[Translation] The Club

From: andrew cooke <andrew@...>

Date: Sun, 23 Sep 2018 11:44:17 -0300

[I've translated this because it rings so completely true.  This is
not my profession, so the following may contain errors.  Andrew]

https://www.latercera.com/opinion/noticia/el-club/327433/

Daniel Matamala

Some years ago the economist Rodrigo Wagner was looking for work in
Chile, returning with a Harvard PhD tucked his arm.  The head hunter's
forst question: Which school did you go to?  Second: What do your
parents do?  Third: What do you siblings do?  "And to finish off they
asked me how many children I had, with a tone that implied I might
hold some religious belief," Wagner recalled. "And this wasn't
unusual: friends returning from MIT have had similar questions."

I remembered this anecdote while reading one of the founders of
Cornershop, Daniel Undurraga.  "It's a monopoly, working in
collusion," he said last year.  On Friday in La Segunda, he explained
that "they all know each other, they take their vacations at the same
resort, and the collusion, implicit or explicit, comes naturally.
This makes people more complacent and less innovative.  There should be
life without parole for collusion because there's no other to stop it
once and for all."

This agrees with the diagnosis of another entrepreneur, Nathan Lustig,
an American living in Chile: "Industry is highly concentrated in a few
hundred very rich families that go to the same schools and
universities.  Everyone in an elite with one or two degrees of
separation.  To compete with a friend of the family, a friend of your
friend, or a member of your church, is frowned upon, and most don't do
it."

It goes without saying that Wagner, Undurraga and Lustig aren't
emissaries from Pyongyang or La Habana, on a campaign to install
Marxism in Chile.  They are supporters of the free market that want to
free the virtues of competition: wealth, innovation, and social
mobility.

This is why the point to an obstacle to that competition: the
homogeneity of the economic elite.

Many refuse to see a problem.  Citing a figure from the OCDE Jose
Pinera celebrates the "marvelous legacy of our Liberal Revolution
... Chile has the most powerful 'social elevator' in the OCDE and
maybe the world."  For Luis Larrain the same figure "shows the lie in
what the left and much of Chilean media claim.  The opportunities to
advance in our country are much larger than in many of the countries
held up as models."

What does the famous figure really say?  That in Chile 23% of the
children from families in the poorest quartile are now in the top
income quartile - the highest proportion amongst the 15 countries
compared.

In other words, 1 in 4 of the children with least resources end up
earning over $600.000 a month (approx$900 USD) (and, therefore, the
other 3 earn less).

This is good news, and a big advance for anyone raised in poverty, but
it has nothing to do with the diversity of the elite, a club that you
obviously can't enter with just \$600.000 pesos a month.

That club stays closed.  Chicago professor Seth Zimmerman shwed that
over half (53%) of the highest directorships in Chile are in the hands
of alumni from nine public (ie private) schools in Santiago: 0.5% of
Chilean students.

They form 19% of those admitted to the most competitive university

"Chile may be stagnating because of its oligarchy", the influential
academic James Robinson warned a short while ago.  There is a
relationship between the homogeneity of its elite and the economic
stagnation.  Already, in 1935, Pareto warned of the necessity of a
"circulation of elites" via meritocracy.  Today Brezis and Temin warn
that "a strong inter-connection between elites means that all sectors
of the economy are governed by a monolithic group."  And that is a
crucial disadvantage in times of transformation.

Where is the talent that will lead Chile through the radical change
that is coming?  Will we continue to search for it in a micro-world of
inter-connected families?  Or open the doors of merit to the other
99.5% of Chile?

Quoting Undurraga again: "The three most important engineers in
Cornershop are from Curico, Rio Bueno and La Calera."

It's not just a question of justice.  It is necessary for efficiency,
and survival.