Monday, June 6, 2011

Left and Right: Venezuela versus Chile

In my last post I mentioned Chile's rapid rise in GDP per capita since 1969, compared with Venezuela's decline. Some critics of free market capitalism argue that it tends to shift wealth towards a rich minority, so that the poorer masses benefit little from growth. Apparent increases in average income could be caused by massive increases of income among the superrich and stagnation among the rest.

So I thought I would double-check Chile's numbers with statistics that told us more about the general health of the population. Below is a World Bank graph showing infant mortality in Venezuela and Chile since 1969:

This is quite difficult to interpret. Chile's infant mortality declined very quickly between 1970 and 1975 (the only points for which the World Bank has data), yet this time period covers both the socialist government of Salvador Allende and the right-wing dictatorship of Augusto Pinochet. It continued to fall under Pinochet and Chile's infant mortality sank beneath that of Venezuela in the late 1970s.

Life expectancy shows a similar trend, with Chile overtaking Venezuela also during the late 1970s. Between 1970 and 1990, Venezuela added only 6.1 years, Chile added 11.6 years.

Not very conclusive. At least we can see that Chile's shift to the right and its economic growth did not inhibit improvements in health, even if it did not necessarily cause them.

So let's compare Chile and Venezuela for a few other indicators, taken from the UN's Human Development Report:

Adult literacy rate
Chile: 96.9%
Venezuela: 95.2%

Public expenditure on health as a percentage of GDP
Chile: 3.7%
Venezuela: 2.7%

Gender Inequality Index
Chile: 0.537 (where 0 is no inequality)
Venezuela: 0.572

Homicide rate per 100,000
Chile: 8.1
Venezuela: 52

Human Development Index
Chile: 0.783 (where 1 is perfect and 0 is terrible)
Venezuela: 0.696

Percentage of population with internet access
Chile: 32.5%
Venezuela: 25.7%

Maternal mortality per 100,000 live births
Chile: 26
Venezuela: 68

Gini Coefficient (income inequality)
Chile: 52 (where 1 is absolute inequality and 0 is absolute equality)
Venezuela: 43.4

We see that Chile has greater income inequality than Venezuela, but that it also performs better for multiple indicators of wellbeing. So it seems fairly reasonable to guess that Chile's economic growth has indeed benefitted the population as a whole. Despite having a massive headstart in wealth, Venezuelans today experience lower standards of living than citizens of relatively free-market Chile.


    "The United States is, of course, in no danger of actually becoming Pakistan, any more than we’re going to become Sweden at the other extreme."

    An article from Nick Kristof that portrays Pakistan as Laissez-faire economy while Sweden is a socialist utopia but ignores the fact that sweden pops up on No.22 in the economic freedom index while Pakistan is at No.123 (1 point above India at 124)

    sorry for rather hijacking this topic :P

  2. Ok, back on topic, Chile had 2 socialist presidents from 2000 to 2010 but both of them did not really change the economic freedom's in chile

  3. Good point on Kristof. Perhaps this is another example of confusion between different kinds of right-wing view. That Pakistan has a powerful and aggressive military might appeal to the American neo-conservatives but it might appall libertarians or paleoconservatives.

  4. yes, and that's the problem, lot's of ideologies on the political spectrum are retrofitted to the american or European political scene where they don't make sense and lot of contradictions occur.

  5. True.

    To be fair to Kristof I did sometimes think years ago that the traits some neo-conservatives most despised among Westerners were precisely the traits we should desire among foreigners: openness to foreign cultures, acceptance of immigrants, aversion to war, willingness to question nationalist mythology, support for secularism, belief in gender equality and so on. They'd be DELIGHTED to see Iran or North Korea develop governments based on those principles!

  6. Neo-con ideology is indeed confusing, many seem to be proponent's of free-markets and economic freedom but want closed borders, limited immigration and ban outsourcing, all of which might be beneficial to US companies.

  7. Absolutely, and the mainstream left is little better with its collage of contradictory stances.

    Ireland is different, lacking this strong left-right divide. The two main parties for decades were non-ideological pragmatists, shifting from protectionism to liberalism as it seemed to benefit them and the country. So the left has tried to play the role of the nation's conscience, talking in moral terms while the bigger parties do the dirty, pragmatic work!

  8. "Despite having a massive headstart in wealth, Venezuelans today experience lower standards of living than citizens of relatively free-market Chile."

    Until the end of the 1990's when Chavez took office this "massive headstart in wealth" went to a tiny fraction of the population. A little more background analysis on this "Left and Right" spectrum is essential here, otherwise its useless. How long has Venezuela been implemeting its "left economic policies"? how long has Chile...??

    Since the Venezuelean government got control over the national oil company in the first quarter of 2003 the poverty rate has been halved and the extreme poverty rate has dropped by even more, over 70% drop. Infant mortality etc has changed dramatically too in this time period.

  9. Absolutely, but perhaps I should have included the graph from the previous post here too:

    It shows that GDP per capita began to decline in Venezuela in 1976, long before Chavez. I looked a little into Venezuela's problems in that post:

    "So what caused Venezuela's unique decline? The rot kicked in around 1976-77, the same year Venezuela's government nationalised its oil industry. Venezuela is one of the world's great oil exporters - by 2009 oil made up around 80% of Venezuela's export revenue - and when oil prices crashed in the 1980s they took Venezuela with them. Soaring oil prices before this provoked massive government expenditure....

    A very human series of errors: euphoric growth prompting a mad spending spree that ended up with massive public debt. Hugo Chavez came into power in 1999 and GDP per capita continued falling rapidly until 2004, since when it has rebounded considerably. Chavez's rule has been controversial but the major declines happened before he came to power."


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