Chile offers experience in risks, benefits of privatizing Social Security

[Rose Siding]

WASHINGTON - Chile scrapped its bankrupt Social Security system in 1981 and replaced it with personal retirement accounts like those that President Bush is proposing for Americans.

Today, Chile's experience offers Congress and the Bush administration three important lessons:
- It's terribly expensive to move to a privatized retirement system.
- It's dangerous to let the private sector manage retirement funds without close regulation.
- Privatized pension funds can bring retirees higher returns than they'd get from the government.

When Chile scrapped its old system, it faced the same problem the United States has: It eventually would owe retirees more than it could reasonably expect to collect in taxes from active workers.
Chile, then a right-wing dictatorship, essentially forced citizens to be savers....
...
On another matter, Bush and Chile's former labor minister may both be wrong. That's the idea that privatizing retirement gives workers what Bush calls an ownership mentality about their assets.
Not so, according to a University of Chile study. It found that more than half of workers didn't know what percentage of their wages was going into the plan. Nine out of 10 didn't know how much their plans' fund managers were charging them.

http://www.realcities.com/mld/krwashington/10683351.htm

[Vincardog]

1. - Privatized pension funds can bring retirees NEGATIVE returns

SSI is an Insurance program not a program to pay hundreds of Billions of dollars to money managers. Remember aWoL's friends at ENRON? Don't fall for this fake bu$h crisis.

[MisterP]

2. ALL Thatcher/Reagan/neocon/neolib policies have been performed

in Chile under Pinochet through the 70's; the economy did not implode completely only because the regime later adopted policies that did not consider only the market.
Palast has several good pieces on this.

[sasquatch]

3. Social Security isn't a retirement plan

It's a safety net so when Ken Lay does to my 401k what Hitler did to Poland, then I'll won't have to live in a cardboard box and eat cat food for the rest of my life.

[Warpy]

4. Where the hell are they getting this "shortfall in 13 years" garbage?

The CBO says it's stable until at least 2052.

That 13 year figure means that they'll be able to rob less than the 40% of FICA they've stolen from us for nearly two decades to cover up what tax cuts to the rich and the corporate have done to the government's overall solvency.

That's the real crisis, folks. They're going to have to start to be honest about those tax cuts in 13 years. Social security is solvent. The rest of the government is not, thanks to decades of shifting the burden of government onto the backs of those least able to pay, and then creating the conditions that take their jobs away completely.

They already know what Chile's overall success is with their much touted privatized system: it's a house of cards that's ready to collapse, leaving Chile's elderly with nothing.

[Dirk39]

5. Good old democrat Pinochet and his Chicago Boys....

The only part of the retirement system that wasn't privatised in Chile after the CIA-supported coup was the one for the fashist army. Killers need gratification.


"Chile's privatized pensions

One of the most trumpeted "successes" of Chile's economic miracle is the privatization of its public social security system. It's most vocal supporter is Chilean economist José Piñera, who was once Pinochet's Minister of Labor, and therefore one of the most hated men in Chile. Today he is an international salesman of sorts, selling other nations on the idea of Chile's retirement program. Journalist Fred Solowey writes:

* "In his speeches and articles, Piñera credits the Chilean pension model with producing just about everything short of the second coming of Christ: pensions that are 40-50 percent higher than under Social Security; security for the old; lower costs due to the 'fact' that the private sector is much more efficient than the public; a rate of savings rivaling that in an Asian 'tiger' economy; and even the end of class conflict in Chile." (38)

Piñera is co-chairman of a $2 million war being waged against U.S. Social Security by the Cato Institute. Their goal is to privatize the program along Chilean lines. Converts to their cause include Newt Gingerich, and, apparently, Time magazine. In a cover story entitled "The Case for Killing Social Security," Time included a sidebar on "How Chile Got it Right." (39) The operative word here is right, as in right-wing — Time's article quotes all the usual conservative think tanks, but not a single dissenting voice.

The Chilean retirement system is only a success to those companies who are pulling down outrageous profits from it. For the working people of Chile, it is a disaster in the making. According to SAFP, the government agency which regulates the private pensions, 96 percent of the known work force were enrolled in the private pensions as of February, 1995, but 43.4 percent of the account owners were not adding to their funds. Perhaps as many as 60 percent do not contribute regularly. Given the rising poverty in Chile, it is not difficult to understand why. Unfortunately, regular contributions are necessary to receive full benefits."

more...
http://www.rrojasdatabank.org/econom~1.htm

Hello from Germany,
Dirk