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The Independent Institute
Commentary

Whither Chile?


With just under 47 percent of the vote, former President Michelle Bachelet obtained a resounding victory in the first round in November’s elections in Chile, inflicting a heavy blow to the right and opening the door to a new left-wing government that, unlike the last time she was in office, will be based on a coalition that includes members of the Communist Party. She also went on to win the second round in mid-December and is now the president-elect.

This is the culmination of a process that has left observers dumbfounded. Chile’s outgoing center-right government under President Piñera has been among the most successful in the country’s history, if we judge it by the statistics that serve to measure these things. And yet the center-right has been going through a traumatic identity crisis. Its candidate, Evelyn Matthei, who obtained 25 percent of the vote, was the third figure to lead that ideological family after two previous candidates had to drop out. Several outsiders also ran in this election. One of them, Franco Parisi, a populist economist who comes from the right, took many votes from Matthei, who represented the well-established parties National Renovation and the Independent Democratic Union.

A quick look at some of the achievements of President Piñera is enough to place him among the best performers in Latin America. The economy grew at an average rate of more than 5 percent in his first three years and is growing more than 4 percent this year—against a 3.3 average rate under Bachelet’s previous government. Poverty has been reduced to 14 percent of the population and almost one million jobs have been created. Under Piñera’s predecessor, unemployment had grown substantially. Behind this success is an investment rate that nears 25 percent of GDP, four points higher than in the days of Bachelet. Foreign investors poured US$ 30 billion into the country last year, almost half of what Brazil took in despite an economy that is nine times bigger.

So, what is happening? Mauricio Rojas, a well-known analyst, thinks this is “the best and least loved government in our history.” He points to “the malaise of success”, a material progress that multiplies expectations a lot faster than the ability to meet them. I agree. I watched a similar process in Spain, where a large middle class that was the child of the booming post-Franco economy eventually became complacent and placed on the system redistributive and egalitarian demands that were incompatible with a prosperous society. The result was, in part, Spain’s recent crisis.

Could the same happen in Chile, whose progress has made it an emblem of the emerging world? Much will depend on Bachelet, who as a candidate has given in to several demands from the radical left, including proposing major changes to the Constitution, universal free education, a tax raise and the creation of a public pension system, among others. Whether she will go ahead with this is uncertain since her majority in Congress falls short of what is required for a constitutional change. But one thing is clear: Her government will be under more pressure than any other since the return of democracy in 1990 to reverse course on many of the institutional factors that have made Chile a envied liberal democracy. A significant segment of the middle class seems to have fallen for the siren song of old-fashioned socialism.

Herein lies a tremendous lesson for the rest of Latin American and the emerging world. The malaise of success can be a much worse enemy of the free society than its ideological foes. There are already signs in countries such as Brazil, Mexico and Colombia that the middle classes brought about by the opening of the economy (in the case of Brazil we are talking about a less accomplished system than in some of its neighbors) are beginning to lose sight of what made possible their rise and their high levels of consumption in the first place.

Bachelet’s responsibility, therefore, goes far beyond Chile. If she steers that dangerous energy towards productive ends and is able to preserve what is best in her country’s socioeconomic model while avoiding a radicalization of vast sectors of society, she will have rendered a service to her country and to the rest of Latin America, where observers are watching nervously what lies ahead. If not, there is much trouble ahead.


Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His Independent Institute books include Global Crossings: Immigration, Civilization, and America, Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.


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