”We thought inequality would eventually disappear.” Rolf Rudes said as he recalled his years as Chile’s finance minister. Now Ruders, who is over 80 years old, is a member of the well-known “Chicago Boys.” He is responsible for the extreme inequality in Chile and is also the object of people’s anger in various protests and riots. I went to San Diego, talked to the rich and the poor, and interviewed the “Chicago Boys.” Chile’s economic policies and development models were the targets of other emerging economies competing to follow suit. So, what is the problem?
| The short “Chilean miracle”|
”Chicago Boys” are a group of students who went to the United States to study economics, aiming to return to the country to teach, improve the quality of teaching, and encourage colleagues to give up socialist economic thinking. Their influence is very great, far beyond people’s imagination. Augusto Pinochet is a Chilean dictator who has been in power for nearly 17 years. After he took power in 1973, he quickly promoted a group of economists to ministerial officials, all of whom received economics education at the University of Chicago. They compiled an economic plan called “bricks” (named for their thick bricks), which comprehensively brings together market-oriented policies and explains the ideal model of Chile’s economic operation.
”Bricks” believes that Chile’s biggest problem lies in its bloated state institutions. Under the guidance of this book, the public sector was appropriately scaled back. From 1973 to 1980, the number of state-owned holding companies decreased from 300 to 24. The budget for infrastructure, housing, education and social security has also been significantly reduced. Chile experienced a major setback in the early stages of reform—the financial sector that had just initiated liberalization reforms was paralyzed by the impact of the 1982 economic crisis. But over time, the country has become more prosperous. From 1985 to 1997, Chile’s average annual economic growth rate reached 7%. During this period, Chile’s investment and export rates ranked first among South American countries. Milton Friedman called this the “Chilean Miracle”. He had taught Chilean exchange students such as Rudes at the University of Chicago.
Inequality has also increased rapidly-but the two beliefs that underpin economists’ implementation of the plan have made inequality a secondary issue.
The temporary residence is next to the high-rise apartment.
One is to believe that economic growth can eliminate poverty, which is considered to be a more important issue than inequality. Now, the relevant data and expressions I heard in San Diego show that the Chicago boys are correct to a certain extent. In 1987, the poor people on record (which meant they could not afford food) accounted for 17% of Chile’s total population. By 2000, this proportion had dropped to 6%. San Bernardo’s Los Blanco market is a low-end market in poor areas, where I met a group of middle-aged people in their 50s. They recalled the hunger and cold experienced when they were young, and believed that Chile’s economic expansion has greatly improved their lives.
The second is to believe that education reform will eliminate inequality. The “Bricks” plan has a chapter devoted to equality of opportunity, explaining how liberalization will work: privatization means more universities, and the new loan system will help people from poor families get degrees. Potential talents are evenly distributed across the country, and education will become a force to promote equality, and promote Chile’s increasing prosperity and gradually eliminate poverty.
In theory, this plan seems to be comprehensive and coherent. However, some Santiago people have stated the fact that they are having a hard time, which exposes the problems in these views and plans.
| Visible hidden poverty |
”We can’t get any help.” Melissa took me to visit her and her husband’s “home”-a self-built barracks in the southern suburbs of San Diego. “In this way, people still think that we are middle class, not Poor people.” All the people I met in San Diego had jobs, including gardeners, nursing assistants, or salesmen in cell phone shops. The income from these jobs makes their family’s economic situation barely above the poverty line. However, these people live in temporary shelters in abandoned garbage dumps. Their “homes” are made of thin chipboard, and more than a dozen families share a common bathroom-surrounded by four corrugated iron plates without a roof.
Santiago-like inequality creates hidden poverty that cannot be recognized by official statistics, which is partly caused by high prices: Families similar to the situation of the Melissa couple mostly live in reluctance to live The loan money is used to buy commodities in local small shops, and the credit interest is as high as 20% of the necessities. Another reason is “refusal to supply”: San Diego’s pharmacy chain believes that there is no need to open branches in poor areas of the city. In Recoleta, a poor area without chain pharmacies, I met local Communist Party officials. Based on this situation, he had to open a state-run “People’s Pharmacy”.
Demonstrations starting in October 2019
| The Reform of Education |
Education reform not only did not reduce inequality, but the distorted education market consolidated inequality. Privatization did increase the number of universities: in the 1970s, Chile had 8 universities, all funded by the government; there are now more than 150 universities, 2/3 of which are private universities for profit. The Chilean government uses only 0.5% of its gross domestic product (GDP) for higher education, which is the lowest in the Organization for Economic Co-operation and Development (OECD) education investment as a percentage of GDP. However, San Diego looks like a city of knowledge, with universities spread all over the streets and stands between automobile exhibition halls.
In theory, competition helps reduce tuition and improve the quality of teaching, but the situation in Chile is the opposite. The per capita cost of university courses accounts for about 41% of per capita income, which ranks first in OECD. In order to obtain more profits, the university will cut all high-funded projects including life counseling. Statistics show that the dropout rate of Chilean universities is as high as 50%, ranking first in the world. The Melissa couple regretted going to college. They think that this is not good for their career prospects, and they also have to bear debts that will take years to pay off.
Barcdano Square-the boundary between rich and poor in San Diego
Pathological competition has also damaged high school education. With the privatization of the education sector, test scores have also become part of school assets. As a result, the school mercilessly eliminates underperforming students instead of helping them. This is a city that needs to invest money to get a good education, and the resulting class division is shocking: when you go south, away from the tree-lined Las Condes district where Melissa works, Going to the location of their temporary residence, you will find that the quality of teaching along the way becomes lower as people’s incomes drop. One parent lamented this: “It turned into an education war.”
This also caused potential damage to the urban structure. Unwritten but well-known income differences have marked the “zones” of living space and activities in San Diego. Baquedano Square (commonly known as “Italian Square”)-the place where the riots occurred in 2019 is a dividing line between the rich and the poor, and the rich never enter the southern part of the city. In addition, there are high-level parks and low-level parks in the city, which are distributed in high-income areas and low-income areas, respectively. Which park you can enter depends entirely on your income. This may be the ultimate privatization-the privatization of urban public facilities, and the only privatization not desired by the Chicago boys.