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Is Chile More Equal Today? Bachelet Pursues Legacy

By: Andrea Kohen - @AndreaKohen - Nov 28, 2016, 7:14 pm

 

Michelle Bachelet
Chilean President Michelle Bachelet has made economic equality a cornerstone of her presidency (Opinion Global). Is Chile More Equal Today? Bachelet Pursues Legacy.

Is Chile More Equal Today? Bachelet Pursues Legacy

I recently heard an interview with Claudio Sapelli, a researcher who has been working on the issue of equality in Chile for decades, and has recently published the second edition of his book A More Equitable Chile.

Sapelli in his study, unlike many others, uses a metric that takes into account evolving economically from generation to generation, which gives a consistency over large periods of time, and allows us to see the real progress.

If we compare different groups of people, of course there will be differences, some of them all too obvious. All of this measuring of equality with the Gini coefficient, which compares people to each other and shows us how unequal a group of people is, does so by measuring their direct income.

The problem of measuring people in the same generation is that it measures the wrong thing. It is based on how much money goes into people’s pockets, but it forgets that wealth is not money but what can be exchanged for money. If there were no goods and services, money would have no reason to exist. The second problem with a measurement such as the Gini is that it does not reflect progress over time and therefore it is impossible to say whether an individual is better or worse off than before it only tells us that there is or is not inequality.

Sapelli reveals that the generation of 1980s, compared to 1970s, at 30 years of age, is more equitable because although inequalities remain and even deepen, new generations have more and better access to goods and services, varying only in the abundance and quality of them, but with equal access, which implies that all are richer than the previous generation.

When we measure inequality, what is measured is how much access a person has to a good or service. In the nineteenth century, not all had access to potable water, a situation that changed over time and allowed the service to reach the houses of the cities. With the arrival of modernity and liberalization, said service was delivered to more people at a lower cost, and eventually become a basic household expense. Therefore, even though the rich may be richer than the poor, both will have access to potable water, and that shortens the real gaps of poverty and wealth.

Chile is a country that is unequal in terms of income, yes, but more equitable, no doubt because of its remarkable access to goods and services.

Understand that real equality occurs when there are as few artificial barriers as possible for people to pursue their goals. Bearing this precept in mind, the current government of Chile has a wrongly assessed reality, and misidentified the country’s problem.

Sapelli measured poverty, education, access to goods and services, and other indicators and all show that the next generation is more prosperous than the previous generation. I want to suggest that this means that we are making progress economically. But if this is true then I ask the question again: “Why is there such discontent?”

Let us go back to the student revolution of the first Bachelet government, when people complained of the lack of short-term benefits resulting from investment in the university education of their children.

This has to be understood in the context of misunderstood social mobility, which obviously depends on the decisions that individuals take in their daily lives; and as such, mobility can be upward or downward. In Chile, the population was led to believe that there was an automatic system of promotion, in which greater national economic growth meant immediate upward mobility, independent of the effort and motivation of each individual. This disconcerts many because most expect that wealth should automatically be redistributed to them.

The government’s solution has been to make people equal at all cost, because if economic growth has not been able to distribute wealth in a more egalitarian way, then the state must step in to play this role.

The data shows that Chile today is wealthier, more equitable, and more egalitarian because there is more and better access to goods and services, but the perception is that this growth does not reach everyone in an egalitarian way. Thus arises social discontent because not all are wealthy, or as wealthy as they would like, even as the country grows.

The reforms proposed by the government tend to make people equal artificially. Reforms are implemented, for example, in education, which try to create a more active role for the state, and eliminate the potential for profit, which studies show produces healthy competition, and offers the best service. A tax reform is implemented to cover the costs of the proposed reform in education, which leads to economic stagnation and diminished growth. Labor reform perpetuates trade union monopolies, and makes it more difficult for employers to hire new employees.

In general, those who work in public policy ignore the data that shows that Chile is superior in almost all metrics to its Latin American peers. They desire to make everyone equal, but the end result with a forced scheme such as they propose leads to economic disaster.

Chile has veered to the left of late and has thought more in terms of the state and less in terms of the individual, condemning thousands to welfare, which is destined to collapse when the critical mass needs it. This in the long run would be equality, but at the cost of making it difficult to become wealthy. This is the legacy of Bachelet, who at the moment must be despondent while traveling to the funeral of Fidel Castro, her ideological inspiration and who reminds her of what her dream for Chile is based on… Equality in poverty.

Andrea Kohen

Andrea Kohen is a Chilean historian and economist with a bachelor's degree in Education Studies. Follow her on Twitter: @AndreaKohen.