Revolts in Latin America: the rise and fall of the neoliberal consensus
Bruno Sgarzini
24 Oct 2019, 9:30 am.
13 million Chileans are under a curfew imposed by the Piñera government (Foto: Migrar Photo)
"A shock program of drastic reduction in public spending would eliminate inflation in months and lay the foundation for a free market economy in Chile", wrote Milton Friedman in a letter sent to Augusto Pinochet after a brief 45-minute meeting with the dictator. From the beginning, Friedman understood that Pinochet knew little about economics, and "taking advantage" of this, he sent him the aforementioned letter. He did it as the leader of the free market school of thought, founded at the Economics Department of the University of Chicago.
The acceptance of Friedman's plan was immediate by Pinochet and originated the "Chilean liberal revolution," which later inspired the presidencies of Margaret Tatcher in Britain and Ronald Reagan in the United States in their deregulation and privatization plans. Behind Pinochet's economic program, however, was the United States, which financed its preparation with funds from the Central Intelligence Agency (CIA) sent to the disciples of the Chicago school of economics indoctrinated in Chile.
The creators of the famous "brick", the 300-page book that served as the basis for the Pinochet program, were formed by the Chicago School at the Catholic University of Chile, under the tutelage of a financing program of the United States Agency for International Development (USAID). The trident of the United States, the Catholic Church and neoliberalism broke into Latin America for the first time to impose a free market ideology across the continent.
José Piñera, the current president's brother and disciple of Milton Friedman, was a member of Pinochet's cabinet and one of the proponents of the Chilean constitution. (Photo: GGN)
Once the public companies' liberalization and privatization reforms were completed, José Piñera proposed a Constitution where the right of the private over the public was institutionalized at the expense of abandoning education, health and even water to the market's wishes. This institutional package, marinated with a system of far-right and moderate right parties, is what is presented as the best management model of a free market economy in the region and the world.
According to Orlando Letelier, assassinated by Operation Condor in the United States, the catechism of this ideology is that "the only possible framework for economic development is one within which the private sector can operate freely; that private enterprise is the most efficient way of economic organization and that, therefore, the private sector should be the predominant factor in the economy. Prices should fluctuate freely in accordance with competition laws. Inflation, the worst enemy of economic progress, is the direct result of monetary expansion and can only be eliminated by drastically reducing government spending".
Why is the Chilean model's problem both regional and global?
José Piñera promoted the Chilean Constitution by listening to the words of his mentor Milton Friedman about the neoliberal experiment, which would become unfeasible if it was not institutionalized in a "democratic regime."
Piñera's brother, in addition, was the one who designed the privatization of Social Security in Chile, taken as a reference by the neoliberals of the world to allow banks, and financial funds, to bet on pension money in the global market.
Precisely, the three main reforms being pushed throughout Latin America to revive the economic growth of the region, estimated for this year at 0.2%, are based on labor, pension and tax reforms similar to those taken by Chile. The catechism cited by Letelier is the same: reduce public spending and liberalize control to private parties to attract capital.
"The sad irony of protests like those of Chile in the region is that they make it difficult to improve the situation through economic reforms", said Brian Winter of the Council of the Americas, founded by David Rockefeller. According to this logic, Brazil would only come out of a seven-point fall in its GDP if its Minister of Economy, Paulo Guedes — trained in the Chilean neoliberal experiment — could reform Social Security and privatize Petrobras, after having liberalized working conditions.
If one observes regionally the tendency from Mexico to Argentina, the mandate of the banks to continue financing the public debts of the nation-states is based on a combo of clear austericide measures. If states like Argentina cannot pass these reforms, as it happened to Mauricio Macri with the labor reform, the IMF immediately appears to finance a shock plan that releases all control to the private sector and drastically reduces public spending by force.
Protests like the ones in Chile are being replicated throughout the continent while the same neoliberal recipes are being imposed (Photo: CNN)
What these measures based on the "debt" trap generate, according to economist David Harvey is that, through the IMF, Treasury Department and Wall Street triad, countries rationalize their debt by generating an even greater, but better structured one, on the basis of transfering their assets abroad (read the United States and Europe).
Since 2008, with the financial crash, this process, which Harvey calls "accumulation by dispossession", has accelerated throughout Latin America leading to the current state of affairs, where most states are in the process of major reforms to return to growth of their macroeconomies, at the expense of their own populations impoverished by these measures.
It was precisely in Chile where this global process of accumulation by dispossession began, given that the economic plan designed by the Chicago Boys was the one that gave rise to the Washington Consensus, imposed in most of Latin America after hyperinflation and large debt scenarios in the '80s. An experience that was replicated in Africa and Asia in the same way as
explained in the Working Document
In the Ruins of the Present published by the Tricontinental Institute for Social Research.
Privatization and drastic reduction of public spending was the neoliberal war cry when they designed the Chilean institutional system to stratify a class society, dominated by a consumption of goods and services based on massive indebtedness.
The balance is too eloquent: one in three Chileans over 18 have no resources to pay their debt, which were contracted in department stores, personal or family education, health expenses and daily purchases, according to a report from the
Concepción newspaper.
In this regard,
El Mostrador published a note titled "With the noose around the neck; the accumulated indebtedness that detonated the October revolt", where they interviewed Lorena Pérez, a researcher at Núcleo Milenio Autoridad y Asimetrías del Poder. Pérez said that most Chileans spend 27% of their salaries paying debts that represent a "kind of salary extension", which is constantly refinanced for consumption purposes, or simply to reach the end of the month.
An even greater additive to this explosive situation is that the privatization of pension funds, carried out by Piñera's brother, has resulted in active workers taking over the economic costs of their parents now that they withdraw from the social security system.
"This generation has to financially bear their own debts and the costs of their parents' undignified pensions," Pérez said of a Chile where the richest beneficiaries of this privatization are the biggest tax evaders.
Precisely, an expert in evading taxes is the current president Piñera, who specialized in buying broken companies, considered "zombies" to, through them, write down their profits in their losses in order to pay less taxes. This is why researcher Martín Rivas described Piñera as "zombie king".
Social explosion and indiscriminated repression
"Piñera has correctly understood the need to make Chile more attractive to foreign investors and to boost economic growth (...) If you want to preserve the hard-earned stability of your country, you should show a similar sensitivity toward less fortunate Chileans", said the Financial Times in an editorial after the Chilean president faced protests against the rise of the Metro fare, among other reforms.
The fare is estimated to have increased 20 times since 2017, and if a Chilean travels twice a day, the ticket price absorbs 16% of his salary. A clear example of how neoliberalism works in Chile.
The
Financial Times, which mistakenly considers the Chilean revolt as one of "the middle class", is criticizing — between the lines — Piñera's decision to establish a curfew and state of emergency in the streets, without taking responsibility for the consequences of the policies it defends in its pages.
129 complaints of torture and cruel treatment by the Chilean military have been registered (Photo: Perfil)
Under a classic strategy to criminalize the protests, the Chilean government, along with the media, remixed the classic combo of groups of infiltrators with acts of violence to typify the demonstrations as a threat to the country's stability.
Hours and hours of video were filmed with episodes of violence by the security forces, as if a movie by Quentin Tarantino was being shot. The globalized citizen could see firsthand how the Chilean military shot young people in the back, beat children and women, and patrolled protesters, among many other episodes of the Chilean horror show.
The balance is 19 dead, more than 200 injured, almost 3,000 detainees and 129 reports of torture and cruel treatment collected by the National Institute of Human Rights (NHRI). A flashback from the dictatorship of Augusto Pinochet, but with touch screens.
David Harvey rightly asserts in his thesis on the accumulation by dispossession that the control of discontent, the product of neoliberal policies, is generally in the hands of the "state apparatus of the debtor country, backed by the military assistance of the imperial powers".
Chile, for instance, has armed forces formed by the US Army School of the Americas under national security doctrines that consider anyone who is a risk to the stability of the country an "internal enemy". What we see on social networks is nothing more than a practical example of everything the security forces do to the Mapuche throughout the year, every year.
Piñera, on the other hand, astonished by the virulence of the protests, rehearses concessions such as freezing Metro and electricity rates, and raising the minimum wage, applying the neoliberal political theory of the Rational Election on which the Chilean political system is based.
This theory assumes that the individual, or agent, tends to maximize their profit-benefit and reduce costs or risks in their decisions. "Individuals prefer more of what's good and less of what causes them harm", says the Economipedia portal. According to Piñera, then, the way to attract the demands of Chileans towards institutionality is to contain them with palliative measures and a dialogue table.
However, Piñera's inability to appease the protesters, by force or persecution, demonstrates a clear collapse of a political system and an institutional design that for ten years has been blocking the Constitution from being modified to contemplate common social rights in the region such as education and health, just to name two of them.
An example of how to understand this is found in the Systems Theory by David Easton — also liked by neoliberals — which states that political systems feed off society's demands, processed by the articulators of the system (call them politicians), and the responses to these demands, which in turn generate other reactions of society that restart the cycle.
From this point of view, the Chilean political system has for a long time been unable to link any of the points listed above for the reasons already mentioned.
Piñera's Minister of the Interior, in charge of the repression in Chile, is Andrés Chadwick, who was part of Pinochet's cabinet. (Photo: Chile's Presidential Press)
That is why in the streets of Santiago they shout "out with them all" against a political class, that from Piñera to Michelle Bachelet has been involved in corruption, and a business elite that takes 65% of the wealth produced by the Chileans without even paying taxes. In this context, Cecilia Moret, first lady of Chile, told a friend that they were going to have to "decrease their privileges" after telling her that the Chilean government was being overwhelmed by a "kind of foreign, alien invasion".
This is the same horror of the plebs in the street that runs through the politicians and businessmen of the global South and North, afflicted by the implosion of a political system that no longer matches the needs of society with corporate voracity.
This April 23, that perception was reflected in a note from the
Financial Times entitled "Why executives are worried about capitalism", where one of the corporate CEOs consulted, Ray Dalio of the Bridgewater fund, simply said the obvious: "Capitalism can be reformed as a whole, or in conflict".
That is why the house of Chilean mirrors, where each of the regional crises are observed bouncing to infinity, shows an overly crude trajectory of the world in which we live.
Hence the first neoliberal essay — with no apparent reinvention capacity — returns to the same military cabbage it left in 1975, after a brief 45-minute meeting between Augusto Pinochet and Milton Friedman, as if in its DNA the only language that could be spoken is that of a corporate dictatorship.
Revolts in Latin America: the rise and fall of the neoliberal consensus