Heroes: Poverty and Inequality 

‘Livin’ on borrowed time and borrowed money 

Sleepin’ on the street there ain’t a damn thing funny 

With the hand-me-down food and hand-me-down clothes’ 

 
In the editorial to the last article, ‘Gimme Danger‘ I talked briefly about ‘the Chicago Boys’ and Chile’s experiment with neoliberalism. 

Until 1973, economic theory and practice in Chile, and much of Latin America, was dominated by ideas promoted by the UNs Economic Commission for Latin America and the Caribbean: a strong state, protectionism, and ‘inward’ development, prioritizing industrialization as the way to emerge from underdevelopment. These were not just left-wing ideas; political parties on the right and some in the business sector also supported them.  

According to US Ambassador to Chile, Willard L. Beaulac, the University of Chile’s College of Economics was ‘a communist nest.’ 

The US government tried to ‘combat and counteract what was perceived as a ‘socialist way of thinking’ in Chile’s economics education‘, and, via a government agency sponsored an agreement between the University of Chicago and the Pontificate Catholic University of Chile (PUC), the bastion of Chile’s conservative elite. As a result, 26 Chilean students were educated at the University of Chicago between 1956 and 1964. 

Referred to as the Chicago Boys, they supported right-wing policies and parties, and worked in right-wing governments, but they saw themselves as scientists, far removed from ideology. They prepared a government plan called ‘The Brick,’ which later served as the economic base for the dictatorship. 

A coup in 1973 saw a military ‘junta,’ led by General Augusto Pinochet, seize power. Pinochet’s dictatorship put the Chicago Boys in charge of its economic team, granting them broad powers to put the Brick’s ideas into practice 

Their first challenge was to control hyperinflation by implementing a shock policy, advised by Milton Friedman: ‘I think that when a person has a serious illness, even more serious measures are needed in order to heal it Shock treatment is the only way.’ 
 

‘Chile became a laboratory for neoliberalism in its most pure (or extreme) version’

 
They implemented drastic cuts in public spending and social investment, causing industrial production to fall 28% in 1975, while GDP was down 12.9%. The regime then opened the economy quickly, liberalizing prices; lowering customs fees from a maximum of 94% to a blanket 10% duty; eliminating certain taxes; and reducing labour unions to a minimum.  

Around 95% of public companies were privatized, sold at clearance prices to a handful of buyers with ties to the dictatorship, fostering crony capitalism and the growth of very concentrated economic groups. Key state-owned companies were bought by Pinochet’s cronies. One, SQM, the main producer of lithium, that was captured by Pinochet’s son-in-law, Julio Ponce. Today, SQM is one of the top five lithium companies in the world, and Ponce is the second richest billionaire in Chile.    

Chile became a laboratory for neoliberalism in its most pure (or extreme) version. Drastic reforms that would be unthinkable in a democracy were executed as military orders, without criticism or opposition and at an enormous social and human cost. 

The results of this experiment make poor reading: 
 

• GDP grew 2.9% annually during the Pinochet’s reign, ranking him 8th out of the nation’s past 10 governments.  
• Annual inflation was 79.9%, the 2nd highest of the past 10 governments. 
• Unemployment averaged 18.0%, the highest of any Chilean government of the past 60 years.  
• Public spending on education decreased from 3.8% of GDP in 1974 to 2.5% in 1990, 
• Health spending fell to 2% of GDP. 

 
In 1990, the country Pinochet handed over was poor and unequal. Poverty measured by the current standard was 68%. The GINI inequality index was 0.57, one of the highest in the world, similar to the Central African Republic or Guatemala. 

Source: https://www.promarket.org/2021/09/12/chicago-boys-chile-friedman-neoliberalism/ 

Neoliberalism has featured large in UK politics, though it is more often known as Thatcherism; small state, privatisation, low taxes, keeping benefits low to stop ‘shirkers’. The theory is simple, economic growth from the top down, which creates the mythical ‘trickle-down’ effect, meaning that we all benefit, rather than just the wealthy. 

Within neoliberalism there is austerity, a discipline to keep the faith when the going gets tough. 

The 2008 GFC led to the construction of a new, elite-driven, capital-centric, shrunken welfare state founded on ideology disguised as pragmatism and objective ‘truths’. As a result, todays welfare states exist in a context in which a new politics of austerity created the parameters.  
 

‘Neoliberalism has featured large in UK politics, though it is more often known as Thatcherism’

 
Austerity incorporates the neoliberal desire to shrink the (social welfare) state, deregulate labour markets and emphasise private markets as the drivers of growth, enabling a reconfiguration of the interests of capital, the needs of people and the role of the state. 

In some ways the new austerity looks like a ‘dream come true’ for neoliberals. However, there is the reality that the GFC exposed the fundamental weaknesses and limitations of neoliberalism, forcing policy makers to question core principles and change direction. 

As was the case in Chile, the last 40-yrs has seen UK citizens used as guinea pigs as the right-wing politicians have experiment with neoliberalism and austerity. 

Today, we are seeing the results; research published by the Joseph Rowantree Foundation (‘JRF’) estimates that 1.8m households containing C.3.8m people, including 1m children, were destitute at some point in 2022. Half of these households were trying to survive on <£89 a week, with 25% reporting no income. 

As a result, >574,000 people relied on foodbanks.  

Destitution is defined as the inability to meet basic physical needs to stay warm, dry, clean and fed, either because of a lack of clothing, heating, shelter, or because household income falls below a minimum level after housing costs – £95 a week for a single adult, £205 a week for a family with two children. 
 

‘1.8m households containing C.3.8m people, including 1m children, were destitute at some point in 2022’

 
Government policy is forcing people into destitution; the basic weekly rate of universal credit is £85, below the defined, £95 level. In addition, the two-children limit and benefit sanctions force families into poverty. 

The reports finding included, C.61% of adults had gone hungry in order to feed their children, and C.51% regularly going without toiletries or hygiene products 

Disabled and people with long-term chronic health conditions, and Black British, Caribbean and African households were disproportionately impacted.  

Paul Kissack, JRFs chief executive, said ‘the government is not helpless to act; it is choosing not to‘. 

The government seem incapable of recognising that this is a crisis, instead they remain fixated on ‘real issues’ such as small boats and woke elites. 

Tax cuts for the rich are a priority and might even be funded by freezing or increasing benefit at a rate below inflation; a real term pay cut.   

We now have more poverty banks that actual banks, covering food, warmth, and babies. Many libraries offer, or plan to offer, free warm spaces for those that cannot afford their heating. 

The billionaires who control the majority of the media tell us that destitution isn’t due to Tory policies, but to the working classes idleness and over-spending. Best summarised by Andrew Cooper, the Tory candidate defeated in the Tamworth byelection, who felt that, if these people are seeking help, they should ‘fuck off‘.  
 

‘the government is not helpless to act; it is choosing not to‘

 
The Tories are not alone in this. Despite previous pledges to so, Starmer has ruled out scrapping the two child benefit limit, an initiative that would remove 270,000 households with children out of poverty. He cited the need to make ‘tough choices‘, his victims know that only too well; heat, or eat, Kier.  

A decade of austerity and squeezed wages and benefits has destroying the social fabric, making many people poorer, sicker and more insecure. The crises caused by Covid and soaring inflation, allied to the self-inflicted disaster of Brexit, have highlighted the holes in the safety net once intended to catch us. 
 

 
The end game of neoliberalism and austerity, is that after a decade of benefits freezes, cuts and sanctions, social security rates are now so meagre that many of those who are ‘lucky’ enough to qualify often still can’t afford to eat, wash or pay the rent.  

This hasn’t happened by accident. Keeping benefits as low as possible has always been deliberate, a legitimate means for government to divide the undeserving sick and poor from ‘hardworking families’. This is destitution by design, instigated by successive governments who deliberately create  policies that force those already struggling into more dire conditions. 
 

‘This is destitution by design, instigated by successive governments who deliberately create  policies that force those already struggling into more dire conditions’

 
Alongside destitution is homelessness; the latest annual figures show that 157,640 families were homeless in 2022/2023, 12.1% higher than before Covid, with 104,510 in temporary accommodation in March this year. The latest rough sleeping figures showed that rough sleeping is also on the rise. 

Rough sleeping might be the public face of homelessness, but beneath the surface are those in chronically insecure accommodation. Many of these are families with children. One recent report suggested that 440,000 children across the UK sleep on the floor. There has also been a rise in the number of homeless people aged 65-74. 

Much of the responsibility for these dreadful statistics, lays with governments whose policy of pumping up house prices, – to please voters who view them as investments, whilst failing to provide for the C.30% of the population for whom even the lowest rung of the property ladder is out of reach. While the situation has got drastically worse under the Conservatives, Labour too bears responsibility both for house price inflation and the lack of socially rented homes. The last time that the number of families in temporary accommodation topped 100,000 was in 2004-05. 

A combination of new duties for councils, restrictions on right to buy and mortgage subsidies eased the situation. But since 2010, Tory cuts to council budgets, combined with a freeze on housing benefit, have seen it deteriorate sharply, millions of people have been forced into an under-regulated private rental market that is totally unsuited to providing secure homes for people on low incomes. 

Of course, it wasn’t meant to be like this. In 2019, Johnson told us that austerity was history, and ‘levelling-up’ was the way forward. And, proving that ‘Turkeys Do Vote for Christmas’, the electorate fell for it. Guess what? We are now more unlevel than ever before! 
 

‘Johnson told us that austerity was history, and ‘levelling-up’ was the way forward. And, proving that ‘Turkeys Do Vote for Christmas’, the electorate fell for it’

 
The all-party parliamentary group for left behind neighbourhoods published a report on Wednesday seen as the first in-depth inquiry into how the government’s levelling up policies are working on the ground. 

There are 225 neighbourhoods in England, where 2.4 million (4% of the population) people live, identified as ‘left behind’. These are places which experience high levels of deprivation and community need and low levels of investment and resources. Often, they are housing estates on the edge of post-industrial towns.  

The new report says these are places which have slipped through the cracks of levelling up funding, arguing that, for levelling up to be successful, it must be led by local people and reflect local needs – ‘not follow a national template. Entrust decision-making – including funding – to communities, not Whitehall or the town hall’. 

Paul Howell, the Tory MP for Sedgefield and co-chair of the all-party group, said the government’s levelling up programme needed to support left behind neighbourhoods ‘by design rather than chance’ if they are to become less left behind. 

The report’s concluded that calling for faster progress on creating a community wealth fund, which would allow spending decisions to be made by local residents. Funds should be allocated to the left behind neighbourhoods on a non-competitive basis and managed where they are held. 

In conclusion, neoliberalism has run its race. The results in the UK are little better, than those subjected on the population of Chile. Those who continue to support the policy, such as Liz Truss’s ‘Growth Group’ resemble the group leader; dangerous and deluded. 
 

‘Got no money to move out, I guess I got no choice 

Rats in the front room, roaches in the back’ 

Lessons learned all round this time out – and just a great shame that this government doesn’t seem capable of learning from misakes of the past; I have to say I’d not heard of the Chicago Boys, but the parallells are there to be drawn. So what was Philip thinking?

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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