Yves here. With 2019 shaping up to be another 1848, it’s hard to provide in-depth commentary on so many protests. Nevertheless, Lambert hopes to provide a high-level piece soon.
In the meantime, this post on Chile will hopefully fill in some of the gaps as well as encourage readers who have insight to provide additional comments and highlight any points that seem inaccurate or incomplete.
It’s also worth noting that Pinochet’s Chicago School experiment ran quickly into the ditch. From ECONNED:
Chile has been widely, and falsely, cited as a successful “free markets” experiment. Even though Chilean dictator Augusto Pinochet’s aggressive implementation of reforms that were devised by followers of the Chicago School of Economics led to speculation and looting followed by a bust, it was touted in the United States as a triumph. Friedman claimed in 1982 that Pinochet “has supported a fully free-market economy as a matter of principle. Chile is an economic miracle.” The State Department deemed Chile to be “a casebook study in sound economic management.”
Those assertions do not stand up to the most cursory examination. Even the temporary gains scored by Chile relied on heavy-handed government intervention….
The “Chicago boys,” a group of thirty Chileans who had become followers of Friedman as students at the University of Chicago, assumed control of most economic policy roles. In 1975, the finance minister announced the new program: opening of trade, deregulation, privatization, and deep cuts in public spending.
The economy initially appeared to respond well to these changes as foreign money flowed in and inflation fell. But this seeming prosperity was largely a speculative bubble and an export boom. The newly liberalized economy went heavily into debt, with the funds going mainly to real estate, business acquisitions, and consumer spending rather than productive investment. Some state assets were sold at huge discounts to insiders. For instance, industrial combines, or grupos, acquired banks at a 40% discount to book value, and then used them to provide loans to the grupos to buy up manufacturers.
In 1979, when the government set a currency peg too high, it set the stage for what Nobel Prize winner George Akerlof and Stanford’s Paul Romer call “looting” (we discuss this syndrome in chapter 7). Entrepreneurs, rather than taking risk in the normal fashion, by gambling on success, instead engage in bankruptcy fraud. They borrow against their companies and find ways to siphon funds to themselves and affiliates, either by overpaying themselves, extracting too much in dividends, or moving funds to related parties.
The bubble worsened as banks gave low-interest-rate foreign currency loans, knowing full when the peso fell. But it permitted them to use the proceeds to seize more assets at preferential prices, thanks to artificially cheap borrowing and the eventual subsidy of default.
And the export boom, the other engine of growth, was, contrary to stateside propaganda, not the result of “free market” reforms either. The Pinochet regime did not reverse the Allende land reforms and return farms to their former owners. Instead, it practiced what amounted to industrial policy and gave the farms to middle-class entrepreneurs, who built fruit and wine businesses that became successful exporters. The other major export was copper, which remained in government hands.
And even in this growth period, the gains were concentrated among the wealthy. Unemployment rose to 16% and the distribution of income became more regressive. The Catholic Church’s soup kitchens became a vital stopgap.
The bust came in late 1981. Banks, on the verge of collapse thanks to dodgy loans, cut lending. GDP contracted sharply in 1982 and 1983. Manufacturing output fell by 28% and unemployment rose to 20%. The neoliberal regime suddenly resorted to Keynesian backpedaling to quell violent protests. The state seized a majority of the banks and implemented tougher banking laws. Pinochet restored the minimum wage, the rights of unions to bargain, and launched a program to create 500,000 jobs.
By DemocraciaAbierta. Cross posted from openDemocracy
Only a week after the huge mobilizations in Ecuador that successfully toppled the controversial ‘paquetazo’, the financial plan imposed on the South American nation by the International Monetary Fund, another Latin American country has risen up against the economic policies of its government.
In a country where the minimum wage of 70% of the population barely reaches $700 USD per month, the news from Chilean president Piñera last week that the fare for a metro ticket in Santiago would rise from 800 Chilean Pesos to 830 ($1.15 USD) hit hard. Chile, a nation with a long history of neoliberalism, has been unable to eradicate poverty with privatisation policies, and it is estimated that around 36% of the urban population live in extreme poverty.
The supposed “economic miracle” of Chile, which received its name from American economist Milton Friedman, was a set of liberalising economic measures put in place during the dictatorship of Pinochet, that imposed a free market in the country with the support from the United States. This economic system, that continues to be implemented today in Chile, has benefitted the economic elites whilst creating inequality and suffering for the majority. It’s hardly surprising that thanks to these neoliberal reforms promoted by Friedman, the 90s became the lost decade of Latin America.
Tired of the economic policies of the government, students and citizens took to the streets of Chile to protest against the rise in price of the metro ticket, but in reality this was just the tip of the iceberg. They are in fact protesting against many other social issues such as high tariffs for electricity and gas, low pensions, and a completely unaffordable health and education system. Protesters burnt metro stations and public busses, and they looted supermarkets and public buildings.
When Piñera spoke to the nation on Saturday evening to declare the suspension of the increase in metro fare, it was already too late to contain the fury that had been unleashed. Students and young people kept marching and demanding justice, whilst the government declared a State of Emergency and sent the army to the streets.
That’s why we explain to you everything you need to know about the current protests in Chile and why this explosion of violence is so important in the region.
Police Violence and Democracy in Chile
It’s not the first time that police use violence against their own citizens in Chile, a country which has a long history of repression of the mapuche indigenous communities when they rise up against the lack of government recognition of their territorial rights.
In fact, police violence against mapuche communities resulted in the murder of community leader of only 24 years of age, Camilo Catrillanca, last year when he was passing through an area in which a police operation was being carried out and suddenly found himself in the middle of a shoot out. A stray bullet hit him in the head and murdered him instantly.
The protests that began in Santiago but that have now extended themselves across the country, have so far caused around 11 deaths, mostly due to violence at the hands of the police and the Chilean army. This display of state violence against citizens comes only 30 years after the dictatorship of Pinochet murdered and disappeared over 40,000 Chileans during its reign of terror. What’s more, according to the National Institute for Human Rights in Chile, there have been 84 firearm casualties and over 1420 people detained since the protests began last week.
The reaction from Piñera has focussed on only the violent acts of the protesters, contributing to the criminalisation of the right to protest in the country. “We have invoked the Law of State Security, not against citizens, but against a handful of delinquents that have destroyed property and dreams with violence and wickedness”.
He justified police repression of protests by declaring that “democracy has a right to defend itself”, however, he also expressed his intentions to reach agreements to improve the standard of living for the lower and middle classes of Chile. The actions of the police and the army over the past week has shocked one of the most democratic countries in the world, and the second most democratic of Latin America according to Freedom House.
Chile’s high score for freedom of assembly and protest may be affected by the actions of the state against its citizens this week, which seriously affect the right to protest by criminalising all individuals involved.
Neoliberal Malaise Throughout the Region
Economic malaise in Chile is part of a regional trend that follows recent protests in Ecuador, that also began as a product of frustration regarding the economic policies of president Lenín Moreno.
Protests in Ecuador began as a reaction against a set of economic policies referred to as the ‘paquetazo’, which were a series of austerity measures imposed on the country by the International Monetary Fund in order to cut public spending and repay debts faster. This included the elimination of fuel subsidies, public salary cuts, and huge holiday reductions for public employees.
Civil society, but mainly indigenous groups led by the Confederation of Indigenous Groups of Ecuador, took to the streets for weeks to protest against the measures, until president Moreno declared that the ‘paquetazo’ would no longer be implemented.
Chileans, no doubt empowered by the recent protests in Ecuador, have also taken to the streets with the same hopes: that they will achieve with their protests real change regarding how their government manages the economy. They also make it clear that the poor management of the economy and imposition of neoliberal policies have devastating and very human consequences for the most disadvantaged of Latin America.
It’s not only Chile and Ecuador that are facing massive citizen unrest in the region. Haití is also rising up against the corrupt government of Jovenal Moïse and demanding not only an explanation for what happened with millions of dollars received from Venezuela, but also an end to neoliberal austerity policies backed by their northern neighbour, the US.
The neoliberal model is in crisis, and these protests have clearly demonstrated this. Now, what happens in Chile will depend on Piñera’s capacity to negotiate real change, but if he fails at doing so, it will be impossible to contain the rage that has already been unleashed in a country where citizens are tired of injustice and inequality.