Latin America reality check: You too may be the 1%

I’m in the “model” Latin American country, Chile. Yesterday, I had to run some errands in Vitacura, which is part of the prosperous “favoured quarter“* of Santiago. It was a classic edge city day. Much of it could as easily have happened in San Ramon, California, as Santiago, Chile. I dropped off my MacBook Pro at a certified Apple dealer next door to a vendor of fine leathers. Walked on a tree-lined sidewalk past an Audi dealer. In the distance, the Marriott, a towering executive desk ornament, windows shut against the smog.

To keep all this prosperity running, you need a critical mass of people with money, right? Which is why an article in the Sunday print edition of generally elite-oriented newspaper La Tercera was so surprising. Here’s what Yale/UChile economics professor Eduardo Engel writes:

Slightly more than 6 million Chileans received a salary in 2010. How many received a monthly wage of more than 6 million pesos (US$144,000 a year)? Please, wait a second. Don’t keep reading, just answer. It’ll be worth the trouble. You have an answer? Second question: how many earned at least 2 million pesos a month (US$48,000 a year)? And third, how many earned at least 1.2 million a month (US$29,000)?

The answers are: For the first question, 6,000. Second question, 40,000. Third question, 125,000. Of a total of 6 million workers.

So: if you are, say, a university professor in the US, you would be in the top 1% in Chile. If you’re a first-year lawyer, you’d be in the top 0.1%. I bet that most of this blog’s readers are 1-percenters.

Henry Ford figured out a long time ago that if you want to sell high-priced products, you need to pay people well. Even though retail is the biggest industry in Chilean cities, retailers here have taken a different tack.

Opposite the article I quoted, there’s a full-page ad for the Banco Security MasterCard. Why pay well? Isn’t it better for the system to offer ever-growing levels of household debt? Consumer debt rose 11% year-over-year in the third quarter last year, the most recent quarter for which I see figures, on page 32 of the linked document. That’s not an unusual rate of increase in this neck of the woods.

You might think this has little to do with the energy situation, which is always my focus on this site. And then you might be surprised when stable, growing countries full of prosperous-looking people in new clothes line up behind a communist, or favour nationalisation of a company producing electricity or oil or copper.

Don’t complain to me that these are illogical responses. The 1% can sit around and complain about the irrational masses until their (our) heads are rolling in wicker baskets, but it won’t convince a cake-eating soul.

* This is a generally good, clear critique of why edge cities suck, though the history lesson is misleading. Favoured quarters were first identified in the 19th century.

5 thoughts on “Latin America reality check: You too may be the 1%

  1. hvalbye

    Hm, I’m finding myself kind of dumbfounded here. Excuse my ignorance, but what exactly are you trying to convey in this post?

    1. sapitosetty Post author

      I don’t think I understand your question, sorry. It says what it says. You want a 13-word version? Many people in Latin America earn little, so the leftist impulse shouldn’t surprise.

  2. mandramas

    Also, compare PPP instead of money, and the numbers with be even harder. That is the nature of capitalism.
    Camilla Vallejos is hardly a Communist. She is the leftier of the Chilean’s politics figures, but she is a moderate interventionism.
    Of course, US and Chilean are so biased to the right that they can see the obvious.

  3. westslope

    Critical for economic prosperity is know-how. Human capital if you prefer. More broadly social capital. That includes the ability to coordinate and work together. Hernando de Soto and others argue that secure property rights are key for economic prosperity and the evidence seems to support that view.

    If market economies tend to reward productive workers, then uneducated, unskilled workers will tend to earn very little. I was under the impression that Chile’s social welfare state was more advanced than other countries and that investments in education and health were significant. Is it not enough?

    In my day I have hung with all kinds of Communists and Neo-Marxists and other radical leftists. They were all well dressed, well fed and well housed.

    Now huge income disparities do create the incentive to take, if not violently take from those with wealth. That is why west coast Aboriginals gave away so many belongings in Potlatches. It was a defence or security mechanism. It removed the incentive for neighbours to violently take material goods from the successful and wealthy.

    But leftists also spend a lot of time, at least in rich developed countries, re-distributing income to their relatively well-to-do clients: rich unionized workers in both the public and private sectors, farmers, corporate farms, etc.

    How much do unionized mine workers earn in Chile? A lot I bet. A lot more than the average Chilean worker.

    Unfortunately in many countries with lots of poverty there is the Roman Catholic Labour Supply policy at work. Have lots and lots of sexual intercourse. Do not use birth-control, have large families and inevitably invest less in the human capital of the multitudes of children.

    I have been a long time fellow travelling companion of the Roman Catholic Church but let’s place the blame for massive numbers of uneducated, poor people in Latin America where it belongs. The Church doctrine on birth control and family planning. The Christian God loves abject poverty and suffering. Beyond a shadow of a doubt. The ‘edge cities’ are the inevitable outcome.

    1. Kepler

      Chile is not investing enough and well in education. It’s even worse in Venezuela, even if lots of money go down the drain.
      I was recently talking to some Spaniards…no wonder we got what we got. They told me they have exactly the same problem with text books as we have (now much less so in the opposition-dominated schools, thanks God): pupils have to buy all the books.
      Latin American countries have also copied the Spanish model: invest by far more in universities, not in primary or secondary schools.

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