Sunday, March 23, 2008

Chile Today - Part 4 The Failure of Neo-liberalism

Seventeen years is a long enough time for an experiment in economic development. South Korea moved from Third World misery to developed status in hardly more than that. How has Chile fared in the 17 years since my first visit? When I returned in 1996 it seemed the place was hopping, lots of new houses – small houses for normal people, not MacMansions – were built by the thousands, unemployment dropping and the squatter colonies were going to be a thing of the past. Of course masses of unemployed and underemployed were still selling pens on the street and long hours, low wages was still the lot of 90% of the employed, but it was supposed to improve.

The optimism of '96 had dissipated somewhat in 1998 due to the collapse of the Asian Tigers the year before. This should have been a wake up cry to the fact that the neo-liberal "export-based" model makes a country highly vulnerable, but I saw nothing about this in the press. Back again in 2001, and the economic motor seemed chugging along again, but still the problems of underemployment and low wages persisted. Added to these problems was the fact that almost no social services existed. No welfare, no health care system, a pension tied to a fluctuating stock market, privatized education and therefore the burden of school fees and university tuition.

What do I find in 2008? Low wages, long hours, poor or non-existent social services, guys selling pens in the streets and tin shack colonies. Middle class people tell me, as they did in 1991, '96, '98 and 2001, that they really wonder how they survive given the low incomes and high cost of everything. Three quarters of Chileans earn less than $440 CDN a month. Yet the prices on most items are about as high as in Canada. In Canada during the early 1960's when most Canadians earned less than $440 a month, prices were in accordance with income – a quart of milk was 20 cents, a kilo of bread 40 cents, a bus ticket 20 cents and so on. Chileans in 2008 pay $1.40 for a litre of milk, $2.30 for a kilo of bread and $1.10 for a bus ticket, and earn 1962-level wages! Professionals and skilled workers make from one quarter to one fifth what their Canadian counterparts make. I should also mention, that the hours are longer and the benefits are also far less, so it is even worse that the wage figures would indicate.

The claim is made that Chile is too poor to afford social services or a more egalitarian wage structure. According to the CIA Source Book Chile's 2007 per capita GDP was $14,400. Adjusted for inflation, Canada's per capital GDP was about the same in the early 1950's. But by then we had a whole raft of social welfare measures and social reforms such as welfare, unemployment insurance, hospital insurance, the eight hour day, two weeks vacation, minimum wage legislation etc. We had a system of public education and wages were rising and would continue to do so until the mid-1970's. Unionized industrial workers were now seen as "middle class" and lived accordingly. All on a per capita GDP of $14,400 which the Chilean rulers find too feeble.

But Chile does have a lot of newly minted multi-millionaires and billionaires...

To be continued


Blogger Graeme said...

I don't remember hearing a whole lot about Chile's privatized pension system when Bush was pushing Social Security "reform." Perhaps because it leaves a ton of people out (which I believe is a big issue in Chile)

12:46 AM  
Blogger Venus Cassandra said...

But but this is Pincohet's miracle!!!!

( : ( :

You can probably see the sarcasm.

12:31 PM  
Blogger sonia said...

All right, so according to you Chile's economy was great until 2001, but then took a dive in 2007.

I wonder what happened between 2001 and 2007 ? An election of a SOCIALIST president perhaps...

Read this.

7:09 AM  
Blogger Larry Gambone said...

You are not reading what I have written. It seemed to be improving in 96, took a nose dive in 98. Furthermore, according to the GDP growth rates, Chile is doing as well under the so-called Socialist presidents as well as the DC ones. The point that I am making is that GDP doesn't mean much unless the wealth created by society is shared and this is not what the so-called Socialists have been doing since they adopted the neo-liberal ideology.

7:40 AM  
Blogger bathmate said...

very good posting. thank you. :)


8:28 AM  

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