Why a 4 percent transit fare hike sent people to the streets
Most observers point to economic inequality to explain the widespread protests. Chile, like other Latin American countries, has large income disparities between rich and poor. The growing lower-middle class is too well-off to receive targeted social assistance but too poor to live comfortably.
Piñera last week announced measures to tackle income inequality — including a higher tax bracket for those at the top and a minimum-wage increase for those at the bottom.
But Chile’s inequality is not just economic — it’s spatial. The dictatorship segregated class groups into different parts of the city — and set things up so that public services like health care, schools, and transit have been delivered unevenly across these neighborhoods. I’ll explain below.
The Pinochet regime shifted thousands of people from the city center to the periphery
Just before General Augusto Pinochet took power, Santiago faced a housing crisis. A series of governments tried to build housing but couldn’t do it fast enough to meet the growing demand. Some politicians organized the poor to invade private land and build themselves homes; democratically elected presidents tolerated these violations to win votes and house the poor, my research shows.
After Pinochet’s 1973 military coup, he promised to make Santiago “a city without slums.” The military eradicated the illegally built housing. In 1979 alone, the military government removed 29,000 families from the city center and housed them in hasty constructions in the far west and south of the city. Other low-income families were lured voluntarily to the city limits when the government relaxed regulations to encourage new affordable housing construction.
Democracy returned in 1990 — but the spatial segregation didn’t change. To keep building lots of housing, the government needed inexpensive, open land — which meant land far from the city center. Meanwhile, sustained economic growth pushed up prices in desirable central areas.
The policy had its successes. Chile became the only Latin American country to reduce its housing deficit and avoid large illegal land takeovers by the poor. But that quantity came with lower quality and geographic segregation by class.
The structure of city government reinforces inequalities
While such economic divides are familiar in American cities, Santiago’s urban governance structure has exacerbated the resulting inequalities. Pinochet’s economic advisers decentralized local government, believing that created competition to improve public services and respond to local interests.
Pinochet therefore divided the Santiago metropolitan area into 52 small districts, or comunas, each of which is primarily locally funded. Although a government “solidarity fund” is supposed to redistribute sales and property taxes collected across districts, the disparities are staggering. The wealthiest district spends eight times more per capita (Vitacura, $1,450) than the poorest (Puente Alto, $180) — even though the poorest use public services much more.
Consider one district in the south of Santiago. During the dictatorship, the government moved 15,000 low-income people from the city center to San Ramón. As its former mayor told me in 2016, “residents in rich communities don’t use public services. … [Here] they use the medical clinics, they go to municipal school, they need buses to get their kids to school. And the residents are poor, so who is going to pay for everything?”
The metro helped reduce these inequalities — but could do even more
Santiago’s metro system is one of the few public services that reached the poor on the urban periphery and connected them with the well-off urban center. Democratically elected governments designed the metro, but Pinochet inaugurated the first line in 1975 and oversaw the system’s expansion across areas where the poor live.
That’s why the fare hikes sparked such anger: The lower classes depend far more on the metro to reach their jobs and to enjoy city life. Fare hikes hit them hardest.
Metro officials defend Santiago’s fares because of the system’s extensive reach and continued development. The metro integrates with the bus system and residents pay a single, flat fare, making it a better deal the farther you go.
But other cities, like Bogotá, Colombia, take an even more redistributive approach, offering subsidized fares when trips originate in low-income districts or issuing special fare cards for low-income groups.
Another redistributive policy involves taxing land values. While subway routes bring low-income users to work in the city center, some of the biggest gains accrue to downtown landowners who see their properties skyrocket in value when the metro connects them with more residents. For instance, the extension of the Jubilee Line of the London Underground increased proximate land values by an estimated $3.9 billion.
Land-based taxation tries to recapture some of these gains for the government. This approach doesn’t deter development such as property taxes, which fall on both land and the construction on it.
Right now, the government plans to extend the subway through Santiago’s richest districts, Las Condes and Vitacura. One option used in Taiwan, Singapore and Japan involves taxing the land-value increases created by transit investments in rich, commercial areas — and using that to fund extending lines and subsidizing fares in poorer areas.
An inequitably funded metro in Santiago is just one part of Chilean protesters’ frustrations. But it symbolizes their deeper distress about spatial inequality and the government system that perpetuates it.
Alisha Holland (@ProfTortuga) is an associate professor in the government department at Harvard University. She is the author of “Forbearance as Redistribution: The Politics of Informal Welfare in Latin America” and is writing a book about mass infrastructure projects, including subways, in Latin America.