Chilean Economy: Growth Benefits All, Not Just the Wealthy

Columnist Daniel Matamala challenges the notion that economic growth is a zero-sum game, where one person's gain is another's loss. He argues that this flawed premise, often used in labor debates, incorrectly suggests a fixed economic pie. In reality, economies expand or contract based on investment, hiring, and work decisions. When an economy grows, formal employment increases, real wages rise, and tax revenue for social spending grows. Historical data from Chile indicates that economic growth accounted for approximately 80% of poverty reduction, with redistribution contributing only 20%. Furthermore, Matamala points out that the burden of corporate taxes often falls on workers, particularly those less skilled, younger, and women, through reduced wages. Therefore, celebrating high corporate taxes may inadvertently harm the very workers they aim to help.

Matamala also addresses the profitability of major project investors, stating that attracting investment requires ensuring it is profitable to invest in Chile rather than elsewhere. These investors are typically individuals and companies with significant capital, capable of committing hundreds of millions of dollars over decades. Opposing investment policies because they benefit capital holders is akin to opposing export policies because they benefit exporters; the alternative is a lack of economic activity, job creation, and tax revenue. Capital is mobile and can be invested globally, whereas workers face higher costs to relocate for better opportunities.

Regarding labor flexibility, the Communist Party has labeled it an agenda of precarization. However, evidence from France and Portugal suggests that reducing working hours can be achieved without harming employment if accompanied by increased flexibility. These countries combined both measures, mitigating negative employment effects. Countries allowing averaged working hours over longer periods have not seen the median worker's actual hours exceed legal limits, indicating that flexibility in calculation does not necessarily lead to longer effective workdays. Matamala concludes that both tax reductions and labor flexibility, when well-implemented, benefit workers, not just employers or investors. Those who suffer when investment falters are not the wealthy, who can invest abroad, but rather the unemployed, informal workers, women, and young people who rely on domestic investment for employment.