Tuesday, December 14, 2004

The Return of "Los Chicago Boys"

In the 1980s, a group of Latin American economists influenced by the Chicago School of economics replaced Chile's Social Security program with a system of mandatory private accounts. Now the system created by "Los Chicago Boys" is coming back to the country that inspired it, as Chile's success serves as a model for the privatization of Social Security. The big question: if Chile's system has been so successful—why is most of the American press still refusing to report on it?

"Chilean Pension System a Model for Privatization," Alan Clendenning, AP via Washington Times, 12/14/04

"Chile's pension system is hailed as a model for the world because workers fund their old-age pensions, although critics point out that it doesn't cover the self-employed or the legions of workers who float from job to job and contribute infrequently. Still, about 7 million Chileans in the nation of 15 million are investors in the longest-running government-mandated private pension experiment on the planet. They don't pay the government a single peso to fund their social security, and half regularly funnel 10 percent of their income into retirement accounts they own and decide how to invest. 'The best thing about it is, I didn't give my future to the government,' said retired tax lawyer Juan de Dios de Vergara, while making minor pension changes at an office run by Summa Bansander, owned by Spain's Banco Santander. 'I assumed my own risks, made my own decisions, and the funds belong to me, so I get the earnings.'

"Countries from Mexico to Sweden have adopted the system or elements of it amid concerns that government-based social security benefits will be slashed when retirees outnumber contributors. The Chilean system also helped feed an unprecedented expansion for South America's most market-friendly economy and has drawn attention from President Bush, who has made privatizing part of the US system a top second-term goal."