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Nothing to lose but their chains;

"Nothing to lose but their chains;" Continued...

Issue: "A warmer Chile," Nov. 9, 2002

Mr. Pinera's greatest success was in social security reform, which he is now trying to bring to the United States (see WORLD, June 29). But other changes-privatization of companies, dramatic decreases in wage taxes, reduction of tariffs to a maximum rate of 11 percent, a reduction of the wage tax and a freeing of the economy generally-also had a dramatic effect on the Chilean economy from the mid-'80s to the mid-'90s. As former finance minister Hernan Buchi summarized the changes, "The government freed all prices, including bread. To make this politically feasible, direct subsidies, not price subsidies, were given to the poor.... In agriculture, we regularized property and water rights, and allowed people to buy and sell land."

More changes also emerged: "The government changed the regulations and allowed the private sector to operate ports.... The telecommunications sector was opened, so even remote farmers could communicate immediately with markets." A statistical comparison of 1973 and 1996, when under the center-left government economic growth began to slow down, illuminates the big picture. Chile's population during those 23 years increased from slightly over 10 million to 14.3 million, while gross domestic product leaped from $17.7 billion to $71.5 billion (in 1995 U.S. dollars), which means that GDP per capita jumped from $1,775 to $4,737.

Meanwhile, inflation dropped from 500 percent to 6.6 percent, exports as a percentage of GDP nearly tripled from 8 percent to 23 percent, and copper exports dropped from 82 percent of total exports to 37 percent, which meant that Chile no longer feasted or starved as the price of copper rose or fell. Social indicators also improved enormously. Infant mortality from 1973 to 1996 fell from 66 per 1,000 live births to 13; average years spent in school doubled to nine; life expectancy increased from 64 to 73 years; and water safe to drink became universal in urban areas.

Marvin Olasky
Marvin Olasky

Marvin is editor in chief of WORLD News Group and the author of more than 20 books, including The Tragedy of American Compassion. Follow Marvin on Twitter @MarvinOlasky.

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