Venezuela’s dictator Nicolás Maduro and the old-guard left around the world are celebrating Chile’s violent street protests as evidence of the alleged failure of free-market capitalism. In fact, it’s the opposite: It’s a first-world revolt by a rapidly growing middle class that is demanding U.S. and European living standards.
I reached that conclusion after a long conversation with former Chilean President Ricardo Lagos, a long-time member of Chile’s Socialist Party and one of the most respected leaders of what is left of Latin America’s democratic, globalized and modern left.
I spoke with him a day after the Oct. 22 speech by Chile’s center-right President Sebastian Piñera, in which he reversed recent hikes in public transportation and announced a package of social-relief measures following street riots that had left 15 dead. Crowds of angry youths had burned down subway stations and supermarkets, forcing Piñera to declare a state of emergency in parts of the country.
I asked Lagos: How could this have happened in Latin America’s most successful economy? Chile is the only country in the region that has reduced poverty from 40 percent of the population 30 years ago to less than 10 percent today. Chile current minimum wage is $408 a month, compared to Venezuela’s $7 a month.
And Chile is the No. 1 country in Latin America in steady economic growth, education standards and innovation, according to the 34-country Organization of Economic Cooperation and Development (OECD,) a think tank for the world’s wealthiest nations.
But while Chile is Latin America’s most successful country by almost every measure, it hasn’t been that successful in reducing inequality, Lagos said. The gap between rich and poor has diminished, but only marginally — and certainly not enough to quell the aspirations of the rising middle-classes.
“The hike in subway fares was the last straw,” Lagos told me. “People have long felt that while poverty has gone down substantially, there has been an excessively high concentration of income.”
Lagos told me that during a recent visit to the suburb of Renca near Santiago, the capital, he went to a low-income housing complex built by his government almost two decades ago for people who had been living in shantytowns. He was surprised by the level of discontent among its residents, he said.
“They told me, ‘How could you would build these homes without parking spaces?,” he said. “I answered, “Would you have thought nearly 20 years ago that you would own a car? Well, I didn’t think so either.”
Likewise, streets and avenues that were built decades ago can no longer accommodate the growing numbers of cars, which is forcing people to spend long hours commuting, he said.
According to Lagos, Chile’s tax collection represents only 18 percent of the country’s economy, much less than the 35 percent in most wealthy nations.
Chile needs to increase taxes, especially to the rich, because more public services are needed, he said. In addition, about 49 percent of Chile’s taxes come from value-added taxes. That puts an extraordinary burden on the poor and lower middle classes, Lagos said.
“People are demanding a new social contract, so that the fruits of growth reach everybody,” he said.
There are probably many factors that led to Chile’s social unrest, including Venezuela’s support for radical leftist groups that — as Maduro himself has publicly confessed — are helping stir up street protests in several countries.
But Chile’s social protests are different from those that we’ve seen in Ecuador, Haiti and other countries that have been forced to raise utility prices because they are essentially broke. Chile’s protests, much like the ones by the “indignados” in Spain or the “yellow vests” in France, reflect a first-world crisis of rising expectations.
Chile’s capitalist system may need a correction, like every system does. But, by every measure, it’s far more successful than the disastrous Maduro regime in Venezuela or the recent populist governments of the Kirchner family in Argentina, which left their countries bankrupt.
We can’t rule out that Chile will recover from this crisis, and that it will become an even more successful role model for the rest of Latin America.
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