As we’ve noted in past Hotlines, over the last 40 years, Chile has become the richest country in Latin America. Poverty has fallen from 45 percent to 6 percent of the population. And per capita income has tripled to $23,000 a year.
That miracle was created by Chilean students of Milton Friedman who created the most free economy in the developing world, built on a foundation of property rights, free trade, a low flat tax, privatization of the Social Security system, and the deregulation of key industries.
But the left has steadily infiltrated the cultural institutions of Chile – schools, universities, churches, and media – and the payoff of decades of indoctrination paid off last year when voters approved rewriting the Constitution. Their project got a huge boost on Sunday when 56% of voters elected 35 year-old left-winger Gabriel Boric the new president of Chile.
Boric has pledged to back the delegates to the constitutional convention who are drafting rules that systematically dismantle Chile’s free-market reforms. They want to raise taxes, rub out the country’s highly successful private pension system and spend lavishly on regulation to combat climate change.
The Chilean stock market crashed on the news of the election. In the last two years, Chile’s central bank says 15 percent of the country’s GDP fled the country over concerns about social unrest and a lurch toward Venezuala-stype socialism.
Is this the end of the Chilean model of free market reform? Voters still have to approve any new constitution and the final product is likely to alienate many moderates. They may also recognize that truly radical change will cause capital flight.
Boric has pledged to support the independence of the Central Bank, appointed moderate economic advisers, and said tax increases would be limited.
The Chilean Miracle is in grave danger, but we are still hopeful that all is not lost.