The recent riots in Chile, triggered by a small increase in the subway fare, have highlighted the politically explosiveness of the pricing of “public goods,” particularly in societies with high wealth concentration.
The root cause of the Chilean riots appears to be a strong conviction held by the main population that the “system” is rigged in favor of the elites and will not provide the most basic public goods necessary for anyone to have a fair shake at improving one’s lot.
For a major metropolitan area like Santiago this means an efficient subway system to transport the less-well-off from the distant suburbs to the jobs in the prosperous city center. The Santiago Metro does this pretty well. But, ironically, having a good subway system causes new issues, such as making the poor much more aware of wealth disparities, and making them highly dependent on continued access to maintain their jobs. Apparently, even small increases in fares can be very unsettling for workers and students living in precarious situations.
This raises the question of what role the government should play in providing public goods and how to pay for them. This is a huge dilemma everywhere but especially in Latin America where government finances have historically been poorly managed and debt levels are high. Over the past decades, governments have pretended they could dismiss the problem by turning to privatization and “high finance”: public companies financed in the bond market and concessions. This is the case, for example of the Santiago Metro, which is a corporation with close ties to the Chilean capital markets.
This abdication of the responsibility for investment in public goods has increasingly become the norm in many Latin American countries where most infrastructure (airports, highways,etc…) has been turned over to the private sector. Increasingly, this also applies to healthcare and higher education, where dysfunctional public institutions are hopeless.
The current government in Brazil is pursuing the most pro-markets policies that the country has seen since the 1960s. The finance minister, Paulo Guedes, would like to privatize and deregulate everything as fast as possible, hoping to spark an entrepreneurial revolution in the country.
But, this is the same country which was paralyzed by a truckers’s strike in 2018, in response to diesel and toll prices. President Bolsonaro’s honeymoon is over now, and as we have seen in Argentina, Chile, Hong Kong and elsewhere, patience is running thin.