If Chile is so successful, why are the streets exploding in rage? Chileans might be feeling more economically precarious. They may feel that a narrow elite dominates the political process and denies them a true voice.
For more than two weeks, protesters have thronged the streets of Chile's major cities. Initially angry over a rise in train fares, the protesters have remained in the streets to rail against inequality, poverty and corruption. This might lead many casual news readers to conclude that Chile is one more broken emerging-market country, mired in economic stagnation and authoritarian rule. The opposite is true: Chile has been one of the developing world's biggest success stories.
From 1973 to 1990, Chile was ruled by the right-wing military dictator Augusto Pinochet. Though hardcore free-marketers applauded his laissez-faire policies, Pinochet's economic record was fairly underwhelming. The dictator encouraged a real estate bubble that went bust and took the economy with it, and his fiscal austerity made the slump worse. But in the years since democracy was restored in 1990, the country has enjoyed a long run of steady growth. It has not only outpaced its Latin American neighbours but has closed a little of the gap with the US as well:
This growth is even more impressive given Chile's dependence on resource exports. It has avoided both the cyclical booms and busts, and the political dysfunction all too common among commodity-based economies. Instead, Chile has managed its natural endowments with skill and prudence; even the Great Recession caused only a brief blip.
Of course, economic growth isn't very important unless it's broadly shared. Like most countries in Latin America, Chile is very unequal, with a Gini index of 46.6 in 2017, as compared to 41.5 for the US (100 indicates maximum inequality). But, thanks in part to increasing investments in education, Chile is substantially less unequal than it was in 1990:
Thanks to continued growth and falling inequality, Chile's relative poverty rate — defined as the percentage of people living on less than half of the median income — is down to just 16.1%, lower than in the US and barely higher than in Japan.
Meanwhile, the country is doing well on a large array of social indicators. Its life expectancy has risen, and now exceeds that of the US:
On measures of political freedom, Chile also does well. Freedom House, a US-based think tank, gives Chile a combined political and social freedom score of 94 out of 100, equal to Germany; the US scores a mere 86. Reporters Without Borders, a France-based think tank, rates Chile 46th in the world in terms of press freedom, ahead of the US at 48th. On corruption, Chile fares a little worse, with the German-based think tank Transparency International giving it only 67 out of 100 on its corruption perceptions index, slightly lower than the US but still ahead of South Korea and Taiwan (100 being the least corrupt).
So to an external observer, Chile looks like a very successful upper-middle-income country — free, prosperous, healthy and doing a good job of tackling its inequality problem. Protests or no protests, Chile's leaders and its democratic system deserve congratulations and admiration for these achievements.
But the question inevitably follows: If Chile is so successful, why are the streets exploding in rage? One possibility is that the common metrics cited above simply miss some important elements of social or economic failure. Chileans might be feeling more economically precarious. They may feel that a narrow elite dominates the political process and denies them a true voice. Or they might simply care a lot about prices of certain daily goods, such as train tickets.
Alternatively, protests like Chile's might simply be an outgrowth of the rise of social media. In his book "The Revolt of The Public and the Crisis of Authority in the New Millennium," former CIA analyst Martin Gurri theorizes that social media has made large protests so easy to start that essentially any reason for discontent -- anger about history, a vague feeling of being cheated by elites, disappointment with government's failure to live up to grand promises -- now tend to spill into the streets.
But it's possible that Chile's very success during the past three decades is what's driving discontent now. Although Chile's growth was fast for 22 years, it has slowed down recently, possibly due to falling commodity prices. In 2018, real per capita income was only 5% higher than in 2013. And most of the drop in inequality ended by 2006. A generation raised on expectations of steadily rising living standards, burgeoning freedom and increasing equality might be enraged that those expectations weren't fulfilled.
This idea, called a revolution of rising expectations, has been used to explain protests and revolutions across the centuries, from the French Revolution to the unrest of the 1960s and 1970s. It implies that rapid bursts of progress followed by pauses tend to stoke uprisings. Chile may well be a victim of its own success. If that's the case, Chile has little option but to wait out the unrest.
Disclaimer: This article first appeared on Bloomberg.com, and is published by special syndication arrangement.