Chilean Official Reveals: Pinera's Pension "Reform" Was a Total Fraud

Chilean Official Reveals: Pinera's Pension "Reform" Was a Total FraudSpecial to EIR News

March 1, 2005 (EIRNS)The privatization plan, which forms the basis of the Bush Administration's plan to "reform" Social Security, was a total fraud and failure, according to Ms. Isabel Marquez Lizana, an official at the Chilean government's Institute for Social Security Normalization and a researcher at the University of Chile. Ms. Marquez was interviewed by Lyndon LaRouche's EIR magazine on Feb. 23.

Ms. Marquez, who lived in Chile throughout the Pinochet dictatorship, is the author of a definitive study of what the 1981 pension "reform," devised by dictator Gen. Augusto Pinochet's Labor Minister Jose Pinera at the behest of George Shultz's Chicago School of Economics, did to the Chilean population. Her master's thesis, "Impact of the 1981 Social Security Reform on Enrollee Benefits," was the first study of its kind, and was cited by the United Nations Development Program's 2004 report, in its evaluation of Chile.

Ms. Marquez discussed with EIR how Chile's historically strong tradition of social protection was wiped out by Pinera, et al., and replaced by the fraud of "individual responsibility" and "ownership." Chile was thrown back into a "pre-industrial age" with mass unemployment, increased poverty, and miserable pensions. Yet, Chile is the cited model for the Bush privatization plan, and Jose Pinera, the self-proclaimed architect of the Chile plan, is the co-head of the privatization project of the Cato Institute, which is the lead promoter of Bush's plan.What the Study Showed

The conclusion of Ms. Marquez's study was that the Pinera plan has failed the Chilean population, and left at least 50% of the population with nothing but the minimum pension provided by the state. To qualify for that pension, she said, people have to live in extreme poverty , without any assets, including even a water heater.

Yet, when Pinera was campaigning to implement the plan, she said, he promised that only a very few people would have to resort to the state-guaranteed pension.

Ms. Marquez summarized the lessons of the Chile privatization plan as follows:

"Well, I think that you have the advantage of looking at how our system works here. It's an advantage because, if it's failed here after everything they've invested in it--- and they didn't pay attention to the issue of costs either. The transition costs have been incredibly high. And with all this, it's still a failure. Coverage didn't increase. If you look at all the assumptions of this system, they said there would be total coverage. But the assumptions didn't work. They said that once that employers no longer had to pay their part (before the system was a tripartite one, in which the government, the employer and the employee paid, but in the private system only the employee paid), he would be so happy that he would go out and hire a lot of people.

"That didn't happen. They said that people would be able to accumulate enough capital to get better pensions. That didn't happen. The capital was going to be invested in social development, but that has hardly happened. And, they all said, there would be full employment, but that didn't happen either. So all the assumptions of today's system are a failure , a fraud. Nothing happened, none of the promises were kept.

"If I had Mr. Pinera in front of me, I would ask him, what do you have to say about your promises? What happened to them? What about all these siren songs?"Pinera and Bush

While President Bush may be ignorant, as usual, about the results of the Pinera plan, he has endorsed it whole hog. While one of his controllers, former Secretary of State George Shultz, worked with Pinera back in the early 1980s, and expressed admiration for the privatization plan, George Bush apparently didn't meet Pinera until 1997, when the Chilean "economist" visited him in Texas. By all reports, Bush was taken with Pinera's plan at that time.

As co-chairman of the Cato Institute's Project of Social Security Choice, from 1995 to the present day, Pinera continues to agitate for the Chile-style plan. After meeting with Pinera in December 2004, President George W. Bush said, "Chile provides a great example for Social Security reform."

Yet, Pinera's reform could only be implemented after 7 years of crushing the labor movement and the opposition in Chile, under one of the bloodiest dictatorships in recent times. The so-called reform enabled financial interests to loot the population of whatever pensions, and other services, they had left.

Ms. Marquez's criticism of the Chilean privatized system has been echoed widely, and EIR has featured two other prominent Chileans detailing its failures. One was, president of Chile's largest labor federation, the Unified Labor Federation, who gave an interview to EIR on Dec. 14, 2004. Another was, who wrote a paper entitled "Chile: Private Pensions, A Quarter Century On," which documented how much worse off Chilean retirees are today, than they would have been under the old pay-as-you-go system.

For the most coherent and pointed expose of the Chilean privatized pension system, however, readers are referred to LaRouche PAC's December 2004 pamphlet,