Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Historical Insanity

Is Chile’s Chaos America’s Future?

Americans need to examine a wave of destructive riots in Chile because economic policies similar to America’s sparked the violence.

To explain, popular anger at Chile’s long-time economic policies is driving massive protests and riots in Chile. Frighteningly the economic polices that anger the protesters are the core agenda of America’s political elites.

The policies are austerity; the slashing of government services to keep taxes low, and unrestrained capitalism that leads to income inequality. These are the same policies that every American President from Ronald Reagan (R-California) to Donald J. Trump (R-Florida) has embraced.

American Presidential Candidates Promote policies that led to Violence in Chile

Moreover, both probable candidates in the 2020 U.S. presidential election; Trump and Joe Biden (D-Delaware) embrace those polices. In fact, The Intercept claims Biden has been advocating Social Security cuts since 1984.

“When I argued that we should freeze federal spending, I meant Social Security as well,” then Senator Biden (D-Delaware) told the U.S. Senate in 1995. “I meant Medicare and Medicaid. I meant veterans’ benefits. I meant every single solitary thing in the government.”

For instance, Trump’s proposed budgets could slash America’s single-payer health insurance program for the poor; Medicaid, by $994 billion in 10 years, The Hill alleges. The Centers for Medicare and Medicaid estimates Medicaid covered  64.498 million people in November 2019.

Cuts to pensions and other programs are among the issues driving the violence in Chile. Thus, some of America’s leaders endorse the policies sparking violence in Chile.

Violence in Chile

Between October 2019 and February 2020, 36 people died in riots in Chile, NACLA estimates.

The violence began as protests against subway and bus fare increases in Chile’s capital Santiago on 7 October 2019, Wikipedia notes. Mobs began brawling with police and destroying turnstiles and ticket machines in the subway.

Chile’s President Sebastián Piñera made the situation worse by attending a birthday party for his grandchild at an expensive pizzeria. The riots heated up when somebody posted pictures of the party on Twitter.

The protests are the worst civil unrest in Chile since the collapse of the nation’s military dictatorship in the 1980s. To control the violence, Piñera had to mobilize the Army and the Carabinero paramilitary police.

Critics allege the government’s efforts to restore order led to widespread human rights violations including torture, illegal raids, arbitrary detention, and sexual assault. Both Amnesty International and the United Nations High Commissioner for Human Rights condemn police violence in Chile.

What Went Wrong in Chile?

Chile frightens me because its government implemented all the economic prescriptions America’s current leaders promote.

For instance, Chile’s infamous military dictator General Augusto Pinochet adopted free trade, privatized businesses, cut import duties and tariffs, made massive cuts to government spending and entitlements, and deregulated the economy during the 1970s and 1980s. Since Pinochet’s downfall in 1988, Chile has been a model democracy.

On paper, Chile is doing everything right, Economist Richard Davies notes. For instance, Chile has the highest per capita income in Latin America, nearly $14,000. In addition, Chile moved from emerging to developed status in 2010 and joined the Organization for Economic Cooperation and Development (OECD). The OCED is a club for developed countries.

Impressively, Chile reduced the worst poverty in the past 40 years. For example, the percentage of Chileans who could not afford food fell from 17% in 1987 to 6% in 2000, Davies estimates.

Chile’s Troubling Economy

Chile’s “economic miracle” came at a high price. Notably, Chile has the highest level of income inequality in the OCED, Davies estimates. Disturbingly, the USA has the third highest level of income inequality in the OCED.

In addition, they concentrate economic power in a few companies in Chile. For example, two companies own 85% of the country’s newspapers and supply 85% of the nation’s online news, Davies claims. Meanwhile, three companies control 90% of Chile’s pharmacy market.

Similarly, Vox Recode estimates that five companies AT&T (NYSE: T), The Walt Disney Company (NYSE: DIS), Verizon (NYSE: VZN), Comcast (NASDAQ: CMCSA), and Netflix (NASDAQ: NFLX) dominated American entertainment in December 2019. Likewise, one company; Amazon (NASDAQ: AMZN), controlled 45% of US online retail in 2019 and could control 51% of US online retail in 2021, Statista projects.

Thus, both Chile and the United States suffer from growing concentrations of economic power. Such concentrated power is disruptive because it breeds jealousy and popular frustration.

Chile’s Higher Education Bubble

The most bothersome similarity between Chile’s economy and America’s is in higher education.

Chile is in the middle of a higher education bubble. For example, Davies estimates, the number of Chilean universities grew from eight in the 1970s, to 60 in 1990, to 150 today.

“There are universities everywhere in Santiago; Chile’s capital,: on main roads, up side streets, and between car showrooms,” Davies writes. However, many of the university degrees are worthless.

Disturbingly, in a Marker article, Davies claims he met Melissa and Emmanuel; two “university graduates,” who were living in a shack in a shantytown built on a dump. Melissa has a psychology degree; but works in a daycare. Meanwhile Emmanuel studied information technology but works as a security guard. The two live on top of a dump because student debt keeps them from making enough money to afford a better place to live.

Similar situations are common in the United States, where the New York Federal Reserve estimates 20.6% of U.S. college graduates work at low-wage jobs. Moreover, StudentLoanHero estimates 44.7 million Americans owed over $1.64 trillion in January 2020. Frighteningly, 11.1% of those debtors; or 4.9617 million people, were 90 days delinquent on student loans.

Consequently, Silicon Valley billionaire Peter Thiel thinks America suffers from a “higher education bubble,” TechCrunch reports. Davies thinks Chile is in the middle of a similar higher education bubble.

Worthless Higher Education

Additionally, there are allegations that much of the new higher education in Chile is worthless. Davies, for instances, estimates 70% of the new college courses in Chile have no accreditation. Thus, the degrees those institutions issue could be worthless.

Similarly, the United States leads the world in diploma mills offering worthless college degrees, Get Educated charges. Get Educated claims there were 134 diploma mills in one state; California, in 2010.

Chile’s higher education bubble has led to rioting, violence, and allegations of human rights violations. I have to wonder if similar violence will break out in the United States.

What is Going Wrong in Chile?

The cause of the current Chilean unrest is hard to pin down. I think income inequality is a definite factor in the violence, but so are growing aspirations.

To explain, a large segment of the Chilean population believes it is entitled to a middle-class lifestyle it is not receiving. I.e. things are good in Chile, but not everybody shares in the prosperity.

Moreover, those not sharing in the prosperity feel they should share in the prosperity. For example, the poor Chilean with no car sees the rich businessman driving by in his Porsche each day and gets jealous and angry.  

Is a Revolution Brewing in Chile?

Historically, such growing aspirations ignited many revolutions. The American Revolution started because many colonists felt they were not receiving the middle-class lifestyle becoming common in the 13 colonies. In addition, the growth of the middle class triggered the French Revolution of 1789.

Anger at concentrations of wealth and power accompanies such aspirations. In particular, the American colonists of 1775 were mad at all the money and political power in the hands of a politically connected pro-British elite. Meanwhile, the French Middle Class and peasants were angry at all the wealth in the hands of the aristocracy in 1789.

Chile’s own violent revolution; Pinochet’s September 11 Coup of 1973, was a reaction against President Salvatore Allende’s radical socialist policies. Both Allende’s socialism and Pinochet’s coup were reactions to the accumulations of power in the hands of tiny groups. To explain, Allende feared capitalists, while Pinochet feared Marxists.

The Crisis of Faith

The current violence in Chile is a protest against income inequality and austerity that has some characteristics of a revolution. Additionally, both Chile and America face a crisis of faith in institutions.

Many Chileans became disillusioned when investigations shattered Pinochet’s reputation as the selfless soldier who saved the Republic. To explain, prosecutors exposed Pinochet’s $28 million personal fortune in the early 2000s. More recently, exposes of widespread human rights abuses and wholesale murder of political enemies under Pinochet’s regime destroyed the remains of the dictator’s reputation.

Similarly, Chile’s Roman Catholic Church is being torn apart by revelations of widespread sexual abuse by priests and a coverup. For instance, church authorities fired two of Chile’s most popular priests because of sex abuse charges in 2019, Angelus alleges.

In the United States, the Catholic and Southern Baptist Churches are being rocked by charges of sexual abuse coverups and widespread corruption. Meanwhile, other institutions; including universities, face their own scandals. For example, the recent college admissions scandal involving several B list celebrities is exposing widespread anger against American higher education.

Is America Next?

Americans will wonder if we could soon see such violence in the United States. I think the answer is yes.

One event that could trigger such violence is President Donald J. Trump’s (R-Florida) reelection. Remember, Trump’s election and inauguration triggered both riots and mass protests.

Trump is unpopular, but so is probable Democratic rival Joe Biden. In fact, many leftists hate Biden as much as they hate Trump. Twitter is full of posts blaming an elite conspiracy for Biden’s astounding comeback in the Democratic primaries.

Another trigger could be an economic downturn or a new recession. A probable side effect of a new recession could be the revival of the radical Occupy movement of the early 2010s.

Is America the Next Chile?

Other violence could be assassinations and bombings. Notably, there was a mass shooting at a Congressional baseball game in 2017. The shooter was targeting Republican Congressional leaders.

Americans need to pay attention to recent history in Chile because that history could soon repeat itself in the United States. Other countries that have adopted neoliberal policies; such as Australia and the United Kingdom, need to watch Chile too. Chile’s present could be their future.

Chile’s recent history shows that capitalism and neoliberalism could be prescriptions for inequality and violence rather than progress and prosperity.