Chile’s Social Explosion: Inequality and the Ghosts of Pinochet

On Sunday, 4th September 2022, the people of Chile go to the polls in a mandatory vote on whether to approve (“apruebo”) or reject (“rechazo”) the new proposed constitution, seeking to replace the 1980 Constitution that was imposed by the military dictatorship of General Augusto Pinochet. This process of constitutional reform was put in motion in October 2019, after the eruption of some of the biggest protests in Chilean history, known as the “Estallido Social” (“Social Explosion” or “Social Outburst”). Yet, before the Social Explosion, Chile was for decades hailed by many economists, politicians, and observers as a beacon of economic development and stability within Latin America.

This article will first analyse the short and long-term causes of the Social Explosion in Chile with a focus on inequality, to help explain why the constitutional overhaul became the rallying point of this social movement. It will be shown how Chile’s economic development has failed to address rampant inequality, and how Pinochet’s dictatorship-imposed constitutional legal framework has cemented a divisive legacy preventing institutional reform, thus leading to demands to replace the 1980 Constitution. Nevertheless, it is important to note that while this article focuses on institutionalised inequality, it does not address some of the other prominent interest groups of the Social Explosion, especially that of Chile’s fast-growing feminist and indigenous rights groups. Furthermore, this article does not engage with the constitutional process itself, merely the reasons behind the desire for constitutional reform.

Figure 1: Abarca Sandoval, C. (2020). Chile's protesters won the right to choose their nation's future, but not without bloodshed.

The Social Explosion

Chile’s economic development over the last thirty years has been in many ways remarkable. Since 1990, the Chilean economy has been growing at a rate of between 4-7% a year, with life expectancy, literacy rates, nutrition standards, maternal and child mortality rates, and numbers of children in primary and secondary level education having reached that of many developed nations (Candia et al., 2021). The last ten years have furthermore seen Chile’s poverty rates reduced from 22.2% in 2011 to 8.6% in 2017, with those living in extreme poverty down from 8.1% to 2.3% in that same period. Meanwhile, record numbers of Chileans are in university education (Candia et al., 2021). This “Chilean Miracle” has drawn widespread international praise from economists, observers, and politicians, earning Chile a reputation as Latin America’s most prosperous country and facilitating its admission as a member of the OECD in 2010 (Candia et al., 2021). Yet it was a 4% rise in the price of Santiago metro tickets by 30 pesos, the equivalent of around $0.04, that sparked a mass uprising (Gonzalez & Le Foulon, 2020). The rise in metro tickets was of course not the primary reason for the subsequent outburst of demonstrations and anger, merely the straw that broke the camel’s back, with underlying economic and social causes for which Chile’s headline economic figures have failed to account for. The next section will analyse the short-term causes of the Social Explosion in regard to the cost of living, before investigating some of the decade’s long resentments and structural issues that had been hiding beneath Chile’s economic growth.

As large groups of Chilean students hopped over metro barriers en masse across Santiago as part of a fare-dodging protest, many people in Chile were broadly sympathetic. By 2019, the cost of living in Chile had been rising for everyone, with the average monthly cost per person around $862 per month (Gaete et al., 2020). The headline figure on Chilean average monthly wages in 2019 was around $871 per month, yet this average is heavily distorted by the small number of top Chilean earners. Instead, almost 70% of Chilean workers were earning less than $640 per month, with 50% of Chilean workers earning less than $466 a month — far below the cost of living (Gaete et al., 2020). For pensioners, the situation was even worse. 90% of pensioners in receipt of the state retirement fund were receiving less than $200 per month, a rate unchanged for much of the previous ten years (Gaete et al., 2020). Consequently, for most Chileans life was only affordable through the issuing of private credit, with those above the poverty line dependent on credit for even basic necessities, with such practice the only one preventing many people from falling into the headline national poverty figures (Candia et al., 2021). Accordingly, the average Chilean household was accumulating a private debt of over 70% of their monthly salary, with interest rates on this credit meaning poorer Chileans were spending up to 20% more on basic goods than those not dependent on credit, throwing them further into debt (Candia et al., 2021). The inability to meet the cost of living through wages was despite Chileans working a standard of 45 working hours plus an average two-hour daily commute (Gaete et al., 2020).

Figure 2: Hernandez, M. (2020). A Chilean Police Officer Is Charged With Attempted Murder After Throwing a Protestor Off Of a Bridge.

Considering such a broader picture, it is perhaps unsurprising that the metro-fee protests generated sympathy, and indeed as the uprising developed many other Chileans came out onto the streets over the wider cost of living issues, including public healthcare workers, groups representing pensioners, motorists opposed to highway toll charges, and feminist groups (Gonzalez & Le Foulon, 2020). By the 18th of October, several areas of Santiago had descended into widespread unrest, with some violent demonstrators taking to burning metro stations, and looting and burning supermarkets (Gonzalez & Le Foulon, 2020). Meanwhile, even peaceful protestors were coming under increasingly violent repression by Chile’s Carabinero police force, further adding fuel to the flames (Gonzalez & Le Foulon, 2020). That night, widely circulated images of President Piñera going out to dine in an upmarket restaurant in a rich part of Santiago untouched by the unrest generated widespread anger (Gonzalez & Le Foulon, 2020). Piñera who, aside from being President, was also one of Chile’s richest men, represented for many Chileans a thoroughly out-of-touch political, economic, and social elite (Gonzalez & Le Foulon, 2020). By the time Piñera had declared a national State of Emergency on 20th October, Chileans up and down the country had been mobilised onto the streets (Gonzalez & Le Foulon, 2020). While the cost of living had helped bring Chile to the boiling point, Piñera’s expensive meal while Santiago burned epitomised to many people a wider and more chronic underlying issue that drove the protests forward — that of rampant inequality within the world’s most neoliberal economic and political system. As the popular rallying cry went; “It Is Not 30 Pesos, It Is 30 Years” (Charney et al., 2021, p. 627).

Inequality in Chile

As measured by the Gini coefficient — the international measure of income disparity — Chile is one of the most unequal countries in the world (Candia et al., 2021). Nevertheless, Chile’s Gini coefficient is not too dissimilar from most of its South American neighbours, as the most unequal continent in the world (Candia et al., 2021). What makes Chile’s inequality so notable is the precise fact that its impressive headline economic figures have made it so lauded as a model for development, yet it has made almost no progress in closing the equality gap. Despite being a member of the OECD, Chile’s coefficient is more on a par with low and medium-developed countries, with years of the “Chilean Miracle” barely making a dent in its rating (Candia et al., 2021). Such income disparity can be illustrated in wages, with the richest 10% of Chileans taking home over 36% of Chile’s wages (World Bank, 2022). This is almost as much as the bottom 60% of Chileans combined, who take home around 39% of wages (Candia et al., 2021). However, when factoring in wider measures of wealth, such as property and assets, not just pay, this inequality becomes even more distorted. The top 10% of Chileans own over 80% of the country’s wealth, while the top 1% alone own almost 50% of the wealth with an average personal wealth valued at $2.67 million (Statistica, 2021). Meanwhile, the bottom 50% of Chileans collectively hold a negative wealth of -0.6%, reflecting their reliance on credit and debt to survive (Statistica, 2021).

Figure 3: ABC. (2019). Up to 1 million people rally in Santiago's streets as protests paralyse Chile.

Yet, beyond these heavily lopsided measures of wealth and income, Chile also experiences this inequality in stark lived social experience. Santiago especially has a visible dividing line between the richer Eastern side stretching towards the Andes, often containing gated US-style suburbs, and the poorer parts of the city which sprawl out into the Western, Southern and Northern valleys and plains (Ditmar, 2021). Such dividing line between Santiago’s wealthier upper-class Eastern districts and the rest of the city is widely acknowledged by the city’s residents, with most of Santiago’s wealthy elite rarely crossing into poorer districts (Ditmar, 2021). Meanwhile, poorer residents often only cross this line to work in jobs servicing the wealthy side of the city, with this long commute from poorer districts helping contribute to the average Chilean commuting time of two hours per day (Ditmar, 2021). Furthermore, poorer districts are home to far fewer essential services, such as pharmacy chain stores, which concentrate in richer areas where they can make more profit (Ditmar, 2021). Even outside of Santiago, nationwide studies have found high rates of inequality in nearly every single municipality of Chile (Candia et al., 2021).

This perception of inequality is backed up by 41% of respondents in a 2016 survey reporting to have experienced discrimination, mistreatment or being looked down on due to their socioeconomic status (Gonzalez & Le Foulon, 2020). Interestingly, respondents to surveys have often reported happiness in their own lives yet have very high perceptions of dissatisfaction amongst the wider population, reinforcing the importance of these visible indicators of inequality in wellbeing at a societal level (Gonzalez & Le Foulon, 2020). Nevertheless, the stark disparity has long been a fact of Chilean existence, with the level of inequality largely unchanged since the 1960s, despite right-wing, centre-right, centre-left and far-left administrations having ruled in that time, plus a far-right wing dictatorship (Kennedy & Murray, 2012). Instead, what helped bring Chileans to the streets in 2019 was another aspect of institutionalised inequality underwritten by Chile’s stringent neoliberalism: that of largely privatised health, pension, and education systems (Muresan & Mongwe, 2020). Underpinning this system of privatised services is the 1980 Constitution and the incredibly divisive legacy of General Pinochet’s dictatorship.

Figure 4: Reuters. (1973). File photo of aides and members of former socialist president Salvador Allende after the coup d'etat by General Augusto Pinochet in Sept. 11, 1973. MB/GN - RTR2UJ2.

Ghosts of Pinochet: Constitutionally Enforced Neoliberalism

In 1973, a collection of right-wing Chilean Army Generals launched a coup to overthrow the democratically elected Democratic Socialist regime of Salvador Allende. General Augusto Pinochet consequently headed a Military Junta that brutally suppressed dissent (Kennedy & Murray, 2012). Close to 80,000 suspected political opponents were interned, with over 50,000 of those horrifically tortured and a further 3,500 ’disappeared’, meanwhile some 400,000 fled the country as exiles (Kennedy & Murray, 2012). However, this brutal and bloody legacy was complemented by a more enduring one. In 1975, amid spiralling inflation, price rises and unemployment, Pinochet’s regime turned for help to the “Chicago Boys”, a group of US-educated economists who were proposing a new free-market economic system that came to be known as neoliberalism, with Chile’s dictatorship providing the perfect testbed for unopposed reform (Kennedy & Murray, 2012). Pinochet’s regime fully embraced these proposed reforms, with state services dramatically defunded or sold, and replaced with a state-enforced free market (Guzmán-Concha, 2017). The result was the world’s first neoliberal experiment, soon taken up with enthusiasm by Britain’s Margaret Thatcher and the United States Ronald Reagan, with many others following suit (Guzmán-Concha, 2017). The Pinochet era, which lasted until 1990, represented to many Chileans a period of rising living standards and economic modernisation, even if for others such a period was one of horrendous brutality, lack of liberty and authoritarianism (Kennedy & Murray, 2012). It was Pinochet’s intention to secure this system of economic governance long after his regime ended. Consequently, he introduced a new constitution in 1980, voted in via sham referendum, which uniquely sought to solidify the privatisation of services and resources, including water, and prohibited discrimination against private enterprise in favour of state provisions, with private enterprise given the right to compete on the same terms as the state (Kennedy & Murray, 2012). In effect, Pinochet’s uncompromising and dictatorially enforced neoliberal economic and social policies were signed into constitutional law.

In turn, the ostensibly centre-left democratic governments that ruled Chile from 1990-2010, and again from 2014 to 2018, were effectively straight-jacketed in reforming Chile’s public services away from private provision (Kennedy & Murray, 2012). Instead, they attempted to rule through a neostructuralist approach that sought to increase wealth redistribution and public services by utilising the free-market-inspired growth in GDP, whilst working within the confines of the neoliberal constitution (Larrabure, 2019). As will be shown, these measures have included introducing universal healthcare coverage for 80 pre-defined pathologies, government-subsidised pension contributions to the poorest Chileans, and government vouchers to subsidise tuition for the poorest students (Larrabure, 2019). Whilst having success in increasing coverage of education to record levels, reducing poverty, and increasing life expectancy — which represents important developments that should not be overlooked — these measures nevertheless have fallen far short of systemic reform to break out of the heavily stratified private provision of services, with private services becoming even more entrenched (Larrabure, 2019). Ultimately, inequality was almost as high at the start of this centre-left period of government in 1990 as it was at the start of the Social Explosion in 2019 (Kennedy & Murray, 2012). Simultaneously, electoral participation in Chile declined precipitously, from 90% in 1989, down to 49% in 2017, signifying a dramatic loss of faith in the politicians competing for elections (Gonzalez & Le Foulon, 2020). Indeed, identification with political parties also fell to 17% in 2019, further illustrating how most Chileans had come to see little difference between the mainstream centre-right and centre-left electoral options on offer — with all these parties having to operate within the same neoliberal constitutional confines (Gonzalez & Le Foulon, 2020).

Figure 5: Vera, P. (2019). A demonstrator flutters a Mapuche indigenous flag near a bonfire in Santiago, Chile, on October 25, 2019, a week after protests started.

Neoliberalism and the Privatisation of Services

Consequently, by the time of the Social Explosion, Chile remained the preeminent example of the neoliberal provision of health, education, and social security systems. Healthcare is administered primarily through either government insurance (FONASA) with mandatory payments, or else private insurance schemes (ISAPRE) (Crispi et al., 2020). However, the high private ISAPRE premiums, especially for those considered at higher risk, means only 18% of the population opts for private insurance, with these premiums out of reach of most Chilean workers (Crispi et al., 2020). Meanwhile, the number of medical staff is tilted heavily in favour of those with private insurance, with only 44% of Chilean doctors having contracts with public providers, whilst the majority instead work to serve the minority who are privately insured (Crispi et al., 2020). In fact, government insurance acts as a cheaper and far less comprehensive competitor on the private market, meaning private insurers are able to attract ever larger numbers of doctors and investments that would otherwise go to public providers, locking the two into an uncompetitive spiral. Consequently, there exists a stark two-tiered system in which poorer or more physically vulnerable people are serviced by an understaffed and poorly resourced healthcare system, while richer and healthier people have access to high-level care at the expense of public providers (Crispi et al., 2020). By depending entirely on marketised healthcare, Chile’s neoliberal ideology intrinsically accepts high levels of healthcare inequality between those who can afford high-premium private insurance, and those who cannot.

The pension system became a further key sticking point. Chileans are forced to pay into privatised pension schemes, which nevertheless suffer from excessive administration fees, with most Chileans struggling to pay into them due to low wages. This has left the majority of Chilean pensioners with private pensions worth only 30% of their wages upon retirement (Kennedy & Murray, 2012). To offset this, a state-funded fixed pension contribution to the poorest 60% of Chileans with no private pension funds was introduced by centre-left Bachelet’s administration (Castiglioni, 2018) However, such contribution was worth less than $200 a month, a level largely unchanged for ten years prior to the Social Explosion, and massively below the cost of living (Gaete et al., 2020). Once again, this private pension system accepts the large pension disparity between higher earners who can afford to pay into their pension funds, and those poorer pensioners with no viable safety net who may nevertheless have spent their whole lives working. To underline the issue of inequality, those paying into private pension plans were barred from withdrawing their own pension payments before retirement age (Kennedy & Murray, 2012). At the same time, it was found that the directors of these private pension funds were making massive profits via investing these pension payments, while Chileans struggling to pay the daily cost of living were barred from withdrawing their own money (Kennedy & Murray, 2012).

Figure 6: Reuters. (2019). Protesters are calling for social reforms and a change to the constitution.

As for education, the number of Chilean students attending public schools has steadily decreased from 78% in 1980 to just 37% in 2014, far below the OECD average of 80% (Larrabure, 2019). Despite this, Chile’s government spends above the OECD average on education, with much of this expenditure going towards subsiding private-sector schools, with subsidised private-schools accounting for 48% of pupils (World Bank, 2022). Notwithstanding these government subsidies, fees for Chilean education are amongst the most expensive in the world, with 40% of funding coming from private sources (OECD, 2014). Government expenditure on the private sector leaves Chile’s public schools severely under-resourced with the lowest OECD spending per pupil and largest class sizes (OECD, 2014). Consequently, the privatised system accepts three-tiered educational access based on wealth. The poorest attend very under-resourced public schools, while Chile’s middle-classes attend higher-ranking government-subsidised private schools, which are nevertheless much below the level of the 14% of fully privatised schools attended overwhelmingly by Chile’s socio-economic elite. With Chile’s high government spending favouring subsidised private schooling for the middle classes at the expense of stronger investment in public education, it reinforces the vicious cycle in which poorer pupils receive worse public education, and hence leave school with worse job prospects (Candia et al., 2021).

At tertiary level education, privatisation is even more pronounced, with private expenditure levels being the highest in the OECD, while the government spends just 0.05% of GDP on higher education (OECD, 2014). Consequently, Chilean tuition fees are also amongst the highest in the world as universities rely on private funding, with the average course costing 41% of the average income (Ditmar, 2021). Bachelet’s centre-left administration attempted to offset these costs by issuing vouchers for the poorest 60% of households that can be used towards tuition, yet these poorer students are still left reliant on credit for transport and other associated schooling costs (Candia et al., 2021). Furthermore, these vouchers are not applicable to fully privatised universities, which thus remain accessible only to the richest students. Consequently, there again exists an institutionally stratified system, from generally higher-ranking fully private universities providing higher job prospects, down to those generally lower-ranking universities accepting poorer government-subsidised students (Ditmar, 2021). Nevertheless, despite low graduate job prospects for poorer students, Chilean levels of tertiary education enrolment have risen continuously across all socio-economic classes, as universities compete for students to gain tuition fees (Pavlic, 2018). Such dynamic has contributed to a large, educated graduate population, that is nevertheless heavily indebted and underemployed.

Figure 7: Reuters. (2019). A demonstrator is detained by members of the security forces during a protest against Chile's government in Santiago on December 17. Since the protests began in October, at least 26 people have been killed, several thousand injured and over 25,000 arrested.

As a result of the enduring legacy of neoliberalism in the provision of these services, it was constitutional reform that became the rallying cry of the demonstrators of the Social Explosion. Indeed, this was not a new demand. Central to the Social Explosion is a galvanised and politicised Chilean youth, who have grown up in the post-dictatorship era of economic growth with heightened levels of education and higher expectations of public services and standard of living (Larrabure, 2019). For Chile’s youth, participation in electoral politics suffered an even more dramatic decline than the general population in the post-dictatorship era, falling to 23% of those aged under 24 in 2005 (Larrabure, 2019). Yet, with this loss of faith in electoral politics to bring systemic reform came a renewed faith in the power of protest. Prior to the Social Explosion, the biggest post-dictatorship demonstrations by far had been two student-led movements.

The first in 2006, known as the “Penguin Revolution”, stemmed from demands from secondary school students for free bus passes and free university entrance exams, which evolved into a wider protest against the poor state of the privatised education system (Larrabure, 2019). This was followed by even more dramatic protests in 2011, this time headed by university students, who occupied university buildings, blocked streets, and engaged in mass demonstrations, leading to months of disruption (Larrabure, 2019). By now, student demands had increased to demand free public education, as well as constitutional reform via constituent assembly (Larrabure, 2019). In 2019, the Chilean youth were once again at the head of the Social Explosion (Gonzalez & Le Foulon, 2020). As the movement sought to unite the disparate groups that had mobilised, it was the student demands for the development of a new constitution, to be elaborated through a constituent assembly, that emerged to the forefront. As Piñera’s authoritarian response to the unrest backfired, the Chilean government was forced to accede to this demand, signing the new law introducing the process for constitutional reform on 24th December 2019.

Figure 8: Felix, E. (2020). People line up for their turn to vote during a referendum to decide whether the country should replace its 40-year-old constitution, in Santiago, Chile, Sunday, Oct. 25, 2020.

Conclusions

As can be seen, Chile’s impressive headline economic growth figures and indicators of quality of life have nevertheless disguised a growing popular dissatisfaction with Chile’s neoliberal economic, political, and governmental system. Dissatisfaction reached a tipping point thanks to the growing costs of living and the inability of the majority of Chileans to survive outside of accumulating large private debts. Nevertheless, it is Chile’s rampant inequality that has been the biggest long-term driver of disaffection, and in particular the highly stratified provision of healthcare, social security and education through the most heavily privatised systems in the OECD. Even though Chile became lauded as a model of economic development, this failed to translate into a fairer redistribution of wealth, despite twenty years of centre-left government. It is here that the legacy of Pinochet’s dictatorship-imposed neoliberal 1980 Constitution has been felt, acting to straitjacket subsequent democratic governments from engaging in meaningful structural reform away from the private provision of services. Consequently, spearheaded by the student movement, it was this constitution that became the primary target of the Social Explosion and acted to unite the large array of disparate groups of Chilean society who had mobilised to the streets. This has led to the long process of constitutional overhaul, which will reach a zenith today after years of protest and upheaval as Chileans head to the polls.

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Visual Sources

Cover Image: Vergara, J. (2019). Protesters protect themselves with a shield from water cannon used by the Special Police Forces during protests in Chile [Photograph]. LSE Blogs. Retrieved from: https://blogs.lse.ac.uk/internationaldevelopment/2019/12/06/chile-woke-up-for-a-new-model/

Figure 1: Abarca Sandoval, C. (2020). Chile’s protesters won the right to choose their nation’s future, but not without bloodshed [Photograph]. Getty Images. Retrieved from: https://theconversation.com/chile-puts-its-constitution-on-the-ballot-after-year-of-civil-unrest-147832

Figure 2: Hernandez, M. (2020). A Chilean Police Officer Is Charged With Attempted Murder After Throwing a Protestor Off Of a Bridge [Photograph]. Getty Images. Retrieved from: https://wearemitu.com/wearemitu/things-that-matter/chilean-police-officer-throws-protestor-off-bridge/

Figure 3: ABC. (2019). Up to 1 million people rally in Santiago's streets as protests paralyse Chile [Photograph]. Retrieved from: https://www.abc.net.au/news/2019-10-26/up-to-1-million-chileans-hit-santiago-streets-chile-protests/11643084

Figure 4: Reuters. (1973). File photo of aides and members of former socialist president Salvador Allende after the coup d'etat by General Augusto Pinochet in Sept. 11, 1973. MB/GN - RTR2UJ2. [Photograph]. Retrieved from: https://www.nbcnews.com/news/latino/chile-judge-jails-over-100-former-secret-police-pinochet-dictatorship-n767781

Figure 5: Vera, P. (2019). A demonstrator flutters a Mapuche indigenous flag near a bonfire in Santiago, Chile, on October 25, 2019, a week after protests started [Photograph]. Getty Images. Retrieved from: https://www.vox.com/world/2019/10/29/20938402/santiago-chile-protests-2019-riots-metro-fare-pinera

Figure 6: Reuters. (2019). Protesters are calling for social reforms and a change to the constitution [Photograph]. Retrieved from: https://www.bbc.com/news/world-latin-america-50430477

Figure 7: Reuters. (2019). A demonstrator is detained by members of the security forces during a protest against Chile's government in Santiago on December 17. Since the protests began in October, at least 26 people have been killed, several thousand injured and over 25,000 arrested [Photograph]. Retrieved from: https://www.scmp.com/comment/opinion/article/3042655/western-media-reports-hong-kong-protests-tell-just-one-many-stories

Figure 8: Felix, E. (2020). People line up for their turn to vote during a referendum to decide whether the country should replace its 40-year-old constitution, in Santiago, Chile, Sunday, Oct. 25, 2020 [Photograph]. Associated Press. Retrieved from: https://apnews.com/article/virus-outbreak-santiago-constitutions-charters-chile-3691808cddec5195a77e6469b567c838/gallery/6f0483b836aa45f199276878509e77d3