What’s Happening With the Crisis in Chile?

What’s Happening With the Crisis in Chile?

Since Chile transitioned to democracy, the right and the left have co-existed harmoniously. The center-left governed for 24 years and the center-right for about 5 years. Both have supported democracy, private entrepreneurship, free markets, and global integration. However, unhappy Chileans seem to have focused on several issues. First, Chileans were protesting the system of retirement and pension plans. Chileans have also protested the tax system. Education is another issue. Another problem Chileans have raised is the problem of health. In Chile, we have seen a remarkable example of a political class that assumed responsibility and has responded as democratic leaders should. This is in sharp contrast with what happened in Venezuela, Nicaragua, Evo Morales’ Bolivia, and Kirchner’s Argentina, where governments assumed a defensive posture and blamed third parties such as the opposition, globalization, the United States, or another remote entity.

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What’s Happening With the Crisis in Chile?

Luis Fleischman

The Peruvian writer Mario Vargas Llosa reasonably expressed surprise as violent protests erupted in Chile.

Vargas Llosa rightly points out that Chile has been the country that most successfully overcame underdevelopment in Latin America by lifting hundreds of thousands of people from poverty. By the same token, since Chile transitioned to democracy, the right and the left have co-existed harmoniously. The center-left governed for 24 years and the center-right for about 5 years. Both have supported democracy, private entrepreneurship, free markets, and global integration.

However, unhappy Chileans seem to have focused on several issues.

First, Chileans were protesting the system of retirement and pension plans. Individual pensions are managed by a series of private financial institutions. The argument often raised is that those who manage these pensions are the richest entrepreneurs while many retirees receive pensions below the minimum salary.

Chileans have also protested the tax system. It is argued that the richest people pay less taxes than the rest. This complaint is echoed by additional arguments denouncing high inequality and the concentration of wealth in the hands of a few. The Economic Commission for Latin America (ECLA or CEPAL in Spanish) reported earlier this year that 1% of the Chilean population controls 26.5% of the national wealth while 66.5% controls only 2.1% of the national wealth.

Education is another issue.

Education is viewed, as in most developed countries, as a key to social mobility. Many Chileans don’t have access to a good education for their children that would allow them to prepare them for a good higher education and consequently to social mobility.

The quality of schools in more privileged neighborhoods is better than those in low income neighborhoods. As a result, those who live in more privileged neighborhoods are better prepared for higher education than those who don’t. Paradoxically, it happens to be that those who attended better elementary, middle, and high schools had been able to access the public university system (which is free) whereas those who came from less privileged backgrounds don’t have enough good scores to enter public universities and thus have no choice but to attend private universities whose tuition is prohibitive.

Another problem Chileans have raised is the problem of health.

Health, contrary to the retirement pensions, is managed by a mixed public and private system. Most people have access to the public system that suffers from several problems. There are not enough hospitals and specialists and preventive health is deficient. Waiting lists are long. Premiums are high and coverage insufficient.

The Pinochet regime (1973-1990) adopted the economic philosophy of Milton Freedman and his Chilean students (the Chicago Boys), according to which a free market with as little state intervention as possible will benefit everyone. This neo-liberal model brought about economic growth and reduction of poverty but turned Chile into a mega private enterprise. Public welfare such as pensions and healthcare became a profitable business. Furthermore, large industries often collude to raise prices.

Part of the problem, many believe, is imbedded in the 1980 Chilean constitution, originated during the Pinochet dictatorship. The Chilean constitution presents some obstacles that limit the ability of the state to take a more active role.

This has limited the ability of citizens to place demands on the state and government and the state has lost its ability to apply regulatory power on areas such as the economy, health care, and retirement plans.

To modify or change a basic constitutional law or provision requires that 4/7 of the Representatives and the Senators approve it.

For example, during the presidential term of Ricardo Lagos (2000-2006), the president proposed an unemployment insurance bill. A few members of parliament claimed that such a measure should be undertaken by the private sector and not by the state. The objection of a parliamentary minority was enough to abort the project and thus the project of universal unemployment protection died out. Thus, the constitution is widely perceived by citizens and analysts as beneficial to the economically powerful and special interests.

The government of President Sebastian Piñera, initially shocked and surprised by the violence displayed by some of the protestors, responded by sending in the military and the security police (carabineros). Curfews, along with some excesses and violations of human rights took place in a country still traumatized by the 1973 coup d’état and the ensuing military rule that lasted 17 years.

However, the president later apologized. Members of his governing coalition showed understanding and willingness to change. They assumed responsibility and stated that stopping the protests can be done only through far reaching social reforms. Another member of Piñera’s coalition pointed out that “we have to assume the responsibility of generating a meaningful social agenda aimed at improving the pension plans, healthcare and the quality of life.”

Thus, Piñera reshuffled his cabinet and installed some immediate reforms. Most remarkably, an agreement on constitutional reform was reached. It was agreed to call for the election of a constituent assembly in October 2020. Once they are elected, they will have between 9 months to a year to write a new constitution. The articles and provisions of the constitution should be approved by 2/3’s of the constituent assembly. Then the constitution, itself, will have to be approved by a popular referendum and by the Chilean Congress. In this way, the constitution will prevent the manipulations experienced in the countries of ALBA where the constitutional reforms were used to refound the state, perpetuate elected dictators in power, and to destroy the old parliament.

Chilean protests have been used to stigmatize Chile and their model of development as a failure and portraying Chile as a myth and socialism as the solution. However, this is a partial and biased analysis. On the one hand, the Chilean model of economic development brought about tremendous growth and considerable reduction of poverty. On the other hand, it is also clear that the model restricts the ability of the state to apply welfare and redistribution policies even when they are vitally needed.

In Chile, we have seen a remarkable example of a political class that assumed responsibility and has responded as democratic leaders should. This is in sharp contrast with what happened in Venezuela, Nicaragua, Evo Morales’ Bolivia, and Kirchner’s Argentina, where governments assumed a defensive posture and blamed third parties such as the opposition, globalization, the United States, or another remote entity.

Published by newsmax.com November 21st, 2019

“The opinions published herein are the sole responsibility of its author”

Luis Fleischman is a professor of Sociology at Palm Beach State College, the co-founder of the think-tank the Palm Beach Center for Democracy and Policy Research and an advisor on Latin America for the Center for Security Policy. He is also the author of “Latin America in the Post-Chavez Era: The Threat to U.S. Security.”

The Interamerican Institute for Democracy is a non-profit organization under regulation 501(c)(3) of the Internal Revenue Service (IRS.) Contributions are suitable for corporate matching. We receive contributions (tax-deductible within legal limitations) from persons, foundations, and business entities.