The price of inequality

Editorial Board of the New York Times

Chile is often praised as a capitalist oasis, a prospering and stable nation on a continent where both prosperity and stability have been in short supply. But that prosperity has accumulated mostly in the hands of a lucky few. As a result, Chile has one of the highest levels of economic inequality in the developed world.

Now that inequality is threatening the country’s stability. Santiago, the capital and largest city, has been convulsed by protests that were sparked by an increase in subway fares but that have become an expression of broader grievances: against the poor quality of public health care and education; against low wages and the rising cost of living; against the meager pensions that Chileans receive in old age.

Sebastián Piñera, the billionaire elected president in 2017, has responded with belligerence, declaring the Chilean government 'at war' with the protesters, whom he has described as organised criminals and, worse, as enemies of the state.

Protesters have burned buildings and subway stations and engaged in looting — behavior that is undoubtedly criminal and reprehensible — but it would be a mistake to seize on that misconduct as an excuse for ignoring the grievances of the protesters, a large majority of whom are engaged in the peaceful exercise of their democratic rights. There is certainly no evidence of an organised movement, or even a coherent agenda. The protesters’ rage is born of the frustrations of everyday life.

Chileans live in a society of extraordinary economic disparities. The distribution of income before taxes is highly unequal throughout the developed world; by that measure, Chile sits roughly in the middle of the 36 developed democracies that constitute the membership of the Organisation for Economic Co-operation and Development. What makes Chile an outlier among those 36 nations is that the government does less than nearly any other developed nation to reduce economic inequality through taxes and transfers. As a result, Chile has the highest level of post-tax income inequality among OECD members.

Santiago’s prosperity is undeniable. Viewed from the top of the tallest building in South America, which stands in the middle of a financial district called 'Sanhattan,' neighborhoods with luxury apartments, private hospitals and private schools stretch as far as the eye can see.

But Santiago’s poverty also is striking: crumbling public hospitals, overcrowded schools, shantytowns that sit on the outskirts of the metropolis. And farther from Santiago are cities untouched by the recent boom. 'The people who govern the country seem to be living in a different world from the rest of us,' Enrique Araya, a 49-year-old lawyer, told a Times reporter on Friday as he and his family banged pots outside of a Santiago subway station — a traditional form of protest.

Chile is not suffering from a lack of resources but instead from an unsustainably narrow conception of its obligations to its citizens. The military dictatorship that ruled the country from 1973 to 1990 rewrote the nation’s laws and economic policies and reshaped its institutions to encourage free-market competition and to minimise the role of government. Its legacy endures. Even after increases in recent years, the Chilean government still spends a smaller share of total economic output than every other nation in the OECD.

The obvious path for Chile is for the government to spend more money improving the quality of life for a vast majority of Chileans, who are exposed to the vicissitudes of a market economy while being denied a sufficient share of the benefits. It is an extreme version of the challenge facing many developed nations, including the United States.

Some Chilean plutocrats appear to be awakening to the reality that Chile cannot sustain broad support for its economic system without a stronger safety net. Andrónico Luksic Craig, chairman of Quiñenco, a financial and industrial conglomerate, wrote on Saturday on Twitter that he was ready to pay higher taxes.

'There is no magic,' he wrote — no alternative to simply spreading the wealth more evenly.

It is time for the Chilean government to acknowledge that reality, too.


This editorial was published by the New York Times on 22 October 2019 under the headline 'Chile learns the price of economic inequality'.  The editorial board of the Times is a group of opinion journalists whose views are informed by expertise, research, debate and certain longstanding values. It is separate from the newsroom. Follow The New York Times Opinion section on FacebookTwitter (@NYTopinion) and Instagram.