Chile's Free-Market Miracle: A Second Look

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.