Did Chile's economic collaspe have anything to do with Keynes and Hayek's philosophies?

Expert Answers
pohnpei397 eNotes educator| Certified Educator

I assume that you are asking about Chile's economic collapse of the early 1970s.  This is the one that led to the overthrow of Salvador Allende.

If so, this economic collapse can be seen as a vindication of Hayek's ideas.  Salvador Allende was a leftist who believed in state control of many industries.  Because of this, his rise to power brought a wave of nationalization of industries and the taking of land from large landholders.  Allende also put price controls in place and, when things started getting bad, started printing money and increasing the money supply in that way.  All of these are things that Hayek would disapprove of given his desire for free markets without government intervention.

An argument can be made, though, that Allende's policies were not the main problem.  The US pressed for its allies to isolate Chile economically because they felt it was moving towards communism.  This, along with resistance by conservative Chileans, can arguably be blamed for the problems.

Disciples of Hayek, however, would argue that the Chilean collapse proves that government intervention does not work.