Tale of two charts: Krugman denigrates Chile

Paul Krugman of the New York Times seems intent on painting Chile's economic conditions as bleaker than they are.

Arias Francisco/SIPA
More aftershocks rocked parts of Chile early Thursday, five days after a massive earthquake that killed more than 800 people. On Wednesday, Paul Krugman of the New York Times was critical of Chile's economic reforms over the last thirty years.

Paul Krugman just can't stand the praise being given to Chile's liberal economic reforms of the last 30-40 years, so he is denigrating them. Why would he do that?  He claims the economic liberalization in Chile is nearly mythical, and uses a chart as his key piece of evidence.  It's scandalously misleading.

That chart does not jibe with my own experience following Chile's development, especially in contrast to other Latin American economies. And note the source: Total Economy Database. Why not use the Penn World Tables, or World Bank data? Paul's data says Chileans are just 15 percent wealthier than they were in 1970. The PWT Mark 6.3 indicates they are 161 percent wealthier. So who do you trust: the global standard for cross-country economic comparisons or the Nobel prize-winning NYTimes blogger?

Even my kids know the answer. Just look at the wikipedia entry on Chile's economy, and you'll find another chart:

For the record, anyone who travels in Latin America can attest that little Chile's role as a model is not what you might expect. Neighboring nations still like to think of Chile as their poor sibling, and pretend that its economic success does not exist. It's time to take off the rose-colored glasses.

UPDATE: The chart Krugman uses cuts off in 1991, so it's not the data source that's misleading. It's chart trickery with the X axis, a Tufte favorite.

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