Neoliberalism: Santiago Calling

It is time to turn neoliberalism up a notch, not down. And the government should stay out

Last week in my beloved hometown, Santiago de Chile, a street protest was staged against the neoliberal model. Check out the report under the bombastic title Chileans take to streets in anger at regime.

The regime is a term used chiefly to describe oppressive and unelected governments. Chile, on the contrary, is ruled by a woman who won by a devastating majority in fair and free elections. However, the state of things has turned nasty thanks to Ms Bachelet's own strategy: she opened the floodgates criticising the neoliberal model. Now some Chileas demand her promises to be delivered. Obviously, president Bachelet knows very well that the economic system works fine. Poverty has decreased. The gap between rich and poor persists due to poor education and uncontrollable fertility rates at the lowest end of the social ladder. Some sections of the opinionated class insist we need a change of the economic course. I cannot help but thinking it’s the society, stupid.

The paradox here is that Chilean president is a lefty-cum-neoliberal, but the result is neither social liberties nor sound free-market policies. The public has been told too often and for too long that the problem is the economy, legacy of the dictatorship and the excuse was that democratic governments were unable to change it out of fear of the reaction by the conservative forces. However, the left now is majority in both chambers of Congress. The president is a left-winger. The electorate is on her side. There are no elections coming up so no need for populism. She is doing nothing simply because on her campaign she lied to everyone, and people are now showing their dissatisfaction. In other words, the electorate woke up to reality.

There is no alternative

In fact, the government should perfect the free-market model and not give in to populism. In Latin America, we have had enough of populism and neo-populism. Neoliberalism is not the root of all evil. Hardly two decades of sound market principles have been applied in Chile, and now poverty is about to be abolished. What do the union workers want then? They simply long for old-school socialism, a system exhausted and proved not only immoral but brutally wrong. People want the state to intervene, but that is actually dangerous. The economy should keep growing to make more people, especially the poor, join the job market. That is why the populist minimum wage should be scrapped altogether: let the market mechanisms work its magic. Trade Unions' main concern is the low wages (£200 per month). I do not understand why then this coalition approved an increase toVAT two years ago, and insist on protectionists barriers to imports of such importance as grains and milk. Prices for diary products and bread have sky-rocketed. The poor have been hit the hardest, and no wonder they complain when their wee salaries are used to subsidise the landownser. An increase in salaries may affect them as a result of higher internal consumption and inflation.

Another problem is Chileans low productivity. Workers tend to be lazy and the job market is not flexible enough. And the icing on the cake is the shambolic transport system in Santiago, and only the government can be blamed for it. Workers find themselves commuting endless hours. There was a faulty transport system before, but it did the job of getting people to their work places, and it was based on freedom to set up new bus routes giving the chance to small entrepreneurs to offer their services. The left coallition decided to change over to a centrally planned system, and in a pompous tone ex President Lagos announced only Stockholm would rival Santiago. It turned out a bloody mess and the Bachelet administration only intensified the problem. Indictments are already underway. Transport has been a major components in Bachelet's underperforming government. People seem to target the economy rather than the ruler of the country. People are wrong.

The gap between rich and poor is less a concern than the gap between society and the economy, the latter is way ahead of the former. Chileans remain deeply Catholic, hence their weak work ethics. Independece Day in Chile means two Bank Holidays in mid-september, and now one more has been added: a week of productivity will be lost this month. They wonder why the economy is not doing any better? Because they do not work enough, perhaps?

On the demographics of Chile, Roman Catholic idiosyncratic vices explain a lot. Sexual oppression leading to teenage pregnancy in the less educated has an impact in the high crime rates, and scores of workers on minimum wage have too many children. If you think that £200 is too low, fair enough. I agree, even. But why would you have three or four children then? The powerful Roman Catholic church opposes all sorts of contraceptive methods and cheers when people breed like rabbits. Let alone legalisation of abortion, which is a taboo in Chile, and anyone suggesting switching back-street abortions to safe hospitals can expect to be labeled, at best, a criminal. (In that case I am a hell of a criminal: legalise abortion now!)

Suffice to say that the protests were fuelled by a Chilean bishop who demanded a 60% hike in the minimum wage and made an appeal to pay an ethic salary, whatever that is. Now with god standing by them, do not expect workers to give up easily.

History repeats itself

We went through this once. See And if it means civil war, so be it, from Time magazine, 10 of setpember 1973 (also here in my Spanish site). At that time, workers took over companies and the whole country was brought down to its knees. The outcome was more that three thousands deaths in 17 years of dictatorship. It is in the government's interest to curb the unions... now!

It is true, this is not as bad as in the 70s. Chile now is stable, inflation under control, food supplies are there, only a bit expensive, but there is no need to queue for hours to buy them. I have to insist and remark that poverty is decreasing. The protests also gathered a few thousands, less than expected, and they only made headlines because of the riots.

The reality is that this government lied, like all their predecessors. Things are not great, but Chileans have never had it so good. How to build up a more meritocratic society is the real challenge. Let’s hope that next time, the left-wing candidate will not run on a free-market bashing ticket. Workers should get over it, and put this down as a lesson: next time, just do not vote for them again.

I recommend the opinion article published in The Guardian How the neoliberals stitched up the wealth of nations for themselves and and the letters about it on Santiago sends a message to the City.