Still, lessons had been learned and free trade had momentum. While the nation was consolidating its free-trade strategy, it was also establishing a revolutionary system of individual private retirement accounts. The connection between the two is important. In Chile, however, market-invested retirement funds mean that every employee is a capitalist and has a visible stake in an internationally competitive economy. A vast majority of Chileans benefit from free trade not just as consumers but also as owners of the productive assets of the economy through their retirement accounts.
Free trade is good for the economy, and what's good for the economy is good for investors.
Thus there is a virtuous cycle of trade liberalization that has so far thrived regardless of the political party in power. To his great credit, however, once in office Mr. Foxley embraced and maintained the principle of a flat tariff rate, and even secured approval for a further reduction. It is likely that the success of Chile's private pension system influenced the new government's policy choices. By the time Mr. Aylwin's government took office, Chilean employees wanted an open, wealth-producing economy in which business, and thus individual pension accounts, could flourish. But whatever the reason, the flat tariff decision was critical.