While we’re wallowing in disastrous economic policy, Chile is flourishing. Why is that?
Wealth: Chile is expected to win entry to OECD’s club of developed countries by Dec. 15 — a great affirmation for a once-poor nation that pulled itself up by trusting markets. One thing that stands out here is free trade.
At a summit of Latin American countries last week in Portugal, Chilean President Michelle Bachelet suddenly became the center of attention — and rightly so. She announced that her country was expected to win membership in the Organization of Economic Cooperation and Development, an exclusive club of the richest and most economically credible nations.
Chile is the first country in South America to win the honor, and in a symbolic way its OECD membership card seals its exit from the ranks of the Third World to the First.
For the rest of us, it’s a stunning example of how embracing free markets and free trade brings prosperity.
Embracing markets has made it one of the most open economies in the world, ranking third on Cato’s index, just behind Hong Kong and Singapore. Per capita GDP has soared to $15,000.
Besides its embrace of free trade, other reforms — including pension privatization, tax cuts, respect for property rights and cutting of red tape helped the country grow not only richer but more democratic, says Cato Institute trade expert Daniel Griswold.
But the main thing, Griswold says, is that the country didn’t shift course. “Chile’s economy is set apart from its neighbors, because they have pursued market policies consistently over a long period,” he said. “Free trade has been a central part of Chile’s success.”
Chile has signed no fewer than 20 trade pacts with 56 countries, giving its 19 million citizens access to more than 3 billion customers worldwide. When no pact was in force, Griswold notes, Chile unilaterally dropped tariffs. This paid off handsomely.
You’ve heard of flat taxes? Chile has a flat tariff — only 5% on any item not exempted by a free-trade treaty, Griswold points out. But almost nobody has signed off on free-trade treaties like Chile.
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Estonia, Israel, Russia and Slovenia are also in the process of applying to the OECD.
Congratulations to Chile on this outstanding achievement. May it continue in this track.