Econoencs/Latin Ameen Statics ' ‘Monetaism and Liberaizaton clearly explains the successes and problems of free-market policy in Chile, Implemented in 1993 by the Pinochet regime under the guidance of economist trained atthe University of Chicago. The authors argue that it was a combination & of misjudgments, including important policy errors, that fed ta the collapse of the Chilean economy in 1982-83. A new Afterword con cludes that the Chilean market-oriented reforms have been largely { successful and analyzes the probable fate of free-market economics under democratic rule in Chile. “The Edwards's book is an indispensable guide to the policy reforms and mistakes that have taken the {Chilean} economy to its present state.” Philip L. Brock, Journal of Money, Credit, and Banking “To a subject that has generated mote passion than light, more ardent debate than careful inference, Edwards and Edwards go far in providing the missing elements. ... This work is absolute must reading for serious students of the Chilean economy, and forall who are concerned with the interplay between economic diagnosis and economic policy in developing countries.” —Amold C. Harberger, University of California, Los Angeles “One of the best books written on the Chilean economy for a very Jong time. ... The economic analysis is up to date, itis carefully annotated and referenced. ... You do not need a degree in economics to read this book.” Journal of Development Stasis “This book provides a thorough, incisive, and very professional analysis of one of the most fascinating economic experiences of recent years.” Claudio Loser, Finance and Development Sebastian Edwards ls the Henry Ford I Professor of Business Eco nomics at the Anderson Graduate School of Management at the University of California, Los Angeles, and a Research Associate al the National Bureau of Economic Research, Alejandra Gox Edwards is associate professor of economies at California State University, Long Beach. “The University of Chicago Press ISBN O-226-18485-7 | WM iii) oFreozes!ie4a90! il ll 3560 10046 10709 ie 5! a} et 2 S| 2 = 2 5 Iti ce ee ACen:sik) ars tas somes ean: vm bene See aber dN eS a let rbat aA rade . unt rey arcan Eeakeemey vet Ms ae aban cit Baw etree omer lites et otal baie emacs yeni 4 yebvr 6 ‘oe eben shaman warn ara ait ite Poe Ste Tyre ae eats ettarseuns rayrohadt pooh 9 amity toate nh an ean atland ses! atts at gina nek un as gy 2 ime me aT smyth kona inch ont. lipmewal ern clnranuties "ae ait BeesTHE CHILEAN EXPERIMENT An Overview ‘The study of Chile’s modern economic history usually generates a sense of excitement and sadness: excitement, because during the last fifty years Chile has been a social laboratory of sorts, where almost every possible type of economic policy has been experimented; sad- ness, because to a large extent all these experiments have ended in failure and frustration ‘The most recent of these “experiments” began in 1973, after the military overthrew President Salvador Allende. In the ten years fol- lowing the coup, the military implemented deep reforms directed at transforming Chile from an economy semi-isolated from the rest of the world, with strong government intervention, into a liberalized world- integrated economy where market forces were freely left to guide most economic decisions. These liberalization reforms were carried out at the same time that a major stabilization program aimed at reducing a rate of inflation of approximately 600 percent was being implemented, Many of the liberalization policies undertaken roughly correspond to what a vast number of economists have been advocating for develop- ing countries: International trade was liberalized; the capital account was opened; prices, including interest rates, were freed; an active do- mestic capital market was developed; the fiscal system was reformed, and a value added tax implemented; the social security system was re- formed; and the private sector began to play an active role in the growth process. 1