A political crisis is coming to a head in Chile, where a bill in Congress is threatening to undo the country’s private pension system, which stands at the heart of the brutal model of radical free-market reforms, devised by a gaggle of University of Chicago economists and imposed by the fascist 1973-1990 Augusto Pinochet dictatorship. A bill passed in the lower House of Congress on July 16, and now headed to the Senate where it will likely pass, will allow workers to withdraw up to 10% of funds accumulated in their private pension fund, known by its acronym AFP.
If the bill becomes law, it will be a first step toward dismantling a vicious system of forced savings that in 1981 confiscated the pensions of state-sector workers enrolled in the efficient “pay as you go” system and forced them to join the private system devised by then-Labor Minister Jose Piñera, a George Shultz pal and CATO Institute affiliate, who is also the brother of President Sebastian Piñera. Today, even if they have contributed to the AFP system for decades, most Chileans can’t afford to retire because their AFP pension isn’t enough to live on. No companies contribute to the AFP system, but the pool of billions of dollars workers contribute becomes play money with which affiliated banks and insurance companies can speculate.
