The people’s rebuke is significant for Chile, a country once hailed as a miracle
By: Rashmee Roshan Lall
Tags: Chile, Privatisation, Socialism, Capitalism, Milton Friedman

Demonstrators clash with riot police during protests against Chilean President Sebastián Piñera on November 18 in Santiago, Chile. Mr Piñera announced Chilean lawmakers agreed on calling a referendum in April 2020 to replace the current constitution, written and approved during General Augusto Pinochet’s military dictatorship in 1980. Marcelo Hernandez / Getty

Poetry is the lifeblood of rebellion it is said, but not the whole story. Sometimes the narrative unfolds less lyrically, in prose. On Friday, Chile announced a referendum to ditch its dictatorship-era constitution, which prioritised the free market for nearly 40 years and ensured steady growth, little public debt, a large sovereign wealth fund and low inflation.

To many this was portentous, possibly even dismaying news.

Chile is considered Latin America’s biggest economic success story and the very embodiment of the free market policies promoted by the US and exported around the world for more than 70 years.

But in fact the concession by the right-wing government of Chilean president Sebastian Pinera was a prosaic recognition of the reality on the ground. Chile has been beset for nearly a month by mass protests, the country’s biggest in living memory. The unrest was ostensibly triggered by a relatively small increase — 30 Chilean pesos (about 15 fils) — in the subway fare in the capital, Santiago. High school and then university students began a limited civil disobedience programme of coordinated fare-dodging but soon enough the protests took on a new and ominous dimension that was disproportionate to the original provocation. Even after the government had reversed the fare hike, the protests continued, having morphed into an expression of popular anger at pervasive and growing inequality over decades. It didn’t help that Mr Pinera called out the army to help restore order, an act that revived memories of all the years Chile had spent under the dictatorship of General Augusto Pinochet.

Television footage showed the whole world the various ways in which the narrative of anger and distress found form on Chile’s streets. There was the sight — and sound — of some of the country’s best-known artistes and ordinary people defiantly singing a nearly 50-year-old anthem of protest, El Derecho de Vivi ren Paz (The Right to Live in Peace). The song is by the late Victor Jara, sometimes described as the Bob Dylan of South America, who was killed by the Chilean military in the early days of the dictatorship. It is seen as significant that Jara’s face has been on T-shirts in recent days, his name on people’s lips, and fragments of his songs on protesters’ placards.

Then there was the slogan often used by protesters on Chile’s streets: “It’s not 30 pesos: it’s 30 years.” The reference is to the arc of a long story — the fateful effects of decades of accumulated neoliberal policies. And therein lies the significance of the constitutional changes being contemplated by Chile. The constitution, which enshrines the market-driven policies that have been extolled by free marketeers around the world, is in the dock and it is the Chilean people who have put it there.

One does not have to be an economist to understand the problems for which the Chilean system is being blamed. They can be summed up in two words: unequal and unhelpful.

Chile is one of Latin America’s wealthiest countries but also one of its most unequal. In fact, it has the worst income equality of the 36 member nations of the Organisation for Economic Co-operation and Development (OECD), a club of mostly rich countries. Interestingly, when the OECD accepted Chile as the first Latin American member in 2010, the organisation hailed its economic policies, especially the “groundbreaking pension reforms”. The OECD said at the time that those reforms of “the early 1980s have served as a model for many other countries”.

Chile is considered Latin America’s biggest economic success story and the very embodiment of the free market policies promoted by the US and exported around the world for more than 70 years

That was true enough — some 40 other countries have been influenced by Chile’s radical privatisation of the public pension system. And in 2005, former US president George W Bush proposed the partial privatisation of America’s social security programme even as he praised the virtues of the Chilean model.

But that’s where the problem of the unhelpful state comes in. Chile’s privatised pension system has meant poverty — literally, payouts that are below the poverty line — for the first generation of workers who participated in the reformed scheme system of private individual accounts and have recently begun to retire. Unsurprisingly then, Chilean pensioners joined the protests. So did others struggling with the high cost of living because public services, such as the water supply, are privatised and healthcare and education are almost totally privatised too.

The people’s rebuke is significant for the country hailed as a “miracle” by the late Milton Friedman, guru of the free market revolution. Friedman served as a respected adviser to both former US president Ronald Reagan and former British prime minister Margaret Thatcher, who were heavily influenced by his theories. However, Chile went further with the free market than both the US and the UK, which respectively retain a state-run social security programme and a National Health Service.

There is a reason it feels as if capitalism itself is on trial in the court of the people — and not just in Chile. In the US, which prides itself on self-reliance, a poll by Axios on HBO earlier this year found 40 per cent support for socialism. And even critics of Evo Morales, former president of Bolivia, have grudgingly admitted that in the past 13 years, his redistributive policies have taken his poor but resource-rich country further and faster in terms of poverty eradication than any other South American nation. And prominent economists, including Thomas Piketty, Emmanuel Saez and Gabriel Zucman, have been chronicling the rise in wealth inequality in capitalist countries.

Around the world, there is a growing sense that unrestrained capitalism is not working too well, that the market cannot be allowed to have its head without state regulation, and that some social protections are essential for people to feel — and to be — safe.