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Owing to its mix of macroeconomic stability, sustained growth, and diminishing levels of poverty, Chile was, until recently, considered a success story of neoliberal orthodoxy. Last month’s subway fare hike changed all that, unleashing a massive wave of civil disobedience and rebellion. Protests erupted in major cities across the country, including an unprecedented mass rally of more than a million people in Santiago. Since then, more than forty metro stations have been destroyed, several supermarkets burned or looted, and many other buildings ravaged, including the corporate headquarters of Santiago’s main electricity company. The government’s strong-arm response has so far resulted in seven thousand arrests, thousands of injured, and twenty-five dead. But weeks after the initial flare-up, Chileans are still on the streets. Their rage can’t easily be quashed, and their concerns will need to be addressed before Chile returns to normal.

Pinochet’s Pension Scheme Rafael Herrera is a seventy-five-year-old retiree. According to La Tercera, he receives a monthly pension of 140,000 pesos (approximately $175) and spends 180,000 pesos (approximately $225) paying off medical debts accrued after a car accident. To cover the difference (and his monthly living costs), he depends on what sporadic work he can find — despite his back problems — and support from his son. When asked why he went out on the streets and joined the protests, he explained his reasons as follows: I know an eighty-year-old old man in a wheelchair, and his pension is miserable. He says that if he had a gun, he would kill someone out of pure rage. I wouldn’t do that, but my anger is the same. To be living halfway. It just won’t do anymore. Herrera’s story is the story of an entire generation of Chileans who saw their plans of a dignified old-age crash against the reality of Chile’s dismal pension provisions. In 1980, when Herrera and his generation were in their thirties, the minister of work and social welfare, José Piñera (brother of the current president, Sebastián Piñera) engineered a reform to replace the existing pay-as-you-go collective pension schemes, removing all elements of solidarity and social security. In this new scheme, each worker would contribute 10 percent of their wages, to be claimed upon retirement. Private companies, the so-called Pension Funds Administrators (AFP), would invest the money and oversee its administration (for profit). It was a way to bring market logic into the pension system and inject a massive tranche of fresh resources into capital markets. As has recently come to light with the release of the dictatorship’s secret minutes, Pinochet’s reaction was at once encouraging and somewhat skeptical: I find the system wonderful; I think that it is necessary to implement it and that it is urgent to do so, but I have always stated the following, and I think you have heard it several times: who will administer the money? This makes me feel ill, because I also know that there are several gentlemen who are becoming millionaires in this country, who have sent people to study the system because they want to operate in it . . . This admission may help explain why the Armed Forces kept their own social welfare scheme during the dictatorship, separate from that of the general population. The private pension system has ended up exacerbating the inequalities of the Chilean labor market. Half of Chile’s workers receive a monthly salary of $437 or less, while the country’s richest 1 percent earn 33 percent of the country’s income. Most workers barely make it to the end of the month. The idea that they could, on top of that, put aside 10 percent of their wages for their retirement has been proven ludicrous. With 50 percent of civil retirees receiving a pension of $200 or less — while retirees from the Armed Forces receive an amount approximately five times the size — this system is now being roundly rejected. AFPs are widely despised, and 80 percent of Chileans are in favor of a state-run pension system. As is the case with most of the country’s contemporary institutions, Chile’s pension system was never agreed upon by those who bear the effects. It was imposed from the top down. When Austrian economist Friedrich Hayek urged British prime minister Margaret Thatcher to adopt a program of reforms like in Chile, she delivered a cool response in a now famous letter: I was aware of the remarkable success of the Chilean economy in reducing the share of government expenditure substantially over the decade of the 70s. The progression from Allende’s socialism to the free-enterprise capitalist economy of the 1980s is a striking example of economic reform from which we can learn many lessons . . . However, I am sure you will agree that, in Britain with our democratic institutions and the need for a high degree of consent, some of the measures adopted in Chile are quite unacceptable. Our reform must be in line with our traditions and our Constitution. Thatcher’s reticence points to the impossibility of replicating Chile’s economic model in the UK. This is not to say that Thatcher was any less extreme in her pro-market ideology. Rather, her letter shows that Chile’s radical free-enterprise economy could only be implemented thanks to the dictatorship; Britain’s democratic institutions, its reliance on some degree of “consent,” would cause roadblocks. The reforms of the Pinochet era could only be imagined in the context of a government whose only true constituency was the Armed Forces. A government oriented toward the broader public, however imperfectly, would have found itself accountable to that public, and so limited by its various interests, traditions, and regulations. But if democratic rule is not compatible with several aspects of Pinochet’s economic regime, how did they manage to survive the thirty years of democracy that followed his fall in 1989?

Locking Down Inequality Since its return to democracy in 1990, Chile has been characterized by a delicate (if tense) institutional balance, maintained through its entrenched bureaucracy, market incentives, and the Chilean Constitution conceived under the dictatorship — plus a strong dose of inertia. One of the constitution’s key authors, Jaime Guzmán, has provided perhaps the best description of the legal and institutional constraints inscribed in the country’s constitution. These were designed to ensure that if reformists ever came to power, they would be forced to maintain the status quo, because the margin of alternatives was sufficiently reduced. In the pension system, but also in education, health, housing, and almost every other aspect of the state system, constitutional locks and the institutional legacy of the dictatorship have worked to prevent any structural modification that might divert the course from neoliberal orthodoxy. While extreme poverty fell dramatically in the first two decades after dictatorship — the number of Chileans living under the poverty line dropped to less than 20 percent of its 1990 figure — Chilean democracy was marred by a broader legitimacy crisis. Reports showed declining levels of electoral participation and a general mistrust of politics — with political parties the least trusted political institutions in the country. Similarly, both the army and the police force have been shown to be incredibly unpopular institutions, with net support of negative 49 percent and negative 37.6 percent, respectively. This widespread mistrust of state institutions seems to stem from the growing consciousness of a crippling political inequality. Major studies have shown that high-earning Chileans tend to have greater faith in the authorities, while poorer people are more likely to be of the opinion that the authorities do not care about “people like them.” While this legitimacy crisis has hit traditional institutions, few alternative organizations remain: those few social organizations that did survive the dictatorship were dismembered in the thirty years that followed. As extreme poverty has become less prevalent since 2010, tolerance for political and economic inequality has waned dramatically. New generations have become politicized in fragmented protests, marked by cathartic moments of social explosion. The last decade in Chile has seen the emergence of various student movements, feminist organizing, and the fight against the private-pension system. These movements have expressed a growing unease with the idea of the so-called “emerging middle class” — the designation referring to those children of the working class who, thanks to new access to technical and vocational training, have avoided extreme poverty. In a radically neoliberal social order, they recognize the vulnerability of their positions, where they lack a basic social safety net and where public services are administered by private enterprise. The neoliberal assault on the social fabric has brought about the need for non-traditional forms of organization: few of these new social actors are unionized, let alone active in political parties. In post-dictatorship Chile, democratization occurred alongside neoliberalization. Their co-implementation has resulted in two seemingly contradictory tendencies. On the one hand, access to consumption and credit has brought about individualization that distances people from community or collective projects. On the other hand, and in contrast to this, this twin historical process has led to a mass democratic force that has been pushing for greater civil and social rights, especially since the student protests of 2011.