CHILE IS POISED TO MOVE SHARPLY LEFT / THE WALL STREET JOURNAL

The Americas

Chile Is Poised to Move Sharply Left

Michelle Bachelet wants to amend the constitution and expand the welfare state.

By Mary Anastasia O'Grady

Nov. 10, 2013 6:36 p.m. ET


New York City Mayor Michael Bloomberg and Chilean President Sebastián Piñera are billionaires. Both ran for office as center-right candidates. Both have a reputation for an arbitrary and capricious style of governance.

It now looks like they will have one more thing in common: hard-left successors. On Tuesday, Sandinista-supporter Bill de Blasio won the New York City mayoral contest. Polls suggest that this Sunday former Chilean president Michelle Bachelet —running for president again—could win in the first-round election. She is a Socialist but is the candidate for the New Majority coalition, which includes the Communist Party and weakened Christian Democrats.

The rise in populism on the heels of the Bloomberg and Piñera administrations is no surprise. Both the New York mayor and the Chilean president have been loath to defend individual rights when they think they know better. Is it any wonder that the electorate in both jurisdictions increasingly believes that elections give chief executives carte blanche?

Mr. Bloomberg carried his eccentricities to extremes, for instance in his campaign against soft drinks. He also was excessively tolerant of Occupy Wall Street's infringement on the civil liberties of law-abiding New Yorkers, though he restored order when things got out of hand.

Mr. Piñera's whims have been more dangerous. Early in his administration he terminated the construction of a coal-fired electricity plant as environmentalists in the streets were demanding. GDF Suez had spent some $15 million on assessments and clearing regulatory hurdles.

But Mr. Piñera agreed with the protesters. So he made a "suggestion"—as he explained during a visit to the Journal's office in September—to the head of the company that the plant be moved. The project was canceled, and the investors went away.

The president doubtless believed he'd maneuvered brilliantly out of a tight political spot. But blowing off an institutional ruling in favor of the mob was like putting blood in the water. His opponents realized that they could devour him by taking to the streets.

Going forward, the collateral damage could be worse. A President Bachelet is likely to find Chileans in the streets useful if she doesn't have the majorities in Congress to fulfill her agenda.

Ms. Bachelet wants to expand the welfare state. To pay for it she wants to raise corporate tax rates and to tax shareholders on retained earnings along with the dividend taxes they already pay.

She would restore a role for the state in the now privatized pension system and has called for an "exhaustive review" of the Trans-Pacific Partnership that would deepen Chile's commitment to free trade. Labor unions would get more power, and education spending would be sharply higher. Most troubling, the self-described admirer of Fidel Castro proposes changes to the constitution that would extend the reach of government and has not ruled out calling a constitutional assembly.

Ms. Bachelet's main opponent is center-right Independent Democratic Union (UDI) candidate Evelyn Matthei. UDI is a coalition partner with Mr. Piñera's National Renovation Party and from 2011 through July 2013 Ms. Matthei was labor minister.

She ought to be having an easy time of it. During Mr. Piñera's tenure, Chile has grown 5.8% per year on average. When he took office, annual per capita income was $15,000. Today it is $20,000. That's not far from the $23,800 annual per capita income needed to qualify as a developed country.

But Mr. Piñera has been no champion of economic freedom. His government introduced a six-month maternity-leave mandate, which he claims "doesn't affect job creation because it is funded by the government. It is not a cost to the companies." That's silly. Someone is paying for it and firms are harmed when a job has to remain unfilled for a half year or filled by a temporary worker.

The Piñera government raised corporate taxes after a magnitude 8.8 earthquake struck the country in 2010. The increase was supposed to be temporary. But when students, led by communist activists, took to the streets to demand state-paid university education in 2011, Mr. Piñera devised a generous package of freebies and subsidies for them—and the tax hike became permanent. His government also added a new preschool entitlement for all. A hydroelectric project in the south of the country, which environmentalists bitterly oppose, has been waiting for approval from his government for two and a half years.

Mr. Piñera seems to have viewed himself in the presidency as a genie who grants wishes when the spirit moves him. But Piñera populism has whetted the public's appetite for more—and the national debate about the role of the state has shifted hard to the left, leaving Ms. Matthei behind.

Now the Communist Party is flexing its muscles and Ms. Bachelet is a fellow traveler. Chile has strong institutions and its open markets will react quickly to a pernicious policy mix. But that won't make the country's political polarization any less intense.


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