“No to Profit”
Fighting Privatization in Chile
May 16, 2013
May 16, 2013
18 Min read time
Chileans fight back against privatized higher education.
Everyone in Chile can recite the following facts: adjusted for income, Chile has the most expensive higher education in the world. Per student, the country spends less than any other, and the student spends more.
These facts were once a point of pride.
During the dictatorship of Augusto Pinochet, education, previously considered a public good, was commodified and repackaged as a private investment yielding purely private gains. But since student protests began in 2006, Chileans have been trying to get their education back.
• • •
After the military overthrew then-President Salvador Allende in 1973, Admiral Hugo Castro Jiménez was named Minister of Education and charged with implementing the military government’s vision for Chile’s educational system. Pinochet’s neoliberal dream was that the free market would optimize education and wean educational institutions off state support. Military “rectors” were appointed to the universities and charged with purging them of dissenting faculty and students. Over time, funding for public education was systematically slashed in order to create an educational vacuum that could be filled by private enterprise.
This makes sense if one regards education as a privilege rather than a need, and Pinochet did: he recast secondary and higher education as non-essential, matters for individual choice. His 1979 Presidential Directive on National Education, which set out his entire educational program, stipulates that while primary education is necessary, secondary and university education should be regarded as atypical and even luxurious: these are “the exception for young people,” Pinochet wrote, “and those who enjoy [secondary or higher education] must earn it with effort and pay for it” or compensate the “national community” in some other way.
The dictatorship dismantled the public University of Chile system, which at the time resembled a typical U.S. state college system, with distinct campuses under centralized leadership. The government’s reasoning is instructive: “None of the existing eight universities find themselves subject to competitive challenges between themselves since they are assured financial support by the state budget,” wrote Jaime Guzmán, an advisor to Pinochet and one of the architects of the military regime’s education reforms. “Competition constitutes a powerful stimulus to personal achievement in human beings,” he claimed, and the same would be true of schools:
In order to improve the low quality of many current schools and university campuses, it becomes indispensable that they be subjected to the competitive challenges that will force them to elevate their teaching if they wish to emerge victorious.
Conditions for this gladiatorial vision would be engineered by creating new universities, promoting institutions of higher education that were not universities, changing the system of state support for higher education, and lowering the “operating costs” of the existing universities—a euphemism for drastically cutting federal funding. The new model would forgo state oversight and regulation in favor of “indirect control of academic quality,” Guzmán wrote in 1981, “which is basically obtained by stimulating competition between the universities.”
Three decades later, Pinochet’s neoliberal model has gone mostly unchecked, and “indirect control” still aptly describes the relationship between the state and higher education in Chile. The government has delegated regulation and oversight to the market and minimized legal obstacles to the establishment of private universities. The country is now awash in universities, institutes, and centers for technical learning. Their number exploded from eight in 1980 to a peak of 310 in 1990. In 2012 there were 174.
These institutions certainly compete for students’ money. Private universities advertise on television, in newspapers, on the subway, on billboards; their ads are as familiar as Coca-Cola’s. But the schools don’t compete in the way Guzmán envisioned. The institutions producing the best research and maintaining the highest academic standards continued to be Chile’s traditional universities, most of which are public and pre-date the neoliberal model.
As for the students—the informed consumers in Guzmán’s model—they are in practice ill-equipped to assess a university’s quality, so they look to other metrics: commercials, sports facilities, infrastructure, ease of admission. This last is a major attraction. Many private universities don’t even require that students take the PSU, a standardized college-admissions test like the SAT or ACT. Many schools, eager for a bigger share of government-backed student loans, appear to have few admission requirements at all.
The students at the universities are largely products of a privatized primary and secondary education system. The union representing teachers and educational support staff was disbanded in 1973, and in 1980 the military regime implemented vouchers. The vouchers would theoretically empower any student to choose between a public school or any of a large number of government-subsidized private schools. The new system was intended to promote competition between schools and to stimulate the public schools to improve.
Chile’s primary education is the world’s most expensive, yet it ranks 119th of 144 countries.
But the plan backfired. Instead, three tiers developed: the private schools for which the student paid full price; the subsidized private schools, which generally required that the student pay a small fee to supplement the government subsidy; and the public schools. Wealthy and middle-class students fled public schools in favor of private or subsidized private schools. Poorer students, for whom the vouchers were primarily intended, were much less likely to attend the subsidized private schools. Some couldn’t get to schools across town, some couldn’t afford the supplementary fee, and some students or their families simply didn’t understand or act on the opportunity. Swamped with applications, many subsidized schools started “creaming off” and accepting only the highest-achieving students—those who were easiest and cheapest to teach and who most likely could afford to pay. Government funding that had previously gone to public schools was diverted to subsidized private schools, leaving public schools with shrinking budgets to educate the country’s most vulnerable and disadvantaged students.
Not surprisingly, the students attending public school fared worse than their peers. Their scores on standardized tests went down, but so did the quality of instruction across the board. Chile has the most expensive education in the world, yet the World Economic Forum (WEF) ranked primary education there 119th out of 144 countries. The higher education system ranks 91st and math and science education rank 117th.
This educational model doesn’t just fail low-income students. It also magnifies class difference, since the voucher system intensifies social segregation. Upper and middle-class families not only pay to separate their children from poorer students, but the families of poor students have been known to spend shocking proportions of their income on expensive private schools to ensure that their children will study with the elite. Instead of pedagogical excellence, status becomes the criterion by which well-informed consumers choose their children’s schools. In conversational Chilean, to be “bien educado,” or well educated, is to be well bred, to have good table manners, avoid controversial subjects, and perform one’s class. These are the relevant tools for success. This is the education that matters.
• • •
It is against this background of dismal public and privatized schooling that Chile’s high school students went on a major strike in 2006.
In any nation, it is remarkable for high schoolers to rise up in protest, but in Chile it is particularly surprising. The dictatorship made political educational content illegal, and during the transition to democracy the emphasis on depoliticization continued. The effects have been long-lasting. As Alberto Mayol, a sociologist at the University of Chile has argued, political action has been demonized. Officials ostensibly devoted to the needs of the people instead engage in ludicrous stunts. For instance, Joaquín Lavín, the right-wing former mayor of Santiago and two-time presidential candidate, has had sand and snow shipped into the city so that poor children there might experience beaches and icy mountains.
Chileans, temperamentally conservative and living in a country dominated for four decades by market ideology, have typically acquiesced to this brand of non-politics as long as the economy has thrived. And it has. Chile’s economy is the strongest in Latin America. Per capita income has risen from approximately $4,400 in 1990 to $17,300 today. The WEF ranks Chile 33rd in competitiveness, poverty has fallen, and life expectancy is on par with that of the United States.
And yet the students came out in droves in the so-called Penguin Revolution. At its peak, almost 800,000 students participated. One of their targets was the Organic Constitutional Law on Teaching (LOCE), enacted by the military government on its last day in office. The LOCE made Pinochet’s educational reforms permanent: it incentivized the creation of new private schools by minimizing accreditation requirements; it emphasized free choice over the right to an education; and it made the state subordinate to the family in making education decisions. Families were responsible for educating their children in whatever way they chose, and the state’s role was to protect their right to that choice. Through the LOCE, Pinochet’s radical transformation of the state’s relation to society became formal policy rather than just governing principle.
The students also contested the dictatorship’s enduring “municipalization” of schools, which decentralized educational regulation and administration. The Ministry of Education was weakened, and authority over schools was devolved to the local level.
The LOCE had proven almost impossible to overturn thanks to electoral rules enshrined in the 1980 constitution. But student pressure seems to have had some effect. The LOCE was replaced in 2009 by the General Law of Education (LGE). Among other things, the new law forbids institutions from discriminating against applicants on the basis of economic factors. Still, the Penguins rejected the reforms, which they saw as largely cosmetic. The LGE slightly improved a discriminatory educational environment that needed instead to be rebuilt.
While the Penguin Revolution didn’t succeed on all fronts, it showed that Chileans were ready to be political again after a long dormant period. When ongoing university student protests began in May 2011, the demands for change had grown: the students want nothing less than the elimination of the voucher system and the formation of public education. Their slogan is “¡No al lucro!”—“No to profit!” The slogan is explicitly aimed at the private universities and banks profiting from high interest rates and exorbitant surcharges on risk-free government-backed student loans, but it also bluntly rejects the intensely neoliberal foundation on which Chilean society is based. And according to the Chilean constitution, it is illegal for universities to earn profits. But the law has proven no barrier in practice. The owners of private universities profit via a variety of legal and semi-legal workarounds including exorbitant payouts to administrators, nepotism, and the creation of sister or shadow corporations owned by the same parties that rent buildings and grounds back to the universities at inflated rates. (The now-defunct Universidad del Mar had 85 such corporations.) These backdoor methods are an open secret, and several presidential administrations elected to ignore them even after María Olivia Monckeberg, one of Chile’s top investigative journalists, published two books exposing them.
The student protesters demanded that the universities be investigated for profiteering. They demanded that municipalization be reversed. They demanded free education. They shut down several universities for an entire academic year. They took over government buildings. On June 30, 2011 some 100,000 Chileans turned out in the streets of Santiago and were joined by another 300,000 or so in solidarity marches in the rest of the country. Demonstrators paralyzed entire sections of Santiago during marches. Yet, at its peak, the student movement had an 81 percent approval rating. The public was on board.
Cutting out the banks would be a major blow to privatized education, but this reform hasn’t yet been made law.
On August 18 the minister of education, obviously stunned at these displays of discontent, offered the students a system of credits and scholarships that would help the poorest three-fifths of the population get an education that was free or near-free. Municipalization would be ended. There were additional concessions, and to outside observers the plan sounded too good to be true. But the students rejected it, and the public agreed with them. The next day, which would become known as the March of the Umbrellas, 100,000 people marched in support of the students despite pouring rain. In September, even after three months of demonstrations and after the students had rejected the minister’s offer, 79 percent of the public approved of the students’ demands, and 78 percent disapproved of the government’s response to the protests.
The minister’s offer didn’t get at what the students saw as the heart of the problem: the universities were still profiting off students by inflating tuition and enrollments, admitting students who would quickly drop out after paying in full. And the government was still stuck paying that tuition—and interest on it—to the universities and banks. Between 2006 and 2011 the state paid the six banks handling government-backed student loans about $317 million just for handling the transactions.
In June 2011, shortly after the protests began, Chile’s lower house of government, the Chamber of Deputies, formed an investigative committee to look into the allegations of illegal profit making. The report it issued a year later found that universities were indeed profiting and described several “formulas” they used to get around the law.
However, the committee’s report had to be officially voted on and accepted by the legislature. Many deputies objected to the “unprofessional tone” of the report. In the end, 46 deputies voted in favor of accepting the report, 45 voted against it, and one person abstained.
In cases where the vote is this close, an abstention is counted as a “nay.” So the vote was now, due to a technicality, a tie. In case of a tie, the motion fails. So the report was rejected, and nothing would be done. “Only in Chile,” said Gabriel Boric, then-president of the Confederation of Chilean Students, “is 46 less than 45.”
In September 2011, around the same time as the March of the Umbrellas, a group of lawyers from the University of Chile Law School independently petitioned the Ministry of Education for an investigation into profiteering. Ten months after receiving the petition, the Ministry finally replied. The response from Director of Higher Education Juan José Ugarte came in an email sent at 9:00 pm on a Monday night. Ugarte claimed that the Ministry of Education had limited powers to intervene and little could be done in any case: the allegations “were impossible to prove via balance sheets or financial statements.” Ugarte added, rather dismissively, that the petition amounted to “a global questioning of Chile’s system of higher education . . . without containing concrete facts that would allow this Ministry to activate an investigation.” This reply came a month after the Chamber of Deputies committee issued its report condemning certain universities for the infractions that Ugarte said could never be proven.
• • •
And yet some accountability has been achieved. In early 2012, the Center for Investigative Journalism in Santiago began uncovering long-suspected networks of bribery and corruption between the National Accreditation Commission (CNA) and affiliated universities. In November 2012, two university rectors were sentenced for money laundering and bribery.
Universidad del Mar, with its 85 shadow corporations, has been discredited and will be shut down at the end of 2014. A month after CNA renewed Universidad del Mar’s accreditation in 2010, the school hired the president of CNA as a consultant for 60 million pesos, roughly $126,000. It also turned out the director of Universidad del Mar’s freshly accredited nursing school lacked a degree in nursing.
The current administration’s minister of justice was forced to resign in December, and on April 17 Minister of Education Harald Beyer, charged with dereliction of duty, was impeached and banned from public office for five years. Even when presented with the investigative committee’s findings, Beyer refused to ensure that the law against educational profiteering was enforced.
Reforms are also underway. The Ministry of Education has proposed creating a new superintendency of higher education with the authority to inspect university financial statements and all relevant contractual agreements and would protect students from false claims or misleading advertisements. Interest rates on government-backed student loans have dropped. And President Sebastián Piñera has announced plans to create a government agency that would handle loans directly rather than going through private banks.
Cutting out the banks would be a major blow to the system of privatized education, but, as skeptics point out, this reform hasn’t yet been passed into law. Other reforms leave the basic structure of education in place. Indeed, they further erode public universities. For instance, the Ministry reformulated the criteria by which the state apportions funds to universities in a way that diminished state support for the University of Chile. The Ministry also proposed that universities shorten the time to degree in order to make the cost of Chilean education appear lower without creating any substantive change.
• • •
The sudden development of political consciousness amid economic prosperity is a hard thing to fathom. But former President Ricardo Lagos thinks he knows how it came about.
During a recent visit to the University of California, Berkeley, Lagos explained that the protesters are mostly members of the rising middle class who have recently left poverty behind. “They have other demands [now], and those demands are much more difficult to fulfill than reducing poverty,” Lagos said. Recalling his tenure as the first post-dictatorship minister of education between 1990 and 1993, Lagos said that the goals were simpler back then: to reduce poverty and build enough schools throughout the country so that everyone had access. “The educational problem was coverage,” he said. “Now the question is quality, and quality is quite different.”
While he acknowledged that managing government-backed student loans through the banks—a practice he helped establish—created intractable problems, Lagos argued that the system was justified by Chile’s extremely fragility in the immediate aftermath of the dictatorship. The suggestion that a government agency, rather than the private sector, should manage student loans would not have been well received, particularly, he claimed, coming from a socialist such as himself. He may be right about that. It’s telling that the banks might be expelled from the thriving university market by Piñera, Chile’s most business-friendly president since the transition to democracy and first who isn’t from the center-left.
Another explanation for the protests, which differs in some respects from Lagos’s and in other ways complements it, comes from Alberto Mayol, the University of Chile sociologist.
Mayol made headlines in November 2011 when he was invited to speak at the Encuentro Nacional de Empresas or ENADE, an annual event at which Chile’s wealthiest and most powerful business leaders gather to discuss the economic future of the country. In a 45-minute speech that instantly went viral, Mayol gave the businessmen a blistering account of how fetishization of the market had failed as a model for society. Pointing to the extraordinary public support the student movement enjoyed, he said Chileans were no longer content to be consumers, the only role a neoliberal, depoliticized social vision had allowed them. They wanted to be citizens, they wanted to be political, and they wanted a public square.
Mayol went on to write two books that expanded on the ideas in that speech. Both books, El derrumbe del modelo (The Collapse of the Model) and ¡No al lucro! (No to Profit!) are currently bestsellers. Citing the sociologist Talcott Parsons, Mayol argues that Chile’s economic dimension has hypertrophied, while the normative, cultural, and political dimensions were left to wither away. “In Chile the economy grew and the texture of society was lost,” he writes. “Laws guaranteeing rights gave up when faced with supply and demand, the only divine law.” So did the laws of the church: “Truths stopped being as grand as cathedrals. If they existed, truths would be as big malls.”
“The culture of the market that was established in Chile made social inequality ethically and politically tolerable,” Mayol writes. Such a system “guarantees that difference will exist,” in fact, “differentiation is its sign of health.”
We are Chileans of an age in which ideas . . . are ‘bought,’ where ‘to cooperate’ means to be dim or naïve (because to be intelligent is to be selfish), where achieving an object regardless of the means is ‘making it,’ and where being a millionaire is synonymous with a high intellectual capacity.
Thus Chileans became accustomed to a passive role. Their country would react to international demand for goods—mainly the nation’s rich underground resources—and services, and that would be all. Everyone had to adapt, and there was no use complaining about it. The result is that Chileans aren’t even actors in a free market anymore. They’ve instead become another resource Chile can offer to investors: a captive consumer base forced to pay private industry for domestic goods that were once public.
Mayol sees the student movement as the stirring to life of a people that had forgotten it once had the right, and even the responsibility, to complain and to demand. Following the example set by the students, citizens started complaining to the institutions that they felt were behaving abusively. In 2010 there were 9,010 complaints against rising health care costs. In 2011 that figure was 25,767. There was no substantive change in health care; what changed, Mayol says, was the public’s consciousness. Suddenly there was hope that complaints might not be futile after all.
Americans may have much to learn from the upwelling of public sentiment against privatized education in Chile. The United States is just starting down the long road toward outsourcing education to private interests such as massive open online courses (MOOCs). But in Chile we see what four decades of privatized education can achieve, particularly when it is backed by a dictatorship capable of enforcing a free market that might, in a less authoritarian setting, have been constrained. Chile has long been cited as the great neoliberal example. The question is what it is an example of. If President Lagos’s explanation is correct, Chile has little to teach us, since many of its internal conflicts are more or less in keeping with its progress as a developing nation. But if Mayol is right—if the protests over education are indeed the cries of a society that wants out from marketization—we should be watching Chile very closely.
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May 16, 2013
18 Min read time