BUENOS AIRES/SANTIAGO – Economists often compare similar economies to isolate the impact of a particular difference. This approach provides a compelling picture of the role of specific factors in driving or undermining an economy’s success.
For example, despite their common historical and cultural roots, North and South Korea are very different societies. The former has a considerably lower standard of living, owing to its communist government and centrally planned economy, which contrast sharply with South Korea’s democratic government and mixed capitalist economy.
Germany’s experience after World War II provides another telling example. When the Berlin Wall fell, barely two generations after the war ended, the standard of living in communist East Germany was just one-fifth the level attained in capitalist West Germany.
The same approach can be used to understand why Chile is prospering, while neighboring Argentina is floundering.