Chile a case study in anti-capitalism

As 2019 draws to a close, it seems destined to rival 1968 as the year of street protest. France, Spain, Lebanon, Iraq, Hong Kong, Ecuador, Chile and Bolivia stand out. The exact circumstances vary and it is difficult to generalise, but one common theme running through several of these uprisings is that a small spark has been sufficient to ignite massive and violent protests based on economic grievance.

It should be said at the outset that peaceful protest is one thing, but nothing justifies violence and wanton destruction such as we have seen on the streets of Paris, Santiago and other cities.

Subject to that important qualification, it would be pleasing to think what is happening is a revolt against inefficient and corrupt government. There are elements of that; but more often it appears that what the protestors want is not just better government but bigger government.

They want more social benefits at the expense of someone else, and they have taken their demands from the ballot box to the street.

Chile is one of the most interesting cases. Several decades of rapid economic growth and development have lifted Chile to the top of the ladder in Latin America, greatly increased living standards, reduced inequality and slashed the incidence of poverty.

This wasn’t an accident or luck. It happened because of good economic policies. Chile’s progress has been nothing short of spectacular. You would not know that from the street protests.

Certainly some have not benefited as much as others from this progress, and a degree of inequality remains as is inevitable in a successful market economy, but the free market system with relatively low taxes — the system that some now want to overturn — has in fact delivered more prosperity, more broadly, than any alternative would have delivered.

The centre-right president of Chile, having initially taken a hard line against the protestors, has comprehensively caved in to their demands.

Some of the policy changes may be warranted, but the real tragedy will come if the changes are taken so far that economic development is stunted, Chile stagnates as a middle income country and its population loses the opportunity to climb the economic ladder further and enjoy the living standards of the most advanced countries.

Chile, in a microcosm, illustrates what is wrong with the anti-capitalist movement and what is at stake if it develops into a major influence on economic policy.