Chile’s Failed Pensions Are Neoliberalism’s Badge of Shame
A successful reform of the system is essential not only to reducing poverty, but also to restoring public faith in the country’s democracy.
Pensions are part of the problem.
Photographer: Claudio Santana/Getty Images South AmericaChile embraced neoliberalism more than almost any other nation, with its 1980 privatization of pensions a hallmark of its paradigm shift. The World Bank and International Monetary Fund were quick to laud General Augusto Pinochet’s government for the move, which more than two dozen nations copied, at least in part. Yet now the need for pension reform is one of the few issues on which Chile’s politicians and policymakers, whether right or left, agree. The system simply hasn’t delivered on its promises for retirees and taxpayers. And both as a symbol and a reality, this failure by a former economic star has fueled the widening rejection of neoliberalism and market-driven approaches in other policy areas.
Chile’s justification for eliminating public pay-as-you go programs (like Social Security in the US) and sending workers into a privately managed system of individual accounts was twofold: First, private funds would grow more and compound faster due to better management, meaning more money for retirement; second, the change would keep down public costs.