Juan Carlos Hidalgo
Chile went to the polls yesterday in what was perhaps the most important presidential election since the return of democracy in 1990. Many foreign observers focused on the curiosity that the two leading candidates were both daughters of Air Force generals who chose opposing sides during the military coup that toppled socialist president Salvador Allende in 1973. But what is at stake in this election wasn’t Chile’s past, but its future.
Let’s first recapitulate where Chile stands today: Thanks to the free market reforms implemented since 1975 by the military government of Augusto Pinochet – that were subsequently deepened by the democratic center-left governments that ruled the country since 1990 – Chile can boast the following accomplishments:
- It’s the freest economy in Latin America and it stands 11th in the world (ahead of the United States) in the Economic Freedom of the World report.
- It has more than tripled its income per capita since 1990 to $19,100 (PPP), which is the highest in Latin America.
- According to the IMF, by 2017 Chile will reach an income per capita of $23,800, which is the official threshold to become a developed country.
- According to the UN Economic Commission on Latin America and the Caribbean (ECLAC), Chile has the most impressive poverty reduction record in Latin America in the last two decades. The poverty rate went down from 45% in the mid-1980s to 11% in 2011, the lowest in the region.
- It has the strongest democratic institutions of Latin America according to the Rule of Law Index of the World Justice Project.
- It’s the least corrupt country in Latin America according to Transparency International.
- Along with Costa Rica and Uruguay, it has the best record in Latin America on political rights and civil liberties, according to Freedom House.
- High income inequality, which has always been a sore in the eyes of many, has decreased in the last decade.
With such an impressive record, it’s quite puzzling that the leading candidate, former president Michelle Bachelet, is running again under a platform calling for changes that would significantly alter the Chilean model by increasing the role of the government in the economy. In particular, Bachelet is proposing free higher education to everyone, the abolition of for-profit private schools and universities, the introduction of a state-owned pension fund in the country’s private pension system, higher taxes on businesses and professionals, and even a new constitution.
Bachelet came in first in yesterday’s election with 46.7% of the vote – short of the 50% necessary to avoid a runoff. On December 15th she’ll have to face again the center-right candidate Evelyn Matthei who came in second with 25%.
It’s very likely that Bachelet will win the runoff, but her governing coalition – which for the first time includes the Communist Party – came short of the two-thirds majority needed to change the constitution. However, her coalition does have enough votes to push for her reforms on taxes, education and pensions.
It is worth noting that, despite talk of Bachelet enjoying massive support among Chileans, not only did she fail to avoid a runoff, but she actually received fewer votes yesterday (3,070,012) than what she got in the first round of 2005 (3,190,691). A lot has to do with the fact that yesterday’s was Chile’s first presidential election with voluntary voting. Approximately 50% of Chileans able to vote didn’t show up to the polls. This means that Bachelet received the vote of only 22% of registered voters, hardly an overwhelming mandate for radical changes.
This doesn’t mean that Bachelet won’t push for those reforms though. After all, her coalition captured a majority of the seats in Congress. Unfortunately, a large segment of Chile’s society seems to suffer from a “high expectations trap,” which involves the danger that a false sense of prosperity sets in before the country actually becomes rich. What we have seen in recent years is that new middle class has become the driving force behind demands for the further expansion of the welfare state.
The future of the successful Chilean model will be at stake in the next 4 years.
Jeffrey A. Miron
Only a heartless libertarian could possibly object to bans on child labor, right? After all, no one wants to live in some Dickensian dystopia in which children toil endlessly under brutal conditions.
Unless, of course, bans harm, rather than help, both children and their families. And in a new working paper, economists Prashant Bharadwaj (UCSD), Leah Lakdawala (Michigan State), and Nicholas Li (Toronto), find just that. They
… examine the consequences of India’s landmark legislation against child labor, the Child Labor (Prohibition and Regulation) Act of 1986. … [and] show that child wages decrease and child labor increases after the ban. These results are consistent with a theoretical model … in which families use child labor to reach subsistence constraints and where child wages decrease in response to bans, leading poor families to utilize more child labor. The increase in child labor comes at the expense of reduced school enrollment.
And it gets worse. The authors
… also examine the effects of the ban at the household level. Using linked consumption and expenditure data, [they] find that along various margins of household expenditure, consumption, calorie intake and asset holdings, households are worse off after the ban.
Good intentions are just that; intentions, not results. The law of unintended consequences should never be ignored.
Douglas Walburg faces potential liability of $16-48 million. What heinous acts caused such astronomical damages? A violation of 47 C.F.R. § 16.1200(a)(3)(iv), an FCC regulation that enables lawsuits against senders of unsolicited faxes.
Walburg, however, never sent any unsolicited faxes; he was sued under the regulation by a class of plaintiffs for failing to include opt-out language in faxes sent to those who expressly authorized Walburg to send them the faxes.
The district court ruled for Walburg, holding that the regulation should be narrowly interpreted so as to require opt-out notices only for unsolicited faxes. But on appeal, the Federal Communications Commission, not previously party to the case, filed an amicus brief explaining that its regulation applies to previously authorized faxes too. Walburg argued that the FCC lacked statutory authority to regulate authorized advertisements. In response, the FCC filed another brief, arguing that the Hobbs Act prevents federal courts from considering challenges to the validity of FCC regulations when raised as a defense in a private lawsuit. Although the U.S. Court of Appeals for the Eighth Circuit recognized that Walburg’s argument may have merit, it declined to hear it and ruled that the Hobbs Act indeed prevents judicial review of administrative regulations except on appeal from prior agency review.
In this case, however, Walburg couldn’t have raised his challenge in an administrative setting because the regulation at issue outsources enforcement to private parties in civil suits! Moreover, having not been charged until the period for agency review lapsed, he has no plausible way to defend himself from the ruinous liability he will be subject to if not permitted to challenge the regulation’s validity. Rather than face those odds, Walburg has petitioned the Supreme Court to hear his case, arguing that the Eighth Circuit was wrong to deny him the right to judicial review without having to initiate a separate (and impossible) administrative review.
Cato agrees, and has joined the National Federation of Independent Business on an amicus brief supporting Walburg’s petition. We argue that the Supreme Court should hear the case because the Eighth Circuit’s ruling permits administrative agencies to insulate themselves from judicial review while denying those harmed by their regulations the basic due-process right to meaningfully defend themselves. The Court should hear the case because it offers the opportunity to resolve lower-court disputes about when the right to judicial review arises and whether a defendant can be forced to bear the burden of establishing a court’s jurisdiction.
These are important due-process implications raised in this case, and the Court would do well to adopt a rule consistent with the Eleventh Circuit’s holding on this issue—one that protects the right to immediately and meaningfully defend oneself from unlawful regulations. Otherwise, more and more Americans will end up finding themselves at the bad end of obscene regulatory penalties by unaccountable government agencies, with no real means to defend themselves.
The Court will decide whether to take Walburg v. Nack early in the new year.