The Spanish economic “crisis” and… Augusto Pinochet

Previous explanations given for Spain’s current situation have been European-based, and the references made have been to past events such as the various Oil Crises, or the most recent Spanish recession in 1993.

Yet the most important consequence of those crises was not what changed, but what stayed the same: the old model in which the State plays a key role in economic and social affairs was essentially preserved.

What is happening in Spain today does not fit this pattern; it is not just a case of changing tactics in order to better deal with the current economic climate.

Rather, an entirely new, and seemingly permanent, model is being imposed. We therefore need to cast a wider net to find similar cases which will allow us to understand the tactics being used ostensibly for nothing other than tackling the crisis.

Actually, Spain today most closely resembles post-coup Chile, though this fact will undoubtedly have escaped a country in which Pinochet’s dictatorship has often erroneously been compared to Franco’s. In reality, the only thing they had in common was the use of repression.

Beyond this there is nothing that connects the two regimes, both having established completely different socio-economic models. While Franco favoured state-run corporatism and paternalism, Pinochet imposed a radical neoliberalism inspired by the likes of Milton Friedman and the Chicago School.

It was a system established through bloodshed and brutal repression, and it brought about the atomisation of society, extreme individualism and the disarticulation of any political or social framework capable of collective leadership.

Failure to take this fact into account has prevented a true understanding of why Spain and Chile’s transitions to democracy were so different.

The paternalistic ingenuousness of Spanish observers, or perhaps their penchant for making Spain the supposed measuring stick for all of Latin America, has led them to overlook the need for deeper analysis of the Chilean model.

As a consequence of which it is now distinctly possible that this same model will take root in Spain, a country of considerable size and very different ethnic, racial, political and social realities.

The Chilean model, so lauded by those who misunderstand it or are beguiled by the scribblings of its champions in the international press, is a machine which churns out inequality.

The Gini Index puts Chile among the most unequal countries in Latin America, a region which itself has the highest levels of inequality in the world.

The fact that the Chilean economy has more than doubled in size since the neoliberal model was introduced has done little to change this fact.

Inequality has emerged from this process unscathed, whether the Right is in power, as it is now, or the Centre Left, as it was in the first twenty years after Pinochet was ousted. In Chile today, political allegiance is largely irrelevant.

Power now rests in the hands of private companies that oligopolistically exploit their respective industries.

Such is the case in the health, education, road, pharmaceutical and supermarket sectors. Supporters of free enterprise conceal the fact that when the State pulls out of certain industries, the gap they leave is filled by two or three conglomerates that divide up the market among themselves and impose their will in all areas, from legislation and employment right through to price fixing.

Despite an average monthly salary of no more than €500, the cost of living in Chile is the same or even higher than in Spain. The cost of a bus or metro ticket in Santiago, for example, is €1.

Petrol costs roughly the same as in Spain and other European countries, a litre of milk will set you back at least €1.10, and so it goes on. Absolute free markets do not necessarily benefit the consumer.

As for pensions, Pinochet replaced the old social security system with individual pension plans. These are not supplementary to the state pension, as they are in Spain.

There is no social security in Chile, just a system of individual private pension funds, which explains why in a country of low salaries there are very few pensioners.

Since pensions are equally low, the majority of people continue working after reaching retirement age, as they simply can’t afford to live without the extra income.

This problem affects everyone, whether they are a university professor or a domestic worker. The type of pensioner you are familiar with (perhaps not for much longer) in Spain and the rest of Europe simply does not exist in Chile.

For more than forty years now, the Chilean education system has failed to provide equal opportunity.

In fact, it is the ideal structure for reinforcing inherited social inequality. The education system is highly segregated, as well as being an extremely profitable business which puts Chile’s universities among the most expensive in the world, despite the lack of justification in terms of their academic quality.

Every month, Chilean families devote almost 50% of their average salary to putting just a single member through higher education.

The State, meanwhile, is in cahoots with the big conglomerates that use education to their advantage, not to mention those profiting from this set up, such as the banks. As a result, the State doesn’t award students any grants or give them loans directly.

What the neoliberal Chilean State does agree to do is to reimburse the banks for the credit they have extended to students in the event of non-payment. Government aid, then, is propping up the financial system instead of supporting education.

What is more, the State only foots the healthcare bills of those who can’t afford to take out private health insurance. Just like pensions, private health insurance is not an additional extra: it’s either or.

There is no universal healthcare system because the State doesn’t finance one, and it doesn’t finance one because 90% of Chilean workers are exempt from paying income tax because of their low salaries.

Instead, they pay one of the highest VAT – Value Added Tax – rates in the world, although Spain has also seen a considerable hike in VAT since the onset of the so-called crisis.

This is what the Chilean neoliberal model really means, and it’s a model which is insidiously, though at ever greater speed, taking root in a Spain desperate to do something to relieve the effects of the crisis.

Because what we are seeing in Spain is not the legacy of Franco’s rule, it’s pure Pinochetan politics. It’s a political and economic model which will inevitably have devastating consequences for social equality.

Twenty-three years after Pinochet was ousted from power, and six years after his death, maybe Spain could learn a thing or two from the Chileans.

Source: http://www.theprisma.co.uk/2013/06/10/the-spanish-economic-crisis-and-pinochet/  - June 10, 2013

(Translated by Fiona Marshall – Email: [email protected])