Chile under neoliberalism

In our book, we examine Chile's economic, social, and development policies over the past six decades. The focal point is the enduring influence of the neoliberal model—a model that took root in the mid-1970s under authoritarian conditions and persisted through democratic governments, albeit with regulatory and social policy adjustments.

Chile's significance on the global stage cannot be overstated. A pioneer in implementing neoliberal economic policies in the 1970s, it became a template for others in the 1980s and 1990s, following the demise of the Soviet Bloc and the rise of the Washington Consensus. The conventional narrative often touts Chile as a success story, citing growth acceleration, macroeconomic stability, and export-led growth. However, our book offers a more nuanced perspective—one that doesn't shy away from the shadows of deindustrialization, financialization, ecological deterioration, and persistent inequality that accompany this seeming success story.

A country of nearly 20 million people, rich in mineral resources and blessed with long coastlines and fertile lands, Chile currently boasts one of the highest per capita incomes in Latin America. Yet, beneath the surface lies a stark reality of social stratification, marked by indices of high income and wealth concentration. 

The neoliberal model, which we dissect in our book, did propel a substantial rise in GDP per capita over the last four decades. However, this growth comes at a cost—a heavy reliance on natural resources leading to ecological fragility and deindustrialization. The services sector has expanded and the economy has become highly specialized in the exports of raw copper and lithium, adhering to an extractive model. Agricultural and fishery exports have also developed, but manufacturing has lagged.  

Inequality has been a persistent feature in Chilean society, dating back to Spanish rule. Although there was a decline in inequality from 1940 to 1973, the Pinochet regime saw a sharp increase in income and wealth inequality as the result of radical privatization of public enterprises—including the private provision of social services, deregulation, and financial liberalization, with these policies accompanied by the curtailment of both labour unions and autonomous civil society organizations. And even after the return of democracy, inequality remains at significant levels. While income-based poverty declined sharply in the last three decades, multidimensional poverty—measured by gaps in access to education, healthcare, good jobs, and housing—remains a concern.

Critical voices from different social groups, such as student, environmental, women's, and workers' organizations, have consistently decried the low wages, expensive social services, territorial concentration and social inequality, and the overexploitation of nonrenewable natural resources inherent in the neoliberal economic model. The crescendo of recent discontent reached its peak in October and November 2019, culminating in massive social unrest across the country. 

To address the ‘social outbreak’, the political resolution from the National Congress involved rewriting the Constitution established during the dictatorship. In the aftermath of the Pinochet era, Chile found itself at a crucial juncture, grappling with the need for a new constitution that would reflect the diverse voices of its population. Two constitutional processes unfolded—one aimed at greater representation for traditionally marginalized groups (women, indigenous people, social groups) and the other involving experts with a more conservative leaning. 

Both attempts fell short, and citizens ultimately rejected the two constitutional projects, with the default result that the electorate implicitly chose to stick with Pinochet's constitution, with amendments, from the 1980s. The reasons behind the public's rejection of these projects remain a topic of ongoing debate. Nevertheless, this decision undoubtedly exposes the intricacies of the impact that neoliberal policies have had on shaping Chilean society for over four decades.

Viewed from a historical perspective, the neoliberal model of the last five decades, both in its authoritarian variant and its post-Pinochet modality, has led to a capitalist modernization process that places Chile at near the top of the Latin American region in terms of per capita income, but at the same time exhibits significant levels of inequality and a worrisome reliance on natural resources that puts pressure on fragile ecological systems. Challenges remain to redress endemic territorial concentration and the exclusion of indigenous populations and to deepen democratic procedures at different levels of society. 

As Chile stands at a crossroads, pivotal challenges await attention for a more balanced and sustainable development strategy aligned with the United Nations Sustainable Development Goals. Shifting away from the intensive use of natural resources, revitalizing the manufacturing sector, embracing a new energy matrix based on solar and wind, and addressing high inequality through essential reforms in taxation and market structures are imperative steps. The realization of these reforms, though challenging, holds the promise of a more inclusive and sustainable development for Chile going forward.

The book, Chilean Economic Development under Neoliberalism: Structural Transformation, High Inequality, and Environmental Fragility, by Andrés Solimano and Gabriela Zapata-Román, is now available from Cambridge University Press. It is published as a part of the UNU-WIDER and CUPS ‘Elements in Development Economics’ Series and digital copies are available free to download under Open Access. Download your copy today.

Dr. Andrés Solimano holds a Ph.D. in Economics from the Massachusetts Institute of Technology (MIT) and is founder and Chairman of the International Center for Globalization and Development (CIGLOB) based in Santiago, Chile.

Gabriela Zapata Román holds a PhD in Development Policy from the University of Manchester and is a researcher with the Faculty of Economics, Government and Communications at Universidad Central de Chile.

The views expressed in this piece are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors.