Chile is Latam's most prominent success story, because of free market economics.
Historically below average, Chile now has the 2nd highest GDP per capita in Latam ex-Caribe.
Capitalism works. Socialism doesn't.
Historically below average, Chile now has the 2nd highest GDP per capita in Latam ex-Caribe.
Capitalism works. Socialism doesn't.
But Chile is now in chaos as over a million Chileans protest in the streets, most peacefully. But there is violence, there is looting, there are buildings set on fire.
As usual, law enforcement forces are no saints, quite the contrary. Violence meets violence. Violence breeds violence. And Chilean law enforcement has quite a terrible track record of repression.
At first protesters wanted a subway fare hike reversed. Got that and more. Now they want a new political system and new president. Protests are against neoliberal (free market) economics and the rich. This is Chile's left protesting.
The inequality issue is well explained here:
Ironically, inequality in Chile is low for international standards (e.g. it is lower than in Sweden or Brazil). Inequality has also been consistently trending lower for decades. Neoliberal economics worked.
Stats and details here: .
Stats and details here: .
You know who also protested for social justice and against neoliberalism and the rich?
Fidel Castro did. Hugo Chavez did.
Fidel Castro did. Hugo Chavez did.
To understand Chile's neoliberal policies success, nothing better than contrasting with Argentina, Chile's neighbor.
Argentina is a poorly governed country with corrupt politicians, a huge government, powerful syndicates and a love for socialist policies and subsidies.
Argentina is a poorly governed country with corrupt politicians, a huge government, powerful syndicates and a love for socialist policies and subsidies.
Argentina has devolved into a true shit-hole country, stagnated for decades, with little economic growth, rampant inflation, a worthless currency, and extensive capital controls. Mostly thanks to irresponsible spending resulting from socialist/populist policies.
I am Argentine.
I am Argentine.
Socialist-populist policies lead to stagnation. Neoliberalism, if well implemented, lead to progress.
Argentina's government spending is 39% of GDP. Chile's 25%. Given how *untrustworthy politicians are, a smaller government is best*.
Argentina's government spending is 39% of GDP. Chile's 25%. Given how *untrustworthy politicians are, a smaller government is best*.
Very importantly, in Chile, policy continuity and institutional stability encourage businesses to plan for the long term. In Argentina, it is all about the short-term and surviving the next crisis.
forbes.com/sites/hbsworki…
forbes.com/sites/hbsworki…
If Chile's problem is not its neoliberal system (again, neoliberalism simply means "free markets"), as Chile's protesters believe, what is it? I leave that discussion to Chileans 👇
Free markets economics does not cause inequality per se. Inequality still is an important issue for sustainable development. Inequality also leads to social unrest.
This is an excellent piece covering inequality in Latin America, and why it matters:
repositorio.cepal.org/bitstream/hand…
This is an excellent piece covering inequality in Latin America, and why it matters:
repositorio.cepal.org/bitstream/hand…
In Chile, the richest 1% make 25% of Chile's income. In the US, the richest 1% make 21% of pre-tax income (more after taxes).
How long before social justice protests start taking place in the US? The situation is not particularly rosy in many metropolis, e.g. San Francisco.
How long before social justice protests start taking place in the US? The situation is not particularly rosy in many metropolis, e.g. San Francisco.
However, every coin has two sides. So lets stay objective. Inequality also makes some work harder, and achieve more. Inequality is to capitalism as death is to life. Can't have one without the other. Communism does not work.
Inequality is growing worldwide. Despite most economic metrics improving, the gap between rich and poor grows bigger. The top 0.1% has captured as much growth as the bottom half since 1980. And the middle class is getting squeezed.
(source: wir2018.wid.world)
(source: wir2018.wid.world)
Monetary policy has resulted in extreme asset inflation, making it harder to afford housing in many places.
Chart below shows house prices vs average income. Note how aside of China it grows steadily since the 2008 Financial Crisis.
(interactive chart: infographics.economist.com/2017/HPI/index…)
Chart below shows house prices vs average income. Note how aside of China it grows steadily since the 2008 Financial Crisis.
(interactive chart: infographics.economist.com/2017/HPI/index…)
One of the reasons for growing inequality, at least in the US, is that millennials are not investing in the stock market.
Too many iphones, decaf soy lattes, and trips to Europe?
(source: cnbc.com/2018/05/16/gal…)
Too many iphones, decaf soy lattes, and trips to Europe?
(source: cnbc.com/2018/05/16/gal…)
Easy monetary policy => stocks go higher. Those who invest in stocks get richer in relative terms.
Probably a reason milennials are not investing in stocks as much is anger with the system. And becoming poorer in relative terms makes them angrier. A self-reinforcing mechanism.
Probably a reason milennials are not investing in stocks as much is anger with the system. And becoming poorer in relative terms makes them angrier. A self-reinforcing mechanism.
Inequality increases when the rich save more *in relative terms*. This is mathematically UNAVOIDABLE, unless there is progressive taxation, i.e. higher taxes for higher income brackets. Yet at least in the US, the rich are paying less than the poor.
(cbsnews.com/news/americas-…)
(cbsnews.com/news/americas-…)
To reduce inequality governments must help people *save more*. For that governments can
- increase minimum wages
- make taxation more progressive
- provide financial education
+ an unconventional idea: incentivize larger companies to partially pay employees with shares.
- increase minimum wages
- make taxation more progressive
- provide financial education
+ an unconventional idea: incentivize larger companies to partially pay employees with shares.
This is not about a bigger government providing a safety net. The smaller the government, and the less regulated the marketplace, the better for growth.
Reducing inequality is compatible with free markets (neoliberal) economics.
Reducing inequality is compatible with free markets (neoliberal) economics.
The fight between socialists and capitalists will intensify. Socialists will protest more and more, emboldened by public opinion supporting street protests.
Politicians will try to appease them by implementing measures such as MMT.
See Dalio's piece: linkedin.com/pulse/paradigm…
Politicians will try to appease them by implementing measures such as MMT.
See Dalio's piece: linkedin.com/pulse/paradigm…
Crypto assets are not supposed to help the poorer catch up with the richer, as some believe.
Bitcoin however may prove extremely valuable as hedge against the TAIL-RISK of fiat systems collapsing, i.e. a put option on central banks without expiry.
Bitcoin however may prove extremely valuable as hedge against the TAIL-RISK of fiat systems collapsing, i.e. a put option on central banks without expiry.
Somewhere crypto/blockchain could be helpful is in designing a more effective form of democracy with direct representation. Participants should be qualified. Want to vote on X? Demonstrate proficiency on the matter first. Democracy, as it stands, is stale. Change is necessary.
A fascinating blockchain project on the subject of democracy and voting is Democracy Earth (democracy.earth). Recommend reading its white paper.
cc @santisiri
cc @santisiri
@santisiri TL;DR
-Chile is a success due to capitalism
-Protesters blame capitalism for inequality
-Inequality is trending lower but is a problem
-Socialism doesn't work
-Inequality is a growing issue worldwide
-Fight between socialists & capitalists will intensify
-Change is necessary
-Chile is a success due to capitalism
-Protesters blame capitalism for inequality
-Inequality is trending lower but is a problem
-Socialism doesn't work
-Inequality is a growing issue worldwide
-Fight between socialists & capitalists will intensify
-Change is necessary
