Chile, Venezuela, And The Left’s Support Of State Over Prosperity  

Can we learn lessons by comparing these two nations?

Yes. More than five years ago, I compared three decades of data to show that pro-market Chile grew somewhat faster than mixed-economy Argentina and much faster than statist Venezuela.

Now we have some new data.

My colleague at the Cato Institute, Marian Tupy, has an article in Reason that compares Chile and Venezuela.

He starts by noting that the two nations have moved in dramatically different directions when measuring economic freedom.

Here’s a sobering chart on the changes.

Some may believe that economic freedom as merely an abstraction.

What’s more important, they argue, is results. Is a nation enjoying good economic performance, or is it stagnating?

Well, it turns out that the abstraction of economic freedom is very important if you want good performance. Here’s another chart from Marian’s article. You can see that Venezuela has stagnated while Chile has boomed.

Chile is not a perfect role model, to be sure, because of an unsavory period of military rule.

But the good news, Marian points out, is that economic liberty has led to political liberty. Whereas the opposite has happened in Venezuela.

Here’s a chart showing the remarkable progress in Chile..as well as the deterioration of rights in Venezuela (please note that “1” means strong political rights and “7” means low or nonexistent political rights).

All this data seemingly is slam-dunk evidence for the Chilean model over the Venezuelan model.

Yet there have been a number of leftists who actually praised the statist policies of Venezuela’s authoritarian rulers. Here are some excerpts from an exposê in theDaily Caller.

And Joe Stiglitz gushed about Venezuela’s economic performance back in 2007.

Wow, this is a remarkable case of ideological blindness. Stiglitz presumably allowed his statist views to drive his analysis.

But let’s focus on one part of that excerpt. Yes, it’s very desirable for all citizens to benefit from economic growth.

But if you look at the chart from Marian’s article comparing GDP per capita in Chile and Venezuela, it’s abundantly clear which nation is producing better outcomes from average citizens.

This is a fundamental flaw of statists. By fixating on redistribution and equality, this leads them to policies that re-slice a shrinking economic pie.

The evidence from all over the world is that this is not a recipe for convergence with rich nations.

This piece was first published on Dan Mitchell’s blog here on 26 May.