Gabriel Boric Is Struggling to Boost Chile’s Meager Pensions, Jacobin, Phineas Ruekert.
Dale Coberly on Social Security: Not so long ago (2003) the Liars who want to destroy Social Security in America were bragging about the privatized pension system adopted by Chile. Many of those liars commented on my posts on AB. Here is an update. This is what Chile’s great privatized pension system looks like today.
Jacobin’s Phineas Rueckert: Zuñiga is one of many over-sixties struggling to survive under Chile’s privatized pension regime. A relic of the country’s seventeen years under the iron-fisted dictatorship of General Augusto Pinochet, who overthrew democratically elected president Salvador Allende in 1973, the system requires Chilean workers to pay 10 percent of their salaries to pension fund administrators (in Spanish, AFPs), who reinvest their savings into the private market. While the system has made a lot of money for foreign capital, it has left Chileans with pensions that are much lower than in neighboring countries.
Left-wing president Gabriel Boric, elected in 2021 on a wave of discontent with rising inequality that saw over three million protesters take to the streets, made reforming the pension system a legislative priority. The current system was created under military rule in 1981, when the pay-as-you-go public pension system was replaced by a privatized one. This was part of an onslaught of neoliberal measures that also included reforms to education and other social services. Hailed by right-wing figureheads from Margaret Thatcher to George W. Bush, who in 2003 looked to Chile as a model when trying to reform the US Social Security system, the system has put a lot of money in the pockets of foreign businesspeople, many of them in the United States, as well as the wealthiest Chileans. As the New York Times reported in 2016, three of Chile’s six largest private pension funds are run by foreign companies, managing $171 billion alone.
“Chilean and foreign capitalists are financing themselves on the humanity and the labor force of Chilean workers to expand their fortune outside the country,” Mesina said. “In a country as small as this, it allocates more than $90 billion abroad.”
In Chile, however, this capital-markets investment has not led to higher pensions. The replacement rate — the monthly pension actually received, as a proportion of the worker’s final month of salary — hovers around 20 percent. In 2016, center-left president Bachelet passed a bill to institute a Universal Guaranteed Pension (in Spanish, PGU), financed through various taxes, to subsidize the smallest pensions. Even with this crutch, pensions are often below the poverty line in one of Latin America’s most expensive countries.
“Essentially much of the world was hoodwinked by the system that was concocted under military dictatorship in far-off Chile,” former ambassador Heine told Jacobin. “And forty years later, when the results come in, we all realize it was a scam.”
Angry Bear’s Dale Cobely: Recently, France showed what happens to a pension paid for by the government: the Retirment age was increased by two years, abruptly and very much without consent of the governed . . . because, after all, if the government pays for it, the government owns it.
Roosevelt understood that, and he made American Social Security worker-paid “so no damn politician can take it away from them.” Roosevelt might not have reckoned with the persistence of damn politicians or the short memory of workers. Right now, we are, or at least I am . . . engaged in a war to save Social Security for the workers against the damn politicians on the right and the left, with not much help from the workers who are hoping that somehow, they can get their groceries in retirement paid for by someone else.
