Untold in the discussions on SS privatization is the origin of this idea. While in Chile, Pres. Bush made a hell of a relevation about what he believes. Talking about his intitiatives to "reform" Social Security, Pres. Bush let drop a
heck of a statement.
Mr. Bush said part of his plan to cut the short-term U.S. deficit involves reform of so-called "unfunded liabilities" such as Social Security and Medicare. He said Chile has a model that could be helpful in this regard. "For example, in Social Security, I talked about the need for personal savings accounts for younger workers as a part of a solution. Frankly, the Chilean model serves as a good example for those who are going to be writing the law in the United States," he said.
The Chilean model! Does he even realize what he's talking about? Pining for Pinochet, sweet Jesus save us all.
More on the flip....
Back in the 1970's, a group of Chilean economist commonly called the
Chicago boys, took home the liberatarian economic theories put forward by Milton Friedman, et al, at the University of Chicago's School of Economics.
Under their [the Chicago boy's] spell, the General abolished the minimum wage, outlawed union bargaining, privatised the pension system, abolished all taxes on wealth and business profits, slashed public employment, privatised 212 industries and 66 banks and ran a fiscal surplus.
Greg Palast deflates the myth of the "Chilean Miracle". 1970's America was not ripe for the type of economic strip mining the Chicago boys did to Chile. Democracy's a bitch that way, but the Chileans were made more pliant. If we're going to talk about the Chilean model, we had better talk about an unspoken presumption of this type of economic policy.
That the test subjects can't fight back. Being a dictatorhip installed by the horrors of September 11th, 1973 that is, the Pinochet regime need not ask for permission. Executing the mission, and those who stood in the way,was the order of the day. When President Bush praises the "Chilean model", unspoken is support for a regime that murdered thousands of their own, that overthrew the democratically elected government of Chile. The Chilean experiment failed with perhaps the greatest failure being that workers were robbed of their pensions.
The "Chilean Model" that Bush points to was imposed by force, and it has failed. During the Pinochet regime's time in power, Chile was a laboratory for neo-liberal economic policies.
Enter José Piñera and the system of individual accounts that became a mandatory replacement for Social Security beginning in 1981. Employers no longer had to contribute anything.
Young Chilean workers like these in auto parts manufacturing will not be able to save enough in their individual retirement accounts--their only pensions-- to keep out of poverty in retirement.
These private accounts, Piñera tells anyone who will listen, have had "double digit returns" since they were started. But the AFPs (private pension companies) charge workers considerable fees for managing their accounts. In fact, the UN report explains, the fees totaled almost $4.5 billion between 1982 and 1998 or "more than a fifth of the net contributions to the system."
So what has the actual return in these accounts been when these administrative costs are considered?
The real rate of return in the individual accounts has averaged but 5.1 percent since 1982, according to a study by the Chilean brokerage firm, CB Capitales. The report concluded that workers would have done better just putting their money in 90-day certificates of deposit (CDs), which have returned 7.2 percent annually.
"The report caused quite a stir in Chile and focused attention on its the real costs," says Stephen Kay, senior economic analyst at the Federal Reserve Bank of Atlanta's Latin America Research Group.
As the study shows, a young worker starting out in 1994 would have lost 6.6 percent per year through 1998. With the money in CDs, their savings would have gone up 42 percent.
But don't worry about the private pension companies; they made $808 million in profits, reaping in 20-percent profits even in years when the individual accounts lost money.
In 1997, Mr. Piñera met then Texas Governor GW Bush,
According to the Washington Post, after the briefing by Piñera, who had been making similar pitches throughout the country as part of a multi-million dollar propaganda offensive, Bush responded positively, saying, "This is the most important policy issue facing the United States today." Bush was convinced that "we have to go to individual accounts," and he brought up the issue when he announced his candidacy for president in 1999.
Should we really permit the ideas of a man who continues to defend the armed overthrow of a democratically elected government, justifying the deaths and dissapearances as neccesary for bringing about free market reforms in Chile, to shape the economic policy of our nation?