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Chile’s Interventionist Inflection: Undoing All Those Years of Success

By: Contributor - Jun 3, 2014, 10:46 am

EspañolFor more than 30 years, Chile has been a beacon of economic freedom, not only for Latin America, but for the entire world. Chile’s economic success has demonstrated that any Latin-American country can find its way out of poverty and join the ranks of the developed world, provided those at the helm adopt market-oriented policies.

Plain and simple: being in a state of poverty is not a deterministic feature of humanity. It can be overcome with the right policies, and the majority of the West and the Four Asian Tigers are familiar with this reality.

Chile

Despite limited support and appreciation for the Chilean Model among the nation’s politicians, and efforts to change it at the margins, it remained largely intact for the past few decades. Recently, however, the dam has begun to burst, and there is reason to worry. In the wake of Michelle Bachelet’s second successful bid for president, Chile is falling for the siren song of European-style socialism.

The heart of the matter centers on the radicalization of Chilean socialists after the 2011 student protests led by Camila Vallejo. A fan of Fidel Castro, Vallejo is a current member of Parliament and the Chilean Communist Party, and she has proposed various reforms to radically change the economic system that has made Chile the vanguard of the region.

The most notable of these reforms is “free education,” which President Michelle Bachelet adopted as one of the main platforms of her electoral campaign. Bachelet is now poised to implement this policy though a new set of tax reforms. In fact, Bachelet has just approved her first education reform bill to prohibit profits in schools that receive any government funding.

These tax reforms proposed by Bachelet, the desire to emulate Europe, and the battle-cry of inequality may appear harmless to many. What is going on in Chile and in the rest of Latin America, however, is not just some random occurrence. Rather, it is a concentrated effort by Latin-American socialists to discredit the obvious success of what limited capitalism has existed in Chile.

One need only look to Venezuela and Argentina for the examples of the “success” of 21st Century Socialism Latin America. There is absolutely no need to follow their script, but some people are hell-bent on economic interventionism, whatever the destructive consequences.

Unfortunately, the lukewarm policies of former President Sebastián Piñera allowed for this transition, as he effectively shifted the Overton window towards statism. When he and other supposed “free-market” politicians try a little interventionism on for size, they both fail and embolden unabashed interventionists. Such is the case with the current Bachelet administration.

Like Argentina at the beginning of the 20th century, Chile finds itself as the vanguard country of the region, noted for its modern institutions, high level of economic development, and stability. But Chile could fall for the same trap of favoritism and protectionism, which inevitably leads to a mess of parasitic cronies and economic failure.

Now more than ever, we need a movement in Chile to reaffirm the principles that led to economic success. Rather than follow Chavismo to the doldrums, Chile should take its model to the next level and emulate Hong Kong and Singapore with further liberalization: cutting taxes, eliminating occupational licenses, removing barriers to opening a business, and last but certainly not least, ending all forms of monopolized central banking with competitive currencies.

Right now, Chile is at a sensitive moment in its history. The people can choose between expanding their economic liberty or falling for the superficial promises of populism. If they choose the latter, the nation will become a statistic, just another country that has fallen to the scourge of socialism.