Chile as a Free Market Economy under Augusto Pinochet for AP World History

Feb 21

2 min read

Chile as a free market economy under Augusto Pinochet is an illustrative example of the Economics in the Global Age topic in Unit 9 of AP World History. You could reference this example on your AP World History test.

Pinochet with President Carter/public domain

Augusto Pinochet’s military dictatorship in Chile, which began with a coup d’état in 1973 and lasted until 1990, implemented radical free market economic policies that transformed the country’s economic landscape. Pinochet’s regime, heavily influenced by the “Chicago Boys,” a group of Chilean economists trained at the University of Chicago, pursued neoliberal reforms aimed at reducing the role of the state in the economy, promoting private enterprise, and integrating Chile into the global economy.

Pinochet’s economic policies focused on several key areas. First, his government implemented privatization measures, selling off state-owned enterprises and assets to private investors in industries such as telecommunications, mining, and utilities. This privatization drive aimed to increase efficiency, competition, and investment in these sectors while reducing the fiscal burden on the state. Second, Pinochet pursued deregulation and liberalization, slashing tariffs, removing trade barriers, and opening up the Chilean economy to foreign investment and trade. These reforms aimed to stimulate economic growth, attract capital inflows, and foster export-led development. Third, Pinochet implemented fiscal austerity measures, including cuts to public spending, subsidies, and social welfare programs, in an effort to reduce government debt and inflation.

The consequences of Pinochet’s free market policies in Chile were profound and controversial. On the positive side, Chile experienced rapid economic growth and modernization during Pinochet’s tenure, with GDP expanding at an average annual rate of over 5%. The country attracted significant foreign investment, particularly in mining and export-oriented industries, and emerged as one of the most open and competitive economies in Latin America. Moreover, Chile’s embrace of free market principles led to improvements in productivity, innovation, and business environment rankings, bolstering its reputation as an attractive destination for foreign investors.

However, Pinochet’s economic policies also had negative consequences and social costs. The neoliberal reforms exacerbated income inequality and social disparities in Chile, leading to widespread poverty, unemployment, and social unrest. The privatization of state-owned enterprises and public services resulted in increased costs, reduced access, and quality concerns for essential services such as healthcare, education, and pensions. Moreover, Pinochet’s authoritarian rule and human rights abuses, including political repression, censorship, and violence against dissidents, tarnished Chile’s international reputation and undermined democratic governance and civil liberties.

In conclusion, Augusto Pinochet’s regime in Chile implemented radical free market economic policies that transformed the country’s economy and society. While Pinochet’s neoliberal reforms stimulated economic growth and modernization, they also exacerbated social inequalities and human rights abuses, leaving a complex and contentious legacy that continues to shape Chile’s development trajectory and political landscape. Pinochet’s tenure underscores the intricate interplay between economic policy, political power, and social justice in the pursuit of economic prosperity and social welfare.