Until just a few years ago, Chile was a case of economic success. The neoliberal reforms of the seventies and eighties, as it has been argued by many academics and international organizations, built a pattern of insertion into the world market which made the country flourish from the nineties onward: Chile at the beginning of the new century became the country with the highest income per capita and the most dynamic economy in the region.
Those results were considered to be clear evidence in favor of the neoliberal strategy in Latin America . Despite the meager aggregate economic results of the region after the reforms of the Washington Consensus (that led to many countries turn to the left during the noughties), Chile was pointed out as a successful case that should be considered when analyzing the causes of the regional stagnation. As Kuczynski and Williamson (2003) indicated, the critics of neoliberalism in the region should also explain the successful case of Chile .1
In the Chilean debate, the economic success was characterized in different ways. During the nineties, for example, Chile was defined by the main newspaper in the country, El Mercurio , as an economic “Jaguar,” in direct reference to the Asian tigers. The main idea behind this was to show that Chile was an exception to the region that signaled the path that the rest of the countries should follow.
Both the old advocates of the military dictatorship and the new intellectuals of the democratic government agreed that, since the neoliberal policies during the dictatorship and the reforms during the nineties, Chile built a pattern of insertion into the world economy where the market and its signals determined the economic specialization and provided the incentives to invest and innovate. This pattern permitted the country to exploit its comparative advantages, dynamize and diversify its exports, attract foreign capital and build an environment for competition which paved the way for a new entrepreneurial class (see Montero 1997; Toloza and Lahera 1998). This process of economic growth and export diversification was defined as a “capitalist modernization” and was considered to be the material base for the stable democracy of the country (Muñoz 2007).
Twenty years later the scenario has changed. A new wave of social conflict emerged since the first decade of the 2000s that challenged the political stability that characterized the country so far. Student, worker, and environmental protests have defied the previous consensus around the economic model. That wave of conflict came in parallel with a period of economic stagnation: since 2011, the export-led growth gave way to a new period of stagnation, export reprimarization and an intensification of the premature deindustrialization 2 of its productive structure.
What happened with the “Jaguar” of Latin America ? During the Chilean presidential elections in 2017 the debate around this question quickly emerged. Many liberal economists argued that Chile was entering into a new populist cycle (this in reference to the first term of the center-left government under President Michelle Bachelet and its proposal for a new Constitutional, tax, labor , and educational reforms) that undermined the main institutional pillars of the so-called capitalist modernization, preventing the country to continue its path of growth and threatening to turn it into the “middle-income trap .” The economic stagnation, then, was not an internal product of the economic model but the result of Bachelet government’s populist turn.
The center-left, on its part, argued that contemporary social riots and economic stagnation had different causes. In relation to the first one, it was argued that, as every process of economic modernization improved the standards of living of the population, it permitted the emergence of new necessities and demands among the people (for redistribution, recognition, democratization, ecological sustainability, etc.) and, thus, opened the door for a new period of agitation. Therefore, the only way to keep a consensus around the process of modernization was through the implementation of reforms that could address those demands. The economic stagnation was considered to be not the result of populist measures but of two different causes: the end of the exogenous super cycle of the commodities and the necessity of the country to, having successfully modernized the economy, jump into new areas such as services, energy and deepen the export diversification in order to build a new economic boom (Foxley 2017).
Evidently, completely different political strategies could be derived from those hypotheses. While the first one argued for a State whose function would be to secure free market and put a stop to the demands for social and political reforms, the second one, on the contrary, wanted to gave answers to those demands. However, even though the political implications of these hypotheses were widely different, both of them shared a key diagnostic: Chile did experience a process of economic modernization that, despite the current stagnation and social malaise, distinguished it from the rest of the region as an example of success.
Put in these terms, the debate about Chile’s economic performance has been implicitly based on a typically Rostownian approach: a moment of economic take-off during the eighties that lineally advanced on the road of economic modernization during the nineties and where the social sectors not yet modernized are considered to be lagging behind and requiring the state to help them jump into the wagon of progress.
Nevertheless, this approach has a series of limitations that makes it problematic to understand development in general, and Chile’s case in particular. After forty years of the implementation of this pattern of integration into the world economy, Chile is still an extractive economy, dependent on copper exports and lacking an endogenous industrial core, with high inequalities and a fragile economic growth. While Chile is the strongest economy in the region, those characteristics have prevented it to replicate a sustainable economic dynamism, as the ones experienced by late-developers like Finland and South Korea during the twentieth century, that could close the productive and income gap with developed countries.
Thus, everything seems to suggest that these characteristics of Chile’s economic regime are not transitory situations within a general process of “modernization” but, on the contrary, permanent economic outcomes of the type of insertion that Chile opted in the seventies and that nowadays is showing its limits in terms of ensuring a sustainable economic dynamism. That perspective opens up a question: if what is been observed in Chile is not a process of economic modernization, what is it?
By looking at the current characteristics of Chile’s productive structure and pattern of specialization one can see that they are not substantially different from the ones of its regional peers. Indeed, the increasing internal deindustrialization and the export specialization on extractive sectors are regional tendencies of which Chile is just another example. Those dynamics are typical of a common peripheral condition, that is, of a growth anchored on sectors with low levels of technological complexity (from natural resources extraction to labor -intensive assembly) and lacking an internal industrial core. Thus, understanding the case of Chile can shed some light on these general tendencies of the region.
This is particularly relevant since this kind of regional peripheral growth has traditionally been associated not only with unstable economic fluctuations (periods of growth followed by stagnations), but also with high levels of wealth and income inequalities, affecting the whole social fabric, particularly the stability of the democratic political system (Cimoli et al. 2015). In fact, the erosion of this kind of growth after the end of the commodity cycle has led the way to strong political crises in the region, from which there is no clear signals of recovery until today.
This book is an attempt to contribute to the understanding of the political and economic variables, both national and international that, in their interactions, shaped Chile’s pattern of integration and growth from 1975 to 2015. The chosen method is political economy rather than formal economics. And the reason for this is that economic regimes, such as the pattern of insertion that is analyzed here, are the outcome of a broader social process that exceeds the mere interactions between prices, quantities, and utilities, as is the focus of contemporary conventional economics, and refers to the dialectical interaction between internal political forces, geopolitical contexts, and international economic dynamics.
To comprehend these interactions it is necessary to have an approach less economistic and more pluralist in its concepts. Econ...