How neoliberal reengineering has incapacitated the Chilean state as multidimensional public service provider
MINT025 – State-building and War-Making in the Developing World
M.A in Development Studies (MDEV)
December 2021, The Graduate Institute Geneva
Word count: 3899
The Estallido Social
On October 18, 2019, Chile awoke – #ChileDespertó. Damaged public infrastructure including 118 metro stations and clashes with the armed police and military marked the violent peak of a series of protests that had started in Santiago de Chile at the beginning of the month (Selman, 2021). Reacting to a public transport fare rise on October 6, students were first to start protesting and ultimately evading payment in metro stations, causing disturbances in those. Met by police violence and repression, the protests escalated and took to the streets on October 18 with all generations becoming involved in what is considered Chile’s wake up to the failed “promise of democracy and a dignified life […] [caused by] the forced deepening of neoliberalism and its violent malaises” (Arias-Loyola, 2021). The protests, named Estallido Social (literally translated as social outburst), were now directed against the elite-ruled government and the neoliberal system promoted by them, which had eroded and crumbled the pillars on which Chileans were trying to build their lives. This became even clearer on October 25, when more than 1 million Chileans came out to peacefully protest in Santiago alone, constituting the largest protest since the end of the Pinochet dictatorship (Caroca Soto et al., 2020). The grim record of at least 26 fatalities, 1,938 victims of firearm induced injuries, and 134 cases of alleged torture, points at a level of violence that was thought to be unimaginable in the region’s most stable and prosperous country (Amnesty International, 2020, OHCHR, 2019, Milanovic, 2019). Chile had been considered for long the “poster child for international organisations”, especially by following internationally encouraged liberalisation and macroeconomic reforms and by becoming the first South American member of the OECD (Ferreira & Schoch, 2020). By referring to the “core functions of the state”, this paper discusses how the 2019 Estallido Social could be viewed as the consequence
of the erosion of state legitimacy and the disenfranchisement of the citizenry (Ghani et al., 2005).
One could argue that as more people mobilised over the course of the protests, more claims were added that concerned long-standing issues at that point, namely unequal access to education and unreliable social security and healthcare provision. This ultimately amounted to a complete rejection of the neoliberal system as well as of the constitution that was holding it in place (Ansaldi & Pardo-Vergara, 2020). Giving in to the demands of the people, the multi-party “Agreement for Social Peace and a New Constitution” proposed a referendum giving the population a choice between reaffirming the constitution inherited from the Pinochet dictatorship or drafting a new one (Negretto, 2021). With the overwhelming rejection of the 1980 constitution in October 2020, Chile entered a constitution-writing era. After a second referendum on the type of constitution-writing body1, Chile voted a constitutional assembly in May 2021 that is currently drafting the new constitution (Ibid). Constitution-making can play an important role in state-building, but the ongoing and recent nature of this in Chile requires research that goes beyond the scope of this paper (Wallis, 2014). Therefore, this paper will not discuss this further, but contents with pointing to highly relevant research avenues in this case such as the post-social-conflict context of this process in Chile and the way Covid-19 has influenced the actions of both the state and society in these politically turbulent times. Still, there are two particularities of the constitutional assembly that are of concern in this paper, which are the 17 legally required seats for indigenous people and the
1 For a more detailed overview and analysis of the constitution-making process triggered by the “Estallido Social”: (Negretto, 2021).
fact that the assembly is led by Elisa Loncón, a Mapuche linguist and indigenous rights activist (Negretto, 2021; Bell, 2021).
The Mapuche are the largest of Chile’s nine indigenous peoples and together they make up 12.8 percent of Chile’s total population (IWGIA, 2021). Being the only South American country that has not yet constitutionally recognised its indigenous people, Chile’s history from an indigenous perspective is one of intense struggle, spanning from colonialization by the Spanish to the anti-terrorist state of emergency declared in October 2021 in the Araucanía region (Lublin & Rodriguez, 2020; BBC News Mundo, 2021). However, the “Estallido Social” protests may have changed the dynamics around the Causa Mapuche, not only by providing the opportunity to write a new constitution, a process presided by a Mapuche woman but already during the protests themselves. The omnipresence of Mapuche flags during the protests, a Mapuche ceremony altar in the main square, and street art of prior violence against Mapuche2, showed how the Mapuche’s struggles quickly became a central theme of the protests (Bartlett, 2020; Rodriguez, 2019).
This paper will analyse in which ways the Chilean state expanded and/or retreated since the introduction of neoliberalism under the dictatorship of Pinochet. It is discussed how state legitimacy defined as “the acceptance of [the state’s] right to rule in a given domain” may be compromised by the neoliberal agenda that has governed public services since then (Ciorciari & Krasner, 2018). This paper is mainly built on the theoretical framework advanced by Ghani, Lockhart, and Carnahan which conceptualises the state as a “multidimensional” service
2 The killing of Camilo Catrillanca has become the symbol of state violence and repression in Chile (McGowan, 2021; Bartlett, 2020).
provider (2005, p.6). Their argument centres around ten core functions of the state and how enhancing them could prevent the decoupling of the state from its citizenry. In light of the popular demands that emerged during the “Estallido Social”, the following will concentrate on two core functions: “investment in human capital” and “provision of infrastructure services” (Ibid, p.6).
The provision of services, state capacity, and state legitimacy during the Pinochet dictatorship
On September 11, 1973, the presidency of Salvador Allende (1970-1973) was ended by a military coup d’état which established the dictatorship of Augusto Pinochet, commander-in-chief of the Chilean Army at that moment and protagonist of the coup. The failure of the new regime to steer the economy away from catastrophic failure3 saw a group of Chilean economists take over, who administered a series of neoliberal policies by ‘shock treatment’ (Arriaga, 1988, p.19). They are known as ‘Chicago Boys’ because many of them completed their PhDs at the economics department of the University of Chicago, where they were exposed to the neoliberal economics and theories of Milton Friedman and Friedrich Hayek. Nominated by Pinochet in 1975 to positions such as Minister of Finance and Minister of the Economy, they initiated a radical transformation of the Chilean state and society through economic policies. They fully reversed the ‘socialist’ nationalisation process which had reached its peak under President Allende and advanced the privatisation of banks, public service providers, and entire industries at an unseen pace. Just before the coup d’état, the Chilean state was in control of over 400 companies, but by 1980 that number had dropped to
3 Chile’s inflation rate at the end of 1974 was still at 375% and the country was running on a 32% deficit (Brender, 2010, p.120; Arriaga, 1988)
45 constituting the first round of privatisations (Meller, 1996, p.186). This was as much a political project aimed at ending the socialist era in Chile as an economic neoliberal project (Serra, 1998). The welfare state, with public services such as social benefits and food subsidies at their high under Allende, was abolished or sold off to the private sector, supposedly a more efficient provider. Via the infamous constitution of 19804 this neoliberal project was set in stone “constructing [a] privatopia” (Couso, 2017). The constitution, which was adopted via a national plebiscite (under the authoritarian rule), sought to “prevent a future return to state control, expand and strengthen property rights [and] restrict the role of the state in the economy […]” (Budds, 2013, p. 307). This is a key moment in Chile’s history, where the state was to a certain extent constitutionally subordinated to global market forces, ultimately becoming the breeding ground of the “Estallido Social”.
The loss of state legitimacy and the consequences of the liberalisation were first felt during the economic crisis in 1982-1983, stalling the neoliberal project for a moment (Clark, 2017). In addition to the withdrawal from most welfare state activities, the state was now failing to ensure the functioning of the economy as it had relinquished control over foreign trade, its finances, and currency to the market5 (Clark, 2017). The promise of a growing economy providing everyone with sufficient income to become satisfied consumers in the market was failing. As people took to the streets, the loss of state legitimacy became evident but was not fatal to the authoritarian regime given the repressive power of the state at that time (Taylor,
4 (Alemparte, 2021); (Heiss & Navia, 2007); (Heiss, 2017)
5 There is a greater degree of complexity to the economic crisis of 1982-83, but there is a consensus that the market-based policies were not working/did not prevent the crisis they should have (Meller, 1996; Hruzik, 2015; Montiel, 2014).
2006). As a response to the crisis, the regime increased state control over the economy, effectively engaging again in the “management of public finances”, and the IMF and World Bank stepped in as foreign interveners (Ghani et al., 2005; Meller, 1996). By bailing out banks and financial institutions, the state effectively regained control over more than 50% of the financial apparatus and by extensions over some of the largest companies in the economy (Brock, 2000). At the same time, the IMF and the World Bank rushed in to save the apparent poster child of neoliberalism by providing billions of US dollars in debt relief and loans (Boughton, 2001). Both the repressive power of the state and the foreign financial intervention were crucial in limiting the fallout of the loss in state legitimacy, due to the incapacity to ensure the functioning of the economy. As Silva (1996) notes, Pinochet “insulated key policymakers from virtually all pressure groups […] by giving [them] […] unconditional backing in the context of a highly repressive authoritarian regime” (p.306). The increase of state control in the economy however was quickly reversed by a second wave of privatisations in 1984-1985. A third wave of privatisations from 1985-1989 then mainly affected basic utilities such as education, health, electricity, and water, which was enabled primarily through the 1980 constitution (Budds, 2013).
It seems that under Pinochet and the Chicago Boys the state effectively withdrew from the economy and the public sphere regarding the provision of public services. This perspective suggests a reduced state capacity and reach given that “the Chilean state gradually delegated its legitimate power of intervention [in the economy] to market mechanisms” (Pflieger, 2015). In 1989, 42% of Chileans were living in poverty, 12% in extreme poverty, and there was a 20% drop in the calory intake of the poorest 20% compared to 1969 (Schneider, 1993). The rising inequality during the same period indicates a clear division between those benefitting from
the neoliberal dictatorship and those losing out on all fronts (Ibid). The state constructed under Pinochet was stripped of its capacity to ensure decent livelihoods for a large part of its population. Simultaneously, the neoliberal restructuring intentionally benefitted and reinforced the position of a business elite composed of the regime and the Chicago Boys themselves plus those close to them (Silva, 1991). The privatisations were an extremely effective tool to dismantle parts of the state and transfer their wealth directly to certain individuals, whose private property becomes untouchable under the 1980 constitution. Many of those privatisations were identified as “controversial privatisations” as they essentially constituted the under-priced selling off state assets to individuals that were running the state or close to it (Prem et al., 2018). The repressive power of the authoritarian regime but also the external support from the international community made the effects of the before-mentioned practices on state legitimacy invisible. Disregarding the conditions under which the neoliberal policies supposedly worked, Chile was considered an ‘economic miracle’ because of its economic growth and the international community, especially the World Bank and the IMF were ready to implement the Chilean ‘model’ elsewhere (Taylor, 2006). It is beyond the scope of this paper to discuss the degree of complicity and premeditation of Western actors (i.e., United States, World Bank, IMF, …) in setting up and ensuring the continuation of the dictatorship, but there is no denying that they played a role.
Entrenching the business elite and the transition into democracy
In order to connect the “Estallido Social” to the dictatorship, it is important to understand that the entrenchment of a powerful business elite is one of the main consequences of the state restructuring during the dictatorship. The previous paragraphs have illustrated how the protagonists of the authoritarian state-building process created this business elite through
privatisations and hinted at the constitutional protection it enjoys. The neoliberal project of the dictatorship is one of “creative destruction” where “established institutions are destroyed through a state-led programme of social engineering in order to lay the foundations of a new society” (Taylor, 2006, p.69). This reengineering of society where both the state and the society are subordinated to market mechanisms is extremely “durable” given its depoliticising nature. The market is considered a neutral intermediary that perfectly allocates resources between interested parties, which meant the failure of the state to execute its core functions was no longer a state failure but was understood through a market failure logic (Navarrete-Hernandez & Toro, 2019). This at least partially severs the relationship between the state and society and therefore the concern with state legitimacy may be decreased regarding the public provision of services. Furthermore, the business elite who had purchased the state’s means to execute some of its core functions was shielded by the same logic. According to it, the predatory behaviour of firms, constituting in the extraction of large rents from basic utilities such as water and electricity, for example, was considered a market failure and outside of the state’s reach. Indeed, the sacred status of private property in the 1980 constitution enables that behaviour to persist up until today. It is especially the privatisation of basic utilities that started a self-perpetuating accumulation of power in hands of the business elite. Budds (2013) describes this succinctly by tracing the “reworking of water” in Chile:
The neoliberalisation of water thus changed the social relations of control over water and drove neoliberal economic development. This is reflected in the expansion of mining, export agriculture, and hydroelectric power through accumulation of water rights, as well as the participation of these sectors in the vigorous defence of the Water Code against major reform.
This, in turn, not only transformed livelihoods, identities, and landscapes throughout Chile, but also reinforced the linkages between economic and political power. By reworking water, the economic effectiveness of neoliberalism strengthened the positions of its core supporters […] (p.314)
Return to democracy and compromises
The plebiscite of 1988 where the Chileans voted against the continuation of the dictatorship, the prior eruption of protests, and the organisation of a political opposition however showed that the depoliticising neoliberal project was not completed entirely. The discontent with the dictatorship itself and its vision of the state and society was high enough to rally the courage of over 50 per cent of voters, who voted against Pinochet whilst still living under his authoritarian rule (Constable & Valenzuela, 1990). The relatively smooth evolving of Chile’s return to democracy is another key moment that advances the understanding of the origins of the “Estallido social” and the demands for a new constitution. When focussing on potential changes to the state as a provider of services, the transition from the dictatorship back into democracy can be characterised as an event where the priority to eliminate as many authoritarian elements as possible prevented a more radical change in the neoliberal logics that were deeply embedded by then (Uggla, 2005). The democratic coalition who negotiated the transition with the Pinochet regime had to heavily compromise which “left both the institutional order and the economic features intact” (Budds, 2013, p.310; Uggla 2005). Furthermore, the outgoing regime was actively consolidating its legacy by negotiating concessions that made reforms of the 1980 constitution harder and limited the power of the following governments. This can be considered the ultimate strategic move to ensure the longevity of neoliberalism in Chile and consequently further entrench the power of the
business elite and in general of those who own capital. During the 17 years of dictatorship, Pinochet and his economic advisors managed to partially re-engineer the state, the society, and the relationship between them, by inserting an extremely powerful neoliberal logic. The subsequent thirty years leading up to the “Estallido Social” can be seen as a period, where governments, now mostly run and/or greatly influenced by business elites (some with historic ties to the dictatorship; cf. following paragraph), were reluctant to reintroduce the classic welfare state but had less repressive means to dampen the discontent in the population (Fisse & Thomas, 2014; Sahd & Valenzuela, 2017).
Disenfranchisement and resistance
During the past thirty years, Chile has experienced several larger protests and as the following shows, these can be connected to the failure of the state as a service provider and to the lack of protection it offers against predatory and dispossessive behaviour of private companies. Student-led protests have a long-standing history6 in Chile (including activism under Pinochet), but two major manifestations of discontent with the Chilean state as an education provider must be mentioned separately: the “Penguin Revolution” of 2006 and the “Chilean Winter” (2011-2013) (Smith, 2019). In what was considered the largest protests since the return to democracy, secondary school students (their black and white penguin-like uniforms inspired the name) protested for weeks against the 1980 Organic Constitutional Law of Education (Cabalin, 2012). It enabled the for-profit behaviour of (semi-)private education providers to the detriment of the students, whose education and future opportunities became largely dependent on the income of the household they were born into. Given the
6 Overview in the LSE blog post by Smith (2019)
governmental reluctance, many of the same students took to the streets again five years late, now as university students, and demanded the end of for-profit (higher) education provision. The Chilean Winter, as the seven months of protest were called, was emblematic of the deep-rooted political contradictions that were making up the Chilean state because the Minister of Education Lavín at the time was both the owner of a private university and one of the Chicago Boys (Ibid). The limited successes of these two major protests point once more to the persistent reengineered version of the state in Chile and how the business elite including the Chicago Boys have permanently positioned themselves to continue shaping the state in their favour (Davies, 2019). There is a plethora of accounts that bear testimony to everyday struggles of people in Chile trying to access basic services such as healthcare and water supplies7. When looking behind the macroeconomic trends that make Chile a ‘success story’, the “loss of trust between citizens and state, the delegitimization of institutions [and] the disenfranchisement of [a large part of] the citizenry” become evident (Ghani et al., 2005, p.9). Manifestation of discontent and indicators of damaged state legitimacy are numerous to the point where “hardly a day goes by without someone marching down the Alameda [main avenue in the capital Santiago]” (Long, 2011).
Parallels with the struggles of the Mapuche and the future
Before concluding, this paper intends to provide an outlook on the current developments in Chile by briefly looking at the relationship between the Mapuche and the state. The Mapuche’s have been resisting the neoliberal reengineering attempts with far greater intensity than the non-indigenous population (Krausova, 2019). After the attempted
7 (Bonnefoy, 2016); (Parra, 2021); (Fraser, 2019)
colonisation by the Spanish and the military occupation by the Chilean state (Pacification of the Araucanía 1861-1883), the more recent land dispossessions and privatisation attempts related to the growing and subsidised forestry industry continue to marginalise the Mapuche (Lublin & Rodriguez, 2020; Funk 2012). The privatised land and water rights constitute rigid structural obstacles to the Mapuche’s claim for their ancestral land and have effectively prevented the recognition of their rights as indigenous people8. Furthermore, by using Pinochet’s anti-terrorism law (1980 constitution) and state of emergency declarations, the Mapuche’s resistance had for long been met with the levels of violence that were witnessed during the Estallido Social (Krausova, 2019). It seems that during the Estallido Social, many realised these parallels and became aware of the existential threat that is a by-product of the neoliberal reengineering that had begun under the dictatorship. Although in no way comparable, the state’s failure to ensure access to the most basic utilities such as drinking water may have triggered the same sense of urgency for change in a large part of the Chilean population than was already felt long before by the Mapuche. Considering the constitutional assembly led by Elisa Loncon, the indigenous representation within it and the newly elected Chilean president Gabriel Boric9, who was one of the student leaders of the “Chilean Winter”, “newfound solidarity between the Mapuche and disaffected Chileans” might lead major changes in the Chilean state (Krausova, 2019).
This paper has attempted to analyse one of the simmering and underlying triggers of the Chilean Estallido Social by adopting Ghani et al.’s theoretical lens of the state as a
8 As defined in the ILO Convention 169, which Chile ratified (Richards & Garner, 2013).
9 The election results of the second round were officially declared on December 20, 2021 (Bonnefoy & Londoño, 2021).
multidimensional service provider. From this perspective, there are various indications that the state in Chile, led and controlled by a business elite, has become detached from its citizenry by pushing an aggressive neoliberal agenda. The student protests, the Mapuche’s struggle as well as the resistance during Pinochet’s dictatorship are a non-exhaustive list of examples that predated the social outburst of 2019. Rather than calling it a neoliberal experiment, this paper and many of the sources corroborate the idea that both the Chilean state and by derivation society have been purposefully reengineered by and to the pleasing of a powerful elite. This is a highly complex and ongoing process, which is why the author would like to acknowledge a few limitations of this paper. The politics of the past thirty years were largely ignored here, but the past thirty years saw different political parties from the right and left taking control over the state. Arguably, however, when looking at the resistance (indigenous and student-led) against the state’s neoliberal functioning, the differences between the legislative periods do not compromise this analysis. Furthermore, the decision was taken to concentrate on the lasting impact of the dictatorship and less on the efforts that have been made to move away from it. The resounding demand for a new constitution during the Estallido Social and the current constitution-writing process may justify the importance given to the period where the 1980 constitution was installed. Likely the prelude to important changes concerning the Chilean state and society (e.g., plurinational state with constitutional recognition of Chile’s indigenous peoples), the Estallido Social with its triggers, origins, and consequences remains an interesting topic for further research. This paper has shown that the reengineering of state and the resulting incapacitation of the state as service provider to its citizenry is likely to be one of those origins.
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