Upon viewing some foolishness perpetrated by California leaders, some pundits would harangue that “California is run like a third world country.” Turns out that’s an insult to third world countries, if this Wall Street Journal article is any indication:
SANTIAGO, Chile — During the emerging economies’ commodities boom a few years back, Chilean Finance Minister Andrés Velasco was a wet blanket at the fiesta. Chile, the world’s largest copper producer, was reaping a bonanza from the quadrupling in the metal’s price. Mr. Velasco insisted on squirreling away a large chunk in a rainy-day fund.
As the savings swelled above $20 billion — more than 15% of Chile’s economic output — Mr. Velasco faced growing pressure to break open the piggy bank. In September, protesters barged into a presentation by Mr. Velasco, carrying an effigy of him and shouting, “The copper money is for the poor people.”
The 48-year-old Mr. Velasco, wary that a flood of copper income could generate lending and consumption bubbles, stood his ground, even as the popularity of the center-left government withered. Latin American history, he cautioned, was full of “booms that had been mismanaged and ended badly.”
Today Mr. Velasco looks like a prophet. Since the onset of the global economic crisis, copper prices have fallen by 50%, in line with the sharp decline in other commodities.
A Latin American socialist government has an effective rainy-day fund, while California reaps the whirlwind of boom-and-bust budgeting.