Understanding Santiago de Chile

Photo by Lei Yu.

​To this urbanist, the cities of Latin America inspire grand passions. The cities north of the Rio Grande include old friends and occasionally disliked acquaintances. I’m very fond of Chicago; Los Angeles irks me. But I could never use such tepid terms about the great cities of South America. I enjoy Beacon Hill, but my heart stops when I think about sunset along the beach at Ipanema. San Francisco can be charming, but Buenos Aires, even during last year’s riots, is always dazzling. American ghettos are very sad, but their sadness is dwarfed by the seas of deprivation that exist in the favelas of far too many Latin American cities.

Latin American cities are enticing to students of cities because they combine great promise and great tragedy. Central Paris is beautiful, but it’s difficult to get excited about trying to fix the problems of the Place des Vosges. To an urban economist, that is the equivalent of a doctor specializing in the minor ailments of the very rich. Detroit has problems, but I have long argued that in the long run, the happiness of Detroit’s current residents will be better served by letting the city collapse, than by trying to undertake the impossible task of revitalizing a city that no longer has any economic rationale. Mexico City, Caracas, Bogotá, Lima, São Paulo, Buenos Aires and Santiago (among others) suffer from congestion, pollution, crime, and vast social inequities, but each one has achieved some measure of greatness and has the potential to be much, much better. The great cities of Latin America, to some extent, combine the social problems of Detroit with the promise of a Paris. This is what makes them so exciting to me and to many other urban economists.

My serious involvement with Latin American cities began 10 years ago during my first year as an assistant professor at Harvard University. Then, as now, many of the most brilliant of our Ph.D. students came from South and Central America. One of the students in the first Ph.D. class on urban economics that I ever taught was a Chilean, Juan Braun. Juan and his family (his father had been a student at Harvard in the 1960s) had a profound interest in the problems of Santiago, and indeed in the urban problems of Chile broadly defined. While Chile has received a remarkable amount of attention from economists over the last three decades, little of that attention has been devoted to urban issues.

The Brauns were convinced that Chile had major urban problems stemming from centralization in Santiago—they believed that congestion, pollution, and infrastructure problems were not being studied. They, and the firm Forrestal Valparaiso, commissioned John Meyer (a founding father of transportation economics) and myself to lead a team of researchers to analyze Chile’s urban problems. This year, the fruits of that research were published by Harvard University Press in the form of the edited volume Chile: The Political Economy of Urban Development.

The book is loosely organized around the question: Is Santiago too big? This same question could be asked of many American cities which dominate their hinterlands to an extent that is almost unimaginable to a denizen of our suburbanized nation. More than one-third of Chileans live within the metropolitan area of the capital city. Buenos Aires and Montevideo are similarly dominant within their own countries. While the U.S. and Canada are nations of remarkably decentralized urban systems, Latin American countries are nations with dramatic centralization. Our book tried to understand why this pattern occurred and attempted to define the social costs and benefits of this centralization.

In addition to editing the volume, I undertook a wide-ranging study of the mega-city phenomenon. Jointly with another Ph.D. student, Alberto Ades (from Buenos Aires), I published a paper called “Trade and Circuses: Explaining Urban Giants,” in the Quarterly Journal of Economics, which used cross-national data and urban history, back to Rome, to understand the mega-city phenomenon. We found that urban centralization has more to do with politics than economics. In stable democracies, on average, 23 percent of the urban population live in the largest city. In dictatorships, the comparable number is 35 percent, and these largest cities are almost always the capitals. Small capitals are almost uniquely a feature of former British colonies, which generally undertook large political efforts to ensure that they would not develop imperial cities, which grew large on the wealth of the hinterland.

The U.S. Senate, somewhat absurdly but not irrationally, unduly empowers the empty spaces of the American west. In a world where the hinterland is not protected by artificial institutions such as this, political influence depreciates with space. The nation’s leaders care about riots in the capital but to them, agrarian revolts hundreds of miles away are far less troubling. Activists close to the corridors of power can effectively lobby in a way that people far away cannot. As a result of this greater influence, the government ends up spending more on people who live close to the capital. The bread allocations in classical Rome favored the capital city, and government spending in 1950s Mexico under the PRI did the same. As government spending favors the capital, the residents of the hinterland mobilize, fleeing rural poverty to get their share of government largesse. The outcome of this pro-capital distribution of government favors is a large capital city. This is why political factors are so powerful in explaining the presence of mega-cities: these political factors determine the extent to which there is a pro-capital bias in government policies.

Chile: The Political Economy of Urban Development tried to understand this urbanization process in one country and then asked: what would better urban policies look like? During the era of Santiago’s greatest expansion, during the early 1970s and earlier, we found a familiar pattern: government spending was highly oriented towards the capital city. Large scale spending on infrastructure, education and social programs was all disproportionately oriented towards Santiago. But by the 1990s, this pattern had essentially disappeared. We could find little evidence (outside of higher education and the subway system) of an uneven distribution of resources. The transition of Chile into a stable democratic system had led to a spatial equity and as a result, the growth of Santiago (relative to the rest of the country) had leveled off.

Still, the legacy of a century of disproportionate growth remained with us. Even though the government now appears to be spatially neutral, the city’s dominance creates a number of major problems, which we thought necessitated reform. Our book contains essays on transportation, pollution, housing, environmental infrastructure and social services such as education. All of these essays presented specific suggestions for reform, many of which have now been implemented.

Matthew Kahn (now of Tufts) and Suzi Kerr (then a Harvard Ph.D. student, now Director of Motu Research) addressed Santiago’s pollution problem. Like Los Angeles, Santiago suffers from a thermal inversion problem, which means that the pollution generated by its businesses, households and cars doesn’t blow away, but instead creates dark, pollution covered skies, reminiscent of Victorian London or industrial Pittsburgh. While Santiago’s geography conspires to create a harmful air quality, man-made factors, such as unpaved roads, leaded gasoline and traditional fireplaces, can all be changed to make the city more livable. Indeed, there have been dramatic changes in the air quality of the Los Angeles Basin since the 1970s, which reflect the technological improvements in gasoline and the automobile. Kahn and Kerr argued for a higher gasoline tax, and policies that would update the automobile fleet (in particular the buses). Paving roads and penalizing businesses that pollute would also help to make the city more livable.

John Kain (the erstwhile ornament of Harvard’s urban economics program) and his student Zhi Liu (a former Harvard Ph.D. student, now of the World Bank) focused on transportation policy. They argued that mistaken government policies had led to an imbalance of investment in rail and roads, both in Santiago and across the country. Instead of expanding Santiago’s subway system, Kain and Liu argued for dedicated bus lanes and better road infrastructure. They particularly emphasized the fact that the highway system was under-developed outside of the Santiago metropolitan area, and that this contributed to the congestion in the central city. Kain and Liu also suggested that a combination of more road construction and congestion pricing (i.e. higher tolls and taxes on car usage in the central city) could be used to make the streets more user-friendly.

Amerita Daniere and José Gómez-Ibáñez tackled the area of environmental infrastructure. In the early 1990s, typhoid and cholera were significant problems in Santiago and appeared to be closely linked to the failure to treat wastewater properly. It is an axiom of local public finance that producing clean water is the most critical function of city governments. Daniere and Gómez-Ibáñez argued that only six percent of Chile’s wastewater is appropriately treated before disposal. To them, investment in waste treatment is a clear necessity and should be the first order of business for the Santiago region.

Denise DiPasquale and Jean Cummings (of City Research) researched Chile’s housing policies. Chile, like many cities, has an aggressive policy of building public housing. The development of public housing in Santiago appeared to follow the dictates of expediency rather than true social costs. As such, the housing is built far away from employment centers, creating daily commutes often upwards of two hours. Subsidized public housing appears to have pursued a false economy by trying to minimize land costs without considering the long-term costs of congestion and lost time from commuting.

Finally, I looked at the provision of health, welfare and schooling expenditures throughout Chile. While there were certainly past issues of under provision in the hinterland, I was impressed by the degree to which Chilean policies had now managed to provide reasonable levels of primary schooling and health services throughout the country. On the other hand, Chile’s massively subsidized higher education sector overwhelmingly resides in the capital. This subsidization both favors the wealthy (who are the primary users of subsidized higher education) and ensures the continued concentration of the country’s elites in Santiago. I urged a balancing of government expenditures towards primary spending and greater spatial neutrality in the subsidies for higher education.

I also looked at Chile’s political system and argued that it too appeared to favor the capital city. For example, while Brazil and the U.S. are marked by federal systems that leave a great deal of room for local innovation, Chile is still remarkably centralized. As a result, the growth of new cities is stunted, making it difficult for local entrepreneurs to succeed. While American city governments have a great deal of freedom to borrow and expand, Chilean cities are still dominated by central control, which invariably tends to stifle local initiative. Unsurprisingly, these observations led me to believe that political decentralization was a necessary move for urban balance in the country.

While the book is about Chile, I have tended to take its lessons and its methodology with me throughout the world. All of our lives are deeply influenced by the cities in which we live, and these cities are ultimately as much the product of government policy as of private initiative. As such, government policies throughout the developing world must better respond to the great problems of cities: pollution and congestion. Moreover, the tendency of centralized political leaders to concentrate power in their own hands is a curse to urban development outside the capital. Healthy urban hierarchies depend on a government structure that respects local initiative and protects the rights of people throughout the country, not just the residents of the capital.