Friday, April 09, 2010

Comparing the economic records of dictatorship and democracy in Chile (Samuel Valenzuela)

As a follow-up to my post on Military dictatorship and free-market economics in Chile - Sorting out propaganda from reality ...

... my friend Samuel Valenzuela, a Chilean comparative/historical political sociologist based at Notre Dame University, e-mailed me the following response, which I pass on with his permission. --Jeff Weintraub

Dear Jeff,

Chilean economic growth during the Pinochet years was only 1% per year on average. The big spurt in growth with macro-economic stability has occurred in the years after the transition to democracy in 1990. The economy since then has almost tripled in size, and now has the highest per capita income in Latin America. The democracy dividend came in the form of a huge increase in foreign direct investment, which over these years has totaled about 120 billion dollars. Foreign investors did not really believe in the stability of the military regime.

(The growth curve began to edge up in 1985, but until 1988 it was all just recovery of past levels. Moreover, in 1988 Pinochet inflated the economy with fiscal spending in a vain attempt to win the plebiscite, resulting in a projected 35% inflation rate in 1990--which the ConcertatiĆ³n government stopped in its tracks by deliberately inducing a slow down of growth to 2% for the year 1991.)

In the years of ConcertatiĆ³n government Chilean welfare institutions were perfected. There is effective access to health for everyone; a universal pension system, with minimum pensions for everyone over 65 whether or not they contributed into a pension fund; access to heavily subsidized housing (all of which was sturdily built and survived the earthquake without a scratch; a new unemployment insurance system; and financial assistance for tertiary education (which now has a coverage of about 35% of all 18- to 24-year-olds). All these measures were taken while maintaining fiscal balance (as an average over several years).

There are few governments anywhere that can match this record.

As to the earthquake, yes indeed: building codes are very strict in Chile. But the essential point is that they are enforced because the country has very low levels of corruption, and builders are held accountable legally for any failures. We were there for the earthquake, and near the epicenter of it. The highways need a lot of repairs, and the coastal towns subjected to the tsunami were very hard hit. Many older structures (often where no one was living) were also destroyed. But in general the cities look just about the same as they did before.