Economic history of Chile
The economy of Chile has shifted substantially over time from the heterogeneous economies of the diverse indigenous peoples to an early husbandry-oriented economy and finally to one of raw material export and a large service sector. Chile's recent economic history has been the focus of an extensive debate, as it pioneered neoliberal economic policies.
Chile emerged into independence as a rural economy on what was the periphery of the Spanish Empire. A period of relative free trade that began with independence in the 1810s brought a modernizing development of certain sectors of the Chilean economy. This was accompanied by formation of a local business class, a novelty in Chile. Chile experienced its first modern economic crisis with the Long depression in the 1870s.
Historically, the Chilean economy has relied on natural resources. The exploitation of lucrative nitrate deposits of the north conquered in the War of the Pacific marked a whole epoch in the history of Chile and the economic legacy of nitrate has been widely debated. The onset of Chilean industrialization has often been dated to the end of the 19th century.
In the first half of the 20th century Chile suffered severe economic recessions including the Great Depression. This period saw the rapid urbanization of the country, and a state-led partial "industrialization" that began in 1939. Large-scale copper mining replaced nitrate extraction as the country's main source of wealth. Chilean agriculture remained one of the most undeveloped sectors of economy and was stagnant, despite land reforms in the 1960s and 1970s, from 1930 to 1980.
In the mid-1970s under the influence of the Chicago Boys, Pinochet's military dictatorship initiated profound changes oriented to a "neoliberal" economic model. The government implemented trade liberalization, as well as privatization of state-owned assets. The democratic governments that succeeded the dictatorship since 1990 have largely continued its economic policies, but increased social spending and reduced poverty. Chilean exports and GDP per capita rose steadily through the 1980s and 1990s until the Asian crisis of 1997 after which economic growth slowed somewhat. In the post-1973 period there has been a rise in outsourcing, self-employment, informal employment and an increase in women's share in the labor force.
Pre-Hispanic economy
In the Far North the Pre-Hispanic economy of indigenous groups were divided among those that practised agriculture and were sedentary and the Changos that lived as coastal hunter-gatherers. The sedentary groups raised llamas and practised irrigation techniques. Bone necklaces, gold and copper objects interpreted as luxury goods suggest according to Villalobos et al. certain level of social stratification among the sedentary groups.At the time of the arrival of the first Spaniards to Chile the largest indigenous population concentration was in the area spanning from Itata River to Chiloé Archipelago. In this area indigenous groups practised glade agriculture among the forests. The forests provided firewood, fibre and allowed the production of planks. Agriculture type varied; while some Mapuches and Huilliches practised a slash-and-burn type of agriculture some more labour-intensive agriculture is known to have been developed by Mapuches around Budi Lake and the Lumaco and Purén valleys. Pre-Hispanic agriculture extended as far south as the Guaitecas Archipelago, were indigenous Chonos cultivated Chiloé potatoes. Tools are known to have been relatively simple. In addition the Mapuche and Huilliche economy was complemented with chilihueque raising. The southern coast was particularly rich in molluscs, algaes, crustaceans and fish.
The fjords and channels of the Chilean Far South were inhabited by nomadic canoe-using hunter-gatherers. These groups included the Chonos, the Alacaluf and the Yaghans.
Colonial economy
Spanish conquest (1541–1600)
The conquest of Chile was not carried out directly by the Spanish Crown but by Spaniards that formed enterprises for those purposes and gathered financial resources and soldiers for the enterprise by their own. In 1541 an expedition led by Pedro de Valdivia founded Santiago initiating the conquest of Chile. The first years were harsh for the Spaniards mainly due to their poverty, indigenous rebellions and frequent conspirations. The second founding of La Serena in 1549 was followed by the founding of numerous new cities in southern Chile halting only after Valdivia's death in 1553.The Spanish colonization of the Americas was characterized by the establishments of cities in the middle of conquered territories. With the founding of each city a number of conquistadores became vecinos of that city being granted a solar and possibly also a chacra in the outskirts of the city, or a hacienda or estancia in more far away parts of the countryside. Apart from land natives were also distributed among Spaniards since they were considered vital for carrying out any economic activity.
Beyond subsistence the 16th century economy of Chile was oriented towards large-scale production. Spanish colonizers used large amounts of indigenous labour following the slave labour system used in the sugar cane plantations of the Mediterranean islands and Macaronesia. This system of labour successively killed the production base leading to the imposition of the encomienda system by the Spanish Crown in order to prevent excesses. In Chile Spanish settlers managed to continue to exploit indigenous labour under slave like conditions despite the implementation of the encomienda. Rich Spanish settlers had over time to face opposition to their mode of production by Jesuits, Spanish officials and indigenous Mapuches.
File:Pedro De Valdivia Siedlungen in Chile 1540 bis 1553.jpg|thumb|right|120px|All mainland Spanish settlements south of Biobío River were destroyed by 1604.
The initial Spanish settlers of Chiloé Archipelago attempted to base their economy on gold extraction and a "hispanic-mediterranean" agricultural model. This activity ended in a general failure given the unsuitable conditions of the archipelago. Spaniards however reoriented their activities into logging Fitzroya.
Century of suet (1600–1687)
The collapse of the Spanish cities in the south following the battle of Curalaba meant for the Spaniards the loss of both the main gold districts and the largest indigenous labour sources. After those dramatic years the colony of Chile became concentrated in the central valley which became increasingly populated, explored and economically exploited. Following a tendency common in the whole Spanish America haciendas were formed as the economy moved away from mining and into agriculture and husbandry. Compared to the 16th and 18th centuries Chilean mining activity in the 17th century was very limited. Over the course of the 17th century the indigenous population of Chile declined, making the encomiendas less and less important. Chilean encomenderos who had encomiendas in Cuyo, across the Andes, introduced to Chile indigenous Huarpes who they hired to other Spanish without encomiendas.In the 17th century economy of the Viceroyalty of Peru, Chile's husbandry and agriculture based economy had a peripheral role, contrasting to ore-rich districts like Potosí and the wealthy city of Lima. Husbandry products made up the bulk of Chilean exports to the rest of the viceroyalty. These products included suet, charqui and leather. This trade made Chilean historian Benjamín Vicuña Mackenna label the 17th century the century of suet. Other products exported included dry fruits, mules, wines and minor amounts of copper. Trade with Peru was controlled by merchants from Lima that enjoyed protection by the Spanish authorities in Lima. In addition to the exports to coastal Peru Chile also exported products inland to Upper Peru through the port of Arica. Trade inside Chile was small since cities were tiny and self-sufficient.
Generally the extraction of wood had little importance in colonial Chile but Chiloé Archipelago and Valdivia were exceptions. These two areas exported planks to Peru. With the destruction of Valdivia in 1599 Chiloé gained increased importance as the only locale that could supply the Viceroyalty of Peru with Fitzroya wood. In 1641 the first large shipment of Fitzroya wood left Chiloé.
Century of wheat (1687–1810)
In the 1650–1800 period the Chilean lower classes grew considerably in size. To deal with the poor and landless population a policy of founding cities and granting lands in their surroundings was implemented. From 1730 to 1820 a large number of farmers settled in the outskirts of old cities or formed new cities. Settling as a farmer in the outskirts of old cities was overall more popular than joining a new city since it secured a larger consumer market for agricultural products. Chilean haciendas engaged little in the supply of Chilean cities but focused on international exports for revenues.Chile begun exporting cereals to Peru in 1687 when Peru was struck by both an earthquake and a stem rust epidemic. Chilean soil and climatic conditions were better for cereal production than those of Peru and Chilean wheat was cheaper and of better quality than Peruvian wheat. According to historians Villalobos et al. the 1687 events were only the detonant factor for exports to start. The Chilean Central Valley, La Serena and Concepción were the districts that came to be involved in cereal export to Peru. It should be pointed out that compared with the 19th century the area cultivated with wheat was very small and production modest.
Initially Chilean latifundia could not meet the wheat demand due to a labour shortage, so had to incorporate temporal workers in addition to the permanent staff. Another response by the latifundia to labour shortages was to act as merchants buying wheat produced by independent farmers or from farmers that hired land. In the period 1700 to 1850 this second option was overall more lucrative.
The 1687 Peru earthquake also ended a Peruvian wine-boom as the earthquake destroyed wine cellars and mud containers used for wine storage. The gradual decline of Peruvian wine even caused Peru to import some wine from Chile as it happened in 1795 when Lima imported 5.000 troves from Concepción in southern Chile. This particular export showed the emergence of Chile relative to Peru as a wine-making region.
Haciendas of central Chile are believed to had become labour-saturated by 1780 generating an "excess" population that could not be incorporated into their economy. Some of this population settled in the outskirts of larger cities while other migrated to the mining districts of Norte Chico. Chile saw an unprecedented revival of its mining activity in the 18th century with annual gold production rising from 400 to 1000 kg over the course of the century and the silver annual production rising from 1000 to 5000 kg in the same interval.
In the 18th century the shipbuilding industry in Valdivia, one of the city's main economic activities, reached its peak building numerous ships including frigates. Other shipyards of Chile included those of Concepción and Chiloé Archipelago. The Chiloé shipyards constructed the bulk of the ships in Chile until the mid-18th century. In 1794 a new shipyards was established the mouth of Maule River. Despite some navigators expressing that Valdivia had better conditions than Guayaquil in Ecuador, this last port was the chief shipyard of the Spanish Empire in the Pacific.
File:García Carrasco cropped.jpg|thumb|Smuggling became increasingly common in the 18th century Chile. Governor Francisco Antonio García Carrasco in picture was involved in a smuggling scandal.
Direct trade with Spain over the Straits of Magellan and Buenos Aires begun first in the 18th century constituting primarily an export route for gold, silver and copper from Chilean mining. By the same time Spain's trade monopoly with its colonies was successively weakened by smugglers from England, France and United States.