Published by EH.Net (October 2023).

Sebastian Edwards. The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism. Princeton: Princeton University Press, 2023. 376 pp. $32 (hardcover), ISBN 978-0691208626.

Reviewed for EH.Net by Andrew Zimbalist, Smith College.


The Chile Project is replete with interesting storylines, but the central theme that runs through the book is clear: Chile adopted a neoliberal economic model after 1973 under General Augusto Pinochet that was continued during the post-1990 democratic period through March 2022 when Gabriel Boric became president. Pinochet’s principal economic advisers were University of Chicago-trained Chilean economists known as the “Chicago Boys.” This neoliberal model, according to Sebastian Edwards, himself a Chicago-trained economist, produced striking economic success, particularly following the economic crisis of 1982-83.

The data on Chile’s economic success since the mid-1980s is straightforward and compelling by most standard economic metrics. Chile’s real GDP per capita growth rate was 3.9 percent during 1985-2015 (though 3.1 percent during 1985-2020). Inflation fell from 26.8 percent in 1985 to 2.9 percent in 2020. The unemployment rate fell from 15 percent in 1985 to 6.3 percent in 2015 (though 10.8 percent in 2020), and the percent of the population living below the poverty line fell from over 50 percent in 1985 to 10 percent in 2015. (Growth rates are calculated from data in Edwards’s Table 11.3.) Edwards would have done well to explore the methodology, accuracy, and reliability of the copious data he cites, especially when comparing Chile to neighboring and OECD countries.

On the basis of Chile’s strong economic numbers, Edwards glibly attributes this success to the neoliberal policy regime pursued by Pinochet. This attribution lacks rigor. There is no consistent definition of neoliberalism. There is no econometric analysis to buttress the claim, and there is no effort to consider other factors that may have supported Chilean growth. Nor does he offer an explanation of why the economy performed so poorly between 2015 and 2020, despite what, he asserts, is a continuity of neoliberal policies during this period.

On p. 14 Edwards writes, “I define neoliberalism as a set of beliefs and policy recommendations that emphasize the use of market mechanisms to solve most of society’s problems and needs.” Elsewhere Edwards uses the phrases “market fundamentalism” and “markets everywhere” to denote neoliberalism. This begs the question: when Edwards says that the salutary economic performance derives from neoliberalism, does he mean the use of the market mechanism to allocate resources without government interference or does he also include privatizing education, pensions and health care? His narrative suggests that he means both, but he fails to explain (a) why capital controls and wage rigidities, though practiced during Pinochet are compatible with this definition or (b) how privatizing education, pensions and health care promoted economic growth. It seems that a more careful and accurate treatment would not consider neoliberalism as a binary phenomenon, but rather as a spectrum where different countries fall at different points. Once considered to be a continuous variable, several statistical tests become available. Yet, we never get this care or rigor in The Chile Project.

The first seventeen years of Pinochet’s neoliberalism, 1973-90, brought rather paltry economic results, including a mere 1.7 percent real GDP annual growth rate, which was below the rate of population growth, according to Edwards, and horrific social outcomes. (Perhaps the timeline should begin a bit later, as the first 18 months of the dictatorship’s economic policies still retained statist elements and the switch to more direct neoliberalism is often marked by Milton Friedman’s meeting with Pinochet in March 1975.) The fastest growth period in Chile was after 1990 (post-Pinochet, though he remained as head of the Armed Forces with a lifetime Senate seat), when Edwards avers that there was continuity in economic policy, and, hence, ongoing neoliberalism.

Never mind that many Chilean politicians from the center and left do not believe post-1990 economic policy was neoliberal. (This is also the argument of fellow Chicago-trained, prominent Chilean economist Ricardo Ffrench-Davis in his book Economic Reforms in Chile (University of Michigan Press, 2002).) Never mind that the early policy measures were constrained by ongoing military oversight, by the Pinochet Constitution which required a supermajority in each house in order to raise taxes, and the perceived need to make change gradually. And never mind that the economic strategy from 1990 to 2022 promoted heavy infrastructure investment, a rapid growth in educational enrollments, the reform of the pension system, a new labor code, an increase from 13.3 percent to 17.8 percent in taxes as a share of GDP, and low income support programs. For most of that period, namely 1990 through 2010, Chile was governed by the Concertación coalition of center and left political parties, which sought to provide a broad basis of support for the country’s gradual transition back to democracy. How does Edwards know that it was the neoliberal elements of Concertación policies rather than the interventionist and redistributive elements that caused the economic growth? He never provides evidence for this.

Edwards also does not consider other explanations for Chile’s positive economic performance, such as effective countercyclical fiscal policy, a rapid increase in foreign investment and capital formation in general, a sharp increase in copper (Chile’s main export) prices from $1.15 per pound in 1990 to $4.24 per pound in 2021, the spectacular emergence of lithium exports for battery production, state-led rapid growth in new or moribund exports such as wine and salmon, stronger labor markets and wage growth to stimulate domestic demand, along with healthier and better educated workers, among others. There are at least as many countries with active government roles and industrial policies that can boast of economic success as there are neoliberal countries. (Of course, this statement is subject to how one delineates economic strategy from neoliberal to statist orientations.) To acknowledge the importance of markets in economic development is a different matter than arguing for privatization and marketization of practically everything.

There are additional weaknesses in Edwards’ narrative. For instance, while Edwards provides a reasonable discussion of the growing economic chaos in the Chilean economy under Allende, he glosses over the massive role the United States played in destabilizing the Chilean economy. Both Nixon (“make the economy scream”) and Kissinger (“no reason to stand by and watch Chile go communist due to the irresponsibility of its own people”) made clear that the United States would attempt to undermine the Allende government – and it did, from extensive credit restrictions, to helping to organize a devastating truckers’ strike and other protest movements, to blowing up power stations and disrupting roadways, to providing planes and logistical support for the coup on September 11, 1973.

It is curious that Edwards leans on the judgment of French philosopher (and non-Chile expert) Michel Foucault to support his conclusion that economic policy under Allende was a failure. While there were certainly large and growing macroeconomic imbalances engendered by Allende’s policies, one could reasonably contest the extent to which the increasingly violent and disruptive opposition exacerbated the problems. Despite the growing economic imbalances, unemployment remained very low and economic growth remained positive during the 34 months of Allende’s presidency.

But a larger point needs to be made: The strategy of Allende’s Unidad Popular governing coalition was both political and economic. It was designed to promote economic growth, redistribute income, and transform the underlying structures of economic power in the country. To evaluate the Allende period solely by considering economic metrics is incomplete.

While Edwards is a bit sloppy in presenting his larger polemic, he is to be commended on several counts. First, based on extensive interviews and documents, he provides a revealing discussion of policy disagreements and miscues between 1973 and 1990. For instance, some generals preferred a statist approach to economic management and Pinochet himself waffled from time to time. Cabinet members also disagreed, sometimes vigorously, with each other over the best exchange rate regime or the privatization of pensions, inter alia. A fixed exchange rate policy led to massive current account deficits, bank failures, a 14 percent drop in GDP and an unemployment rate close to 30 percent in 1982.

Second, Edwards offers a critical look at the role of Milton Friedman in Chile, attributing many of the austerity and pro-market policies that ensued to Friedman’s in-person meeting with Pinochet in March 1975. Edwards also argues that Friedman espoused contradictory positions on the Chilean economy over time. Edwards’ treatment of his friend and colleague Arnold Harberger is considerably gentler, despite the fact that, according to Edwards, Harberger also attended the fateful March 1975 meeting with Pinochet.

Third, Edwards presents a balanced narrative for much of the book, including several poignant critiques of the Chicago Boys’ policies. For instance, he notes that the Chicago Boys tended to downplay the significant welfare-reducing effects of large companies and monopoly power, because, they argued, with reduced tariffs these companies would be constrained by competition from international trade. Edwards points out that many large companies in Chile set up trading subsidiaries that signed exclusivity contracts with the foreign corporations that were supposed to be providing competition. Edwards also highlights the corrupt privatization process in Chile that sold major companies off to friends and relatives of Pinochet at bargain basement prices, including the largest lithium company (SQM) and the national airline (LAN Chile). The latter was sold off to a group that included the eventual right-wing president of Chile, Sebastian Piñera.

Fourth, Edwards is to be commended for insightful analyses of the failure of the privatization of pensions and the vote to reject the new proposed constitution in 2022.

In the end, The Chile Project is a provocative and interesting, if imperfect and uneven, account of the rise and fall of neoliberalism in Chile and the role of the Chicago Boys.


Andrew Zimbalist is the Robert A. Woods Professor Emeritus of Economics at Smith College. He has published several books and numerous articles, and consulted for the UNDP, US AID and various companies, on economic development in Latin America.

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