By Marian L. Tupy, courtesy of Foundation for Economic Education
In May (2016), I wrote about Venezuela’s heartbreaking decline from relative prosperity to socialist destitution. The humanitarian catastrophe that is unfolding in the Latin American nation should serve as a warning to all – don’t try this at home!
However, socialism is very much alive in the least likely place: Chile. Chile, the poster child who exemplified the benefits of economic liberalization, is experiencing a resurgence from the left. Why? To answer that question, let’s look at the state of things in both countries.
Chile was one of the poorest countries in Latin America until relatively recently. In 1950, for example, its average annual income per capita (PPP) was just 38% of that of Venezuela, the richest nation in Latin America. That was how things stood when a Castro-inspired socialist, Salvador Allende, was elected as the 30th president of Chile in November 1970.
He proceeded to nationalize the industry and collectivize agricultural land, sparking shortages and mass protests. The inflation rate rose to 600% and poverty increased to 50%. Parliament urged Allende to desist, while the Supreme Court declared his actions unconstitutional.
Allende ignored both institutions. In 1973, Parliament asked the military to restore constitutional order, which it did last by bombing the Palacio de La Moneda. Allende committed suicide.
Today, black-and-white images of a stern-looking general, Augusto Pinochet, the leader of the military junta that led Chile after Allende’s death, evoke the human rights abuses that occurred. However, it should be possible to separate the murder of 1,200 to 3,200 opponents of the government from the economic reforms that Pinochet undertook.
The first was inexcusable. The second was beneficial because it made Chile the richest country in Latin America and, finally, a full democracy.
Here, it is worth a short digression. On a previous occasion , I have criticized those who, like Barack Obama, have recognized human rights abuses in Cuba, while praising the “achievements” of the Castro regime. At the risk of opening myself up to charges of hypocrisy, I want to argue that Chile and Cuba are different in some crucial respects.
By definition, dictatorships that liberalize their economies exercise less control over the lives of ordinary people than dictatorships that maintain economic control.
As people get richer, they tend to create alternative centers of power and authority flows away from the state. Thus, market-friendly dictatorships such as Chile, Indonesia, Mexico, South Korea, and Taiwan ended up not only prosperous, but also democratic. Socialist dictatorships, such as Cuba and Venezuela, maintain economic control, which prevents not only enrichment, but also democratization.
In short, when the government is the sole employer, it is almost impossible to disagree and demand political rights.
As the 1980s progressed, opposition to Pinochet hardened. The general lost a referendum in 1988 that would have prolonged his tenure in office and resigned from power in 1990. A succession of governments maintained the free market reforms introduced under Pinochet and the country prospered.
Between 1974 and 2016, the average annual per capita Gross Domestic Product (GDP) (PPP) increased by 230%. In Venezuela it was reduced by 20%.
Today, Chileans are 51% richer than Venezuelans. Unemployment in Chile is 6%. In Venezuela it is 17%. Inflation in Chile is 3% and Venezuela’s 487%. In 2016, the Chilean economy grew by 2.7%. In Venezuela it was reduced by 10%. Chile’s debt is 17% of its GDP. Venezuela’s is 50%.
In 1974, life expectancy in Venezuela was one year higher (66) than in Chile (65). In 2015, the average Chilean could expect to live 8 years longer (82) than the average Venezuelan (74).
In 1974, infant mortality in Chile was 60 per 1,000 live births. In Venezuela, it stood at 43. Since then, Chile reduced infant mortality by 88% (to 7) and Venezuela by 70% (to 13). Last but not least, Chile has received a perfect score (10 out of 10) in a democracy index compiled by the Center for Systemic Peace , while Venezuela languishes at 4 out of 10.
Socialism on the Rise
However, for a number of reasons, socialism in Chile is on the rise. The Chilean extreme left is, after Cuba, the second most radical in Latin America. It is not particularly popular – communists only voted 5% in the last election – but it is good for mobilizing supporters. The communists are also part of the governing coalition and, therefore, can exert influence on the politics of the left-wing president Michelle Bachelet.
The left has never accepted the “Chilean model” because it was imposed by Pinochet and that makes it, in the eyes of the left, illegitimate. It doesn’t matter that it works. The same is true of the Chilean Constitution, which the left is trying to rewrite, and the semi-private education system, which the left wants to nationalize.
Furthermore, the media are very left-wing and their reports give the impression that there is much more discontent in Chile than there really is. Young people, who grew up in a free society, do not remember the failures of Allende’s time.
They cry out for free education, as in Western Europe, without realizing that Chile is still a developing country. With 7% of the population living in poverty, the country needs to focus on growth, not redistribution, and high taxes and high spending reduce long-term growth.
The little defenders of the government are not blameless either. They assumed that the battle of ideas was over and thought that the positive results of the Chilean model would speak for themselves. They didn’t think there was ever a need to defend them. Furthermore, center-right political parties have been intimidated into submitting; whoever speaks in defense of the Chilean model is branded an apologist for Pinochet.
Yet for all of Pinochet’s crimes, Chile works. The same cannot be said of Venezuela, much less of Cuba. It would be a shame if Chile suffered, just because of the brutality of the regime that put the country on the path of freedom and prosperity.
Marian L. Tupy is the editor of HumanProgress.org and a senior policy analyst at the Center for Global Liberty and Prosperity. He specializes in globalization and global wellbeing, and the political economy of Europe and sub-Saharan Africa.
