Charged Affairs

By Arlen Agiliga | Rising Expert on Economics | November 25, 2025 | Photo Credit: Flickr

Associated with deregulation, austerity, and the sanctity of the private sector, the modern interpretation of ‘neoliberalism’ emerged from drastic changes to the Chilean economy implemented by the Pinochet regime in the 1970s. From the outset of its entrance into popular political and economic thought as a term of art, neoliberalism has faced intense scrutiny from opponents that prefer a larger, more active role for government and bureaucracy in business and economics. For a brief while though, the late 20th century economic miracle in Chile — neoliberalism’s ‘birthplace’ — was enough to silence critics and make Chile’s neoliberal economic model an exemplar for other countries across the developing world. More recently however, nationwide popular protests and political upheavals that mainstreamed anti-neoliberal ideas have raised existential questions about Chile’s neoliberal legacy and the fitness of the neoliberal model for the rest of the world. Coincidentally, on the heels of Chilean neoliberalism’s identity crisis, Latin America found a new neoliberal champion in Argentina’s Javier Milei. But despite the early successes of Milei’s economic reforms, a marked uptick in social unrest in Argentina may portend a similar fate for his neoliberal project as Chile’s.

Following the 1973 deposition of socialist Salvador Allende as a result of Augusto Pinochet’s military coup, Chile underwent a yearslong program of drastic economic “shock therapy” that involved the abolition of price controls, the liberation of imports, the deregulation of financial markets and capital flows, the reduction of corporate income tax, the reversal of business nationalizations and land expropriations, and the raising of interest rates to combat rampant inflation, among other neoliberal policy reforms. It was these reforms that laid the groundwork for Chile’s eventual economic miracle beginning in the 1990s after a period of “growing pains” in the 1970s and early 1980s. By the early 2000s, Chile had become one of the richest countries in Latin America on a GDP per capita basis after being amongst the poorest in the 1980s. Poverty declined drastically as well, from 53% of the population in 1987 to 6% in 2017, the lowest figure in Latin America. Infant mortality rates decreased from 22.0 deaths per 1,000 live births in 1987 to 7.5 in 2017, and life expectancy increased from 72 to 81 years during the same period. Essentially, by all objective accounts, neoliberal reform in Chile had a positive effect on the country’s overall development.

Despite the country’s objective economic and developmental progress as a result of neoliberal reform though, a growing, pervasive malaise was spreading throughout the Chilean population in the early 2000s. As Sebastian Edwards explains in The Chile Project, ‘while every traditional indicator showed that Chile was a major success and was steadily moving towards the ranks of the advanced nations, substantial portions of society were deeply unhappy and demanded major changes.’ This malaise culminated in the massive 2019 protests that were set in motion by a 30 peso increase in metro fares, although the target of the protesters was the neoliberal model itself, as exhibited by graffiti that read “neoliberalism was born and will die in Chile!”

Understanding the Chilean malaise and the disdain for neoliberalism despite the economic and developmental progress it catalyzed, Edwards argues, necessitates going beyond income and development statistics and focusing instead on “social interactions … the provision of amenities and public goods … and … the way common people are treated by the elites.” Indeed, Edwards asserts that many of the protesters he spoke with in 2019 mentioned “dignity” as a key goal of their agitation.

Similar sentiments have cropped up more recently in Argentina. In Buenos Aires, a protester with a disabled daughter criticized Milei’s austerity measures targeted at pediatric care, saying that ‘[Milei] doesn’t care,’ while a mother at a related protest passionately exclaimed that ‘we all matter, not just the people who have money.’

Importantly, although Milei’s neoliberal reforms have notched meaningful macroeconomic wins including historically low inflation, a budget surplus for the first time in over a decade, and relative currency stability as a result of the abolition of currency and foreign exchange controls, these successes have come at the cost of social welfare, which in turn drives the people reliant on government programs and the social safety net to protest in defense of the dignity they feel they are losing.

To be clear though, this phenomenon of shock therapy and austerity catalyzing social unrest is not unique to Argentina — the same phenomenon occurred in Chile. Although Chile first began implementing neoliberal reforms during the 1970s, it was only after a decade of severe growing pains related to the transition from socialist-oriented to market-oriented economic policies that Chile could reap the dividends of such a painful transition and experience the economic and developmental miracles that cemented neoliberalism as a bona fide path to prosperity.

In other words, painful but temporary rationalizations of the social safety net in the first stages of neoliberal reform are a feature rather than a bug. But deftly managing the inevitable political and social unrest that such rationalizations create is of critical importance to ensuring the neoliberalized economy has enough time to actually produce the development outcomes that make the rationalizations and societal turbulence eventually worthwhile.

In Chile, Pinochet’s brutal dictatorship ensured the country’s neoliberal reforms had the requisite time to incubate and take root, but contemporary Argentina is a different beast entirely. Choosing to scapegoat left-wing Kirchnerist and Peronist influences as the reason for Argentina’s social unrest rather than his own neoliberal policy, Milei’s rhetoric implies that opposition to the neoliberal model in Argentina will only grow, exacerbating polarization and reducing the likelihood that neoliberalism in Argentina will persist long enough to affect material development outcomes for common Argentinians.

Furthermore, as the case of Chile makes clear, the balancing act between economic growth and social stability in a neoliberal economy does not necessarily become less important even after the economy has progressed through the first stages of a neoliberal transition. The 2019 protests in Chile were catalyzed by feelings of dispossession amongst large swaths of Chilean society even as the country had risen to the highest ranks of development in Latin America in the 21st century. In fact, as poverty rates fall and health outcomes and life expectancy improve, it is likely that more qualitative aspects of personal “dignity” become more critical to common people, making the provision of public goods and interactions between different strata of society that Edwards mentions even more critical to social wellbeing.

Thus, although the initial stages of a successful neoliberal transition may rest on austerity, the continued success of a neoliberal program is dependent on striking a balance between prudent economic management and an intimate awareness of — and a willingness to be responsive to — the diverse needs of all levels of society.

Mr. Agiliga is an investment banking analyst based in Ulaanbaatar and a Princeton in Asia Fellow. He is also a Rising Expert on Economics at Young Professionals in Foreign Policy.