In nations around the world, people are protesting economic inequality and taking to the streets in political frustration. We said it here first: The pitchforks are coming. This week, Cesar Hidalgo joins Nick and Paul to discuss the unrest in Chile and explain how his political organizing app is helping protestors prioritize the policies they want government to address.
The texture piece is courtesy of Gustavo de la Piedra, a listener from Santiago, Chile. The news clips are sourced from the news station France 24.
Cesar Hidalgo is a Chilean-Spanish physicist, author, and entrepreneur. He currently holds an ANITI (Artificial and Natural Intelligence Toulouse Institute) Chair at the University of Toulouse, an Honorary Professorship at the University of Manchester, and a Visiting Professorship at Harvard’s School of Engineering and Applied Sciences. From 2010 to 2019, Hidalgo led MIT’s Collective Learning group. He is known for the creation of the field of Economic Complexity, which uses disaggregate data and network methods to explain and predict economic development dynamics, for his work on the creation of data visualization and distribution systems, and for advancing ideas on the use of Artificial Intelligence in democracy.
The pitchforks are coming… for us plutocrats: https://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014
‘Chile Woke Up’: Dictatorship’s Legacy of Inequality Triggers Mass Protests: https://www.nytimes.com/2019/11/03/world/americas/chile-protests.html
Global protests share themes of economic anger and political hopelessness: https://www.washingtonpost.com/world/2019/10/25/global-wave-protests-share-themes-economic-anger-political-hopelessness/
Chile announces $5.5 billion economic recovery plan as protests bite: https://www.cnbc.com/2019/12/03/chile-announces-5point5-billion-economic-recovery-plan.html
Nick Hanauer: My Twitter feed lit up in the last month, from of all places, Chile.
Paul Constant: Are these the pitchforks that Nick was warning us about?
Cesar Hidalgo: I think so. Because the society in which people now are better prepared and better educated, they also expect something better and at the moment many people are not getting that. There’s a lot of anger that is based on that tension that people are better prepared than before, but they’re getting less.
Speaker 4: From the offices of Civic Ventures in downtown Seattle. This is Pitchfork Economics with Nick Hanauer, where we explore everything you wished you’d learned in Econ 101.
Gustavo: Hola Pitchfork listeners. This is Gustavo from Santiago. The Pitchforks have come to Chile.
Speaker 6: Every day for the past month, the Plaza Italia has been overrun with hundreds of thousands of demonstrators who have come to protest a deeply unequal society.
Gustavo: It turns out that the government favored a small elite in lieu of the people for far too long and the country decided it has had enough. Citizens have been protesting due to, among other things, low wages, mismanagement of public funds, increased cost of living, healthcare problems, and perceived abuse of citizens pension plans, not to mention enormous income inequality.
Speaker 6: Since the beginning of the protest, more than 1500 people have been wounded and 20 killed in violent clashes, including at least five killed by live ammunition.
Gustavo: The riots left a lot of destruction and ashes in their wake, not only in the capital Santiago, but in many cities. Luckily it was relatively short lived, only a month or so, which is very brief compared to demonstrations that have taken place in other countries, some of which are quelled with military force, continue for years or never succeed. The government has given into many of the demands of the people and we are emerging from this a better country.
Speaker 6: Led by young people, Chile has woken up. The population is now demanding the resignation of conservative president Sebastian Pinera. Despite government concessions and the resignation of several ministers, anger has not subsided. The country’s pain runs too deep.
Nick Hanauer: So a big thanks to superstar Pitchfork Economics listener, Gustavo from Chile for sharing his personal story and that material. That was incredible. I’m Nick Hanauer, founder of Civic Ventures.
Paul Constant: I’m Paul constant and I’m a writer at Civic Ventures.
Nick Hanauer: Well, Paul, the Pitchforks do appear to be coming.
Paul Constant: It’s true.
Nick Hanauer: Yeah. The shit is hitting the fan all over.
Paul Constant: Our podcast name is revealing itself.
Nick Hanauer: Exactly. And as you may know, my Twitter feed just lit up in the last month or so from of all places Chile and that’s because there’s been this crazy wave of protests that have occurred because inequality has gotten so bad there.
Paul Constant: Here’s a quote from the LA Times. “From Chile to Sudan, Lebanon to Columbia; mounting anger and frustration over rising economic and social inequality, political corruption and disillusionment with democratically elected and authoritarian governments have led to a wide array of mass protests in recent months.”
Nick Hanauer: Yeah. And there was this really interesting study recently, that analyzed 843 protests in 84 countries between 2006 and 2014; found that the main causes were economic injustice and perceived failures of political systems. So the Chile protest began with just a 3.75% subway fare increase in Santiago and a couple hundred public high school students, swarmed a Metro station to protest it, and the state responded with violence, which did not go well. Riots followed across the country and more than a million people protested on October 25th. To be clear, this is serious business. There are 26 people who apparently have died, thousands injured, more than a billion and a half dollars of economic losses for business.
But the subway fare was the spark, but it’s really about inequality. And just to zoom in on that, Chile’s income gap is 65% higher than the already egregiously awful OECD average and has the highest level of post-tax income inequality in the OECD. So it’s not surprising that people are pissed off.
Paul Constant: There were taxes on WhatsApp messages, that sort of stuff. And it’s funny because the inequality is so huge, but it really is the cliche about the straw that broke the camel’s back. It’s the one tiny thing that becomes the focus for an explosion of outrage that has been gathering for years, decades.
Nick Hanauer: And today on the pod, speaking of Chile, we get to chat with a friend and friend of the pod, physicist, economist and entrepreneur Cesar Hidalgo, who we’ve had on the pod before talking about economics. But Cesar is Chilean and deeply connected to what’s happening in Chile. And he is going to talk to us about his perspectives on that and what needs to happen down there and just about inequality in these protests in general.
Paul Constant: And his role in the protests. Which is very [crosstalk 00:06:14]
Nick Hanauer: That’s right. That’s right. He’s done some really interesting things. So as always it will be amazing to talk to Cesar. He is one of the most interesting and brilliant people that we have ever come across.
Cesar Hidalgo: My name is Cesar Hidalgo, I’m a founder of Datawheel and I’m also a professor at the University of Toulouse, Manchester and Harvard.
Nick Hanauer: So Cesar you have joined us because you’re super interested obviously in inequality as we are on the podcast and you are also from Chile where there has unfolded a shit storm of protest over inequality over the last few weeks. So tell us about that.
Cesar Hidalgo: It’s a very politically active place right now Chile, and I think it’s hard to explain to someone from the outside because of course there’s a lot of actors and there’s a lot of tension among them. But if we’re going to simplify the situation, is that in the middle of October, there was a call for people to evade the subway fares. That call was received with some sort of hostility on behalf of the government, and it escalated it quickly into protest that became massive. Some of them had some violent components. And what happened is that in a couple of days, there was this Saturday in which over 70 subway stations were burned and more than a hundred supermarkets were destroyed. And that was really a life changing moment for everybody that is from the country or was in the country because it marked the beginning of an era of uncertainty that hasn’t stopped until today.
So since then, protests continue ongoing but also there are other groups, people identify them as groups of organized crime, like drug dealers, that have used the chaos as an opportunity to loot and destroy big parts of cities, basically the commercial neighborhoods where all of the stores are one next to each other. The government has not been able to deal properly with the situation and the police is not well prepared to participate of these type of activities. And they’ve committed and many acts of civil rights violations in the process of trying to keep the situation under control. The president now has single digit support and the only thing that happened that was a little more substantial, but it’s still debated, is that there’s going to be a referendum next year to decide whether there’s going to be a new constitution. If the referendum is approved, there’s going to also be a question about how that new constitution is going to be written, and then there’s going to be another referendum to exit that process that would have to approve the new constitution.
So Chile’s in a very politically active situation. The decisions are going to probably take place next year. But at the moment, I think many people are trying to see how this is going to evolve because honestly it’s something that it’s very chaotic.
Paul Constant: There have been other economic protests in Chile, are there other protests inspired by the economy in Chile, does this feel the same as, is there something different about this one?
Cesar Hidalgo: Absolutely different. So Chile has a tradition of protests, and you can be cynical about it. I’ll say that the students protests every time, they’re going to go into exams, because there is some sort of annual regularity to protesting. There’s no protest on recent history that has been as massive as this one on the side of the peaceful side of the protest. And also one that has been as destructive on the side that has been, more, let’s say aggressive. Like 70 subway stations, subway stations are made of concrete and metal; they don’t burn. And also the number of civil rights violations that Chile has seen. It’s something that Chile has not seen since the times of the dictatorship, even the early dictatorship. So this is really an event that sure, maybe you can say it’s not unheard of in the entire history of the country, but definitely it’s an event, that it’s a 40 to 50 year event. It’s not a two to three year event.
Paul Constant: So who is protesting?
Cesar Hidalgo: Many people are protesting, and part of the thing that makes this situation complicated is that if you look at it from abroad and say, okay, if people are unhappy and there’s inequality and so forth, and you see the massive protests you, kind of get a simplified view. But myself being someone from the country, I get access to all of the different little bits of information. So there are protests and there is unhappiness, but if within the context there are many different smaller groups that are trying to capitalize on the general mood. So just to give you an example, like groups of people that work on transportation such as truckers or bus drivers and so forth, they organize to do protests so that they would remove fees that were owed to tolls. In Chile there are many tolls that are private because many highways were built in a model of privatizing and providing license for private companies to build those highways in exchange for collecting tolls.
And in that case, the guys are using the opportunity that the country is in at the moment. That is very difficult to push their agenda and they got something out of it, because here was an announcement that there was something going to be done in that way. So look, what I’m trying to say is not that this protest is about transportation or tolls. What I’m saying is that this leaderless protest that has a lot of unhappiness, because the conditions are bad in Chile, for many people. And the consequence is that many different groups are trying I think to capitalize on that, which makes the situation more complicated because there isn’t a set of demands that I would say would satisfy everyone. The ones that may satisfy a large number of people though, are demands regarding pension reform and demands regarding wages.
Because those are like two issues that are very transversal and affect lots of people. But just like their social demands in terms of pension and wages, but big part of the protest has been about doing a constitutional assembly to create a new constitution. That’s people, for instance, that their main point of concern is that the constitution that Chile has right now was the constitution that was approved in 1980 due to Pinochet’s regime. Therefore, even though the constitution might have some parts that are reasonable, they consider it completely legitimate and their main point of products is to remove the constitution. Other people don’t want to change the constitution, so that’s why there’s going to be a referendum. Other people are more concerned about the social agenda, pension reforms, wages. Other people that are just trying to see what they can get for their own group. It’s a complex environment in which everybody’s trying to get what they can.
Paul Constant: As you know, Nick wrote a piece a few years ago now called “The Pitchforks are Coming” talking about income inequality and he talked about these sorts of uprisings that always happen when there’s sufficient inequality in a society. Do you think that there’s a relationship between that? Are these the pitchforks that Nick was warning us about?
Cesar Hidalgo: I think so because what I think is happening here at the larger scale is that a bit of the following. So we think about it, it has been 30 years since 1990 and the world has changed a lot since 1990. There’s a whole new generation of people that now are not just adults, but they come of age, they’ve penetrated society and they’re now entering what their life is going to be. Unlike previous generations. These people have a strange combination. On the one hand, they’re better educated than previous generations. 32 year old, a 34 year old Chilean today on average has higher levels of education than a 32, 34 year old Chilean 50 or 60 years, or even 30 years ago. There’s more people that have finished high school. There’s more people that go to college and so forth.
But when it comes to the share of income that these people are receiving, many of them are receiving relatively small shares. In the U.S the intergenerational inequality has been in the news quite a lot recently, and I think that causes attention because in our society in which people now are better prepared and better educated, they also expect something better from their adult lives. And at the moment many people are not getting that and the conditions to make that happen don’t seem to be clear. So I think there’s a lot of anger that is based on that tension that people are better prepared than before, but they’ll get less for all of that preparation.
Nick Hanauer: Yeah, it’s super interesting. And what’s also interesting is how many global protests are taking place right now. It’s not just Chile, it’s Lebanon, Iran, Sudan, Columbia, Ecuador, Iraq,
Cesar Hidalgo: Mexico, yeah.
Nick Hanauer: Mexico, France, the yellow vests in France. I mean, surprisingly the only place where we haven’t had broad scale protests since, at least since Occupy is the United States,
Cesar Hidalgo: Like in Chicago, they tried to… Sorry in, in Seattle, they tried to evade the subway; they did in New York, but they left the day. They go home in a day.
Paul Constant: Yeah. What should Chile do?
Cesar Hidalgo: That’s a tall question, and I think there’s no shortage of people trying to answer it. I think there’s many different things that Chile need to do on different fronts. On the one hand, there is a legit crisis of legitimacy in politics that is going to be very hard to overcome. I think that a new constitution and hopefully helpful and healthy process. To create a new constitution might go a long way to help solve that political crisis because it’s not just the president, but like in general, congressmen and politicians in general are not very much appreciated by the population right now, but that’s not going to solve all of the problems. That might brings some sort of instability for a certain period of time. But Chile does need to take risks and enter more sophisticated economic activities.
And for that there has to be a rethinking of the model that the country has regarding growth by both the authorities and the private sector. Because both of them have been very, very conservative in the way that they try to develop the country. They’ve stuck to an idea of a static competitive advantages in which we should do what we’re better at because that’s where the highest profit margins are. And hence they have under invested in science, in education, in startups, in VC funding, in biotech, wherever there would be a growing market of the future that is a losing market of today, Chile has not invested. It has to be investing in things that are very secure, very profitable. Like copper mining is super profitable, but that are dead ends from a development perspective.
So there, there needs to be, besides a political change, there needs to be a new development strategy that is really focused on trying to get some moonshots on new sectors that can create an economy that includes all of these educated population that Chile has right now that are excluded or are doing menial jobs, that they clearly do not satisfy their intellect nor their standard of living that I think they deserve.
Paul Constant: Talking about inclusiveness, you’re working on a solution here that I think is really interesting. One of the things about Occupy, it got a lot of political work done but it was leaderless and it didn’t really have a direction. And you have launched a platform for Chileans to directly participate in policy conversation and that seems like something that could not have existed 20 years ago, or maybe even 10 years ago. And I was wondering if he could talk about that a little bit.
Cesar Hidalgo: So when everything went South in Chile, I was very shocked, and I run a software company called Datawheel. We specialize in the creation of data integration, distribution, platforms and solutions. So we have a very sophisticated software stack that allows us to build very complex websites very quickly. So I talked to one of my engineers in Chile and I asked him, “Carlos, are you thinking about building a platform?” He say like, “Yes, you know what I thinking because, well, this is what we do, this is what we could do to help.”
So this was like four or five days from the moment in which everything started. So we say, okay, let’s… I talk to the rest of the dude in my company. I say I’m going to take a small team of five people to do a platform and we’re going do it from one day to the next.
So we had a meeting at lunchtime. We talk about different interaction paradigms and what we decided is that people were going to be on the street protesting, therefore we needed something that was good for mobile. So what we did is I collected at least of 90 proposals from a think tank that includes lots of lawyers and economists and people that work on policy issues. And we put them together on a website in which the proposals appeared side by side. And we asked people, which you prioritize? Would you prioritize the new constitution or to raise the minimum wage? It doesn’t mean that you have to have one and not the other. It means that at the end of the day time is finite, and hence, you have to sort a to do list and see what do you want to do first, what do you want to try to do second and so forth.
Paul Constant: And so what have you learned about what Chileans want in terms of policy?
Cesar Hidalgo: So we launched that the next day on a Thursday, October 24th and it went super viral. So viral that it crashed our servers. We had to ring now the whole team of Datawheel to scale this up. And we got over a million preferences collected in less than 24 hours and we are now near 8 million preferences collected. So we’ve done many waves of data collection. And what we find is that, first of all, this is a very interesting experiment because unlike social media, there is our divergent medium in which everybody is talking about different things and everything that gets said gets a split into a billion different nuances that it started a billion different conversations. This type of media has guard rails and hence it’s convergence rather than divergence. And we found that the list that people produce made sense very quickly.
So in the list of the first week, the things that were on top included the pension reform, increasing the minimum pension to be at least the same as the minimum wage was. The minimum pension now in Chile is below the poverty line. So it’s about $150 a month, so of course nobody can live on that. Then we also found in the top of the list a lot of items that were punitive towards the elite. So for example, one item was to have effective jail for people that have committed tax fraud, okay? To have effective jail for people that have been in collusion. In Chile, just to give you some background, pharmacies and other producers of chicken and paper, were found to be involved in price fixing scandals and there were many price fixing scandals during the decade, and people didn’t go to jail for the price fixing scandals. So those punitive measures came out on the top of the list.
The constitution came towards the top, came in the first week, I think around 22, 23 out of 90 which is very much on the top. And on the bottom of the list, we know we found things that were clearly relevant that told us that our method works. For example, [inaudible 00:21:52] highways were not at the top of the list. Or the most recent wave collections, data wave collections. We found that for instance, reform of the mail system or making Chile a federal state are things that don’t get support and are at the bottom of the list. So we do find things at the top of the list that make a lot of sense, that are at the heart of what many people agreed. And on the bottom we find things that don’t. So it shows that the system appears to be working.
Paul Constant: So security for people who play by the rules and consequences for people who don’t. That seems to be the part of the theme that you’re, you’re talking about here
Cesar Hidalgo: For sure. You know that Chile has this 401k type of pension system that that pioneered in the 80s, is resulted in very meager pensions and at the same time the people that are managed these pension funds do quite well. The pension funds also have a huge profits because they basically, they can capitalize on the profits. But they pass on the losses to the contributors. So people feel very exploited, and I think I would divide the protests between what younger and older people want because we saw that also in Chilecrasia. The second week of Chilecrasia , we were super violent and we were on every morning and every late night TV show. And they had the politicians that are in Congress discussing our list on TV. And that brought a wave of traffic that was people older than 40, older than 50 which were people that were on TV, scared about what was happening on the streets, not leaving their homes.
And in that week, everything that had to do with pension reform, of course, it really went on the platform. Why? Because well these are people that now have worked all of their lives since their eighties to 2020 and in this 40 years they have been contributing to this pension system that now they realize wasn’t as great as they expected. So they’re very unhappy because they’re unable to retire many of them. And the ones that don’t have contributions in those pension systems, and they have to deal with the state pensions. They really have nothing to rely on if they would not have a family member that completely support them.
Nick Hanauer: Do you think this idea of basically extending a new, creating a new way for people to participate in democracy is extensible to other countries?
Cesar Hidalgo: Well, we have four open crasia projects working now. One in Chile, one in Columbia, one in Georgia, one in Lebanon. The one in Lebanon has done quite well. They has collected about 300,000 preferences by now. So I do think that these project are extendible and the intuition that I have is that, I don’t know if there’s going to be any online or partly digital democracy by the year 2030 but I would be surprised if there wouldn’t be at least one by the year 2100. Because as you engage younger people in their evaluation of these type of tools, they seem like second nature to them. I do think that technology has changed extremely fast, and there are ways for people to participate and coordinate activities online that governments have not been able to adapt to. And there’s a generation of people that are expecting these things to happen.
So at some point someone is going to break the code that is going to figure out how to do this better. So far I would say the best example that we have is the one of Taiwan, which I assume you guys are familiar with. That hasn’t replicated well in other places. In the case of Chilecrasia we did have massive participation at the moment in which the situation was the most politically active, but sustaining participation over time is difficult. And that brings us to our whole set of questions of how do you scale ability of people to pay attention to these things with AI and other technologies.
Nick Hanauer: We should stand one up in the United States and see what happens.
Cesar Hidalgo: If you help me support that, I’m doing my oath for citizenship next week, after next week whenever you want.
Nick Hanauer: Okay. Okay. I think we’ll have to talk about that further.
Paul Constant: So there’s something we ask everyone we talk with and that’s, why do you do this work?
Cesar Hidalgo: Why do I do this work? To be honest, because it helps me learn. So imagine that like in the heat of the moment when everyone was biting each other’s heads off, we were with a group of like 20 something years old. We created this platform, we launched it, we had hundreds of thousands of people participate, giving us tons of data that then we made openly available, and we now have network of preferences for hundreds of policy issues that has been generated by hundreds of thousands of humans that I was to understand the transitivity and the rankings of preferences in ways that we never could. So to me, this was a great learning opportunity. We did get insulted a lot, a lot of people take these things more political than they are. They think that if the tool was created, it must have been created by one of the incumbents.
So many people accused the tool for example, to come from the Communist Party. And then when other people from the right shared it, they accused it to be like a Trojan horse from the fascist because it’s hard for people to understand, one of the things not as a sort of brainwashing exercise from one of the sides. But I think it was an amazing learning opportunity and I think probably there’s going to be a lot of papers that we’re going to be able to write from that data. A lot of lessons that we’re going to be able to learn. There’s a lot of people that work on algorithmic decision making or using algorithms to augment social decision making that have been working in the context of [inaudible 00:27:28] and they don’t have too much data. I think this is going to be data that’s going to be valuable for that community. So learning definitely is my number one goal. And the only way to learn is to jump into the deep end of the pool and it starts swinging your arms and legs and see if you float.
Nick Hanauer: Cesar, you always float. It’s what I know about you. So well listen, thank you so much for taking time out to talk with us about Chile. I think what’s happening there is really interesting and consequential. Obviously there’ve been some people who were killed and hurt and that’s a very serious and terrible thing, but I do think it’s really important. Obviously we wouldn’t be doing a podcast devoted to it, if I didn’t believe that it’s really important for people to stand up against the rising inequality in their communities. Eventually, because you have to do it or it’s going to get worse. Anyway, my friend, thank you so much for chatting with us.
Paul Constant: Yeah. congratulations on your citizenship. That’s very exciting.
Cesar Hidalgo: Thank you. So I enjoyed talking with you, and like anytime you want. I’m here to discuss ideas.
Nick Hanauer: Okay. Thank you Cesar.
Paul Constant: Thank you.
Nick Hanauer: Take care, bud.
Cesar Hidalgo: Goodbye!
Nick Hanauer: Bye.
Paul Constant: So where is Chile right now? As of now, in early December, the protests are still ongoing. The government in November agreed to hold referendum in April of next year to replace the constitution, which was written under a dictatorship.
Nick Hanauer: A neoliberal dictatorship.
Paul Constant: Voters will be asked whether they approve of the idea of a new constitution and whether current lawmakers should serve on the commission that would redraft the documents. So they have an opportunity to start completely over from scratch.
Nick Hanauer: Yeah, interesting.
Paul Constant: And this really speaks to the power of organizing. I think in the 21st century there are so many tools. This protest that started as 200 mostly high school girls, who decided to protest tiny, what amounts to a tiny transit fare can turn into a nationwide uprising.
And I think that what we’re seeing here is something new. I don’t think that the policy app that Cesar is working on is going to be the next constitution. But it might be the beginning of the next articles of Confederation.
Nick Hanauer: It’s certainly the beginning of the next conversation, which is super interesting and I’m intrigued. I think that we will continue to talk to Cesar about this technology. I think it’d be a fun project maybe for Civic Ventures. It’d be interesting to do it in the United States and see where it took us.
Paul Constant: Yeah. Think about what we might’ve done if we had it in Occupy.
Nick Hanauer: That’s right. That’s right.
Paul Constant: It’s just a few years too late.
Nick Hanauer: I think the problem that the technology tries to address is a very real one, which is that people feel strongly that their interests are not represented by their democracies.
And this is true, this is the fact of the neoliberal era, is that all the political parties were captured by elites, both the left and the right. And economic inequality got worse under Republicans and Democrats. Leftists and rightists essentially across the Western world because all of those folks were in the thrall of a bunch of economic ideas that basically told you that if rich people got richer, that would be good for everybody. And turned out not to be true, and now we’re all paying the price for it.
But finding new ways for people to express their sentiments in a democracy and having it be enacted, I think is what it’s going to take to get democracy back on track and get societies working in the way that we’d ideally like them to be.
The holidays are coming up and we’re going to take a break. And as a consequence, we’re going to reissue one of our favorite episodes called, “What’s the Trick in Trickle-down Economics” featuring the amazing historian Yuval Harari and our friend, the neuropsychologist Molly Crockett. It’s one of our favorite episodes. If you have not heard it, you’ll love it. And if you had, it’s worth re-listening.
Speaker 4: Pitchfork economics is produced by Civic Ventures. The magic happens in Seattle in partnership with the Young Turks network. If you liked the show, make sure to subscribe, rate, and review us wherever you get your podcasts. Find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on medium@civicskunkworks and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at civic ventures, thanks for listening. See you next week.