Chile’s Plantation Economy

ıThe ‘miracle of Chile’ has been lauded by many, including Milton Friedman, for its high-income economy and strong sovereign bond rating. Neoliberalism, the belief that less government leads to more profits for the private sector, has been adopted in Chile and is seen as a potential model for the future of America. 

However, beneath the surface, Chile’s economy is far from perfect. It has been described as a ‘plantation economy’, similar to that of the U.S. South in the 19th century. In this system, workers are paid a stipend of $500 per month, far less than the country’s average wage. This has led to an extreme concentration of wealth, with conglomerates and wealthy families owning a large proportion of the country’s resources. This could be a sign of where America is headed, with the middle class already facing a difficult situation.

The Brutal Truth about the Miracle of Chile

The Organisation for Economic Co-operation and Development (OECD) has highlighted Chile as the OECD country with the greatest disparity between the rich and poor, as well as the fourth poorest member state out of the 34. Despite this, the country’s Gini coefficient of 52.1 is still among the highest in the world, and non-income dimensions of well-being such as health and education are also skewed in favor of the wealthy. 

The Pinochet administration, 1973-90, adopted Milton Friedman’s neoliberalism, abolishing worker unions and making it easier to undercut worker rights during recessions. Barbara Figueroa, president of the Chilean Confederation of Workers (CUT), has stated that workers have waited for over 30 years for labor reforms to take place following the right-wing dictatorship of General Augusto Pinochet. 

Gonzalo Durán, an economist and researcher at Fundación Sol, has noted that 90 percent of working Chileans make less than 650,000 pesos per month, which is equivalent to USD 1,300. This figure is less than the average minimum salary in developed countries. Meanwhile, Emmanuelle Bazoret of the University of Chile has commented that mid-level income is very low in Chile, meaning that the gap between the lower classes and the middle class is small, leaving them vulnerable to social decline. 

The World Bank and the International Monetary Fund have praised Chile’s GDP per capita and income per capita, which stands at $14,000. However, this figure is based on the top 1-10% of the population, and if these are removed from the data, the average income per capita is closer to $4000, which is the same as the minimum wage. 

21% of Chileans live in poverty, and a study by de López, Figueroa y Gutiérrez in 2013 highlighted the lack of information about the “super rich” in the CASEN household survey. The authors concluded that the income distribution in Chile is greatly affected by this and that the richest 1% of the population is significantly underestimated. 

The evidence presented suggests that income inequality has risen over the course of the 1990s and 2000s, and only 22% of workers hold what could be referred to as a high quality job. This leaves 78% of the population in low quality jobs, which can be considered slavery. The data provided to the world is therefore questionable, and Chile’s true economic situation is far from the glowing reports given by international agencies.

Chile’s Students – A Catalyst for Change

Forty years after the coup headed by General Augusto Pinochet, Chile remains a fractured nation, where the past continues to haunt the present. In recent months, students have taken to the streets in protest of the privatized educational system, which has made higher education increasingly unaffordable. This is symptomatic of a much deeper issue: inequality and a lack of opportunity for upward mobility, especially for those living in shantytowns on the outskirts of Santiago. 

According to the NGO Un Techo Para Chile, these settlements are often occupied irregularly and lack access to basic necessities such as drinkable water or sewer systems. Furthermore, access to quality healthcare and education is severely limited. Noam Titelman, president-elect of the Catholic University Student Federation (FEUC), has attributed the recent student movement to “the accumulation of inequality, injustice and hopelessness” (Source: Council on Hemispheric Affairs). 

Neoliberalism is an economic theory which has been praised for its success – if you are already wealthy. But, if Chile is to be taken as an example of neoliberalism at its best, the results are not encouraging. Robert McChesney, editor of the Monthly Review, has described it as “capitalism with the gloves off”, while the New York City author and social critic Fran Lebowitz has said “in this country, capitalism triumphed over democracy.” When a society fails its people, the consequences are felt in the streets.

Leave a Comment

Your email address will not be published. Required fields are marked *