Friday, January 15, 2010

Chile's Economic Miracle: Free Trade Lessons

The chart above helps to document graphically what has accurately been described as the “Chile economic miracle.” Up until the early 1980s, when the first round of economic reforms (1974–1983) were starting to have a positive effect, Chile’s economic performance was among the weakest of the Latin American countries, with annual increases of real GDP per capita averaging only 0.76 percent from 1913 to 1983. Additional economic reforms in 1985 and 1990 that included trade liberalization supercharged Chile’s economy, and annual growth in per capita output since 1983 has averaged an impressive 4.2 percent per year.

Before the economic reforms, with only 0.76 percent annual growth, it took almost an entire century for living standards to double in Chile; living standards now double every 17 years with 4.2 percent real growth, and that’s a real economic miracle!

One major factor in Chile’s amazing economic success has been its active pursuit since the 1990s of becoming one of the world’s most open and free markets. To help overcome its natural handicap of being a small and remote country, Chile has become a world leader in free trade, demonstrated by its free trade agreements with more than 50 countries around the world, which give its consumers and companies access to more than half of the world’s customers and markets.

Read more here of my Enterprise Blog post
More on Chile’s Economic Miracle: Free Trade Lessons for the U.S.?

13 Comments:

At 1/15/2010 10:18 AM, Blogger Paul said...

Oh dear, you didn't mention Pinochet. Prepare for a lecture from the sour grapes Lefties here.

 
At 1/15/2010 11:07 AM, Blogger vakeraj said...

Can we thank Milton Friedman and the "Chicago Boys" while we're on the topic of Chile?

 
At 1/15/2010 11:29 AM, Blogger Matt said...

I'm kneeling at my Friedman altar right now
;)

 
At 1/15/2010 12:12 PM, Blogger bobble said...

This comment has been removed by the author.

 
At 1/15/2010 1:04 PM, Anonymous Anonymous said...

i suppose if you consider currency pegs, government export subsidies, and intellectual property theft as part of free trade, then you have your "miracle"

No, we would call that the "Soviet model" and, yes, leftists claimed it was a miracle.

 
At 1/15/2010 1:13 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

I prefer free markets and free trade, in general.
But what if we plot mercantile-communist-fascist China? What conclusions could we draw from China?

Haiti has been practicing free trade, too. Some say that is why their farm sector collapsed, driving rural people to the cities (which are now collapsed too--no building codes).

There are correlations, then cause and effect. I grew balder in this same time period--Chile needs me to go bald?

Chile spend a pittance on its military--low military spending is correlated with rapid growth nations, such as China, Thailand and Chile.

 
At 1/15/2010 4:46 PM, Blogger sethstorm said...

In other words, they made the economic version of the Faustian deal.

No thank you, but it'll be believable if the displaced are helped on their terms.

 
At 1/15/2010 7:25 PM, Blogger juandos said...

"In other words, they made the economic version of the Faustian deal"...

ROFLMAO!

Yeah, basic economics is a deal with the devil! LOL!

Not quite like your hero, eh sethstorm?

 
At 1/16/2010 1:26 AM, Blogger sethstorm said...

juandos said...
So you want to justify Pinochet and his actions just because of who put them there?

Then why is it fine to deal with and support nominal Communists(read: China) who do the same thing? By all accounts, the same thing should be done to the PRC - yet our nation helps *those* Soviets because of multinational support.

As for the Faustian deal, that is in reference to Chile selling its sovereignty.

 
At 1/16/2010 8:08 AM, Blogger juandos said...

"So you want to justify Pinochet and his actions just because of who put them there?"...

Hmmm, I don't see anything in my post justifying Pinochet's alledged actions...

"Then why is it fine to deal with and support nominal Communists(read: China) who do the same thing?"...

So its still Tiananmen square for you, eh sethstorm?

If anyone on this site has some first hand knowledge of the ugliness of communism its me...

In many respects I find that the US trading with China truly distasteful...

Still with the advent of capitalism such as it is in China today can democracy of a sort be to far behind?

 
At 1/17/2010 12:00 AM, Blogger Billy said...

I always find it odd that this type of growth is called a miracle. Most economists and others who understand basic economics know that free trade can increase growth. The real miracle is that politicians agreed to this. Maybe the title of the post should be called "Chile's Political Miracle

 
At 1/17/2010 5:01 AM, Anonymous Nouts said...

This increase is due in no small part to Chile's MASSIVE privatization program.

Their first wave of privatization is largely regarded as a failure because they concentrated ownership among conglomerates called "grupos." Milton Friedman is often blamed for their deep recession in the 80s, but that was the result of too much comingling of financial and real assets, similar to the Japanese zaibatsus.

Learning from their mistakes, they encouraged wider share ownership. Unfortunately broad-based share ownership was unstable; many people sold their shares. But that's actually a good thing because individuals holding shares in individual companies would not be properly diversified.

Chile also privatized their Social Security system, tripling the rate of return on contributions. It became the model for more than 15 other nation's privatization programs, including Sweden.

Pinochet was an evil dictator, but he supplanted an equally evil dictator: Salvador Allende. Allende took the presidency with scarcely over 30% of the vote. He immediately nationalized banks, farms, and private businesses in violation of Chile's constitution.

Recently opened KGB files revealed that the Soviet Union heavily funded Allende's campaign and paid him over $400,000. That communist scumbag was owned by the Soviets. Yet all we ever hear about is CIA involvement, the United Fruit Company, and Pinochet's ruthless suppression of communist revolutionaries.

Killing communists isn't a crime - it's a public service.

 
At 1/18/2010 11:55 AM, Anonymous Benny The Man said...

Chile has unquestioned national health insurance and coverage.

 

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