WSJ: Chile’s Cautionary Lesson for Americans

April 29, 2012 9:32 pm0 commentsViews: 1

Mary Anastasia O’Grady

April 29, 2012

Wall Street Journal

A free economy is at risk when a demand for equality is not answered by a defense of liberty.

 

Communists are not taking over Chile. But you wouldn’t know it from watching the media frenzy surrounding 23-year-old student leader and avowed communist Camila Vallejo in Santiago.


Since last year the red-diaper baby, whose parents were supporters of Salvador Allende, has headed scores of street demonstrations demanding free university education, nationalization of the copper industry, and the end of the liberal economic model.


Amazingly, she has put the center-right government of Sebastian Piñera in a defensive crouch.


How this can be in Chile, the poster-child of liberal economic reform, is at first a puzzle. The answer—and this is a cautionary tale for Americans—may lie in Chile’s political and intellectual climate, which is desperately short of voices able to defend the morality of the market and the sanctity of individual rights.


Even while the material benefits of the market economy have been piling up for decades, Chile has been intellectually swamped by leftist ideas. The common principle: Economic inequality is immoral and the state has an obligation to correct it.


Rather than push back against this invitation to tyranny, the right too often cedes the moral high ground to its proponents. Mr. Piñera is among the culprits. His reactive half measures designed to satisfy the moderate elements of the equality brigades are undermining Chilean freedom. They are also undermining his power by making him look weak and incompetent.

Chileans aren’t interested in communism. That much was proved when Ms. Vallejo returned home from a trip to Cuba earlier this month to declare that Fidel Castro is a “great visionary” and his reflections are “light and hope” for Chile. She looked like a Castro stooge, and her popularity dipped. Things got worse when Cuban blogger Yoani Sánchez pointed out how ridiculous the Chilean “rebel” appeared in Cuba, following the orders of the military dictatorship.

Like a good student, Ms. Vallejo learned fast. Tapping into the middle-class sense of entitlement is a safer avenue for a rising demagogue. When 10,000 students poured into the streets of Santiago to renew their demand for free universities Wednesday, she was again on hand. “The people of Chile are here to continue defending the right of education,” she declared.


Twenty years ago a mere 200,000 Chileans went on to higher education. Today that number is almost 1.2 million. Yet many students don’t finish, according to Rodrigo Troncoso, an analyst at the Institute for Freedom and Development in Santiago. He says this means that they end up carrying enormous debts but have careers that don’t pay well. A large number of Chilean households want the national government to solve their problem.


While this may explain the clamor to expand education entitlements, it doesn’t explain Mr. Piñera’s dismal 29% popularity rating. (He got 44% in the first round presidential election.) Gross domestic product has expanded at more than 6% for the past two years while government technocrats have been toiling away to boost investment, generate more energy, and reduce government intervention. The goal is to make Chile a developed country by 2018.


The country’s rank in the World Bank’s Doing Business survey deteriorated from 2006 to 2010 but the decline has been reversed in the past two years, with Chile moving up to 39th from 53rd. Other Piñera objectives include reducing waiting time for environmental impact studies, eliminating regulatory redundancies, cutting import tariffs and opening sea and air ports to foreign competition. The number of days it takes to start a business is down to seven from 27 and will soon be reduced to one.


All of this will create a more dynamic Chile. But it won’t stick if the nation is not convinced that what is making Chile great is also good. Mr. Piñera could play a role here but the defense of liberty is not his forte. In 2010 he canceled the construction of a coal-fired electric plant under pressure from environmentalists rather than stand by the rule of law. A “temporary” corporate tax increase to 18.5% from 17% in the aftermath of the 2010 earthquake is now being raised to 20% and made permanent. Tax cuts for individuals meant to offset those increases may not pass in Congress because Mr. Piñera’s coalition does not have a majority.


Then there is his education reform which tries to placate Ms. Vallejo’s aficionados without giving in to the demand for a free university system. It guarantees scholarships for the bottom 60% of the population and 2% real interest rate loans for all but the richest 10%.


The technocrats might be congratulated for holding free university education at bay considering the political pressures. But the reason Ms. Vallejo has them on the run in the first place is the more fundamental problem. If Mr. Piñera wants to solve it he will have to become an advocate for freedom.