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Chile’s economic miracle burns in protests: scientists argue what’s causing

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Manish Saini
Manish works as a Journalist and writer at Revyuh.com. He has studied Political Science and graduated from Delhi University. He is a Political engineer, fascinated by politics, and traditional businesses. He is also attached to many NGO's in the country and helping poor children to get the basic education. Email: Manish (at) revyuh (dot) com

Economic reforms in Chile have been seen as role models for decades, but now all the gains of the Chilean economy are in question. “It’s not 30 pesos, it’s 30 years” is one of the slogans of the protests that have engulfed the country since the subway fare has increased. But the protesters themselves explain that it is not the price of the ticket, but the fact that three decades after the fall of the military dictatorship, people do not feel a significant improvement in living standards and demanding social justice. Protests have been going on for three weeks, and economists argue about their reasons.

  • Chile’s neoliberal development model fails: Branko Milanovic, the researcher of the problem of inequality, professor at the City University of New Yorkaccuses the country’s politics of the last 30 years. This model was supported by Western countries, having adopted Chile at the OECD, the “club of developed economies,” writes Milanovic, the World Bank cited the Chilean experience of labour market regulation and pension reform as an example, but everyone turned a blind eye to inefficient redistribution, which could not mitigate enormous inequality and poverty. Pensioners live on $ 200-300 a month in a country where the price level is 80% of the US level, and the wealth of 12 Chilean billionaires is a quarter of the country’s GDP – this is almost the highest level in the world, if we exclude countries such as Lebanon and Cyprus, where many billionaires simply “park” their wealth, Milanovic compares. The poorest 5% of the population of Chile live as poor.
  • The Chilean success story cannot be denied because of the current protests, disagrees Jan Vazquez from Cato Institute. From 1990 to 2015, the incomes of the poorest 10% of the population grew by 439%, and the richest 10% – half as much, by 208%. The poverty rate has fallen from 45% to 8.6% in 30 years, and a large middle class has been formed. Chile has high social mobility, the OECD estimates that 23% of those born in families of the 25% of the population with the lowest incomes in their lifetimes reach 25% of the income level of the most well-off. Now economic growth has slowed, stagnant wages coupled with tax increases without a proper increase in the quality of public services have led to discontent, Admits Vazquez, but suggests not to put an end to past successes and the Chilean model, which the centre-right government “failed to provide moral protection”.
  • The protests that have been going on in many countries of Latin America since the spring of 2019 have a common feature, says Monica de Bollé of the Peterson Institute for International Economics research center: people in them are experiencing severe post-commodity boom syndrome (post-commodity price boom syndrome). As raw material prices rose, people felt safe and confident in their future, and in recent years have lost this confidence. And the authorities, instead of solving the problem of poverty, are trying to strengthen their position through militarization and a violent response to protests, de Bolle summarizes.
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