In recent days, Chileans were shocked to learn that for the past eleven years the top two toilet and tissue paper manufacturers in the country have colluded to raise prices for their products. The fact that the companies involved, CMPC and SCA (formerly PISA), turned themselves in and will therefore enjoy the benefits of immunity provided by Chilean law, has only added fuel to the collective outrage.
What these firms did was reprehensible. However, there is more than a whiff of overreaction in the way Chilean public opinion, and the Chilean government, has responded to the revelations.
Politicians, business leaders, and consumer advocates are piling on, trashing not only the companies but also the Chilean capitalist model itself. Few are defending the idea that capitalism needs better regulation rather than abolishment.
The case has dominated headlines for weeks. One of Chile’s main business associations has suspended the membership of CMPC. Its leader, Eliodoro Matte—scion of one of Chile’s most powerful families—is being taken to the cleaners in the press. Chilean consumers’ trust in private business has taken a hit: up to 50 percent of them have said the case will change their purchasing habits.
The governing left-wing coalition, down in the polls after its own scandals, saw an opening to bash business, and is seizing it.
President Michelle Bachelet has said the case is “incredibly serious” and has renewed calls for stiffer antitrust fines, including jail time for offenders. Firebrand members of her coalition have gone further, with one prominent radical senator calling for a cacerolazo (massive banging of pots and pans that became a common form of protest during the dictatorship of Augusto Pinochet) against collusion. The Chilean Congress is on the verge of passing legislation punishing active participants in cartels with jail time.
Fighting cartels is all well and good, but the topic should be handled with care.
The blunt way in which the media, politicians, and even business elites are treating the topic suggests that Chileans—the most sophisticated, pro-business Latin Americans you will find—have trouble sizing the proper role of business in our societies.
Ever since antitrust legislation was first enacted in the late nineteenth century in the United States, modern societies have understood that cracking down on the abusers of capitalism should not be taken as an indictment of the system as a whole. Public opinion, particularly in the U.S., seemed to understand that a few rotten apples did not mean spoiling the entire batch, that one could punish the sinners without calling the entire system into question.
In fact, when Standard Oil was broken up in the United States in the early twentieth century due to violations of the Sherman Antitrust Act, American President William Taft reminded the public of the need to preserve the system while “destroying merely those practices which unduly restrained inter-State commerce and stifled competition.”
Many Latin American countries have approached the enactment of their own antitrust statues with a similar measure of prudence.
For example, when Mexico fined a transport cartel earlier this year, there were few calls for an overhaul of the entire system. After its competition authority raided the offices of national airline Aeromexico earlier this year, political leaders were cautious not to interfere with the ongoing investigation. And in Brazil, antitrust authorities have begun investigating prominent international cartels such as one involving auto-parts makers.
In these countries, the digging up of evidence of corporate malfeasance is being discussed in a measured way, without prompting calls to undo the entire system. In Chile, however, it is being used to question capitalism itself.
Corporate scandals are just the tip of the iceberg in the creeping discomfort surrounding role of private business in Chile. For months, the country has been rocked by allegations of corruption involving the illegal funding of political campaigns by large corporations. With great élan, the government is pursuing a labor reform that would give unions enhanced powers at the expense of business owners. And a mayor of a Santiago municipality is promoting “popular” drug stores that sell at “fair prices” in order to counter “price-gouging chain stores”—a line straight out of Hugo Chávez’s script. Not surprisingly, the rant has become popular, and mayors from both the left and the right are lining up to copy the initiative.
These developments underscore how difficult it is in Latin America to speak up for private business.
Capitalism does need to be saved from its own excesses in Chile, but few public leaders today have the moral authority to do so without coming across as defenders of plutocrats. For whatever reason, the continent does not have a powerful conservative movement capable of effectively defending capitalism, while not denying the need to rein in its excesses. This lack of a counter-narrative creates perfect conditions for the extreme left-wing experiments that have plagued the rest of the continent for so long.
A large part of Chile’s success in recent years has come on the backs of private businesses. While the Chilean model has many flaws, it does not merit throwing the capitalist baby away with the bathwater.
Sadly, few are saying this. For all the benefits it brought society, these days “the Chilean way” has few defenders.