Has Chile missed it’s window for education reform?
While the Bachelet administration was not directly discussed during our plethora of meetings in Chile, the shadow of socialism and redistribution as a response to growing inequality in the country is a theme that was clearly articulated by MIT alums on the final day of our visit.
The Chilean economic miracle, a combination of the commodity supercycle, capital friendly policy, small government and strong institutions forged a shining light of a nation in South America. Chile tripled real income levels over a three decade period starting in the 1980s, dragging swathes of its population out of poverty and into the middle class. GDP per capita on a PPP basis is $22,353, placing the country atop its South American peers and on a level akin to Southern and Eastern Europe.
While Chile has undertaken a world class approach to managing its natural resource revenues, it faces a stark future of muted growth and economic uncertainty. The moderation of the Chinese infrastructure development spree and a projected end to nearly two decades of rapid resource consumption has signalled an end to the two decade long commodity supercycle. The rise of China, like the rise of the United States before it is a one of window of unprecedented consumption and growth that is unlikely to repeat itself until India develops in the coming decades. China’s voracious appetite for copper, used primarily in wiring and electronics, while ever present, is unlikely to hit the highs of the 2000s. This means, that despite good organization and planning, Chile is unlikely to enjoy the bumper wealth it has enjoyed riding this rise and is set for several lean years.
In is in this context that Michelle Bachelet’s callous decision to raise taxes with a primary goal of funding the country’s failing public school system. These taxes, leveled against foreign investors and Chile’s middle class are ill timed against the backdrop of the projected sustained economic difficulties. Taking aside the long term implications of this anti foreigner and anti free market stance, this wrong footed policy may not be able to generate the needed tax dollars required. Moreover, Bachelet’s decision to overhaul Chile’s voucher system that allows lower income students to attend better private schools in favor of redistributed resources towards mass enrollment of the Chile’s poor into unionized state funded schools. As Chile’s education minister Nicolás Eyzaguirre surmised, “What we have now is one competitor . . . with skates going at a high speed and the other barefoot.” “The barefoot one is public education. I have been asked why not provide better training and more food to the one going barefoot? First, I have to take away the skates of the other.”
This policy of a goal of collective mediocrity of the poor appeals to notions of fairness but flies in the face of both timing and what Chile needs at this present time. A system that allows the best and the brightest from Chile’s poorer demographics is what is needed to increase social mobility and allow the overall pie to grow. That said, even if this broken policy is reversed, Chile’s time to heavily invest in its education system may have fettered away. WIth leaner times on the horizon, will there be a sustainable stream of money to push through education reform demanded by Chile’s next generation?