The Daily - Capitalism on Trial in Chile

Episode Date: November 15, 2019

Free-market economists once talked about “the miracle of Chile,” praising its policies as Latin America’s great economic success story. But recently, over a million people have flipped the script, taking to the streets and facing down a violent police response as they demand a reckoning on the promise of prosperity that never came.Today, we explore how, in Chile, capitalism itself is now on trial.Guest: Amanda Taub, who explores the ideas and context behind major world events as a columnist for The Interpreter at The New York Times, spoke with Annie Brown, a producer for “The Daily.” For more information on today’s episode, visit nytimes.com/thedaily. Background reading: “It’s not 30 pesos, it’s 30 years.” Our correspondent went to Santiago, the Chilean capital, to understand how a small hike in public transportation fares ignited mass protests.After weeks of demonstrations, Chile’s president said he would support a new Constitution. But for many, it was too little, too late.Our correspondent went inside a trauma unit in Chile that’s responding to “an epidemic” of protesters who have been shot in the eye by police pellet guns. Watch the video below.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, Chile's free market reforms have been celebrated as an economic success story. Until they weren't. The Daily's Annie Brown speaks to our colleague Amanda Taub about why in Chile, capitalism itself is now on trial. It's Friday, November 15th. So Amanda Taub, let's start back at the beginning of last month. What was going on in Chile? Amanda Taub, let's start back at the beginning of last month.

What was going on in Chile? On October 6th, the Chilean government announced that there was going to be an increase in the fares for the public transportation system, the metro system in Santiago. And it was 30 pesos, which might not sound like a lot. That's about four cents in U.S. dollars. But for ordinary Chileans who were already really struggling to make ends meet, it was just too much to bear. was just too much to bear. Soon after the fair was announced, it was actually high school students in the center of Santiago who first started this kind of civil disobedience protest movement,

where they started out by jumping turnstiles or holding gates open for people so they could avoid paying the metro fares altogether. That then spread to university students, and there are a lot of university students in Santiago. Chile has had large protests in recent years. That part was not surprising. But then around the end of the second week of protests, things changed. In Chile, student-led protests turned deadly this weekend.

A tense week in Chile after violent protests broke out. According to the government, nearly 20 people have been killed in the clashes. And protesters began to burn metro stations. Subways, buses, and high-rise buildings were set on fire. They did what some have estimated to be billions of dollars of damage to the metro system in Santiago. The demonstrations have closed schools, shut down transportation, and caused several stores and businesses to temporarily close. Suddenly there was just this general sense that things were completely out of control and really dangerous. Amanda, what is driving these protests?

Because it seems like the magnitude of them no longer matches the thing they were originally about, which was this 30 peso fare hike. So the problem is not the amount of money itself necessarily, but the feeling that they already really needed help from the government. And instead of getting it here, they were being squeezed further. So the fact that people in Chile are upset about the subway fare, this small increase in the subway fare, is really a marker, a sign that there's something much deeper happening in Chile. Right. It's become sort of the crucial piece of evidence for a lot of people that the government isn't working for them, that it's not aware of their lives, and it's not trying to solve problems for ordinary people. And on top of that, there was a series of scandals involving either corruption or tax evasion by wealthy and powerful Chileans. And that created this growing anger and a sense that the entire

system might be illegitimate, that it wasn't just about distribution of money, but about fundamental fairness and who the government was working for and who it was taking for granted. And what does the government do? The government did a few things. The Chilean president, Sebastián Piñera, he said, He declared an emergency state.

This is a state of emergency now. And then Piñera announced that they would cancel the subway fare increase. But then, when that didn't quell the protest, And when that didn't quell the protest, he said, We are at war. And what people heard when he said that was essentially that his government considered itself at war with the Chilean people

who were protesting in the street. And then he called the military out to restore order. And what that looked like was tanks rolling down streets in the capital of Chile and Santiago, military forces coming out, you know, fully armed, and joining the police who were already in body armor, already driving around in armored vehicles. And so you had all of a sudden these images of tanks

facing down Chilean college students in the streets and groups of protesters waving signs calling for political change. And for a lot of Chileans, particularly the ones who had lived through dictatorship, suddenly this incredibly traumatic moment of Chilean history seemed to be recurring. So walk me through that history. Where does it start? So that story really begins in 1970, when Salvador Allende, who was a socialist, was elected president. But because it was 1970 and it was the Cold War, the United States was pursuing a policy of opposing socialism and communism around the world.

We all are distressed at the plight of the Chilean people and the failure, really, of the Allende government. They were very much opposed to his government. The government policies have failed. The Marxist theory does not work among a free people. And so even though he was democratically elected, the United States backed a coup by the military that removed him from office and installed a military government led by General Augusto Pinochet in his place.

And what happens when this new American-backed leader, Pinochet, takes over? The initial days of the military regime were incredibly brutal. In the time we were there, between 400 and 500 people were shot by firing squad in groups of 10 to 33. They rounded up activists, anyone who was seen as a leftist, a potential agitator, a potential threat to the military's control and power. 33 was the largest group that was let out to be shot. Inside the stadium. Inside the stadium. They were arrested and imprisoned in the national stadium,

which gives you a sense of the scale of these roundups, that it was a stadium full of protesters. They're beating people physically to death to get information or because they don't like them or whatever. We saw it. The most famous of them was a man called Victor Jara, who was a musician, but he was really more of a national cultural figure

who, for a lot of people, embodied Chilean identity. He had one popular song called El Derecho de Vivir en Paz, which means the right to live in peace. He was arrested, tortured by the military. They crushed his hands and then mocked him, saying, try to play the guitar now. Then they killed him. His body was riddled with bullets and then dumped a few days later in a poor neighborhood on the edge of Santiago, just left on the side of the road. You know, Victor Jara, I think, became symbolic for a lot of Chileans of

the brutality of the military regime. And how does the U.S. respond to this, given that it had a hand in the rise of this dictator? This was the Cold War, and this was one part of their Cold War foreign policy, a way to protect what they saw as U.S. interests against the potential rise of communism around the world. And the United States recognized Pinochet as the legitimate government of Chile and was very supportive of his regime. So for the United States, this was an opportunity to pursue a goal that many in the U.S. government had had for a long time, which was to get Chile to adopt more free market, economically conservative policies.

And they had been pursuing this for a while through this program that was almost like an exchange program where they encouraged and sometimes paid for Chileans to come to the United States to study economics at the University of Chicago. The question is, which system has the greatest chance for enabling poor people to improve their lot. Led by Milton Friedman, who was the kind of most famous thinker of the movement at the time. And on that, the evidence of history speaks with a single voice. The freer the system, the better off the ordinary poor people have been. And the group of Chilean economists who had come to the U.S. to study, as the U.S. had hoped, they went back to Chile, brought their policies with them, and tried to influence the government's economic policies.

They started to be called the Chicago Boys. They were known for having adopted this really kind of laissez-faire, extreme free market view of how things ought to work. laissez-faire, extreme free market view of how things ought to work. And once Pinochet took over, their policies became the foundation of the economic plans that he pursued. That is why the operation of the free market is so essential, not only to promote productive efficiency, but even more, to foster harmony and peace among the peoples of the world. We'll be right back. And what exactly were those economic policies that the Chicago boys were finally able to implement under Pinochet? So they were really the basket of policies that we now know as neoliberalism. The idea was that the government was supposed to get out of the way of the free market.

So state-owned enterprises were privatized. Pension system was privatized. The education system was partially privatized. There was a real reduction in regulations, cuts in taxes. It was essentially the remaking of the economy along the lines that the most influential free market economists had imagined in their research at the time. So this is a kind of extreme version of a free market economy where you remove social safety nets and allow the market to take control. Exactly. And these ideas were pretty prominent in a lot of parts of the world at the time. Margaret Thatcher was influenced by them in the UK, Ronald Reagan in the United States,

but they didn't go nearly as far in implementing them. The United States still had social security, the UK still had the national health system, but in Chile, instead of incremental changes or incremental reforms, they really kind of went for it. And in 1980, they wrote and imposed a new constitution. And these ideas were really interwoven throughout the constitution in order to kind of lock in these reforms. And what effect do these policies have? Do they do what the Chilean government had hoped they would do? In many ways, yes. Infl inflation was down, the economy grew, and Chile became a richer country than its neighbors in Latin America.

And many people saw this as... Chile is by all odds the best success story in Latin America today. The best success story of Latin America. They called it the miracle of Chile. Milton Friedman was very proud of it. But I am more than willing to share in the credit for the extraordinary job that our students did down there. And these policies stayed. They were maintained by the subsequent democratic governments, even those that were center-left. So from the outside, Chile looked like the Chilean miracle was continuing.

So from the outside, Chile looked like the Chilean miracle was continuing. But it turned out that for Chileans, all of that economic growth came with an asterisk. And that asterisk was that as the years went on, it was true that the country's economy was growing, but a lot of those gains were accruing to the very rich. Middle-class Chileans, poor Chileans were not seeing their lives improve. And in fact, the country's weak social safety net was making that even more difficult. So for instance, the retirement plan, after it was privatized, it took a long time before the first generation to participate in that plan started retiring in large numbers. And when they did in the last few years, it became clear that the consequences of this plan were poverty for a lot of Chile's elderly.

And I mean that in the most literal technical sense, the median payment under the private pension program is less than the poverty line for one person in Chile. That means that 50% of people are at that or less. And the minimum payment, the payment that the government will guarantee as long as you have paid into the system for 20 years, which is a big if, is even lower. Works out to about $130 a month, which is just not enough money to get you very far in Chile.

So this idea that by privatizing these systems, you're letting the market take care of what the government cannot, that has really not panned out. That's right. And so when the current president, Sebastián Piñera, who has continued to really embrace these right-wing neoliberal economic policies, announced that they were raising the metro fares by 30 pesos,

4 cents, that felt to a lot of people like the final straw, the last thing that just confirmed to them that the government didn't have their interests at heart. It might have stopped there had the president not taken the step of calling the military

out into the streets, because that was what really confirmed for a lot of Chileans that as a common chant and slogan of know, slogan of the protest said, it's not 30 pesos, it's 30 years. That made a lot of people feel like they were not just protesting the metro hike. They were not just protesting the specifics of retirement policy. They were protesting 30 years in which they felt that they had still been kind of trapped under the shadow of the dictatorship because its policies were still reaching out and affecting their lives.

So I flew to Santiago to find out how much do people really think that they are out there because of 30 years of economic policy and the legacy of the dictatorship. When I got to Chile and was reporting on the ground, something that was immediately striking to me was how it was just everywhere. The legacy of dictatorship was not subtext, it was text. It says, literally text, We're not everyone, we're missing those who are dead. Scrawled graffiti on buildings and written on protesters' signs and on their t-shirts with pictures of Victor Jara and quotes from his songs.

This was something that people very consciously and very directly connected to the legacy of the Pinochet regime. the legacy of the Pinochet regime. I spent a few days just going to as many protest events in as many parts of Santiago as I could. And throughout all of the protests that I attended, really they were talking about the changes that they wanted to see, including the changes to the Constitution, which was just this remarkable and extremely

unusual scene to see regular people. They brought their dogs, they brought their toddlers, they were sitting on the floor, some were eating snacks, having a very serious conversation about what elements of the Constitution would need to be changed, the mechanism that should be used to change it, and what would make it legitimate. And how possible would it be for Chile to rewrite its constitution? How much is this just a pipe dream of these protests? It's seeming more possible than ever. So President Piñera, in the last couple of days,

has said that he would be willing to start the process of coming up with a new constitution. But that hasn't satisfied the protesters because one core demand that they have is that the constitution come from civil society groups and individuals and regular people rather than just the politicians. And President Piñera has said that he wants Congress to be the ones to come up with the new constitution. So the people are saying, we want to be involved in this rewriting of a constitution that is actually left over from the dictatorship. And the president is saying, okay, yeah, we'll rewrite the constitution, but you can't be involved. And they're saying that they think that the government institutions don't have enough legitimacy to be the ones to come up with the new constitution.

That if they do it, that won't solve the problem of its illegitimacy in their eyes. I think the broader context here that we really need to pay attention to is that Chile's system was essentially an export from the United States. These were ideas that were embraced in the U.S. so much that our government encouraged and exported them all over the world. And Chile took those ideas and ran with them. In some ways it worked. took those ideas and ran with them. In some ways it worked, but now, decades later,

we're starting to see the results of that experiment. And so what's happening in Chile goes to this question that countries all over the world are asking, which is, basically, is more capitalism always better, or is there a point when capitalism goes too far? And what's happening in Chile is one answer to that question. Amanda, thank you so much. Thank you. El derecho de vivir, poeta o chimí, que golpea de Vietnam a toda la humanidad. Ningún cañón borrará el surco de tu arrozal. We'll be right back.

Here's what else you need to know today. On the investigation front, yesterday was a very somber, prayerful day. I thought it was a successful day for truth, truth coming from the president's men, people he appointed. During a news conference in the Capitol, House Speaker Nancy Pelosi said that the first two witnesses to publicly testify in the impeachment inquiry, George Kent and Bill Taylor, had, quote, corroborated evidence of bribery by President Trump. So what was the bribe here? The bribe is to grant or withhold military assistance in return for a public statement

of a fake investigation into the elections. That's bribery. Democrats are eager to establish that the president committed bribery, an impeachable offense that is specifically mentioned in the Constitution. But I am saying that what the president has admitted to and says it's perfect, I said it's perfectly wrong. It's bribery. For the next few weeks, we'll be covering the latest developments in the impeachment inquiry in our new podcast.

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