The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism
Best single volume: the reforms, the 1982 crash, the pension system and the reaction against it.
Summary
Edwards, a Chilean economist at UCLA who was a student in Chile during the period and later worked at the World Bank, wrote a history of the economic reforms implemented under Pinochet and their consequences through the 2019 protests and the constitutional process.
The historical account covers the programme's origins in an exchange agreement between the Catholic University of Chile and the University of Chicago that trained a generation of Chilean economists under Friedman and Harberger; the group's role after the 1973 coup; the shock stabilisation; the privatisations; the trade liberalisation; the 1981 private pension system that replaced pay-as-you-go with individual accounts; the 1982 debt crisis that forced a large state rescue of the banking system; and the recovery and growth from the late 1980s through the 2000s, which reduced poverty from around forty per cent to under ten.
Edwards's argument is that the reforms delivered genuine and large gains in income and poverty reduction, and that they nonetheless produced a political failure. Inequality remained very high. The pension system delivered replacement rates far below what people had been led to expect, because contribution densities were low and fees were high. Education and healthcare became stratified by ability to pay. The result was a population with rising incomes and rising resentment, which produced the 2019 protests and the rejection of the model.
He is unsparing about the human rights context and does not treat the economic record as separable from the dictatorship that imposed it.
The book is written by someone who was present and who shares much of the economics, which gives it both insight and a perspective. The constitutional process it ends with resolved differently from what appeared likely at the time of writing.
Key takeaways 7
- Chile's reforms substantially raised incomes and reduced poverty from around forty per cent to under ten over three decades.
- The 1981 private pension system delivered replacement rates far below what people expected because contribution densities were low and fees were high.
- The 1982 crisis required a large state rescue of the banking system, which contradicted the programme's own principles.
- High inequality persisted through the entire period of growth, which is what eventually produced the political rejection.
- Stratifying education and healthcare by ability to pay generated resentment that rising incomes did not offset.
- The reforms were implemented by a dictatorship that suppressed the opposition they would otherwise have faced.
- A programme can succeed on its stated economic measures and still fail politically if the gains are distributed in a way the population rejects.
Who should read it
Investors and analysts working in Latin America who want an insider's assessment of what market reforms delivered in Chile and why they were eventually rejected.
Similar books 6
Chosen by shared topics, the entries that hold them, and the people who recommended both.
How the productive structure and business class were remade after 1973.
How Chicago-trained Chilean economists came to run economic policy under Pinochet.
The critical case; distributional costs behind the headline growth numbers.
Brookings assessment of the reform package by economists who took it seriously.
Latin America's reforms from the 1980s debt crisis to the mid-1990s, assessed.
Why growth kept disappointing despite reform; good on institutions and productivity.
Where it sits in the reference 3
Topics