Chile’s Augusto Pinochet and Illinois’ Bruce Rauner. Privatizing pensions.
On September 11th, 1973 the fascist military leader of Chile, Augusto Pinochet, led a U.S.-backed coup against the socialist government of Salvador Allende.
Henry Kissinger’s hands were all over it.
Allende was killed
It is still not known how many thousands of people were murdered by the Pinochet government. Thousands disappeared.
Pinochet instituted the free-market policies of the “Chicago Boys,” Chilean economists, the majority of whom were trained at the Department of Economics of the University of Chicago under Milton Friedman.
In 1988, after 17 years as dictator, Pinochet’s government was eventually tossed out of power.
Amazingly, one of the central policies of the Chicago Boys, the privatization of retirement pensions, remains in effect long after the death of the fascist Pinochet.
The Pinochet Pension in Chile looks very much like the one Illinois’ Governor Bruce Rauner would like to see put in place here.
Today’s NY times:
Hundreds of thousands of protesters marched in Santiago, the capital of Chile, on Aug. 21. The pension funds have chafed at the criticism. CreditXcam/European Pressphoto Agency
SANTIAGO, Chile — Discontent has been brewing for years in Chile over pensions so low that most people must keep working past retirement age. All the while, privately run companies have reaped enormous profits by investing Chileans’ social security savings.
The bubbling anger boiled over in July when Chileans learned that the former wife of a Socialist Party leader was receiving a monthly pension of almost $7,800 after retiring from the prison police department. That figure dwarfs the average monthly pension of $315, which is even less than a monthly minimum-wage salary of $384.
In a country already battered by widespread political and corporate corruption, this was the last straw.
Hundreds of thousands of people marched through Santiago, the capital, and other cities to protest the privatized pension system. More than 1.3 million people, according to organizers, turned up in August, the largest demonstration since Chile’s return to civilian rule in 1990.
One protester was Luis Montero, 69, whose monthly pension is about $150. Like many Chileans, Mr. Montero has mainly worked informal jobs without a contract at wages too meager for him to save enough for retirement. He still does maintenance work at a school to make ends meet.
“I’ve worked my entire life and I’d like to stop and rest, but I can’t,” Mr. Montero said. “I have no idea what I will do when I get older.”
In 1981, the military dictatorship of Gen. Augusto Pinochet privatized the old pay-as-you-go pension system, in which workers, employers and the government all contributed.
Under the privatized system, which President George W. Bush hailed as an example to follow, workers must pay 10 percent of their earnings into accounts operated by private companies known as pension fund administrators, or A.F.P.s, the initials of the term in Spanish. The administrators invest the money and charge workers a commission for transactions and other fees. Employers and the government do not make any contributions to the workers’ accounts.
Chileans were given the option of keeping their old plan or switching to the new system. Most switched. But those entering the work force after 1981 had to invest in the privatized system. (The armed forces and the police were exempted from the change and today enjoy pensions several times higher than those available in the privatized system.)
The money invested by the administrators bolstered Chile’s capital markets, which stimulated economic growth and yielded reasonable returns. Today six A.F.P.s — half of them owned by foreign companies — manage $171 billion in pension funds, equivalent to about 71 percent of Chile’s gross domestic product, according to the office of the supervisor of the pension funds.
But the pioneering privatized system has failed to provide livable pensions for most retirees. If the stock market dips or investments go awry, workers’ savings and retirees’ pension checks decline.
“The pension system is unfair,” said Romina Celis, a 28-year-old teacher who marched in one of the protests. “I don’t know what formula we can use, but there has to be more state participation. We must continue protesting. The thought of reaching old age so precariously is scary.”
Women fare worse than men do because they earn less, are more likely to work intermittently, retire earlier (the retirement age is 65 for men and 60 for women) and have a longer life expectancy.