Person:

Walton, Michael

This paper explores the nature and drivers of inequality in Chile. It is a companion paper to Lecaros et al (2023) that analyzed the widespread citizen perceptions and concerns over high inequalities and lack of fairness in Chile. A central theme is that Chile is in a form of “inequality trap”, in which reinforcing elements of the system perpetuate inequality. This is in spite of the democratic transition of 1990, significant growth, and the large expansion of social provisioning. Chile has been successful with respect to poverty: there has been a dramatic reduction in absolute income poverty, and a near-universal floor for education, health, and pensions, albeit with pervasive issues of quality. However, most dimensions of inequality are perpetuated through structural features of the socio-economic system. These include: the inter-generational transmission of financial, human, social and cultural capital—notably through the education system; concentrated ownership in the business sector; a segmented labor market; and inequalities in access to mechanisms for managing employment and health risks and income insecurity in old age. There is a polarized discourse around the “neoliberal” model, but the real issues concern how structural inequalities interact with both market and government forces. There is no panacea, but there is substantial scope for public action that can tackling unjustified inequalities while also supporting efficiency. The kinds of systemic change required echo—if in new forms—the large-scale policy and institutional changes that now-industrialized countries went through in the 20th century, that were only partially modified by the “neoliberal” reversal from around the 1980s. These were underpinned by major political conjunctures, and there is an important outstanding question as to whether Chile’s politics can support the kinds of changes needed.

Chile has pioneered many things: a market-oriented, “neoliberal” approach to development; an impressive transition from authoritarianism to democracy; innovations in social policy; and an extraordinary series of street protests between 2006 and 2019. While often lauded as a model of economic and social development, the protests reflect acute concerns over perceived failures in the Chilean political, economic and cultural system, concerns that were profoundly inflected with issues of inequality and lack of fairness. To inform this contrast, this paper undertakes a systematic assessment of the perceptions and perspectives of Chilean citizens, both in the context of the protests and in their broader expressed views in surveys. The core theme is that “the street was right”, in the specific sense that the protests reflected much wider sentiments across social classes over perceived inequities in economic advancement, social provisioning, and the undignified “treatment” by state actors and elites. The paper then compares these perceptions with some of the “objective” measures of inequality. While alternative measures indicate modest declines in some measures of inequality, Chile remains a very high inequality society, in relation to income, wealth, and education. These perceptions and patterns are central to Chile’s current development challenges, in ways that resonate with the position of many countries in today’s polarized environment. This is the first of two papers, with the sequel exploring the underlying drivers of inequality and implications for policy direction.