Crisis of 1982: Difference between revisions

[[image:Economic growth of Chile.PNG|thumb|Growth rate of Chile's GDP (orange) and Latin America (blue) between 1971 and 2007.]]

The '''Crisis of 1982''' was a major [[economic crisis]] suffered in [[Chile]] during the [[military government of Chile (1973–1990)|military dictatorship]] after years of radical [[neoliberalism|neoliberal]] reforms. It was the worst economic crisis in Chile since the 1930s [[Great Depression in Chile|Great Depression]].<ref name=mem>{{in lang|es icon}} ''[http://www.memoriachilena.cl/temas/dest.asp?id=transformacioncrisis82 La transformación económica de chilena entre 1973-2003]''. Memoria Chilena.</ref> Chile's [[GDP]] fell 14.3%, and unemployment rose to 23.7%.<ref name=mem/>

After the socialist reorientation of the economy during the [[presidency of Salvador Allende]], (1970—1973)economic sabotage by the [[Richard Nixon|Nixon]] presidency,<ref>{{Cite web|title=Chile and it'sthe United States: Declassified Documents Relating to the Military Coup, September 11, 1973|url=https://nsarchive2.gwu.edu/NSAEBB/NSAEBB8/nsaebb8i.htm|access-date=2020-12-15|website=nsarchive2.gwu.edu|quote=President Richard Nixon had ordered the CIA to "make the economy scream" in Chile to "prevent Allende from coming to power or to unseat him,"}}</ref> and the subsequent Chilean economic crisis which reached it'sits zenith during 1973,<ref name=salazar>''Historia contemporánea de Chile III. La economía: mercados empresarios y trabajadores.'' 2002. [[Gabriel Salazar]] and [[Julio Pinto]]. ppp. 35-4535–62.</ref>{{rp|35–45}} the Armed Forces following the orders of the Congressmilitary junta and with the support of the United States government madeexecuted a [[1973 Chilean coup d'état|Coupcoup d'état]] and demobilized the Marxist Guerrillasforces loyal to Allende like the [[Revolutionary Left Movement (Chile)|Revolutionary Left Movement]]. AinThey 1975closed down the congress, afterimposed censorship, limited civil rights and arrested thousands of people from leftists to center democrats. Upon taking over power, the military junta under the command of General Pinochet set out to implement a series of neo-liberal economic policies based on the [[Chicago school of economics]]. In 1973, only a little bit over two years of heavyregulatory protectionismpolicies andestablished statismby Allende, the military junta decided to reform the failing economy, and the [[Chicago boys]] were permitted to implement some of the neoliberal economical policies outlined in ''[[El ladrillo]]''.<ref name=salazar2>''Historia contemporánea de Chile III. La economía: mercados empresarios y trabajadores''. 2002. [[Gabriel Salazar]] and Julio Pinto. p. 49-62.<salazar/ref>{{rp|49–62}} In 1979 however, Chile decided to depart from the principle of free floating exchange rates, with disastrous results.<ref name="The Political Economy of Unilateral Trade Liberalization">{{cite journal| url=http://www.anderson.ucla.edu/faculty/sebastian.edwards/W6510.pdf | workjournal=UCLA | title=The Political Economy of Unilateral Trade Liberalization | year=1990 | accessdateaccess-date=2010-12-06}}</ref> From 1976 onwards import [[tariff]]s decreased strongly impacting negatively the Chilean production aimed for the [[Single market|internal market]].<ref name=Leiva1983/>{{rp|26}}

==Boom and burst De Pinochet==

The 1982 crisis has been traced to the overvalued [[Chilean peso]], which had been helped by being pegged to the [[US dollar]], and to the high [[interest rate]]s in Chile, which would have hampered investment in productive activities. In fact, from 1979 to 1982, much{{vague|date=October 2013}} of the spending in Chile was the consumption of goods and services.<ref name=salazar2salazar/>{{rp|49–62}} Foreign loans given to Chilean companies started to decline in late 1981 reaching the point of becoming negligible one year later.<ref name=Leiva1983/>{{rp|28}} Events can also be explained in terms of [[Interest rate|interest rates]] and [[capital flows]] using the nineteenth-century Banking School theory of [[Financial crisis|financial crises]].<ref>{{Cite book |last=Read |first=Charles |url=https://www.worldcat.org/oclc/1360456914 |title=Calming the storms : the carry trade, the banking school and British financial crises since 1825 |date=2022 |isbn=978-3-031-11914-9 |location=Cham, Switzerland |pages=286 |oclc=1360456914}}</ref> By 1982, Chile's [[external debt]] had risen to over 17 billion dollars.<ref name=salazar2salazar/>{{rp|49–62}} [[Income per capita]] in Chile fell in 1983 to levels below those of 1960.<ref name=Leiva1983>{{Cite journal |title=Evolución de la Crisis Económica |journal=Coyuntura Económica |last=Leiva L. |first=Jorge |volume=10 |pages=3–71 |publisher=Academia de Humanismo Cristiano|year=1984 |language=Spanish}}</ref>{{rp|3}} Incomes fell as salaries were not adjusted for [[inflation in Chile|inflation]].<ref name=Leiva1983/>{{rp|4}} Around half a million persons were on [[employment programme]]s.<ref name=Leiva1983/>{{rp|4}}

In agriculture, the entrance of [[financial speculation|speculative capital]] before the crisis led to the bankruptcy of several processing companies.<ref name=Pau34-35>Rytkönen, P. 2004. Fruits of Capitalism: Modernization of Chilean Agriculture, 1950-2000. ''Lund Studies in Economic History'', 31, p. 34-35.<Paulina/ref>{{rp|34–35}} [[IANSA (company)|IANSA]], a sugar company that had belonged to the state before its [[privatization]], went bankrupt because of a short-term gains policy by its new owners.<ref name=Pau34-35Paulina/> {{rp|34–35}}

In November 1981, banks were bailed out by the government after they had taken excessive risks: the large [[Banco de Talca]] and [[Banco Español Chile]] and the small [[Banco de Linares]] and [[Banco de Fomento de Valparaíso]].<ref name=mercurio/> Financial societies (Compañía General, Cash, Capitales and del Sur) were also bailed out.<ref name=mercurio/> Banco de Talca and Banco Español Chile were nationalized, removing the management and wresting ownership from shareholders (they were later privatized again).<ref>[https://www.wsj.com/articles/SB122265260912184329 What We Can Learn From Chile's Financial Crisis]. ''[[The Wall Street Journal]]''. September 29, 2008. Retrieved May 14, 2012.</ref>

All sectors of [[agriculture in Chile|Chilean agriculture]] except fruit exports and [[forestry in Chile|forestry]] contracted during the crisis, but recovery was fast after 1984.<ref name=Pau26Paulina>Rytkönen, P. 2004. Fruits of Capitalism: Modernization of Chilean Agriculture, 1950-2000. ''Lund Studies in Economic History'', 31, p. 26.</ref>{{rp|26}} The number of farm bankruptcies in Chile increased from 1979 to its 1983 peak.<ref name=Pau26Paulina/>Rytkönen, P. 2004. Fruits of Capitalism: Modernization of Chilean Agriculture, 1950-2000. ''Lund Studies in Economic History'', 31, p. {{rp|26.</ref>}}

[[File:Panfleto_Tercera_Jornada_Protesta_Nacional.jpg|thumb|200px|Pamphlet calling for a protest including a [[cacerolazo]] (a banging of pots and pans) in 1983.]]

The crisis has been credited of beginning, despite its severe repression, a [[Jornadas de Protesta Nacional|wave of protest all over Chile]] against the dictatorship.<ref name=salazar2salazar/> {{rp|49–62}}

In the years after the crisis, the economic policy of the dictatorship changed to include [[price band]]s for some foodstuffs and a [[floating exchange rate]].<ref name=Pau66Paulina/>Rytkönen, P. 2004. Fruits of Capitalism: Modernization of Chilean Agriculture, 1950-2000. ''Lund Studies in Economic History'', 31, p. {{rp|66.</ref>}}

Supporters of the neoliberal policy of the military dictatorship have argued that the crisis started outside Chile and hit the whole of Latin America in the so-called ''[[La Década Perdida]]'' (The Lost Decade).<ref name=salazar2salazar/>{{rp|49–62}} Historians [[Gabriel Salazar]] and [[Julio Pinto]] have countered that the type of crisis is a freauentyfrequently inherent weakness of the neoliberal model.<ref name=salazar2salazar/>{{rp|49–62}} In contrast, economist [[Milton Friedman]] blames precisely the country's departure from the neoliberal model and political interventions in matters such as the Chilean peso.<ref name="Two Lucky People">{{cite journal| url=https://books.google.com/books?id=6l0_vQ1zpI8C&printsec=frontcover&dqq=To+lucky+people+milton+friedman&hl=en&ei=iEefTfftKtOzhAeDgYnxBA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCkQ6AEwAA#v=onepage&q=sergio%20de%20castro&f=false | workjournal=University of Chicago Press | title=Two Lucky People | year=1998 | accessdateisbn=9780226264158 | access-date=2011-04-08| last1=Friedman | first1=Milton | last2=Friedman | first2=Rose D. }}</ref>

According to [[Ricardo Ffrench-Davis]], the "unnecessary" radicalism of the shock therapy in the 1970s caused mass unemployment, loss of purchasing power, extreme inequalities in the distribution of income, and severe socioeconomic damage.<ref>[[Konrad Adenauer Foundation]], Helmut Wittelsbürger, Albrecht von Hoff, [http://www.kas.de/wf/doc/kas_4084-544-1-30.pdf?040415182627 ChilesChile's Way to the Social Market Economy]</ref> He argues that the 1982 crises as well as the "success" of the pragmatic economic policy after 1982 proves that the radical economic policy of the Chicago boys harmed the Chilean economy from 1973 to 1981 though the economy of Chile recovered quickly and continued to rise rapidly over time.<ref>Helmut Wittelsbürger, Albrecht von Hoff: [http://www.kas.de/wf/doc/kas_3585-544-1-30.pdf ''Chiles Weg zur Sozialen Marktwirtschaft.''] (PDF; 118&nbsp;kB); ''Konrad-Adenauer-Stiftung -Auslandsinfo.'' 1/2004, ppp. 97, 104.</ref>

[[Category:1982 in economicseconomic history]]