The big question ahead of this year’s presidential election in Chile was whether Chileans were actually fed up with their country’s free-market model, or whether they were satisfied with it, but just indifferent to the ideological debate surrounding it. Up until yesterday’s run-off election, there were mixed signals. However, the decisive victory of center-right Sebastián Piñera over socialist Alejandro Guillier could be interpreted as a popular slap on the back of Chile’s successful economic model.
For nearly 20 years after the return of democracy in 1990, Chile enjoyed a political consensus on its liberal economic system. Successive center-left governments deepened the free market policies inherited from the military dictatorship, with evident success: Chile became Latin America’s most prosperous country. However, the free market consensus began to fray late last decade. Driven by massive student protests that demanded more government intervention in education—including universal free tuition in higher education—certain sectors of the erstwhile moderate center-left coalition began to openly question the free-market model. The first spell in opposition of the center-left coalition after the return of democracy in 2010-2014 (Piñera’s first term as president) consolidated this transformation.
When Michelle Bachelet became president again in 2014, her new left-wing coalition included for the first time the Communist Party, which now wields a lot of influence within her administration. Even though Bachelet’s platform called on simply softening the rough edges of the free-market model, some leading members of her coalition openly said the ultimate goal was its dismantlement. Bachelet’s thumping victory in 2013 (with 62.2% of the vote in the run-off and majorities in both houses of Congress) was interpreted as Chileans embracing much more government intervention in the economy. Surely so, in her second administration, Bachelet successfully pushed legislation raising taxes sharply on corporations, empowering unions, introducing new entitlements, and weakening the country’s mostly privately-run education system. In addition, the “No más AFP” movement—calling for an end to Chile’s private pension system—reached a critical mass, congregating tens of thousands of people all over the country in well-publicized protests. Chileans were reneging on their free-market model…
But, were they? Despite the wide margin of Bachelet’s victory in 2013, turnout in the runoff was only 43%. This was the first presidential election in which voting was voluntary—and Bachelet actually received less votes than in her first election in 2009. Some Chilean scholars, like Luis Larraín of Libertad y Desarrollo, a leading think tank, pointed out that surveys showed that a majority of Chileans were satisfied with how things were going in their lives. Moreover, they expressed a preference for policies that emphasize individual responsibility over government assistance. And even though Bachelet was able to pass her reforms in Congress, her government’s popularity plummeted—partly as a result of a corruption scandal that implicated her son.
Economic growth also plummeted. Whereas the economy grew on average 5.3% annually in 2010-2013, since 2014 growth averaged only 1.9% per year. Private employment collapsed and informality rose significantly. “Businesspeople are on the other side of the Andes waiting for the election,” an Uber driver in Santiago told me in October, referring to the lack of investors’ confidence in the policies of the current administration.
However, despite the fact that polls indicated that Sebastián Piñera was the overwhelming favorite to win back the presidency, he underperformed in the first round of the election in November, receiving only 36% of the vote. More alarmingly, nearly half of voters casted votes for either left-wing or radical left-wing candidates. There again rose the perception that Chileans were indeed turning their backs on the free-market model…
After yesterday’s result, there are good reasons to believe that this is not the case. Guillier moved sharply to the left in the campaign leading to the runoff. It is safe to say that this is the first time that the leading candidate of the leftist coalition used such radical rhetoric against the free-market model. (He even rose eyebrows when he finished a high-profile speech with Che Guevara’s infamous line “Ever onward to victory.”). It is also telling that the turnout in yesterday’s runoff was higher than in the first round in November—actually, it is the highest since voluntary voting was introduced. This indicates that many Chileans believed that there was a lot at stake in this election. It is reasonable to believe that many Chileans who were previously uninterested in the presidential race decided to vote in the runoff when they perceived that Guillier meant to double down on Bachelet’s failed economic policies.
Despite this, Piñera is hardly champion of free-market policies. In his first term as president, he raised taxes on corporations and introduced a multitude of subsidies and transfers. His effort to steal the left flank of the center-left coalition on social policies only pushed if farther to the left. Piñera already announced that he does not intend to reverse Bachelet’s reforms.
Chileans might have dodged a bullet with Gullier, but Bachelet’s harmful economic legacy will stay on.