It’s the Economy, Chile

chile chicago boys
The “Chicago Boys” applied free-market reforms to Chile in the 1970s. (Cinema Chile)

EspañolI was surprised this week to see one of the most important events in Chilean economic history go almost completely unnoticed, lending credence to the old saying “good news is never news.”

A recent International Monetary Fund (IMF) report focused on Chile’s waning growth expectations. Projections have fallen to 2 percent from the 3.6 percent expected last April, and far from the 4.5 percent forecast in October of 2013. The announcement is surely worrying, especially when accompanied by an estimated inflation rate of 4.4 percent for 2014.

So what’s the good news? The same IMF report also revealed that Chile has reached a per capita GDP of US$23,165, reaffirming our place among a select group of countries on the threshold of development.

Though we remain well behind leading countries such as Luxemburg ($92,507), Norway ($65,896), Switzerland ($55,237), and the United States ($54,678), the Organization for Economic Cooperation and Development (OECD) index has ranked Chile just behind Poland ($24,429) and Hungary ($24,336), and ahead of Mexico ($17,925), as the preeminent Latin-American nation.

This accomplishment is not the result of chance, nor an improved calculation methodology, but rather the implementation of free-market economic policies that put us on the path toward progress almost 40 years ago.

A quick look back back at the numbers throughout our history will confirm this assertion. In 1975, Chile produced a per capita GDP of $4,541, similar to Mexico ($4,730) and Brazil ($4,539) — the South American country that today has only reached $15,153. By that time, the United States had exceeded $17,000 per capita, Sweden hovered around $15,000, and Spain barely reached $9,819.

Fifteen years later, in 1990, Chile produced $6,845 per capita, and reached $11,383 at the turn of the century. Since 2000, an economic consensus that recognized the individual and private enterprise as the engine of the economy, along with the state in a subsidiary role, allowed policies to be improved and eventually achieve a doubling of Chile’s per capita GDP.

As with everything, we must choose to either see the glass as half empty or half full, and there will be some who will surely downplay Chile’s economic growth. Our country certainly has a long way to go, and in no way am I suggesting we become complacent or cease to critically analyze our policies.

However, these numbers do confirm that the path set out 40 years ago was the correct one. Despite any ideological or political criticism of the “Chilean model,” today we are able to cite real empirical evidence that confirms economic progress. In short, when Chile is called into question today, we can confidently quote James Carville and declare: “It’s the economy, stupid.”

Translated by Peter Sacco.

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