A couple of days ago a friend from my fellowship asked me “Is it true that Universities in Chile will be tuition-free and funded by corporate taxes?” Well, to be honest I have never put it in that way, but yes, the answer to my friend’s question is that it is true.
Chilean universities will gradually become tuition-free, starting in 2016 with the poorest deciles and so on. And how will this huge reform be funded? The government of president Michelle Bachelet, who has the majority in both chambers of the parliament, passed a tax reform which, once in place, will collect about 8.2 billion dollars annually. The tax reform increases corporate taxes and corrects different loopholes in Chilean legislation.
It is important to bear in mind that this reform of the higher education system is part of an ambitious education reform which combines the re-centralization of public education, the end of selection in school admission processes and the end of profit with public funds.
Even more, the educational reform is part of an even more ambitious pack of reforms: taxes, labor law, electoral system, common law spouses regulation and a new constitution. Bachelet’s government program is meant to transform the Chilean society, and it was presented that way to the people during the campaign. It seems she and the coalition that supports her, want to get rid off the deep Neoliberal system implemented during the dictatorship of Pinochet (1973-1990) and administered by the democratic governments afterwards.
President Michelle Bachelet came to power in 2014, vowing to fight inequality.
Now, Bachelet’s educational reform has faced sharp criticism. First, it was said that increasing taxes will prevent the dynamism of the economy and future investments. Well, even after the tax reform Chile has one of the lowest tax revenues as share of the GDP of the OECD countries (Chile is a member since 2010). In addition, Bachelet’s tax reform received strong support from the International Monetary Fund as it will be a strong tool to fight inequality. In this point Chile also holds the title of one of the most unequal countries of OECD.
Secondly, many critics focused on the idea of having universal gratuity, including all members of society. Even intellectuals from the center-left coalition have argued that granting free education for the top ten per cent of the population is extremely regressive as a social policy. Why should fiscal money go to the pockets of millionaires? Well, this educational reform is addressing another huge social problem in Chile besides inequality: classism, and the manner to fight classism is facilitating social integration.
If for instance the top ten per cent of the population should have to pay for their university tuition while the rest of the population could access the free state-funded education, this would lead to universities for the rich (paid) and universities for the poor (free). Hence, the elites would continue to separate from the rest. A system as described above already exists for primary and secondary education, with private (and very expensive) schools where the majority of the CEOs and board members of the biggest Chilean companies and politicians studied.
On the other hand, free state-funded education to everybody also brings back a conception of a society of rights rather than a society of consumption. If education is to be considered a fundamental right, then the state must guarantee its access to every single member of the community.
Finally, in a country with a GDP per capita of USD 22,000 where around 50% of workers earn less than USD 700 monthly, it is mandatory to take action on this matter and it seems that this reform is a long term investment that Chile is making on its own people.
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5 Comments
Roxane
24/08/2015, 4:58 pmThe need for growth as a vicehle that would take Greece out of the current crisis is tautological. Yet, what is for debate and needs to be debated is how a country like Greece that has been suffering from serious structural problems in its recent and not so recent economic history can achieve growth. The debate about whether to remain or not in the euro zone is important, but it will remain academic unless there is a concerted effort (with the help of the EU in this case) to fight corruption. To do that most of the energy and effort has to be spent on reforming the judiciary. The rules of the game are such that whoever “screams the loudest” has better access to the media and the benefit of the judiciary system that is inherently incapable of ensuring a framework on which economic reforms can take place. Without contracts that are enforceable for all the parties involved, it will be futile to introduce reforms. The latter will be unravelled by the inability of the courts to enforce these contracts. For the new reality to become understood as something that requires new bold reforms to open up highly regulated markets and allow for productivity convergence between the public and private sectors, people need to be convinced that the rules of the game apply to all concerned. Until now as we speak, any attempt to bring individuals to justice who have either stolen public funds by not returning huge sums of collected VAT to the government, let alone the known income tax evaders, only results cases that are pushed into the future as these individuals are allowed to walk. The excuse here is that the judiciary is too overburdened to deal with these cases effectively and promptly. I am afraid that unless this government or any government deals with that aspect of the broken system, any reforms will never be implemented. To have any chance of success, let alone any chance to reach a climate for economic growth, there has to be a framework for enforcing contracts that is recognized and respected by all by imposing stiff penalties to all those who violate their side of the contract, whether public officials involved in corruption cases or entrepreneurs not returning the sums of VAT that they have collected on behalf of the government.One may counter, that Greece was growing until 2008 at reasonably healthy rates with the same judiciary and the same lack of contract enforceability system. Yet, even though we all recognize the reasons behind this consumption led growth engineered by easy credit, which led to the current crisis, it is the asymmetry between the upturn and downturn that obscured any need for reform. An expanding economic pie conferred benefits to all, even though these benefits also created “built in” destabilizers that now confront us all. I think, given the state of corruption as the result of lack of contract enforceability, the main reform that at this point that needs to take place, is the reform of the judiciary, for anything else to have any chance of success.
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