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Worldcrunch

Wealth Divide: Zeroing In On The 'One Percent' Of Chile

The Occupy Movement began on Wall Street by the so-called 99% shut out from economic growth. But Latin America's income gap mirrors the U.S. In Chile, it is particularly extreme.

Article illustrative image Partner logo "Somos el 99%"

-Essay-

SANTIAGO - In September 2011, the American Occupy Wall Street movement launched in New York with the slogan "We are the 99%."

The movement also created a tumbler blog where the 99% could rally against the greed and corruption of the 1% of highest-income earners in the U.S.

Inspired by these demonstrations, the 2001 recipient of the Nobel Prize in Economic Sciences, Joseph Stiglitz, published a book entitled "The Price of Inequality – How Today’s Divided Society Endangers Our Future." The new Spanish-language edition carries the subheading "1% of the population has what 99% needs."

Stiglitz says that the universal value of equity has been replaced in the neoliberal capitalist system by the greed of a few. The economic system fails the majority of citizens, while the economic interests of a minority control the political system. This is the reason why the world is losing trust in its politicians and democracy has deteriorated.

The U.S. has led this growing divide within developed economies, and Stiglitz reveals the origins of these inequalities rooted in markets that are not functioning like they should (they are neither efficient nor stable) and political systems that are incapable of correcting the deficiencies of those markets.

With the European and U.S. financial crises, market failures have become evident. Their inefficiencies are revealed through the huge, unmet needs of millions living in opulence. There are no investments to lift the poor out of poverty, to promote development in Africa, nor to resolve the issue of global warming. But at the same time, there are unused resources: unemployed workers and unused machinery. This is the paradox of an unjust and inhuman system.  

Though dominant in the U.S., where market self-regulation and the power of corporations are much more visible, these levels of inequality and injustice are expanding all over the world. Stiglitz reveals that in Chile: 1% of the population possesses one-third of the nation's wealth. Over the last three decades, 90% of society has increased their salaries by only 15%, while that proverbial 1% has increased by 150%, and the very top 0.1% by 300%.

Yes Chile, also has its 99%. The Chilean economic and political model, a reproduction of the North American version, has brought inequalities to the extreme across society. In 2009, the difference between the average income of the 1% and the poorest 10% was 260 times, while in 1990 it was 158 times (Gonzalo Durán and Marco Kremerman, April 2 2012. El Mostrador).

Just rhetoric

This difference in incomes is the consequence of an elevated concentration of property and wealth in a few hands. The most powerful economic groups have multiplied their actions in the last 20 years in a rhythm that simply excludes the rest of Chile. They accumulated with the dictatorship and kept going when it ended and the coalition governments were formed.

There was a talk of greater equity in several of the governments, and former President Ricardo Lagos’ program used the motto “growth with equality.” Nevertheless, it turned out to be little more than rhetoric. We now know that the governments of the time when the dictatorship fell and the coalition governments were formed did not have the will or the means to deliberate public policy measures to favor a better income distribution nor to decrease inequalities of access to health, education and provisions. The complicity with the nation's elite was manifest. 

Most economists and politicians in the coalition governments in Chile believed in the benefits of a self-regulating market economy. Others, having occupied positions of power under their governments, were hired as executives or board members of large domestic and foreign companies, while the most corrupt, turned into lobbyists in order to facilitate business for CEOs, while remaining advisors to the government.

The commitment to the neoliberal model revealed a lack of ethics, theoretical and political fragility of the leadership of the Coalition against the imposition of the right-wing civil-military model. But it is also a result of the overwhelming power that national and international economic groups have acquired, who tamed the opposition to neoliberalism in the past, turning them into staunch supporters.

Big businesses took over the means of production, at low cost, thanks to the privatization of public enterprise. But they were also installed in Parliament and in public services as well as in media, schools, universities, clinics and soccer teams. With this amount of material and communication power they were able to install their ideas in public opinion with few counterbalances.

Giving to the rich

In the last decade, the wealth of the five most powerful economic groups has expanded in an unprecedented way, from $5.6 million in 2002 to $48.3 million in 2010.

In addition, the Chilean tax regime has been extremely generous to large corporations and wealthy sectors of the population, while, on the other hand, the unprecedented expansion of the credit system through high rises and supermarkets has provided huge profits to these groups. Finally,the expansion of trade and financial openness of the Chilean economy, through the Free Trade Agreement (TLC), the central component of the country's foreign policy, has allowed a global scale reproduction of Chilean investors abroad.

Consequently, it is no exaggeration to say that the State has been captured by an economic minority who use it in their favor. Instead of using it as a tool to compensate for the inequalities of the market economy, it has become an instrument for economic expansion of a few. Under such conditions, the nation's sense of community has weakened by the presence of a fragile State, serving a minority considered an ideological nuisance.

The market economy has become a market society, where the ultimate goal is profit and personal enrichment. And when politics does not involve the market, society can be dangerously affected.

Advancement opportunities for small businesses narrow, and workers are placed in a position of fragility, environmental protection is weakened and the economic concentration in Santiago is amplified. Such conditions close opportunities for progress towards a developed society, with a more balanced distribution of economic (and political) power and even growth eventually darkens.

Faced with such powerful economic groups, we find a weakened State. A State without capacity or legislative instruments to promote economic initiatives or which could help fulfill the potential of small business owners.

It should be noted that the Constitution of 1980 prohibits the State from fostering entrepreneurship. This same State, co-opted by business groups, has not been interested in stimulating trade unionism or collective bargaining, an indispensable foundation for improving the distribution of equilibrium. Stiglitz is absolutely right. In Chile, 1% has seized what 99% of the population needs.

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About this article source Website: http://www.americaeconomia.com/

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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