January 18, 2006
An Unintended Lesson From Chile
By Froma
Harrop
"Some members
of Congress could take some lessons from Chile," President
Bush said four years ago, "particularly when it comes to
how to run our pension plans." Americans, hold that thought.
Bush was referring
to Chile's private retirement accounts, which our conservatives
hailed as a model for Social Security. Chileans, apparently, were
not as enchanted. The victor in the recent presidential campaign
was center-left Michelle Bachelet, who vowed to dump the program
and start again "from scratch."
It turns out that
up to a third of the money Chile's workers put in their private
accounts had vanished into the pockets of the companies that were
investing it. Chilean senator-elect Guido Girardi recently expressed
the anger of many when he promised: "I am going to do away
with these thieves in jackets and ties. We are going to defend
the citizenry from these funds that rob people of their pensions."
Not quite a thumbs-up
for a program that Bush had called "a great example"
for the United States. Americans should further note that the
broad discontent follows over a decade of mostly strong economic
growth in Chile. Suppose the workers had suffered a sharp stock-market
downturn, in addition to paying outlandish fees to investment
companies. You don't want to think about it.
One could make a
case -- though not a convincing one -- that Washington would do
a better job curbing the appetites of the mutual funds that might
invest Social Security money. If there is one lesson this Congress
does not need to learn from Chile, it's how to enrich corporate
interests.
Speaking of which,
Americans are now reeling under their first overdose of another
privatization scheme -- a Medicare drug benefit run by the insurance
companies. Chaos has reigned since the program's launch on Jan.
1. Pharmacists can't reach the insurers. The names of people who
signed up for the benefit are nowhere to be found on the government's
computers. Alarmed governors have set up "emergency"
plans to ensure that elderly citizens obtain their pills.
The turmoil will
no doubt lessen once the program irons out the creases. Calm was
restored to New Orleans, too. The bigger story will be how much
medication is actually being bought at amazing expense to the
taxpayers.
Some scrap of self-preservation
stopped American workers from getting dragooned into a privatization
plan for Social Security. And the examples from Chile and our
own Medicare drug benefit should build the antibodies needed to
ward off the next such attack.
By now the public
knows the early symptoms. You hear the words "ownership,
choice and personal responsibility," and you can feel a privatization
plan coming on. These words are code for replacing a simple government-run
benefit with a bazaar of confusing options. It is always sold
as a free-market solution, but in reality it's a means of shoveling
taxpayer dollars to private interests. And the more mystified
people are by the many alternatives, the easier it is for those
interests to siphon off cash.
Recall the recent
crusade to privatize our Social Security. The point man for the
Cato Institute's campaign was Jose Pinera, who helped design Chile's
private pensions. Pinera wrote a long and detailed essay noting
that the Chilean system "is based on ownership, choice and
personal responsibility." But he apparently ran out of ink
when the time came to discuss the fees charged by the investment
funds.
Other privatized
retirement plans have suffered even greater hemorrhage than Chile's.
In Britain's Personal Pensions system, fees and other costs will
devour 43 percent of the typical bloke's account over a 40-year
career, according to a World Bank study.
Last April,
conservative New York Times columnist John Tierney offered
his support for Chile's system. In a piece called "The Proof's
in the Pension," he recounted the positive experience of
a Chilean economist friend. Imagine the airtight case Tierney
could have made had he talked to two Chileans. On the other hand,
he might not have been able to find the second Chilean.
The candidate who
lost to Bachelet was Sebastian Pinera, billionaire businessman
and brother of the above-mentioned Jose Pinera. Even he had campaigned
to fix his brother's handiwork.
Perhaps Bush was
right in ways he never intended: Congress could indeed take some
lessons from Chile.
Copyright
2006 Creators Syndicate
