Book contents
- Frontmatter
- Contents
- Acknowledgments
- 1 Introduction
- 2 An Overview of Social Security: Purposes, Modalities and Historical Evolution
- 3 The Rise and Fall of Pension Privatization in Latin America and Central and Eastern Europe
- 4 The Evolution of Social Protection and Pension Systems in Chile from the 19th Century until Its Privatization in the 1980s
- 5 Empirical Elements for Evaluating the Privatized Chilean Pension System
- 6 Synthesis and Conclusions: Reform Paralysis and the Road to De-privatization
- References
- Index
- Frontmatter
- Contents
- Acknowledgments
- 1 Introduction
- 2 An Overview of Social Security: Purposes, Modalities and Historical Evolution
- 3 The Rise and Fall of Pension Privatization in Latin America and Central and Eastern Europe
- 4 The Evolution of Social Protection and Pension Systems in Chile from the 19th Century until Its Privatization in the 1980s
- 5 Empirical Elements for Evaluating the Privatized Chilean Pension System
- 6 Synthesis and Conclusions: Reform Paralysis and the Road to De-privatization
- References
- Index
Summary
From the 1980s to the 2010s, we have witnessed a cycle of privatization and then de-privatization of pension systems that reached nearly 30 countries, mostly in Latin America and Central and Eastern Europe. Chile privatized its pension system in the Pinochet regime in the early 1980s and at the time of this writing it is still stuck with that system. The promise of pension systems based on individual accounts administered by financial companies were multiple and ambitious: higher pensions, lower burdens on the fiscal budget, private saving mobilization, individual choice, depoliticization of pension policies and higher rates of economic growth. After a few decades of application of capitalization pillars, the reality was far more disappointing than the promise at the outset of the privatization experiment in a number of countries. This privatized pension model had been recommended by international financial institutions, free market economists and private financial institutions that perceived large pools of resources to be intermediated for profit. However, the new reality was of low pension benefits, high fees charged by pension management companies, enlarged fiscal deficits, low coverage, financial volatility, lack of social participation in the management of pension funds and the redirection of the workers’ pension savings funds to finance the operations of large corporations, commercial banks and economic conglomerates. In light of these realities, with differences across economies, nearly 20 countries chose to de-privatize their pension systems (partially or completely) and return to public pension systems. Mandatory private pillars were significantly downsized or closed in the counterreform process. In contrast, mature capitalist economies did not choose the radical privatization route in response to the various demographic challenges of an aging population, fiscal constraints and productivity slowdowns faced by high per capita income nations. These nations introduced adjustments to the benefits of their social security systems and increased retirement ages but without abandoning the social contract of intergenerational solidarity and progressive redistribution that lies at the foundation of modern social security systems.
The purpose of this book is to examine the pension privatization experience of Chile, placing it in a proper historical and international perspective.
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- The Rise and Fall of the Privatized Pension System in ChileAn International Perspective, pp. 1 - 12Publisher: Anthem PressPrint publication year: 2021