Chile: A political suicide?

Foto de Martin Krause
Martin Krause

Member of the Academic Council of Libertad y Progreso.
PhD in Administration from the Catholic University of La Plata and Professor of Economics at the Faculty of Law and Social Sciences of the UBA. His research has been collected internationally and he has published books and scientific and outreach articles. He has served as Rector of ESEADE and as a consultant for the University of Manchester, Konrad Adenauer Stiftung, OAS, IDB and G7Group, Inc. He has received awards and scholarships, including the Eisenhower Exchange Fellowship and the Freedom Project of the John Templeton Foundation.

LA NACIÓN – A table with data from the World Bank is circulating online, showing that Chile’s GDP per capita grew by 161% in the period 1980-2020. Colombia, which is in second place, grew 95% and Uruguay grew 92%. Argentina, having grown 7.5%, only surpasses Venezuela at -76%. However, Chileans seem to have decided to turn against the model, in a very rare case in which those who are ahead want to be inspired by those who are last. It is often mentioned that the reason for this change would be an increase in inequality, but if we are to take generally accepted data, such as the Gini coefficient, which measures all countries within a range of total inequality (1) and total equality (0), in the 30 years of this indicator, inequality in Chile has fallen from 57.20 in 1990 to 46.60 in 2017, the latest figure.

For thirty years, Chile has ranked first among Latin American countries in terms of institutional quality, ranking between 20 and 25 in the ICI world ranking published by RELIAL and the Fundación Libertad y Progreso, followed by Uruguay and Costa Rica.

However, the Chileans seem to have decided to abandon this road and commit something of a mass political suicide. Is it so? What are they thinking? Someone might say that, once they have reached a certain level of wealth, they now want to follow a more egalitarian model, say, the “Nordic” one. But they already had that opportunity with Lagos or Bachelet. Boric arrives with a message that is more post-Marxist, anti-liberal, and closer to Bolivarian populism. It is true that he moderated his program to receive the support of the Christian Democrat Provoste and Ominami, but he has already expressed his willingness to liquidate the pension system and there are about 200,000 million dollars of the savings in the pension funds as a trophy.

This is not what’s surprising. Rather, I’m surprised that people have voted willing to hand over their own funds against the promise of a welfare state that has already bankrupted its pension system in the past. Why do Chileans do that?

It is not easy at all to know what they think. An election is the largest poll possible, but it would be risky to say they think like Boric. An election is a collective decision made on the largest sample we can find, but it tells us little about what the voters think. Do those who voted for Boric also think that Israel is a genocidal state? A survey, on the other hand, selects a representative sample of people to be surveyed and asks them a series of questions from which a better understanding of what they think can be obtained. Although the survey is not accurate either, since many times the questions involve expenses that are not assumed. For example, it is not difficult for me to choose that one should spend a hundred million dollars on environmental protection instead of a hundred dollars; but if I had to give my bank account details, I would probably choose the second one.

It is not easy at all to know what they think. An election is the largest possible poll, but it would be risky to say most Chileans think like Boric. An election is a collective decision made on the largest sample we can find, but it tells us little about what the voters think. Do those who voted for Boric also think that Israel is a genocidal state? A survey, on the other hand, selects a representative sample of people to be surveyed, but asks them a series of questions from which a better understanding of what they think can be obtained. A survey, however, is not completely accurate either, since many times the questions involve expenses that are not taken into account. For example, it is not difficult for me to choose that one should spend a hundred million dollars on environmental protection instead of a hundred dollars; but if I had to give my bank account details, I would probably choose the second one.

The market is also a place where people’s preferences are expressed, with the additional advantage that there you have to walk the talk. The markets usually generate good forecasts, although they are not always correct, the Chilean peso has devalued against the dollar from 700 to 1 in May 2021 to 871 to 1 nowadays. The stock markets fell after the election, which is to be expected, but investors are keeping an eye on the next news, in particular the formation of the economic team of the new government.

In mid-September, the Center for Public Studies (CEP) released its prestigious annual survey, in which Chileans were asked about their trust in institutions. Political parties appear at the last place (4%), the Congress (8%), the government (11%) and the Public Ministry (12%) fare only a little better, showing the great failure of traditional politics in that country and particularly from parties that supported the existing institutional framework. Confidence is led by universities (47%), followed by radio stations (38%), the police (36%), the Armed Forces (30%), municipalities (29%) and the police (26%). The Constitutional Convention is in 7th place (24%).

The survey also shows that the perception of those surveyed about whether the country was progressing or stagnant remained similar until 2014 (45% each). It collapsed afterwards, during the second governments of Bachelet and Piñera, with 60% believing the country was stagnating and only 20% believing it was progressing.

Obviously, Boric was able to channel this prevailing sense of frustration, perhaps creating an image closer to that prestigious academic world than to the traditional political world. That relationship however is fallacious, since Boric has been a student leader before anything, and then politician that, although he finished his law degree at the University of Chile, never graduated because he failed to complete the required work for the final degree.

The institutional quality Chile has shown in the last decades will now be put to the test. Institutional quality is, in other words, limits to power. The new government lacks its own majority in Congress, where the traditional forces of the Concertación and the traditional right remain somewhat powerful. Institutional quality is more than that: it is respect for the division of powers, an independent justice system, freedom of expression, individual guarantees, respect for property rights, freedom to enter into contracts, to dispose of property through local and international trade and a stable currency.

Institutional change, although possible, is always relatively slow. Forty years ago Estonia was part of the Soviet Union, today it is ranked 16th in the aforementioned ICI. Change is necessarily gradual. The left originally proposed revolutionary changes, but it was not successful. Today socialism has become gradual, but when a country begins that path the left locks himself into power and blocks any exit, as shown by Cuba, Venezuela, Nicaragua. That will be the test for the Chileans.

Will they get caught in that downward loop without being able to escape? As the old story goes, when a frog is thrown into a pot of boiling water, it jumps; but if you put in cold water and slowly heat it, it dies boiled. The temperature has started to rise in Chile, it is necessary to see if it continues to rise. It is not clear if the new government will be able to achieve it or if the frog, or rather the Chileans, will jump.

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