7.3 Economic Policies of the Military Governments

Military governments in Latin America embraced neoliberal economic policies in the 1970s and 1980s. These reforms, championed by the Chicago Boys in Chile, focused on privatization, deregulation, and free-market principles to boost growth and attract foreign investment.

While some countries experienced short-term economic gains, neoliberal policies often led to increased inequality and social unrest. Many nations faced debt crises, hyperinflation, and were forced to implement harsh structural adjustment programs, sparking widespread resistance from labor unions and social movements.

Neoliberal Economic Reforms

Implementation of Neoliberal Policies

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• Neoliberalism, an economic ideology emphasizing free markets and minimal government intervention, was adopted by many Latin American military governments in the 1970s and 1980s
• The Chicago Boys, a group of Chilean economists trained at the University of Chicago under Milton Friedman, played a key role in implementing neoliberal policies in Chile during Augusto Pinochet's dictatorship
• Privatization of state-owned enterprises was a central component of neoliberal reforms, with governments selling off companies in sectors such as telecommunications, energy, and transportation to private investors
• Deregulation of the economy was another key aspect of neoliberalism, with governments reducing regulations on businesses and labor markets to encourage private sector growth

Consequences of Neoliberal Reforms

• Neoliberal policies often led to increased foreign investment and economic growth in the short term, but also contributed to rising income inequality and social unrest
• Privatization of state-owned enterprises often resulted in job losses and reduced access to services for low-income populations, as private companies prioritized profits over social welfare
• Deregulation of the economy often benefited large corporations and foreign investors at the expense of small businesses and workers, leading to increased economic concentration and reduced competition
• The implementation of neoliberal policies was often accompanied by repression of labor unions and social movements that opposed the reforms, as military governments sought to maintain political stability and attract foreign investment

Economic Challenges

Debt and Inflation Crises

• Many Latin American countries faced severe foreign debt crises in the 1980s, as they struggled to repay loans taken out in the 1970s to finance import substitution industrialization and other development projects
• Hyperinflation, or extremely high rates of inflation, plagued countries such as Argentina, Brazil, and Peru in the 1980s and early 1990s, eroding the value of wages and savings and contributing to social and political instability
• Import substitution industrialization, a development strategy focused on producing goods domestically to reduce dependence on imports, had reached its limits by the 1980s, as many countries faced balance of payments crises and rising foreign debt

Structural Adjustment Programs

• In response to the debt crisis, many Latin American countries were forced to implement structural adjustment programs mandated by the International Monetary Fund (IMF) and World Bank as a condition for receiving new loans
• Structural adjustment programs typically involved austerity measures such as cutting government spending, reducing subsidies, and privatizing state-owned enterprises, which often had negative impacts on social welfare and economic growth
• The implementation of structural adjustment programs was often met with resistance from social movements and labor unions, who argued that the policies disproportionately impacted the poor and working class while benefiting foreign investors and local elites

Economic Successes

The Chilean Economic Miracle

• Chile's economic reforms under Pinochet's dictatorship, which included privatization, deregulation, and trade liberalization, were often touted as an "economic miracle" by proponents of neoliberalism
• The Chilean economy experienced rapid growth in the late 1970s and 1980s, with GDP per capita rising from $1,500 in 1975 to over$5,000 by 1990
• However, the economic success came at a high social cost, with rising income inequality, reduced social spending, and widespread human rights abuses under the military dictatorship
• The sustainability of Chile's economic model has also been questioned, as the country has faced challenges such as environmental degradation, dependence on commodity exports, and a lack of economic diversification in recent years

Limits of Neoliberal Success Stories

• While some Latin American countries, such as Chile and Mexico, experienced economic growth and increased foreign investment under neoliberal policies, the benefits were often unevenly distributed and came at a high social cost
• Many countries that implemented neoliberal reforms, such as Argentina and Peru, faced economic crises and political instability in the 1990s and early 2000s, leading to a backlash against neoliberalism and the election of left-wing governments
• The limits of neoliberal success stories highlight the importance of balancing economic growth with social welfare and political stability, and the need for alternative development models that prioritize equity and sustainability