What Chileans are staking at the polls

On Sunday, Dec. 17, Chileans return to the voting booths. It is the second and definitive ballot. What’s at stake? Something very serious. Probably the permanence of millions of people in the middle classes, and it is known that freedom and democracy are better defended when a high percentage of citizens is part of that socioeconomic sector.

Between 1990 and 2015 — the period of liberal democracy — the country made a giant economic leap. At the time it seemed that the Chileans held a consensus that it was sensible to insist on the model of the market, of a smaller government, of incentives to entrepreneurs, a system of pensions based on individual capitalization and the private property of the productive apparatus, which had produced such good results in the country, even if it was installed by dictator Pinochet at the initiative of “the Chicago boys” who joined his administration.

In 1990, only 23.7 percent of Chileans could qualify as members of the middle social sectors. In 2015, the number had jumped to 64.3 percent — almost triple — an impressive feat that had placed the country at the head of Latin America and the threshold of the First World.

For those who worry about the levels of income difference — not about the reduction of poverty, which is the really important aspect — it is useful to remember that, even though Chile’s Gini index is one of the world’s worst, it dropped during that period from 57 to 50. In other words, the difference between what the wealthier 20 percent and the poorer 20 percent earn has diminished noticeably.

I extract the main data from a very serious study by Liberty and Development (L&D), a remarkable Chilean think tank that, as comedians do, gives the good news of an increase in the middle class followed by the bad news: a substantial part of those social sectors might evolve again toward poverty, given that an important portion of this group is very close to the so-called vulnerability strip.

What is that? The affair has to do with the definition of the term “middle class,” a vaporous expression with several meanings. The L&D study follows the methodology of the World Bank, which classifies as middle classes all adults who earn the equivalent of between 10 and 50 dollars per day, measured by the purchasing power.

Well, then. Most of the Chileans classified as middle-social-level are closer to the 10 dollars per day than to the 50. They are more likely to return to the levels of poverty, a phenomenon we have seen several times in Argentina, Ecuador, Peru, Bolivia and, above all, in Venezuela and Cuba, countries where people’s real salary is in the 10-dollars-per-month range.

What is needed for something like that to happen in that country, derailing what was called “the Chilean miracle?” Simple: a populist government that irresponsibly increases public spending, that relies on networks of patronage, of grateful stomachs that trade their votes for alms, that forgets that governments do not produce wealth because wealth is generated only in the private domain and requires a slow cycle of maturation that includes intense labor, innovation, investment, profit, savings, and renewed investment.

In other words, the upheaval would be handed down by a government (or several successive governments) that forgets that the rational order of the economy demands that the State live off society, not the opposite, as happens in failed nations spawned by Peronism, Chavism, Castroism and similar evils lurking behind the flags of social justice.

The United States, which is today and for the past century was the world’s largest economy, has grown an average of only 2 percent per year, but it has done so for 235 consecutive years, not counting the exceptional periods of recession. The immediate leaps belong to the delirious fantasies of social engineers such as Mao Zedong, Fidel Castro and Hugo Chávez.

This is what’s at stake for the Chileans on Dec. 17. No trifle that.

Published in Spanish by El blog de Montaner on Saturday December 9th, 2017

*The opinions published herein are the sole responsibility of its author.*