Will Brazil Take The Venezuelan Or Chilean Path?

Image Credit: Flickr-Senado Federal | CC BY 2.0 (https://creativecommons.org/licenses/by/2.0/)

In her work The Voice of Reason, Ayn Rand once taught that

Capitalism has been called a system of greed—yet it is the system that raised the standard of living of its poorest citizens to heights no collectivist system has ever begun to equal, and no tribal gang can conceive of.

Despite Rand’s efforts to explain the positive impact of capitalism on society, over the years some countries in South America have decided to abandon her lessons and try socialist measures at the expense of their citizens’ wealth.

The whole continent has bet on socialist ideas in recent decades; however, the majority of the South American countries have experienced the failures of this political and economic theory thus far. Nevertheless, among so many socialist economies, one country stood out positively because it was saved by the ideas of the “Chicago Boys.”

The Chicago Boys' Meaningful Economic Impact

They were a group of Chilean students studying economics under the guidance of Milton Friedman and Arnold Harberger. These young economists would lead Chile to a prosperous era known as “the Chilean economic miracle,” which represented a time of unprecedented implementations of free-market ideas and economic growth.

Before this radical economic transformation took place in Chile, the country was haunted by the mistakes of Salvador Allende and his predecessors, who had been governing Chile with excessive state control. When Allende was removed from his presidential position, Chile was suffering the effects of hyperinflation at the rate at 286 percent, government bankruptcy, severe scarcity of basic goods, and the downfall of the country’s economic and political structures.
 

In 1974, a coup d’état took place granting Chile’s presidency to Augusto Pinochet. The new military regime decided to allow a group of classical liberal experts to implement free-market ideas and the principles of capitalism and freedom, and for as much as it may sound paradoxical considering those ideas were implemented during a military regime, Pinochet trusted the young classical liberal economists to carry out these laissez-faire policies.

It is important to highlight that even though Chile developed a strong economy, it happened at the cost of great human rights violations, with a plethora of crimes and casualties taking place under Pinochet’s regime (1974-1990). 

Despite the chaotic horrors perpetrated by Pinochet, the Chicago Boys managed to develop an economic plan to boost a free market revolution that would bequeath a positive economic outcome to Chileans, booming the economy and making it stronger.

 

As a positive outcome of the Chilean free-market revolution, the economy has boomed and become stronger. This has made Chile a key example of the power of the free market and capitalism with limited government intervention. The numbers and facts do not lie. Chile’s poverty rate indicates that there has been a major decrease in poverty in the years since 1990. The inflation rate has also gone down drastically, from its highest of 746.3 percent in April of 1974 to only 2 percent in March of 2019. However, the free-market magic did not stop there.

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