There was good news for Argentina last week. It was expected that Daniel Scioli, the Peronist candidate and political heir of Cristina Fernandez de Kirchner, would win the presidential election. Much to most people’s surprise, Maurico Macri, the more free-market-oriented mayor of Buenos Aires, won almost as many votes as Mr. Scioli, forcing a runoff, which Mr. Macri has a good chance to win.
The Peronists (named after former dictator Juan Peron) have had political control much of the last 70 years, and it has been a disaster for the country. In 1900, Argentina was one of the 10 highest-income countries in the world, having an estimated gross domestic product per capita of roughly 80 percent of that in the United States. Successive Argentine governments have squandered much of the wealth and potential of the economy, so now Argentina ranks approximately 57th in per capita income.

The relative economic rankings of countries’ rise and fall largely depends on whether they are moving toward more economic freedom or less. The accompanying chart tells the story of what has happened in South America over the last 30 years. Argentina had moved away from economic freedom decades ago, but in 1985 its per capita income was still almost twice that of Chile. Argentina had already fallen behind Venezuela because, up to that time, Venezuela had been much more economically free. But over the last couple of decades, Venezuela has become one of the least-free economies in the world and, as a result, despite having the world’s largest oil reserves (latest estimates put them even greater than Saudi Arabia’s), real incomes have actually been falling — showing man’s infinite ability to destroy good fortune.
In contrast, Chile moved toward enhancing economic freedom, including increasing free trade, the rule of law and protection of private property, and curtailing corruption. The result is that Chile now has the highest per capita income in South America, having surpassed both Venezuela and Argentina. Peru has been learning from the good example of next-door Chile by increasing economic freedom, which has led to much higher growth in the last few years. Given the present course, it is likely that Peru will overtake Venezuela in per capita income in the next few years.