Milton Friedman, Economic Reforms Saved Chile

"How Milton Friedman Saved Chile," Bret Stephens in today's WSJ:

"Milton Friedman has been dead for more than three years. But his spirit was surely hovering protectively over Chile in the early morning hours of Saturday. Thanks largely to him, the country has endured a tragedy that elsewhere would have been an apocalypse.

Earthquake magnitudes are measured on a logarithmic scale. The earthquake that hit Northridge in 1994 measured 6.7 on the Richter scale. But its seismic-energy yield was only half that of the 7.0 quake that hit Haiti in January, which was the equivalent of 2,000 Hiroshima-sized bombs exploding all at once.

By contrast, Saturday's earthquake in Chile measured 8.8. That's nearly 500 times more powerful than Haiti's, or about one million Hiroshimas. Yet Chile's reported death toll—711 as of this writing—was a tiny fraction of the 230,000 believed to have perished in Haiti."

From yesterday's WSJ, "A Tale of Two Quakes."

From Don Boudreaux and John Stossel on Chile.

MP: From a previous CD post, the top 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% from 1913 to 1983. Additional economic reforms in 1985 and 1990 that included trade liberalization supercharged Chile’s economy, and annual growth in real per capita output since 1983 has averaged an impressive 4.2% per year.

Before the economic reforms, with only 0.76% 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% 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.

The bottom chart above shows that 2009 GDP (PPP) per capita in Chile (2009) is the third highest in The Americas for the major countries (data here).