Chilean Privatized Social Security Falling Apart

Michael HiltzikPromoters of privatizing the US Social Security system have never tired of holding up Chile’s privatized program as an example of how this can make workers rich. The trick is that they never ask ordinary Chilean workers and retirees how they feel about it.

That may be because they know what the answer would be. It was visible last month in the streets of the capital, Santiago, where crowds estimated at 100,000 to 200,000 marched to demand reform…

The Chilean program was promoted relentlessly by its creator, Jose Pinera, who got himself a sinecure at the Cato Institute out of the deal. From there he fed American conservatives’ fantasies of “an obvious free market solution that works,” he wrote for a Cato audience in 1997. (In that same article he declared that “America’s Social Security system will go bust in 2010.” Umm, no.) He boasted of how he single-handedly “decided to undertake a structural reform [of Chile’s bankrupt retirement system] that would solve the problem once and for all.” …

But the seams soon showed. The World Bank determined that fees charged by those favored investment firms consumed fully half the pension contributions of the average worker retiring in 2000. The government surplus disappeared, and those outsized stock market gains faded away.

A series of reforms of the reform followed. But not enough. Many workers can’t afford to pay the 10% minimum contribution, and others have been moved out of the system by a shift toward contract labor. The average pension for retirees is about $400 a month, Bloomberg reports, but 40% of retirees are getting less than $260.

—Michael Hiltzik
Chile’s Privatized Social Security System, Beloved by US Conservatives, Is Falling Apart

5 thoughts on “Chilean Privatized Social Security Falling Apart

  1. Great article. Hiltzik knows perfectly well the answer to his final sentence, “Will the privatization lobby in the U.S. take the hint?” Those lobbyists could give less of a fuck. I imagine Hiltzik is writing to the Ted Talks crowd, trying to persuade them that the default consensus about how “entitlements” need to be curtailed is absolute bonkers. If he gets through to one of them, he’s done more good than I ever have. Nice work, Mike.

    • I love Hiltzik. He’s a national treasure and he really isn’t that well known. Well, there’s a shock!

    • This is a constant thing in conservative apologetics. We saw it big time after Obamacare was passed. All these conservatives looking to different countries to find a “truly conservative” healthcare system. And in each case, all they showed was that they didn’t understand healthcare and they knew almost nothing about whatever country they were talking about.

    • Hiltzik is always a good resource. I love his work. He were at NYT, he’d be famous. Not that he isn’t in his way.

      I get sick of this conservative game where there’s always a better (that is: more conservative) system “out there” that works so well. One that that constantly amazes me is that Baker and Weisbrot wrote Social Security: The Phony Crisis back in 1999, yet I hear all of the arguments today — 17 years later. Why won’t conservatives just be honest: they hate Social Security because they hate the idea of it.

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