Toxic inequality

It would be surprising if there weren't protests on the streets of Athens, Madrid or New York. Punishing economic hardship should be enough to convert millions of the resigned into the indignant. But learning that some of those responsible for the crisis are now profiting from it sparks a natural human response: turn off the television and take to the streets in protest. That is easy to understand. What is harder to understand is why this is also happening in Chile. And why does it matter if the streets of Chile are filled with protestors? It is a small and remote South American country that has very little impact on anywhere else. That may be true, but understanding events in Chile provides some useful clues to the nature of the wave of protests that we are seeing in other countries around the world.

Start with a fundamental paradox: the Chileans should be celebrating, not protesting. Theirs is one of the most successful countries in the world. At the end of the 1980s, 45 percent of its population was living in poverty. Today that figure is 14 percent. After two decades of rapid economic growth, more jobs and higher salaries have contributed to social improvements. What's more, inflation, which always hits the poor hardest, has fallen from 27 percent in 1990 to three percent today. Any European nation would envy Chile's macroeconomic figures. And in any ranking of nations on corruption levels, human development, international competitiveness, economic freedom, connectivity and many other issues, Chile is always among the top placed (and always number one in Latin America).

And yet... for the last few months, there have been protests in the streets. They started under the previous administration, presided by Michelle Bachelet, and continued after the opposition won the elections and is now in government. Initially, the protests were organized to stop the building of a dam. Then the movement escalated into massive demonstrations in protest at the low quality and high cost of education.

During a recent visit to Chile I had the opportunity to ask President Sebastián Piñera about the paradox of the country's economic success and its social unrest. "I understand the students' reasons for protesting," he told me. "Chile focused on providing access to the education system to as many new students as possible as rapidly as possible. In the process, quality suffered. And there is also a problem with the costs of education and what share of them should be covered by the state."

Piñera has substantially increased education spending, and is trying to reform the system. But the president is also aware that Chileans' unhappiness extends beyond the education system. He is correct. According to the Latinobarómetro survey, Chile is the Latin American nation where people feel most strongly that they are not progressing. It is also the country with greatest disappointment over how its democracy works, with a sharp falloff in support for its economic model. How come?

Needless to say, history, politics, politicians and personalities are a big part of the explanation. But two other factors also clearly emerge: the rapid growth of the middle classes and economic inequality. The growth of the middle classes creates demands at a pace and of a nature that few governments can adequately satisfy. Building a school or a hospital is much easier than improving the quality of education or healthcare. Chile's middle class, like middle classes everywhere, expects high quality education and healthcare, right now. One conversation with a Chilean student protester was revealing. "My family has always been poor, but now we belong to the middle classes. But the government is doing nothing for us; it is only interested in helping the poor or the rich, the investors. But for those of us in the middle: nothing."

This way of thinking is also related to inequality. While the disparity between the rich and the poor has fallen in recent years, Chile still suffers from some of the world's highest levels of economic inequality. The subject came up with everybody I talked to during my stay there. It is clear that in Chile, as in other parts of the world, tolerance towards economic inequality is evaporating. Reducing inequality, and fast, has become a national priority in large measure thanks to the students' protests. The country owes them a debt of gratitude for sparking a national conversation on a subject that had been treated with far less urgency than it deserves.

It remains to be seen if the government, the students and the rest of Chilean society are able to make the changes needed to reduce inequality without trading off some of the country's other important achievements. Many other nations face what may well be one of the central challenges of our time.

In the past two decades, Chile has shown the way on how to achieve rapid economic development. I would not be surprised if this small, smart nation also becomes a model on how to fight economic inequality.

I am on Twitter at @moisesnaim