Chile's Free Market Miracle: A Second Look

This book contains an analysis of the economic and social effects of the Pinochet dictatorship by John Lear and Joseph Collins around 1990 and an epilogue by Stephanie Ronsenfeld from around 1994.The authors show the effects of deregulation on all aspects of Chilean life. The public health system--which seventy percent of Chileans as of 1990 belonged to--has been rapidly defunded , farmed out to municipalities. Relatively few Chileans can afford the relatively new HMO-type companies whose primary focus is accomodating people who can pay the most i.e. the well-off. Thyphoid fever and Hepatitis rapidly expanded to epidemic proportions from the mid-70's until a decaded later--short term profit, absent government restraint, makes dumping industrial waste and chemicals into rivers into the water supply a reasonable cost-effective mean as does neglecting to ensure adequate sanitation standards in the food you sell. The government finally enacted some regulations in the mid-80's to try to roll back the epidemics. The authors point out the declining infant mortality rate, which neoliberal advocates point to with pride is, apart from the expanding birth rate in the upper classes, in large part due to "socialistic" government programs targeting new mothers and infants. The health of the infants and mothers after they conclude the program is, of course, another story. The authors show that Chile's privitization and municipilization of education has grossly skewed the benefits towards wealthy municipalities able to generate the resources and high-income students to be "self-financing."They show that the privitized social security accounts are of scant benefit for a large number of Chileans who cannot generate enough income to meet their stringent minimum requirements. This great mass of people inevitably have to fall back on the scant package offered by the government which, combined with required government payments to those who retired before the early 80's when privitization was implemented, promises to bring severe fiscal probolems for Chile in the next few decades. They show that wages have stagnated or declined relative to pre-1973 levels--per capita income did not return to its 1970 level until 1989. They show that the monumental economic crises in the early 80's which admirers of Pinochet's economic policies like to forget, was very much due to the extreme neoliberal policies of the junta. In the late 70's Chile's economy took off. Tarrifs were eliminated, restrictions on foreign investment lifted and the Peso was pegged at 39 to the dollar, considerably overvalued. The result was a flood of ultra-cheap imports, mostly luxury items and little productive inbestment. The banks, freed from regulation, recklessly loaned out. Then at the end of 1981 all of the suddent there was recession in the U.S. and thus restriction of its market, capital flight, corporations and banks under enormous debt went under and the economy was on the verge of collapse. Pinoch