Cutting State Holdings: A Descent Plan

By: Unknown
China Times, June 16, 2001

. . .I am at first so intrigued by the crowds of up to 5000 Social Security workers who have been regularly flooding downtown Santiago this winter, throwing leaflets into the air, chanting, stomping and whistling, chaining themselves to lightposts and church pews, blocking traffic and standing up to riot-police water cannons and tear-gas barrages. It is certainly looks like the same gumption that drove Chilean workers to demand guns from Allende to face down the military.

But there's an ugly glitch in this scenario. This is the Chile of 1998. And like so much in modern Chile, this demonstrationis an illusion. These workers aren't fighting for a free pint of milk for every Chilean infant, for nationalization of the cooper mines, for a higher minimum wage or for union control of the workplace. No, theseworkers - men and women alike - are the salaried and commissioned sales force of Chile's privatized pension system. Anf they are infuriated by a very mild proposed government rule change aimed at curbing the fraud that riddle the system. If approved, the new rule would add a thin layer of protection to all Chilean workers. But it would also directly bite into the monthly commissions the protesting workers have been earning by juggling others' pension funds. Indeed, these workers in the streets today are battling for the right to keep ripping off their fellow workers.

. . . . . . . . . . . . . . . . . . .

Cecilia is the main breadwinner. She never talks about politics unless asked. But she's a staunch leftist, cominfg from a family of Communists and supporters of M.I.R. - the extreme left quasi-querilla group pulverized by Pinochet. Until recently, Cecilia was one of those Social Securitysalespeople. After three years of solid performance, she was summarily booted from her job for not having met her monthly quota of sales. "No matter how long you work for these pension agencies," she says over a cup of tea, "you can only come in under quota one month. Two month in a row and kaput."

She explains in surreal detail the corruption and unfairness of Chile's privatized Social Security system. Thanks to "pension reform" imposed by Pinochet in 1981, all workers in Chile, whether employed or self-employed, must contribute a percentage of their income every month to a private retirement fund managed by one of a half-dozen investment companies known as A.F.P.s. Unlike in the United States, where both worker and employer pay 7.5 percent each into Social Security through payroll deductions, Chilean employers no longer make any contribution at all toward worker pensions. They retain, however, the right to withhold employee contributions from workers' paychecks, and news stories are legion of this or that company that "forgets" for months and sometimes years to workers' funds into A.F.P.s. And because so many Chileans are self- or marginally employed, almost half the fundholders don't keep their own required contributions up-to-date. An equal number have been revealed to have less than a $1,000 balance - hardly enough to support retirement.

Because the fund managers invest in bonds and Chilean stocks, each fund closely mirrors the others in terms of investment choice and performance. So while there's tremendous competition among the A.F.P.s to get as much money into their own investment pools as possible, there's little incentive for workers to transfer from one to another. "But that's where we salespeople come in," says Cecilia. "We work on commissions based on the new acoounts we recruit. So we get all our friends and say, 'Give me your account and I will give you a gift' - a bottle of whiskey, a cordless phone, a stereo. Right now the hot gift is a mountain bike." As a result, about half of Chilean accounts holders switch A.F.P.s once every six months. About a third of those transfers, says the government, are "irreular," suggesting considerable fraud.

"My biggest deal was a factory in Valparaiso," remembers Cecilia. "The union there pooled thirty-four workers who offered to transfer their accounts all at once. I closed the deal. I gave the union a big-screen TV, a steam iron and a juicer, which it raffled off to the workers."

. . . . . . . . . . . . . . . . . .

Sociologist Tomas Moulian points to spread of credit to the masses as only the latest step in implementing the neoliberal economic model. In one of Chile's sweetest ironies, his book on the subject, The Real Chile: Anatomy of a Myth, stayed on the country's bestseller list through all of 1997.

"But a sense of direction was recovered immediately," says Moulain. "A re-ordering, a re-privatization of evevrything, commenced under a neoliberal pattern. The new economic groups that emerged were much stronger than the older ones. Not indepted to foreign capital, they were interwoven with it. And the tremendous pools of private money generated by the private pension funds were used to fuel these new groups. It was the workers' money that built such prosperity for the elite." This Chilean model, says Moulain, "anticipated Reagen and Thatcher. Because of the neoliberal intellectual sway over the military, Chile started out early on the road that everybody in now on."

He adds: "In this sense the Chilean terror was rational. This whole model is frankly impossible without a dictatorship. Only the dictatorship could have disciplined the working class into submission while their salaries were lowered and their pensions used to accumulate wealth for others. Only a dictatorship can keep a country quiet while education, universities and health care are privatized, and while an absolute marketization of the labor force is imposed. Today, inder this simulated democracy, the work force is too fragmented to recover and the population is distracted by consumerism and disciplined by credit obligations."

Global Action on Aging
PO Box 20022, New York, NY 10025
Phone: +1 (212) 557-3163 - Fax: +1 (212) 557-3164


We welcome comments and suggestions about this site. Please send us your name for our postal and electronic mailing lists.