Chilean Model of Economic and Political Changes in Chile and China

Chilean Model of Economic and Political Changes in Chile and China
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Chilean Model of Economic and Political Changes in Chile and China
Chile has had an exceptional economic and political transformation over the years. The country’s improvement has been globally recognized and appreciated by several countries, mainly because of the effective policies that were set up in the country. Nonetheless, it is important to recognize that the nation did not have a smooth economic transformation, especially because some of the reforms implemented by the government had a devastating influence on the nation’s GDP. For instance, the global economic recession that took place in 1982 resulted in a 14.1 percent drop in Chile’s GDP (Takoushian, 2019). Moreover, the nation’s currency increased in value, making it more vulnerable to the global economy. Nonetheless, Chile managed to successfully deal with their crisis and change their economy to one that is more stable and efficient to the extent that figures from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) acknowledged Chile’s economic growth as the most significant compared to other nations (Takoushian, 2019). The method used by Chile to manage its economy is therefore highly essential since it offers great insights on how to manage the crisis. On the other hand, China has been at the forefront of building relationships with nations in Latin America, most specifically Chile, which has potential markets and natural resources. China’s relation with Chile can be traced back to the mid-1970 when the Cubillos visited China and signed agreements concerning economic relations. The relationship between the two nations has enabled them to grow exponentially over the years, with each party contributing highly to the development of the other. In light of this, this essay seeks to discuss how both countries implemented the Chilean model of political and economic change.
The Switch from Socialist Economy to Market Economy
Chile’s road to political and economic stability was shaped by the complicated history of their revolutionary socialist policies to the adoption of a market economy. In 1970, Chile democratically elected President Salvador Allende, in a crucial moment when the country was undergoing huge economic instability and high inflation. Allende was a well-known figure and envisioned a socialist economy for Chile. Allende enacted socialist policies and increased public spending under the ‘Popular Unity’ coalition (Carrasco, 2018). The most significant of these policies was the drastic increase in housing construction, nationalization of basic industry, and strong protection for worker organization. The socialist policies had huge effects on the economy as workers began to take hold of their working environments. However the United States was against the socialist and communist ideologies, and as a result, it purposed to burden Chile with economic sanctions that ultimately crippled the economy. The sanctions, together with an unwavering economic crisis had huge effects on the country’s GDP, which reduced significantly. Additionally, Chile’s economic reserves depleted exponentially. Consequently, Allen’s socialist methods led to more rebellion and eventually, a violent coup d’йtat in 1973 that initiated the era of Augusto Pinochet (Carrasco, 2018).
Pinochet’s administration pushed for a free market economy to help the country to recover from the economic crisis. The change to a free market was facilitated by scholars known as the ‘Chicago boys,’ who had supported the principles of free markets since 1970 under Alessandri but lost the elections to Allende. Once the Pinochet attained power, the Chicago Boys managed to implement various reforms, including the elimination of trade barriers, tax reductions, privatization of social economies, price liberations and so forth. The adoption of free markets led to an economic boom in Chile, which resulted in an increase in per-capita income from $4,000 to $10,000 (Pinera, 2003). The move to free markets was also supported by the country’s political institutions established during that time. The constitution established in 1980 established a limited democracy, which was aimed at securing private property and economic liberty to avoid falling victim to collectivist tendencies that might destroy Chile’s economy and democratic institutions. Moreover, unlike the previous constitution under Allende, the current constitution restricted politicians from changing the foundations of the economic model established during the Pinochet era (Pinera, 2003).
The Influence of the Chicago Boys
The Chicago Boys grew interested in Chile’s economy since 1970. The group of US-educated scholars from the University of Chicago laid out a series of principals and suggestions that were aimed at establishing foundational economic changes in Chile. The group created an economic policy called El Ladrillo, which was recommended to Alessandri. Pinochet’s administration gave the Chicago Boys a chance to implement their principles after Pinochet occupied the presidency seat. In the mid-1970, the group played an important role as economic advisors to the government and made rapid changes in the Chilean economy. Some of the reforms favored the United States since the group called for the sale of nationalized companies. The group’s changes also attracted foreign investors ...