What Arizona can learn as Chile joins the OECD

By Byron Schlomach, Ph.D.
Goldwater Institute 
On January 11, Chile was officially invited to join the Organization of Economic Cooperation and Development (OECD). Chile will be the OECD’s 31st member and its first from South America. The OECD is largely made up of the world’s richest and most stable economies and Chile’s invitation to join the club wasn’t always a given.

In the early 1970s, Chile’s economy was a basket case not unlike Haiti’s before last week’s earthquake. Abject poverty, rampant inflation, and high unemployment were the norm. There is no denying that Augusto Pinochet was a detestable tyrant, but he did one thing right after he took control of the country: he turned economic policy over to 10 Chilean economists who had been trained at the University of Chicago in the theories of John Locke and Nobel Prize winning economists F.A. Hayek and Milton Friedman.

The government began selling government-owned businesses, deregulating enterprises, and removing wage and price controls. In 1981, Chile’s social security system was privatized under the direction of Jose Pinera, who was given the Goldwater Award for Liberty in 2003 and is the brother of Chile’s just-elected President Sebastian Pinera. These economic policies set the stage for Chile to become South America’s most vibrant and successful economy.

Chile’s economic experience could be instructive to Arizona policymakers. Government-owned enterprises like stadiums and Phoenix’s Sheraton Hotel have become too common. The state still owns huge swaths of land that ought to be sold and put to use creating jobs. The state should also loosen regulations on wages. Arizona has the potential to create the most vibrant economy of any state in the union. We just need to be freed to exercise it.

Byron Schlomach, Ph.D., is the director of the Goldwater Institute’s Center for Economic Prosperity.


  1. Chile was a basket-case because of the US imposed sanctions put in place to destabilize the freely elected Allende government. While these privatization schemes are much heralded by conservatives, the truth is, the Chilean economy was boosted by state-sector industries and investments. But the propaganda overrides the actual facts of what took place just as this article overlooks the havoc the Chicago school economists just created for our own economy.

    The Chicago Boys knew full well of the murder and torture being carried out by the regime they were apart of. The regime killed and tortured opponents and the Chilean military, in which thousands of officers were trained by the US, quashed all dissent. I find it disturbing that Mr. Scholmach wants to herald these men just as it it equally disturbing to have him point Arizona to reforms which seem to only be instituted when all opponents can be rounded up and shot in the back of the head, tortured to death, or flown out into the Atlantic and be dropped alive into the middle of the Ocean.

  2. ………………
    “all opponents can be rounded up and shot in the back of the head, tortured to death, or flown out into the Atlantic and be dropped alive into the middle of the Ocean.”

    That was Argentina, Todd.

  3. Chile’s private pension system has proved it’s worth for two decades. It has a defined start and tangible results out of it, so it’s the easiest thing to confirm that Chile’s economic revitalization came with the implementation of this very very very interesting structure for private individual investing.

    AS in we should be doing this, not throwing money at Congress to spend elsewhere while it runs a Ponzi scheme for retired Americans.

  4. wanumba,
    No, this was Operation Condor which included the governments of Argentina, Chile, Paraguay, Bolivia and Brazil.

  5. ………………..
    “this article overlooks the havoc the Chicago school economists just created for our own economy.”

    To whom are you referring, and what havoc just created for our own economy?

  6. Friedman’s views as embraced by Greenspan, for instance.

  7. Zombie Pinochet for Governor! lol

  8. Motivated Voter says

    Thanks for the morning laugh VSB.

    Goldwater misses a big one here — Chile depends on the copper industry for about 50% of their export economy.

    When we celebrate places like oil-rich Texas or copper-rich Chile being the beacons of economic policy, we tend to gloss over the fact that they both depend very heavily on a singular natural resource. You watch – next time copper takes a huge dive the sheen of Chile will slide down with it…and that big income differential that they are supporting becomes a lot more evident when working class miners lose their jobs.

  9. The Governor has create a Committee on Privatization and Efficiency. Similar to Chile, this will lead the AZ state government to focus on its core constitutional duties, and do those duties cost-effectively.

    @Motivated Voter: Texas is a highly diversified economy, with the largest number of corporate HQ’s of any state in the economy. Its become the most successful state because it followed free-market principles that rewarded hard-work and risk taking.

    The formerly dynamic economies of California and New York should take note. They are becoming has-beens.

  10. Motivated Voter – yes, wonderful point. Also, forestry products are the second largest export and this industry was largely started and subsidized by the government.

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