A New Consumer Society (1978-1982)

In the era of the "Chilean Miracle" of economic growth, neoliberal policies implemented under the Pinochet regime aimed at creating "economic" freedom for a new consumer society. Inflation was the first target of Sergio de Castro's monetarist policies - with the money supply stabilized and value of the Chilean peso on the rise, the growing middle class would have more purchasing power. The privatization of state assets overwhelmingly benefitted the middle- and upper-classes, particularly those with close ties to the military government or economic regime. An agriculture-based export economy developed, resulting in a period of deindustrialization that hurt much of the urban workforce. The mining industry was also scaled back, to prevent the fluctuations of the copper market from devastating the Chilean economy.

Cheap and easy credit flowed in to Chile, from the Bretton-Woods institutions, the United States, and other pro-market governments around the world. The availabilty of credit and influx of cheap luxury goods from the international markets facilitated the rise of a materially well-off middle class. Between 1973 and 1982, savings dried up while credit and borrowing increased. Foreign debt doubled between 1978-1981. The rising debt and trade imbalances were not a problem in a time of industrial expansion and economic takeoff, but should a recession hit, the consequences for Chile's economy, nailed as it was to the volatility of the market and uncomprising quality of de Castro's theories, could be disastrous.