Thursday, June 30, 2011

How The Economic Miracle of Chile Increased Life Expectancy by Almost 22 Yrs. in Just Half a Century

The top chart above helps to document graphically what has accurately been described as the “the economic miracle of Chile.” 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 0.70% 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 4.0% per year. Before the economic reforms, with only 0.70% annual growth, it took almost an entire century for living standards to double in Chile; living standards now double every 19 years with 4.0% real growth, and that’s a real economic miracle!

A 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, giving its consumers and companies access to more than half of the world’s markets.

The bottom chart above illustrates a major benefit of Chile's miraculous economic turnaround: a significant increase in life expectancy relative to its South American neighbors.  In 1960, life expectancy in Chile was only 57 years, much lower than Venezuela (59.5 years), Paraguay (63.8 years) and more than five years below Argentina (65.2 years).  By 2009, life expectancy in Chile increased to 78.7 years, the highest in all of the Americas except for Canada (80.89 years) and the United States (79.43 years).  That's an amazing increase of almost 22 years in life expectancy for Chileans, from 57 to 78.7 years, in just half a century. 

Bottom Line: The "Chilean economic miracle" demonstrates that free market capitalism and free trade are the best paths to prosperity and a long life. 

Thanks to Charles Musick for providing the life expectancy data. 

32 Comments:

At 6/30/2011 11:16 PM, Blogger ShadowStock said...

the change is miraculous;

it can be seen with the high value primary schools, privatized schools based on results for a fraction of the cost, world class medical care at a fraction of the cost, growing GDP per capita
the solution was privatize..., utilities, schools, transportation, and create a culture of you can't get something for nothing.
beautiful country and hard working people beautiful people


great write up!!

thanks

 
At 7/01/2011 12:40 AM, Blogger Che is dead said...

Wait just a minute ... According to Herbert Matthews and the New York Times the "economic miracle" was supposed to happen in Castro's Cuba. Oh well, there's always Venezuela.

 
At 7/01/2011 5:52 AM, Blogger Rufus II said...

73% of Healthcare in Chile is delivered by the Public Healthcare System (Fonsa.)

Drugs such as insulin are sold Over the Counter.

 
At 7/01/2011 7:07 AM, Blogger Larry G said...

"73% of Healthcare in Chile is delivered by the Public Healthcare System"

indeed. Rufus has uncovered yet another fly in the libertarian pretend game.

" All employees pay 7% of their monthly income to the fund."

life expectancy is measure for the entire population - and if there was not universal coverage - we'd see the type of results that the US has.

and education? it's a little less free market "private" than purported:

" According to the constitution, primary and secondary school are mandatory for all Chileans.
The Chilean state provides an extensive system of education vouchers that covers almost 90% of primary and secondary students. This extensive voucher system is based on a direct payment to the schools based on daily attendance; in practical terms, if the students moves to a different school, their attendance payments move too.
Schools are either public (nearly all owned by the municipality of the commune in which the school is located) or private, which may receive government subsidies."

see that phrase - "govt subsidies"?

so they have mandatory health care and mandatory schools - both universal and both subsidized.

so much for the free market, eh?

 
At 7/01/2011 9:19 AM, Blogger Che is dead said...

"73% of Healthcare in Chile is delivered by the Public Healthcare System" ... indeed. Rufus has uncovered yet another fly in the libertarian pretend game."

Uh-oh, the gig is up. Larry and Dufus have put their minds together and found the real reason for Chile's success in increasing life expectancy. No, it's not a dramatic increase in personal and national wealth brought about by free market reforms. It's Chile's public health care system.

Only one small problem, the increase in life expectancy is due almost entirely to a decrease in infant mortality. And the decrease in infant mortality coincides with Chile's increase in national wealth and the associated reduction in poverty. The infant mortality rate in Chile fell from 76.1 per 1000 to 22.6 per 1000 from 1970-85. The creation of Chile's public health care system predated this remarkable decrease in infant mortality by almost 30 years, so it cannot be responsible for the sudden decrease in infant mortality.

Having brought Chile's public health care system to our attention, it would interesting to see how well it has worked. Here's a excerpt from a Northwestern University blog post that speaks to that question:

There are two main insurance systems in Chile: FONASA (public health insurance) and ISAPREs (the collective group of private insurance companies). Everyone has access to FONASA if they wish. If they can afford it, then the beneficiary must pay 7% of his income to fund FONASA. Additionally there may be additional co-pays. If the beneficiary is insured by one of the ISAPREs, then he will typically be paying more than 7%, and will almost always have significantly greater co-pays.

So why would someone choose private insurance over public, especially when nearly 60 of the most common illnesses are covered under AUGE regardless of insurance plan? It seems that private hospitals (“clinicas”) have more resource and more physicians working for them. 70% of the population is insured under FONASA, but 60% of doctors work in the private sector. Thus, wait times decrease and quality of care increases. Not only that, but facilities also tend to be more up-to-date, and patients have more of a choice in whom to consult and how to be treated.

Northwestern University

It seems that the need for reforms may have only just begun.

 
At 7/01/2011 11:03 AM, Blogger Junkyard_hawg1985 said...

Larry,

According to Gapminder, government spending accounts for 53% of healthcare spending in Chile. I would also say that your claim that government healthcare in Chile is the reason for improved life expectancy is complete bunk. Note the intro from the following article.

"The 1950's and 1960's witnessed centralisation of public health care into a National Health Service. Neoliberal policies in the 1970s and 1980s refocused health policy onto extending the scope for private insurance and provisions in health care. The return to democracy in 1990 has produced a reappraisal of health policy, with the emphasis on strengthening and improving public health insurance and care."

After reading this paragraph, go back and look at the life expectancy chart over time. What you see is that the life expectancy took the great leap forward vs. other countries during the 1970's and 1980's when the focus move away from a central government planning for healthcare.

 
At 7/01/2011 12:05 PM, Blogger Ron H. said...

Che is,

"Only one small problem, the increase in life expectancy is due almost entirely to a decrease in infant mortality. And the decrease in infant mortality coincides with Chile's increase in national wealth and the associated reduction in poverty. The infant mortality rate in Chile fell from 76.1 per 1000 to 22.6 per 1000 from 1970-85. The creation of Chile's public health care system predated this remarkable decrease in infant mortality by almost 30 years, so it cannot be responsible for the sudden decrease in infant mortality."

While this is an excellent comment, I fear you may have missed your target audience, by using numbers. Neither member of the new brain trust can handle numbers, or percentages, or heaven forbid, calculations of present values for future cash flows.

Perhaps some simple pictures would be more effective.

 
At 7/01/2011 5:55 PM, Blogger Methinks said...

Dead Che,

I fear Ron H. is, as usual, correct. Although, I did enjoy your post.

Also, thanks for the link to the Dufus Mathews story. It's as comforting a bed of nails to know that before Bsrbara Walters became visibly orgasmic while interviewing Chavez, there was a long list of useful idiots who were and still are mentally copulating with murderous dictators from other countries as well. Since violence against innocents turns them on so, you can imagine my trepidation as they trip all over themselves to prostrate before our current el presidente.

 
At 7/01/2011 5:55 PM, Blogger BrophyWorld said...

Childhood education in Chile is a good example of how a military dictatorship can be better than a democracy. The Pinochet government radically revamped education in Chile in 1981 and has become a successful laboratory studied by researchers around the world. Prior to that time, the national government was a democracy that operated most schools for children, enrolling 80% of students, using a national curriculum.

There have been many protests in recent weeks by socialists who want to destroy the system and replace it with larger handouts:
http://brophyworld.com/voucher-education/

 
At 7/01/2011 6:01 PM, Blogger Larry G said...

see sometimes, you have to repeat the sentence:

" The National Health Fund (Fonasa), created in 1979, is the financial entity entrusted to collect, manage and distribute state funds for health in Chile. It is funded by the public. All employees pay 7% of their monthly income to the fund"

Now I'm sure ya'll know what the word "National" means right?

and I'm sure you know when it says that ALL pay 7% of their monthly income that that is a government dictated individual mandate.

right?

ya'll are comical sometimes.

when the words say "govt", "national", "all will pay 7%".

It's a govt run system guys.

They are doing what ObamaCare was proposing to do - to set up a system that encourage and incentivized competition - as opposed to having nothing at all to do with it and let the free market run things.

This is yet another example of a govt-run program.

 
At 7/01/2011 6:15 PM, Blogger Larry G said...

Dictatorship or Democracy - these are the words that fairly describe the education system in Chili;

subsidized by the govt with standards set by the govt.

there is no govt-free (free of govt) education system in Chili.

I actually LIKE the healthcare system in Singapore and Chili because clearly the govt has a positive and effective role in it.

Public education is the ultimate socialism anyhow, right?

 
At 7/01/2011 6:48 PM, Blogger Marko said...

Has anyone checked out the wikipedia article that Dr. Perry cites on the miracle in Chile? It is funny how Point Of View it is against the free market helping. I love wikipedia generally, but compare the treatment of Socialism (you can almost hear the editors beaming their approval) and the Chile article.

Sad.

Oh and Larry, you seem confused.

 
At 7/02/2011 6:58 AM, Blogger Larry G said...

well the beauty of Wikipedia is that they give their sources, they usually identify contested views and often give a paragraph on each of the divergent views.

is it perfect? of course not.

but it's pretty clear that Chili, lost most places that have universal health care does so WITH govt influence and involvement - as opposed to the wet dream of the libertarians of having absolutely no govt involvement and free market nirvana - which in the entire world - is a myth in terms of it providing any semblance of universal health care.

let's call Chili and Singapore "hybrids" in which govt is involved but tries to put together a framework to incentivize personal responsibility and free market principles.

 
At 7/02/2011 2:30 PM, Blogger Manuel Viaggio said...

The change is no doubt miraculous but not clearly related to any economic policy. As your charts clearly show, by 1980, that is, well before any succesful economic measure was implanted, Chile had caught up with Argentina in terms of health. Since then, the trends are broadly similar. There has to be another explanation.

 
At 7/02/2011 4:22 PM, Blogger Ron H. said...

"but it's pretty clear that Chili...

What is this Chili you keep babbling about? Are your Wiki references about chili?

Are you sure you're posting on the right blog?

 
At 7/02/2011 5:17 PM, Blogger Larry G said...

Chile - oops.. my bad

 
At 7/03/2011 4:36 PM, Blogger Courcheval said...

If life expectancy was related to free trade markets, the US would be world champion in that matter. Unfortunatly, it seems that the cost of drugs in that country is one of the causes of the declining life expectancy (now behind Cuba).

If life expectancy was to be an indicator of well being (finishing your life with Alzeimer is not a desirable end), it seems that the countries with best social health care, without surprise, get the best rankings (Japan, Scandinavian countries).

Now, how will those countries deal with the massive arrival of baby boomers at retirement age? They might simply print paper to pay the additional costs...a bit like in the US.

 
At 7/03/2011 4:42 PM, Blogger Courcheval said...

This comment has been removed by the author.

 
At 7/03/2011 7:36 PM, Blogger Larry G said...

The challenge for the countries that provide govt-sponsored/govt-sanctioned health care is to find a model where people who have the means can pay for the incremental benefits at some cost... but not have taxpayers paying that cost.

Medicare Part B and MedicAid are the big challenges for the US but other countries are also on the bubble.

Part B is voluntary, you have to sign up for it... none is taken out in FICA but the problem is that it only costs about 100.00 a month whereas the average use is about 400.00 a month.

Clearly, people are going to have to pay more in premiums and co-pays and possibly means-tested in benefits (like MedicAID is SUPPOSED to be).

 
At 7/05/2011 1:04 AM, Blogger Methinks said...

If life expectancy was related to free trade markets, the US would be world champion in that matter.

U.S. markets are more free than a lot of markets, but they don't even begin to approach free markets. The U.S. markets are not as free as those in Hong Kong or Singapore, for instance. Life expectancy is higher in those countries too and neither place has anything resembling the socialized medicine of European countries.

In countries without modern medicine (3rd world) the lack of first world medicine plays a large role in life expectancy. People die of things nobody in a first world country dies of. But, when you compare first world countries, its role diminishes.

Life expectancy statistics are impacted by infant mortality rates (lower in the U.S. but recorded as higher as a result of different recording conventions than those used by European countries). People in the united states are more likely to die in accidents and more likely to be murdered and to have a less healthy diet, among other factors.

When you compare Americans of European descent to Europeans, the life expectancy of Americans is greater. Unfortunately, the life expectancy of blacks and latinos is shorter for a variety of reasons and that reduces our overall statistics.

health care outcomes, on the other hand, are much better in the United States than in any European country.

The rankings you are referring to are WHO, I assume. The WHO gives the existence of socialized medicine in any country a 30% weighting in compiling the ranking. So, it doesn't matter if the system is good or bad or how long the wait lists, countries with socialized medicine are always ranked higher than those without it. It's a political thing at the WHO.

 
At 7/05/2011 7:18 AM, Blogger Larry G said...

"U.S. markets are more free than a lot of markets, but they don't even begin to approach free markets. The U.S. markets are not as free as those in Hong Kong or Singapore, for instance. Life expectancy is higher in those countries too and neither place has anything resembling the socialized medicine of European countries."

Singapore has a govt-imposed, mandatory 33% payroll tax as well as subsidized health care for those who cannot afford it.

It's not anything like a true free market.

It's more an example of HOW a govt can put the framework in place for a more effective supply/demand market but in no way, shape, or form would you call what is in Singapore as a free-market with no govt influence.

there is a heavy govt influence - heavier than in the U.S. - AND twice the payroll taxes that we have.

 
At 7/05/2011 2:25 PM, Blogger Ron H. said...

"Singapore has a govt-imposed, mandatory 33% payroll tax as well as subsidized health care for those who cannot afford it.

It's not anything like a true free market.
"

Do you understand nuance? Degrees of shading?

"not as free as"

"free-ER"

"high-ER"

Reread Methink's comment again, slowly, try to comprehend what you read, and read it all the way to the end.

Even after a lengthy previous discussion of Singapore's healthcare system, you still don't understand some of the important features. Crank up Wikipedia & look again. Pay more attention to the details.

You are embarrassing yourself.

 
At 7/05/2011 7:41 PM, Blogger Larry G said...

what I can comprehend Ron is that you lack a brain and have mush impersonating one.

try to comprehend that dude.

I DO UNDERSTAND the important features including the one you do not which is it is a govt-run system first and foremost no matter what else you say you like about it.

I like it too but I consider it to be an example of what a good govt-run system can be but it clearly is not a free-market system in any way, shape or form unless ones has mush for gray matter.....

 
At 7/05/2011 8:28 PM, Blogger Larry G said...

so the question that Ron has not answered is if the US did what Singapore did - have a 33% payroll tax and govt subsidized health care would our life-expectancy and infant death numbers be like Singapores?

and if they were - would you attribute it to a "free market"?

That makes Ron's "lessons" about "comprehending" even more COMICAL.

 
At 7/06/2011 4:47 AM, Blogger Ron H. said...

"what I can comprehend Ron is that you lack a brain and have mush impersonating one."

That's it? I take that to mean that you don't really have a response.

You aren't addressing the subject being discussed. Why won't you answer the questions people pose to you and respond to what they write?

"I like it too but I consider it to be an example of what a good govt-run system can be but it clearly is not a free-market system in any way, shape or form unless ones has mush for gray matter....."

Do you even understand that you are agreeing with what everyone else has already said? That Singapore doesn't have a free market health care system, but it's freer than some.

Remember that nuance thingy. Why is this so difficult for you?

I've answered your irrelevent question about life expectancy in great detail several times in the past. I won't waste time answering it again, only to have it reappear in the future. If you understood the answers you've been given, you would understand that you're asking the wrong question.

You need to do better than this, Larry.

 
At 7/06/2011 7:56 AM, Blogger Larry G said...

Ron - you've done nothing by whip up the air with your sanctimonious blather.

get your lips a rest cuz they're not connected to the thinking end.

Anyone who cannot recognize what a govt-run system is or is not and continues to portray themselves as an economic literate is in sad shape.

 
At 7/06/2011 7:20 PM, Blogger Ron H. said...

Larry, Larry, Larry,

You're off topic & down in the weeds here, can't you at least repeat some of the same silly stuff you have repeatedly written about government run healthcare?

Or at least try again to support your strange claim that healthcare is somehow the only meaningful influence on life expectancy.

You seem determined to ignore the thoughtful comments others have made - and I don't even include my own - trying to correct your misconceptions about the subjects you pretend to know something about.

You assertions haven't changed since the beginning, indicating that you haven't understood, or have willfully ignored the education others have tried to give you.

Many have given up, and no longer respond to you. You will end up in dialogs with only your tag team buddy Dufus.

Learn to read & comprehend.

 
At 7/07/2011 7:58 AM, Blogger Larry G said...

Ron - Ron - Ron - I don't think reading and comprehending covers your issues... it's called living in one's own world refusing to recognize the realities of when the govt is involved in health care or not.

you seem to share this problem with others here I noticed but in the real world - when govt mandates a 33% payroll tax - that's called govt healthcare not private sector health care.

think hard Ron... think hard..

 
At 7/07/2011 11:00 AM, Blogger Ron H. said...

It's that nuance thing, Larry, you're not getting it.

It's not a question of whether government is involved, it's a question of to what extent and in what ways.

When customers have the kinds of choices, they do in Singapore, competition puts downward pressure on prices. It's a fairly complex system, and I don't expect you to understand it completely, but suffice it to say, that the kinds of choices users of medical services have, make it a reasonably good system.

A less than perfect comparison would be to the use of food stamps in the US. Customers choose what to buy, so the price of food isn't distorted to any great extent.

The Singapore system allows for economic realities that will operate no matter what, sort of like gravity, that aren't improved on by government interference.

When a lot of different people tell you that you're missing something, it's possible they're all wrong, but you might want to consider that they could be on to something.

 
At 7/07/2011 9:45 PM, Blogger Larry G said...

Ron - it's either disingenuous or ignorant or both to assert that govt-directed health care is "free market" - and doing so as a "free market" advocate.

I believe that Singapore and Chile and other govt-direct health care CAN encourage and incentivize a better approach that a pure non-govt free market can.

that's the bottom line Ron.

You can't show me a better non-govt free market approach so instead you cling to examples that are, in fact, govt directed health care.

the "economic realities" of the Singapore system are made possible by none other than the govt.

without the govt collecting a mandatory 33% payroll tax - their system would undoubtedly not have universal coverage and as a direct consequence a lower life expectancy and a higher infant death rate.

them's the facts.

 
At 7/07/2011 11:13 PM, Blogger Ron H. said...

"Ron - it's either disingenuous or ignorant or both to assert that govt-directed health care is "free market" - and doing so as a "free market" advocate."

Nobody is asserting that Larry, you don't read well, and don't understand nuance.

"without the govt collecting a mandatory 33% payroll tax - their system would undoubtedly not have universal coverage and as a direct consequence a lower life expectancy and a higher infant death rate."

You have yet to make that connection in all this time. You have ignored any other possible influence on life expectancy, while assuming that life expectancy is the only valid measure of well being, and you refuse to acknowledge the errors introduced by the use of different definitions of live birth in different parts of the world.

You continue to cite a report from an organization that gives more weight to "fairness", than to actual medical outcomes, and quality of life.

You don't read or understand what others write.

Chink, chink, chink...There appears to be no way in. You are doomed to remain stuck in there.

 
At 7/07/2011 11:44 PM, Blogger Larry G said...

Ron - you have failed to cite a single example of a truly non-govt involved free market for health care.

ALL of the govts that have GOOD life expectancy data have govt-directed health care.

you continue to live in a world that denies this simple fact.

how can anything else you say have any merit when you are so far into la la land on this ?


tsk tsk.

 

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