Economic Liberalization Plus Social Welfare Equals Prosperity


All I really know about contemporary Chile is that President Michele Bachelet has an amazing life story and is very popular. So for all I know, The Washington Post’s article on Chile’s emergence as a developed country is riddled with errors. But like everyone else, I enjoy hearing my prejudices confirmed so I liked this:

Today, Pinochet-era reforms such as a policy of privatizations and low import tariffs remain in place.

Chile’s openness to trade is combined with generous social spending. In recent years, Chile has accelerated spending on education and day care. Forty percent of youths now go on to universities or other institutions beyond high school, authorities say, and 70 percent of those are the first in their families to do so.

I don’t in any sense endorse going through a period of brutal military dictatorship. That said, this description of Chile’s post-Pinochet trajectory reflects my preferred version of left politics—an emphasis on bringing justice and tolerability to a free market regime through taxes on social welfare spending, rather than an effort to directly push market outcomes in a more congenial direction through regulation. Places like Denmark, with high taxes and open economies, are probably the best model of this. In the United States, politicians will go to almost any length to minimize the volume of formal taxes, and consequently we rely much more heavily on regulation (see, e.g., the idea of “mandates” on either individuals, employers, or both in health care) and I think we do so to our detriment.