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Power, Ideology and the Washington Consensus: The Development and Spread of Chilean Housing Policy

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Abstract

It is well known that reality is often stranger than fiction. That certainly applies in the case of the housing subsidy model of Chile. Developed by Chileans with the assistance of neo-liberal ideology invented in Chicago, the powerful institutions of Washington DC appear to have been minor actors on the Chilean scene. Initially, Chile needed World Bank support and finance, but once this had been achieved it followed its own agenda. The Inter-American Development Bank and USAID faired little better. Chile was master in its own house. Was this a victory for national autonomy over the power of international finance? Clearly not, because the new model being applied in Chile was the precursor of much that was implemented from Washington in the days of structural adjustment. Chile 'won' because it accepted the rules of the new game established by institutions far more powerful than the multilateral development banks. Developmental Washington learned much from Chile and then applied those lessons to the more indebted, smaller and less sophisticated countries.
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Power, Ideology and the Washington Consensus: The
Development and Spread of Chilean Housing Policy
Alan Gilbert
Online Publication Date: 01 March 2002
To cite this Article: Gilbert, Alan (2002) 'Power, Ideology and the Washington
Consensus: The Development and Spread of Chilean Housing Policy', Housing
Studies, 17:2, 305 - 324
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Housing Studies, Vol. 17, No. 2, 305–324, 2002
Power, Ideology and the Washington Consensus: The
Development and Spread of Chilean Housing Policy
ALAN GILBERT
Department of Geography, University College London, London, UK
[Paper rst received August 2001; in nal form October 2001]
ABSTRACT It is well known that reality is often stranger than ction. That certainly
applies in the case of the housing subsidy model of Chile. Developed by Chileans with
the assistance of neo-liberal ideology invented in Chicago, the powerful institutions of
Washington DC appear to have been minor actors on the Chilean scene. Initially, Chile
needed World Bank support and nance, but once this had been achieved it followed its
own agenda. The Inter-American Development Bank and USAID faired little better.
Chile was master in its own house. Was this a victory for national autonomy over the
power of international nance? Clearly not, because the new model being applied in
Chile was the precursor of much that was implemented from Washington in the days of
structural adjustment. Chile ‘won’ because it accepted the rules of the new game
established by institutions far more powerful than the multilateral development banks.
Developmental Washington learned much from Chile and then applied those lessons to
the more indebted, smaller and less sophisticated countries.
KEY WORDS: housing subsidies, Development Banks, policy diffusion, Chile
Introduction
Once upon a time, there was the Washington consensus (Culpeper, 1995;
Iglesias, 1992; Mosley et al., 1995; Tussie, 1995; Williamson, 1990). Today,
everyone in Washington DC seems to know better and adheres to the post-
Washington consensus (IADB, 1999; Stiglitz, 1999). As an internal Inter-Ameri-
can Development Bank document (1999, para V: 1) puts it: “the Washington
Consensus’ of private markets and minimalist states will not be sufcient to
deliver the kind of broad-based growth the region needs”. Today, ‘developmen-
tal’ Washington (by which is meant the World Bank, the IMF, the Inter-Ameri-
can Development Bank, USAID and private consulting companies like the Urban
Institute and PADCO) is committed to poverty alleviation, debt relief for the
most indebted, the environment, women and children, community partici-
pation, decentralisation and even the reduction of inequality. In the process, the
World Bank has changed from behemoth to Information Bank, the IMF into a
negotiator of debt relief to very poor countries, the Inter-American Development
Bank has espoused the need to bring greater equality to Latin America, and
USAID has gone environmental and everyone is into gender and micro-nance.
0267-3037 Print/1466-1810 On-line/02/020305–20 Ó2002 Taylor & Francis Ltd
DOI: 10.1080/0267303022012324 3
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306 Alan Gilbert
In short, the rigour of neo-classical economics had given way to compassionate
conservatism.
That Washington’s approach to development should be subject to change is
hardly surprising (Mosley et al., 1995). Every decade has seen a new approach:
modernisation in the 1960s; distribution with growth in the 1970s; stabilisation
and structural adjustment in the 1980s, and adjustment with a more human face
in the 1990s. Within those broad paradigms there have been shifts towards or
away from rural development, urbanisation, industrialisation, the informal sec-
tor, and so on. But, whatever the current paradigm or shift, it strongly affected
the rhetoric and behaviour of development agencies and academic discourse
across the globe. The new language inltrated the annual reports and the
academic journals (Mosley et al., 1995). Third World governments modied their
requests for assistance and loans in the light of the new conventional wisdom.
In the search for loans and technical assistance, it was important to align your
government’s rhetoric with whatever Washington thought. Academic thinking
was not much different in its readiness to take on, or at least to discuss, the latest
modication in policy. The power of developmental Washington lay in large
part in the receptiveness of its audience.
This paper questions whether Washington has ever exercised quite as much
power as its advocates and its critics claim. Using the example of housing policy
in Chile, the paper will attempt to show rst that what happens on the ground
is frequently, perhaps usually, very different to what Washington institutions
intend.
The Achilles’ heel of Washington is that its development agencies lend money
on certain conditions and the countries and institutions that borrow frequently
fail to full those conditions. The big gap that exists between intent and practice
has long undermined Washington’s power. Several poor countries are very
skilful at manipulating the multilateral development banks (Taher, 2001). Some
gain their manipulative power through their sheer size: China and India, and
even Indonesia, Brazil, Mexico and Nigeria have a huge advantage over small
countries in this regard. Others like Chile are successful manipulators partly
because their ofcials are as clever as those in the Washington institutions.
Clever local ofcials can play one Washington institution off against another.
This is possible because there are sometimes substantial differences in the
approach of Washington agencies (Klak, 1992). Indeed, one of the reasons why
poor countries do not always have to do what they promise to do is that one
Washington agency is likely to undermine the actions of another. Different
institutions have different priorities that lead them to compete for poor country
patronage. Occasionally, different departments within the same institution are
holding different hymn sheets. Few have homogenous policies across their remit
countries because different departments have different priorities. Some ofcials
in the agencies even pride themselves on their exibility and responsiveness to
their client countries (IADB, 1999; Tussie, 1995). Today, the problems are worse
because ‘target proliferation’ has made many ofcials in the World Bank and the
Inter-American Development Bank less than certain what their priorities are
supposed to be. The post-Washington consensus has made development goals
so multifarious that no one is entirely sure what their institution is trying to do.
This brings ‘creative chaos’ according to one of my informants; others were less
charitable.
The argument here is not that development Washington lacks power over
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Chilean Housing Policy 307
poor countries and particularly over smaller Third World countries. ‘Condition-
ality’ showed that power to be very real and few doubt that decisions in
Washington changed the lives of many in the Third World, often in a highly
damaging way (Bond, 2000; Cornia et al., 1988; Moseley, 1992; Ogu, 1999;
Woodward, 1992). Although they were almost certainly necessary, “structural
adjustment programmes have done avoidable harm and could be made more
pro-poor” (Killick, 1999, p. 1). They certainly had a profound effect on urban
areas, changing cities “from a position of leadership in national economies and
a magnet attracting people from the countryside to a focal point of national
depression” (Riddell, 1997, p. 1303).
Nor am I saying that there was never substantial agreement within ‘develop-
mental’ Washington about development priorities because as Williamson (1990)
has shown, there undoubtedly was. But, it may be argued that the very
emergence of a Washington consensus was due less to autonomous thinking
about development than to the application of broader thinking about economic
theory to development thinking. Washington got what passes as its consensus
from other places and institutions.
In short, my argument is that developmental Washington is powerful but is
weakened by the demands of its shareholders and increasingly by the voices of
outside lobbies and some beneciary countries. The different agendas of the
agencies undermine the consistency with which common purpose might be
achieved. Some beneciary governments are adept at ignoring the conditions
laid down. All this weakens those institutions. After three months working in
Washington, I began to suspect that many ofcials are more victims than
oppressors. If a minority declare how powerful they are, it is at least partly
down to self-delusion.
Methodology
The evidence used to support my argument is drawn from consideration of one
country’s relationship with Washington in the eld of housing. I examine the
development of housing policy in Chile from the early 1970s to the 1990s. Of
course, the use of only one country, and its policy in only one sector, can hardly
prove the case. However, it can be argued that such evidence is sufciently
strong to question the idea of an omnipotent developmental Washington, at least
with respect to middle-income countries. It is also supported by the experience
of the World Bank and USAID in South Africa, the subject of another paper
(Gilbert, 2002).
The data are based on reading and on 22 interviews in Chile, a dozen more
in Washington and a couple more in other places. In Chile, interviews were held
with numerous people associated now, or in the past, with the Ministry of the
Interior, the Ministry of Housing, the Chamber of Construction, the College of
Architects, the United Nations, the University of Chile and the Catholic Univer-
sity. Among these people are those who claim to have invented Chile’s housing
policy, those who negotiated with those people on behalf of Washington
institutions, those who helped to develop and modify Chilean policy, those who
tried to take that policy to other parts of Latin America because they admired
that policy, those who have operated housing policy in Chile and some who
strongly dislike the whole housing model. Some of the people interviewed have
played several roles in the events described, not wholly surprisingly because
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308 Alan Gilbert
that period is now nearly three decades old. In Washington, interviews were
held with people at the Inter-American Development Bank, USAID, the World
Bank as well as with a number of housing consultants.
The many people who kindly submitted to having a tape recorder thrust
under their noses will remain nameless. They were promised that their opinions,
information and stories would remain anonymous and that promise is being
kept. Failure to cite all sources has been criticised by one of the anonymous
referees of this paper for not allowing proper verication of the assertions made.
I accept that this is a real problem, although not the associated charge that such
an approach is worthy only of journalists. Much thought has been given to
getting round this problem, and the conclusion is there is no satisfactory way.
The only way to attribute the ideas to specic interviewees is to give each person
either a false name or a number and to insert those names or numbers into the
text next to their contribution. However, this does not actually tell the reader
what they want to know which is ‘who dished the dirt’. As such, I have decided
that the reader will just have to trust me. The reader can be assured that the
argument is backed up by genuine, painstaking research including many hours
of interviews. If this is journalism, then at least it is meant to follow in the noble
tradition of investigative journalism!
If each interviewee cannot be thanked by name, it should be recognised that
the research would not have got very far without their assistance. Their expertise
has been invaluable both in giving useful leads and in allowing me to try out my
developing interpretation of events on them. They have also provided a lot of
documentary information, which has subsequently been supplemented in the
archives of a number of Chilean and Washington institutions.
A Background to Chile
At one level Chile is an interesting case insofar as it is regarded by many as the
prototype of how poorer countries should operate in a globalising world. It has
successfully developed its export sector, it has cut back on government interfer-
ence in the economy, it has privatised most economic activities and public
utilities, it has developed its capital markets and it has an impressive private
pensions industry (Castan˜ eda, 1992; Lira, 1994; Marcel & Arenas, 1991; Roberts
& LaFollette, 1997; Vergara, 1994). If the level of inequality is still an acute
problem, the amount of poverty has been cut over the last 10 or 15 years
(Edwards, 1995, p. 291; Razcynski, 2000; Scott, 1996); the Gini index in 1994 was
56.5, a year when 20.5 per cent of the population were living below the poverty
line (World Bank, 2000, p. 282).
However, the Chilean model is highly contentious because of the bloody coup
that removed a democratically elected socialist president in 1973, for the illicit
help that the opposition received from the US, because of the appalling human
rights record of the 1970s and because of the excessive zeal with which
right-wing economics was embraced (Collins & Lear, 1995). Views differ on the
extent to which the economic record can ever justify the human rights abuses.
Opinions are also less than uniform on the employment record or on the issue
of inequality (Diaz, 1997; Hojman, 1992; Raczynski, 2000; Richards, 1995).
Fortunately, the country has been run since 1990 by a series of freely elected,
democratic regimes. Its current president belonged to the old left and was
Chilean Ambassador to Moscow when the 1993 coup took place. For a time, it
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Chilean Housing Policy 309
even looked likely that the former dictator would be brought to trial for human
rights abuses; only his apparently frail health has saved him.
Chilean housing policy from the early 1950s until 1970 was decient in many
ways (Arrellano, 1982; Bravo & Martinez, 1993; Castan˜eda, 1992; Haramoto,
1983; Kusnetzoff, 1990; Macdonald, 1983; Rojas, 1999; Silva Lerda, 1997). The
formal market supplied higher-income groups but did an inadequate job at the
bottom end of the income scale. The government tried, unsuccessfully, to
remedy the problems but failed consistently to cut the housing decit. Accord-
ing to Lozano (1975, p. 181): “The public sector was responsible for producing 59
percent of the units built in the period 1960–1967.” Total housing construction
during those years amounted to 4.5 units per thousand people as opposed to the
9 units per thousand that would have been needed to begin cutting the housing
decit. High building standards priced most units beyond the means of the poor
and better off families were often the main beneciaries. Although more units
were built during the Frei administration, that administration’s programme has
been roundly criticised. It failed to complete as many units as it promised and
relied increasingly on an unsuccessful sites and services programme. As the
election of 1970 approached, the housing debate was increasingly politicised and
the number of land invasions began to escalate (Cleaves, 1974; Haramoto, 1983;
Kusnetzoff, 1975, 1987; Trivelli, 1987).
Faced by a huge wave of expectation, the Allende government tried to use
housing construction as a motor to generate work and economic growth. It
rejected the idea of sites and services and attempted to accelerate the public
housing construction programme through advanced technology and state con-
struction. In the process, it upset the private building sector and disrupted the
housing nance industry by ending indexation of mortgage repayments. It will
never be known what the nal outcome would have been because of the military
coup that took place in 1973.
The military government immediately jettisoned the socialist housing pro-
gramme although it failed to put anything in its place. By 1975, however, the
outlines of a new housing model were taking shape. The new system would be
market led and would be embedded in much more competitive economic and
nancial systems (Almarza, 1997; Arellano, 1982; Haramoto, 1983). On the
supply side, public housing would no longer be contracted by the state but
would be built by the private sector responding to market signals. Instead of
builders producing what the public sector asked for, they would have to
compete to produce what consumers wanted. The state would play a subsidiary
role. Private enterprise was expected to produce cheaper units than under the
public contracting system and to provide a choice of housing for the poor.
Families could use their subsidy to buy the house that they wanted. Planning
controls over the land market in Santiago were virtually eliminated in an
attempt to reduce the cost of acquiring land (Harberger, 1979; Smolka &
Sabatini, 2000; Trivelli, 1987).
Subsidies were to be given to families who could demonstrate that they were
poor and that they were prepared to contribute to their own housing solution
(Moffat, 2000). A whole new system for calculating the extent of family poverty
(the Ficha Cas) was establis hed which included a hom e visit (Castan˜ eda, 1992).
Once a household had established its eligibility, it was ranked on the basis of the
number of people in the family, the time over which savings had been accumu-
lated in a designated account, and the volume of those savings (Rugiero, 1998).
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310 Alan Gilbert
New subsidy awards were announced every few months. The points system on
which the allocation was based was intended to be transparent and honest and,
hence, to build condence in the system.
Despite its neo-liberal economic agenda, the Pinochet government was pre-
pared to continue the well-established Chilean tradition of providing subsidies
for the poor (Richards, 1995). As Moffat (2000, p. 189) describes it: “From the
1940s the dominant idea in Chilean society is that the right to housing, and to
education and health, ought to be guaranteed by the state for that group of the
population who, because of their low incomes, is unable to resolve their
problems on their own.” Where the new policy was different was that it
attempted to replace one paternalist system that was ineffective with another
that was more efcient and explicit and which made better use of the subsidies.
The goal was to direct subsidies to the genuinely poor but only to those who
were prepared to help themselves. Eligibility for a housing subsidy was depen-
dent upon the poor contributing to the cost of their new home. They were
expected to save the deposit for their home. The longer their savings record and
the higher the amount saved, the more likely they were to get a subsidy. The
public housing ministry would issue guidelines and application forms that
would explain how people would become eligible for a subsidy. Because the
rules for allocating subsidies would be manifestly open and transparent, any
form of political favouritism or corruption would be impossible.
In the years after 1977, the new demand-side subsidy mechanism gradually
became an established part of the Chilean model. Initially, it was not all that
successful and it took some years to begin to function properly (Nieto, 2000).
Ironically, its best results were achieved under the democratic governments of
the 1990s. Chile soon began to claim to be the only Latin American country that
was managing to cut its housing decit (Almarza, 2000; Ducci, 1997; Moffat,
2000; MPC, 1996; Nieto, 2000).
Why the Chilean housing model is worth discussing is that it was undoubt-
edly an advance on what went before. It increased housing production consider-
ably while reducing the numbers of government housing ofcials, provided
decent accommodation for many among the poor and actually began to cut the
housing decit (Held, 2000, p. 5). Not surprisingly, its achievements began to be
broadcast widely in Latin America and beyond. It even reached the pages of
Time Magazine, which described the housing subsidy system as a “show piece of
social policy” (Richards, 1995, p. 516). The publicity was due to the fact that the
model was broadly in line with developmental Washington’s advice on housing
policy. In 1993, the World Bank was explicitly recommending that:
“privatization of housing production should go hand in hand with the overall
privatization of public sector enterprises” (World Bank, 1993, p. 62) and USAID
was denouncing “centralised bureaucracies” and praising the virtues of the
market (Kimm, 1993, p. 49). With Washington’s help, the example of the Chilean
housing subsidy model spread to other Latin American countries. Costa Rica,
Colombia, Ecuador, Panama all adopted subsidy models strongly inuenced by
Chilean practice (Gilbert, 1997; Held, 2000; Pe´rez-In˜igo Gonza´lez, 1999) and
considerable interest was shown in Guatemala, Paraguay, Uruguay and
Venezuela. The World Bank, the Inter-American Development Bank and, partic-
ularly, USAID were inuential in helping to diffuse information about the
Chilean ‘housing model’. By 1993, a Chilean-type model, or at least elements of
the Chilean model, had become acknowledged ‘best practice’. In principle, the
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Chilean Housing Policy 311
model embraced three elements that were highly approved in the new develop-
ment environment: explicit targeting at the poor, transparency and private
market provision (World Bank, 1993, p. 126).
The Chilean housing model tted the ‘enabling approach’ that dominated
Washington thinking about shelter in the 1990s. The enabling approach aimed
“to create a ‘well-functioning housing sector’ that serves the needs of all key
stakeholder groups” (Mayo, 1999, p. 39). The key guidelines were “to redirect
developing-country governments from engaging in building, marketing,
nancing, and maintenance of housing units toward facilitating expansion of the
private sector’s role in such activities” (World Bank, 1993, p. 62). In order to
facilitate private sector engagement , governments need to work on “property
rights development, mortgage nance, targeted subsidies, infrastructure for
urban land development, regulatory reform, organization of the building indus-
try, and institutional development”. At rst sight, the Chile model tted that
advice perfectly.
Who Invented Chile’s Housing Policy?
The housing subsidy policy was designed between 1975 and 1978. Some attri-
bute the basic concept to Jose´ Pablo Arrellano, an economist who later became
Minister of Education. He produced an early diagnosis of the decient state of
Chilean housing nance which, one important actor claims, lays down every-
thing that was to underpin housing policy in the country except how to do it
(Arrellano, 1976). Other actors say that a study produced at the request of the
Central Bank by the Economics Department of the University of Chile and the
Corporacio´ n de Estudios Econo´ micos (Universidad de Chile, 1977) was more
inuential. The latter view is supported by the fact that although the nal report
of this study was published later than the Arrellano paper, it contains a much
more complete blueprint of the future programme. The University of Chile study
was also signicant insofar as many of the people who contributed to the work
were central in the reformulation of the country’s general economic and social
policy. They included representatives of the Chilean planning ministry, the
Central Bank and the Chilean Chamber of Construction.
The University of Chile study discusses most of the key elements of the new
housing strategy. It lays out a new mechanism for providing nance for housing.
It favours indexation of mortgage lending. It indicates the roles that different
public and private institutions should play in housing nance. It is adamant that
the state’s role should be reduced but it is equally strong in afrming that the
state should provide subsidies for lower-income groups. However, the nature of
those subsidies should be very different from those of the past; they should be
used to stimulate housing demand rather than supply. The subsidies should also
be transparent and progressive although no real preference was expressed as to
how these aims should be achieved.
MINVU, the housing ministry, played very little part in the formulation of
these general guidelines but was given total responsibility in the University of
Chile study for administering the subsidy programme. The government agreed
and, from that point on, the details were developed by three ofcials in MINVU.
They make no claim to have conceived the basic outline and they recognise the
innovative roles played in the formulation of economic policy by Miguel Kast,
Jose´ Pablo Arrellano and Alvaro Saieh. What they do claim is credit for having
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312 Alan Gilbert
designed the detailed programme and for having lled certain gaps in the
original blueprint. Two of the triumvirate were interviewed and they are
justiably proud of the part they played in its design. They differ only in their
evaluation of the effectiveness of their efforts; one is effusive about the policy’s
impact, the other is more guarded and aware of the many compromises that had
to be made. Other interviewees have recognised the contribution that this
triumvirate made to Chilean housing policy and none have put forward any
kind of counter claim about their own signicance.
The only foreign institution that was involved in the original formulation of
housing policy was USAID. USAID was inuential insofar as they nanced the
University of Chile housing study and provided a consultant, Richard Pratt, to
help prepare that study. His contribution and experience is recognised warmly
in the University of Chile report.
The Inter-American Development Bank had not been active in Chile because
the Nixon administration (1968–72) had instructed that no new loans were to be
made to the Allende government. “During the years that Salvador Allende was
in power, lending to Chile out of ordinary capital was halted due to pressure
from the United States. Only the private sector received funding” (Tussie, 1995,
p. 42). Its normal role was resumed after 1973 and its rst loan was approved in
1976, to support an informal settlement-upgrading programme in Santiago and
Concepcio´n. BID-MINVU agreement was signed on 10 March 1976, US$25.2
million for infrastructure and community services in 15 settlements in Santiago
and 2 in Concepcio´ n. From the point of view of the Bank, this was denitely not
a housing programme. Short of funds, and being pushed hard by the Carter
administration (1976–80) to direct half of its lending programme to projects
beneting low-income groups, formal housing was considered too expensive an
item to be used to assist the poor (Tussie, 1995, p. 50). This became a Bank
mandate in 1978 when the negotiations for the Fifth Replenishment were
concluded (Culpeper, 1995; Tussie, 1995).
The rst World Bank involvement came well after the housing policy had
been introduced (see below). Indeed, the World Bank did not lend any money
to Chile until 1984. Ofcials of that institution make no claim to have invented
the housing policy and when they rst became acquainted with it in the early
1980s, they were most certainly not impressed (see below). The Bank’s import-
ance to the subsequent development of the subsidy programme was two-fold.
First, the money it lent was vital in providing the country with greater legiti-
macy in the outside world. Just as some people in the World Bank wanted to get
involved in Chile at this time, the Chilean government wanted the prestige that
obtaining a World Bank loan would bring. Second, in making a loan, the World
Bank became involved in redesigning the subsidy programme. Although one of
the original MINVU triumvirate views the Bank’s involvement as a nuisance,
meddling with the basic design, other Chileans regard the advice that the Bank
gave them as being very helpful. One administrator of the programme has no
doubt that their help made the subsidy programme “more efcient, much less
bureaucratic and more transparent”. The Bank was particularly inuential in
helping to design the second stage of the subsidy programme that began in 1984.
The Hidden Agenda
So far, Chilean housing policy appears to have been invented at home and to
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Chilean Housing Policy 313
have been aided only in small part by advice and funding from Washington.
This account is accurate but it omits one important element: the intellectual
inuence of another US city. Without Chicago, or more precisely the Department
of Economics at the University of Chicago, it is unlikely that the housing model
would have taken the form that it took. Chicago did not design the housing
policy but its inuence was very important in laying down the guidelines of
economic and social policy generally.
The involvement of the University of Chicago in guiding the military govern-
ment’s economic programme is by now well known (Barber, 1995; Valde´s, 1995).
The young Chilean economic technocrats who had been trained in Chicago were
active in trying to discredit the economic policy of the Allende government.
They produced El Ladrillo a book that was very inuential with the military and
on the political right (De Castro, 1992). When the coup took place, they were in
position to take over the reins of the Chilean economic and planning system. The
new free market, monetarist approach was to be introduced rapidly. The
planning ministry, ODEPLAN, circulated a policy statement to most other
government bodies in 1974 insisting that each develop its policy along the lines
of the generic blueprint. The Chileans most frequently credited for this policy
initiative are Miguel Kast and Jaime Guzman (about whom more is said below).
In turn, they involved other Chicago trained economists outside government like
Alvaro Saieh of the University of Chile to provide technical help.
The link between ODEPLAN, the new housing policy and the Chicago-trained
Miguel Kast is clearly drawn in the following extract from the Chilean Chamber
of Construction’s history of housing policy in the country. The new market
economy had got rid of:
the discounts to producers of popular housing, for example, soft credit
to constructors, xed prices for construction, etc. It was necessary to
design something new. The solution came from Miguel Kast, Sub
Director of Odepla´n, who proposed ending the use of crossed subsidies
and converting them into a transparent, non-repayable form of State
help, assigned to each unit constructed, according to a pointing system
that encouraged household saving and help to family groups. So was
born, the housing subsidy system, that continues to this day and which
signied a transcendental shift insofar as it directed the demand of
those needing subsidies towards the market. It introduced the idea that
housing was a good that could only be obtained through one’s own
efforts; the state subsidy would be channelled to those who were most
in need as a reward for their effort. (Ca´mara Chilena de Construccio´n,
1991, pp. 90–91)
Two factors eased the task of introducing those guidelines into the housing eld.
The rst was that the recent history of housing intervention under the socialist
government had been highly problematic. When the Allende government more
or less threatened to nationalise housing construction, private sector capital was
withdrawn. In the difcult political and economic circumstances that led up to
its eventual violent overthrow, no one had much condence in the country’s
housing policy. Second, the repercussions of the 1970–73 period and the serious
economic recession that hit the country in 1975 resulted in closure of the
country’s savings and loans system. The demise of this system, which had been
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314 Alan Gilbert
strongly encouraged by USAID throughout Latin America, meant that there was
little or no nance available even for higher-income groups.
Given their instructions from ODEPLAN, MINVU ofcials decided to try to
design a housing policy that met the monetarist guidelines and which managed
to improve on previous versions of Chilean housing policy. It should be
emphasised that these ofcials were not Chicago Boys; they were not even
economists. Nor, were all of them sympathisers with the new regime, indeed,
one of them had served in MINVU since 1965. He had therefore served under
the Christian Democrat government of Eduardo Frei, the socialist administration
of Salvador Allende, and under Augusto Pinochet.
The Involvement of Washington
As shown above, Washington’s rst involvement in the housing arena came
with a small grant from USAID to nance the University of Chile study. In 1976,
the agency stepped up its assistance by providing US$55 million for a co-operat-
ive building programme which produced 8800 homes, mainly for higher income
groups (Silva Lerda, 1997, p. 106). It also helped to establish a secondary
mortgage market in the country and its loan, which lasted 3–4 years, was critical
at a stage before the pension funds or the stock market were really booming.
The Inter-American Development Bank was only involved in the housing
programme indirectly, through its 1976 loan for an upgrading and sites-and-ser-
vices programme. Upgrading was an experiment for the bank and its perceived
success stimulated the Bank to shift heavily in the same direction (see below).
The World Bank was not working in Chile during the 1970s because the
country was regarded as something of a pariah both in political and develop-
ment circles; “at the beginning no one wanted to touch Chile”, says one World
Bank ofcial. Indeed, the World Bank did not make a loan to Chile until 1984.
It became involved because the Chilean economy was in a deep recession
(Ffrench-Davies, 1983; Meller, 1991). During 1982, the GDP fell by 14 per cent
and unemployment rose to 20 per cent. As a result, the Chilean government
were very anxious to attract both the foreign exchange and the kudos that a
World Bank loan could bring.
A World Bank mission visited the country in 1983 to develop a loan proposal
for nancing urban infrastructure. The mission talked with MINVU ofcials
about the new housing subsidy policy. Initially, they were less than impressed
and a Chilean insider says that negotiations were “very difcult”. The Bank’s
policy at the time favoured sites and services programmes over nished housing
and the Chilean idea of building nished houses for the poor and nancing sales
through a 75 per cent subsidy seemed to wholly undermine a key ingredient in
the World Bank’s approach to development, nancial sustainability. Bank
ofcials were worried that the idea of subsidising up to three-quarters of the
price of a complete house would not be acceptable in Washington. Several
Chileans were invited to Washington to explain the mechanics of the subsidy
programme. When the idea of a loan was eventually oated in Washington,
deliberately placed near the end of the nancial year to help curtail debate, the
Executive Board still came up with some serious objections. These were resolved
only when a key adviser to the Executive Vice-President, Sir Alan Walters,
agreed to spend three days in Chile. Sympathetic as he was to the broad
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Chilean Housing Policy 315
principles of the Chilean economic model, he did not need a great deal of
convincing. He returned trumpeting the viability of the new housing model and
a loan was approved in December 1984.
At rst, relations between the Bank and MINVU were harmonious. Missions
came and went, advice was offered and many technical improvements were
made to the model. The Chileans regarded the World Bank’s advice as being
particularly valuable in terms of improving their targeting of the poor. But,
gradually, the relationship soured. From the point of view of the Chileans, Bank
ofcials were constantly interfering with the policy and were never satised.
From the Bank’s perspective, the Chileans were increasingly failing to do what
they had promised. Although the World Bank eventually developed a liking for
the basic principles underlying the housing model (Renaud, 1988), it was
distinctly less enthusiastic about the experiment in practice (Persaud, 1991,
1992). By comparison, USAID always seemed to be happy about it (Kimm, 1993).
Two major points of difference led to friction between the two parties. The
rst concerned the role of the private sector, something that both sides were
anxious to encourage. Unfortunately, the private sector was extremely reluctant
to build housing under the new rules laid down by the government. In addition,
the private banks were failing to lend to the poor; “the single greatest weakness
of the Chilean experience” (Conway et al., 1996, p. 18). In the eyes of the World
Bank missions, the so-called private market solution offered by the housing
subsidy model was a sham. Because the private sector was not prepared to build
the cheapest form of housing, the construction of basic housing units was still
handled through state contracts. The role of the private sector in housing nance
was little better. Because the private banks did not want to lend directly to the
poor, the Bank of the State was forced to step in (Conway et al., 1996, p. 18). In
itself, neither problem was a real concern because the World Bank frequently
provided lines of credit to national and local governments. The real difculty
was that the Chileans “were saying one thing and doing another”. Bank ofcials
could not see any real private sector involvement. As such, the original principle
of a market-based housing sector was being seriously undermined.
The second problem related to the mortgage loans made by the state banks.
Almost from the start the recipients of the subsidies failed to pay the interest on
the loans. Whatever the reasons (see below), the loan portfolio was in a poor
state when the Bank began to get involved. As a condition for approving their
loan, the World Bank insisted that the Chileans improve the loan portfolio.
Because the Chileans were saying that the credit was different from the grant,
the Bank insisted that they demonstrate that fact by collecting the interest. If no
interest was collected, the loans effectively became grants. The Chileans said that
politics would not enter into the housing policy: that business was business, and
grant was grant. At the end of the day the Bank argued, they did not do that.
They were not fullling the terms of the deal.
To paper over these differences, various kinds of compromises were made
which both sides would probably now accept were bound to fail. Perhaps the
greatest of these compromises came over repayment of the debt. The World
Bank insisted on the Chileans improving the loan recovery rate a little each year.
Those involved on the World Bank side are adamant that there was complete
agreement on this (and it certainly appears to be clear in the documentation).
However, the Chileans are equally insistent that they never promised to collect
the money. According to one source, they agreed to follow the Bank’s recom-
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316 Alan Gilbert
mendations about how to improve the recovery rate but, because they did not
believe that these recommendations would work, they never promised to
improve debt collection.
The World Bank did not believe that a military government, infamous for its
human rights abuses, could fail to persuade people to repay the interest on their
home mortgages. They did not accept the explanation by Chilean ofcials that
Chileans have a deep-seated aversion to repaying debts to the government.
Many Chileans have said how their countrymen pay back loans to private banks
but have an entirely different attitude to the state. According to some, this
reluctance to pay the government goes back to the days of Salvador Allende;
according to others, it is of much longer standing. Other interviewees put the
blame squarely on the state; “the public sector is a bad debt collector”. Many
stories were told about the failure of government agencies even to issue bills.
The government was also reluctant to improve collection by reclaiming the
homes of severely indebted families. In any case, it was arguably impossible to
do so. One former government ofcial explained how when he asked the police
to do the job, they refused. He contemplated sending in the army but did not
want to be responsible for people being killed. In the end, nothing was done. A
third explanation of the failure to improve the loan portfolio is linked to the 1982
recession. The severity of the recession had plunged many families living in
public housing into deep poverty; ofcials realised that many simply could not
pay off their accumulated debt. What turned this into an even more sensitive
problem was that the government had already effectively written off the debts
of the middle class, the banks and business groups. This was a vast write-off
amounting to US$6 billion (Meller, 1991; Moran, 1989, p. 499). If the government
were to insist that the poor pay back their very small debts it would have caused
a major political problem. Since the president was attempting to win a plebiscite
to continue in power, this was not a viable administrative strategy.
The nal break with the World Bank, however, came after democracy had
returned in 1990. Faced by the choice of collecting lots of very small debts at a
high administrative cost and generating resentment at a time when he was
attempting to persuade community leaders not to encourage land invasions, the
Minister of Housing effectively wrote off the debt. In 1991, the Consolidacio´n de
la Deuda Social ruling was made which permitted people to pay off their whole
debt by paying a small part of it. Bills were sent out and long queues formed
outside the government ofces. The World Bank had never liked the series of
debt amnesties that had occurred under the military government and this
proved to be the last straw. The nal report of the World Bank on the 1989 loan,
and the frosty reply by the Chilean government, brings out the severe tension
that had built up (World Bank, 1995). ‘After a big ght’, and a visit from the
Bank’s vice-president, any prospect of a third loan was ruled out. Chile decided
that it did not need World Bank money badly enough to put up with all of the
interference and the World Bank decided that it did not want to support a
programme that was not doing what it promised to do. They both decided to go
their separate ways.
If relations with the World Bank were difcult, relations with other institu-
tions in Washington were much easier. Indeed, it seems that despite the
seemingly watertight nature of the Washington consensus, Chile successfully
played one development institution off against another. An interesting example
of this involved both the World Bank and the Inter-American Development
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Chilean Housing Policy 317
Bank. In the early 1980s, the Inter-American Development Bank talked to
MINVU about a possible housing loan. They had already made a loan to the
ministry in 1975 but the relationship had not been altogether easy and was based
on an uncomfortable compromise. The Inter-American Development Bank was
committed to a sites and services project but MINVU wanted to build proper
houses. The memory of the disastrous experience of Operation Site, known
ironically in Chile as Operation Chalk because the chalk marking the boundaries
was the only thing families supposedly received, still rankled with MINVU. To
resolve this difference of approaches a compromise was reached. As one insider
puts it: “the Bank would create serviced lots and we at MINVU would put
structures on top”. If, in the end, “it was a housing programme, it had nothing
to do with what we were trying to do to change the system”. On the Bank side,
ofcials were very satised with the upgrading programme (Inter-American
Development Bank, 1998). When the president of the Bank visited the project
and approved it, Bank ofcials agreed to try out this kind of programme in other
countries. However, it is not wholly clear that the Bank understood what the
Chileans were doing. Bank ofcials were certainly discouraged from asking too
many questions. When two tried to probe more deeply into the settlement
removal programme, the Chilean government asked them not to come back. One
of these ofcials now admits that the Ministry did not want us to know what
was going on in the eradication programme and that the Inter-American
Development Bank was possibly a little naõ¨ve in those days.
When in the early 1980s, the Bank started exploring the possibility of nancing
a similar kind of project MINVU ofcials rejected it out of hand. The ministry
now had several years of experience instituting a policy based on nished
housing and its architects and engineers did not approve of the low standards
and inefciency which they perceived to be inherent in sites and services
projects. The bank pressed the issue but MINVU were immovable.
At rst sight it seems most unusual for a Latin American ministry to turn
away foreign funding, but, MINVU’s opposition to self-help housing was of long
standing and deeply felt. Its hostility was partially due to its close relationship
with the construction industry but it was also motivated by the unacceptable
living conditions that sites and services offered. Families could not be expected
to live in such bad conditions for several years. In addition, self-help housing
was thought to be inefcient because it did not provide many opportunities for
economies of scale. The distaste of its top ofcial and later Minister of Housing
(from May 1984 until December 1988) towards ‘progressive housing’ was such
that he still writes articles criticising this approach (Poduje, 1997). In any case,
the MINVU did not lose out for long because it signed its rst agreement with
the IDB’s ‘rival’, the World Bank, in 1984. Despite the latter’s reservations about
lending for nished housing, it ended up providing a loan.
Meanwhile the Inter-American Development Bank discovered that if MINVU
were hostile, the Ministry of Interior was interested in an upgrading pro-
gramme. The latter had inherited the task of sorting out the problems that had
been caused by the land invasions that had occurred under the Frei and Allende
administrations. With money from the Inter-American Development Bank, the
Ministry of the Interior could install services and infrastructure in most settle-
ments and provide new serviced sites for any people who had to be moved. In
the process, they would win some political backing to support the president’s
hoped-for transition from ‘despot’ to democratic ruler.
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318 Alan Gilbert
Former MINVU ofcials accuse the Ministry of the Interior of being more
interested in increasing its political patronage than in producing an appropriate
housing policy. They even suggest that the latter’s policy made collecting the
housing debts harder for MINVU. Former Interior ofcials accuse MINVU of
being high-handed and technocratic in their opposition to a sensible approach to
a difcult problem. Whatever the truth, each continued to plough its own path
during the 1980s. Even when ‘progressive housing’ made an appearance in
MINVU policies in 1991, it was unwelcome to many people in the ministry and
accommodated rather few families, particularly in Santiago.
Arguably, both ministries ended up with what they needed, foreign capital to
nance the kind of policies that they wanted to support. The Inter-American
Development Bank was happy insofar as it was funding a sites-and-services
programme but some World Bank ofcials were tied to a programme that they
never much liked and which they found less and less convincing as time went
on. Several years were to pass before both Banks started to promote the Chilean
model in the rest of Latin America and even beyond (Mayo, 1999, p. 35; World
Bank, 1994).
It is apparent, therefore, that developmental Washington appears to have
played something of a contradictory role in helping to develop housing policy
in Chile. Arguably, the two Washington banks undermined one another’s
position in actively following their role as banker over and above their role as
‘evangelist’ of good development practice (Mosley et al., 1991, p. xix). Both banks
were forced into difcult compromises. The Inter-American Development Bank,
which has long prided itself on its exibility and willingness to listen to the
views of its lenders (Inter-American Development Bank, 1999; Tussie, 1995), was
involved rst in a strange compromise that involved it a slum upgrading
programme that was actually part of a resettlement policy that has been roundly
condemned in the literature (Rodrõ´guez & Icaza, 1993; Scarpaci et al., 1988;
Schneider, 1995). Later, its erstwhile partner rejects the offer of a second loan
although the Bank nds its money is acceptable to a second ministry. Mean-
while, the World Bank steps into the void at MINVU. Uncertain of the merits of
the Chilean policy, it tries to improve the quality of the programme but
recognises that it has failed. It eventually gives up lending for housing in Chile
to the mutual relief of both parties.
This hardly constitutes the kind of forceful leadership from Washington with
which conditionality and the Washington consensus have been associated. My
strong impression is that Chile gained more from its relationship with Washing-
ton than did the two powerful development banks.
Washington’s Role in Spreading the Gospel
Unlike the forceful ‘selling’ of the pension model, when former Minister of
Labour, Jose´ Pin˜ era, set up an ofce in Washington to propagate the new
wisdom, the designers of the new housing model were rather ambivalent
(Barrientos, 1996). MINVU did not have an ofce of external relations until 1999,
when the demand from other Latin American countries and particularly Central
America for information and help about the Chilean programme had increased
markedly. Ministers certainly sought to create a favourable impression of
Chilean policy at foreign conferences and particularly at the Istanbul Habitat
conference. However, none of those who were interviewed seemed very opti-
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Chilean Housing Policy 319
mistic about transferring the Chilean model to other countries. The most
common attitude was that to be successful, the Chilean model requires a large
number of changes in economic, political and social behaviour and virtually no
other Latin American country is prepared to make those changes. Practically all
of the leading advocates who were employed on missions by the Inter-American
Development Bank and by USAID returned somewhat disillusioned by their
experiences abroad. One told of his frustrations over the frequency with which
the Bolivian and Ecuadorian governments changed the minister; every visit
required a fresh sales pitch to convince the new incumbent of the advantages of
the Chilean model. Another said that none of the principles that underlay
Chilean policy were unacceptable to most Latin America housing ministers
except one, conceding control over housing contracts to the market. One way in
which a select handful of Latin American public servants can get rich is through
public works contracts. A third source suggested that Chile’s neighbours need
more housing ministers who care about the issue and who do not take a very
short-term view. They need to create a different nancial system, a mortgage
system, and a social pension system that will create long-term investment funds,
not continue with old-fashioned state-run pension systems that do not work. In
short, they need the kind of institutions that Chile has established. The consen-
sus in Santiago is clear; Chilean housing policy cannot easily be exported.
By contrast, developmental Washington pushed Chilean experience rather
hard. Certainly, the Inter-American Development Bank embraced the Chilean
model closely in its housing policy during the 1990s. This is surprising given its
showdown with MINVU over the issue of self-help housing. But times change
and by the early 1990s, the Bank’s coffers were full and the Bank was committed
to lending half of its funds to the social sectors. Although the Inter-American
Development Bank had not worked with MINVU since the late 1970s, had had
nothing whatsoever to do with inventing the housing subsidy model, had never
nanced any part of Chile’s new housing programme, and has been accused of
helping to undermine the World Bank’s rm line on mortgage repayment, it
decided to take up the ag. When one of the triumvirate that had ‘invented
MINVU’s strategy resigned from the ministry he was employed as a consultant
to different Washington institutions and, in 1988, became a member of the
Inter-American Development Bank’s staff. From then on bank ofcials were
putting a Chile-type subsidy component into most housing loan proposals
(Gilbert, 1993; Mayo, 1999). The Bank was also sending Chilean housing ofcials
to other countries of Latin America so that they could explain the success of the
Chilean experience.
Once the Executive Board had agreed that formal housing was an effective
form of social investment, the Chilean model was inserted into most Bank
housing projects By 1995, up-front capital subsidies were de rigueur. The nancial
sector gurus in the bank were happy that the housing people had moved away
from the principle of subsidising the interest rate. Those concerned with over-
coming poverty and inequality, a key plank in the new post-Washington
consensus, were also happy with a policy that improved the shelter conditions
of the new target group, the poor. How was the apparent conict involved in
offering foreign loans, achieving nancial probity and alleviating poverty
squared? The Bank’s way out ‘has been to subsidise the hell out of these things’.
USAID also had a very positive view about the Chilean housing model.
Having played a signicant part in setting up savings and loans institutions and
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320 Alan Gilbert
having nanced the preparatory work for developing the housing subsidy
model, they did little more besides nancing a relatively small co-operative
housing programme between 1976 and 1980 (US$55 million). They did less and
less because the Carter administration became increasingly concerned with the
military government’s human rights record. It was only when a major earth-
quake hit Santiago in 1985 that USAID re-entered the country in a big way. Even
then they were working with the co-operative movement rather than with the
government.
Despite its lukewarm relationship with the military government, USAID’s
ofce in Santiago greatly liked what they saw the Chileans developing in terms
of housing, health and pension reform. As one USAID insider puts it: “We were
in direct discussion with them throughout and mutually learned about housing
programmes”. They believed that it was wholly compatible with some of the
basic underpinnings of what they had been attempting to introduce in Latin
America. They liked its emphasis on market principles. They liked the idea of
up-front capital subsidies. They admired the competence of many of the Chilean
technocrats. For this reason, the Regional Housing and Urban Development
Ofce of USAID did its best to publicise the Chilean model. They did this by
making sure that Chilean ofcials were represented at important meetings about
housing in the region. The regular meetings of UNIAPRAVI (Unio´n Interameri-
cana para la Produccio´n y Financiamiento de Vivienda), FIIC (Federacio´ n
Interamericana de la Industria de Construccio´n), and of the Latin American
housing ministers were all important in this respect. In addition, other depart-
ments of USAID were also working independently in diffusing Chilean experi-
ence. One of the USAID interviewees was surprised when shown a book called
If Texas were Chile, a publication based on the proceedings of a seminar at the
Sequoia Institute, nanced by USAID (Brock, 1992).
Compared with USAID and the Inter-American Development Bank, the World
Bank did not push the Chilean model all that hard; something that is unsurpris-
ing given the increasingly frosty relations between MINVU and Bank ofcials.
What is more peculiar is that some in the Bank were pushing the Chile model
even when their colleagues were at daggers drawn with MINVU. In 1992, for
example, one of the Bank’s principal housing researchers was telling South
Africans about the Chilean model and in 1994, a World Bank mission offered the
formulators of that country’s new subsidy programme advice that was strongly
inuenced by Chilean experience (World Bank, 1994).
The selling of the Chilean housing model appears to be rather paradoxical.
Those who had most to do with the policy, the Chileans and the World Bank,
had least to do with that exercise. By contrast, USAID and the Inter-American
Development Bank, neither of which had funded Chile’s experiment, pushed the
model quite hard. USAID pushed it through its consultancy and fellowship
programmes. The Inter-American Development Bank pushed it through its loan
programmes.
Conclusion
In the housing arena, developmental Washington imposed little or nothing on
Chile; rather Washington seems to have learned quite a lot from Chile. In that
respect, Washington’s relationship with Chile seems to be very unusual because
most observers assume that Washington always wields the most power in any
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Chilean Housing Policy 321
relationship. It has to be said that World Bank and Inter-American Develop-
ment Bank ofcials admit that some very large Third World countries can buck
the law as decreed from Washington, but Chile has only 15 million or so
inhabitants. Of course, Chile was not one of the world’s poorest countries even
in the 1970s. Nevertheless, it was heavily indebted in the 1970s and 1980s and
therefore appeared to be susceptible to heavy-handed pressure from Washing-
ton. The fact that it managed to withstand that pressure and maintain a high
level of autonomy in its relationship with Washington means there is hope for
many more Third World governments.
What Chile did was to develop its own policy and to take advantage of the
different priorities of the different actors in Washington. The Chilean govern-
ment was helped by the fact that developmental Washington has as great a
need to peddle loans as Third World countries have to borrow them. In
addition, as Chile’s economy got stronger, its negotiating position improved in
one vital respect; it did not need Washington’s money and therefore could go
elsewhere to ordinary banks where no strings were attached to the market-
based loans. But some parts of Washington needed Chile’s housing model and
proceeded to publicise its virtues across the globe.
So far this might seem to be a thoroughly encouraging message for the left
and for anti-globalisation rebels. The fact that a relatively small Latin American
country can run rings around the World Bank, USAID and the Inter-American
Development Bank is surely a wonderful rallying cry for ghting against the
Bretton Woods institutions and US interference. Unfortunately, it is not quite
so simple. For a start, the government that established the ‘admirable’ new
housing model was one of Latin America’s most right-wing and least demo-
cratic regimes. Perhaps that can be forgotten insofar as the three democratic
regimes that followed Pinochet have embraced important elements of that
policy and have improved it greatly; between 1992 and 1997, the Chilean
housing model had never worked better.
But the real objection to a ‘radical’ interpretation of this experience is that
Chile only bucked a small part of the Washington consensus. After all, the
housing model was born into a crib of neo-liberal orthodoxy designed in
Chicago. The housing model was only invented to satisfy the neo-liberals in
the nance and planning ministries. It was distinctive in that it developed
neo-liberal policies before Washington. Arguably, it imposed those ideas on
Washington at least as much as the other way round. The sad thing about all
this is that Chile could get away with what it did only because it was not
offending the key principles of neo-liberal orthodoxy. Chile’s autonomy in the
housing arena was only permitted because it was merely doing what the senior
managements of developmental Washington wanted. Why should the World
Bank or the Inter-American Development Bank get upset about minor
deviations in housing when Chile is showing the rest of the world how to
export, how to privatise pension funds and how to control ination?
If this interpretation is correct, it suggests that relatively small countries, at
least those with relatively sophisticated ofcials, can get away with a great deal
providing that they do not buck the grand design. But the existence of
that grand design appears to be far more worrying than the supposed
Washington consensus. If there is a grand design it suggests that it is not
Washington ofcials who are in charge so much as global nancial institutions.
The developmental Washington that appears to be in charge, is actually follow-
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322 Alan Gilbert
ing the rules laid down elsewhere. In future, perhaps we should really speak of
the post-Chicago consensus?
Acknowledgements
I should like to thank the ESRC for funding this research under the Future
Governance programme. I should also like to thank the many people in Chile
and Washington DC who submitted to being interviewed and several others
who contributed to this research in a variety of different ways. I would
particularly like to thank Paula Jiro´ n for the assistance she gave me during the
eldwork in Chile. Naturally no one is responsible for any errors apart from
myself.
Correspondence
Alan Gilbert, Department of Geography, University College London, 26 Bedford
Way, London WC1H 0AP, UK. Email: agilbert@geog.ucl.ac.uk
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The 1980s began with many developing countries facing severe debt problems. Stabilization and structural adjustment policies were introduced by the IMF and the World Bank, as the conditions for obtaining loans. By 1985 some parts of the United Nations — notably the Economic Commission for Africa, the ILO and UNICEF — were drawing attention to the severe human costs which these policies involved, in terms of unemployment, child malnutrition and setbacks in education and health. The following piece was presented by Richard Jolly, then Deputy Executive Director of UNICEF on leave of absence from IDS, as the Barbara Ward memorial lecture at the 18th World Conference of the Society for International Development in Rome. It was an early presentation of the need for an alternative approach. Two years later, Giovanni Andrea Cornia, Frances Stewart and Richard Jolly, all at the time working for UNICEF, published their detailed analysis and country data in two volumes, also entitled Adjustment with A Human Face. Partly in response, the Bretton Woods Institutions made some changes to their policies, though far less than were necessary.
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As compared to the other case studies, the Chilean experience is characterised by two distinctive features. First, the transition to the New Economic Model (NEM) began ata much earlier date This can be fixed precisely to the immediate aftermath of the military coup which overthrew the Popular Unity government in September 1973. Secondly, and largely as a result of the country being ruled by a military dictatorship, the reforms which put in place the NEM in Chile were implemented at a speed and with a scope and ideological coherence which is unparalleled in Latin America. The new model constituted a major rupture with the former politico-economic regime of democratic government characterised by extensive state intervention in the economy, and its successful introduction represents a major discontinuity in Chilean history.
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In the early 1990s, the World Bank began to recommend that governments reform their national housing, land and financial sectors in ways that would 'enable the market to work'. Chile and Colombia have both taken this advice seriously. Unfortunately, Colombian experience demonstrates that while some elements in the new approach are eminently sensible, there are certain flaws. Offering subsidies for homes but not for services is highly questionable and the criticism made of sites and services schemes is inappropriate. A further weakness of the Washington approach is the sacrifice of rental accommodation on the altar of owner-occupation.