The Chile Project

By Sebastian Edwards

The book tells the fascinating story of how Chile became the ultimate testing ground for free-market economics—from a quiet academic exchange program to a full-blown political and economic transformation. It's a wild ride filled with bold reforms, skyrocketing growth, deep inequality, and, ultimately, mass protests.

Back in the 1950s and 60s, the U.S. was worried about socialism creeping into Latin America. So, they funded a collaboration between the University of Chicago and Chile's Catholic University, sending Chilean students to study under Milton Friedman and other big-name free-market economists. These students, later known as the "Chicago Boys," became true believers in free markets, privatization, and deregulation. At the time, this was just an academic idea, but soon, they'd get a once-in-a-lifetime chance to put their theories into action.

Fast forward to 1973—General Augusto Pinochet seizes power in a brutal coup, overthrowing socialist President Salvador Allende. Chile suddenly became a dictatorship, and the Chicago Boys saw an opportunity. Without democratic pushback, they could go all-in on their free-market vision. Pinochet wasn't an economist, but he liked the idea of turning Chile into a business-friendly, capitalist powerhouse.

The Chicago Boys wasted no time. State-owned industries? Privatized. Tariffs? Slashed. Government spending? Cut. They wanted a lean, free-market economy, and they got it. By the 1980s, businesses could finally set their own prices, inflation was tamed, and Chile's economy boomed. Milton Friedman himself visited in 1975 and gave it his stamp of approval. The press started calling it the "Chilean Miracle"—a model for Latin America and beyond.

One of their biggest moves came in 1981—a radical pension reform. Chile ditched traditional government pensions and replaced them with a fully private retirement system (the AFP system). Instead of the government guaranteeing retirement funds, workers had to contribute to private accounts, which were then invested in the stock market. Early on, returns looked great, and Chile's pension model became a blueprint for other countries looking to cut down on government spending.

Fast forward to the 2000s, and the problems started surfacing. Not everyone was saving enough. Workers in lower-paying jobs, freelancers, and women were getting shockingly low payouts. Meanwhile, the wealthy—who could afford higher contributions—were doing fine. By the 2010s, anger over tiny pensions and rising living costs fueled widespread protests. Chileans started to lose faith in the free-market experiment.

Then came 2019. Decades of frustration boiled over, leading to massive protests demanding economic change. One of the biggest calls was for a new constitution, one that would undo many of Pinochet's economic policies and strengthen social protections. Chileans overwhelmingly voted to draft a new constitution, and in 2022, a progressive, left-leaning proposal was put forward. But—it got rejected. People wanted change, but not that much change.

In 2023, a second, more conservative draft was proposed. That one got rejected too. Now, Chile is stuck in limbo, with no clear path forward. The same economic model that once made Chile a poster child for free-market success is now at the center of deep political division and social unrest.

I loved the book. Its a part of world I didn't know much and the author does a great job of telling a coherent story.