Sebastián Edwards, the most prestigious economist in Chile: & quot; There will be a shift towards a more inclusive capitalism & quot;

Sebastián Edwards (Santiago, Chile, 1953) is the most prestigious Chilean economist worldwide. Professor of international economics at UCLA, Edwards has worked at the World Bank and is an associate researcher at the National Bureau of Economic Research (NBER). He is one of the pioneers in the study of economic populism. He lives in California, where he teaches and writes. He is also a successful novelist and a restless intellectual, very aware of what is happening in his home country that now lives convulsed days.

Is the Chilean model over? Why? The dying model. As in Faulkner's novel, the outcome is true: it is the death of the model. What we don't know is how long the process will take, if it will be slow or fast. Nor do we know exactly what will replace it. You have talked about the Chilean paradox: that the model that has most reduced inequality in the region has been the first to be knocked down by the people. How do you explain it? My explanation is simple: there is more than one concept of inequality, more than one way of understanding the phenomenon. On the one hand, there is income inequality or vertical inequality, which is measured by economists with the Gini coefficient. This is the one that has fallen quite quickly, although it is still high. But there is a second concept, which acquires great importance once countries have reached a certain degree of development. It is about "horizontal inequality" or inequality of treatment; inequality of access to public goods such as green and recreational areas, inequality before the law, inequality with respect to access to certain jobs. It is what the philosopher Elizabeth Anderson calls "relational inequality." And it is in this area where Chile is wrong, very bad. The shortcomings are captured in the Better Life Index of the OECD. When one analyzes it, Chile no longer appears as paradise or the oasis of which so many spoke. There are abuses, humiliations, bad treatment. People feel they don't respect her, they feel a lack of dignity. What are the reasons for this seizure in her opinion? The middle class feels they have abused her for years. He just got fed up. The following must be remembered: in 1990, 53% of Chileans lived below the poverty line; In 2018, only 8% were poor. That is, 40% of the population (a huge number) went from being poor to being middle class. But it is a very vulnerable middle class. They are people with aspirations and fears, especially fear of falling back into poverty. The different governments failed this middle class, the one that was accumulating rage and resentment, the one that was feeling past to carry, the one that felt humiliated. Does it make sense that those who feared being poor again endorse some disorders and destruction that only impoverishes them? That is the tragedy. The enormous collateral damage of the outbreak. Looted supermarkets are in the lowest income places; The same with pharmacies and hospitals. Most likely, they will not be rebuilt and that these people have more hardships. It is always like that. So it was in the "Riots of 1992" in Los Angeles, California, that I had to live. This tragedy is accentuated in a case such as the Chilean, where the protests have no leaders to channel them. You have said that there is no need to fear the elaboration of a new Constitution in Chile. In all the countries of America that have approved constitutions in the last 30 years, public spending has increased significantly and one of them - Venezuela - is an economic disaster. Why do we have to be optimistic? I say you don't have to be pessimistic; Chile does not have to be the next Venezuela. In the last 30 years there have been completely new constitutions in eight countries in the region, and Venezuela is the only economic disaster. The other countries have had problems, but they have overcome them with political negotiations, constitutional reforms, adequate laws. Peru has even been an economically very successful country, although with political problems. If the greater public expenditure is accompanied by greater collection, there should be no problems. This is what happened, for example, in Peru and in Paraguay. The important thing is this: although we must not fall into irrational fear, we must make a modern and reasonable constitution. That is, a constitution away from that of Venezuela. A constitution with mechanisms that anchor the country in an economic reasonableness, that protect one of the greatest achievements of democratic Chile: the defeat of inflation, a scourge that harshly punishes the poorest. Note this: between 1938 and 1998, Chile never had an annual inflation of less than 5%. Never! Since that date, inflation has exceeded 5% only twice. A huge change.The Constitutions are not a panacea. You are co-author of a study that shows that including the right to education in constitutional texts does not guarantee that education is good. It is a detailed study, with advanced and sophisticated statistical techniques. Our results indicate that the quality of education - measured by the results of the PISA test - is not higher in countries that more strongly guarantee social rights in their constitutions. There are countries in which the constitution does not include those rights (USA) and education has a relatively good quality, and others with strict rights and bad education. There are family, institutional, structural and policy factors that are much more important. For example, how many books are at home and what are the family's reading habits. And those factors are not changed at a stroke, through an article in the constitution. You were a pioneer in the study of economic populism. What things would indicate to us that a constitutional text has fallen into economic populism? In our original study, Rudi Dornbusch and I studied inflationary explosions in populist regimes. We show that there is a well-defined cycle, a cycle that goes from euphoria to catastrophe in a more or less short period. The greatest antidote to a populist explosion is to ensure in the Constitution that the central bank is an autonomous body, managed with absolute professionalism. Countries with central banks managed with political and short-term criteria are susceptible to populism. That is precisely what happened in Venezuela. Unfortunately in the world there has emerged a current of thought called Modern Monetary Theory (MMT) that ignores this simple and effective rule. It seems that in Argentina they will adopt it. I predict a bad result. Apart from the mistakes made, the image of Sebastián Piñera, a billionaire, has not helped overcome the crisis. In 2009 you proposed that you give away all your fortune. What do you think would have happened if I had? I don't know; nobody knows. But what is certain is that a president with enormous wealth, a president who appears on the annual Forbes list of billionaires, does not have the image of the "man in the street." He is thought, correctly, as someone with great privileges. And that is not healthy in politics, especially in situations of social crisis in which the legitimacy of politicians is questioned. Why Chilean intellectuals, both right and left, did not see this phenomenon coming? Well, nobody saw the magnitude of the outbreak; its massiveness and the violence that accompanies it. But much they noticed that there was an underground "malaise", a rage that accumulated every time it was discovered that employers committed abuses, and these abuses were not punished by law. The discomfort theory hovered in Chile in different versions. Some said the model had run out and required major adjustments. Many of us knew that something bad could happen, but we didn't imagine how bad it was going to be. No one imagined these days of fury and destruction. When the final story is written, it will be said that the right made many mistakes. Both political, intellectual and social. Among the latter, one of the most serious was to move into isolated neighborhoods, in a parallel world of privileges, in an "oasis" within a country with apprehensions, anxieties, difficulties, and fears. What, in your opinion, will be the end of this process? It is a question of several dimensions. In the economic, and in the medium term, this ends with a substantial withdrawal of neoliberal policies, with a shift towards a more inclusive model of capitalism, with many greater elements of social democracy. In the immediate, it is difficult to know how violence ends. Everyone is trying to prevent the military from leaving the street. That is essential. What elements will condition it? There has been a huge lack of courage and vision on the part of politicians. There has not been a single "voice of reason." No one to admire and whose ideas make sense across the board. Ideally, several leaders should emerge with this reasonable voice, interlocutors in a great national conversation.

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