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Bachelet’s Labor Reforms Have Already Failed, in Uruguay

By: Hana Fischer - @hana_fischer - Aug 31, 2015, 12:25 pm
Chile's status as a beacon for South America is changing under President Michelle Bachelet.
Chile’s status as a beacon for South America is changing under President Michelle Bachelet. (Diario U Chile)

EspañolThe Chilean Senate is discussing a bill that would radically alter the labor market. While an effort to gradually improve legal frameworks is an important part of a republican system, this task demands an understanding of the lessons of history in order to be successful. This is one of the main differences between statesmen and demagogues.

Chile carries a heavy burden on her back. The statist policies implemented during most of the 20th century brought the country to the brink of the abyss. Not long ago, despair and frustration filled the nation, and the result was a bloody military dictatorship that ruled Chile between 1973 and 1990.

In this respect, Chile’s history is not much different from that of Uruguay. We had the same misguided policies during an era of prevailing populism: from the 1930s to 1950s, both countries applied foreign-exchange controls with a multiple-rate system and an import-substitution model.

But the Uruguayan government went further, enacting mandatory collective bargaining for all sectors. The move disrupted the country’s social harmony, increasing the power of unions and dooming companies to financial disaster.

The governments of Uruguay and Chile claimed to be “defending the working class” with their interventionist policies, but it was workers who paid the price for those policies with their jobs. This then led to social unrest and violent clashes in these countries. In short, they became radicalized, agitated, and traumatized societies.

Democracy returned to both countries only after significant effort, but they went separate ways. Chile developed as a thriving, dynamic society, with strong social mobility that attracted migrants from all over the world. It became a country full of opportunities that rewarded and encouraged entrepreneurship.

On the other hand, Uruguay remained a statist county, with little place for merit-based progress, pushing the most capable to find opportunities abroad. Don’t let official statistics fool you: Uruguay continues to be a country that rejects its most skilled and talented citizens.

As many progressive Chilean politicians have said, they have “learned from the errors of the past.” They have realized that it is better to keep the Communist Party away from the ruling coalition, because it will otherwise inevitably neutralize the other factions.

When Marxists take power, the unavoidable result is a society of wealthy politicians and their cronies, while the rest of the public becomes poorer and poorer, both financially and in spirit.

In Uruguay, no such lessons have been learned. Even the moderate progressive alliance Broad Front, led by President Tabaré Vázquez, has increased interventionism in the private sector.

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Chilean authorities must realize that attempts to imitate Uruguay’s path will not end well, especially the efforts to reintroduce collective bargaining for wages and increasing the power of unions.

The proposed labor reform currently being debated in the Chilean Senate presents several issues that are a concern:

  • Inter-company unions will be in charge of collective bargaining for all workers.
  • Employers will be prohibited from granting union benefits to non-unionized workers.
  • Union leaders will be allowed to disrupt a company’s activities, because employers will be banned from replacing workers on strike.
  • The reform would deny an employee the option to return to work, on an individual basis, after 15 days on strike, and consequently his right to continue working.
  • Employees would be prohibited from censuring union leaders during a strike.

Chilean President Michelle Bachelet, who supports the bill, said that “the experience in countries with higher levels of union membership and collective bargaining shows that it is possible to arrive at agreements for mutual benefit on a wide range of topics.”

However, the Uruguayan experience refutes Bachelet’s statement. The privileges awarded to unions have resulted in nearly dictatorial power over private companies, and business owners feel they are losing control. Unions have frequently adopted disproportionate and arbitrary measures, in some cases even running afoul of the law.

But nothing comes for free. Union leaders advance their political careers while “defending” the interests of their fellow employees, and many have reached high-ranking positions in the government. They are clearly the winners of this reform.

Meanwhile, ordinary workers lose. The frustration with unions is causing many companies to leave the country. In addition, business owners are cutting down on employees, and when possible, replacing them with machines.

This results in a decrease of economic activity and an expansion of government at the expense of political and civil rights. To make matters worse, union conflicts are on the rise, as is usually the case when the government makes it clear to the public that it is the quickest way to appropriate the fruits of other people’s labor.

Since Chile’s return to democracy until Bachelet’s second term as president, the country was a shining beacon for South American nations. Faced with such drastic labor reform, which 52 percent of Chileans oppose, all we can do is hope politicians return to the “ethics of responsibility.”

Translated by Adam Dubove.

Hana Fischer Hana Fischer

Hana Fischer was born in and resides in Uruguay. She serves as a writer, researcher, and international affairs columnist in different media outlets. A specialist in philosophy, politics, and economics, she has written several books and received honorable mentions. Follow her @hana_fischer.

Taxi Cartels Shout Down Uber Hearing in Brazil

By: Contributor - Aug 31, 2015, 10:06 am

PortuguêsEspañolBy Bernardo Vidigal On August 28, a public hearing about a bill seeking to ban Uber took place in the Legislative Assembly of Minas Gerais state, Brazil. Following similar actions in São Paulo and Vitória, representatives of Students For Liberty Brazil showed up and made the case for freedom of transportation. We arrived early and were harassed by taxi drivers from the outset. Not all of them behaved that way, as many tried to calm down their colleagues, but to no avail. The confrontation became so heated that the legislature's police intervened to guarantee our safety. We remained guarded at all times, and in the end the officers even escorted us out of the building through the back door. While there were around 400 taxi drivers protesting Uber, our delegation had 11 SFL representatives and nine activists from partner organizations. Thaiz Batista, a Brazilian SFL Executive Board member, took the stage to defend Uber, citing examples of other apps that once upset the apple cart and also faced attempts to ban them. That includes the popular messaging platform Whatsapp. One can understand why people fear Uber, at least until they get what it really represents. The world is changing quickly, and that can be threatening, but the uberization of the economy is here to stay and will continue to raise fears in many sectors. Uber Won't Kill Taxis Airbnb scares hotels; Netflix scares cable television; and Whatsapp scares telecom giants. But radio didn't kill newspapers, televisions didn't kill radios, and the internet didn't kill the television. Likewise, the uberized economy will not mean the death of taxis, hotels, cable TV, or telecoms. It will only require that they adapt. The biggest problem is that change is scary. It means new habits, new actors, and new trends, but when change brings about innovation, it's always a good thing. Uber will not kill Minas Gerais taxis, for many reasons. First, Uber does not always directly compete with taxis. Second, Uber cannot cover the entire taxi market. Third, taxis will have to improve their service to regain some of their market share. There are many ways in which Uber does not compete with taxis. A Uber Black ride, for example, is more expensive than a regular taxi ride. The service's success only shows that some consumers are willing to pay for a premium transportation service. In addition, potential Uber clients are not the majority of Brazilians; they're rather those who already have smartphones and don’t mind spending more to get around town, many times leaving their own cars at home. In other words, most Uber users were not regular taxi clients. Uber cannot cover the entire market either. Fewer than 30 percent of Brazilians have a smartphone, which means that Uber cannot reach the majority of potential clients. It is true that in big Brazilian cities, where Uber operates, more people use smartphones. But there is another way that taxis still win: you can't hail a Uber car on the street. You can barely identify one. This portion of the market remains the sole domain of taxis. Finally, competition raises standards across the entire market. What happens when a new player shows up and starts "stealing" your clients? The natural response is to improve your service. If taxis decide to improve their services, they will also see another very natural consequence: new clients. It is a bit of a challenge, no doubt, but consumers and the taxi industry will benefit from Uber entering the market. Blame the Bureaucracy But is the competition between Uber and taxis unfair? Maybe. In Brazil, taxi drivers enjoy a series of tax breaks that Uber drivers do not, but that is not the whole picture. One thing must be said in defense of taxi drivers: their job is extremely regulated, and they are forced to comply with an enormous amount of bureaucracy that creates inefficiencies across the market. As private agents constrained by a municipal monopoly, they suffer from the worst of both worlds. The monopoly is so poorly managed that it does not even generate gains to drivers, because prices are fixed and many taxi licenses belong to a small number of people, concentrating what little profit there is. [adrotate group="8"] This does not mean we should bind Uber with the same regulations that burden taxi drivers. On the contrary, Uber has proved that individuals freely choosing how to move around town works. Uber drivers decide to join the company and consumers choose to use the service. Besides, Uber is not the only company offering this service, other apps have sprung up to give Uber a run for its money. Even Google is reportedly preparing to enter the market. Unfortunately, the public hearing on Friday wasn't productive at all. The majority of taxi drivers refused to listen to different points of view. They even turned their backs to the Uber spokeman when she took the stage. They went out of their way to intimidate us, booing and making noise while reporters were interviewing us, and cursing and threatening us throughout. A takeaway from this experience is that the fight should not be against Uber, but against inefficiency. What prevents taxi drivers from innovating and competing is the regulatory status quo. Therefore, the debate should not focus on more (bad) regulations, but in favor of less or none at all. With less government interference, the taxi market would be able to grow and be more competitive, benefiting not only consumers, but taxi drivers as well. //   Bernardo Vidigal is the Brazilian programs associate with Students for Liberty. Follow him @BernardoVidigal

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