Chile’s Economy After The Fall of Socialism
Government economic regulation determines how successful and how developed a country’s economy will be. In 1970, Salvador Allende rose to power through the application of Marxism. During his first year of rule, his government was successful in achieving economic growth, reduction of inflation, creation of employment opportunities, and increased income and consumption. This was realized through the increase of wages and salaries, increased distribution of resources, and reduction of taxes. However, this was short lived as a result of a drop in international copper prices. Copper was a major source of income for the country and after its price dropped, revolts and strikes against the government occurred. …show more content…
According to De Haan, a study by two economists Nelson and Singh used economic freedom as a control variable in a relationship between economic growth and political freedom. They concurred in their research that economic freedom directly affects economic growth positively. An example is in 1970 and the years following, Chile recorded one of the lowest scores in economic freedom and in return they had a suffering economy. But later the economy started experiencing major growth from the 1980’s, which exhibited an increase in economic growth of 7.2% compared to other countries in South America. (De Haan et al …show more content…
For example, during the 1982 recession, the gross domestic product dropped by 14.1%, which resulted in the overvaluation of their currency, making the currency more vulnerable to the volatility of the international economy. These changes led to a decrease in capital, which, in return, made financing investments nearly impossible. This led to an increase in unemployment by 23% and a decrease in salaries and wages by over 10%. (Buc 10)
This success has been achieved through the application of crisis management process, which had affected the management reforms applied in 1974 to restore Chile economy. Some of the reforms that the government has applied include, privatization, open market economy and regulation of policies. This gave Chile an advantage in dealing with the global crisis over other countries. According to Cimoli, this led to the most developed economy years later with the Nation’s Economic Commission for Latin America and Caribbean recording the strongest economy for Chile in the 1980s (Cimoli et al
Government economic regulation determines how successful and how developed a country’s economy will be. In 1970, Salvador Allende rose to power through the application of Marxism. During his first year of rule, his government was successful in achieving economic growth, reduction of inflation, creation of employment opportunities, and increased income and consumption. This was realized through the increase of wages and salaries, increased distribution of resources, and reduction of taxes. However, this was short lived as a result of a drop in international copper prices. Copper was a major source of income for the country and after its price dropped, revolts and strikes against the government occurred. …show more content…
According to De Haan, a study by two economists Nelson and Singh used economic freedom as a control variable in a relationship between economic growth and political freedom. They concurred in their research that economic freedom directly affects economic growth positively. An example is in 1970 and the years following, Chile recorded one of the lowest scores in economic freedom and in return they had a suffering economy. But later the economy started experiencing major growth from the 1980’s, which exhibited an increase in economic growth of 7.2% compared to other countries in South America. (De Haan et al …show more content…
For example, during the 1982 recession, the gross domestic product dropped by 14.1%, which resulted in the overvaluation of their currency, making the currency more vulnerable to the volatility of the international economy. These changes led to a decrease in capital, which, in return, made financing investments nearly impossible. This led to an increase in unemployment by 23% and a decrease in salaries and wages by over 10%. (Buc 10)
This success has been achieved through the application of crisis management process, which had affected the management reforms applied in 1974 to restore Chile economy. Some of the reforms that the government has applied include, privatization, open market economy and regulation of policies. This gave Chile an advantage in dealing with the global crisis over other countries. According to Cimoli, this led to the most developed economy years later with the Nation’s Economic Commission for Latin America and Caribbean recording the strongest economy for Chile in the 1980s (Cimoli et al