The Long Run Development of Chile and the Natural Resources Curse. Linkages, Policy and Growth, 1850-1950

Abstract

The long run development of Chile and the Natural Resources curse. Linkages, policy and growth, 1850-1950. Abstract: This chapter analyses the effects of Natural Resources on the Chilean economy in the long run (1850 -1950). Specifically, the authors focus their attention on the mining cycles (nitrates and copper) and their impact on the mining activity. We also compare it with the evolution of the industry and whole economy, and how this has affected the economic growth of the country. In that sense, the industrial performance in Chile at the end of the 19th century until the Great Depression is still under debate. The optimistic view of Kirsch (1977) forehead the pessimistic view of Lagos (1966) and Palma (1979). The new data and its analyses shows a neutral effect of the Natural Resources in the industrial development.

Natural Resources Curse in the Long Run? Bolivia, Chile and Peru in the Nordic Countries’ Mirror

“…Thereafter, Chile became a monopolistic producer of this product (one of the main non-metal minerals of the Second Industrial Revolution), which facilitated the acceleration of the economy and the increase of fiscal revenues [57][58][59][60][61][62]. Both processes have generated an abundant debate concerning the Chilean historiography and the effects that nitrate exploitation had on the economy, especially regarding the resource curse and the fiscal dependency originated by nitrates [57,58,61,[63][64][65]. Besides this debate, the nitrate cycle is characterized by high growth rates and two deep crises, one after the First World War and a bigger and definitive one during the Great Depression, when exports of nitrates fell over 90% and total exports circa 80%.…”

“…The share of the industrial GDP in the total output was between 10 and 15% and was concentrated in consumer goods. During the First World War, an incipient industrialization was growing, in response to the locking of the international market; however, with the end of the conflict, the country resumed its dependence on foreign markets [57][58][59]61].…”

“…However, the analysis should not only look at the 1940-1973 period, but take into account the structural restrictions of the Chilean industrialization process (1870-1970) as a whole. Thus, if we keep our view just in the ISI years, we are not considering the problems faced by the Chilean economy to consolidate a diversified economy in the years prior to these policies [57,61,90]. In a long-term perspective, the ISI period could be considered a failure in GDP growth terms, but taking into account structural transformation and development, the share of industry was growing, and real wages remained matched with productivity gains [67].…”

Natural Resources Curse in the long run? Bolivia, Chile and Peru in the Nordic countries’ mirror

“…Thereafter, Chile became a monopolistic producer of this product (one of the main non-metal minerals of the Second Industrial Revolution) which facilitated the acceleration of the economy and the increase of fiscal revenues. [57][58][59][60][61][62] Both processes have generated an abundant debate concerning the Chilean historiography and the effects that nitrates exploitation had on the economy, especially regarding the resource curse and the fiscal dependency originated by nitrates. [57,58,61,[63][64][65] Besides this debate, the nitrate cycle is characterized by high growth rates and two deep crises, one after the First World War, and a bigger and definitive one during the Great Depression, when exports of nitrates fell over 90% and total exports circa 80%.…”

“…During the Fisrt World War, an incipient industrialization was growing, in response to the lock of international market, however, with the end of the conflict, the Country resumed its dependence in foreign markets. [57][58][59]61] The state led industrialization (also known as Import Substitution Industrialization, ISI) strategy has been object of several critics, especially for the poor economic performance during the 1950s. However, the analysis should not only look at the 1940-1973 period but take into account the structural restrictions of the Chilean industrialization process (1870 -1970) as a whole.…”