Chile’s Free Markets Enabled It To Survive Its 8.3 Quake Almost Unscathed

By Monica Showalter,

“Small Earthquake In Chile, Not Many Killed” was once billed as the world’s dullest headline. Well, now there’s been a huge quake in Chile and not many killed. Not dull at all — viva free markets!

It’s a sign of hope, particularly for the earthquake-jittery Los Angeles and Yellowstone areas, to see that Chile, a sliver of a country on the knife’s edge of a jutting tectonic plate, came out of an 8.3 mega-quake, and a series of aftershocks as high as 7.6, with just six dead — four of heart attacks.

The United Nations and others, of course, have lauded the country’s quake-preparedness standards, and President Michelle Bachelet has praised the calm response of the people. And all of that is true — experience and high standards help.

But it’s indisputable that whenever a quake headline reads 8.3, high casualties are expected. Haiti, after all, lost 12,000 people in its 6.8 temblor in 2010 .

What made Chile different was that it had not only the codes but also the wherewithal to enforce them. Credit a prosperous enough economy and a property-owning citizenry willing to defend its possessions. Those can only come from free markets.

Chile’s far north, up by its awesome Atacama desert, is pretty much a frontierland, dominated by mining companies, mining roads, mining ports and mining towns with pre-fab houses — hardly a glamour zone expected to have lots of cash to pay for code enforcement.

No matter. That part of the country is responsible for the largest part of Chile’s GDP, due to a bold series of reforms made by far-sighted, free-market reformers in the 1970s known as the Chicago Boys.

Their privatization of industries, embrace of free trade and foreign investment, and installation of a dazzling system of private pension accounts made Chile the wealthy country it is today. They also come together to save Chile from natural disaster.

Up north are roads that just sparkle from perfect maintenance in what is otherwise a desert wasteland — running water that can be drunk right out of the tap, and prosperous citizens in lovely tourist towns such as San Pedro Atacama.

All these benefits flow from the reforms initiated by Chile’s “Chicago Boys”.

Time was, Chile’s economy was dominated by state-owned copper mines and little else. That made the country subject to booms and busts and lots of poverty.

Then, in 1980, competition from private mining companies was introduced and production took off. The resulting prosperity allowed the economy to diversify to the point where copper today accounts for just 20% of GNP vs. 85% before the reforms.

Follow this link to read more.