A chilly Chilean lesson

I have been interested in following the news from Chile.

Most recently, I found this very interesting essay by Avel Kaiser in the Jan 1 Wall Street Journal. An excerpt:

Latin America’s freest, most stable and richest nation—is in free fall. Public order has collapsed, violence is rampant, and populism is the new creed of the political class. 

There is a recession, characterized by capital flight and rising unemployment...
It took a mere 40 days for the Latin American “oasis”—as President Sebastián Piñera called Chile not long ago—to vanish. How a stable and prosperous Chile fell so dramatically in such a short period is a lesson for every Western democracy. 

Coordinated protest groups destroyed almost 80 subway stations, bringing Santiago’s public transportation to a halt. Rioters attacked public and private property. 

...The economic pain started with the antimarket reforms of the previous government under Socialist President Michelle Bachelet, 

The policies result from a profoundly false narrative Chilean elites tell themselves about the country. Over the past 20 years, intellectuals, media personalities, business leaders, politicians and celebrities in this Latin American nation have marketed the myth that Chile is an extreme case of injustice and abuse. It began at the universities, where progressive ideologues spread the idea that there was nothing to feel proud about when it came to Chile’s social and economic record...“neoliberalism” had created a society of winners and losers in which neither group deserved the position in which it found itself. 

... Even Mr. Piñera, a billionaire, accepted the basic premises of the progressive elites’ narrative. In his first term he raised taxes to address what he called one of Chile’s main problems: inequality.  

Chilean elites are waging a sustained war against law enforcement. Many police officers don’t dare act for fear of sensationalist media coverage and punishments by courts under the sway of progressive elites. The same is true for the military. 

The free market didn’t fail Chile, whatever its politicians might say, and the state doesn’t lack the means to restore the rule of law. The central problem is that a large proportion of the elites who run key institutions—especially the media, the National Congress and the judiciary—no longer believe in the principles that made the country successful. The result is a full-blown economic and political crisis. Other nations should take note: This is what elite self-hatred can do for you.

My emphasis, and the central point for today. Societies fall apart when the people who run its central institutions no longer believe them worth defending. Sometimes they're right about that -- Soviet Union. Sometimes they're not. The lessons for the rest of us are obvious. 

Easier coverage of the swift decline include Mary Anastasia O'Grady in the Wall Street Journal last October 27:

left-wing terrorists savaged Santiago and cities around the country with violence. 

This happened in a nation that, as the newspaper La Tercera reported on Oct. 5, has seen the poverty rate fall below 9%, down from 68% in 1990. Income inequality has also been coming down. 

On Saturday over a million demonstrators poured into the streets of Santiago to voice grievances—reportedly everything from the high cost of living to income inequality and climate change. 

Yet it is unlikely that the eyes of the world would be on Chile if not for the perpetrators of violence, who took advantage of the moment to wreak havoc and demand a new constitution 

But the hard left has spent years planting socialism in the Chilean psyche via secondary schools, universities, the media and politics. 

Even as the country has grown richer than any of its neighbors by defending private property, competition and the rule of law, Chileans marinate in anticapitalist propaganda. The millennials who poured into the streets to promote class warfare reflect that influence. 

The Chilean right has largely abandoned its obligation to engage in the battle of ideas in the public square. Mr. Piñera isn’t an economic liberal and makes no attempt to defend the morality of the market. He hasn’t even reversed the antigrowth policies of his predecessor, Socialist Michelle Bachelet. Chileans have one side of the story pounded into their heads. As living standards rise, so do expectations. When reality doesn’t keep up, the ground is already fertile for socialists to plow. 

The violence has another explanation. To chalk it up to spontaneity requires the suspension of disbelief. As one intelligence official in the region told me Friday: “It takes a lot of money to move this number of people and to engage them in this level of violence.” The explosive devices used, he said, were “far more sophisticated than Molotov cocktails.”

Writing Nov 3, she adds

Negotiations with terrorists and their political representatives seldom end well. Yet that’s what Mr. Piñera seems to have in mind. He has opened the door to rewriting Chile’s Constitution to meet the demands of socialists, communists and others on the left.

The new constitution is apparently happening. This may be the Estates General all over again.

If Latin American history is any guide, a constitutional rewrite will strip away political and economic rights, concentrate power and leave the nation poorer and more unjust.

Mr. Piñera has agreed to talks with the “citizens” whose interests are presumably represented by the firebombers and looters. Last week he announced that he would not rule out any “solution” or “structural reform.” On Wednesday government spokeswoman Karla Rubilar, with regard to a new constitution, said “there is nothing written in stone.”

It's hard to think of a case that introducing profound changes to a country's order in response to mobs has worked out well. Some revolutions end well, ours. Many do not. Some old orders were worth preserving. Some were not. But the mechanism has been seen many times before.

This is a stunning surrender and it is hardly surprising that it seems only to have whet the appetite of the radical left.

What isn’t debatable is the economic gains, across the board, that the market model has created. Less than 9% of the nation now lives below the poverty level. In a 2018 Organization for Economic Cooperation and Development report titled “A Broken Social Elevator? How to Promote Social Mobility,” Chile stands out for its social mobility.

Yes, some say that young Chileans don't know history. But can they not see Argentina,  Venezuela, Cuba? Can they really believe the same medicine will work for Chile, if only different doctors hand it out?

Update: Thanks to @Shekhar_HK17, here is a somewhat different view on the inequality question from Sebastian Edwards. Excerpt:

Chile’s Paradox

The data discussed above shows a (relatively) positive picture. But, behind these rosy figures, there is a big paradox: While conventional indicators show a significant decline in inequality, the perception among Chile’s citizens is that inequality has greatly increased—See Figure 4. 

This contrast between “reality” and “perception,” constitutes “Chile’s paradox.” There are three possible explanations for it: 

The first is that we are talking about two different meanings of “inequality.” While most economists focus on “income inequality,” as measured by the Gini, the people are talking about a broader concept, one that includes quality of life, social interactions, access to basic services, the nature of interpersonal relations, and the degree of “fairness” of the political and economic systems.

Second, it is possible that people don’t realize that conditions have greatly improved. It is conceivable that the narrative about the county’s social and economic trajectory has been captured by the left and by the critics of “neoliberalism.” This is a “veil of ignorance” type of argument. 

The third possible explanation is that people recognize that there has been progress, but believe that things are moving too slowly. This is an “impatience” argument that compares reality with aspirations. The disconnect between the two is captured vividly by the privately run pensions system. While people expected—and were promised—a high replacement rate, this has been, on average, a very low 30 percent.

Which of these three possible explanations is correct? As in the old SAT question, the right answer is “all of the above.”

I still resist the nostrum, passed around as known fact, that "inequality" produces social and political discontent. It's really hard to see inequality. It is a problem of statistics, not of daily life. The perception of inequality -- what we used to call envy -- and "inequality" as a political slogan is a powerful force to be sure.

The puzzle is that every income class in Chile has gotten better off than their counterparts in other Latin American countries.  Why would they want to go back to I get poorer but you get poorer still so we are less unequal?