Retirement pensions are traditionally provided through government social insurance systems, which pool risks broadly across the population and provide benefits that are set in law. In contrast, under privatized systems, workers’ benefits depend on their own individual account balances and investment returns, with little or no redistribution and pooling of risk across the population. In 1981, Chile became the first country to fully privatize its social security retirement system, setting an example that Argentina and numerous other countries later emulated. More than two decades later, both Chile and Argentina undertook “re-reforms” to their privatized systems, with Chile maintaining its privatized system while Argentina returned to a fully public system. The United States also confronted efforts to privatize its Social Security system around the same time periods—in the early 1980s and the early 2000s—but ultimately chose to strengthen the existing system rather than privatizing. This article examines and contrasts these three countries’ experiences in the 1980s-90s and 2005-08, probing the factors that led to or prevented privatization. While finances usually provided the stated pretext for reform, privatization is now widely acknowledged to worsen the financial challenges faced by pension systems. Ultimately, neoliberal ideologies were pivotal in putting privatization on the policy agenda, and institutional structures and interest group mobilization helped to shape the outcomes of the privatization effort.
Social Security Individual Accounts in China: Toward Sustainability in Individual Account Financing
