May Day: Two Directions for Latin America

Bolivian president Evo Morales has nationalized his country’s natural gas industry. He sent soldiers to occupy the gas fields on May 1, celebrated by socialists worldwide as May Day. This May Day was also the 25th anniversary of  Chile’s Social Security privatization. As Jose Pinera wrote in the New York Times:

Since the system started on May 1, 1981, the average real return on the personal accounts has been 10 percent a year. The pension funds have now accumulated resources equivalent to 70 percent of gross domestic product, a pool of savings that has helped finance economic growth and spurred the development of liquid long-term domestic capital market. By increasing savings and improving the functioning of both the capital and labor markets, the reform contributed to the doubling of the growth rate of the economy from 1985 to 1997 (from the historic 3 percent to 7.2 percent a year) until the slowdown caused by the government’s erroneous response to the Asian crisis.

Perhaps 50 years from now, we will know whether Chile’s privatization or Bolivia’s nationalization brought a higher standard of living to citizens.

It might also be noted that Pinera is sometimes criticized for having engineered the privatization as part of a military government (although such critics rarely acknowledge that successive Social Democratic governments have not abolished the pension reform). But  how free is a country in which a president, just back from a summit with Fidel Castro and Hugo Chavez, can unilaterally send soldiers to seize an industry from its legal owners? Morales is taking very little time to earn the attribution “increasingly authoritarian.”

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