One year ago we were writing this article in the middle of Chilean revolts, showing how the neoliberal policies that have been carried out since the Seventies have caused vast inequalities and social issues.
Today, 26th October 2020, Chilean people have finally managed voting to scrap constitution dating back to Augosto Pinochet’s dictatorship.
From the Rethinking Economics community, the biggest wish for a rosy fate.
Since history can always teach important lessons, it may be worth going back in time and try to understand how we got to these days’ Chilean troubles.
Let’s start with a riddle: what sounds like a harmless teenagers’ rock band but is actually much more similar to a handful of very dangerous technocrats?
Chilean people certainly know the answer, since this mysterious creature is one of the reasons that brought them to set up such a massive mobilization like the one we are watching lately.
Starting from the late 60s-early 70s some prominent students from Chilean economic faculties had the opportunity to study very high-level programs at Chicago University. There they could learn from Milton Friedman and his fellows the principles of the new-born neoliberal economics. We all know what the main point of this doctrine are: low inflation reached by accepting large unemployment, low government expenditure, freedom of capital circulation, dismantle of the welfare state.
The Chicago Boys were born.
Once back in their country, they set up an economic program for Chile called “el ladrillo” (the brick), which reflected what learnt abroad, and when the military coup put Augusto Pinochet in power in 1973, they were chosen as the economic advisors of the regime and they finally had the opportunity to implement it. By 1981, 480 among the 507 public enterprises had been privatized, unemployment was around 15% until 1985, the economic cycle lived its most tumultuous days (-12.9% GDP growth in 1975, +10.4% in 1977, -11% in 1982 and so on) and huge capital inflows started coming in, especially from the United States.
During the following years, even after the fall of the dictatorship, Chile has been the most neoliberal-oriented country in the world: on these days, forty-six years after the coup, public transport is managed by a private company, as well as public education, public health, water, electricity, the retirement system, as well as all the welfare system (the Chicago Boys had a very peculiar notion of public good…); most of the supermarkets and other first-consumption suppliers are not Chilean (try to guess which country they are mainly from); government expenditure is the lowest among the OECD countries (25.2% of GDP). This fact, joint with the neoliberal necessity to keep wages as low as possible, had an inevitable consequence: in order to access to basic needs, you have to borrow, and of course it is not going to be easy to pay back. Just to mention the student loans, there are around 700’000 young people having accessed to the CAE (Credito con Aval del Estado) program, more or less one fourth of the overall population between 20 and 29 years old. More than a half of them is in arrears or defaulting.
Given this anything but rosy situation, one could expect the principal international organizations to strongly criticizie Chilean policies and to have planned something to solve the problems. Well, it is not exactly like this…
Both the International Monetary fund and the World bank, just to mention two randomly, have always appreciated how Chile has been administrated and have pointed it as an example to be followed from all the developing countries (I invite you to check it personally https://www.worldbank.org/en/country/chile/overview)
If we consider the fact that these two institutions are the main lenders of the Chilean government, it is easy to understand why they are so fond of it.
More in general, Chile is more or less everywhere considered as a virtuous country because of its technological development, its financial stability and its growth-oriented policy. But has anyone ever asked himself who this growth is for? Probably not, and that’s why we are witnessing such a huge protest. As it happens very frequently also in western developed countries, economic scenarios are only evaluated through the lens of the free-market ideology, but now the Chilean people are showing us that these evaluations are very likely to be made just from and for the elite. The remaining 99% is only made by servants of the system. According to neoliberal thought, they should be happy to live in a country that offers so much technological goods and efficient services they will never be able to afford.
The Chicago Boys came with the dictatorship and established their ideas without any contrast: nobody has indeed ever considered to argue with them, mainly because the ones who tried to oppose to the regime mysteriously disappeared. So, the main expression of a dictatorship and the fake-democratic regimes that followed has been economic orthodoxy: imposed ideas, imposed policies and imposed evaluation of their results. And here we have seen which results!
Now the world is watching the mess they created. Demonstrations against the government, massive strikes, urban fights between the people and the police, burned metro stations, burned supermarkets and so on. According to the Guardian, around 2000 citizens have been arrested and more than 20 died during the clashes. “No son 30 pesos, son 30 años” is a common slogan of the protesters. It means people are not protesting for the underground’s price hike, as reported from most of the chilean press, but because it is 30 years since dictatorship has ended and the economic policies are still the same.
Revolutions start from inequality, said Aristoteles. An economic regime that has come from a dictatorship cannot be god for the people. Participation, debate and inclusiveness are fundamental for a more equal world and the wellbeing of everyone.
A lesson for the economists is then that the orthodox thought is dangerous: since you always have to check how the policies you suggest work in practice, you cannot blindly follow a fixed idea without caring of the issues it implies. In pluralist environments it may be more difficult to get to a collective decision, it may happen that you quarrel with each other, but if things go wrong you can always change your mind without worrying about losing your credibility.
Social consciousness is -probably- more important than personal ideology.
[All the data come from the OECD and the World Bank databases]