One of the reasons why this blog is called International Liberty is that the world is a laboratory, with some nations (such as France) showing why statism is a mistake, other jurisdictions (such as Hong Kong) showing that freedom is a key to prosperity, and other countries (such as Sweden) having good and bad features.
It’s time to include Chile in the list of nations with generally good policies. That nation’s transition from statism and dictatorship to freedom and prosperity must rank as one of the most positive developments over the past 30 years.
Here’s some of what I wrote with Julia Morriss for the Daily Caller. Let’s start with the bad news.
Thirty years ago, Chile was a basket case. A socialist government in the 1970s had crippled the economy and destabilized society, leading to civil unrest and a military coup. Given the dismal situation, it’s no surprise that Chile’s economy was moribund and other Latin American countries, such as Mexico, Venezuela, and Argentina, had about twice as much per-capita economic output.
Realizing that change was necessary, the nation began to adopt pro-market reforms. Many people in the policy world are at least vaguely familiar with the system of personal retirement accounts that was introduced in the early 1980s, but we explain in the article that pension reform was just the beginning.
Let’s look at how Chile became the Latin Tiger. Pension reform is the best-known economic reform in Chile. Ever since the early 1980s, workers have been allowed to put 10 percent of their income into a personal retirement account. This system, implemented by José Piñera, has been remarkably successful, reducing the burden of taxes and spending and increasing saving and investment, while also producing a 50-100 percent increase in retirement benefits. Chile is now a nation of capitalists. But it takes a lot more than entitlement reform, however impressive, to turn a nation into an economic success story. What made Chile special was across-the-board economic liberalization.
We then show the data (on a scale of 1-10) from the Fraser Institute’s Economic Freedom of the World, which confirm significant pro-market reforms in just about all facets of economic policy over the past three decades.
But have these reforms made a difference for the Chilean people? The answer seems to be a firm yes.
This has meant good things for all segments of the population. The number of people below the poverty line dropped from 40 percent to 20 percent between 1985 and 1997 and then to 15.1 percent in 2009. Public debt is now under 10 percent of GDP and after 1983 GDP grew an average of 4.6 percent per year. But growth isn’t a random event. Chile has prospered because the burden of government has declined. Chile is now ranked number one for freedom in its region and number seven in the world, even ahead of the United States.
But I think the most important piece of evidence (building on the powerful comparison in this chart) is in the second table we included with the article.
Chile’s per-capita GDP has increased by about 130 percent, while other major Latin American nations have experienced much more modest growth (or, in the tragic case of Venezuela, almost no growth).
Perhaps not as impressive as the performance of Hong Kong and Singapore, but that’s to be expected since they regularly rank as the world’s two most pro-market jurisdictions.
But that’s not to take the limelight away from Chile. That nation’s reforms are impressive – particularly considering the grim developments of the 1970s. So our takeaway is rather obvious.
The lesson from Chile is that free markets and small government are a recipe for prosperity. The key for other developing nations is to figure out how to achieve these benefits without first suffering through a period of socialist tyranny and military dictatorship.
Heck, if other developing nations learn the right lessons from Chile, maybe we can even educate policy makers in America about the benefits of restraining Leviathan.
P.S. One thing that Julia and I forgot to include in the article is that Chile has reformed its education system with vouchers, similar to the good reforms in Sweden and the Netherlands.
[…] written many times about the spectacularly positive impactof pro-market reforms in […]
[…] time. And when looking at decades of data for Chile, the big jump in prosperity clearly began after the economy was liberalized, not after Pinochet ceded power in […]
[…] an easy choice. The current constitution limits the power of government and has helped Chile become the Latin Tiger. Incomes have jumped and poverty has […]
[…] written many times about the spectacularly positive impactof pro-market reforms in […]
[…] time. And when looking at decades of data for Chile, the big jump in prosperity clearly began after the economy was liberalized, not after Pinochet ceded power in […]
[…] como “Chicago boys” — puseram em marcha uma agenda econômica radical, que criou um boom na economia chilena. Além de remover controles de preço, privatizações e desregulamentação, a […]
[…] how Chile began to prosper after it began to shift to free markets around 1980 and notice how Venezuela began to fall after it shifted to statism starting around […]
[…] to free-market reforms in the 1980s and 1990s, growth exploded, Chile became the Latin Tiger and poverty […]
[…] time. And when looking at decades of data for Chile, the big jump in prosperity clearly began after the economy was liberalized, not after Pinochet ceded power in […]
[…] time. And when looking at decades of data for Chile, the big jump in prosperity clearly began after the economy was liberalized, not after Pinochet ceded power in […]
[…] true, I tell them, but please respond to my question about what we can learn when we compare Chile’s successful experience with economic liberty and Venezuela’s awful experience with […]
[…] true, I tell them, but please respond to my question about what we can learn when we compare Chile’s successful experience with economic liberty and Venezuela’s awful experience with […]
[…] Perhaps the most discouraging development is that Chile dropped to #29, a very disappointing result (and perhaps a harbinger of further decline in the nation that used to be known as the Latin Tiger). […]
[…] written many times about the spectacularly positive impactof pro-market reforms in […]
[…] written many times about the spectacularly positive impact of pro-market reforms in […]
[…] In Latin America, we have Chile. […]
[…] Here’s the data on Chile, which shows both rich and poor benefited from that nation’s shift to capitalism. […]
[…] Here’s the data on Chile, which shows both rich and poor benefited from that nation’s shift to capitalism. […]
[…] conocidos como los «Chicago boys» — presentaron una agenda económica radical que creó un auge para la economía chilena. Además de la eliminación de los controles de precios, la […]
[…] advisers known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] advisers known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] advisers known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] advisers known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] advisers known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] known as the “Chicago boys” — put forth a radical economic agenda that created a boom for the Chilean economy. In addition to the removing of price controls, privatization, and […]
[…] you can see, per-capita economic output in Chile (in blue) has soared while per-capita GDP in Venezuela (in red) has […]
[…] I suppose I should highlight the fact that a high-level official for a left-leaning government is pointing out that Chile’s reforms have been very successful. […]
[…] Income has soared and poverty has plummeted thanks to market-based reforms. […]
[…] bottom line is that Macri should have been bold and made sweeping changes once he was in charge. Like Chile after Allende’s Marxist regime was […]
[…] Wouldn’t it be a great ending to the story if Argentina become another Chile? […]
[…] As far as I’m concerned, the real debate is now whether a new government will adopt the right policies when Maduro is finally evicted (in other words, is there any hope for Chilean-style economic liberation?). […]
[…] have three charts that illustrate how Chile’s pro-market reforms have been great news – especially for poor people (or, to be more accurate, for Chileans who […]
Dan Mitchell, does no say HOW Chile made the reforms, which is very interesting.
The Milton Friedman like reforms were done by a Military intervention after the three Allende disaster years.
There is no doubt in my mind that changes like those made by the Military Government are impossible to be made in democracy.
Glad the hear Mitchell say Chile is doing just fine.
But unfortunately peoples have a short memory:
Allende (how ruined Chile in just three years) has a statue in front of he Presidents Office building, while the Military President Pinochet (that made this economic miracle) has none!
[…] have three charts that illustrate how Chile’s pro-market reforms have been great news – especially for poor people (or, to be more accurate, for Chileans who […]
[…] bottom line is that Chile became the Latin Tiger thanks to economic liberty. That’s great news for the country, but especially good for the […]
[…] Chilean-style reform in Brazil – Brazil recently elected a president who is viewed as the Trump of Latin America. But he might be the good kind of populist who uses his power to copy Chile’s hugely successful pro-market reforms. […]
[…] pro-market reforms turned Chile into the “Latin Tiger,” let’s hope Guedes is […]
[…] the Baltic nations do well, especially Estonia and Lithuania. Chile also remains highly ranked, as is the supposedly socialist nation of […]
[…] the Baltic nations do well, especially Estonia and Lithuania. Chile also remains highly ranked, as is the supposedly socialist nation of […]
[…] comparando Chile con el resto de Sudamérica. Como puede ver, la dramática liberalización económica de Chile llevó a niveles mucho más altos de prosperidad […]
[…] start by comparing Chile with the rest of South America. As you can see, Chile’s dramatic economic liberalization led to far higher levels of national […]
[…] generally sided with Higgs, though there obviously are cases – such as Chile– where bad statist policies were followed by sweeping economic […]
[…] par comparer le Chili avec le reste de l'Amérique du Sud. Comme vous pouvez le voir, La libéralisation économique spectaculaire du Chili a mené à des niveaux beaucoup plus élevés de prospérité […]
[…] start by comparing Chile with the rest of South America. As you can see, Chile’s dramatic economic liberalization led to far higher levels of national […]
[…] start by comparing Chile with the rest of South America. As you can see, Chile’s dramatic economic liberalization led to far higher levels of national […]
[…] generally sided with Higgs, though there obviously are cases – such as Chile – where bad statist policies were followed by sweeping economic […]
[…] Lo que es más relevante, al menos para la explicación de hoy, es cómo Chile luego saltó por encima de Venezuela gracias a sus reformas a favor del mercado. […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms , […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms , […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms , […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms , […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms , […]
[…] Lo que es más relevante, al menos para la explicación de hoy, es cómo Chile luego saltó por encima de Venezuela gracias a sus reformas a favor del mercado. […]
[…] What’s most relevant, at least for today’s discussion, is how Chile then jumped over Venezuela thanks to pro-market reforms, […]
[…] may be an exception to that unfortunate pattern. It has enjoyed amazing levels of growth since a shift to free-market policies starting about 40 years ago. It is now the richest country in Latin America and if its […]
[…] chances. My fingers are crossed that the corrupt government is overthrown and Venezuela becomes another Chile (hopefully without a transition period of military […]
[…] answer is yes. Chile would be an obvious example, as would certain post-Soviet Bloc nations such as […]
[…] answer is yes. Chile would be an obvious example, as would certain post-Soviet Bloc nations such as […]
[…] But not the first part of that sentence. He’s correct that Chile is a poster child for market-friendly reform. […]
[…] Alors là, je suis sidé par une affirmation. Non par première partie de cette phrase. Il est juste de prendre le Chili comme tête d'affiche de pays favorable au marché-libre . […]
[…] But not the first part of that sentence. He’s correct that Chile is a poster child for market-friendly reform. […]
[…] only a blind ideologue could deny the tremendous success of Chile’s […]
[…] by Abir Doumit, reviews success stories from around the world, including Hong Kong, Singapore, Chile, Estonia, Taiwan, Ireland, South Korea, and […]
[…] hope this is right and Brazil becomes a star reformer. Chile (and, in recent years, Peru) have been lonely outposts of good policy in South […]
[…] Chileans also had a period of stagnation during their era of statism. But once free-market reforms were adopted, the notion started a lengthy boom and per-capita GDP is now almost twice world […]
[…] Looking at the rest of the world, I’m also not surprised to see strong scores for free-market success stories such as Singapore, Estonia, Hong Kong, and Chile. […]
[…] Piñera – The former Secretary of Labor and Social Security in Chile, Jose helped implement many market-oriented reforms. He’s most famous for the system of personal retirement accounts that are now seen as a role […]
[…] improvement has been dramatic, even though the nation has slipped a bit since […]
[…] comparison between Chile and Cuba is especially apt since the pro-market reforms in the South American nation came after a coup against a Marxist government that severely weakened […]
[…] On the other side of South America, Chile has enjoyed comparatively strong growth since reforms began in the 1980s. […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data” in Mitchell’s full bog post, Chile has made improvements in many more, if not all […]
[…] is one of the world’s economic success stories. Reforms in the 1980s and 1990s liberalized the nation’s economy and resulted in rapid […]
[…] Chile is one of the world’s economic success stories. […]
[…] Chile is one of the world’s economic success stories. […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data, Chile has made improvements in virtually all areas of public […]
[…] And Allister is right. It is ordinary people who suffer. Venezuela’s long-term experiment with statism has resulted in stagnation and chaos. Once one of the richest nations in Latin America, it is now falling behind nations that have liberalized. […]
[…] restraint (even if Paul Krugman can’t understand the numbers). Chile, meanwhile, engaged in many pro-growth reforms over the past three decades (though I’m worried the new government may harm the […]
[…] nation in Latin America, perhaps Chile, Panama, or Costa Rica. I haven’t been to Chile, but I’m very impressed by the nation’s incredible progress in recent decades. I have been to Panama many times and it is one of my favorite nations. I’ve only been to Costa […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data, Chile has made improvements in virtually all areas of public […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data, Chile has made improvements in virtually all areas of public […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data“ in Mitchell’s full bog post, Chile has made improvements in many more, if not all […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data, Chile has made improvements in virtually all areas of public […]
[…] for all this success is that Chile didn’t just reform its pension system. As you can see from this Economic Freedom of the World data, Chile has made improvements in virtually all areas of public […]
[…] Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and […]
[…] wrote back in July about the remarkable transformation of Chile into a prosperous market […]
[…] Latin America, perhaps Chile, Panama, or Costa Rica. I haven’t been to Chile, but I’m very impressed by the nation’s incredible progress in recent decades. I have been to Panama many times and it is one of my favorite nations. I’ve only been to […]
[…] Latin America, perhaps Chile, Panama, or Costa Rica. I haven’t been to Chile, but I’m very impressed by the nation’s incredible progress in recent decades. I have been to Panama many times and it is one of my favorite nations. I’ve only been to […]
[…] Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and […]
[…] wrote back in July about the remarkable transformation of Chile into a prosperous market […]
[…] And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, […]
[…] Singapore. And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and […]
[…] And I’ve trumpeted the good policies in Switzerland and Australia, as well as Canada, Chile, and […]
[…] Thanks to Pro-Free Market Reforms, Chile Is the Latin Tiger […]
Another country that has made it to the Top Ten in the EFW index is Mauritius. I find this heartwarming, because it means that there are now economic role models in every continent. (Although one might argue that Mauritius is not really part of Africa.)
Reblogged this on Public Secrets and commented:
Good illustration of what actually works to build prosperity, unlike Keynesian nonsense. Also, an interesting note about Sweden and the Netherlands adopting school choice — vouchers.