WHY CHILE IS MORE ECONOMICALLY FREE THAN THE UNITED STATES
September 21, 2009
In the 2009 Economic Freedom of the World Report, Chile is now number 5, one place ahead of the United States. In 1975, of 72 countries, Chile was No 71. How did this happen, asks José Pinera, a distinguished senior fellow with the Cato Institute?
From 1975 to 1989 a true revolution took place in Chile, involving a radical, comprehensive, and sustained move toward economic and political freedom (from a starting point where there was neither one nor the other). This revolution not only doubled Chile's historic rate of economic growth (to an average of 7 percent a year, 84-98), drastically reduced poverty (from 45 percent to 15 percent), and introduced several radical libertarian reforms that set the country on a path toward rapid development; but it also brought democracy, restored limited government, and established the rule of law.
In 1998, The Los Angeles Times described the importance of the Chilean revolution to the world:
- In the early 1970s, Chile was one of the first economies in the developing world to test such concepts as deregulation of industries, privatization of state companies, freeing of prices from government control, and opening of the home market to imports.
- In 1981, Chile privatized its social-security system; many of those ideas ultimately spread throughout Latin America and to the rest of the world.
- The ideas that took root in Chile are behind the reformation of Eastern Europe and the states of the former Soviet Union today.
- Since 1990 Chile has had four moderate center-left governments and, despite minor setbacks on tax, labor and regulation policies, the essence of the free-market reforms are still intact.
- The 1980 Constitution is the law of the land, and has been amended by consensual agreements among all parties represented in Congress.
- Not only is Chile now at the top of rankings on free trade (number 3 in the world after Hong Kong and Singapore) and transparency (less corruption that in most western European countries), but it is expected to be a developed country by 2018, the first in Latin America.
Source: José Pinera, "Why Chile Is More Economically Free Than the United States," Cato Institute, September 17, 2009.
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