30/10/19: The Chilean Neoliberal Experiment in Question


Efraín Gonzales de Olarte[1]

The successive economic crises of the eighties of the last century, in Latin America, led to the application of the recipes of the “Washington Consensus (CW)”, collegiate opinion of multilateral organizations, renowned economists and the Department of the American Treasury of 1989. In essence, this consensus had three central points: the liberation of all the markets intervened or regulated by the states, the privatization and withdrawal of the state from productive activities, the promotion of free enterprise and private investment, which in its set and breadth generated the so-called economic neoliberalism or neoliberal model.

The set of ten recipes contained in the CW was applied in a varied way in almost all Latin American countries. The one that stood out for its early application and within a dictatorial government was Chile and, over time, the model was maintained even by the democratic governments that replaced Pinochetism, both right and left. Chile’s growth was paradigmatic and became the “model” to imitate, not only in macro-economic management, poverty reduction, but also in several of the institutional reforms: the pension system, labor market regulation, the quasi privatization of higher education, etc. The neoliberal model worked much better in Chile than in the other countries of Latin America. There was, however, a critical issue: the inequality of wealth and income, which over time increased. This issue seemed of less concern, since GDP per capita went from US $ 2,500 in 1990 to 22,000 in 2018, which covered the other results, the problem was that personal income did not grow as the product, today the average monthly income is of only 550 dollars. Additionally, social programs (education and health) did not help reduce human inequalities. Apparently the inequality thesis proposed by Thomas Piketty (El Capital in the 21st Century) was validated in Chile, that is, profits growth was greater than revenue growth.

Two weeks ago, it could be said that Chile, already considered a high-income country, had only the task of improving equity and social services for all Chileans.However, when the Santiago metro ticket was increased by 30 pesos (a few cents od dollar), nobody would think that a social revolt of dimensions and violence absolutely unknown in Latin America would be triggered.

How to explain that the exemplary country bursts like a social bomb and calls into question the most successful model and experience of neoliberalism? Trying to answer this question, I have some hypotheses to propose. The first is that growth is not the same as development, production in Chile grew steadily, its physical infrastructure improved, poverty was reduced, but the welfare of the Chileans of below did not improve as much as the welfare of the Chileans of Above, that is, it has not been an equitable growth, there was no development for all and the inequalities generate resentment and envy. The second is that the predominant Economic Science cares more about things than people, since the objectives of the policies are always: increase of the product (thing), improvement of competitiveness (lowering of things to sell), the increase of investment (new things), economic stability reflected in low inflation rates (that things don’t cost more) and etc. Growth is how to get more and more and cheaper things, the secondary thing is if these things are distributed with private criteria or with social criteria, and even more if these things are available to everyone, consequently, what happens with the People will be dependent on how things evolve and are handled. People were the adjusting variable of things, the world only seen from the top of the social pyramid. The third is that the excessive individualism promoted by neoliberal theses leads to the weakening of human relations and the reduction of the principles of coexistence: solidarity, empathy, charity, dignity and finally social justice. The latter has become functional to economic justice defined by the economic model predominant, which has certainly generated a crisis of moral values.

I think that this set of factors is at the origin of the indignation of Chileans that has led them to break good manners, but above all to show that democratic and institutional mechanisms are strongly weakened in their essential bases, as well as their ethical foundations. The way out of this crisis goes through the restitution of human values, the change of moral and democratic referents and to prefer people over things. That is, a whole review of the neoliberal model and in general of the idea of ​​development.

Lima, October 2019

[1] Professor of Economics, PUCP

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