Catalysts of Chile's Economic Revolution

Chile is on the way to becoming the first Latin American nation to move to "developed country" status from "developing country" status, especially in light of the recent invitation to join the Organization of Economic Cooperation and Development. It has moved from a debtor nation to a creditor nation and its poverty rate is 14 percent compared with 45 percent in the 1980s.

But here's the rub, at least for the liberty-minded observer. A National Public Radio report heralded the milestone and identified the catalysts as Chilean government subsidies and other social services, such as building homes for the poor.

In reality, what drove Chile to economic success were the free market policies that its leaders enacted in the late 1970s and 1980s. From 1984 to 1998 Chile's average annual rate of growth hit a historic 7 percent and today is running around 3 percent — all a big turnaround from negative 11 percent in 1975.

The NPR piece noted that the Chilean economy is "among the world's most open" but it glossed over how Chile got there — through aggressive, liberty-inspired approaches to government. Between 1975 and 1989, an ideological revolution of sorts took place in Chile. Former Chilean Minister of Social Security, Jose Pinera, called the period a "radical, comprehensive, and sustained move toward economic and political freedom."

Mr.

Pinera was among the group of Chileans, and other Latin Americans, dubbed the "Chicago Boys." The Chicago Boys studied under free market economist Milton Friedman in the 1970s at the University of Chicago and have been largely credited with many of the free market reforms that were enacted in Chile that steered the country out of deep economic woes at the time.

Chile in some ways has advanced liberty and free markets more so, in recent years, than the United States. In the CATO Institute's 2009 Economic Freedom of the World Annual Report, Chile ranked 5th, one spot ahead of the U.S. A number of successful free-market reforms led to Chile's success, among the more notable of which is Chile's privatized social security system, which gives citizens a choice and control over their personal retirement funds, a system designed by Mr. Pinera. Other liberty-friendly reforms included privatization of various government-run entities, such as telecommunications, power, and water sectors; deregulation of industry; and the abandonment of price-control schemes that prevailed in Chile in the years leading up to the free-market revolution.

As the first Latin American country to be upgraded to the status of developed nation, it is critical to acknowledge the reasons for Chile's ascension: free market, limited government approaches. Failed socialist policies in Venezuela and Cuba are not helping bring freedom or economic prosperity to those countries. But liberty-minded approaches in Chile have done so for the Chilean people.

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