Miguel Paz, December 16, 2011. Written for PBS Idealab
Kremerman’s post was highly controversial among Chile’s elite, an endogamous group of power players, little accustomed to public scrutiny and not fond of being forced out in the open. It also caused some deep rumblings among the middle class, during a time when issues such as inequality and the extreme gap between the rich and poor have become a matter of national and international public interest around the world.
One of the things we loved about Kremerman’s work is that he came to his conclusions using public data from the latest National Socioeconomic Characterization Survey(CASEN in Spanish), one of the public data sets we’re using in Poderopedia to establish a database of who’s who in business and politics (based on the fact that in countries like ours, where you are born, your last name, and which school you attended very much define who you are in the scale of power).
WHAT IT MEANS TO BE PART OF THE 0.1%
Four thousand families might seem like a lot, but that 0.1 percent of the richest households (in a country of 17,094,270 people) is part of the 10 percent that runs practically everything in Chile.
According to the 2009 CASEN data extracted by Kremerman for his post: "4,459 families have a monthly average income of $19 million pesos ($37,300). This is 0.1 percent of the richest households, who generally tend to under-report their income in such surveys."
Being part of the 0.1 percent means that you might be our president or in theannual Forbes billionaires list, and that you either own one of the top 100 Business Groups or work for one of them, according to the Superintendency of Securities and Insurance (our SEC).
It also means, as Kremerman put it, that you probably own banks, insurance companies, retail stores, pharmacies, private pension funds, private health insurance companies, mining companies (the heart of Chile’s economy), soccer clubs, forestry companies, fishing companies, or big media.
So what if we go deeper and see what being part of the 0.1 percent means to the rest of Chilean citizens? How do the 0.1 percent decisions affect people’s everyday life?
Kremerman did the exercise. Here goes — Chile’s 0.1 percent decide:
- The interest rate you end up paying with a bank for consumer credit.
- The excessive charges on electricity, water, telephone or gas bills.
- The supermarket account you pay each month.
- The return of your pension fund (during the first half of August 2011 the Pension Funds had lost more than $8,000 billion pesos, or $15.4 billion, equivalent to more than 6 percent of the total funds).
- The value of your private health care insurance plan.
- The credit card interest charged by retail stores when you have to buy clothes or any appliance.
- The harsh conditions for small businesses that operate as a supplier, contractor or part of the business chain of large companies (sometimes waiting 120 days or more to receive pay).
- Bus fare and plane ticket costs.
- The percentage of fish available for artisanal fishermen.
- The shows and news you see and hear on TV and most radio stations.
- The editorial line of the biggest media companies.
- The fee you pay in a private school or university.
- The players that are hired by your favorite soccer team.
- And, of course, the possibility of not having universal quality public education and health because they don’t want to pay more taxes (one Warren Buffett idea they failed to like).
The 0.1 percent make up the core of Poderopedia’s who’s who database. But in our research, we’re discovering that the power map of civic, business and political leaders, as well as companies and organizations, covers the top 20 percent of the country with links in each one of the sectors mentioned above, similar to the well-known Pareto principle.
UNDERSTANDING OCCUPY CHILE
The Chilean economy is often applauded by the media and think tanks. But you don’t read as much about the gap between the richest 10 percent and the poorest 10 percent.
In a recent book, however, economist Cristóbal Huneeus and Andrés Velasco, formerHarvard teacher and ex-minister of Finance, demonstrate that the income of the richest 10 percent is 78.5 times greater than that of the poorest 10 percent today.
If you break down the numbers, like Kremerman did, it means that “Chile has an average per capita GDP of $32 million pesos ($16,000) a year for a household of four people, but over 80 percent of Chileans live in a household with an annual income not exceeding $10 million pesos ($19,000).”
It also means that “the richest 5 percent of the population generates income 830 times more than the poorest 5 percent,” Kremerman wrote. And, according to the 2009 CASEN,the poorest 10 percent live with 1.5 percent of the country’s total revenues, and the richest 10 percent represent 39.2 percent of revenues.
In addition, Chileans on average owe 7.5 times more money than what they make each month, so many are afraid of losing their jobs or becoming ill. That makes it easy to understand why long before Occupy Wall Street began, we had thousands of students and citizens protesting for free quality public education, with nine out of 10 Chileans supporting their protests.
But on the other side of the food chain, many business associations, lobbyists and large funders of political campaigns continue to reject a tax increase on the rich and oppose structural changes that would break the asymmetry of power between the major economic groups and ordinary citizens.