy pillar for attaining sustainable democracy and growth, is also determined by the degree of satisfaction of the moral collective need for environmental protection. Pioneering studies making fundamental contributions to our understanding of the collective submarket for environmental sanctity deal with transferable emissions permits (item #bi2005002763#), emission markets (item #bi2005002830#), a strategy for reducing greenhouse emissions (item #bi2005002807#), vulnerability of forestry to the threat from environmental NGOs (item #bi2005002802#), and the creation of an advanced emissions and air quality market (item #bi2005004894#).

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