Abtract
A lot has been made about the privatization of retirement funds. This includes both private investment accounts and government based retirement programs. The US has had experience with privatization of retirement with plans. Most notably with the 401k replacing defined pension benefits. Unknown to most, this has resulted in very negative implications for the vast majority of American’s retirements (details here), details here other countries have had not been all peaches and cream. According to the Center for Economic Policy Research, Argentina’s experience was documented by at
http://www.cepr.net/documents/publications/argentina_2002_04.pdf
Excerpts from this article are listed below with some commentary.
How the Crisis Started
“While the decision to peg its currency to the dollar would have created problems in any case, the decision to privatize Social Security made Argentina’s situation more precarious. The reason is simple Social Security privatization deprived the government of a large amount of tax revenue. Payroll that had gone to the government to support the old pay as you go Social Security system were instead diverted to private accounts. As a result, the government lost an amount of revenue that is estimated at 1.0 percent of the annual GDP. Argentina’s government had to borrow to make up for the lost revenue. Argentina was forced to pay very high interest rates on its new debt as a result of a series of external events beginning with the US Federal Reserve’s interest rate hikes in February of 1994 and the series of emerging market financial crises (Mexico, East Asia, Russia, Brazil) that followed. By 2001 they were nearly equal to 3% of GDP. ”
Essentially the CEPR work indicates that Argentina was sent on a debt spiral by the privatization of its social security program. This was uncovered in the media at the time.
“Furthermore, in addition to the crisis which caused banks to fail and lead to a depression in Argentina, they further cut the benefits in the traditional Social Security program by 13 percent in September 2001.”
We are seeing something similar with pensions in this country. See this exerpt from Global Research
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This after the UAW had already agreed to the most shameful concessions in 2007. Although concessions are often made in the name of “job security,” the result is that corporations become emboldened by such acts. Eventually, every benefit of workers that contradicts company profit will be targeted. The demand for concessions never stops, and soon the point arrives when the benefits of having a union become questioned, since dues money is not paid with concessions in mind.
The autoworkers struggle is at the forefront of the pension battle nationwide, since their struggles in the 1930’s originally paved the way for pensions. Equally important is the pension struggles emerging with public employees, the last stronghold of workers who receive them. Public employees will find their pensions under immense attack as the economic crisis intensifies, and government budgets are depleted (see “State Budget Crisis Deepens” on this site).
Fighting the corporate strategy of bankruptcy and business closures is an immediate need of working people. This tactic will increase in number as the crisis deepens and companies strive to “restore profitability” by drastically lowering wages. If a company attempts such a criminal act, the workers should demand a bailout for themselves; the government should take over the plant so that the workers can keep their jobs, such as was done for the banks. Management must be sacked and instead of a government bureaucrat, the workers themselves should run the business.
To win this program, new levels of organizing and solidarity are needed, such as the example of the United Electrical Workers, who occupied their factory and organized in a brilliant fashion. They won a stunning victory by utilizing the methods of the original autoworkers struggles from the 1930’s. If a fight is to be waged, it must be done seriously and with determination, uniting both retired and active workers. The UEW workers have shown the way forward for the labor movement, which can no longer rely on union concessions or the promises of Democratic politicians, but only their own collective strength.
[...] http://counterecon.com/2008/01/11/argentinas-experience-with-pension-privatization/ [...]