Pension-Cutting, Poverty and
the World Bank

Seventy-three-year-old Paula Duarte lived in a small rooming house on the Avenida de Mayo in downtown Buenos Aires. When the Argentine government slashed pensions in early 1992, she began looking desperately for work. On August 20, 1992, still unemployed, she hanged herself with a nylon cord from a tree outside the University of Buenos Aires Law School. In her purse were just two pesos.

In the weeks that followed, news of other elder suicides shocked Argentina. In Rosario, Maria del Carmen Castillo, 67, and her sister Maria Josefa, 59, killed themselves in the Parque Independencia; in Mar del Plata, Manuel Adolfo Calvo, 83, and Amadeo Natalio Montero, 76, shot themselves in the head; in the capital, a man of 70 hanged himself from the crossbars of a swing in the Parque Patricios; Juan Labagarre, 77, and Juana Suarez, 77, threw themselves under railroad trains; and in Rosario, Lionel Maniero, 65, walked into the headquarters of the government Social Service Program for the Elderly and shot himself in the bathroom. Twenty-three elder suicides of this kind in less than two months!

Bowing to pressure from the World Bank, the government of President Carlos Menem had cut payments for most of Argentina's three million pensioners to just $150 a month--less than half the minimum needed for food and shelter. Even the country's middle class elderly--former teachers, government workers, corporate employees--found themselves suddenly among a "new poor," on the very margins of survival. "They have seen their whole life expectations dissolve," commented Nélida Redondo, a writer on aging. "This is a very hard reality."

As neighborhoods set up emergency food programs and homeless elders slept in public parks, the Menem government tried hard to minimize the events. Economy Minister Domingo Carvallo told pensioners that they should get jobs (though unemployment stood at record levels) or seek aid from their children. Pressed by a journalist to explain why so many older people were taking their lives, Menem replied grandly: "I am the President of the Republic, not a psychologist or sociologist."

The Menem government's action reversed a long tradition of support for older citizens in Argentina, dating back to the early 1900's. Eva Peron, legendary wife of President Juan Peron, championed social security in the late 1940's, winning the hearts of the poor descamisados. Later governments built on her legacy, improving levels of support and extending pensions to nearly every citizen, even in the countryside.

More recently, as Argentines lived longer, the number of pensioners rose dramatically and the country's pension costs soared. Deeply-indebted governments, under pressure from international lenders, began to misuse pension funds and to borrow against them to meet current budgets. Businesses stopped paying their pension taxes. Starved of funds, health clinics cut back and senior centers reduced operations. In July 1990, the unthinkable happened: 32 residents of a government-run home for the elderly died of malnutrition. Health Minister Mathilde Svatetz, a protégé of economic czar Carvallo, resigned amid a storm of public criticism. But cutbacks continued.

The World Bank gave the Argentine government little choice, insisting that a draconian reduction of social security benefits was needed to restore business confidence and stabilize the shaky Argentine economy. Emergency Bank loans carried harsh "conditionalities." When the axe finally fell, outraged retirees brought suit in court. Menem and Carvallo countered by declaring a "social security state of emergency." Confronted with anguished pensioners, Menem admitted that the World Bank's program was "like surgery without an anaesthetic." Carvallo even wept in front of the television cameras ("crocodile tears" charged activist Norma Pla in disgust). The cuts were not rescinded.

Menem and Carvallo were not the first Latin American leaders to cut pensions. That distinction fell to General Augusto Pinochet, the military dictator of Chile, in 1981. Under pressure from the World Bank and the International Monetary Fund (IMF), Pinochet and his Chicago School economic advisors substituted privately-managed annuities for most public pensions. In the process, they deeply cut pensions for Chile's million pre-reform retirees. Not long after, the government funded a $3.5 billion bailout of private banks and their foreign creditors. According to Colin Gillion, social security chief at the International Labour Organization (ILO), at least half of all Chilean workers will get pensions below the poverty line. The ILO also reports that benefits in early 1992 for the 300,000 elderly in the government's "safety net" program were just $36 per month--about enough for a loaf of bread and a cup of coffee each day.

Encouraged by its success in Chile, the World Bank launched a broad campaign for pension "reform" as part of its worldwide push for downsized public programs and "privatization" of public services. Bank teams invaded the pension administrations of half a dozen Latin countries in the mid-1980's, demanding access to information and developing a broad critique of existing systems. Bank experts like Carmelo Mesa-Lago and William McGreevy insisted on a bleak, Malthusian view of pensions and "population aging." With increasing numbers of older citizens, they argued, governments simply could not afford to offer substantial pensions--a luxury that only rich countries could now consider.

In Latin America, as life expectancy grew and the number of elderly shot upwards, pensions and other social security payouts like health insurance had reached a third or more of the national budget of many countries by the early 1980's. These outlays offered a large, vulnerable target to the Bank, as foreign debts came due. Other potential targets, such as military budgets, remained largely immune to criticism and cuts.

World Bank experts used a populist rhetoric in their analysis. The old pensions systems should be scrapped, they claimed, because they favored middle class retirees at the expense of the poor. But World Bank reforms, once enacted, never promoted greater "equity." Quite the opposite. According to the Bank's own reports, its pension reforms deepened poverty, widened income differences, and dumped millions of vulnerable elderly off the pension rolls entirely.

Mexico's pension funds have collapsed to less than half their former level. Deep cuts and austere re-organizations have hit retirees in Uruguay, Chile, Brazil, Venezuela and Peru. According to the ILO, Latin America's 14 million pensioners received last year an average of just $132 per month, less than half the sum needed for "minimum necessities."

Pension cutbacks have now spread well beyond Latin America. In Eastern Europe and the former Soviet Union, pensioners have been selling their home furniture to buy bread, due largely to shock therapy reforms imposed by the Bank and the IMF. The Bank's pension work has become so controversial that senior management suppressed a major policy document, due to be released in late 1993, reportedly because they didn't want to tarnish the Bank's image on the eve of its 50th anniversary.

China, with 100 million older citizens, is now at the top of the Bank's priority list for pension reform because of its enormous and rapidly-growing elder population. In 1948, life expectancy in China was only 29. Today, Chinese life expectancy is over 70 and still rising. In just 25 years, there will be over 250 million Chinese over age 60--one quarter of the world's older population.

Ever since market reforms got under way in 1979, creating unemployment for the first time in three decades, the Chinese government has pushed over-50 workers out of their jobs and into retirement, in order to create more jobs for unemployed youth. The government has strictly enforced a mandatory retirement age, and encouraged still earlier retirement through propaganda campaigns, special retirement bonuses, and rules that allow jobs to be passed on to adult children.

This program proved more and more expensive, as the number of retired people soared. In the decade from 1978 to 1988, the number of state sector retirees grew from 2.8 million to 15.4 million. Meanwhile, unemployment continued to rise. Soon after China became a member of the World Bank in 1986, the Bank sent a team to survey the pension system. After months of study, the report concluded predictably that pensions were "excessive," and that sooner or later reforms would have to be made.

Since then, the Chinese government has been under pressure to cut its pension outlays and impose greater austerity on its older citizens. But Chinese still venerate their elders and social solidarity remains a powerful value. So the government has hesitated to chop urban pensions, for fear of massive social unrest. Within the government, a fierce debate is now under way, between pension advocates in the Ministry of Labor and those who favor "individual initiative" in the State Commission for Reform of the Economic System. In late 1993, the World Bank announced a $600 million loan to the Chinese Finance Ministry, to promote "de-linking the social responsibilities of public enterprises"--a project which will remove housing, health care and pensions from firms in five experimental areas and open the way for pension cuts.

Hong Guodong, one of China's most influential government authorities on aging, emphasizes the burden of China's growing number of older "dependents," a point often made by the World Bank. In fact, with far fewer children, the numbers of dependents of all ages in China has actually declined. Older persons are "dependents," only in a narrow market sense, of course. They often are forced into retirement against their will. By taking care of grandchildren and participating actively in community projects, older citizens contribute a great deal to social welfare.

In the 1990's, inflation started to eat into Chinese pensions. Some retirees lost their income (or had it drastically cut) when their former enterprises went bankrupt, radically downsized, or otherwise succumbed to new market forces. Sources in China speak increasingly of elders losing their apartments, of their lack of funds to pay for medical care, and of their fear of further change.

In the spring of 1994, hundreds of pensioners in the industrial city of Wuhan struck back. Commandeering cars and trucks to block a key bridge over the Han River, retirees from the city's huge steel and metalwork factories protested their shrinking pensions and expressed their anger at the government's abandonment of its older citizens. Some observers see China's twenty million state pensioners as ready recruits for a major social protest movement. High officials are clearly worried at the prospects.

China's emerging movement of seniors may draw inspiration from a well-established movement in Hong Kong. Though Hong Kong has been booming (reputedly it has more Rolls Royces per square mile than anywhere else on earth), older people have no regular public pensions, the government has cut their social services and health care, and their housing gets more unaffordable each year. In the late 1980's, a social activist group called the Society for Community Organization (SoCO) started organizing older people into neighborhood Mutual Aid Committees. In addition to forming consumer co-ops and sponsoring social events, the Committees began to take political action--through surveys, petitions, rallies and marches. They publicized the notorious "cage homes" and rooftop shanties where many old people are forced to live in crowded Hong Kong. The government, under increasing pressure, began to make concessions.

In 1992, seniors from a number of Committees came together to form the Elderly Rights League, to coordinate projects and protests and to build links to other groups and movements, including students, trade unions, the handicapped, and single mothers. Their parades, protests and spirited agitation have already won them wide admiration and established the League and its allies as one of the most active and influential of Hong Kong's political movements.

In Argentina, also, soon after the pension cutbacks, a militant retirees' movement took shape. It started spontaneously, independent of political parties, in the dense network of senior centers in Buenos Aires, a city where nearly a fifth of the population is now over age 60. Women--who greatly outnumber men in later life and are much more likely to suffer from poverty--assumed key leadership in the movement.

Borrowing a tactic from the human rights movement that brought down the military dictatorship in the 1980's, the seniors held a vigil every Thursday in the Plaza de los dos Congressos, outside the national parliament building. Sometimes they paraded somberly into the square, carrying a national flag. Occasionally they stopped traffic, occupied government buildings, and even scuffled with security forces and government officials in the streets of the capital. Armed riot police hesitated to strike down these white-haired grandparents. On March 2, 1994, more than ten thousand people converged on the center of the capital to mark 100 weeks of these dramatic protests.

Sixty-two year old Norma Pla, who founded her own local group, has been the movement's most prominent leader. A favorite of the media, she fascinates because of her strong personality and her fiery determination. She has proved naturally charismatic, with a few missing teeth, a gift of eloquence and a sure political sense of timing. "What about the old people who live all winter under the bridges?" she rhetorically asked a reporter one winter day. "All winter long without a house or warm clothes! It's not because they are vagrants, but because there just isn't enough pension for them to live decently."

Pla proved her mettle by facing down Domingo Carvallo in front of television cameras. When Carvallo insisted sadly that he, too, had elderly parents, she answered scornfully: "Do you mean that parents of ministers have nothing to eat? You earn more in one month than my income for five years!" Brandishing a national flag she declared: "We are flesh and bones like everyone else. We must have money to live!"

The Argentine government has tried to discredit the movement by falsely accusing it of being bankrolled by enemies of the ruling party and infiltrated by "troublemakers." But the feisty seniors have attracted too much public sympathy for the charges to stick. Carvallo finally agreed to make a few concessions, raising pensions for the oldest-old and paying supplements to some of those most destitute. But austerity measures continue. After more than two years of hardship, many retirees have exhausted their savings and their patience is at the breaking point. Amid widening public sympathy and grassroots alliances, the struggle goes on.

In Uruguay, two enormous protest strikes have prevented the government from taking more drastic steps to slash pensions--in spite of pressure from the international bankers. In Brazil, too, public protests have slowed down pension-cutting.

The pension struggle has now spread to Western Europe and North America as well. In every country, trade unions and political organizations are re-thinking their traditional policies on retirement and employment. In Italy, a million people demonstrated against the government's proposal to chop public pensions.

As people across the globe live longer, the battle over social policy for older citizens will continue to sharpen in virtually every land. The wealth and productivity of human society in the twenty-first century can certainly provide pensions, housing, health care and employment rights to older people everywhere. But seniors could instead suffer from more harsh pressures of Bretton Woods bankers and their grinding austerity programs. The senior movement, now gathering strength, will largely decide the outcome. Unions must be part of this movement. More than we realize, it can mark decisively the social and political landscape of our common future.