Public Employee Press

Part 5 in a series on the threat to secure retirement

Now advising Bush
Architect of a flawed plan

The architect of Chile’s privatized pension system is José Piñera, the minister of labor and social security under the Pinochet dictatorship, who has spent the last two decades preaching the gospel of private accounts to George W. Bush and other world leaders.

Piñera co-chairs the Project on Social Security Choice at the libertarian Cato Institute, which champions individual liberty, free markets and limited government.

Piñera has described the move to privatize social security in Chile under Gen. Augusto Pinochet’s government (1973-1990) as “part of a global model aimed at strongly reducing the size of the state and eliminating the power of labor unions.”

Between 1975 and 1989, the government sold off more than 160 corporations, 16 banks and over 3,600 agro-industrial plants, mines and land parcels. By 1998, about a dozen investment groups controlled some $30 billion in the privatized Pension Fund Administration.

Privatization freed up funds for the military government and filled the pockets of the oligarchy, which supported the regime. Today, many of the owners and executives in the privatized state companies are Pinochet cronies from the military, government and business.

Piñera himself was a vice president of the privatized national electric company.

A Harvard-educated economist, Piñera is an admirer of Friedrich August von Hayek (1889-1992), a radical supporter of laissez-faire (free market) economics, who is associated with the University of Chicago. The economic advisors of the Pinochet government known as the “Chicago Boys” called for a “shock treatment” to eradicate state control over the economy.

In addition to his role in privatizing social security, Piñera oversaw Pinochet’s labor policy, which initially banned collective bargaining and unions. While the government reintroduced collective bargaining in 1980, when Piñera was labor minister, organizing, striking and wage negotiations were
nevertheless severely restricted.

At the Cato Institute, Piñera has spent the last 20 years promoting social security privatization in the United States and abroad. He touted privatization during a social security summit hosted by the Clinton administration in 1998. A year earlier, he and Cato President Edward H. Crane dined with Bush when Bush was governor of Texas and contemplating a run for the presidency.

Crane told Mother Jones magazine about the Texas meeting: “Bush said, ‘José, you make a very compelling case. I do believe that privatizing Social Security is the most important issue facing the nation.’ ” The institute has continued to advise Bush through his two terms as president.

— Gregory N. Heires