Many of those advocating privatization of the Social Security system have pointed to the "success" of Chile in privatizing its pension system.
While such advocates highlight high investment returns for some workers, they ignore the downside for most of the population, which as a recent CBS report explained, includes the fact that nearly half of Chile's workforce are either self-employed or seasonal workers who rarely declare income, pay taxes or contribute to their pensions. These people have little to retire on, other than the government's guaranteed payment of $150 a month.
So we are supposed to talk about a system leaving half the population in poverty in their old age as a model?
Who Controls Chile's Pensions? But there is another issue in the privatization debate, the oft-repeated statement that this privatized system fed economic growth in Chile. With nearly $60 billion worth of retirement assets put into the Chilean stock market through privatized accounts, supporters of privatization say all this investment in local companies helped fuel an economic boom in the country. With far larger sums at stake in Social Security, conservatives argue that privatization here would be an economic windfall for the economy.
It's fascinating that conservatives are promoting this kind of industrial policy, forced savings by individuals directed by the government into investments in the country's industry. I've argued in the past that we should be using social security money to encourage direct investments in the US economy, but most conservatives supposedly object to such political use of government-controlled capital.
So why the love by conservatives of Chile's system? Let's be real. Conservatives don't really object to government money subsidizing the corporate sector; they just fear that it may be subject to democratic controls and thus be invested in ways conservatives might object to. So Chile is a wonderful model since it hands the money over to rightwing-controlled funds:
Chile's six pension funds, whose trustees include at least 17 Cabinet members of the former military regime that imposed the system ... have become one of the most profitable industries in Chile, reporting a higher return on equity than Chile's biggest utilities.
Here's the question then. Since even privatized systems end up with the government engaging in industrial policy with the investments, why not cut out the middleman of private accounts, with all their complications, and just have the government invest some portion of social security directly in private investments in lieu of the current investments only in Treasury bonds? This would be a far more accountable approach to deciding how to allocate so much capital in our society.
Avoiding Talking About Pensions and Jobs: What's remarkable is that both liberals and conservatives largely talk about Social Security in terms of personal finance, but studiously ignore that we are talking about how to invest trillions of dollars of capital in the economy, an inevitably political question that both sides seem to want to dodge for different reasons, conservatives because they think they can quietly hand the money over to friendly capitalist firms on Wall Street, liberals because they are afraid to actually talk about the government taking a pro-active role in job creation.
But the Social Security debate is about more than just social insurance for the elderly and disabled. It's about how we as a society are going to invest a big hunk of capital controlled by the government over the next few decades. We can use it to encourage broadly-shared economic growth in our economy or we can blindly hand it over to multinational corporations who may well use workers' money against those workers and send their jobs overseas to sweatshops.
For all conservatives talk about an "ownership society," even mutual funds don't give workers any real say in how money invested in their name gets used in the economy. It's all about Wall Street financial people using other peoples' money to fund takeovers, plant shutdowns, outsourcing, and every other financial maneuver that undermines workers' lives in this country.
What we need is a real debate about the social and economic choices of how to use the money collectively invested through our pension system. As a society, we can use that retirement money to create good jobs, or we can hand it over to Wall Street firms who might try to maximize workers' returns as investors, but would often undermine the jobs which provided the money for the investments in the first place. This is the real issue at stake in the debate over Social Security and its trust fund.
Nathan Newman is a longtime union and community activist and author of Net Loss [Penn State Press] on inequality in the Internet economy. Email nathan@newman.org or see www.nathannewman.org.