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Latin America and the Caribbean

Chile’s Municipal Election Results Indicate Historic Levels of Discontent

The clearest winner in Chile’s 2016 municipal elections was abstention, and that is bad news for all parties, left and right.

Municipal elections in Chile are often used as an indicator to measure how well traditional parties will fare in the following years’ parliamentary and presidential elections. During the latest elections ? held on October 23 ? Chileans voted for their alcaldes (mayors) and concejales (council members), varying between six, eight, or ten total local representatives, depending on the size of the population within the municipality.

The high rate of abstention in these elections isn’t surprising given the national polling data showing a steady decline in public confidence in government institutions and parties over the past two decades. According to the latest Servel figures, the 2016 municipal elections reached a 65 percent abstention level — a new historic high. The 35 percent participation rate for 2016’s municipal election is down from 43.2 percent in 2012.

In 2011, modifications to Chile’s electoral system instituted automatic voter inscription and the voluntary vote, following nearly a century ofobligatory voting. Taking these high abstention figures as simply a sign of voter apathy would be a mistake. Similarly, making an argument for a return to compulsory voting in order to increase participation also misses the point. At the center of the problem of abstention is the perceived failure of both the right and the left to implement reforms to create a more inclusive democracy and an equitable development model.

CEPR and Julia Villarruel-Carrillo / November 08, 2016

Article Artículo

Yes, It's the Monday Before the Election and Robert Samuelson Wants Us to Cut Social Security

Yep, he tells us the real national embarrassment is not having a racist, sexist, xenophobic candidate as a major party presidential nominee. It's not our failure to address global warming so our kids might face a ruined planet. No, Robert Samuelson tells us our real national embarrassment is that we have an aging population and, horror of horrors, this may involve spending more money on Social Security and Medicare. Okay, let's go through his story.

Samuelson tells us:

"In 1990, those 65 and over comprised 12.5?percent of the population; now, according to Census Bureau projections, that share is racing toward 16 percent in 2020 and 19 percent in 2030. That’s one in five Americans. Already, federal spending for older Americans (mainly Social Security, Medicare and nursing-home care under Medicaid) dominates the national budget. It’s crowding out spending on other programs, from defense to parks, and is the chief source of chronic budget deficits.

"Nor is that all. The economy’s slowdown reflects in part the retirement of millions of baby boomers, whose exit from work reduces labor force growth. The generational unfairness is palpable. Younger Americans are seeing more of their taxes diverted to care of the elderly, who often are in better financial shape than the young who are subsidizing them.

"What we need — it was obvious even before the Bill Clinton presidency — is a new social contract between generations, one that acknowledges longer life expectancy (justifying higher eligibility ages for Social Security and Medicare benefits) and greater wealth among millions of older Americans (justifying lower benefits for well-to-do retirees)."

Okay, so we have a rising share of the population over age 65. That is something that happens when a country gets wealthier and medical technology improves. If we take a little longer view, the share of the population over age 65 was 7.4 percent in 1945. It's currently just under 15.0 percent. That means that we have seen a rise in the share of the over age 65 population rise by more than 7.5 percentage points. Apparently in Robert Samuelson world, that rise was okay, but something really really bad will happen when the share of people over age 65 rises another 4.0 percentage points to 19.0 percent.

CEPR / November 07, 2016

Article Artículo

Ross Douthat and the Government Subsidized Life

Ross Douthat devoted his NYT column this morning to how people in the United States and other wealthy countries deal with a world in which they have fewer children. It's mostly devoted to social psychological speculation, which I will leave to others to assess, but I do want to pick up on an economic item that is a central theme.

Douthat tells readers:

"The Obama White House’s 'Life of Julia' ad campaign in 2012 — featuring a woman whose every choice was subsidized by the government from cradle to grave, with a lone child but no larger family or community in sight — seemed to many conservatives like a perfect confirmation of our fears: Here was liberalism explicitly pitching the state as a substitute for kith and kin."

While I don't recall the campaign ad, presumably the subsidies are for items like child care, education, health care, and Social Security. Douthat is making a clear contrast between incomes that people earn in the market, implicitly without the hand of government, and the items that the government gives to people. In his view, and the view of the conservatives he refers to, the former is good and latter in some way bad. This distinction becomes more problematic when we acknowledge that the government shapes the market in ways that enormously impact the ability of people to earn income in the market.

Starting with an example that was in the news last week, the Fed may soon decide to raise interest rates. The purpose of this move is to slow the economy and the rate of job creation. In addition to keeping some people from getting jobs (disproportionately African Americans and Hispanics), a higher rate of unemployment will weaken the bargaining power of workers who do have jobs. In particular, it puts downward pressure on the wages of the workers at the middle and bottom of the wage distribution.

Going in the opposite direction, the government protects the income of doctors from prohibiting foreign doctors from working in the United States unless they have completed a residency program in the United States. As a result of this restriction, doctors in the United States earn twice as much as their counterparts in other wealthy countries like Germany and Canada. This costs the country roughly $100 billion a year in higher medical expenses.(This effectively reduces the wages of all non-doctors, since our money buys less.)

In the same vein, the government grants patent monopolies in prescription drugs. These monopolies allow drug companies to charge prices that are often several thousand percent above the free market price. This protectionism both makes some of those involved in the process of developing and distributing drugs very rich and ends up costing the rest of us a huge amount in higher drug prices. The gap between the patent protected price of drugs and the free market price can easily exceed $350 billion a year.

There are a variety of other mechanisms through which the market has been shaped in recent decades to redistribute income upward. This is the topic of my new book Rigged: How Globalization and the Rules of the Market Economy Were Structured to Redistribute Income Upward (it's free). It is important to recognize how the market was structured to enrich the rich since it undermines the moral distinction that Douthat and his fellow conservatives want to make.

CEPR / November 06, 2016