Thursday, January 27, 2005
Social Security Privatization: Chile's Story
Whenever the folks at Cato or Heritage, or their buddies in the Bush Junta, want to talk up Social Security privatization -- oops, I mean "choice" -- oops, I mean "private accounts" -- oops, I mean "personal accounts" -- they almost invariably mention the "success" of privatization in Chile. Fine. Let's talk about Chile's experience with privatization:
Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees that may have soaked up as much as a third of their original investment - are failing to deliver as much in benefits as they would have received if they had stayed in the old system. Dagoberto Sáez, for example, is a 66-year-old laboratory technician here who plans, because of a recent heart attack, to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month. "Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."This is "successful"? I don't think so.
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