Chile’s Plantation Economy

The developed world is just crazy in love with the “miracle of Chile,” as expressed by Milton Friedman some years ago. The accolades are everywhere, ranked as a “high-income economy” by the World Bank.  The country has the strongest sovereign bond rating in South America. It is a role model for neoliberalism.

Neoliberalism is the Milton Friedman school of thought that the best government is the least government. After all, people can take care of themselves and make much more money when they are free to make decisions in a deregulated free marketplace. The operative formula is: Less government equals more profits for the private sector. As such, Chile represents the epitome of neoliberalism, and the likely future direction of America.

The “miracle of Chile” is absolutely true, if you are already wealthy.

However, once the curtain is pulled back, Chile’s complexities defy the blaring of trumpets for neoliberalism’s goddess of capitalism.

Chile is a “plantation economy,” similar in many respects to the plantation economy in the U.S. South during the 19th century. At its peak, there were 4-5 million slaves owned by only 3.8% of the people. The slave owners bought slaves, housed them and fed them.

Whereas today, in Chile, the moniker “slave” has been changed to “worker,” and rather than provide room and board like 19th century slave owners did, they now provide a stipend of $500 per month for the workers to provide their own room and board.  Thus, removing the stigma of slave ownership.  It is estimated that one-half of all Chileans make less than $500 per month. Thus, the slave market is rather sizeable, measurably more so than in the United States of America in 1850.

Chile’s wealth is so top heavy in favor of so few that it resembles the Leaning Tower of Pisa, ready to topple at any moment.  Conglomerates and/or extremely wealthy families own everything from pharmacies to logging to fishing rights to retail stores to minerals to grocery stores. It is a nation-state of concentrated ownership. The country is likely a snapshot of where America is headed in the years ahead, a pure corporate state. After all, the middle class is already under attack.

The Brutal Truth about the Miracle of Chile

According to the Organization for Economic Co-operation and Development (OECD), “Chile is the OECD country with the greatest difference between the rich and poor,” as well as the 4th poorest country of the 34 member states.

“… Chile’s inequality is still among the highest in the world (its Gini coefficient is 52.1), and non-income dimensions of well-being, such as health and education, are also skewed in favor of the rich.”  ((Tamar Manuelyan Atinc, et al, “Can Education Reform Address Inequality and Middle Class Frustration? An Experiment in Chile,” Brookings, May 9, 2014.))

The Pinochet administration, 1973-90, set the tone for worker slavery by adopting Milton Friedman’s neoliberalism. Pinochet abolished worker unions. The “Chicago Boys” first course of action, after Allende, the deposed president who was killed (supposedly he committed suicide in the presidential palace) was to nose-dive the economy by manipulating the monetary tools, making it easy to undercut worker rights. Workers are always most vulnerable during recessions.

According to Barbara Figueroa, president of the Chilean Confederation of Workers (CUT) workers have waited “for over 30 years” for labor reforms to take place following the right-wing dictatorship of General Augusto Pinochet, who implemented neoliberal reforms which decimated worker rights and regulations.  ((Chile Workers Push for Labor Reforms, Telesur TV, September 4, 2014.))

According to Gonzalo Durán, an economist and researcher at Fundación Sol, a non-profit organization that focuses on labor issues,   “…90 percent of working Chileans make less than 650,000 pesos per month, totaling USD 1,300.” In other words, “Nine out of ten workers in Chile make less than the average minimum salary in developed countries.”  ((Council on Hemispheric Affairs))

Yes, nine out of ten workers, aka: slaves, in Chile make less than the average minimum salary in developed countries. This leaves one out of ten that makes a living wage that removes them from the risk of slipping on a banana peel and falling into the pit of abject poverty.

According to Emmanuelle Bazoret, University of Chile, “Mid-level income is very low in Chile,” Bazoret said. “As a result the distance between the lower classes and the middle class is very small. Their precarious economic position makes them susceptible to social decline due to unemployment, illness or poverty in old age.” ((Chile’s Middle Class Survives on Shaky Ground, Deutsche Welle, 2014.)) The middle class is defined as those who make more than $500 per month in Chile.

Yet, all of the neoliberal data collectors of the world, like the World Bank and the IMF, boast about how rapidly Chile’s GDP per capita and income per capita, at $14,000, have zoomed upwards. However, upon closer inspection, pulling the curtain back, it is suggested that if the top 1% to 10% is removed from the income per capita data, which data itself is very, very suspect, this then leaves average income per capita in Chile at approximate $4000 rather than the $14,000, which is inclusive of the top 1% to 10%. Coincidentally, $4000 is very close to the minimum wage of $380 per month. Try supporting a family on $380/month!

Twenty-one percent of Chileans live in poverty. Lo?pez, Figueroa y Gutie?rrez in 2013 analyzed the distribution of income in Chile but used the database from the Internal Tax Service. The authors observed: “Evidence exists that the measures of inequality that are actually available, which are based in household survey data, under-estimate the real concentration of income.”  ((Sarah Gammage, et al, “Poverty, Inequality and Employment in Chile”, International Labor Office, Geneva, Switzerland, 2014.))

The study by de Lo?pez, Figueroa y Gutie?rrez (2013) confirms the analysis that the income distribution in Chile is greatly affected by the lack of information about the “super rich” in the CASEN household survey. The authors conclude that the richest 1 per cent of the income distribution is significantly underestimated using the CASEN.

…the evidence presented here underscores that income inequality has risen over the course of the 1990s and 2000s… only 22 per cent of workers hold what could be referred to as a high quality job. ((Ibid.))

Only 22% of Chileans hold what could be referred to as a high quality job. This leaves 78% of the population holding low quality jobs, which is where slavery begins and ends. Yes, 78%.

As a result, it is just short of remarkable that Chile is held in such high esteem by various agencies of the world, but on the other hand, who’s providing the numbers? Therefore, is the data provided to the “world” relevant at all?

Chile’s Students – A Catalyst for Change

“Forty years after the coup headed by Gen. Augusto Pinochet, Chile remains a wounded, divided nation where the past lives in the present.”  ((“Enduring Rifts: Chile 40 Years After the Pinochet Coup”, Pulitzer Center on Crisis Reporting, November 11, 2013.))

The students in Chile have taken to the streets in protest of a privatized educational system that has priced them out of the school market. As well, their activities are likely the symptom of much deeper problems like severe inequality and lack of opportunity for upward mobility amidst the rows and rows of homes for the poor in townships hidden from the glistening streets of Santiago.

“According to the NGO Un Techo Para Chile, shantytowns are settlements located in areas often occupied irregularly, where urbanization is limited or inexistent. The access to daily and basic needs such as drinkable water or sewer systems is dramatically limited. Access to quality health care and education are not readily available.”  ((“Women Lead in Chile’s Shantytowns”, The Santiago Times, December 12, 2009.))

According to Noam Titelman, president-elect of the Catholic University Student Federation (FEUC), the fuel that sparked Chile’s student movement was “the accumulation of inequality, injustice and hopelessness.”  ((Council on Hemispheric Affairs.))

When a society fails its people, hopelessness ends up in the streets.

Neoliberalism is an economy theory that works extremely well, if you are already rich; however, for the rest of society, the jury is still out. But, if Chile is the prime example of how neoliberalism works at its best, they should not hold their breath.

Robert McChesney, editor of the Monthly Review, said this of neoliberalism: “It is capitalism with the gloves off.”

But, maybe more to the point, Fran Lebowitz, the NYC author and social critic had this to say about neoliberalism: “In the Soviet Union, capitalism triumphed over communism. In this country, capitalism triumphed over democracy.”

Robert Hunziker (MA, economic history, DePaul University) is a freelance writer and environmental journalist whose articles have been translated into foreign languages and appeared in over 50 journals, magazines, and sites worldwide. He can be contacted at: Read other articles by Robert.