For a few decades, Chile was very interesting for fans of free markets.
The country became famous for its system of personal retirement accounts, but there were many other reforms that liberalized the economy. Everything from free trade to privatization.
Unsurprisingly, Chile quickly became the richest nation in Latin America, surpassing countries such as Argentina and Venezuela that foolishly embraced bigger government.
But in recent years, Chile has become very interesting for fans of political drama.
- In 2019, there were big protests by the left, initially triggered by an increase in subway fares in Santiago.
- In 2020, the left enjoyed a victory as the country voted overwhelmingly in favor of writing a new constitution.
- In 2021, the left enjoyed another victory when former student activist Gabriel Boric was elected president.
- In 2022, the pendulum swung back to the right as voters overwhelmingly rejected a left-wing constitution.
- Now, in 2023, the right enjoyed another big victory in yesterday’s election for a Constitutional Council.
In a report for Bloomberg, Matthew Malinowski and Valentina Fuentes explain what just happened.
Chile’s political right dealt a crushing blow to the government of President Gabriel Boric that will undermine the young leader’s progressive agenda…right-wing candidates won 33 seats Sunday in a Constitutional Council in charge of drafting a new charter. This is above the three-fifths majority needed to push through articles at will… Left-wing contenders obtained 17 spots… A prior attempt to rewrite the charter was overwhelmingly rejected in a September referendum out of concern it went to far to the left, overhauling the foundations of Chile’s free-market economy…and weakening political checks and balances. …The election serves as a harsh reality check for Boric’s left-wing administration as it seeks to revive its progressive agenda, including plans to increase taxes on the rich.
I started today’s column by noting that Chile was interesting for fans of economic freedom and then shifted to explaining why it was an interesting country for fans of political drama.
Let’s close by revisiting the implications for economic policy.
The obvious good news is that there presumably no longer is any danger that Chile will be saddled with a leftist constitution (filled with “rights” to other people’s money).
But I’m more interested in whether yesterday’s election results indicate a rebirth in support for free enterprise.
Chile enjoyed enormous gains thanks to economic liberalization, with the poor enjoying disproportionate gains. But I worry that the nation will get caught in the “middle-income trap” without additional limits on the size and scope of government.
That won’t happen with Boric still in power, so we’ll have to see what happens in the next general election.
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Image credit: Mark Scott Johnson | CC BY 2.0.
