By Julian Fellerman, B.A. program alumnus.
Insight from Quilpué, Chile.
As the product of the Jackson School, which encourages its students to be “global citizens” and “critical thinkers” regarding issues on the world agenda, I have not been able to help but analyze my surroundings here in Chile with a corresponding mindset. Past academic courses touching on the familiar themes of economic growth, development, industrialization, protecting indigenous rights, among others, have all subtlety influenced the way I view my surroundings here in Chile. The main impetus to writing this piece was the desire to understand “development” from a variety of angles and viewpoints. Along these lines, by way of my current position teaching English in Chile, living with a host-family, casually conversing with people in my town regarding the quotidian matters impacting the lives of ordinary, every-day people, I have been afforded the unique opportunity to gain an on-the-ground perspective of development to contrast with my previous assumptions, the majority of which have been fostered through reading numerous articles and books on the subject.
A prime example that immediately comes to mind comes from earlier this year with one of the students in my ‘English Club’ elective. In preparation for the Chilean Ministry of Education’s English Opens Doors debate initiative we held informal discussions covering a wide range of topics. After posing a question to my kids regarding charities and foundations and their role in impactful change in places like Africa, the topic of discussion eventually steered into territory more relevant to my students: what does it mean to be a Third World, developing country? Taking the question a step further, I asked them about their thoughts on Chile, and whether or not they viewed it as a first world, industrialized country. One student quickly responded without hesitation; “I think Chile is definitely a Third World country.” Amidst head-nods and what seemed to be resounding agreement from the others in the group, he proceeded to explain his rationale.
Frankly, I wasn’t sure how to react. After two years of solid immersion in all things ‘Global Development’ during the latter half of my university stint, I had come to not only associate the term ‘Third World’ with the abject poverty seen in the shanty-towns of Africa, India and Southeast Asia, but also as a term that had lost some of its relevance and could no longer be used to classify countries in the modern, post-Soviet era. Even more so, in preparation for my trip to South America, I had been quite adamant about doing my homework and reading the associated literature. Thus, after some pretty hefty research regarding Chile’s current and future economic prospects, its inclusion as the first Latin American country into the Anglo-Saxon-dominated OECD, as well as high rankings in terms of democracy, rule of law, and business-friendly infrastructure conducive to foreign direct investment, I was operating under the assumption that Chile had realized the elusive ‘pinnacle’ of development, one which is set out and perpetuated by an intricate system of lending and indebtedness between creditors such as the World Bank, Regional Development Banks, industrialized countries, and their debtor counterparts in the rest of the world (the majority of which lay south of the equator). However, after a few months in-country, my current viewpoints have deviated slightly from those I was harboring at the outset.
After stumbling upon this revelation, I began to view my surroundings differently. Starting with my own backyard – Quilpué – the town in which I’m currently living has plenty of industry, exemplified by a bustling city center and pockets of noticeable wealth in a few neighborhoods; yet, it also has more than its fair share of poorer, destitute sectors which comprise a sizable part of the outlying metro area. I’m now reminded of this on my walk home from work every day, where I pass El Retiro, one of the nicer, safer neighborhoods of the city lined with aesthetically-pleasing houses, manicured lawns, and expensive, foreign-manufactured cars in the driveways only to walk a half a kilometer further and see rows of rinky-dink shacks lined up near a small stream, bordering the countryside and number of abandoned warehouses.
Beyond the intra-city level, another aspect which has caught my interest is the relationship between Santiago, the sprawling, capital-city metropolis and the rest of the country. If one were to create a “Development 101” course, included in the curriculum would certainly be the relationship between a country’s administrative center, or its core, and the rest of the country, often referred to as the periphery. The idea is that as a country begins to develop its industry and advance its economic prosperity, inevitably certain demographics begin to benefit more than others, and a disparity in wealth and income distribution occurs. More often than not, pockets of wealth accumulate in the larger centers of industrialization and commerce, i.e. cities, while rural areas are generally omitted from this progress.
Now, I would be among the first to say that any economic progress, albeit only in certain areas, is better than absolute poverty all around. Especially with the proper political institutions in place, this new economic capacity could effectively be leveraged in order to redistribute wealth in a more equitable fashion. However, this theory usually remains a theory, and looks entirely different in operation. In the case of Chile, Santiago has become a bastion of finance and commerce, and accordingly, has become the gateway for foreign capital not only into Chile, but the whole of South America. Buoyed by copper exports, the Chilean economy has managed to utilize a surplus in its natural resource sector to diversify other sectors of its economy, most notably financial services and materials & processing. As such, the Chilean economy has a low level of unemployment and growth prospects that would make any European periphery country green with envy. However, the reality of the white-collar executive in Santiago is not necessarily the same as the fisherman in Coyhaique, and what may be beneficial for the former may not be for the latter.
This is where the oft-heard phrase in development literature comes into play: “Industrialization and its Discontents.” Although I personally am of the belief that industrialization is a crucial element of economic growth, and that the entire doctrine of modern capitalism implies that there will be winners and losers in any case of even slight economic progress, as it is this competition between firms and companies that creates the foundation for growth, and maintains market efficiency. And, I firmly believe that it is the government’s role to manage and oversee the economy in a way that mitigates any possible negative externalities associated with the free-market capitalist model. The universal solution to this has been the creation of the modern welfare state: however, within the parameters of this essay, I’d like to focus on the protection of environmental and indigenous rights. In Chile, there is at present an overwhelming detachment between what is happening in Santiago and what is happening in the rest of the country, namely rural areas with special neglect of the Chilean South. Currently, Chile has seen a wave of protests with the slogan “Patagonia Sin Represas,” a movement which has materialized in order to challenge a motion to build a sprawling network of five hydroelectric power plants in one of the most ecologically, environmentally, and culturally significant places on earth. The HidroAysén project has been fully endorsed by the current administration led by President Sebastian Piñera, which helped to facilitate a joint-venture between Endesa, the Spanish-Italian energy conglomerate, and Colbún S.A, a Chilean utility company to secure the necessary investment and capital to finance the project. On one end, the project will supposedly help maintain Chile’s current rate of economic growth by providing the necessary energy infrastructure needed to support said growth; on the other hand, a number of studies point out that it will very likely displace thousands of nearby indigenous, fishing, and agricultural communities, as well as have dire consequences for the swath of Chilean Patagonia in which it is being constructed.
I will be the first to stand by the importance of a “pro-business” mindset in advancing the livelihood of a country and its citizens. I do maintain the belief that the concept of finance does in fact serve an invaluable role in allocating capital efficiently across market segments to provide support and enable firms and companies to grow and achieve larger scale. However, the realm of finance often does not adequately take into account the real world outside equity markets, with a precedent that encourages managers to pick securities and shares which maximize returns for investor portfolios whether or not the returns come at the expense of a minority group or a nature reserve that exist outside this realm. As far as “socially-conscious investing” is concerned, a friend and past colleague of mine has summed up the idea quite aptly in his blog, where he states that in spite of an investor’s abstinence from buying shares in companies whose operations negatively impact the environment, the void will inevitably be filled by other investors in the market. This is due to the fact that “markets are typically very efficient, and unless everyone works together to withdraw financing from ‘unethical’ firms, those who don’t care will arbitrage their share price back up to where it was before socially conscious investors withdrew their capital.”
In addition, I politically consider myself as a left-leaning moderate, and before coming to this country, would never in a million years have thought myself to be falling on the socialist end of the political spectrum. Basically, the fact of the matter is that many Americans in the current day are a bit hesitant to refer to themselves as socialists. However, I have noticed that the variation of the ideology that exists here, Socialism “a la Chilena,” along with the country’s current model for economic and social development is less about radical, Marxist-style income re-distribution utopianism, and more about a sort of moral and economic fairness.
To conclude, I would like to point out that on the whole, Chile has made great strides in overcoming a brutal dictatorship, adopting a pro-growth economic model and providing appropriate political institutions to support it. All of this can be noted in the country’s past three decades of positive growth in Real GDP and GDP-per capita, both of which have resulted in improved living standards for many Chileans and a robust middle-class which increasingly enjoys more influence in the country’s political agenda. However, despite these notable improvements, creating tangible solutions for extending the benefits of this growth to the country’s poor remains a large-scale issue. As a result, Chile must address its underlying political and social problems moving forward before we go ahead giving it our unrelenting praise.
Julian Fellerman graduated in the summer of 2011 with a degree in International Studies (Development Track). He has complemented his studies with internships at the U.S. Department of Commerce-Export Assistance Center and the Global Indexes Group at Russell Investments. While at Russell, he was part of a team that produced the Russell Indexes Country Guidebook, a semi-annual report which outlined the macroeconomic and investment landscape for developed and emerging countries in Russell’s indexes.
He is currently a volunteer with the Chilean Ministry of Education/UN Development Programme initiative, English Opens Doors, where he teaches primary and secondary-level English at Colegio Montesol, a semi-private school located in Quilpué, Chile. He wrote this piece for a blog he is keeping chronicling his experiences in the Southern Cone.