James Robinson, Andrés Velasco, and Ignacio Briones at UNAB: Challenges and Opportunities for Economic Development in Chile and Latin America

James Robinson, an academic from the University of Chicago, was the main speaker at the event organized by the Universidad Andrés Bello, opening an interesting debate on the role of the Executive and the political system in country development. The former finance ministers of the Bachelet and Piñera administrations made their own analysis, focusing on our country and what it lacks to leap forward. According to both, the key is changes in the political system.»The secret to economic success is to create institutions that can enable society to drive the necessary innovations.» The phrase, spoken by James Robinson, professor at the Harris School of Public Policy of the University of Chicago and author of successful books such as «Why Countries Fail,» opened a discussion organized by the Economic Policy Institute of the School of Economics and Business of the Universidad Andrés Bello, in which former Finance Ministers Andrés Velasco and Ignacio Briones also participated.

At the event, James Robinson highlighted the strength of Chilean institutions, emphasizing the need to promote inclusion in the country and reduce the influence of the elites in different aspects.

«Chileans feel there are possibilities; this could be a developed country, the only country in Latin America that could do so. To get to the next level, Chile needs to be more inclusive. Despite improvements, there is a lack of inclusion in many dimensions,» he said.

After Professor Robinson, it was the turn of Andrés Velasco, former Minister of Finance and current Dean of the School of Public Policy at the London School of Economics and Political Science, who said that in Chile, there is a prevailing feeling that «something is screwed up.»

In response to this assertion, Velasco stated that both progressivism and the conservative world are mistaken in their perceptions. The former blames inequality for the problem, while the latter blames growth.

For Velasco, the situation is due to multiple factors, and the solution lies in two keys: institutions and political culture.

«The political system is at a standstill. The system is in a deadlock because society is in a fundamental conflict over which direction to take. A country is ungovernable when it has 22 weak political parties, growing discord, and the impossibility of forming majorities. The rules of politics must be radically changed,» he added.

Economist and former Minister of Finance Ignacio Briones talked about how to get out of the middle-income trap. In this sense, he referred to the deceitfulness of voluntarism and appealed to the need to «do the job» from the political system.

«In economic matters, we economists know that if we want more investment, more entrepreneurship, more innovation, more productivity, it doesn’t happen by magic; it depends on the incentives that drive agents, and these incentives are called rules; they are called public policies, they come from the political system. And if the political system doesn’t mediate, or is dysfunctional, or fails, and there are no agreements, reforms, or rules, well, there are no incentives for investment, growth, entrepreneurship, or productivity. In other words, we can’t expect any different outcome. That’s why this (the political system) is the mother of all battles. We are in a repeated game of non-cooperative equilibrium, which has us stuck,» he argued.

To conclude his argument, he affirmed that when the political system «does its job,» expectations are fulfilled, and we are in a virtuous circle; but when it is dysfunctional, expectations are frustrated, accumulate, and explode.» This is the first reform to think not only about growth but also about future development,» he said.

Strengthening the Political System and Institutions: The Road to Agreements

After the three presentations, the speakers exchanged ideas in a panel moderated by the Dean of FEN UNAB, Miguel Vargas Román. The discussion focused on strengthening the political system through the necessary changes and adjustments. Professor Robinson stated that the common idea among the presentations «is that the political system is at a standstill, like a blockage (…) not because of specific institutional issues, but because there is a sort of fundamental conflict in society regarding the direction it wants to take. There is a lot of continuity but also very rapid changes.»

Andrés Velasco, for his part, argued that «I do not believe that Chile is a society deeply divided in preferences, not even because the oligarchy does not want to give up its power. The oligarchy is no longer so powerful. We have a tie because the oligarchy is not as powerful as it was. The paradox is that the underlying preferences are not so different, but the system works so poorly that aggregating those preferences is inefficient; therefore, I am optimistic. I don’t think there is a great divide here, which will mean that the country will be divided forever. With specific changes to political engineering, which are not so tremendous, these relatively slight political divisions can open a path to certain agreements. »

For Ignacio Briones, what «we need again is the epic of a possible future, a hopeful future of hard work, not of things given away, that we have to sweat for. I believe that Chileans want to sweat and are willing to do so if the goal is attractive. The terrible thing is that this supposes leadership; it supposes people, which is the opposite of institutions. Given a certain institutional setting, which leaves us in a tie, the only way to break it, because the system is endogenous and will not break it, is for there to be an outsider who pulls the cart in the opposite direction. That’s called leadership.

In closing, Dean Vargas emphasized that these types of activities and debates are aimed at understanding the reasons why «our country has been slowing down our economic growth.» He valued the diversity of opinions on the subject and how they shed light on where the solutions lie.