Editing Miracle of Chile

{{short description|Reorientation of the Chilean economy}}
{{Use American English|date=March 2023}}
{{Economic history of Chile}}
[[File:Chile and Latin America GDP Average.png|thumb|Chilean (blue) and average Latin American (orange) [[GDP per capita]] (1980–2017)]]
[[File:Economic growth of Chile.PNG|thumb|[[Chile]]an (orange) and average [[South American]] (blue): Rates of Growth of GDP (1971–2007)]]

The "'''Miracle of Chile'''" was a term used by economist [[Milton Friedman]] to describe the reorientation of the [[economy of Chile|Chilean economy]] in the 1980s and the effects of the economic policies applied by a large group of Chilean economists who collectively came to be known as the [[Chicago Boys]], having studied at the [[University of Chicago]] where Friedman taught. He said the "Chilean economy did very well, but more importantly, in the end the central government, the [[military junta]], was replaced by a [[Chilean transition to democracy|democratic society]]. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."<ref>{{cite web|title=Commanding Heights: Milton Friedman|url=https://www.pbs.org/wgbh/commandingheights/shared/minitext/int_miltonfriedman.html#10|publisher=PBS|access-date=December 29, 2008}}</ref> The junta to which Friedman refers was a [[Military government of Chile (1973–90)|military government]] that came to power in a [[1973 Chilean coup d'état|1973 coup d'état]], which came to an end in 1990 after a democratic [[1988 Chilean national plebiscite|1988 plebiscite]] removed [[Augusto Pinochet]] from the presidency.

==Overview==
The economic reforms implemented by the Chicago Boys had three main objectives: [[economic liberalization]], [[privatization]] of state-owned companies, and stabilization of [[inflation]]. The first reforms were implemented in three rounds – 1974–1983, 1985, and 1990. The reforms were continued and strengthened after 1990 by the post-Pinochet [[centrism|center]] government of [[Patricio Aylwin]]'s [[Christian Democratic Party (Chile)|Christian Democrats]].<ref name="Thomas M. Leonard p. 322">Thomas M. Leonard. ''Encyclopedia Of The Developing World.'' Routledge. {{ISBN|1-57958-388-1}} p. 322</ref> However, the center-left government of [[Eduardo Frei Ruiz-Tagle]] also made a commitment to poverty reduction. In 1988, 48% of Chileans lived below the poverty line. By 2000 this had been reduced to 20%. A 2004 World Bank report attributed 60% of Chile's 1990's poverty reduction to economic growth, and claimed that government programs aimed at poverty alleviation accounted for the rest.<ref>{{Cite web |title=Successes and Failures in Poverty Eradication: Chile |url=http://documents.worldbank.org/curated/en/292491468743165841/pdf/308060CL0poverty01see0also0307591.pdf}}</ref>

[[Hernán Büchi]], Minister of Finance under Pinochet between 1985 and 1989, wrote a book detailing the implementation process of the economic reforms during his tenure. Successive governments have continued these policies. In 2002 Chile signed an association agreement with the [[European Union]] (comprising [[free trade]] and political and cultural agreements), in 2003, an extensive free trade agreement with the [[United States]], and in 2004 with [[South Korea]], expecting a boom in import and export of local produce and becoming a regional trade-hub. Continuing the coalition's free-trade strategy, in August 2006, President Bachelet promulgated a [[free trade agreement]] with the [[People's Republic of China]] (signed under the previous administration of [[Ricardo Lagos]]), the first Chinese free-trade agreement with a [[Latin America]]n nation; similar deals with Japan and India were promulgated in August 2007. In 2010, Chile was the first nation in South America to win membership in the [[OECD|Organization of Economic Cooperation and Development]], an organization restricted to the world's richest countries.

[[#Performance on economic and social indicators|Some economists]] (such as Nobel laureate [[Amartya Sen]]) have argued that the experience of Chile in this period indicates a ''failure'' of the economic liberalism posited by thinkers such as Friedman, claiming that there was little net economic growth from 1975 to 1982 (during the so-called "pure [[Monetarism|Monetarist]] experiment"). After the catastrophic [[Crisis of 1982|banking crisis of 1982]], the state controlled more of the economy than it had under the previous socialist government, and sustained economic growth only came after the later reforms that privatized the economy, while social indicators remained poor.<ref name=ft>http://www.ft.com/cms/s/0/7c2a7a48-2030-11db-9913-0000779e2340.html#axzz1qL9FWsgp {{dead link|date=October 2018}}</ref> Pinochet's dictatorship made the unpopular economic reorientation possible by [[Augusto Pinochet#Suppression of opposition|repressing opposition to it]]. This repression included assassinations organized under [[Operation Condor]], [[Human rights violations in Pinochet's Chile|mass systematized torture]], exile, and the international hunting of dissidents. In all, there were 40,018 victims documented, including 3,065 killed.<ref name="more victims">{{cite news| url=https://www.bbc.co.uk/news/world-latin-america-14584095 | work=BBC News | title=Chile recognises 9,800 more victims of Pinochet's rule | date=18 August 2011}}</ref> Rather than a triumph of the free market, the [[Organisation for Economic Co-operation and Development|OECD]] economist [[Javier Santiso]] described this reorientation as "combining neo-liberal sutures and interventionist cures".<ref>{{Cite book | url=https://books.google.com/books?id=XY0OR_n8MncC&pg=PA101 | title=Latin America's Political Economy of the Possible: Beyond Good Revolutionaries and Free-Marketeers| isbn=9780262693592| last1=Santiso| first1=Javier| year=2007| publisher=MIT Press}}</ref>

==Background==
In 1972, Chile's inflation was at 150%.<ref name="news.bbc.co.uk"/> According to Hernán Büchi, several factors such as expropriations, price controls, and protectionism caused these economic problems.<ref name=Buchi>{{cite journal |last=Büchi  |first=Hernán |author-link=Hernán Büchi |date=18 September 2006 |title=How Chile successfully transformed its economy |journal=Backgrounder |volume=1958 |pages=1–10 |url=http://www.heritage.org/Research/Reports/2006/09/How-Chile-Successfully-Transformed-Its-Economy |archive-url=https://web.archive.org/web/20100420011745/http://www.heritage.org/Research/Reports/2006/09/How-Chile-Successfully-Transformed-Its-Economy |url-status=unfit |archive-date=April 20, 2010 |access-date=1 October 2010}}</ref> At the same time, the [[United States]] conducted a campaign to deepen the inflation crisis.<ref>United States Senate Report (1975) [https://www.intelligence.senate.gov/sites/default/files/94chile.pdf "Covert Action in Chile, 1963–1973"] ''U.S. Government Printing Office'' Washington. D.C.</ref> The Central Bank increased the money supply to pay for the increasing deficit. Büchi states that this increase was the primary cause for inflation.<ref name=Buchi/>

United States government documents report an antagonistic foreign economic policy toward the Allende government that was "articulated at the highest levels" during this time.<ref name=us-senate-1975/>{{rp|33}} Shortly after Salvador Allende was elected president, but before he assumed office, then-CIA-director [[Richard Helms]] met with [[Richard Nixon|President Richard Nixon]] and discussed the situation in Chile. Helms' notes from his September 15, 1970 meeting contain the indication: "Make the economy scream." A week later [[Edward M. Korry|Ambassador Edward Korry]] reported telling outgoing Chilean president [[Eduardo Frei Montalva]], through his Defense Minister, that "not a nut or bolt would be allowed to reach Chile under Allende." By late 1972, the Chilean Ministry of the Economy estimated that almost one-third of the diesel trucks at [[Chuquicamata Copper Mine]], 30 percent of the privately owned city buses, 21 percent of all taxis, and 33 percent of state-owned buses in Chile could not operate because of the lack of spare parts or tires. In overall terms, the value of United States machinery and transport equipment exported to Chile by U.S. firms declined from $153 million in 1970 to $110 million in 1971.<ref name=us-senate-1975/>{{rp|33}}

Immediately following the [[Chilean coup of 1973]], [[Augusto Pinochet]] was made aware of a confidential economic plan known as ''[[El ladrillo]]''<ref name=LADRILLO>{{in lang|es}}[http://www.cepchile.cl/dms/lang_1/cat_794_inicio.html ''El Ladrillo: Bases de la Política Económica del Gobierno Militar Chileno.'' Santiago de Chile: June 2002] {{webarchive|url=https://web.archive.org/web/20070607205314/http://www.cepchile.cl/dms/lang_1/cat_794_inicio.html |date=2007-06-07 }} {{ISBN|9567015074}}</ref> (literally, "the brick"), so called because the report was "as thick as a brick". The plan had been quietly prepared in May 1973 <ref name=HERENCIA>{{in lang|es}} [http://news.bbc.co.uk/hi/spanish/latin_america/newsid_3192000/3192145.stm Villaroel, Gilberto. ''La herencia de los “Chicago boys”''. Santiago do Chile: BBC Mundo.com – América Latina, 10/12/2006.]</ref> by economists who opposed [[Salvador Allende]]'s government, with the help from a group of economists the press were calling the [[Chicago Boys]], because they were predominantly alumni of the [[University of Chicago]]. The document contained the backbone of what would later on become the Chilean economic policy.<ref name="HERENCIA"/> According to the 1975 report of a [[Senate Intelligence Committee|United States Senate Intelligence Committee]] investigation, the Chilean economic plan was prepared in collaboration with the CIA.<ref name=us-senate-1975>{{cite book|title=Covert Action in Chile 1963–1973|year=1975|publisher=U.S. Government Printing Office|location=Washington, DC|url=http://www.intelligence.senate.gov/pdfs94th/94chile.pdf|author=Select Committee to Study Governmental Operations with Respect to Intelligence Activities, United States Senate|access-date=14 July 2013|archive-url=http://webarchive.loc.gov/all/20130706111810/http%3A//www.intelligence.senate.gov/pdfs94th/94chile.pdf|archive-date=2013-07-06|quote=Another goal, achieved in part through work done at the opposition research organization before the coup, was to help the new government organize and implement new policies. Project files record that CIA collaborators were involved in preparing an initial overall economic plan which has served as the basis for the Junta's most important economic decisions.|url-status=dead}}</ref>{{rp|40}}

The plan recommended a set of economic reforms that included [[deregulation]] and [[privatization]]. Among other reforms, they made the central bank independent, cut tariffs, privatized the state-controlled [[pension]] system,<ref name=PENSION>[http://assets.aarp.org/rgcenter/econ/ib23_chile.pdf RIX, Sara E., Ph.D. ''Chile’s Experience With The Privatization Of Social Security.'' AARP Public Policy Institute, August 1995]</ref> state industries, and banks, and reduced taxes. Pinochet's stated aim was to "make Chile not a nation of [[proletariat|proletarians]], but a nation of [[entrepreneur]]s".<ref name="news.bbc.co.uk">{{cite news | url=http://news.bbc.co.uk/2/hi/americas/63821.stm | work=BBC News | title=Pinochet's rule: Repression and economic success | date=2001-01-07 | access-date=2010-05-12}}</ref>

==Reforms==
The first reforms were implemented in three rounds: 1974–1983, 1985, and 1990.

The government welcomed [[foreign direct investment|foreign investment]] and eliminated protectionist [[trade barrier]]s, forcing Chilean businesses to compete with [[import]]s on an equal footing, or else go out of business. The main copper company, [[Codelco]], remained in government hands due to the [[Chilean nationalization of copper|nationalization of copper]] completed by [[Salvador Allende]], however, private companies were allowed to explore and develop new mines.

Minister of Finance [[Sergio de Castro (economist)|Sergio de Castro]], departing from Friedman's support for free floating exchange rates, decided on a [[Fixed exchange-rate system|pegged exchange rate]] of 39 pesos per dollar in June 1979, under the rationale of bringing Chile's rampant [[inflation]] to heel. The result, however, was that a serious balance-of-trade problem arose,<ref name="The Political Economy of Unilateral Trade Liberalization">{{cite journal|year=1990|title=The Political Economy of Unilateral Trade Liberalization|url=http://www.anderson.ucla.edu/faculty/sebastian.edwards/W6510.pdf|journal=UCLA|archive-url=https://web.archive.org/web/20040730125426/http://www.anderson.ucla.edu/faculty/sebastian.edwards/W6510.pdf|access-date=2010-12-06|archive-date=2004-07-30}}</ref> leading Milton Friedman to criticize De Castro and the fixed exchange rate in his Memoirs ("Chapter 24: Chile", 1998).<ref name="Two Lucky People">{{cite book|url=https://books.google.com/books?id=6l0_vQ1zpI8C&q=sergio+de+castro|title=Two Lucky People|last1=Friedman|first1=Milton|last2=Friedman|first2=Rose D.|publisher=[[University of Chicago Press]]|year=1998|isbn=9780226264158|access-date=2011-04-08}}</ref> Since [[Chilean peso]] [[inflation]] continued to outpace U.S. dollar inflation, every year Chilean buying power of foreign goods increased. When the bubble finally burst in late 1982, Chile slid into a severe [[recession]] that lasted more than two years.

This deep economic recession of 1982–1983 was Chile's second in eight years. (In 1975, when GDP fell by 13 percent, industrial production plunged by 27 percent and unemployment increased to 20 percent). Additionally, inflation reached 375 percent in 1974—the highest rate in the world and almost twice the top level under Allende.<ref>Constable and Valenzuela, "A Nation of Enemies," p. 170</ref> During the 1982–1983 recession, real economic output declined by 19%, with most of the recovery and subsequent growth taking place after Pinochet left office, when market-oriented economic policies were additionally strengthened.<ref name="Thomas M. Leonard p. 322"/>

Starting in 1985, with [[Hernán Büchi]] as Minister of Finance, the focus of economic policies shifted toward financial solvency and economic growth. Exports grew rapidly and unemployment went down, however, poverty still represented a significant problem, with 45 percent of Chile's population below the [[poverty threshold|poverty line]] in 1987. Büchi wrote about his experience during this period in his book ''La transformación económica de Chile: el modelo del progreso''. In 1990, the newly elected [[Patricio Aylwin]] government undertook a program of "growth with equity", emphasizing both continued economic liberalization and poverty reduction. Between 1990 and 2000, poverty was reduced from 40 percent of the population to 20 percent. 60 percent of this reduction can be attributed to GDP growth, with the remaining 40 percent attributable social policies.<ref name="DEPRESSION2">{{Cite web |title=Chile: Successes and Failures in Poverty Eradication |url=http://info.worldbank.org/etools/docs/reducingpoverty/case/24/summary/Chile%20Summary.pdf |archive-url=https://web.archive.org/web/20101129004544/http://info.worldbank.org/etools/docs/reducingpoverty/case/24/summary/Chile%20Summary.pdf |archive-date=2010-11-29 |access-date=2023-06-29}}</ref>

===Free trade agreements===
Successive Chilean governments have actively pursued trade-liberalizing agreements. The process began in the 1970s, when Pinochet cut tariffs on imports to 10%. Prior to that, Chile had been one of the most protectionist economies in the world, ranking 71 out of 72 in a 1975 [[Cato Institute]] and [[Fraser Institute]] annual report.<ref name="Cato-Fraser">{{cite web | url=http://www.fraseramerica.org/commerce.web/product_files/EconomicFreedomoftheWorld1975-1995.pdf | title=Economic Freedom of the World 1970–1995 | work=[[Cato Institute]] and [[Fraser Institute]], 1996 | url-status=usurped | archive-url=https://web.archive.org/web/20160314142857/http://fraseramerica.org/commerce.web/product_files/economicfreedomoftheworld1975-1995.pdf | archive-date=2016-03-14 }}</ref> During the 1990s, Chile signed [[free trade agreement]]s (FTA) with Canada, Mexico, and Central America. Chile also concluded preferential trade agreements with Venezuela, Colombia, and Ecuador. An association agreement with Mercosur—Argentina, Brazil, Paraguay, and Uruguay—went into effect in October 1996. Continuing its export-oriented development strategy, Chile completed landmark free trade agreements in 2002 with the European Union and South Korea. Chile, as a member of the [[Asia-Pacific Economic Cooperation]] (APEC) organization, is seeking to boost commercial ties to Asian markets. To that end, it has signed trade agreements in recent years with New Zealand, Singapore, Brunei, India, China, and most recently Japan. In 2007, Chile held trade negotiations with Australia, Thailand, Malaysia, and China. In 2008, Chile hopes to conclude an FTA with Australia, and finalize an expanded agreement (covering trade in services and investment) with China. The P4 (Chile, Singapore, New Zealand, and Brunei) also plan to expand ties through adding a finance and investment chapter to the existing P4 agreement. Chile's trade talks with Malaysia and Thailand are also scheduled to continue in 2008.<ref name="USDoS">{{Cite web
| url=https://2009-2017.state.gov/r/pa/ei/bgn/1981.htm
| title=Background Note: Chile
| work=[[United States Department of State]], Bureau of Western Hemisphere Affairs, January 2008
}}</ref>

== Performance on economic and social indicators ==
[[Image:GDP per capita LA-Chile-2.png |thumb|right |GDP per capita in Chile and Latin America (1950–2010)]]
[[Amartya Sen]], in his book ''Hunger and Public Action'', examines the performance of Chile in various economic and social indicators. He finds, from a survey of the literature on the field:

{{blockquote|The so-called "monetarist experiment" which lasted until 1982 in its pure form, has been the object of much controversy, but few have claimed it to be a success...The most conspicuous feature of the post 1973 period is that of considerable instability...no firm and consistent upward trend (to say the least).}}

[[File:Unemployment Chile.png|thumb|left|Unemployment in Chile and South America (1980–1990)]]

Wages decreased by 8%.<ref name="Petras and Vieux 1998 57-72">{{Cite journal | last1 = Petras | first1 = James | last2 = Vieux | first2 = Steve | title = The Chilean "economic miracle": an empirical critique | journal = [[Critical Sociology (journal)|Critical Sociology]] | volume = 17 | issue = 2 | pages = 57–72 | doi = 10.1177/089692059001700203 | date = July 1990 | s2cid = 143590493 }}</ref>{{when|date=October 2019}} Family allowances in 1989 were 28% of what they had been in 1970 and the budgets for education, health and housing had dropped by over 20% on average.<ref name="Petras and Vieux 1998 57-72"/>

Nobel laureate and economist [[Gary Becker]] states that "Chile's annual growth in per capita real income from 1985 to 1996 averaged a remarkable 5 percent, far above the rest of Latin America."<ref>{{cite journal |last=Becker |first=Gary S. |author-link=Gary Becker |editor1-first=Peter |editor1-last=Robinson |year=1997 |title=What Latin America Owes to the "Chicago Boys" |journal=Hoover Digest |issue=4 |issn=1088-5161 |url=http://www.hoover.org/publications/hoover-digest/article/7743 |access-date=3 October 2010 |url-status=dead |archive-url=https://web.archive.org/web/20100724040917/http://www.hoover.org/publications/hoover-digest/article/7743 |archive-date=24 July 2010 }}</ref> Since then the economy has averaged 3% annual growth in GDP.<ref name="WDI">World Bank. (April 2010). Washington, DC: World Bank. Statistics retrieved 1 October 2010 from [http://data.worldbank.org World Development Indicators database].</ref> Becker also said, in 1997, that Chile had become "an economic role model for the whole underdeveloped world".<ref name=":0">{{Cite web |last=Kaiser |first=Axel |date=2020 |title=The Fall of Chile |url=https://www.cato.org/cato-journal/fall-2020/fall-chile |access-date= |website=[[Cato Journal]]}}</ref> [[Margaret Thatcher]] declared that Pinochet's regime had turned Chile "from chaotic collectivism into the model economy of Latin America" whereas [[George H. W. Bush]] asserted that "Chile's record of economic accomplishment is a lesson for Latin America on the power of the free market. Nowhere among the nations of this continent has the pace of free‐market reform gone farther, faster than right here in Chile".<ref name=":0" />

Developments were very positive with regards to infant mortality and life expectancy—infant mortality rate fell so much that Chile achieved the lowest level of infant mortality in Latin America in the 1980s.<ref>{{cite book |title=Economic Reforms in Chile: From Dictatorship to Democracy |last=French-Davis |first=Ricardo |publisher=U Michigan P |location=Ann Arbor, MI |page=188}}</ref> [[Infant mortality]] rate in Chile fell from 76.1 per 1000 to 22.6 per 1000 from 1970 to 1985.<ref name=WDI/> In 1988, the military government passed a law making all abortion illegal. As of July 19, 2017,<ref>{{cite news|url=https://www.theguardian.com/world/2017/jul/19/chile-abortion-mother-rape-life-legalization|title=Chile passes bill to legalize abortion in certain cases|agency=Reuters|date=19 July 2017|newspaper=The Guardian}}</ref> legislation permitting abortion under limited circumstances (if the pregnancy endangers the life of the woman, if the fetus is not viable, or if the pregnancy resulted from rape) was passed.<ref name=cnnchile>{{cite web|url=http://www.cnn.com/2017/08/03/americas/chile-vote-abortion-ban-eased/index.html|title=Chilean lawmakers vote to ease abortion ban|author=Spencer Feingold|website=CNN|date=3 August 2017}}</ref>

However, Sen claims that this improvement was not because of "free-market" policies but because of active public and state intervention. Chile had a very long tradition of public action for the improvement of childcare, which were largely maintained after the Pinochet coup:

{{blockquote| ... there is little disagreement as to what caused the observed improvement in the area of child health and nutrition...It would be hard to attribute the impressively steady decline in infant mortality ... (despite several major economic recessions) ... to anything else than the maintenance of extensive public support measures}}

Nevertheless, according to libertarian writer [[Axel Kaiser]]:<ref name=":0" />

{{Blockquote|text=In short, thanks to the free‐market reforms introduced by the Chicago Boys and maintained by the democratic regimes that came later, Chile became the most prosperous country in Latin America, which mostly benefitted the poorest members of the population.}}

Performance on economic indicators in comparison to those of other Chilean presidencies:<ref>Ricardo Ffrench-Davis, ''Economic Reforms in Chile: From Dictatorship to Democracy'', University of Michigan Press, 2002, {{ISBN|978-0472112326}}, p. 7</ref> 
{| class="wikitable"
! style="width:10.5em;" style="text-align:left;" | Presidency
! style="width:4.5em;" | Alessandri (1959–64)
! style="width:4.5em;" | Frei-Montalva (1965–70)
! style="width:4.5em;" | Allende (1971–73)
! style="width:4.5em;" | Pinochet (1974–89)
! style="width:4.5em;" | Aylwin (1990–93)
! style="width:4.5em;" | Frei Ruiz-Tagle (1994–99)
! style="width:4.5em;" | Lagos (2000)
|-
| style="text-align: center;" style="text-align:left;" | Economic growth (% of GDP)
| style="text-align: center;" | 3.7
| style="text-align: center;" | 4.0
| style="text-align: center;" | 1.2
| style="color:#006600" style="text-align: center;" | 2.9
| style="text-align: center;" | 7.7
| style="text-align: center;" | 5.6
| style="text-align: center;" | 5.4
|-
| style="text-align: center;" style="text-align:left;" | Growth rate of exports
| style="text-align: center;" | 6.2
| style="text-align: center;" | 2.3
| style="text-align: center;" | -4.2
| style="text-align: center;" | 10.6
| style="text-align: center;" | 9.6
| style="text-align: center;" | 9.4
| style="text-align: center;" | 7.5
|-
| style="text-align: center;" style="text-align:left;" | Rate of unemployment (Workers in job creation programs counted as unemployed)
| style="text-align: center;" | 5.2
| style="text-align: center;" | 5.9
| style="text-align: center;" | 4.7
| style="text-align: center;" | 18.1
| style="text-align: center;" | 7.3
| style="text-align: center;" | 7.4
| style="text-align: center;" | 10.0
|-
| style="text-align: center;" style="text-align:left;" | Real wages (1970 = 100)
| style="text-align: center;" | 62.2
| style="text-align: center;" | 84.2
| style="text-align: center;" | 89.7
| style="text-align: center;" | 81.9
| style="text-align: center;" | 99.8
| style="text-align: center;" | 123.4
| style="text-align: center;" | 134.4
|-
| style="text-align: center;" style="text-align:left;" | Rate of inflation
| style="text-align: center;" | 26.6
| style="text-align: center;" | 26.3
| style="text-align: center;" | 293.8
| style="text-align: center;" | 79.9
| style="text-align: center;" | 17.7
| style="text-align: center;" | 6.1
| style="text-align: center;" | 4.5
|}

==Milton Friedman==
Milton Friedman gave some lectures advocating free market economic policies at the [[Universidad Católica de Chile]]. In 1975, two years after the coup, he met with Pinochet for 45 minutes, where the general "indicated very little indeed about his own or the government's feeling" and the president asked Friedman to write him a letter laying out what he thought Chile's economic policies should be, which he also did.<ref name=REASON>[http://www.reason.com/news/show/118494.html Doherty, Brian. ''The Life and Times of Milton Friedman: Remembering the 20th century’s most influential libertarian.'' Reason Magazine, March 2007 Print Edition]  Friedman's 21 April 1975 letter may be found in Milton and Rose Friedman's ''Two Lucky People'' and in an [http://www.cb.cl/newcbcl/Estudios/DetalleE.asp?Id=1297 online Chilean newspaper] {{webarchive|url=https://web.archive.org/web/20071031071137/http://www.cb.cl/newcbcl/Estudios/DetalleE.asp?Id=1297 |date=2007-10-31 }}.</ref> To stop inflation, Friedman proposed reduction of government deficits that had increased in the past years and a flat commitment by government that after six months it will no longer finance government spending by creating money. He proposed relief of cases of real hardship among poorest classes. In October 1975 the New York Times columnist Anthony Lewis declared that "the Chilean junta's economic policy is based on the ideas of Milton Friedman…and his Chicago School".<ref name=REASON/>

Friedman has wondered why some have attacked him for giving a lecture in Chile: "I must say, it's such a wonderful example of a double standard, because I had spent time in Yugoslavia, which was a communist country. I later gave a series of lectures in China. When I came back from communist China, I wrote a letter to the Stanford Daily newspaper in which I said, 'It's curious. I gave exactly the same lectures in China that I gave in Chile. I have had many demonstrations against me for what I said in Chile. Nobody has made any objections to what I said in China. How come?'" He noted that his visit was unrelated to the political side of the regime and that, during his visit to Chile, he even stated that following his economic liberalization advice would help bring political freedom and the downfall of the regime.<ref name=PBS/>

== Democracy ==
Commenting on his statement about the "Miracle", Friedman says that "the emphasis of that talk was that free markets would undermine political centralization and political control."<ref name=PBS>{{cite news|url=https://www.pbs.org/wgbh/commandingheights/shared/minitextlo/ufd_reformliberty_full.html|title=Up for Debate: Reform Without Liberty: Chile's Ambiguous Legacy|last=Friedman|first=Milton |date=10 January 2000|publisher=[[Public Broadcasting Service|PBS]]|access-date=2009-09-29}}</ref> Friedman stated that "The real miracle in Chile was not that those economic reforms worked so well, but because that's what Adam Smith said they would do. Chile is by all odds the best economic success story in Latin America today. The real miracle is that a military junta was willing to let them do it."<ref>{{cite journal |last=Friedman |first=Milton |author-link=Milton Friedman |editor1-first=Milton |editor1-last=Friedman |editor2-first=Thomas Stephen |editor2-last=Szasz |year=1992 |title=The Drug War as a Socialist Enterprise |journal=Friedman & Szasz on Liberty and Drugs: Essays on the Free Market and Prohibition |url=http://www.druglibrary.org/special/friedman/socialist.htm |access-date=3 October 2010}}</ref> Friedman said the "Chilean economy did very well, but more important, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society."<ref name=PBS/>

==Current Chilean economy==
{{main|Economy of Chile}}

According to the 2015 [[Index of Economic Freedom]] (of the Heritage Foundation, Fraser Institute and WSJ), Chile's economy is the 7th freest.<ref>{{cite web |url=http://www.heritage.org/index/country/Chile |archive-url=https://web.archive.org/web/20090117021906/http://www.heritage.org/index/country/Chile |url-status=unfit |archive-date=January 17, 2009 |title=Chile |first1=Terry |last1=Miller |first2=Kim R. |last2=Holmes |first3=James M. |last3=Roberts |first4=Anthony B. |last4=Kim |year=2010 |work=2010 Index of Economic Freedom |publisher=The Wall Street Journal & The Heritage Foundation |location=New York |access-date=2 October 2010 }}</ref> Chile is ranked 1st out of 29 countries in the Americas and has been a regional leader for over a decade. Chile's annual GDP growth was 3.2% in 2008 and had averaged 4.8% from 2004 to 2008.<ref name=WDI/>

The percent of total income earned by the richest 20% of the Chilean population in 2020 was 51.6%, while the percent of total income earned by the poorest 20% of the Chilean population was 5.5%, with the middle 60% of the population earning 42.9% of total income.<ref name=WDI/> Chile's [[Gini coefficient|Gini index]] (measure of income distribution) was 44.9 in 2020, compared to 24.7 of Denmark (most equally distributed) and 74.3 of Namibia (most unequally distributed). Chile's inequality as measured by the Gini coefficient has generally been decreasing since 1990.<ref name=WDI/>

==See also==
* [[Pensions in Chile]]
* [[Economic history of Chile]]
* [[2011–12 Chilean student protests]]

==References==
{{reflist|2}}

==Sources==
* {{Include-USGov
|agency=Select Committee to Study Governmental Operations with Respect to Intelligence Activities, United States Senate
|article=Covert Action in Chile 1963—1973
|url=https://www.intelligence.senate.gov/sites/default/files/94chile.pdf
|accessdate=24 November 2019}}

{{Economy of Chile}}
{{Economic miracle and tiger economy}}

{{DEFAULTSORT:Miracle Of Chile}}
[[Category:1970s in Chile]]
[[Category:1980s in Chile]]
[[Category:Military dictatorship of Chile (1973–1990)]]
[[Category:Economic booms]]
[[Category:Economic history of Chile]]
[[Category:Economic liberalization]]
[[Category:Milton Friedman]]
[[Category:Reform in Chile]]
[[Category:1970s in economic history]]
[[Category:1980s in economic history]]