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Chile's New President Threatens the Nation's Market-Driven Prosperity

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Tags World History

01/06/2022
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With his arrival to the office, Chile’s newly elected president, long-time outside opposition leader Gabriel Boric, has vowed: “If Chile was the cradle of neoliberalism, it will also be its grave.” While the term suffers for want of a clear definition, Boric has not been shy over the course of his career about making clear what policies he opposes, and so we may infer something of what he means. From fewer taxes and regulations to free trade and relaxed capital controls, Boric opposes them all.

Perhaps ironically, these are precisely the policies, beginning in the 1970s that the country adopted in order to grow rich. For example, since 1970 Chile’s GDP has increased by a factor of five, and grew at an average of 5 percent annually from 1990 to 2018. During the latter half of the same period poverty was cut by three-quarters, to 9 percent. And so on the surface it may seem strange that a rabid campaigner for social justice, of which the amelioration of poverty surely counts as a primary goal, would oppose such policies as made Chile rich—and even stranger that Chileans would have voted for him.

So how did Boric get elected, and what is he talking about?

First, what Boric ostensibly refers to is the influence during the 1970s on Chile’s economic development and public policy prescriptions by economists hailing from the University of Chicago. The university, home to several coalescing strands of thought regarding regulation, trade, and monetary and fiscal policy, did indeed see several of its alumni employed by the Chilean state. Perhaps Boric also indicts the Austrian school and the many talks given by Ludwig von Mises and F.A. Hayek, who advocated policies similar to those of the so-called "Chicago Boys," for their influence on the country’s direction.

Lumping all these thinkers together as “neoliberal,” which Boric would not be alone in doing, is problematic when trying to evaluate what it is he seeks to overturn. As a paradigm, “neoliberalism” suffers from a chronic elasticity borne of fundamental vagueness. Indeed, the phrase is perhaps most often used as a pejorative by those on the left seeking to tar more centrist members of their political coalition with big business sympathies. That being said, in its broadest agreed-upon sense “neoliberalism” refers to a belief in the need to deregulate markets, eliminate capital and wage controls, and lower trade barriers. Under this label everyone from Mises to Bill Clinton qualifies, hence its poverty as an analytical lens.

But even if we grant Boric his chosen signifier for the set of policies he opposes, why should anyone want to turn away from the policies that made Chile the most prosperous state in its region? As documented above, the evidence of their success seems overwhelming. At the same time that neighboring Argentina and Brazil were plagued by chronic inflation and economic crises, Chile was calm and prospering. Beneath the surface, however, all was not well.

Chileans broadly had two chief complaints. First, while the economy grew robustly, the economic gains tended to be concentrated at the top of the income distribution and clustered in coastal metropolises. Even though Chileans’ relative standard of living continued to increase over the same period, its Gini coefficient, its measure of wealth concentration, declined at the same time—indeed, it is lower than in the US—this proved a robust rallying cry for Boric. Civic involvement and confidence in the government have also declined, as the centrist duopoly that dominated politics left voters feeling increasingly detached from politics.

Whatever the merits of these issues (even though Chilean citizens remain by and large better off than citizens of neighboring states such as Brazil and Argentina), they should not be allowed to fester further. Massive protests have shaken the country numerous times over the past decade, and now have produced a backlash against one of the most competently managed states in the region, which translated into a landslide victory for a communist collaborator who wants to hike taxes, curb profitable mining operations, and reserve half the seats on corporate boards for workers.

… At least, that is what Boric said when he launched his campaign.

In the lead-up to the decisive second round of elections Boric tacked to the center. However, whether calculated or genuine, this turn is likely to be less important than the narrative he has worked so hard thus far to establish and to channel. Even if, as The Economist reports, he is increasingly listening to more moderate economists newly integrated into his camp, their rational policy prescriptions may prove politically impossible precisely because of the environment Mr. Boric has helped to create. Chile faces no serious problems minor reforms couldn’t fix. Dubious labels aside, Boric has done nothing but cast scorn on the policies that made the country wealthy. While the centrist elites who together dominated the government for thirty years bear some responsibility for not responding to clearly worsening circumstances, Chileans everywhere should hold their breath as we wait for what comes next.

Author:

Joseph Solis-Mullen

A graduate of Spring Arbor University and the University of Illinois, Joseph Solis-Mullen is a political scientist and graduate student in the economics department at the University of Missouri. An independent researcher and journalist, his work can be found at the Ludwig Von Mises Institute, Eurasian Review, Libertarian Institute, Journal of the American Revolution, Antiwar.com, and the Journal of Libertarian Studies. You can contact him through his website http://www.jsmwritings.com or find him on Twitter @solis_mullen.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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