Featured Article: Combatting income inequality in Chile

The following message is an abridged version of a column written by Civic Action team member Paul Constant. To read the full version, follow this link.

Chile has a long and proud history of political protests. But the uprising of late 2019, when more than a million Chileans took to the streets to protest extreme wealth inequality, was unlike anything in the nation's history. Those protests have led Chile to elect a progressive for president – and now, the country could soon vote to reject neoliberalism by enacting a new constitution that actively works to build a better economy for everyone.

To understand how income inequality skyrocketed in Chile, we have to look back at the 1970s. During the dictatorship of Augusto Pinochet, Chile enacted neoliberal policies that only helped the rich get richer – and even worse, the country prioritized private property above all else when the constitution was redrafted and finalized in 1980. Fast-forward 40 years, and this “free-market” approach has suppressed wages and allowed corporations to scoop up natural resources that residents need to survive. 

Here’s just one example of the impact of neoliberal policies on the Chilean people: Chile is the only nation in the world with a fully privatized water market, and a 2020 analysis found that just "1% of registered actors own 79.02% surface consumption rights," which the authors term as an "abysmal" level of inequality. While water prices for consumers in Chile are the highest in all of Latin America, mismanagement and deregulation have led to public health emergencies, and the nation has suffered from a decade-long "mega-drought" worsened by climate change.

But all of this could change if the Chilean people vote to adopt the newly drafted constitution, which focuses less on corporate profits and more on the well-being of the people. The current draft of the constitution would increase labor force participation by requiring gender parity, breaking up corporate monopolies, and establishing government offices that would create a social safety net ensuring more robust economic inclusion for low-income populations.

While the new administration in Chile is not perfect – and its new constitution is still highly contested before a Sept. 4 public vote – it’s a major step forward from the neoliberalism of the past four decades. If there's anything the U.S. can learn from Chile's shift away from trickle-down economics, it's that leaders can only prioritize wealthy people and corporations for so long before the people rise up to demand significant change.