Chile's Free-Market Miracle: A Second Look
The critical case; distributional costs behind the headline growth numbers.
Summary
The reference has not verified this book in detail; the summary states only what the title, author and subject establish.
Collins and Lear wrote a critical assessment of the Chilean economic model, published in 1995 when the country was widely presented as a development success.
Their argument is that the aggregate figures conceal what happened to most Chileans. They examine the distribution of the growth, arguing that real wages took until the 1990s to recover their pre-1973 levels, that income inequality increased substantially, that poverty rose sharply during the 1982 crisis and the adjustment that followed, and that the growth was concentrated in export sectors with limited employment effects.
They examine specific sectors. In agriculture, the reversal of land reform transferred land to larger commercial operators, and the fruit export industry that resulted employs a largely seasonal, temporary and low-paid workforce, disproportionately women, without the employment security that the earlier arrangements had provided. In forestry and fishing, they document resource depletion and the environmental effects of the extraction model. In mining, they examine the terms on which foreign investment was permitted and what share of the resource rent remained in Chile.
They also examine the social sectors: the privatised pension system, the education voucher system and the health system, arguing that each produced stratification by income and that the state retained the costs while the private sector took the profitable segments.
The book argues one position and was written to counter the prevailing account. Chile's subsequent record complicates both sides: poverty fell very substantially from the 1990s onward, which the critics did not anticipate, while inequality remained high and the pension system's inadequacy became the central political issue, which the defenders did not. Edwards's The Chile Project, also in this reference, is the more balanced later assessment.
Key takeaways 7
- Real wages in Chile took until the 1990s to recover their pre-1973 levels despite the growth in aggregate output.
- Income inequality increased substantially during the period presented internationally as a development success.
- The fruit export industry created seasonal, temporary and low-paid employment rather than the secure work the earlier arrangements had provided.
- Reversing land reform transferred agricultural land to larger commercial operators rather than restoring a prior distribution.
- Forestry and fishing expansion depleted resources at rates the extraction model did not account for.
- Privatised pensions, education vouchers and health provision each produced stratification by income.
- The state retained the unprofitable segments of social provision while the private sector took the profitable ones.
Who should read it
Readers examining the Chilean model who want the critical assessment from the period, alongside later and more balanced accounts.
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Where it sits in the reference 3
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