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25 years after coup, is Chile a model for social security?

Special Citation Will Be Presented Thursday in Washington

From Institute for Public Accuracy
Tuesday, September 8, 1998

WASHINGTON -- Twenty-five years after a military junta seized power in Chile, a special presentation in Washington on Thursday will focus attention on a prominent U.S. think tank that touts a former high official in the Chilean dictatorship as a visionary for privatization of Social Security in the United States.

The current co-chair of the Cato Institute's Project on Social Security Privatization, Jose Pinera, was Chile's Minister of Labor and Social Security from 1978 to 1980. According to Cato, Pinera "was the architect of that country's successful pension reform." After a coup toppled Chile's democratically elected government on Sept. 11, 1973, Chile privatized its pension system. Now, some U.S. advocates of privatizing Social Security cite Chile as a model.

A news conference on Thursday, Sept. 10 (at 11 a.m. in front of the Cato Institute, 1000 Massachusetts Ave., N.W., in Washington) will present a special citation to the Cato Institute for its embrace of Pinera in view of his role in Chile's dictatorship.

In the aftermath of the coup, led by Gen. Augusto Pinochet, "Chile's institutions were destroyed, including the Congress, the press and trade unions," recalls Saul Landau, a scholar and documentary filmmaker. "Troops burned books deemed subversive. The junta began a systematic terror campaign, arresting, torturing and murdering thousands of `suspected subversives.' A Chilean government agency estimates that the reign of terror between 1973 and 1990 resulted in the deaths of some 2,300 Chileans."

As for the privatization of Chile's pension system, "the 25-year Chile experiment provides good warnings for the U.S. debate," says Teresa Ghilarducci, an associate professor of economics at the University of Notre Dame who has studied Chile's pension reform. "Only half of Chilean workers are covered," she notes, and "employers don't pay a penny."

John B. Williamson, a professor of sociology at Boston College who has done extensive research on Chile's pension system, says that glowing reports about privatization in Chile "have emphasized the positive without adequate attention to the downside. What we are not hearing much about is what happens to these retirement accounts when there is a sharp contraction in the stock market of the sort that many emerging nations have recently been experiencing." He adds that "Chile has one of the most unequal income distributions in the world, and privatization is increasing not decreasing the level of that inequality."

Among those available for interviews are:

TERESA GHILARDUCCI, ghilarducci.1@nd.edu

SAUL LANDAU, slandau@igc.org

JOHN B. WILLIAMSON, john.williamson@bc.edu

For more information, contact Sam Husseini at the Institute for Public Accuracy, (202) 347-0020.