Daily Archives: December 17, 2004

Anti-Social and In-Secure: The Chilean experience with pension reform

With the recent indictment of aging former Chilean dictator, Augusto Pinochet, the Chilean people are finally getting a chance for justice to prevail years after the military, with the backing of the CIA, Henry Kissinger and Richard Nixon, overthrew the democratically elected socialist Salvador Allende.

In light of efforts here in the United States to reform Social Security one can only hope that the truth about the reform of Chile’s national pension system put in place by the notorious “Chicago boys” during the Pinochet dictatorship also comes to light (this group lobbied Pinochet, successfully, to install an early version of free market reforms that are now known as “shock therapy”). This article by independent journalist Greg Palast is a good place to start:


It turns out that Jose Pinera, Pinochet’s labor and social security secretary and thus one of the architects of the Chilean shock therapy, is now a Cato Institute fellow in Washington D.C. (a city where Pinera’s Chilean boss General Pinochet allegedly directed assassins to murder Orlando Letelier, Allende’s ambassador to the United States, who was killed along with his colleague American Ronni Moffit, by a car bomb in 1976).

(For the record it should be noted that although many of the economic advisors to the Chilean dictatorship studied at the University of Chicago, Pinera got his training in the wonders of the free market at Harvard.)

Pinera and Cato are leaving no stone unturned in an effort to pay back his former boss’s American backers with support for the Bush Administration’s proposal to privatize the U.S. social security system.

While free marketeers brag about the alleged success of the Chilean program, two recent reports note significant problems. A World Bank report notes that poorer citizens pay a disproportionate share of contributions as commissions to financial players who manage the funds. And a report by the New York Federal Reserve Bank notes that many retirees in Chile must still work to make ends meet. The link below is to the excellent site sponsored by the Social Security Network where Greg Anrig of the Century Foundation summarizes these two studies.