May 17, 2019

Side by side, Venezuela and Chile, compared in video

By Monica Showalter
Economist Steve Hanke has found a terrific video treasure on Twitter from El Cato, the Spanish-language branch of the Cato Institute, comparing and contrasting the development arcs of Chile and Venezuela. Here it is:

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Prof. Steve Hanke
✔ @steve_hanke

Video at the tweet

#Chile liberalized its economy and enjoys a high quality of life and freedom. #Venezuela embraced socialism and is now one of the world's poorest nations and under a dictatorship.

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10:46 AM - May 16, 2019

The video is in Spanish but don't worry if you don't speak the language, you don't need it in this one. Just turn the sound down and watch the powerful photos and graphics.
The bright beauty of Santiago, Chile is shown in stark contrast to the filthy hellhole Caracas, Venezuela, has become. You can see the grainy, dark, dank dirty inhuman cementiness of that city - which has been so familiar to us in photos it sometimes goes unnoted, with the normality contrast that Santiago provides. This gives us a good whiff abou how far Venezuela has fallen through socialism. There are charts with data, such as this one below, showing how the countries have switched places over the last few decades.
Why did the countries switch places on the development scale - so spectacularly directly? Look - it's almost a straight line up and a straight line down. Why did the countries switch places on the development scale in such an unmistakeably straight line?



Well, because Venezuela took the express train to socialism, and Chile embraced free markets.
Once upon a time, Chile was the country that was the socialist dump, in the early 1970s it was literally a vassal state of Cuba's Fidel Castro, who came down to that country under the regime of then-President Salvador Allende, and barked orders. That Castrofication, as well as a long baseline history of soft socialism before Castro showed up in the decades earlier- a long soggy socialist slide - made Chile the country that was the hellhole.
Now it's Venezuela. And by the wildest coincidence, Venezuela, has embraced the ame Castro and all his minions, getting the exact same result.
The uplifting element of the video is that Chile didn't stay a dump.
Chile all by itself embraced free markets. It didn't have any American invasion or nation-builders in the works for it (cripes, when this happened, Jimmy Carter was president in the states), Chile actually did the whole thing itself.
And far from being a U.S. model, or imitation, Chile's embrace of free markets was quite organic, it done at approximately the same time Ronald Reagan and Margaret Thatcher were freeing up the U.S. and U.K. economies, so nobody was under anyone's tutelage at the time. One of the most striking things about it was that Elliott Abrams, who worked at the State Department at the time as the Latin American point man, was actually working to thwart it, based on a backward-looking argument about human rights violations in the country under the constitutionally authorized (same as Juan Guaido in Venezuela) Pinochet military government. It kind of gives reason for doubt to see Abrams at the helm in the U.S. again over Venezuela given his inability to understand how Chile dug out of its socialist morass.
Armed only with a group of young economists schooled in economist Milton Friedman's free market economic philosophy, Chile cut spending, stabilized its currency, got its massive socialist debt paid off, cut taxes, threw out thousands of leftist regulations (some of which had that lefty-we-know-what's-good-for-you-odor, such as the one that prohibited new vineyards from being planted as a means of combating alcoholism), installed unilateral free trade (letting every nation have free trade from its end even if they were charging tariffs on their own, which took guts to do), and most importantly, set itself up for investment and prosperity by initiating the world-famous Chilean Model, the system of private pension savings that works so much better than America's Prussian-Model Social Security system, which is going broke.
Jose Pinera was the young economist who, with great difficulty, set up that revolutionary model, which turned out to be a runaway success, copied by every nation that has decided it doesn't want to have an unfunded pension liability problem - and any nation that wants to have money spent for nice things like roads and bridges (without having to beg the Chinese to build them on their own terms).
I've been to both Chile and Venezuela and the difference couldn't be more startling. Chile looks like a classy version of what California could or would be, minus its Mexican PRI-style "perfect dictatorship" (as Mario Vargas Llosa once put it) socialism. The Chilean roads are beautiful, the subway is efficient, the stores are full of beautiful things to buy (I still want to go back and buy more stuff there!) and the corruption is nil.
Venezuela by contrast is a hellhole of chaos, dilapidated, noisy, graffiti-strewn, full of crooks at every turn, empty store shelves, long lines to buy scarce goods, and utterly miserable.
Both countries embraced socialism, each at the bottom ends of their scales on the charts. But Chile also stands as a model for how Venezuela can get out of its socialist morass once it gets the dictatorship out of there. There isn't much hope for persuading Alexandria Ocasio-Cortez or Bernie Sanders of the importance of rejecting socialism from these charts but it could help educate Millennials, who get nothing like this in their schooling. One can also hope that Abrams doesn't interfere with the embrace of free markets as he did in Chile -- because Chile really does have the solution for how to fix Venezuela down the road. El Cato's video shows it.

Economist Steve Hanke has found a terrific video treasure on Twitter from El Cato, the Spanish-language branch of the Cato Institute, comparing and contrasting the development arcs of Chile and Venezuela. Here it is:

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