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The return of democracy in Chile during the 1990s
In 1990, Chile returned to democracy after 17 years with an authoritarian, military government. Salvador Allende was the president during that time, but the military and the National Police are overthrow in a military coup. A Military Board governed the country and Augusto Pinochet directed it. The history of Chile shows characteristics of a socialist and neoliberalist government which contribute to the change in the economic and social situation in Chile. It is important to understand that Chile’s economy began to succeed after Allende’s overthrow. The Pinochet dictatorship brought notable economic growth, increased annual growth of 8 percent between 1977 and 1981. The following sections will explain the political background of Chile and caused the most serious financial crisis. From the return to democracy of 1990-2005, Chile has had uninterrupted economic growth, but was enough? In this role, I will investigate what effect economic growth in Chile has in lack of equity, poverty, and education. Chile has been called as a model to follow Latin America for its rapid develops economic and social. However, the evidence shows that these profits were not shared equally, so, this created a historical maximum inequality.
At the beginning of Allende’s presidency in 1970, Allende faced a great opposition from the right and the people of the middle and high class. Its objective was to redistribute wealth among the members of the poorest society because "they had been excluded from social improvements" in the past (Teichman 64). However, Allende needed to expand his electoral support base, then he created employment opportunities and redistribute the land to hold supporters of the party during his side. His plan to redistribute the land was not good because, although permanent workers benefited from it, the minifundistas and temporary rural workers did not do so. Therefore, the production of decreased agriculture (Teichman 65). "The increase in salary meant that food consumption increased and to meet demand, the government had to import more" (Matus, slide). To increase employment opportunities, Allende invested in the nationalization of companies, particularly in the copper mining industry. At first, this action was going well, but the government could not maintain the demands for the increase in wages. Therefore, production in mining drastically, causing the miners to declare a strike. These escases will be the beginning of inequality as seen through economic growth in Chile.
Consequently, these actions led to a series of strikes and demonstrations from 1971 to 1973. On September 11, 1973, the military launched a blow against the Allende government. Two days later, Augusto Pinochet became the president of Chile. Pinochet had very little understanding of economics when he took power. However, he wanted to undo the actions of Allende, for the reason, Pinochet hired a group of free market economists called "The Chicago Boys". The group asked that Chile undergo a ‘shock treatment” which included drastic cuts in government and privatization expenses (Kennedy and Warwick S30). The Government decreased its financing for health care by 40 by hundreds;This decision came to the poor to fend for themselves. "Obviously, reducing inequality was not a short -term concern for neoliberal administration" (Kennedy and Warwick S30). In privatizing the agricultural land, the regime did not sell the land to the minifundistas because it wanted to create a great capitalist Rich Agriculture. Therefore, small farms declined, which caused an increase in unemployment by 22 per hundred, which is record level (Teichman 69).
In addition, the privatization of health care has contributed to an increase in inequality. The government divides the health system into 2 systems: a public system and a private system. With 85 for hundreds of the population using the public system, the services will deteriorate due to the decrease in government expenses. Despite the devastating impacts on ignored groups, this death helped those in the private system. More babies were born of educated mothers and infant mortality rates fell (Kennedy and Warwick S30). This economic growth shows good results for some, but not all. As can be seen that the division between the rich and the poor is actually increased in inequality. Inequality in Chile is one of the worst among the richest nations and derives from this division.
The economy experienced tremendous GDP growth during the Pinochet regime, but most of that growth was 10 percent of the country’s richest population (Coha 2011). How is it possible that a fraction of the country benefits from that and not the rest? While Chile followed a neoliberal model, inequality would still persist. This model does not support lower class citizens and for the privatization caused an increase in income inequality. Economic growth was not enough because the richest 20 percent earns 14 times more than the poorest 20 percent (Larsson 16). The reality is that while the statistics of economic growth are positive, most Chileans are not represented by this growth. Today in Chile, inequality is still presented and Chileans are dissatisfied. Eventually, something will change, but for now they must fight for their rights.
This growing inequality accordingly led to considerable poverty. Similar to inequality in Chile, poverty rates decreased on the one hand in Chile and increased by the other part during the economic growth period. The development of poverty in Chile will be explained in two parts: poverty relating to absolute poverty. Chilean absolute poverty is a measure of income poverty related to consumption possibilities. For example, a house whose income is insufficient to pay the basic needs of life is the definition of absolute poverty. The poverty line is based on the estimated minimum wage on which "prices are adjusted annually to reflect prices for the consumer" (Larsson 7). Chilean relative poverty is the consideration of income distribution and how much is deprived of a company or culture. For example, a house whose income is 60 percent under average income in a particular region would be considered deprivation of capacity. So how are they related to economic growth? From the return to democracy, income and consumption power they increased due to the free market economy. The increase was not unexpected because with general economic growth, both increase. Therefore, according to national poverty line, absolute poverty decreased from 39 percent in 1990 to 15 percent in 2009 (Larsson 13). Relative poverty, on the other hand, studies comparisons of the economic condition in different regions. The government dispersed income distribution in 1990, but the poor did not receive as much money as the people in the middle or high class. Therefore, relative poverty did not decrease as a result of distribution in favor of higher income than from lower income.
These results show that economic growth does not decrease relative poverty in Chile.