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Article: The Chile con: privatizing social security in South America. (a closer scrutiny at the success of privatized social security in Chile)
- Article from:
- The American Prospect
- Article date:
- July 1, 1997
- Author:
CopyrightCOPYRIGHT 1997 The American Prospect, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Advocates of privatizing Social Security point to the success of Chile. In 1981, Chile replaced its inefficient state-run pension program with a private system where workers fund their own retirements through compulsory private savings. The Chilean solution has captured the imagination of free-market believers the world over. But a closer look suggests that Chile is no model for the United States.
One problem is huge management fees. Up to 20 percent of worker contributions go to middlemen. A second failing is that only a little over half of Chilean workers make regular social security contributions. And even for those who do contribute Chile's new private ...