top of page

Chile's Neoliberal Mirage

Samuel Belon assesses the battle to make good the promise of the massive 2019 protest movement in Chile and where that leaves the future of neoliberalism.

EXTRACT FROM PANORAMIC'S PRINT ISSUE


Chile stands at a crossroads. Our President, Sebastián Piñera, assumed office under one constitution but will leave with a new one. This will mark the culmination of the “Estallido Social” (literally “social outburst”), the protest movement which began in October 2019 in Santiago as a response to raised metro fares. Protests and riots quickly spread across Chile, and the movement’s grievances developed to reflect the wider challenges faced by Chilean citizens and characteristic of neoliberalism globally: a high cost of living, extreme privatisation and growing inequality. Piñera was forced to declare a state of emergency, deploy the military to the streets, and impose a curfew – making a mockery of his previous assessment of Chile as Latin America’s “oasis” earlier that month. After a month of protests, in November 2019, Chile’s largest parties ceded to the demand for a referendum on whether and how a new constitution should be drafted. When the referendum was held in October 2020, 78% voted for a new constitution, with voter turnout at 51% – a landslide victory.


How did a 30 pesos (50 cent) increase in metro ticket price catalyse the largest mass protests in the last thirty years, calling neoliberalism into question? “It wasn’t thirty pesos, it was thirty years,” one slogan read. Other slogans highlighted how the damaging privatisation of the education system and even access to drinking water demonstrated the extremity of Chile’s free-market approach. Replacing a dictatorship-era document that has protected the economic status quo would allow for more inventive and radical policy-making. If the state were to be designated as a protector of basic social rights, this would be a major step towards the creation of a welfare state. As someone whose family has lived under a system in which money determines your educational and healthcare opportunities, one in which every aspect of life is measured in the unit of hard currency, the potential for genuine change fills me with hope for a new kind of national identity based on a shared will for equality and the recognition of value beyond currency. However, the momentum of the 2019 protests risks stalling. Will the current system implode, or can the right-wing placate an infuriated population and double down on a long and profitable history of free-market economics?


ILLUSTRATION BY ANJA SCHWEGLER


Chile’s development trajectory during the second half of the twentieth century has been one of the most influential in the world. In 1970, Salvador Allende became the first Marxist to be elected president in a liberal democracy in Latin America, however, his vision was quick to fail. By 1973 he had been overthrown in a CIA-backed coup and replaced by a military dictatorship led by the army’s commander-in-chief, Au- gusto Pinochet. Under Pinochet, the government adopted a radical fiscal programme of privatisation and deregulation, whilst brutally suppressing, and even executing, leftists, socialists and political critics. The theoretical underpinnings of Pinochet’s dictatorship were provided by a group of Chilean economists trained in the new ideas of neoliberalism by Milton Friedman and Arnold Harberger at Chicago University. When the “Chicago boys” returned to Chile from their US-funded scholarships, they were given free rein to put their ideas into practice.


Chile became a laboratory to test an extreme version of the free-market economics that would later be implemented by Reagan and Thatcher in the 1980s (now known as neoliberalism), initiating the “momentous break with the past away from socialism and extreme state capitalism,” as Stanford political scientists Ratliff and Packenham put it.


The restructuring of Chile’s economy had long-lasting consequences for the nation. Following the peaceful transition to democracy in 1990, the subsequent ruling party, a left- wing coalition dubbed “la concertación”, retained a strict free-market approach – despite being composed of opponents of the military dictatorship and former members of the Allende government. As the first finance minister of the democratic period has explained, the new government ad- opted a pragmatic view of fiscal policy. After all, they had to reckon with the undeniable benefits this economic model brought to Chile: GNI per capita almost tripled during the military dictatorship, and more than quadrupled in twenty years under la concertación. This coincided with rapidly changing lifestyles, displayed in an eighteen-year increase in life expectancy between 1970 and 2019.


The impressive growth of Chile’s economy is evident in statistics, however, it has also been a source of fascination, fetishisation even, by free-market political thinkers in the West, who eagerly turned Chile into an exemplar of “ThirdWorld” development, symbolic of the victory of laissez-faire capitalism over socialism and progressivism. Milton Fried-man called this a “miracle”, while fellow Nobel laureate Gary Becker described Chile as an “economic role model for the whole underdeveloped world.” This line was quickly taken up by Western politicians throughout the 1990s, exemplified by Bush’s assessment in 1990 that: “Chile’s record of economic accomplishment is a lesson for Latin America on the power of the free market.” Thatcher later followed suit, declaring in 1999 that Pinochet’s regime had transformed the country “from chaotic collectivism into the model economy of Latin America.”


“Chile became a laboratory to test an extreme version of the free-market economics that would later be implemented by Reagan and Thatcher in the 1980s.”

Chile’s embrace of free-market economic reforms not only instigated the turn towards neoliberalism in the West – as Niall Ferguson states: the “backlash against welfare started in Chile” – but has also shaped development programmes across the world. The 1990s brought with them the “Washington Consensus”, a list of ten economic policy prescriptions considered by US-based international institutions such as the International Monetary Fund and the World Bank as a “standard” reform package for crisis-wracked developing countries. These prescriptions included trade liberalisation, privatisation of state enterprises, deregulation, and the adoption of “moderate” marginal tax rates. As the poster child for economic reform in Latin America, Chile’s fiscal approach was hastily repackaged and implemented with varying (and vigorously contested) levels of success across much of Latin America and sub-Saharan Africa. The symbolic importance of Chile within the neoliberal narrative means that any constitutional changes will likely have consequences that extend far beyond the country’s borders, potentially reshaping attitudes towards development and the costs of neoliberalism globally. If neoliberalism was born in Chile, will it die there too?


ILLUSTRATION BY ANJA SCHWEGLER


To many in the West, the anger behind the Estallido Social might seem odd given the economic progress achieved in Chile. However, looking at economic growth alone obscures the less favourable outcome of neoliberal fiscal policy: “heterogeneous” economic growth. Chile may now be counted among the world’s industrialised countries, but among these, it possesses one of the highest levels of inequality. This, coupled with chronically underfunded public services and sweeping privatisation, results in the majority of Chileans living under the constant stress of extreme precarity. The public health service, used by 85% of the population, has waiting times for specialist appointments averaging 302 days, and this increases to 381 days for surgical interventions. In Chile’s 2017 national household survey, only 20% of respondents in low-income households believed they would receive attention for a catastrophic illness in time. The alternative is to pay – and that means debt. The Estallido Social should not have surprised any close observer of Chile: the total privatisation of basic services, when coupled with inequality and a decrease in the pace of economic growth, has created endemic resentment. The cognitive dissonance experienced by many is only exacerbated by Chile’s supposedly miraculous development narrative. Many are sick of Chile being considered a success story abroad and of leaders boasting about achievements that feel illusory. In this context the people have lost faith in mainstream politics – in a recent survey, only 3% of the population stated that they trusted “political parties”, and 2%, Congress.


ILLUSTRATION BY ANJA SCHWEGLER


I have seen this myself, with each summer visit to Santiago to see friends and family further entrenching my understanding of the psychological burden neoliberalism places on the citizen. From the clothing you wear to the school you attended, your skin colour, your last name, the neighbourhood where you grew up, your accent, and so on, people are distributed geographically and categorised socially on the basis of a market logic that functions to both exacerbate and obscure the radicalised class system inherited during Chile’s colonial period. When the logic of currency is allowed to enter the most intimate of spheres, it comes to dominate your existence – to define your worth to the extent that your accumulation of capital stands in for the value of your life, as shown by our medical system.


“Today’s economy was built on the story of Chile, if that starts to collapse, where will it leave us?”

The new constitution is an opportunity for the Chilean population to imagine alternatives to the current neoliberal order for both their social identities and the wider political and economic system. A “Constitutional Convention” is tasked with drafting the document that will be put to a national referendum by September 2022. Elected in May 2021, the make-up of this body represents a slap in the face for the already bruised Chilean establishment. Indepen- dents (largely involved in 2019’s anti-inequality protests) and the left, together won more than two-thirds of the seats; whereas Piñera’s ruling coalition (“Chile Podemos Más”) won just one fifth. Some, like Chilean economist, Sebastian Edwards, predict that “the neoliberal experiment – in Chile – is completely dead,” and anticipate the implementation of a Nordic-style welfare state in the coming years. Others worry that conditions are ripe for the emergence of a populist“strong leader”, potentially aided by institution-damaging leftist overreach in the Convention – Hugo Chávez’s Venezuela looms large in the imagination. However, not all observers are so sure that Chile is ready to bury neoliberalism. November’s congressional election results have been taken as evidence that “Chileans have not undergone a permanent shift to the left,” with Piñera’s coalition remaining the largest group, and investors betting against “radical” change. I cannot help but wonder what this means for the world at large. Mirage or miracle; surely what happens in Chile will have implications for the legitimacy of neoliberalism far beyond this nation’s borders. Today’s economy was built on the story of Chile, if that starts to collapse, where will it leave us?


WANT TO HEAR MORE ON THIS TOPIC? CHECK OUT OUR EDITORS' RECOMMENDATION:


Comentarios


  • 644788_email_512x512
  • Instagram
  • LinkedIn
  • Facebook
bottom of page