For the past generation, Chile has been graced with the most stable democracy and economy in South America. Chileans boast some of the highest standards of living in Latin America and one of the region's least corrupt and most efficient governments. Nevertheless, in spite of the rapid expansion of civil and political rights since the country's democratic transition in 1990, the presence of resolute and efficient institutions, and prolonged economic growth, socioeconomic inequality still abounds--a problem attributable to previous regimes' failure to guarantee equal social services to all strata of society.
During the colonial era, royal monopolies dominated the Latin American economy, accumulating vast amounts of wealth in few hands and creating a wide gulf between the ruling class and the working class. This pattern of dual societies persisted long after independence and frequently generated social pressures that undermined the stability necessary to sustain a prosperous, modern-day working democracy.
Chile typified this pattern. During the dictatorship of General Augusto Pinochet, the structure of the Chilean economy was radically altered from the socialist policies of President Salvador Allende. Pinochet's team of expert economists, the "Chicago Boys," made Chile an extreme experiment in neoliberalism, implementing tight monetary policies to tackle inflation, deregulating the economy and virtually abolishing trade barriers. Most notable, however, were the privatization of health care, higher education, and the pension system.
The reforms initially did not have the expected results. In 1982 the Chilean economy collapsed, partly because of a region-wide debt crisis but also because a total lack of regulation led to the collapse of the banking sector. Unemployment soared above 20 percent while real wages fell, and even more cuts were made to government spending on social services. Only after Finance Minister Hernan Buchi made key reforms did the economy recover, hitting its highest-ever annual growth rate in 1989.
In 1990 Chile finally returned to democracy. The Concertacion de Partidos por la Democracia, a bloc of center-left parties, assumed power with Patricio Aylwin, the first elected president since Allende, as their leader. The Aylwin government decided to continue the market-based model established by the Pinochet regime but to add more social protection to curb the effects of a purely neoliberal model. Since its democratic transition, Chile has experienced the highest average growth rate in its history while increasing social spending and fully expanding civil and political rights to its citizens.
Despite good governance, Chile has faced a paradox of economic growth coupled with persistent inequality that can be traced to problems with social services, which continue to vary in quality despite increased coverage. The duality of Chile's social services is most evident in its education and health care systems. The quality of primary and secondary education still depends on socioeconomic status. A good family name is essential for admission to some of the most elite academies, whose high tuitions and exclusive policies effectively ban the poor.
Higher education has seen better results, as the expansion of private universities has generated competition and increased scholarships for talented students. …