(This article was originally published in the Santiago Times)
By David Pedigo
If 2010 represented an opportunity for the Chilean government to prove its competence and capability in the face of a catastrophic 8.8-magnitude earthquake and a mine collapse that trapped 33 miners underground for 69 days before being rescued, 2011 represented a whole other realm of problems. It represented an opportunity for Chilean society, especially its youth, to understand and confront the serious issues of education reform and inequality that the country faces.
For the last two decades, Chile has prided itself on leading Latin America on almost every indicator of development, but there has long been unrest underneath the surface. This prosperity was built on a 17-year dictatorship which, although long gone, established the rules that continue to govern the country today. These rules were made to spur development, but were written without regard to fairness or public welfare, leaving ample opportunity for dissent. Last year, this dissent reached a critical mass.
A NEW AWAKENING
2011 was especially difficult for President Sebastián Piñera, who began the year on a high note, boasting approval ratings of 63 percent after his success in handling the natural and mining disasters of 2010. By the end of 2011, his approval had fallen to 34 percent and his disapproval rating rose to 60 percent–the highest for any Chilean president since the return to democracy in 1990.
Piñera’s demise came from nationwide student protests that began sprouting up in May. These protests challenged the long-standing inequality of Chile’s class-based education system. Chileans’ contempt for Piñera’s business-like governing style amplified their conviction. Many characterized him as someone who cared little for social issues.
Among the students’ demands were the abolishment of the current university selection exam (PSU) and increased funding of university tuition. In an attempt to pressure the government into meeting their demands, many university and high school students went on strike, refusing to go to class and taking over their schools in what were referred to as “tomas,” or takeovers.
Although Piñera agreed to increase state funding for more economically disadvantaged students, the student protests ultimately failed to achieve these objectives. In December, the school "tomas" finally ended, with a few holding out until January, and Camila Vallejo, the then-president of the Confederation of University Students of Chile (Confech) and one of the leaders of the student movement, lost reelection. Much like Occupy Wall Street in the U.S. and the “indignados” of Spain, the demonstrations petered out without much to show for it on a policy level.
DOWN, BUT NOT OUT
Still, it would be disingenuous to count the students out at this point. Unlike their counterparts in the Occupy Wall Street movement, the Chilean students brought concise demands to the table and presented real challenges to the government’s legitimacy. Camila Vallejo remains active in Confech and was named the person of the year by both the UK’s The Guardian newspaper and a national poll. Giorgio Jackson, the former Confech spokesperson, meanwhile, has formed a broader political movement called “Revolución Democrática” that soon hopes to present candidates for the National Congress.
The students’ demand for educational reform also drew attention to broader problems with the Chilean economy, some of which have begun to be addressed. For example, in making its initial demands for reform, Confech expressed frustration that Chile’s two main political coalitions failed to address the social demand for education reform. Now, politicians have begun to think critically about reforming the political system to provide more flexibility for individual political parties. Tax reform has also become a key issue, after Confech proposed in October a higher corporate tax rate to pay for an increased public investment in education.
Though the students may have lost the battle on the policy level, they were certainly the ideological victors. Ninety percent of Chileans supported their demands on education, and even some of Chile’s wealthiest businessmen made calls for higher corporate taxes (companies paid a 20 percent tax in 2011) in order to spur public investment in health and education.
Education reform may be a serious issue in Chile, but in the context of last year’s debate, it merely served as an indicator for general discontent with the status quo. Although Chile has been hailed as a success story for free market capitalism due to its impressive economic development and modernization, it still has some major problems. Chile is the 17thmost unequal economy in the world, according to the CIA World Factbook, and this is becoming an issue of increasing importance. The true challenge is how to confront the latter without sacrificing the former.
As several politicians and the aforementioned businessmen have pointed out, redressing economic inequality would likely mean a tax adjustment, and such policies are always accompanied by a fear of capital flight. This is especially true in Chile, as the country’s economic growth is often attributed to its low corporate tax rates and openness to world markets.
This is not necessarily a strong determinant of economic fortitude, however. Indices like the Heritage Foundation’s Annual Index of Economic Freedom, which claims to measure economic growth by way of economic openness, praise Chile for its market-friendly policies. But the index also deducts points for government spending, even for education and research and development, areas that have obvious long-term benefits for economic growth and social well-being.
A much more relevant indicator of future economic strength is the World Bank’s “Doing Business” index, which measures the ease of doing business in countries across the world. The index examines a variety of factors, including ease of starting a business, taxes, investor protection, and bankruptcy laws, among others. Taken together, these factors determine how effectively countries can attract investment, rather than simply how far they can remove their government from the economy.
Chile maintains a strong position in this index as well, ranking No. 39 worldwide and No. 1 in Latin America. Significantly, Chile ranks No. 110 in bankruptcy practices, compared to a much more consistent No. 45 in tax rates, meaning that it may be able to maintain its strong business climate in the face of tax increases if they are leveraged against effective bankruptcy reform. The tax adjustment need not be a major one either—a report by the Organization for Economic Cooperation and Development (OECD) suggested that a redistribution of only 1 percent of Chile’s GDP could completely eradicate poverty in the country.
Still bruised from its fight with the students, the Piñera administration has recognized the need for some kind of equitable reform. However, there are divides within political coalitions as to where and how deep taxes must be, and even as to whether or not they should take place at all.
At the same time, the administration’s effort to address this demand has been undercut somewhat by its attempt to pass a law to limit the right to publicly protest. This law seemingly seeks to insulate the government from the type of public policy headache that the students gave it last year.
Whether the administration is willing (or even capable) of carrying out the demands of its critics remains to be seen, and both of the aforementioned policies will be under close scrutiny. Chile’s political playing field, however, has undoubtedly changed, and it has done so dynamically.
David Pedigo is a staff writer for The Santiago Times in Chile and a 2011 graduate of Beloit College, where he wrote his thesis on Mexico's drug war. He has also conducted research in Ecuador for Beloit College's International Symposium.
[Photo provided by Sebastián Villanueva]