Thursday, 3 November 2011

Cracks in the 'Chilean economic miracle'

By Carlos Fortin

John Kenneth Galbraith is reported to have once said about Milton Friedman: 'Milton's misfortune is that his economic policies have been tried'. For a long time the Chilean case appeared to give the lie to Galbraith's witticism. Alas, though, not any more.

Despite continuing acceptable economic performance indicators in Chile, a deep malaise about the prevailing model of society and the economy is surfacing. This is highlighted by a wave of publicly supported street protests led by university and high school students. The protesters have succeeded in redefining the country’s public agenda and putting the political class and the advocates of the current neoliberal model on the defensive.

The students' complaint is about education being highly unequal, prohibitively costly and of poor quality. Their main proposals are
  • a universally free education financed by increased taxation of higher incomes, and
  • an end to for-profit enterprises running educational establishments that benefit from government subsidies
These proposals are a matter of controversy. In particular the idea of a universal free higher education has been criticised as a subsidy to the rich. But the protest seems to have struck a deeper chord. It is a challenge to the dominant Hayek-Friedmanian view that responsibility for personal advancement is solely individual and that inequality is justifiable on grounds of differential individual talents and efforts and the need for incentives.

An indication of the seriousness of this challenge is the fact that Chilean sociologist Eugenio Tironi has recently published an article in El Mercurio which in effect amounts to a mea culpa.

Education for Mobility?

Tironi, an ideological icon of the social-democratic coalition that governed for 20 years after the Pinochet dictatorship and highly influential in securing the adoption of the neoliberal model by the coalition, writes that the current Chilean model of society:
'rests on the expectations of social mobility of the population which make them accept high levels of inequality as the price to be paid for the forthcoming opportunities...the governing classes told the people the mechanism [for mobility] was education, offering a future whose only limit was the talent of each individual'.
In this view, Tironi writes,
'individual energies should be devoted to studying, not to promoting structural change'.
His conclusion:
'for hundreds of thousand families this promise was … a swindle... The way forward is not to try and repair the myth but to make a clean break with it'.
What seems to be at stake in the current Chilean debate is the vision of what a 'good society' is and the role and place of equality in it. And the answers that are emerging are a far cry from what Milton Friedman had in mind in the 1970s when he coined the phrase "Chilean economic miracle".