Mar 1 1998

Selling Social Insecurity

Stossel Embraces Pinochet’s Pension Privatizer

Early last year, ABC News asked me to participate in a “town meeting” at the right-wing Cato Institute. It was for a piece that ABC’s 20/20 was doing on José Piñera, Cato’s guru of Social Security privatization. The Harvard-educated economist–who also owns a lucrative world-wide consulting business–axed Social Security in his native Chile in 1981, while serving as minister of labor for the Pinochet military dictatorship, and now argues for the U.S. doing the same thing.

Having written extensively on Chile’s privatized, individual pension account system, I accepted the opportunity to warn millions of Americans about the danger Piñera represents to their retirement security. I was worried because the reporter doing the story, John Stossel, while once an effective consumer reporter, is now more likely to quip that he now earns too much money to worry about the price of a can of peas (Extra!, 11-12/96). I sent producer Mark Golden a stack of studies and articles–documenting how this costly, wasteful, unpopular system will create widespread old-age poverty in Chile. I also suggested a number of critics 20/20 could interview in Chile (none of whom appeared in the show).

When I arrived at the Cato Institute on February 14, 1997, the place was crawling with well-scrubbed young conservatives, Wall Street types and right-wing politicians on hand for the one-sided pro-privatization conference that proceeded the town meeting. By later afternoon, it was obvious that only a handful of Social Security defenders would be present. Despite the stacked deck, a few of us managed to get points across at the town meeting.

“But is that true?”

But not, as it turned out, on the air. The program, titled “Retired and Rich,” finally aired November 28. Stossel repeated all the Wall Street scare tactics about how the U.S. Social Security system is about to go under, while ignoring the prudent analysts who say that the oft-repeated doomsday projections are based on overly pessimistic assumptions (Extra!, 7-8/95; 3-4/97).

Five critics of privatization were flashed on the screen–each for just a few seconds, as a lead-in for Piñera to make a point. I actually got maybe 10 seconds–enough time just to say that Piñera’s claim that the private pensions already are 50 to100 percent higher is a lie–and that the system is a failure for average Chileans. “But is that true?” Stossel then asked, as the camera switched to a busy street in Santiago’s posh central business district, with Stossel adding that the people he met in Chile didn’t agree with me. “Does anyone speak English who wants to be on U.S. TV?” he then asked (in a country where few working people speak English) followed by two brief pro-privatization comments by Chileans.

Had he visited the neighborhoods of working people, as I urged, or the factories, fields, mines or hospitals where they work, we would have gotten a very different picture. Among the facts provided to Stossel, but ignored in the program:

  • The private pension companies are among the most distrusted and unpopular institutions in Chile, according to reputable opinion polls;
  • Administrative costs are 20 times higher than those in our Social Security system;
  • The Chilean generals kept Social Security (and national healthcare) for the military and police when they ended it for the rest of the country;
  • The military government slashed the value of non-military Social Security benefits almost 40 percent before privatizing the system. Piñera compares private pensions with these weakened Social Security benefits, not with adequate ones from the early1970s;
  • Almost half the people who have private pension accounts don’t contribute to them regularly and it takes twice as long to qualify for a guaranteed minimum pension as it did under Social Security.

Throughout the segment, Stossel shamelessly used a group of 80-something senior activists picketing outside the conference as foils, mocking the fear they have about attacks on Social Security. Piñera received only respect and soft-ball questions.

Hurting grandmothers

“Our first rule was don’t hurt your grandmother,” said a sincere-looking Piñera on camera. But it’s precisely current–and future–grandmothers who suffer most under his system of social insecurity. The welfare rolls have swelled 300 percent–mostly with older women who earn less during their working lives and can’t possibly save enough on their own for a decent retirement. Nor can most blue-collar workers, as at least six studies have shown (e.g., International Labor Review, No. 2/93). Stossel couldn’t find even a moment to mention them.

Incredibly, Stossel told ABC viewers that participation in the private pension system is completely voluntary. In fact, all people starting work since 1982 have to open individual private account. Employers–who once were required to pay around two-thirds of Social Security costs–no longer contribute anything to employee retirement. When the military junta imposed Piñera’s system in 1981, people already working supposedly were given free choice to stay in Social Security or leave. Many employers actually ordered employees to switch, and anyone remaining in Social Security had to begin paying all of the considerable payroll taxes themselves.

In the segment, Piñera got plenty of time to ham it up about how people flocked to the new system, and how he was ready to go into exile if they hadn’t. “I went to every TV program, every radio, every trade union pushing it,” said Piñera proudly. Of course we’re never told that Piñera’s general pals had destroyed the trade unions–killing, jailing and torturing thousands of activists–and banned the opposition political parties for a number of years.

“Retired and Rich,” was right about two things: people are retiring and someone is getting rich, but ABC forgot one detail: It’s the pension fund companies–several of which are owned by U.S. conglomerates like Aetna and American International Group–that are raking it in. In 1995, when every Chilean with one of these pension fund accounts lost money, the companies running them still made whopping profits of more than 20 percent. And they grow more powerful every day because of all they money they control. (That apparently doesn’t bother Stossel either. He came back to the Cato Institute last October 4 to moderate a panel. The topic: “The Businessman as Hero.”)

Ironically, two of the other three segments of 20/20 the night “Retired and Rich” aired were about consumer fraud: rip-offs by rent-to-own companies and excessive bank charges. At one point, a victim in the rent-to-own piece tells reporter Arnold Diaz, “Do the math, it’s not a good deal.” Too bad Stossel didn’t do the math–or even decent reporting.

At least one network news program got the story right. In a two-part segment on the CBS Evening News (3/11-12/96), reporter Ray Brady took the trouble to look at the dangers of Social Security privatization, to include critics of the Chilean scheme and to nail Piñera with an on-camera quote his handlers no doubt won’t let him repeat. “Life,” Piñera said to Brady, “isn’t fair”–at least for low-income people. Fairness is something else that Stossel forgot all about.