Essay about Chile: Contending Perspectives of Growth

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Chile: Contending Perspectives of Growth The development of South America’s economies in the modern era is an enigma of economics. Even though South America is abundant in natural resources, their economies still lag behind the rest of the world. Sadly, it appears that there is no ‘magic bullet’ to help bring these countries up to speed. Chile is approaching this situation differently than other countries. Even though Chile is in a better economic situation than many of its’ neighbors, its’ people are nowhere near content. The government of Chile has a plan to eradicate poverty and become a developed nation by 2020. By taking the best ideas from contending perspectives of growth, Chile has realistic shot at achieving its’ goal. If you compare Chile’s perspective of growth to other countries, you would probably say they are the closest to following the ‘Washington Consensus’ model of growth. The basic idea of the Washington Consensus is that an emerging economy needs to embrace the free market and allow for foreign investment. During the late 1970s-early 1980s the government of Chile privatized many state owned businesses and really started to embrace the open market. While this transition caused turmoil during the 1980s, it has let to relative stability today in comparison to other Latin American economies. Today one third of Chilean GDP is from exports, most of which is commodities (Chile). Chile has formed many trade alliances and is really trying to put its’ name out there as a trade partner. In 2012, Chilean GDP increased to $28.2 billion which was a 63% increase (Chile). Chile is sending the message that they want foreign investment and trade partners. Since exports are such a huge part of GDP, Chile imposes heavy taxes on their exports which are a big share of government revenue. With such a dependable source of income, then why is Chile still lagging behind the developed world when it comes to GDP per capita? The GDP per capita in Chile is $14,310 according to the World Bank, making it one of the highest in South America (Chile Overview). But this figure still lags behind the rest of the world. This begs the question, if Chile is so rich in natural resources, and has opened up its markets, the why is GDP per capita of Chile about half of South Korea, another ‘emerging economy’. Many economists would argue that resource exploitation is the reason why Chile is so poor considering its’ natural resources. The idea of resource exploitation is that foreign interests or a few select people benefit by depleting a resource and selling it at a profit. While Chile has not solved this problem, it has come closer than other South American countries. Chile imposes heavy tariffs on commodity exports such as Copper. With the world population growing and developing, there will only be more of a demand for Chile’s commodities. But then why is Chile still so far behind when it comes to resources? It isn’t using the money properly. According to the World Bank, the government of Chile plans on reaching its’ development goals by; modernizing the public sector, job creation and equity improvement, and the promotion of sustainable investments (Chile Overview). This plan takes the ideas of the Washington Consensus and adds in the best ideas of Structuralism and Dependecy Theory, two other theories of growth.
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