The Chile ‘Miracle’ Goes in Reverse. Investment and growth are falling, and now the government targets private schools.
By MARY ANASTASIA O’GRADY -Nov. 2, 2014
It’s nonsense to suggest that a free society can guarantee equal opportunity or equal economic outcomes. But that doesn’t stop elected politicians in modern democracies from promising both.
That’s why an A for honesty is in order for Chile’s education minister, Nicolás Eyzaguirre, who admitted in June that Socialist President Michelle Bachelet ’s campaign pledge to rid Chilean education of “inequality” requires withdrawing the freedom parents now have to choose their child’s school.
“What we have now is one competitor . . . with skates going at a high speed and the other barefoot,” he said. “The barefoot one is public education. I have been asked why not provide better training and more food to the one going barefoot? First, I have to take away the skates of the other.” (Emphasis added)
(L-R) Education Minister, Nicolas Eyzaguirre, Chilean President, Michelle Bachelet and Home Minister, Alberto Arenas ENLARGE
(L-R) Education Minister, Nicolas Eyzaguirre, Chilean President, Michelle Bachelet and Home Minister, Alberto Arenas EUROPEAN PRESSPHOTO AGENCY
Welcome to Ms. Bachelet’s Chile, where freedom is a problem because it upends the Socialists’ brave new world of equality. Learning more now, or earning more later, are symptoms of unfairness in the eyes of la presidenta and her party militants.
To understand why the outlook for the Chilean “miracle” is so grim and investment is plummeting, look no further than this government’s obsession with holding back those who would skate ahead of the pack.
Ms. Bachelet has increased tax rates on everything from capital to consumption. One objective is to soak the investor class, making it poorer so that income inequality goes down. But it is more likely that income disparities will go up since the rich have ways to shelter income while the poor depend on job creation from investment to earn their daily bread and build wealth.
When policies are capital-friendly, as they have been in Chile since the 1980s, life on the lower economic rungs improves in absolute terms. Writing in the Chilean daily El Mercurio on Oct. 19, former finance minister Hernán Büchi noted that Chile tripled its real income in three decades “and as a consequence generated an enormous social transformation especially for the poorest.” A 2013 World Bank study showed that between 1992 and 2009 Chile was “the country with the greatest social mobility on the continent,” Mr. Büchi wrote.
Last month the International Monetary Fund reported that on a purchasing-power basis Chile’s annual GDP per capita is now equivalent to $23,165, putting it just behind Poland ($24,429) and well ahead of Mexico ($17,925).
This impressive performance is unlikely to continue now that Chile is becoming another high-tax jurisdiction. According to the most recent figures available from Chile’s central bank, investment dropped 12.3% in the last quarter of 2013, 5.5% in the first quarter of this year and 8.1% in the second quarter. Last year around this time, the forecast for 2014 GDP growth was 4.5%. Now it hovers around 2%, thanks to falling commodity prices and the rising uncertainty produced by Ms. Bachelet’s hostility toward competition and profits.
The higher tax rates are supposed to generate higher revenue which the government says will be spent to improve public schools. Yet in the unlikely event that tax revenues increase while investors are running for the exits, there is no correlation between spending increases in union-controlled classrooms and academic results. The intellectual authors of the plan seem to recognize this, and it’s why they want to destroy private-school competition.
Chile’s popular voucher program began in 1981. Today it allows students to get an education at nonunionized private schools with a combination of government resources and parental assistance. It also permits selective admissions. The program has been enormously successful, and according to the Santiago-based Institute for Liberty and Development (ILD) nearly 1.9 million children (54% of the K-12 population) now attend private schools using government vouchers. Of those, some 1.1 million (31% of all school children) attend “for-profit” schools using a voucher.
The new law, which passed the lower house last month and now goes to the senate, would prohibit students from using vouchers to attend for-profit schools and prohibit schools that receive public subsidies from charging parents a co-payment. What is more, schools will no longer be allowed to select students because, apparently, it is “unfair” for gifted children to learn at their own speed.
This is cruel. It won’t affect Chile’s wealthy families, but many lower-income children will lose out. According to ILD, enrollment at the public schools dropped by 545,000 students from 2004-13 while subsidized private schools have increased by 364,000 students. The fact that many parents make the sacrifice to make co-payments demonstrates how badly they want to avoid public schools.
Ms. Bachelet has the teachers unions on her side but is rapidly losing support from the public. Chileans are catching on that “fairness” is just a cover for special-interest politics. A government that wanted to truly help the disenfranchised would work to expand choice rather than deny children the right to skate as fast as they can.