Chile – A Bright Spot or a Lost Case?

Just like every individual, every country has its own journey. The journey is, without a doubt, the most important aspect because there is no destination or end goal for a country. It has to keep going. Here, we talk about Chile, a country that has seen its fair share of ups and downs, with a journey to remember. Here, we try to point out specifically, those few moments in its history which have actually shaped the course for the future.

Latin America, a continent overpowered by political fomentation and social unrest, has led to the creation of states which are run by only a few individuals. Most states are witnessing a huge problem of power and wealth disparity, but the bigger problem is that numerous methods have failed to curb such problems. Chile also seems to be in the same zone as its neighbours. However, there are certain things that it has done differently over the last three decades. This has made the country distinct and a potential role model for the other Latin American countries (in both good and bad ways).

Let us start at the beginning. It all started with the advent of the very charismatic military leader, Pinochet. Pinochet came into power after carrying out a coup on September 11, 1973, and he presided over Chile until 1990. However, what is interesting about this military dictator is that he turned the tide by building a nation on the foundation of strong economic reforms.

He began with the massive movement of privatisation. And he implemented privatisation successfully even before Thatcher or Reagan. From education to prison to highways, everything was given to private companies. And business was fuelled with aggressive free trade and huge foreign investments. Unlike countries such as Venezuela or Colombia, Chile was a safe bet for western Europeans and Americans, who back then were looking for potential avenues for investment abroad. The way Pinochet implemented his vision is something that till date is a matter of awe for experts all over the globe. Being an emerging nation back then, it had evidently harnessed the benefits of free trade, making the policies attractive for others to follow. Yet, even though this early dive into market-oriented reforms was pretty useful in giving people vast opportunities, Pinochet was still not loved by his nation. It was probably because he was, after all, a military dictator. His political ambition of gaining absolute power as the dictator of Chile made him less likeable to his countrymen. The social restrictions on the people were immense. Pinochet had successfully cancelled all elections and declared himself the supreme leader. Strict monitoring and regulatory laws in place curbed the powers of the media and also of his opponents.

The people, however, began to achieve their goal of greater democracy when they managed to orchestrate a plebiscite in order to ratify their leaders. Soon, this wave of change and rebellion got them full democracy, which was much needed in order to restore the liberty of the people. However, the next two consecutive leaders followed, more or less, in the footsteps of Pinochet. This led to a crisis and inequality increased manifold, which led to numerous movements by commoners who demanded welfare. In 2006, this led to the first win for the Socialist Party since the end of the Pinochet era. Michelle Bachelet took office, the first woman to do so in Chile.

She had won the elections promising reform and redistribution, a deadly combination that can potentially bring a country to its heels. She started with the reforms in the education sector which was highly privatised and had been a massive cause for unrest among the majority. Equal opportunities for all was promised and thus, specific changes were made to favour the underprivileged. However, all these changes had borne one problem, the increase in the size of government. This led to a reform in the taxation policies. The transition mostly affected the domestic enterprises which were at a major disadvantage now. Chile’s corporate tax was placed above the average of the OECD states. And as predicted by experts, this paved way for a slowdown in the near future.

Sebastian Pinera replaced Bachelet in the elections of 2010. His focus, unfortunately, was not on reforming the taxation policies. We can see that post-2010, most emerging states, especially in Asia, had increased subsidies and loans manifold. This led to a brilliant scope for the businesses to grow which boosted the nation. It had also given leeway for newcomers to enter the market and start their own enterprises. Innovation was rewarded and the masses thrived. However, Chile was at a disadvantage. A major focus on decreasing disparity had not really helped them in the long run. It surely made the rich poorer, but did it make the poor richer? The answer is no. Even with all those policies in place, the commoners were still not satisfied and slowdown of the economy helped no one.

Election time had come and Bachelet came into power again. She faced battles of her own. By this time the rich class was weary of the welfare policies which had led to vast losses in a profitable global period. Hence, this obviously started a conflict between the administration and the business class. It took a toll on the polity, economy, and society. Political interferences were prevalent which made it exceedingly hard for the administration to even execute innovative ideas. By the end of her term, Bachelor’s approval ratings had taken a deep dive.

Chile is run on its traditional sectors, from mining to infrastructure. Innovation and start-ups are generally not favoured by the laws. Most importantly, there are very few patrons of ideas in most formal sectors. Thus, Chile lags behind at the core and its policies make it a stagnant nation. Probably, the major fault on the administration’s part was focusing on equality and not growth. One cannot happen without the other and thus, even attention should have been given to both. Chile’s main drawback is not the fact they couldn’t redistribute the wealth, rather the reality is that the administration is incapable of providing opportunities to people to rise up the ladder. The inhibitions limit the potential of the state. Now, personally, I do believe that yes, it is an honest plight for a government when it doesn’t know what actually works for its people. However, we can deduce one answer from the above instance that quick fixes and aggressive welfare policies are unlikely to benefit any country in the long run.

Ultimately, one must concede that Chile indeed has been a bright spot in the Latin American region, despite all the problems it currently faces. How much hope is left (or lost) with this South American nation, only time will tell.


Atreyi Bhaumik

I am a student in Delhi University, pursuing bachelors in Economics. I also have a keen interest in Policy and probably will explore that field in the future.

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