Wednesday, February 25, 2009

Lessons from Fernando Léniz

Our first guest speaker on Tuesday was Fernando Léniz, who was the first Economy Minister of Chile after the 1973 coup that led to assumption of power by Augusto Pinochet. Here's a picture of him with Dr. Roy Nelson, my professor at Thunderbird:



Here's what I learned about economic reform from Don Fernando. Initially, Pinochet did not have the power to impose economic changes, so he did not get involved. Léniz was tasked with helping to implement a system developed by the Chicago Boys. More specifically, he sought buy-in from the people and gave presentations toward that end. His main audiences were:

  • Military regiments
  • Women
  • Workers unions

    Clearly, he needed the military's support but not because they were to enforce the policies. He needed the support of the military because they were a widespread and highly-influential social group. The same could be said for women and workers unions. How he did this is by using the classic advice to any presenter: Know Thy Audience. Don Fernando did this by explaining how a free-market economy would benefit each group. For example, women were worried about how eliminating price fixing would harm them. He crafted an example using food that helped them understand that market-driven prices would improve quality and availability. He not only did this in person, but appeared regularly on prime-time television to reinforce his message.

    Don Fernando further explained that he often made concessions to get buy-in, something not normally associated with military dictatorships. He also said that "it really helped NOT having a Congress," though I don't believe he meant this to be "it really helped HAVING a dictator." It's that it takes a while for real change to bear fruit; 10 years in Chile's case. Congressmen tend to be so focused on the next election that they're not patient enough to support long-term solutions. From his perspective, success was not measured in GDP but in the people's perception of how the economy serves them personally. Once the people buy-in to the policies, they'll give them time to work. Unfortunately, people in the U.S. (including Congressmen) cast their votes based on 30-second sound bites rather than a true understanding of the issues.
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