Lessons From The Land Of 15% Growth

IBD Editorials ^ | May 5, 2011 | Staff

[Kaslin]

Economics: As the U.S. languishes, Chile posted a head-turning 15.2% yearly gain in GDP in March, and forecasts for the year are rising. Why can't we do that here?

A year ago, Chile lay in rubble, victim of the world's fifth most powerful earthquake. So Chile's 15.2% growth is a big bounce from a bad setback.

But it shouldn't be dismissed as an anomaly. It's a showy number, but not the only one.

The same day Chile released its data, Goldman Sachs raised its 2011 growth forecast for the country to 6.4% from 6%. In its annual regional business index, Latin Business Chronicle ranked Chile as having the best business climate in Latin America in 2011.

Such numbers are so alien to the U.S. in the economically debilitated Obama era, it makes sense to look at what Chile has done.

First, Chile's policies for long-term growth were put into effect in the 1980s by the group of Milton Friedman-inspired economists known as the Chicago Boys.

Under them, Chile's pension privatization cost nothing and left the country with no net debt. The private funds now hold assets worth 90% of GNP ($185 billion) — capital used to develop the country. Already, Chile's education and infrastructure are the best in Latin America as a result.

Second, there's free trade, of which Chile is a global champion, signing at least 58 treaties to gain access to 2 billion customers.

That's a big reason Chile is close to full employment and is scrambling to attract growth-hungry U.S. entrepreneurs — and getting them.

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[newheart]

The principles of successful free market economies are not unknown, even to the current administration and the Democrats in Congress. Clearly the failure to implement those policies strongly suggest that the failure of America is the heart of their agenda.

At what point do stupid policies become treasonous?

[econjack]

This is exactly what Friedman was saying all the time. Get the gov't out of the way and let the free market do its thing and everyone benefits. This horrid myth in the US that corporations are bad has got to stop. Obama has to deflect the blame for his own ineptness to the corporations (e.g., last week it was high gas prices were because of greedy speculators and corporations) because of his socialistic policies are a complete failure. Also, don't lose sight of the fact that Chile tried the Communistic route under Allende in the 70's and the people responded to his policies by putting enough C4 under his car seat to blow him and his Mercedes over a 17' wall. All we need to do here is get that Bozo out of the White House in 2012.

[wjcsux]

I remember learning about Chile during Elementary School in the early 60’s. At that time, they were a very poor country. They have come a long way. They discovered Marxism doesn’t work.

[Mike Darancette]

A year ago, Chile lay in rubble, victim of the world's fifth most powerful earthquake.

They handled the aftermath very well.

[cookcounty]

One of the things driving the Chilean economy is the PRIVATIZED Social Security system, which dumps billions of dollars into investments every year.

....I shouldn’t say “dumps”...the return on their SS “contributions” is enormous! You would want it.

[Mr. Silverback]

Bump!

[boop]

I read recently that the average retirement is 52K per year in the private social security system of Chile. I don’t know if this is a rumor.

[IBD editorial writer]

It depends on what you put in, but $52k is a pretty normal equivalent for a normal middle class Chilean. A typical American would get those kinds of checks, too.

You don’t have to bother with a 401k with that kind of pension coming in. I don’t see why we don’t scrap this stupid 0% yield system we have now and just go private. Only the politicians will be left without their slush funds.

[lonevoice]

Interesting article ping